Market risks threatening Santa Claus rally

Market historian on the risks facing an impending Santa Claus rally.

Transcript

00:00Let's talk the January effect, right? It held this year. What are the possible outsized events

00:07that could impact 2025? The January barometer, which I think we're talking about here, is as

00:13the S&P goes in January, so goes the year. That's something my father, Yale Hirsch, invented in 72.

00:19And also the standard clause reality, which is the last five days of the year and the first

00:22through the new year. We put that together with the first five days and create this January

00:26indicator trifecta. So when all three hit, all are positive, the market's up 90.6% of the time,

00:3329 out of 34 years, 17.7% on the S&P average gain. What derails that, you know, could be something

00:41systemic, could be some disappointment with economics. We'll start looking for the Santa

00:45Claus reality to show up or not. As my father said, if Santa Claus should fail to call,

00:50bears may come to broaden the wall right where we are here. So years when the Santa Claus reality

00:54has failed to materialize, we see markets either flat or bear markets or at least times when you

01:00could buy stocks cheaper during the year. So I think something geopolitically or even, you know,

01:06politically, domestically could rock the markets. But other than some disappointment out of the

01:13market leading companies, you know, the Mag 7 or, you know, something that lasts long, I don't see

01:18much that's going to derail it. But if it does, we may have to go back and figure out what derailed

01:22it, you know, with a little bit of hindsight. But if we see all three of those down,

01:25I'll start getting a little bit less bullish.