It’s the holiday season, but the stock market’s festivities have been anything but cheerful this week.
At the week’s start traders were buoyed by a record-breaking Nasdaq 100 topping 22,000 and an optimistic outlook on interest rate cuts ahead of the Federal Reserve meeting.
All signs pointed to the Santa Rally – a time Wall Street traditionally celebrates with stocks climbing during the final stretch of the year – making its grand entrance yet again in 2025.
Yet, just as traders were preparing for a festive year-end bull run, the Grinch arrived midweek to throw a wrench in the celebrations.
The Grinch Steals The Show
Wednesday marked a dramatic turn of events as the Federal Reserve’s hawkish tone sent shockwaves through the markets.
Chair Jerome Powell delivered a lump of coal to investors by declaring a “new phase” for monetary policy. While the Fed had already cut rates by 100 basis points since September, Powell hinted at a prolonged pause, citing rates moving “meaningfully” closer to neutral territory.
The implications were clear: the days of aggressive cuts are over. Even worse than that, the Grinch didn’t rule out the possibility of a rate hike next year. This unexpected twist sent shivers down traders’ spines, leaving markets rattled.
The CBOE Volatility Index or VIX – Wall Street’s so-called fear gauge – spiked over 70% on Wednesday, its sharpest single-day surge since February 2018.
The S&P 500 and Dow Jones Industrial Average recorded their worst daily performances in over two years, while tech stocks sank like a stone in deep water.
Hopes for a Santa Rally seemed to crumble as the Grinch stole the show.
A Christmas Miracle?
Just when it seemed all was lost, Friday brought a glimmer of hope—the kind of plot twist only a Christmas story could deliver.
Fresh inflation data offered an unexpected gift to traders: the Fed’s personal consumption expenditure (PCE) price index rose by 2.4% in November, falling short of the anticipated 2.5%. Even more encouraging, the core PCE, which excludes volatile food and energy prices, held steady at 2.8%, undercutting predictions of 2.9%.
This softer-than-expected inflation print was the equivalent to finding a shiny new toy under the tree.
Risk appetite rebounded swiftly, with traders rushing to scoop up the stocks battered during the week’s earlier sell-off.
Sentiment brightened, and with it, the Santa Rally narrative began to regain momentum.
The Santa Rally And Its Legacy
The stock market has a long-standing tendency to rally during the last trading days of December.
According to data from Seasonax, the S&P 500 has posted gains during the Dec. 20–Dec. 31 period in 76 out of the past 96 years, averaging a 1.92% return. Over the last eight years, this year-end rally has been remarkably consistent, delivering positive returns each time.
In the past three decades, the S&P 500 has ended the year on a high note in 24 of 30 instances. Even the losses have been relatively mild, with the most recent December downturn occurring in 2022 when the index slipped by 1.8% during the final days.
With six trading days left in 2024, traders may still have time to save the Santa Rally.
10 Stocks To Watch For Year-End Gains
Looking back at 20 years of data, here are 10 standout names within the S&P 500 index that have consistently delivered strong year-end performances:
| Stock | Avg. Return | Max Gain | Max Loss | Win Ratio |
|---|---|---|---|---|
| Freeport-McMoRan Inc FCX | +3.63% | +14.63% | -13.51% | 90% |
| Illumina, Inc ILMN | +3.62% | +20.76% | -2.56% | 80% |
| Newmont Mining Corporation NEM | +3.37% | +16.14% | -3.66% | 75% |
| The Mosaic Company MOS | +3.29% | +13.26% | -5.98% | 75% |
| Global Payments Inc GPN | +3.06% | +9.31% | -2.12% | 75% |
| CBRE Group, Inc CBRE | +2.94% | +13.46% | -2.25% | 75% |
| Invesco Ltd IVZ | +2.80% | +10.23% | -2.83% | 70% |
| ON Semiconductor Corp ON | +2.73% | +11.45% | -3.78% | 70% |
| Mohawk Industries, Inc MHK | +2.60% | +13.58% | -6.57% | 70% |
| Western Digital Corp WDC | +2.59% | +22.24% | -3.78% | 65% |
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