Will the US stock market still rise in January 2026? After the Santa Claus rally, the "January Effect" will support the market

As Christmas approaches, the US stock market is once again迎來 the annual traditional market trend. This phenomenon, dubbed the “Santa Claus Rally” by investors, typically occurs during the last five trading days of each year and the first two trading days of the new year. According to statistics since 1950, the S&P 500 index has a 79% chance of rising during this period, with an average gain of about 1.3%.

Why is the US stock market prone to rise during Christmas?

Multiple factors drive this trend. The festive season’s optimistic atmosphere, year-end bonuses entering the market, and fund managers buying strong-performing stocks to enhance their portfolios all contribute to the traditional momentum of the Santa Claus Rally.

This year’s Santa Claus Rally will officially start on December 24 (Wednesday) and continue until the close on January 5, 2026 (Monday). The market is holding its breath, wondering whether the S&P 500 can break through the 7000-point threshold.

S&P 500 targeting 7000 points: options data reveals insights

From the options structure, the current positive Gamma zone for the S&P 500 is concentrated between 6950 and 7050 points. If volatility during the Christmas week continues to be eroded by time decay, 7000 points will become a critical psychological threshold and an important short-term technical reference.

Will the January 2026 effect take over?

Looking ahead to January of the new year, Oppenheimer analysts have identified some favorable signals. They conducted backtests based on the S&P 500’s position relative to its 200-day moving average and found an interesting pattern:

Since 1950, when the S&P 500 opened above its smooth trend line (200-day moving average) in January, the average monthly gain is 1.2%, with a 64% chance of rising. Conversely, if it opens below the trend line, the average gain is only 0.7%, with a 50% chance of an increase. Currently, the S&P 500 is favorably positioned above the trend line.

The “January Effect” refers to the seasonal phenomenon where stocks tend to rise in the first month of the year. If the Santa Claus Rally successfully pushes the index higher, setting a strong start for the new year, then the upward momentum in January becomes more promising.

In other words, US stock investors may continue to enjoy the upward momentum brought by the January Effect after crossing the Christmas rally.