#barometer

Schatz 1881. Experience the expensive and well done toys 🧸 . We did!

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As Yale Hirsch’s now famous line states: “If Santa Claus should fail to call, bears may come to Broad and Wall.”

Typical early December seasonal weakness sets up the Santa Claus Rally well. The Street has been buzzing about the Santa Claus Rally for months now. Most still get it wrong. It’s not the yearend rally, the Q4 rally that runs from Halloween through January. Yes, November, December and January are the best three months of the year, but they are not the Santa Claus Rally.

Santa Claus Rally was devised by Yale Hirsch in 1972 and published in the 1973 Stock Trader’s Almanac. The “Santa Claus Rally” is the last 5 trading days of the year plus the first 2 of New Year. This year it begins on the open on December 24 and lasts until the second trading day of 2026, January 5. Average S&P 500 gains over this seven trading-day range since 1950 are a respectable 1.3%.

Failure to have a Santa Claus Rally tends to precede bear markets or times when stocks could be purchased at lower prices later in the year. Down SCRs were followed by flat years in 1994, 2005 and 2015, two nasty bear markets in 2000 and 2008, a mild bear that ended in February 2016 and the Tariff Tantrum early in 2025.

This is the first leg of our January Indicator Trifecta (2026 STA p 20) which includes the “First Five Days” (2026 STA p 16) and the full month “January Barometer” (2026 STA p 18), also invented and named by Yale Hirsch in 1972. This January Trifecta helps us affirm or readjust our outlook. When we hit this Trifecta and all three are positive S&P is up 90.6% of the time (29 of 32 years) with an average gain of 17.7%.

Based upon the outcome of these three indicators, we may adjust our outlook for the balance of Q1 and 2026. Until then, we remain bullish as this is the seasonal favorable period for stocks. Valuations are a concern, but economic data is holding up, the Fed is cutting interest rates, and the market continues to track seasonal trends and patterns rather closely.

The barometer: