US vs Korea Santa Rally Features | S&P500 Probability and KOSPI Tax Issues

The Two Faces of the Santa Rally: US vs Korea

In the stock market, there is a belief that "Santa Claus comes to give gifts in December," known as the 'Santa Rally'. However, this formula does not apply equally to all countries. While the US market shows a statistically high probability of rising, the Korean market has to fight against structural selling pressure. Today, marking the closing day of December 31, 2025, we analyze the structural differences between the two markets and the dramatic turnaround of the Korean market this year.

US vs Korea, The Truth of the Santa Rally | Mismatch of Statistics and Taxes

1. US Market: "Santa is a Regular Guest on Wall Street"

In the US market, the Santa Rally is not just a hope, but a historically proven statistical pattern. Based on the S&P 500 index, the probability of a rise during the last 5 trading days of December and the first 2 trading days of the New Year reaches a staggering 76%.

Why the Rise is Natural

• Strong Consumption: The year-end holiday shopping season, leading from Black Friday to Christmas, stimulates expectations for corporate earnings.
• Institutional Vacation: When institutional investors close their books (Book Closing) and go on vacation, selling volume drops sharply, allowing the index to rise easily even with small buying pressure.
• Absence of Tax Issues: Unlike Korea, there are no punitive taxes imposed simply for holding stocks at the end of the year, so there is little incentive to sell.

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2. Korean Market: "Tax Wall Blocking Santa"

On the other hand, December in the Korean market (KOSPI, KOSDAQ) is traditionally a month where 'supply and demand distortion' occurs. This is because there are unique institutional factors in Korea that turn Santa away just as he is about to arrive.

Category	Hindrance Factors and Characteristics
Major Shareholder Capital Gains Tax	If you hold a certain amount of a specific stock, you are classified as a 'major shareholder' and subject to heavy taxes. To avoid this, a selling bomb from 'Big Hands' pours out right before the year-end cutoff date.
Ex-Dividend	On the day after the right to receive dividends is confirmed, the stock price is artificially adjusted downward. Also, short-term financial investment funds that entered solely for dividends exit like an ebbing tide.

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3. The Reversal of 2025: The Year Fundamentals Won

However, December 2025 was different. The Korean stock market also moved in step (Coupling) with the US, showing a strong year-end rally. This was because corporate earnings strength (Fundamentals) was robust enough to overshadow the chronic supply and demand headwinds.

Earnings improvements driven by the semiconductor supercycle and the settlement of the government's 'Value-up Program' made the "appeal of holding stocks" higher than the "selling to avoid taxes." Ultimately, 2025 proved that the Korean market can also break the jinx if earnings support it.

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4. Conclusion: Strategy for January 2026

Both the US and Korea closed the year with a smile. Now, the market's eyes turn to the 'January Effect'. While the US might take a breather due to fatigue from the year-end rally, Korea enters a period where funds that left to avoid major shareholder status flow back in. It is necessary to pay attention to small and mid-cap stocks or oversold stocks that were alienated from the December rally.

Key Summary:
While the US is statistically strong in December, Korea tends to be weak due to tax issues. However, in 2025, strong fundamentals overcame structural weaknesses, allowing both countries to enjoy the 'Santa Rally'.

The content of this blog is for reference only for investment judgment, and investment decisions must be made under the individual's own judgment and responsibility. Under no circumstances can the information in this blog be used as evidence of legal liability for investment results.