Bob Graham – Riggs Asset Management Company

Hi there, this is Bob Graham from Riggs Asset Management Company.

Today I want to talk about a couple of things that may be interesting—and potentially beneficial—for the markets as we move toward the end of the year.

There are a few old Wall Street adages, and like most market sayings, there’s usually a fair amount of truth behind them.

Two of the most well-known are:

• The Santa Claus Rally

• The January Effect

You may hear these terms mentioned in financial news this time of year, so let’s take a moment to explain what they mean.

The Santa Claus Rally

First, let’s talk about the Santa Claus rally.

This refers to the tendency for the stock market to rise during the final trading days of December and the first few trading days of January.

The rally typically covers about seven trading days—from around Christmas through the first few days of the new year.

People often ask why this happens.

Is it because investors are in a good mood during the holidays?
Is it optimism about the new year?

There are many theories, but regardless of the explanation, the historical pattern is fairly consistent.

On average, the market rises about 70% of the time during this period.

What’s even more interesting is that when markets have already had a strong year—meaning gains of 10% or more—the probability of a Santa Claus rally increases significantly.

Historically, in those strong years, the market rises during that period about 86% of the time.

Since we’ve had a very strong market year, the probability of seeing a Santa Claus rally is actually higher than usual.

The January Effect

The second seasonal pattern is called the January effect.

Despite the name, the January effect actually begins earlier—often around November.

What tends to happen is that smaller and mid-sized companies start to outperform larger companies toward the end of the year.

By mid-December, that trend often begins to accelerate.

Historically, the strongest period for this effect runs from mid-December through mid-to-late January.

Interestingly, in years like 2024, when much of the market’s gains have been driven by large mega-cap companies, the January effect can be even more pronounced.

That means we may begin to see smaller and mid-sized companies take the lead during this seasonal period.

Looking Ahead

There’s also another factor that could influence this trend.

If we see lower levels of regulation and a lighter regulatory environment from the incoming administration, that could potentially extend the strength in small- and mid-sized companies well into 2025.

So when we look at the markets heading into year-end, several factors appear to be lining up:

• The potential for a Santa Claus rally

• The emergence of the January effect

• Stronger performance from small- and mid-sized companies

Taken together, these factors suggest we could be heading toward a strong finish to the year.

If you have any questions about this topic—or anything else related to the markets or your portfolio—please feel free to reach out to your Riggs team.

We’re here to help you in any way we can.

And I hope everyone has a great year-end. Thank you.