December often sees robust equity market gains, particularly in the second half. Seasonal optimism, portfolio rebalancing, and reduced volatility make it one of the strongest periods for European stocks, especially during U.S. election years.
The holiday season isn’t just a time for gifts and celebrations; it’s also one of the most promising periods for equity markets.
The so-called Santa Claus Rally, a term coined to describe late December’s propensity for robust gains, is once again in focus, with European markets showing signs of aligning with this well-documented seasonal phenomenon.
Historically, December’s gains have been driven by a combination of factors, including optimism for the new year, strategic portfolio adjustments by institutional investors, and the quieter trading environment during the holiday period, which tends to reduce volatility and favour upward momentum.
But how have European equities fared during this period in the past, and which companies have consistently delivered stronger-than-average returns? Let’s take a closer look.
December: A historically profitable month for European equities
European equities have long displayed an affinity for December gains. The Eurostoxx 600, a broader measure of the continent’s equity market, has ended the month in the green 15 times over the last 22 years, delivering a 68% success rate.
Similarly, the Eurostoxx 50, a benchmark for large-cap European stocks, has shown a consistent December rally over the past 37 years, posting an average gain of 1.86% and finishing the month higher 70% of the time, according to data from Seasonax platform.
When measured against other months, December’s winning ratio is only narrowly eclipsed by April’s 71%, making it one of the strongest periods for European equities.
Stronger rallies in U.S. election years, December’s second-half surge
What makes this year particularly intriguing is that the rally tends to strengthen following U.S. presidential elections. In such years, European equities have outperformed their typical December averages.
Since 1984, the Eurostoxx 50 has delivered a 2.8% average return in December during U.S. election years, closing higher in eight of the last nine instances. The sole exception was in 2000, when the index dropped by 2.84%.
Notably, in December 2016, the Eurostoxx 50 posted an impressive 9.2% gain, the third-largest December rally in its history, surpassed only by the surges of December 1998 and 1999. This performance was buoyed by a wave of investor optimism following Donald Trump’s election victory, a sentiment that may echo this year’s market dynamics following his 2024 election win.
In particular, the second half of December remains one of the most lucrative stretch for European markets.
Over the past 37 years, the Eurostoxx 50 has averaged a 2.2% rally between December 15 and January 1, with 29 years recording gains and just eight registering losses.
The standout performance occurred in the final two weeks of December 1998, when the index surged by 8.9%. The worst showing was a 3.8% drop in 1990, during a period marked by global geopolitical tension.
10 European stocks to watch this Christmas season
5 Top Performers in the Eurostoxx 50
Certain European stocks have carved out a reputation for delivering outsized returns during the holiday season.
Over the past 20 years, CRH plc has established itself as a standout performer within the Eurostoxx 50, posting an impressive average return of 3.95% and an exceptional 90% success rate during the period from December 10 through year-end.
Flutter Entertainment and Infineon Technologies, each delivering average gains of 3.68%, follow closely, though their win ratios of 85% and 70%, respectively, suggest slightly higher risks. Bayer and BASF round out the top performers, with average gains of 2.52% and 2.76%, respectively.
5 Top Performers in the Eurostoxx 600
In the broader Eurostoxx 600, the gains among the top 5 performers are even stronger.
Informa plc leads the charge with an extraordinary average return of 27.97% during the highlighted period.
Other notable performers include Tullow Oil (+17.86%) and Beazley plc (+17.50%), both of which deliver strong gains with high consistency.
WH Smith and Tate & Lyle also feature prominently, returning 16.93% and 16.09%, respectively, during the festive period.
Conclusions
The Santa Claus Rally has become a staple of market folklore, but its persistence over decades suggests there is more than just mythology at play.
Bolstered by historical data and a blend of optimism for the year ahead, portfolio rebalancing, and year-end positioning, investors are gearing up for what could be a rewarding conclusion to another positive year for markets.
Though past performance is no guarantee of future results, December’s historical trends provide reason for cheer—at least for investors—and perhaps a much-needed gift to end the year on a positive note.
