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STA Weekly Report – What Can We Learn From Holiday Returns?

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What Can We Learn From Holiday Returns?
Year-End Tax Planning and Financial Ideas
Weekly Snapshot of Global Asset Class Performance
401k Plan Manager  *Updated on 10/23/2018

What Can We Learn From Holiday Returns?

After October delivered a thrashing to broad swaths of the equity market, November opened with relative calm. However, equity markets have once again exhibited heightened volatility this week, just in time for the Thanksgiving Holiday.

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Source: STA Wealth Management, Bloomberg

Source: STA Wealth Management, Bloomberg

As we prepare for the holiday season, we thought it would be an appropriate time to look at how markets have historically behaved both leading up to and after the holidays.


The chart below compares the average daily returns for the three trading days before and after Thanksgiving broken into two date ranges: 1950-1989 and 1990-2017. From the chart, we can make several observations. First, the days just before Thanksgiving have historically generated positive returns regardless of the sample date range. Second, the average daily return for the 3 trading days before Thanksgiving and three trading days after Thanksgiving has been about 0.03%. This is nearly flat and suggests that this year’s pre-Thanksgiving market swings may be an outlier.

Source: CXOAdvisory

In fact, over the last 55 years (1963-2017), the S&P 500 has closed up on the Wednesday before Thanksgiving 76% of the time, has closed up the Friday after Thanksgiving 71% of the time, and has closed down the following Monday 64% of the time.

While the historical probabilities of a positive Thanksgiving week return appear high, the reality is that markets during the week of Thanksgiving offer a mixed bag of results.


Of course, Thanksgiving isn’t the only holiday ahead. Christmas is another holiday with stock market ties. Not only are holiday sales important to the consumer discretionary sector, but the time leading up to and after the Christmas holiday is known among investors for its potential to deliver a Santa Claus Rally.

The Santa Claus Rally as it is known describes sustained increases in the stock market during the last week of December that last into the first couple of days in January. However, what we have noticed is that the Santa Claus Rally often cited in the media, is rarely accompanied by statistical data. A paper on the subject titled “Yes, Virginia, There is a Santa Claus Rally: Statistical Evidence Supports Higher Returns Globally” was published in the Journal of Financial Planning and provides some insight, albeit while excluding the performance of the first two days of each year studied.

The study looked at the S&P 500 Index and found that the mean return during the holiday period is about 20 basis points, versus the mean return for the non-holiday trading days of only about 3 basis points. At the same time, the outperformance during the holiday period came with less risk as measured by standard deviation and suggests that holiday returns are superior from a risk/reward standpoint. Not only was this found to be the case domestically, but the study found better risk adjusted returns in several international markets as well.

However, this study left off two full trading days each year which may skew the results and not offer a full picture. However, we found another analysis that showed that over the past century equity markets are no more likely to rally than in other times of the year.

As a result, we think it is best to leave the short-term trading strategies around the holiday’s alone and instead focus on a longer-term investment discipline.

Asset Class Performance Table

If you have any questions, please feel free to email me at


STA Investment Committee

Luke Patterson, CEO & Chief Investment Officer
Mike Smith, President
Andrei Costas, Senior Investment Analyst (Equity Strategies)
Nan Lu, Senior Investment Analyst (Fixed Income Strategies)

Written By: Scott Bishop, MBA, CPA/PFS, CFP®

The end of the year presents a unique opportunity to look at your overall personal financial planning situation.   With factors like the 2018 tax law changes, life changes or just working towards your goals, now is an especially important time to review things.  It is always a good time to see if you are  on-track at your stage in life. Taking what we now know about the new tax law and weaving together all of the other areas of your personal finances is one of the key ways we provide value to you as your trusted adviser. Below are some things we’d like to help you think through before the year ends.

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Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by STA Wealth Management, LLC (“STA”), or any non-investment related content, made reference to directly or indirectly in this article / newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article / newsletter serves as the receipt of, or as a substitute for, personalized investment advice from STA.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  STA is neither a law firm nor a certified public accounting firm and no portion of the article / newsletter content should be construed as legal or accounting advice.  A copy of the STA’s current written disclosure Brochure discussing our advisory services and fees is available upon request. Please Note: If you are a STA client, please remember to contact STA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. STA shall continue to rely on the accuracy of information that you have provided.






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