“Be at war with your vices: at peace with your neighbors: and let every new year find you a better man.”- Benjamin Franklin
While seasonality and technical patterns can sometimes be a bit much – it seems like there is an indicator for EVERYTHING these days – there is a reason so many people follow them: they can work. As we approach the last few trading weeks of the year there are 3 famous indicators to look out for which may give insights into what is brewing in 2026. Data presented here was taken from the 2026 Stock Trader’s Almanac written by Jeffrey Hirsch. The 3 dates and trends to keep your eye on:
- The Santa Claus Rally: Devised by Yale Hirsch in 1972, this is a 7-day indicator covering the last 5 trading days of 2025 and the first 2 of 2026. This year, the indicator runs from 12/24/25-1/5/2026. A failure to have a Santa Claus rally means a higher potential for flat or negative returns. The failed rally precluded solid bear markets in 2000 and 2008, a mild bear ending in Feb 2016, and flat years in 1994, 2005 and 2015. There is a famous saying: “If Santa Claus should fail to call, bears may come to Broad and Wall.” This was very true in 1999-2000, which marked the peak and pop of the tech bubble and the start of a 33-month -37.8% slide. Though this was not true in 2024 and our current year, both times the Santa Claus Rally did NOT materialize, and we had very strong up years. Always exceptions to a trend.
- The First 5 Days: These are the first 5 trading days of 2026 which, when positive, bode well for January and the year (although it has the lowest hit rate of the 3). In the 27 times since 1950 that the first 5 days were negative, 15 of those ended up being positive years and 12 down, making it only 44.4% accurate. Additionally, a midterm election makes this even less accurate. This is seen as an “early warning system” and best when combined with the other 2 indicators.
- The January Barometer: When January is positive, the year is typically positive as well. In 75 years, the January barometer has only missed 12 times – an 84% accuracy ratio. Although this indicator missed in both 2020 and 2021 where the January Barometer was negative, the year turned out to be strongly positive. It has held from 2022-2025.
When all three indicators hit positive, it’s a very bullish sign. Since 1950, the S&P 500 is positive 90.6% of the time with an average gain of 17.7% with the “trifecta”. Though a market can certainly rally without the “trifecta” since we did not hit the Santa Claus Rally to end 2024/start 2025 and it has still been a very respectable year. The last time the January Barometer read positive and the market was down happened in 2016. These are not perfect indicators; for every trend there will be an exception, especially if driven by a large unforeseen macro event such as COVID, a trade war, or a shooting war/commodity disruption. So, while we wait for the year to wrap up (and much depends on the Fed meeting 12/10 as well as some economic data, especially labor data, finally getting released) we can start looking ahead and reading the tea leaves on what 2026 might bring!