As we focus on Christmas Day only 10 days away, those of us who love our commitment to investing in stocks and those who simply want share prices to rise to boost their super are wondering if we’ll see a Santa Claus rally before the festive season starts?

Following the tragedy at my beloved North Bondi where I have been a surf club member since age 12, our entire country needs as much good news as possible.

What is the history of the US-generated Santa Claus rally? Generally, there’s uncertainty about when it starts. Investopedia maintains it covers the period of the last five trading days of the year and the first two in January. “Since 1950, during this seven-day trading window, the S&P 500 has gained an average of 1.3% and been positive 79% of the time,” Brian Dolan of Investopedia reveals.

Despite the interference of computer trading, algorithms, bots and other new age creations of the stock trading world, this regular occurrence of an older world seems to persist. It might say something about the positivity that Christmas, the New Year and the history of economies as well as stock markets say about human beings.

In that context, I love this from Jeffrey A. Hirsch, editor of the annual Stock Trader's Almanac: “Despite all of the high frequency trading and algorithmic trading and the velocity of the market these days...patterns [like the Santa Claus rally] continue to persist.”

And I love the fact that his father, Yale Hirsch, invented the term in 1972!

I think we’re inspired by positivity. It’s why we’re uplifted by great parents, teachers, coaches and outstanding high achievers. Also, in pure factual terms, when it comes to the stock market, it rises seven or eight times out of 10, and January is a really important month.

This from tradethatswing.com underlines how the first month of the year that follows a Santa Claus rally is important: “There is something called the January Barometer, which says that how January goes, so goes the rest of the year for stocks. January 2025 finished with the S&P 500 up just over 2% and the Nasdaq 100 up just over 1.5% for the month. Since 1950, when January is an up month, the average return for the year (S&P 500) is right around 17%. When January is a down month, the average yearly return is -1.7%. Take from it what you will. For the year so far (as of November 30), the S&P 500 is up 16.96%.”

Dolan says Santa Claus rallies have been explained by “increased holiday shopping, seasonal optimism, end-of-tax-year considerations, and less institutional trading since many cut back on activity during the holidays.”

The latter means the market is more influenced by retail traders over this time and they can be more positive than big fund managers. Whatever the cause, what I want under by imaginary Christmas tree, is a Santa Claus rally followed by a positive January.

Historically, the second year of a US President is the worst for stocks, maybe because it’s a mid-term election year. But this kind of historical analysis is primarily based on usual presidents. Donald Trump is a human curve ball who hates Wall Street hating him, so I think tax changes, financial deregulation and a Fed that eases interest rates could be good for stocks.

Also, a poorer year for stocks doesn’t have to mean a down year. Morningstar says between 1970 and 2023, the second year of a president saw stocks up 7.4%.

Today the local stock market is expected to be off 51 points at the start, which follows a negative lead from Wall Street on Friday, when all major indexes were down because of anxiety around AI and possible over-investment by some of the US big tech companies.

AI concerns could persist until mid-January, when US reporting season for the December quarter gets going. And that should make or break the January performance of the overall stock market.

This week there is important data that could feed into a Santa Claus rally or grinch Christmas.

The big market deal will be the delayed October and November US jobs report, which will give us a more credible snapshot of the labour market there. And that will have a big bearing on what’s expected for interest rates.

Importantly, if the numbers say the US economy is slowing but not heading for a recession, then there’ll be high hopes of two interest rate cuts that will definitely spur on a good Santa Claus rally and January effect.

“Evidence of further softness in job creation will lead to some repricing of a January 28 US rate cut, given widespread expectations of a pause,” the AFR reported from a NAB economist.

Later in the week, the Yanks see the latest CPI data, which will show how inflation is tracking, with the impact of tariffs expected to be seen in these stats. Good inflation news will help rate cut expectations and stock prices.

If this week’s data drops are positive for rate cuts, then AI anxiety could be trumped. President Trump would love that and so would Wall Street, setting us up for a good old merry Christmas Santa Claus rally.