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Santa Claus Rally

Definition of 'Santa Claus Rally'

A "Santa Claus Rally" is when the stock market rallies during the month of December, usually, in the last week of the month. Sound familiar? You might be thinking of the January Effect, which presumably occurs when investors sell stocks in December only to buy them back in January for tax purposes. Confused yet?

At the end of the day, stock market rallies are attributable to the collective psychology of market participants. Some years, stock may post strong gains from December into January; other years, not so much.

Regardless, if you see stocks rallying in the week between Christmas and the New Year, people are going to call it a Santa Claus Rally.

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