NEW YORK(TheStreet) -- The 'Santa Claus rally' has proved elusive here at the statr of December.

Major U.S. markets have traded for the past five days, setting a dour mood for December, a month that traditionally has been good for stocks. December often gets a boost from the upbeat mood connected with the holidays, gift buying, tax considerations and investing the Christmas bonuses.

But fund managers are split on whether the S&P 500 can continue its run after such a strong year. The index has notched 25.2% year-to-date, and is poised for its best year since 2003 when it recorded a 26.4% gain. That year, stocks rallied more than 5% in December as the index posted its first annual gain in four years after the tech crash.

Fast-forward to 2013 and conditions are very different. The recovery has been in train since 2009 and stock valuations are no longer cheap. In addition, a spate of positive economic data has ironically dampened sentiment by renewing fears the central bank could begin cutting its bond purchases this month. Bond buying by the Federal Reserve has bolstered the relative appeal of equities even as robust earnings growth remains elusive.

Jim Kee, president of South Texas Money Management in San Antonio, says December could be a negative one for markets.

"Markets have risen at three times their average annual rate and looking at technical charts, we expect a pullback," he said in a phone interview. "Strong [economic] data is also bringing forward the case for tapering." Kee, who is also chief economist, helps oversee more than $2 billion in funds under management.

Others are still optimistic. Palisade Capital Management chief investment officer Dan Veru expects this month to add to annual share gains.

"Economic data suggests higher earnings and that will support higher stock prices," the New Jersey based manager said in a phone interview. "We're just in a transitory phrase where investors are nervous about what it could mean when we enter a period of tapering. But data is not improving so much that it would warrant a rapid reversal of stimulus."

Veru helps oversee $4.5 billion in funds under management.

--By Jane Searle in New York.