- US equities exhibit a strongly positive year-end performance post-Thanksgiving
- FX pairs do not follow a specific pattern in the examined period
- Gold and USDJPY rally every time the Thanksgiving holiday falls on November 23
We are nearing the end of another trading year and the newswires are crammed with stories about the famous Santa Claus rally. In a nutshell, the market believes that risky assets tend to rally towards the end of the year. Most analysts calculate the assets’ performance during the last five trading days of the year and the first two of the new year when analysing this “phenomenon”. However, others are confident that this rally tends to start after the annual Thanksgiving holiday.
Consequently, we decided to have a look at the performance of the main tradable assets for the period between the Thanksgiving holiday and the last trading day of the year. We selected 1991 as our starting year, not for the lack of data but because we feel that this timeframe is a closer match to current market conditions.
S&P 500 index sends the strongest message
Table 1 below presents our findings for the 32 years of market data examined. After a quick glance, one can see that there is no widespread rally at the instruments in question. However, there are some interesting results. The S&P 500 index is sending the strongest message as it has managed to finish the year in the green in 75% of the periods examined, i.e. 24 years, with an respectable average gain of 1.6% achieved. Regarding the FX world, only EURUSD tends to exhibit a pattern with 66% of the years ending on a positive note and recording a decent return of 1.2% on average.
When focusing only on the past 10 years, the results somewhat change. More specifically, EURUSD tends to rally after the Thanksgiving holiday with an average gain of 1.1%. The 10-year US yield exhibits a similar score, but the average yield increase is just 2bps, which is rather miniscule for its standards. We have also included BTCUSD (Bitcoin) in Table 2 below, but the results do not really confirm the Santa Claus rally, despite the 10.9% average rally.
What happens in the pre-election years?
We could not complete our analysis without the main 2024 event: the US election held in November. Such a major event affects investment decisions long before the actual election date as market participants prepare for the next administration. Therefore, we examined the year-end performance of key assets, after the Thanksgiving holiday, in the eight pre-elections years appearing in our data. Interestingly, only the performance of the S&P500 index stands out. Except for 2015, this index tends to end the year positively with an average gain of 4.3% registered.
What happens when the Thanksgiving holiday falls on November 23?
Our final step was to examine the performance of these assets when the Thanksgiving holiday falls on November 23, like in 2023. We found four instances in the 1991-2022 period when this occurred: in 1995, 2000, 2006 and 2017. A smaller sample to play with but we have two assets, gold and USDJPY, rallying in these four periods. Gold is seen gaining 1.3% on average, while USDJPY tends to climb by 2.4%.
To sum up, the market appears to be gearing up for a Santa Claus rally and, according to our findings, the S&P500 index tends to confirm this expectation when examining the 32 years of data. Drilling down to just the past 10 years, EURUSD exhibits a strong tendency to rally into year-end. Finally, when the Thanksgiving holiday falls on November 23, USDJPY and gold appear to enjoy a strong upleg by the end of the trading year.
