‘Santa Claus Rally’ Arrives Ahead of Schedule
The Santa Claus rally looks to have arrived slightly ahead of schedule. The classic Santa Claus rally covers the last five trading days of December and the first two of January. In 2025, that period starts on Christmas Eve (Dec 24) and runs through Jan 5, 2026. But with US stocks having posted gains for the last four sessions, it looks like year-end optimism is already rubbing off on stock markets.
It remains to be seen if this was just Santa warming things up for stocks before kicking on with things over the Christmas-New Year period, or if all his energy directed at equities has already been spent. Either way, with the S&P500 closing at a fresh record high, US GDP outstripping expectations by some margin, and with tariff concerns, which dominated proceedings for much of 2025 now receding, risk assets are looking relatively contented. Particularly after what has been a bumpy year.
Gold and silver have been hitting the accelerator pedal this week, with each precious metal chalking up fresh record highs in rather nonchalant fashion. With gold notching up the $4500 level, and silver breaching $70, the price activity reflects the growing appeal of these assets as a store of value, with US rates projected to head lower and global debt lingering as a potential trouble spot for markets. Thinner liquidity conditions this week, owing to the festive season, have likely amplified some of the price moves in the precious metals market but nonetheless the demand picture still looks solid.
Levels to watch for gold include moderate psychological resistance around $4500 followed by technical resistance around $4511. What could stop the bull run of gold and silver? Profit taking could set in with investors tempted to lock in gains on long positions in and around these record highs. But for now, the bullish outlook remains intact for the metals market.
Crude prices are mounting a recovery effort thanks to geopolitical headlines around US-Venezuela and Russia-Ukraine. This has allowed oil to bounce from the December lows, with traders focusing on potential short-term supply disruptions, rather than expectations that supply could outstrip demand in 2026. The push higher in US GDP also gave crude prices a lift. With US crude trading at around $58.40, resistance levels to watch include $58.90 and $60, with support at $57.50. The outlook for oil has a downside bias in the medium and long term on oversupply concerns, but geopolitical headlines in the short term could add volatility to the upside.
As mentioned, US GDP was the main economic release of the week, and it came in at 4.3% (on an annualised basis) for Q3, well ahead of the 3.3% expected and the 3.8% prior reading. The good news from the perspective of risk assets is that the economy looks to be in a much better place now compared to the post- ‘Liberation Day’ fears from earlier in 2025. The ‘bad news’ may be that we might have a prolonged wait for the next Fed rate cut if this pace of growth is maintained.
Looking ahead, not much else is scheduled on the economic calendar this week due to the holiday period. Tokyo Core CPI, due for release on Friday, could affect yen rates if it deviates much from the 2.5% inflation level expected.
