Is the Santa Claus Rally Coming to Markets in 2025? Expert Opinions Clash as Year-End Rally Beckons

The December seasonal surge historically hits different — but will this year play by the rules?

When we talk about earning $57 an hour (translating to roughly $118,560 annually for full-time workers), we’re discussing a comfortable income bracket that many financial professionals fall into. Yet even those with solid six-figure earnings remain acutely aware of market seasonality and how December trading patterns can significantly impact annual portfolio returns. This year, the market is buzzing about whether the famous Santa Claus Rally will materialize as scheduled.

The Numbers Don’t Lie: December Has Been Kind to Investors

History strongly favors December bulls. Over the past four decades, the S&P 500 has climbed in December 74% of the time, posting an impressive average monthly return of 1.44% — the second-strongest performance of any month after November. Across the Atlantic, the pattern repeats with even greater consistency. The Euro Stoxx 50 has delivered an average December gain of 1.87% since its 1987 launch, with an extraordinary 71% win rate when it comes to posting positive monthly returns.

These aren’t coincidental blips — they reflect a deeply ingrained seasonal pattern driven by fundamental market mechanics and behavioral finance.

Why December Tends to Deliver: The Psychology Behind the Rally

According to Seasonax analyst Christoph Geyer, institutional investor behavior sits at the heart of this phenomenon. Fund managers execute critical year-end portfolio adjustments to lock in gains and present polished results to clients and stakeholders. This “year-end portfolio rebalancing” creates sustained buying pressure, particularly in assets that have already demonstrated momentum or are positioned for near-term upside.

Beyond mechanics, the December environment carries an unmistakable psychological component. The festive season elevates collective sentiment, encouraging investors to adopt a more optimistic stance on equities. Combined with elevated risk appetite, this creates an environment where buying pressure naturally intensifies.

Will 2025 Break the Pattern? The Great Debate

Market watchers are split heading into year-end 2025. Amy Wu Silverman from RBC Capital Markets’ Derivatives Strategy team argues that this year may represent an exception. She points to 2025’s equity performance as largely defying typical seasonal playbook, suggesting conventional patterns may not hold.

Tom Lee, co-founder of Fundstrat Global Advisors, takes the opposite stance. He’s constructive on the prospects for a strong year-end rally, citing two catalysts: anticipated Federal Reserve rate cuts arriving this month and the conclusion of quantitative tightening after nearly three years. Lee argues that liquidity conditions are primed to surge, positioning the S&P 500 for a potential year-end melt-up. If December performs as he expects, he anticipates aggressive catch-up buying from fund managers determined to avoid annual underperformance.

The Bottom Line: Opportunity Meets Uncertainty

December 2025 presents a fascinating case study in market seasonality. While historical precedent strongly favors upside, current macro conditions and market dynamics introduce genuine uncertainty. For investors monitoring year-end positioning, the next few weeks will prove critical.