Final Macro Bumps, Is Santa Still Coming?

Moomoo Macro Moover joined discussion · Dec 2, 2025 03:16

We’re now in the final stretch of 2025, and the question is louder than ever: is Santa preparing another rally for Wall Street — the seasonal burst that has delivered gains nearly 80% of the time since 1950?

Final Macro Bumps, Is Santa Still Coming?

Institutional bulls like J.P. Morgan are calling for $S&P 500 Index (.SPX.US)$ to hit 8,000 by the end of 2026, and seasonality charts are flashing green. But despite the optimism, the path to a year-end melt-up is far from straightforward. We are facing a rare moment where a powerful structural bull market is temporarily trapped behind three macro hurdles. For December’s historical strength to unfold, the market must thread a very specific needle in the days ahead.

Part 1: The Macro Hurdles — Three Gates Santa Must Pass

Before the "Santa Rally" can officially launch, the market requires a specific sequence of events from the central banks and economic data. We need to see the following three "Green Lights":

The Fed: The Dovish Test

The market has already priced in a major easing of liquidity, yet we’ve now entered an uncomfortable “data vacuum” with no fresh signals to guide policy. Despite this silence, the pressure is squarely on the Federal Reserve to validate the narrative investors have already embraced. As of today, interest-rate futures imply an 86.5% probability of a cut at the December 10th meeting — meaning hesitation would no longer be seen as caution, but as a liquidity shock that could instantly unwind the rally setup.

Source: CME FedWatch

The urgency behind this aggressive pricing comes from the market sensing a major regime shift. With Kevin Hassett emerging as the frontrunner for the next Fed Chair, investors are positioning ahead of what they expect to be a significantly more dovish policy era. His potential appointment points toward a future of lower interest rates and, importantly, confirms more dovish stance of the Fed.

Because QT has already concluded, the December rate cut is no longer viewed as a reaction to current economic conditions—it is seen as the formal kickoff to a new, easier-liquidity regime. In other words, the cut is symbolic: it marks the beginning of the post-QT era the market has already priced in.

NFP: The "Goldilocks" Trap

The next major key arrives on December 16, when the Non-Farm Payrolls (NFP) report is released. Markets are currently priced for a smooth soft-landing: inflation cooling, growth moderating, and no signs of economic stress. For that narrative to hold, the NFP print must land precisely in the “Goldilocks” zone—soft enough so that rate cut expectations are not undermined, but not so weak that it signals the economy is cracking.

The risks are sharply two-sided.

– If the data is too hot, hiring or wage growth well above expectations would immediately push yields higher and undermine the currently priced in rate cut expectations.

– If the data is too cold, especially if unemployment approaches or exceeds the 4.4% Sahm Rule trigger, the narrative flips from “rate cuts are bullish” to “recession is coming,” prompting defensive selling.

In short, the NFP cannot overshoot on either side. The report must thread the needle: slowing, but not collapsing. Only a Goldilocks print keeps the soft-landing story alive and preserves the conditions for a year-end rally.

Bank of Japan: The Currency Tightrope

The Bank of Japan remains one of the most structurally underestimated risks for U.S. equities. Yet OIS markets — as reported by Reuters — now imply a 73% probability of a December rate hike at the BOJ’s meeting on December 18–19. This creates a dangerous divergence: the market is barely paying attention, while pricing signals a major shift.

To preserve global liquidity, the BOJ must remain silent or explicitly dovish. Major institutions — from Capital Group to the BIS — have warned that even a modest BOJ tightening could trigger a sharp yen rally and set off an unwind of the massive yen-funded carry trade. Capital Group notes that a policy shift in Japan would “present material risks to global risk assets,” while BIS research shows that past episodes of yen strength have preceded broad equity drawdowns. Analysts quoted in Reuters and The Block further caution that a BOJ hike could force leveraged investors to reduce exposure across global markets. The chain reaction is well known: yen spike → carry-trade unwind → leverage reduction → liquidity drain from U.S. equities, especially the Magnificent 7, which rely most heavily on cheap global funding — a dynamic that could easily echo last July’s fast, mechanical, and indiscriminate selloff across $Tesla (TSLA.US)$, $NVIDIA (NVDA.US)$ , $S&P 500 Index (.SPX.US)$ , and $NASDAQ 100 Index (.NDX.US)$.

In this setup, stability from Tokyo is not optional. It is a prerequisite for any Santa Rally to unfold.

Part 2: The Rally Tailwinds — Three Gifts That Could Supercharge December

If the macro checklist above is cleared—if the Fed cuts, NFP lands soft, and the BoJ stays calm—the structural setup for the rest of December is incredibly potent.

The Liquidity Pivot: "End of QT" Launchpad

The real engine behind this rally isn’t speculation — it’s liquidity. As of December 1st, the Federal Reserve has officially ended Quantitative Tightening (QT), closing the chapter on years of balance-sheet shrinkage. History shows what happens at this exact moment: when QT stops, equities don’t inch higher — they surge. In the last QT cycle, the $Nasdaq Composite Index (.IXIC.US)$ jumped 14.33%, the $S&P 500 Index (.SPX.US)$ gained 10%, and every major index moved sharply higher, as the chart above makes clear.

The Structural Tailwinds: AI Capex Supercycle + December Seasonality

December enters with one of the strongest seasonal tailwinds in market history. Bank of America’s data going back to 1928 shows the month finishing positive 73% of the time—the most reliable month of the year. The recent weakness in November only strengthens the case: over the last 75 years, when November ended in the red, December rallied in 20 of 23 instances (87%). These moves are driven not by sentiment but by systematic flows — pension rebalancing, retail inflows, window-dressing, and positioning into the new year.

Source: BofA Global Research, Bloomberg

Layered on top of this is the structural engine of the rally: the AI Capex Supercycle. J.P. Morgan’s call for the $S&P 500 Index (.SPX.US)$ to reach 8,000 is anchored in hard data, not optimism. The top 30 AI companies are projected to spend $585 billion over the next 12 months (+34% YoY), and history shows actual CAPEX typically comes in ~15% above forecasts. If that pattern repeats, the AI infrastructure buildout will exceed even the most bullish expectations, driving sustained EPS growth through productivity and automation.

Source: J.P. Morgan

Goldman Sachs sees the November shakeout as a reset: crowded tech trades unwound, breadth improved, volatility cooled, and ~$16B of systematic selling is now behind us. With a cleaner tape and AI demand broadening, Goldman argues U.S. equities start December with the strongest foundation in months — and a real shot at new highs.

The Risk-On Revival: Small Caps and Retail Roar Back

Finally, the strongest signal for a year-end rally isn’t coming from the Mag 7—it’s coming from the speculative corners of the market. Retail sentiment, depressed for months, has snapped back sharply. Investors are piling into the riskiest small caps, with option activity in loss-making $iShares Russell 2000 ETF (IWM.US)$ names going vertical. Even meme-style stocks are reawakening: $Beyond Meat (BYND.US)$ jumped 36% on the first trading day of the month. This surge into “junk” is a classic risk-on pattern, showing capital moving out the curve in search of leverage, convexity, and explosive upside—exactly the behavior that typically marks the euphoric phases of a bull run.

Source: SG Cross Asset Research

If the macro hurdles fall into place, the Santa Rally becomes not just a seasonal pattern but a statistically and structurally reinforced outcome. Liquidity has flipped from a headwind to a tailwind, AI spending is entering a supercycle, and risk appetite is igniting across small caps and speculative names. Everything is lined up for a year-end melt-up — yet with critical macro events still ahead, will the market finally get the clean runway it needs?

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