Year-End Rally or Not?Three Events to Watch
The S&P 500 bounced back last week and has recouped most of the November pullback and is poised to stage a year-end rally, if a few remaining catalysts don’t provide any negative surprises. And since the holiday period is one filled with additional distractions and commitments, I wanted to provide a list of potential events that will likely decide if we get a Santa Claus rally into year-end (and new highs) or more volatility.
Key Remaining Event 1: FOMC Decision (Wednesday, 12/10).Dovish commentary and data have been an important part of this recent market rebound and that needs to be continued if the S&P 500 is going to hit new highs. It’s more likely than not that the Fed cuts rates again at this meeting, but it’s not a foregone conclusion and the Fed could hold rates steady. The potentially bigger question is whether the Fed signals a pause in rate cuts in 2026 (which would be a negative). Markets will need dovish reinforcement at this meeting to fuel a year-end rally.
Key Remaining Event 2: ORCL Earnings (Monday, 12/8) Repairing AI Enthusiasm. Concerns about gargantuan cap-ex and deteriorating financial ratios for major AI linked tech firms are one of the causes of recent AI skepticism, which was the main reason for the pullback in stocks earlier this month. In many ways, ORCL is now the poster child for these concerns, as the company commits hundreds in billions in cap-ex to build out AI infrastructure, leading to real deterioration in its financial ratios (which has been reflected in a rise in ORCL CDS pricing). ORCL needs to reaffirm that it’s confident all these investments will have positive ROI and it’s staying fiscally responsible to stop the growing concern that AI hyper scalers may be investing too heavily in the AI buildout and that the ROI of these investments will disappoint. I find this event the most concerning. As a result, I am thinking that we will move some of our money to dividend/bond investments after the first of the year.
Key Remaining Event 3: November Jobs Report (Tuesday, 12/16). Markets have been flying somewhat blind since the government shutdown, as government data has been nonexistent, but that will change in a big way starting this week as we get a lot of updated data on growth and the labor market. However, the most important remaining economic report of the year is the November jobs report, which will be released two weeks from tomorrow. The November jobs report needs to show stable labor market trends because stocks at these levels very much assume solid economic growth. If growth becomes a concern in 2026, that will be a major surprise negative.
Bottom line, the market has again proved resilient by rebounding from the November pullback, but a rally into year-end is not a foregone conclusion. The issues that caused the volatility earlier this month are not fully resolved, and if these events turn out to be negatives for the market, then we will likely see a rebound of November volatility into year-end. Not to worry, as our performance YTD has been good.
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Source:Seven's Report 12-1-25