Santa Claus Rally — Does It Still Work?

The Santa Claus Rally is a well-known seasonal effect.
Looking at the last 25 years, the S&P 500 shows an average gain of ~0.54% over the 5 business days starting on December 29.

However, the effect weakens significantly in recent periods:

Last 10 years: ~0.27%, already close to the average weekly P&L of the S&P 500
Last 5 years: ~-0.22%

This suggests the Santa Rally has deteriorated over time. What used to be a strong seasonal tendency now appears less reliable, especially in modern market regimes.

Seasonality provides useful historical context, but it should not be used as a standalone trading signal.

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