Investors are entering a Christmas-shortened trading week with two major concerns: the potential for a Santa Claus rally on Wall Street and the sentiment of holiday shoppers regarding the economy. Last week marked the final full trading week of 2025, characterized by volatility, particularly within the artificial intelligence sector. Market dynamics were influenced by mixed monthly jobs data and a moderation in consumer inflation. The S&P 500 managed to rise by 0.1% over the past week but remains slightly negative for what is typically a strong month for the markets. As of the most recent close, the index is up 16.2% year-to-date.
The stock market will have modified hours during the holiday season, closing early at 1 p.m. ET on Christmas Eve and remaining shut for Christmas Day. Investors are now looking ahead to the so-called Santa Claus Rally, which encompasses the last five trading days of the year and the first two of the new year. This year, the relevant dates are December 24, 26, 29, 30, and 31, followed by January 2 and January 5. Historically, the S&P 500 has seen an average gain of 1.3% during this seven-session stretch since 1950. Yale Hirsch, the founder of the Stock Trader’s Almanac, introduced the term “Santa Claus rally” in 1972. His son, Jeffrey Hirsch, has noted that a decline during this period could serve as an early warning sign for investors. He cautioned that it should prompt a closer examination of other economic indicators rather than signaling an imminent bear market.
In addition to market movements, consumer sentiment is under scrutiny, especially as the holiday shopping season is in full swing. The Conference Board’s consumer confidence index fell in November to its lowest level since April, with many respondents expressing concerns about job security and inflation—factors that are central to the Federal Reserve’s dual mandate. The upcoming consumer confidence reading for December is scheduled to be released on Tuesday at 10 a.m. ET. This follows a recent government report indicating an increase in nonfarm payrolls in November after a decline the previous month, despite a rising unemployment rate that has reached a four-year high. Fortunately, the inflation landscape has shown some improvement, with November’s consumer price index registering a smaller-than-expected year-over-year increase.
Looking ahead, the week will include several key economic announcements. On Tuesday, December 23, reports will be released at various times throughout the morning, including GDP data, durable goods orders, and industrial production figures. Additionally, the weekly jobless claims report will be available on Christmas Eve.
Overall, as trading slows for the holidays, focus will turn to economic indicators and consumer confidence to gauge the potential direction of the markets heading into the new year.
