How Nasdaq volatility is impacting investors in early 2026
Dec 16, 2025
Market Insights
Dec 16, 2025
Every December, the same storyline comes back: the last weeks of December are usually strong.
There is a real seasonal pattern people are referencing. The issue is that the pattern is narrower than most commentary implies, and its usefulness depends on what you do with it.
Most market references define the Santa Claus rally as a seven-trading-day window: the last five trading days of December and the first two trading days of January.
That matters because “the last weeks of December” includes days that are not part of the classic Santa window. When someone says “Santa is here” in early or mid-December, they are usually describing a different move.
The end of December compresses several effects into a short span:
Year-end portfolio activity (rebalancing, year-end reporting behavior, tax-related decisions in some jurisdictions)
Holiday trading conditions (lighter participation, fewer decision-makers at desks)
The calendar window itself (the seven sessions often cited in the stats)
Put together, it is easy to turn “seasonal tendency” into “late-December rule,” even though the statistical window is tighter.
If you strip away the mythology, the historical case rests on two simple claims: returns have been positive more often than not, and conditions are often quieter.
Investopedia summarizes the most common figures for the S&P 500 since 1950: the Santa window has averaged about +1.3%, and it has been positive about 79% of the time.
| Metric (S&P 500) | Santa window result |
|---|---|
| Average return (since 1950, seven-session window) | ~+1.3% |
| Positive window frequency | ~79% |
A useful extra detail from LPL: this short window has historically looked stronger than an average seven-day stretch, which is one reason it gets so much attention.
Russell Investments notes that from Dec. 23 through New Year’s Day, global equities often trade at 45% to 70% of normal volumes, with similar slowdowns in derivatives and credit, and participation tends to normalize in early January.
Thin volume does not guarantee gains. It does help explain why small catalysts can move prices more than investors expect in late December.
The Santa narrative was born in a more human-driven tape. Today, execution is more systematic, and flows can change quickly even when many desks are lightly staffed.
That does not erase seasonality. It does make the “pattern” more vulnerable to positioning shocks and fast de-risking.
When markets move on central-bank guidance, inflation, geopolitics, or fiscal headlines, the calendar becomes background context.
End-of-year coverage often highlights this tension directly: late-December gains can appear in quiet sessions, but the bigger forces are still rates, valuations, and policy expectations.
Even recent years offer reminders that the Santa window is not a rule:
MarketWatch described a year where U.S. stocks were missing the Santa rally into late December.
LPL has highlighted periods when the rally was “in jeopardy,” framing the window as one that can disappoint despite strong long-term averages.
For institutions, the key point is not whether the pattern exists. It is that the range of outcomes still includes unpleasant tails in a very short time window.
The institutional mistake is to treat the Santa Claus rally like a trade signal. The institutional use is more practical.
When volume drops to a fraction of normal, the cost of being wrong can rise quickly.
Scaling down discretionary changes that are not time-sensitive
Tighter execution guardrails (participation limits, liquidity checks, tighter slippage tolerance)
Stress testing short-window scenarios (what a 1% to 2% move does to exposures, hedges, and constraints)
The average return is a historical average, not a forecast.
A sensible stance is: if the tape is supportive, seasonality may align with it. If macro conditions deteriorate, seasonality is not a defense.
This is where the topic earns its keep.
Define the Santa window as seven sessions, not a generic “late-December rally.”
Explain that the window is often positive, but not reliable enough to build promises around.
Frame outcomes as ranges and probabilities, so “no Santa” does not become a credibility issue in early January.
If you are running institutional capital, the Santa Claus rally is best viewed as a seasonal footnote with two practical implications: late December can be statistically supportive, and liquidity often gets thinner at the same time.
That combination argues for disciplined risk sizing, careful execution, and clear communication, not pattern-chasing.
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