From the Desk: Will the Santa Claus Rally Continue? Vol. 2
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Since their inception in 1970, the Cleveland Cavaliers are 353-375 (.485 winning percentage) in the month of November, with most of those wins coming in recent years of the franchise. This year, with Coach Kenny Atkinson at the helm, our beloved Cavs were 12-3 last month (.800 winning percentage).
Since 1945, the S&P 500 (you had to see another Cleveland team / market comparison coming…) has been up an average of 1.4% in the month of November (CNBC.com). This November the S&P 500 rallied 5.7% to log its best month of 2024. Yale Hirsch, the founder of the Stock Trader’s Almanac, coined the "Santa Claus Rally" in 1972 after noticing the long-time trend of the equity market ending the year by bringing more Joy to the World.
At the time of this writing, the S&P 500 is up 4.81% since the start of the Cavs regular season (10/23/2024), and that’s in just 45 calendar days, only 31½ of which were trading days. Over the same period the Cavs have racked up an impressive and franchise best 20-3 record. Clearly, the Santa Claus rally is benefiting both investors and Cavs fans alike.
Both Goldman Sachs and JP Morgan released S&P 500 forecasts for 2025 suggesting a target of 6,500 by the end of next year, about a 7.5% gain from its current level. Other institutions have the well-known index closing next year somewhere between 6,700 and 7,000. I can’t help but recall former Chairman Greenspan’s phrase “irrational exuberance” and think that investors may be a little too optimistic and perhaps are setting unrealistic expectations following two consecutive years of more than 20% gains. After all, investors are more likely to view forecasts as statement of fact rather than mere possible outcome. But then again, we have history on our side. According to Yahoo Finance, since 1950, there have been eight times the S&P 500 has gained 20% or more two years in a row. In six of those eight times, the third year saw positive gains, with an overall average of 12% and median return of 13%. There’s good reason to be optimistic about 2025—cautious, but optimistic.
As for the Cavs, I must give credit for the impressive victories that give rise to the Santa Claus Rally in Cleveland right now. Cleveland fans have had many a Blue Christmas as over the years we’ve watched leads surrendered, starters injured, and our winter teams just being outmanned. But this year Coach Atkinson has Cleveland fans Rockin’ Around the Christmas Tree.
Whether the Santa Rally continues on Wall Street through the year and into 2025 is yet to be seen. But given the presents equity markets have already delivered to investors, I’m guessing most would still be 'laughing all the way' even if it fizzles. Whether the Santa Rally continues for the Cavs is also yet to be seen, but this diehard fan of all things Cleveland will enjoy the ride and won’t necessarily have a Blue Christmas if it doesn’t.
The views and opinions expressed in this commentary are those of the author noted and may or may not represent the views of The Lincoln Investment Companies. This is not a solicitation, recommendation or endorsement of any investment, investment strategy, tax strategy or legal advice. You should discuss any legal, tax or financial matters with the appropriate professional.
The S&P 500 index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. It is not possible to invest directly in an index. Past performance is no guarantee of future results.
