The Holiday Trading Effect: Timing, Liquidity and Investor Impact

Key takeaways

Analysis of multi-year trading data reveals liquidity typically drops across asset classes from November to early January, often leading to wider spreads, slower execution and higher trading costs.
Market behavior diverges from historical norms during late November and late December as participation declines globally.
Specific to 2025, the MSCI semi-annual rebalance on Nov. 25 is expected to lift global volumes well in excess of normal.
We believe investors who plan around these seasonal patterns—adjusting timing, execution and coordination—can reduce implementation risk and cost.

Markets don’t sleep over the holidays, but they do slow down. Historical trading patterns show consistent liquidity shifts from late November through early January.

What the data tells us

We’ve analyzed several years of global trading activity and identified recurring patterns of reduced liquidity as markets approach year-end.

Regardless of the country, multiple factors should be considered when trading near the end of the year. Why? Because from late November through New Year’s Day, there is a confluence of holidays that historically have had a significant impact on liquidity, spreads and opportunity costs.

When properly managed, these factors—across all asset classes—can yield positive outcomes. On the flip side, when these factors are managed poorly, or when the unique elements of market closures are overlooked, the probability of a suboptimal result increases.

Below, we examine the global liquidity environment across asset classes during this end-of-year timeframe. These observations are based on our decades of experience as a trading solutions provider and are intended to serve as approximate figures.

The Thanksgiving week slowdown (late November)

Even though Thanksgiving is largely a U.S.-based holiday, its impact is felt globally. Because the U.S. comprises roughly 50% of the overall global market, U.S.-specific holidays can have outsized influence on liquidity and volumes worldwide.

U.S. equity volumes typically fall to 80% of normal the day before Thanksgiving and roughly 45% the day after, which is a half-day session.

Europe and Asia remain active but see secondary effects, with volumes 10–25% below average.

One thing to consider is that there can be a catch-up period starting on the Monday after Thanksgiving, with outsized volumes on T+2 through T+5.

Specific to this year, the MSCI semi-annual rebalance will take place on Nov. 25. We estimate that this, along with month-end volume considerations, will increase global volumes well in excess of normal volumes. However, with the Thanksgiving holiday falling two days later, overall liquidity following the rebalance is likely to remain impacted.

The Mid-December fade

Across asset classes, participation starts to decline by mid-December as investors wind down positions and liquidity providers reduce exposure.

FX markets are among the first to feel it, with volumes running 30–50% below normal by the second half of the month.

In fixed income, dealer inventory thins and bid-offer spreads widen—signs of constrained liquidity across both U.S. and European markets.

Volume declines of 20–40% in Europe and up to 50% in Asia are typical.

The late December lull and early January recovery

From Dec. 23 through New Year’s Day, global equities often trade at 45–70% of normal volumes, with similar slowdowns in derivatives and credit markets.

The quietest sessions of the year tend to coincide with overlapping holidays—Christmas Eve, Boxing Day and regional banking closures.

Trading conditions typically normalize within the first week of January as participation returns.

Lower volume levels historically tend to have larger impacts when moving in or out of positions, leading to more significant cost implications. Spreads widen, implicit costs increase and opportunity costs rise as trade timelines stretch.

What this means across asset classes

These seasonal divergences appear consistently across our multi-year dataset:

Equities — Lower volumes magnify market impact and increase implicit costs. Investors executing transitions or large allocations face higher opportunity costs as trade timelines stretch.
Fixed income — U.S. volumes are typically down around 20% in December, while European fixed income declines 20–40% and Asia 40–50%. Spreads widen, liquidity is constrained and execution may require longer time horizons. Less dealer inventory means fewer offerings in the marketplace—yet patience is often rewarded.
Foreign exchange — Liquidity declines steadily through year-end. While top-of-book pricing may remain tight, market depth weakens, making larger trades more difficult to complete efficiently. Christmas Eve and Boxing Day are historically the quietest days, with volumes roughly 20% of normal. The week between Christmas and New Year’s typically runs at 50–70% of normal levels.
Derivatives — Over the past decade, global futures and options volumes in late December have averaged 40% below normal levels. Asian futures volumes usually decline about 20%, and European volumes fall roughly 0–10%. The reduction is most acute during the final week of December, when participation thins further.

Turning insight into execution

We view year-end not as a time to retreat from trading, but as a time that rewards preparation.
Investors who map their execution timelines to these known liquidity cycles can reduce implementation risk and achieve more consistent outcomes.

That often means completing major trades before mid-December or waiting until early January—when liquidity, dealer participation and settlement normality return.

Visibility, coordination and patience remain the key ingredients of effective execution during this seasonal divergence.

Because portfolio needs don’t always align neatly with the calendar, partnering with an experienced trading team can help manage complexity, coordinate across time zones and ensure efficient outcomes when liquidity is tight.

Investor implications

Understanding how trading conditions evolve between late November and early January helps investors calibrate strategy, manage costs and avoid unnecessary volatility.

To help navigate these year-end complexities, our Institutional Trading Calendar provides an at-a-glance view of market holidays and other days with reduced liquidity. Updated regularly, this calendar is a practical tool for institutional investors to plan trades and manage liquidity across regions, helping them anticipate and navigate the reduced market activity that often occurs during holidays.

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Important information pertaining to the hypothetical example: Past performance does not predict future returns. Return level is proportionately scaled in line with cash level to be overlaid. Source: Russell Investments. Assumptions: Average cash level 1.0%, 10-year history from 12/31/2023, gross of fees. Opportunity cost from not securitizing cash varies by asset allocation and time period, and is represented by horizontal bars as marked within the chart legend. Target asset allocation used: 0% cash, 74% MSCI World, 26% Global Aggregate (GBP Hedged). For illustrative purposes only. Does not represent any actual investment. Indexes are unmanaged and cannot be invested in directly. Performance benefit (net) of overlaying cash by last 5 individual calendar year is as follows: 2023:20 bps, 2022:-17bps, 2021:16bps, 2020:14bps, 2019:23bps.

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