🎅🏼 Santa Rally or Coal in the Stocking? December's Historical Weirdness

You know the Santa Claus rally - that magical time when stocks supposedly levitate higher between Christmas and New Year's like they're being pulled by reindeer

Author

Jason Paloma
December 07, 2025 • Estimated Reading Time: 19 minutes

😎 Market Vibes

🎅🏼 Santa Rally or Coal in the Stocking? December's Historical Weirdness

Well, well, well. Here we are, one week into December 2025, and Wall Street's favorite holiday tradition is looking about as reliable as your uncle's promise to "only have one drink" at the office party.

You know the Santa Claus rally - that magical time when stocks supposedly levitate higher between Christmas and New Year's like they're being pulled by reindeer. Historial data shows the S&P 500 has gained during this seven-day window 79% of the time since 1950, with an average pop of 1.3%. Sounds great, right? Like a guaranteed gift under the tree.

Except 2025 is shaping up to be the year where Santa might be checking his naughty list twice before showing up.

As of Friday, the S&P 500 is currently hovering around 6,000-7000, the Nasdaq at 23,500, and the Dow at 47,850. These aren't terrible numbers - the S&P is only about 0.4% off its recent highs. But here's the thing: this year has been weird. Like, "DeepSeek meltdown in February, surprise April tariffs, months of AI valuation hand-wringing" weird.

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🤔 The Fed's December Dilemma (And Why It Matters More Than Santa)

Let's talk about the elephant in the room wearing a Powell mask. The Federal Reserve's December 10 meeting is arguably the single most important catalyst for where markets end this year.

Currently, markets are pricing in an 87% probability of a 25 basis point rate cut. That's up sharply from about 30% just a week ago.

But here's where it gets interesting. The delayed September PCE data (thanks, government shutdown) came in showing core inflation at 2.8% annually, slightly below the 2.9% estimate. Market observers note this as potentially supportive data. Jobless claims hit their lowest level in about 3 years.

The question mark? Nobody knows if the Fed will actually deliver this cut AND sound dovish about future cuts. If Jerome Powell shows up sounding like the Grinch about 2026, even a December cut could spark volatility. And let's not forget - there's speculation that Kevin Hassett could be nominated as the next Fed chair given his support for faster rate reductions. That's adding another layer of uncertainty to an already unpredictable market environment.

Bitcoin, that supposed inflation hedge and "digital gold," is trading around $91,000-$92,500 after falling from its October high near $126,000. It's down roughly 17% in November alone.

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💭 Why This December Feels Different (Spoiler: It's Not Just You)

Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets, summed it up perfectly: "None of the months this year have behaved the way they have seasonally."

Now we're in December, and the setup for a classic advance isn't clear at all. Lower trading volume? Check. Holiday cheer? Questionable. Institutional investors taking vacation while retail investors drive prices higher? Maybe, but retail has been burned enough this year to be cautious.

Omar Aguilar, CEO of Schwab Asset Management, sees "a lot of dispersion and a lot of discrepancy" beneath the surface. New macro data is arriving unevenly post-shutdown. Leadership is rotating across sectors. The megacap tech stocks that powered most of 2025's gains are swinging wildly - they're both the market's rocket fuel AND its anchors.

And here's the kicker: the options market is showing more bearish sentiment than usual. Traders are buying downside protection instead of betting on seasonal strength. That's not exactly the setup for a feel-good holiday rally.

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✍️ The Bitcoin Situation (Or: How I Learned to Stop Worrying and Love the Volatility)

Let's check in on our favorite digital drama queen. Bitcoin is consolidating around $91,000 after a brutal November that saw it drop 17%. It briefly dipped at the start of December before bouncing back above $93,000 on Wednesday.

The technical picture is messy. Strong resistance sits at $92,500-$93,500, which marks the neckline of a descending structure from November's highs. Bulls are watching to see if it can clear roughly $93,200 to break the pattern of lower highs. On the downside, $91,000 is acting as crucial support, with the next major zone sitting between $83,000-$85,000.

What's driving this? A cocktail of factors: roughly $2 billion in Bitcoin ETF outflows, weak December historical performance (the long-term average return is 8.42%, but the median is only 1.69%), and whales continuing to send coins to exchanges rather than accumulate.

The Exchange Whale Ratio - which measures how much of total inflows come from the top 10 large wallets - climbed from 0.32 earlier this month to 0.68 on November 27. It's eased to 0.53, but that's still in a zone that historically reflects whales preparing to sell, not buy. Long-term holders have been reducing positions for more than six months straight.

Analysts are split on whether Bitcoin can reclaim $100,000 by year-end. Some point to the Fed rate cut and growing institutional adoption as potential catalysts. Others note the roughly 30% drawdown from October's all-time high near $126,000 as a typical mid-cycle correction - painful but not fatal.

Either way, December's setup is uncertain. Bitcoin could stabilize above production-cost estimates around $90,000 and grind higher into year-end, or it could test the $83,000-$85,000 support zone before any meaningful recovery.

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The Gold Rush Nobody Saw Coming

While everyone was obsessing over whether Bitcoin would hit $100,000, gold quietly went absolutely bonkers. It's now trading above $4,200 per ounce - a historic milestone that has the precious metals crowd doing victory laps.

Gold futures rose above $4,270 during the week, bringing the yellow metal within shouting distance of its October record high around $4,336.

Here's what's fascinating: gold is behaving exactly like it should during periods of monetary uncertainty. Lower real interest rates make non-yielding assets like gold more attractive. Geopolitical tensions are elevated. Dollar strength has been variable. Central banks continue accumulating gold reserves. It's all adding up to a perfect storm of demand.

Silver jumped too, rising in sympathy as investors flocked to precious metals. The CME FedWatch Tool showed rate cut odds climbing throughout the week, adding fuel to the precious metals rally.

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What About Stocks That Aren't Named Nvidia?

Let's zoom out from the macro chaos and talk about what's actually happening in individual names. Because while everyone obsesses over whether the S&P 500 will hit 7,000 or crater to 6,500, there are legitimate stories playing out across sectors.

Salesforce offered a stronger-than-expected revenue forecast this week and jumped. Meta surged almost 4% after Bloomberg reported executives are considering budget cuts as high as 30% for the metaverse group. (Turns out burning billions on digital worlds nobody uses isn't a great business model - who knew?)

Apple closed at a record high despite having a fairly pedestrian year with only a 12% gain. BTIG's chief market technician noted the stock could face pressure in coming weeks as it's become extended. Netflix fell 3% in premarket trading after announcing it would acquire Warner Bros. Discovery's film studio and streaming service HBO Max for $72 billion - a deal the Trump administration views with "heavy skepticism."

Natural gas futures touched $5.046 per million BTUs, the highest since late December 2022, as cold weather hit the Midwest and East Coast. Stocks of natural gas producers benefited, with the First Trust Natural Gas ETF up almost 7% for the quarter.

The retail sector showed mixed results. American Eagle Outfitters jumped nearly 13% after beating earnings estimates, while other retailers struggled with persistent inflation concerns and cautious consumer spending.

What's the common thread? Individual company fundamentals still matter, even when macro forces are dominating headlines. Strong execution, cost discipline, and realistic guidance are getting rewarded. Overpromising and underdelivering? Not so much.

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Bottom Line: Expect the Unexpected (And Maybe Some Coal)

So where does all this leave us as we head deeper into December 2025?

The Santa Claus rally is real - statistically speaking. The data doesn't lie. Since 1950, those final five trading days of December plus the first two of January have delivered gains 79% of the time. But here's what the data also shows: patterns break. 2024 broke the pattern. 2015 broke the pattern. And 2025 might be setting up to do the same.

The setup just isn't there. We've got a Fed decision that could go either way. We've got AI valuations that swing between "generational opportunity" and "dot-com bubble 2.0" depending on which analyst you ask. We've got Bitcoin looking shaky, gold looking strong, and retail investors who've been whipsawed enough times this year to approach December with extreme caution.

Does that mean stocks will definitely fall? Nope. Could we still get a year-end rally if the Fed delivers a dovish cut and corporate earnings hold up? Absolutely. But betting on historical patterns in a year that's defied every seasonal trend seems like hoping for a Christmas miracle rather than following a solid strategy.

The smart approach? Stay informed. Watch for the Fed's tone on December 10. Don't chase moves based on hope. Keep some powder dry for opportunities. And maybe, just maybe, prepare for the possibility that Santa's sleigh got delayed at customs this year.

Because if 2025 has taught us anything, it's that the market doesn't care about what's "supposed" to happen. It only cares about what actually does.

Trade smart out there. And if Santa does show up? Great. But don't count on it.

🔥 What’s Heating Up This Week

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