DECEMBER STOCK MARKET SEASONALITY

December trading historically tends to be relatively quiet and positive, with the S&P 500 showing gains about 80% of the time since 1990—making it a reliably bullish month, though not as strong as November, the best-performing month. While markets often consolidate in the first half of December, especially after a strong run-up, they typically rally in the second half, contributing to the well-known “Santa Claus rally,” which spans the last five trading days of December and the first two of the new year. Historical models dating back to 1928 (filtered by matching day-of-week patterns) support this seasonal trend, and volatility—measured by the VIX—usually declines as traders wind down for the holidays. However, while seasonality offers useful guidance, it accounts for only about one-third of price action; real-time market catalysts drive the majority of moves. Notable exceptions like the 2018 sell-off remind us that year-end crashes, though rare, can signal major market tops or bottoms. Small-cap stocks also tend to outperform large caps in December, offering another strategic edge for portfolio positioning heading into 2026.

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