Article By Kieran Degiorgio
The festive period, traditionally enjoyed with family and friends amongst a variety of occasions, has also repeatedly brought joy to investors in what has historically been a seasonally strong period for financial markets.
In fact, whether you believe in Santa or not, the so-called ‘Santa Claus Rally’, which officially spans the last five trading days of December and the first two trading days of the new year, has seen the US’s equity benchmark, the S&P500, register positive returns 80% of the time for an average gain of 1.3% during the period.
The above-mentioned seven-day stretch is also characterized by lower levels of activity and trading volumes, especially amongst institutional investors, with this consequently allowing for naturally more bullish retail investors to become more determinant to price action, exerting pressure to the upside.
General optimism over the coming year and preparation for the ‘January Effect’, which marks another seasonally strong period for financial markets are other uplifting factors, along with a slowdown in tax-loss harvesting, which alleviates selling pressure.
While historical odds tilt the balance of risks to the upside over the coming weeks and paint a promising, although simplistic picture, if there’s anything this turbulent year has taught us, it is to expect the unexpected.
Reflecting on a year which in summation has been yet another, broadly speaking, positive one for investors, one should not only look at the absolute return figure obtained, but also at the volatility endured along the way, which was aplenty and observable across multiple asset classes.
From the March shift to looser German fiscal policy which prompted a material repricing higher for Euro yields, strengthening the Euro along with further bolstering the attractiveness of European equities, to the onset of Trump’s tariffs on Liberation Day in April, with risk assets violently tumbling as sentiment soured against a highly uncertain macroeconomic backdrop.
The alleviation of such problematic trade policies, both on growth and inflation, and a return to clearer future visibility along with continually strong economic growth and corporate financial performance, supported by a roaring AI investment theme, quickly reshored confidence, with one of the fastest ever V-shaped recoveries being posted as lost ground was recouped into the end of June.
Fears surrounding US labor market conditions and lofty valuations in relation to tech companies coupled with the longest ever US government shutdown did little to dampen appetite for risk, with this being further fueled by the FED’s easing of monetary policy to the current upper bound of 3.75%.
Gold and Silver’s parabolic rise also easily deserve a spot on the year’s highlight list, with a global wave of central bank easing along with stimulative fiscal stances in Europe, China, the US, and most recently Japan propping up demand for real assets as the threat of continued monetary debasement through higher inflation becomes ever too real. Not to mention a more fragmented world order and heightened geopolitical tensions.
Tying back into seasonality, when reflecting over the recent past, we can notice that historical seasonal patterns have not been respected throughout 2025. In fact, the S&P500 gained circa 10% during the supposedly seasonally weak August to October period as investors cheered the ever-rising probability of FED interest rate cuts. Historically strong November was lukewarm at best, with markets taking a breather as investors reassessed funding costs and expected returns on AI investment.
It is as such sensibly concludable and advisable that while seasonality should be considered, as is intertwined in the market’s fabric and investors’ behavioral biases, that a more holistic approach is adopted to portfolio positioning over varying time horizons, taking into consideration the multitude of factors which encompass the broader market context at any point in time.
After a lackluster start to the final month of the year, markets seem to be picking up pace as we head into that all important seven-day stretch, with investors eagerly awaiting Santa’s verdict to determine if global markets made it to the ‘naughty’ or ‘nice’ side of the list.
Kieran Degiorgio is a Senior Portfolio Manager and Research Analyst at Curmi & Partners Ltd.
The information presented in this commentary is solely provided for informational purposes and is not to be interpreted as investment advice, or to be used or considered as an offer or a solicitation to sell/buy or subscribe for any financial instruments, nor to constitute any advice or recommendation with respect to such financial instruments. Curmi & Partners Ltd is a member of the Malta Stock Exchange and is licensed by the MFSA to conduct investment services business.