The State of Markets: “Santa Rally Ahead?”
Several US indices performed well this week. In particular, with the Fed cutting rates and announcing plans to expand its balance sheet, a number of indices made new all-time highs. That was most marked in cyclically sensitive parts of the market (e.g. in the DJ Transports and Russell 2000 indices). Tech heavy markets, in contrast, generally underperformed (e.g. see the NASDAQ100). Illustrating that divergence, the S&P500 failed to break convincingly above its late October highs, while the equally weighted S&P500 pushed above its recent trading range (see chart below).
Next week is typically when the ‘Santa Rally’ begins in earnest, i.e. equities are seasonally strong into year-end. If it happens, the key question is whether this rally will be led by cyclicals, or whether tech stocks will also participate (and ‘catch up’, after lagging this past week). As of today session, AI-themed stocks are notably lower on the warning from Broadcom (-11.2%) that their profit margins may be thinner than expected going forward.
More central bank policy decisions are due next week: the BoE and ECB are both on Thursday, followed by the BoJ on Friday. It’s also a big week for US macro data, with November nonfarm payrolls and CPI due on Tuesday and Thursday respectively. Other key data include the NAHB index (Monday); housing starts & permits, retail sales, and S&P PMI data (all on Tuesday). That will be followed by PCE income and spending (and inflation) on Friday. Elsewhere, there are manufacturing and service sector PMIs due in Europe and Asia. It’s also a key week for the UK, with employment and wage data due on Tuesday, CPI & RPI inflation on Wednesday, followed by retail sales on Friday. Please see below for a full list of upcoming macro data, earnings, and events.
Key chart: Equally weighted S&P500 index, with its 50 & 200 day moving averages
Upcoming Important Data/Events This Week:
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Events: |
NB despite the re-opening of the US government, some US macro data releases are still delayed (beyond their original publication date). Bank of England rate decision (with Statement and Minutes but no live press conference, Thurs, 12pm); ECB rate decision (Thurs, 1:15) followed by press conference held by Lagarde (1:45pm); BOJ rate decision (Fri, 3am). |
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Monday: |
NAHB homebuilders index (Dec, 3pm). |
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Tuesday: |
US nonfarm payrolls, hourly earnings & unemployment data (Nov, 1:30pm); US housing starts & building permits (Sept, 1:30pm); US retail sales (Oct, 1:30pm); US S&P manufacturing & service sector PMIs (December first estimates, 2:45pm). |
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Wednesday: |
UK headline & core CPI, RPI & PPI (Nov, 7am). |
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Thursday: |
US headline & core CPI (Nov, 1:30pm). |
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Friday: |
US personal income & spending including headline & core PCE (Oct, 1:30pm); US existing home sales (Nov, 3pm). |
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Key earnings: |
Micron (Wed); Nike, FedEx (Thurs). |
Key Research
Longview on Friday, 12th December 2025:
“US Labour Market, Disinflation, & Fed Policy in 2026 – PLUS Strategic AA Macro Updates”
On the surface, the Fed seems to be largely finished with its rate cutting cycle. That is, after three cuts this year (matching 2024), it views the policy rate to be “within a range of plausible estimates of neutral” (as Powell noted on Wednesday, see HERE). The dot plots (SEPs), therefore, only have one rate cut for 2026, while the rates market expects something similar (a little more than two 25bps cuts, i.e. current pricing -> 62bps next year).
With that, the Fed is also starting to expand its balance sheet. Starting today, it will buy about $40bn of Treasury bills per month, in order to maintain “ample reserves” (albeit the size will taper off next year, see HERE for detail).
Key North American Macro Data & Events:
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Events: |
NB despite the re-opening of the US government, some US macro data releases are still delayed (beyond their original publication date). Speeches by Fed’s Miran at Columbia University ‘The Inflation Outlook’ (Mon, 2:30pm), Williams (Mon, 3:30), Waller at Yale University ‘Economic Outlook’ (Wed, 1:15pm), Bostic (Wed, 5:30pm); speech by BOC’s Governor Tiff Macklem (Tues, 5:45pm). |
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Monday: |
Canadian existing home sales (Nov, 10am); US Empire manufacturing (Dec, 1:30pm); Canadian housing starts (Nov, 1:15pm); Canadian headline & core CPI (Nov, 1:30pm); Canadian manufacturing sales (Oct, 1:30pm); NAHB homebuilders index (Dec, 3pm). |
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Tuesday: |
US ADP weekly employment (1:15pm); US nonfarm payrolls, hourly earnings & unemployment data (Nov, 1:30pm); US housing starts & building permits (Sept, 1:30pm); US retail sales (Oct, 1:30pm); US New York Fed service sector business activity (Dec, 1:30pm); US S&P manufacturing & service sector PMIs (December first estimates, 2:45pm); US business inventories (Sept, 3pm). |
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Wednesday: |
US metropolitan area employment and unemployment (Sept, 3pm). |
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Thursday: |
US headline & core CPI (Nov, 1:30pm); Canadian employment change (Oct, 1:30pm); US Philadelphia Fed business outlook (Dec, 1:30pm); US weekly jobless claims (1:30pm); US Kansas City Fed manufacturing sector activity (Dec, 4pm); US total TIC flows (Oct, 9pm). |
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Friday: |
Canadian retail sales (Oct, 1:30pm); US personal income & spending including headline & core PCE (Oct, 1:30pm); US existing home sales (Nov, 3pm); US Michigan Sentiment (December final estimate, 3pm); US Kansas City Fed service sector activity (Dec, 4pm). |
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Key earnings: |
Micron (Wed); Nike, FedEx (Thurs). |
Fig B: US housing starts & building permits (millions)
Key European Macro Data & Events
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Events: |
ECB rate decision (Thurs, 1:15) followed by press conference held by Lagarde (1:45pm), speeches by ECB’s Wunsch in Brussels (Fri, 8am) & Kocher in Vienna (Fri, 9am). |
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Monday: |
Spanish home sales (Oct, 8am); Eurozone industrial production (Oct, 10am). |
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Tuesday: |
Spanish labour cost (Q3, 8am); HCOB manufacturing & service sector PMIs for France (8:15am), Germany (8:30am) & Eurozone (9am) – all December first estimates; Italian headline & core CPI (November final estimate, 9am); German & Eurozone ZEW survey – expectations & current situation (Dec, 10am); Italian & Eurozone trade balance (Oct, 10am). |
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Wednesday: |
German IFO business climate (Dec, 9am); Eurozone labour cost and headline & core CPI (Q3 & November final estimate, 10am). |
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Thursday: |
French INSEE business & manufacturing confidence (Dec, 7:45am); Eurozone construction output (Oct, 10am). |
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Friday: |
German GfK consumer confidence (Jan, 7am); PPI for Germany (7am) & France (7:45am) – both for November; Italian ISTAT consumer & manufacturing confidence (Dec, 9am); current account balance for Eurozone & Italy (Oct, 9am); Italian industrial sales (Oct, 10am); Eurozone consumer confidence (December first estimate, 3pm); French retail sales (Nov). |
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Key earnings: |
N/A |
Fig C: German IFO business climate (index)
Key UK Macro Data & Events
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Events: |
Bank of England rate decision (with Statement and Minutes but no live press conference, Thurs, 12pm). |
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Monday: |
Rightmove house prices (Dec, 12:59am). |
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Tuesday: |
Employment, jobless claims & average weekly earnings (Nov/Oct, 7am); S&P manufacturing & service sector PMIs (December first estimates, 9:30am). |
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Wednesday: |
Headline & core CPI, RPI & PPI (Nov, 7am); Land Registry house price index (Oct, 9:30am). |
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Thursday: |
N/A |
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Friday: |
CBI industrial trends survey (Dec, 11am); Gfk consumer confidence (Dec, 12:01am); public sector finances (Nov, 7am); retail sales (Nov, 7am); CBI distributive trade survey (Dec, 11am). |
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Key earnings: |
Accenture, Cintas (Thurs). |
Fig D: UK CPI (headline & core, Y-o-Y %)
Key Asia-Pacific Macro Data & Events
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Events: |
BOJ rate decision (Fri, 3am); speeches by RBA’s Brishetto (Mon, 2:20am) & Jones (Mon, 10:15pm). |
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Monday: |
Chinese home prices (Nov, 1:30am), retail sales, industrial production and property data (Nov, 2am) & FDI (Nov); Australian Westpac consumer confidence (Dec, 11:30pm); Australian S&P Global manufacturing & services sector PMIs (December first estimates, 10pm); Japanese tertiary industry index (Oct, 4:30am). |
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Tuesday: |
Japanese S&P manufacturing & services sector PMIs (December first estimate, 12:30am); Australian Westpac leading index (Nov, 11:30pm); Japanese imports/exports, & trade balance (Nov, 11:50pm); Japanese machinery orders (Oct, 12:50pm). |
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Wednesday: |
N/A |
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Thursday: |
Australian consumer inflation expectations (Dec, 12am); Japanese CPI (Nov, 12:30pm). |
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Friday: |
Australian private sector credit (Nov, 12:30am). |
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Key earnings: |
N/A |
Fig E: Japanese CPI (headline & core, Y-o-Y %)
This Week:
Longview on Friday, 12th December 2025:
“US Labour Market, Disinflation, & Fed Policy in 2026 – PLUS Strategic AA Macro Updates”
US: Quarterly Asset Allocation Update No. 64, 11th December 2025:
“Key for 2026 US Outlook is Inflation Forecast. Our View -> Downside Surprise Expected a.k.a. Capex or Consumer Led Acceleration?”
China: Quarterly Asset Allocation Update No. 64, 10th December 2025:
“The Limits of Stimulus a.k.a. Consumer Retrenching Underway”
Daily Dose of Macro & Markets:
Daily Dose of Macro & Markets 11th December 2025:
“Squaring The Oil Market Debate”
Daily Dose of Macro & Markets 10th December 2025:
“Is a Mid-Cycle Re-Acceleration Starting?”
Daily Dose of Macro & Markets 9th December 2025:
“Rate Hikes! Really?”
Weekly Risk Appetite Gauge:
Weekly Assessment of the Market’s ‘Appetite for Risk’, 8th December 2025:
‘S&P500, The Fed, & December Seasonality’
Last Week:
Longview on Friday, 5th December 2025:
“Tactical Asset Allocation, the Broadening and the Broken Western System (a.k.a. The King is Dead–> Long Live the King)”
Tactical Equity Asset Allocation Update No. 263, 2nd December 2025:
“US Equities & The Challenge of the ‘Midterms’”
Daily Dose of Macro & Markets:
Daily Dose of Macro & Markets 4th December 2025:
“US Economy: A Tale of Two Cities -> More Evidence”
Daily Dose of Macro & Markets 3rd December 2025:
“Falling Bank Capital Requirements –> Supportive UK Economic Growth”
Daily Dose of Macro & Markets 2nd December 2025:
“BoE: The Growing Case For More Cuts”
Weekly Risk Appetite Gauge:
Weekly Assessment of the Market’s ‘Appetite for Risk’, 1st December 2025:
‘After That, What's Next?’