A Santa Claus Rally

 12/19/2025

 

Santa Claus Rally Comin’ To Town

 

Friday, Dec. 19, 2025 11:00 AM CST

The stock market often rallies into the end of the year. Given the seasonal significance, it is referred to as the Santa Claus Rally.

It appears that rally is finally underway.

DOW Industrials peaked December 12 at 48,820. The market then declined to 47,900 or so, a 920point drop. But Thursday Dec 18, the market rallied and then gave back 414 points of the gain. This morning it has regained 273 points of the Thursday advance.

The Transports made a new high last Friday closing at 17,620. It appears that both indexes could make new highs by year end. That would be a positive Dow Theory buy signal. That means my prior suspicions of a stock market top are in serious doubt. Various measures of investor confidence are as high as ever, and that is not bullish. But the market goes where it wants.

Trump continually demands lower interest rates. He ignores that the FED can only set the overnight inter-bank lending rate, not the longer rates. The FED did his bidding lowering that rate to 3.75% . the FED had to as the 3-month Treasury Bill was trading right there. Now the FED also announces monthly purchases of  $40 B of Treasury Bills. This injects money into the markets. That was known as Quantitative Easing a few years back. Every time the FED bought Treasuries, QE, the stock market rose higher.  The ten-year yield is 4.15% and has not fallen as much as I thought it might.  Mortgage bonds average 12 years until they are rolled over due to home sales. The ten-year rate tends to set the direction of mortgage rates, hence its importance. Let’s keep a watch on the ten-year note.

Wednesday morning, crude oil prices made a stand right at the $55 level.  This column has noted the importance of that support level. The media latched on to the Trump Venezuela embargo of oil tankers. Our US Navy seized one.  Other empty ships are anchored outside the harbors, wary that they might be seized as well if carrying Venezuelan oil. This further pressures Cuba which is near totally dependent on such oil shipments.

This column does not usually cover political markets. It appears Trump is testing even his die-hard MAGA supporters. He made derisive comments on the tragic death of Rob Reiner and his wife. He is hawking a Trump watch on television. He fired the Board of the Kennedy Center, made himself Chairman, and appointed his faithful including Chief of Staff and Attorney General to the Board. The new Board promptly attempted to rename the 1964 Center, the Trump-Kennedy Center. The Board can no more do that than change the name of the Lincoln Memorial. And then there is the Department of War, not Defense. None of this will play well in the mid-terms.

Dennis.elam@att.net