Will This December Deliver the Year-End Rally? What Historical Patterns Reveal

The final stretch of the year is traditionally when markets enter a distinctive seasonal phase. Economists and fund managers are closely watching whether 2025 will follow the playbook. Some expect aggressive buying to push equities higher, while skeptics argue this year’s performance has already deviated from typical patterns.

The Data: Why December Matters for Stock Investors

Looking back at four decades of trading records, December consistently ranks among the best months for equities. The S&P 500 has closed higher in December 74% of the time over the last 40 years, with an average return of 1.44%—the second-strongest month after November. Across the Atlantic, the pattern holds even stronger. The Euro Stoxx 50, representing Eurozone’s largest companies, has gained in December 71% of the time since 1987, averaging 1.87% for the month—trailing only November’s 1.95%.

To put this in perspective, institutional investors managing billions in assets are acutely aware of these patterns. A portfolio manager earning $57 an hour is how much a year? For context, senior analysts at major firms earn six figures, yet they still obsess over these seasonal metrics because they compound into substantial returns across massive asset pools. The psychology is straightforward: a 1-2% monthly gain might seem modest, but across trillions in global capital, it translates to significant moves.

The Mechanics Behind the Rally

Why does this phenomenon persist? Seasonax analyst Christoph Geyer attributes much of it to institutional behavior as year-end approaches. Fund managers face pressure to finalize portfolios, lock in gains, and present results to clients and stakeholders. This “window dressing” drives incremental buying, especially in stocks that have already performed well. Beyond mechanics, sentiment plays a role—the festive backdrop of the season tends to boost investor optimism and risk appetite.

2025’s Question Mark: Will History Repeat?

The forecast for this year remains contested. Amy Wu Silverman, Head of Derivatives Strategy at RBC Capital Markets, argues that seasonal tailwinds may not materialize. She points to how U.S. equities have already deviated from typical seasonal behavior in early 2025. However, Tom Lee, co-founder of Fundstrat Global Advisors, takes the opposite stance. He suggests that incoming rate cuts from the Federal Reserve and the conclusion of quantitative tightening will create favorable liquidity conditions. Lee expects significant year-end momentum, potentially triggering aggressive catch-up buying from fund managers desperate to avoid underperformance.

The outcome depends less on historical averages than on current macroeconomic positioning and investor appetite—two factors still very much in flux.