The Santa Claus Rally Was A No-Show. What Market Experts Expect for 2026.

Stock traders didn’t get much from Santa this season. Does that mean this year’s returns will be lighter than in years past?

The Santa Claus rally—the tendency for stocks to rise during the trading period containing the final five trading days of December and the first two of the new year—yesterday looked as though it would materialize in the 11th hour but ultimately disappointed. Over this season’s stretch, between Christmas Eve through Monday’s close, the S&P 500 was down 0.11%.

While this marked the third consecutive year without a Santa rally, the benchmark index has, on average, returned 1.3% during the rally period since 1950. Looking ahead, some investors see Saint Nick’s returns as a directional signal of where the stock market is headed in the year ahead.

Between Santa slumping, and major institutions’ 2026 S&P targets implying relatively small annual gains, the outlook for U.S. stocks may not seem great. Still, some market watchers are keeping an open mind until more information comes in.

Santa’s absence in certain years—such as 2000 and 2008—turned out to be a harbinger of doom. The 4% decline in the 2000 season preceded the tech bubble’s bursting, while the 2.5% loss for the 2008 season was followed by the second worst bear market in history, per Jeff Hirsch, the author of the Stock Trader’s Almanac.

Hirsch, however, is reserving “final judgment” for the end of January. If the S&P posts negative numbers for both the first five trading days of the year and the month overall, that would “weigh heavily on the outlook” for 2026, he said in a note published Monday.

While some veteran investors were ringing an alarm on U.S. stocks last year, others are sanguine.

Mark Newton, Fundstrat’s head of technical strategy, said that the small S&P breakout that kicked off the start this week, the first full trading week in January, “looks like a big positive,” in a report published Monday. He thinks the recent move in the benchmark index could lead it back above 7000 in spite of Santa being a no-show.

DataTrek’s Jessica Rabe said investors shouldn’t read too much into January’s numbers as a sign of things to come. “Of course, like any stock market heuristic it doesn’t work every year, but history shows a positive performance for the S&P in January tends to lead to much stronger returns for the year overall,” she wrote in a report today.

So far so good. The S&P is up 0.8% over the first two completed trading days of 2026.