Stocks Poised for ’Most Wonderful Time of the Year’ According to Bank of America Analysis

Wall Street's seasonal patterns suggest investors should buckle up for a potentially explosive fourth quarter.

The Santa Rally Cometh

Bank of America's research team identifies historical trends pointing toward strong year-end performance. Historical data reveals consistent upward momentum during the final stretch—though past performance never guarantees future results, as regulators love to remind us.

Institutional Positioning

Major funds are rebalancing portfolios ahead of the new year, creating predictable liquidity flows. This annual ritual often generates the kind of market movements that make brokers smile all the way to the bank.

Seasonal catalysts combine with technical factors to create what analysts call the 'perfect storm' for bullish activity. Of course, on Wall Street, every storm has winners and losers—usually determined by who gets the information first.

Timing the Tinsel

The critical window for capturing these gains typically begins in late October and extends through December. Missing the entry point by just days can mean the difference between champagne celebrations and New Year's resolutions about finding a better financial advisor.

While traditional markets anticipate their holiday cheer, cryptocurrency traders watch with mild amusement—another year of stocks trying to match crypto's 24/7 volatility with their limited trading hours and market closures.

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Technology stocks tend to rise during the fourth quarter as well, with the Nasdaq 100 (NDX) up 69% of the time with an average gain of 6.16%.

Santa’s Coming to Town

Bank of America adds that investors should also watch out for the “Santa Rally,” a phenomenon where stocks often rise in the final weeks of December. Since 1950, the seven-day period spanning the last five trading days of December and the first two trading days of January has been positive 79% of the time with an average return of 1.3%, according to Investopedia.

The MOVE is often tied to lighter trading volumes, year-end portfolio adjustments, and a surge in holiday spending, all of which tend to support equities heading into January.