Week Ahead: Santa rally on deck for the US500?

• US500 ↓ 1% month-to-date
• December historically good month for stocks
• ‘Santa Rally’ chatter + US data = fresh volatility
• Trader’s pricing in 27% chance Fed cuts rates in January 2026
• Technica levels: 50-day SMA, 6715 and 100-day SMA

You better watch out, because a Santa Claus rally could be coming to town!

December is historically one of the strongest months for the S&P500, with the index posting positive returns almost 80% of the time since 1950.

And with Christmas just around the corner, market chatter around a potential ‘Santa Rally’ is poised to intensify:

Monday, 22nd December

• CNY: China loan prime rates
• SPN35: Spain trade
• TWN: Taiwan unemployment
• GBP: UK GDP
• USDInd: US Chicago Fed National Activity Index

Tuesday, 23rd December

• SG20: Singapore CPI
• CAD: BoC meeting minutes
• AUD: RBA meeting minutes
• US500: US GDP, industrial production, durable goods, consumer confidence

Wednesday, 24th December

• TWN: Taiwan industrial production
• US500: US initial jobless claims
• US and most European markets close early on Christmas Eve.

Thursday, 25th December

• Christmas Day. Markets closed in the US, Canada and Europe.

Friday, 26th December

• JP225: Japan Tokyo CPI, unemployment, industrial production, retail sales
• Boxing Day. Markets closed in the UK, Canada, Australia and some EU countries

FXTM’s US500 jumped almost 1% on Thursday after US CPI unexpectedly slowed to 2.7% in November.

However, the index is still down 1% month-to-date amid concerns over sky-high AI-fuelled tech valuations.

Looking at the charts, prices remain somewhat bullish on the weekly charts - boasting gains of 15% year-to-date.

With less than two weeks left until the end of 2025, the question is whether the US500 will end the month positively.

Here are 3 factors to keep an eye on in the week ahead:

1) ‘Santa Rally’ chatter

As the countdown to Christmas enters its final stretch, anticipation may mount around a Santa Claus rally.

This financial phenomenon is where stocks generally rally in the last week of December and the first two trading days of the new year.

It is not fully clear whether it’s purely psychological or the product of some underlying financial forces, but history has shown that this is a recurring seasonal pattern.

The Santa Claus rally has averaged a 1.3% gain on the S&P 500 since 1950.

2) US economic data

On the data front, a string of high-impact data releases may influence Fed cut bets beyond 2025. These include GDP, Industrial production, and consumer confidence, among other data releases.

• The US500 is likely to trade lower if the stronger-than-expected data shaves the odds of a Fed cut in the first quarter of 2026.

• Should weak data support the argument for faster rate cuts next year, the US500 may receive a boost.

3) Technical forces

The US500 is under pressure on the daily charts with prices wobbling around the 50-day SMA.

• Should 6715 prove to be reliable support, prices may rebound back toward 6900 and the all-time high at 6934.3.

• Weakness below 6715 may open a path toward the 100-day SMA and 6510.