Every year around this time I find myself staring at the same calendar page and asking the same question: are we finally going to get that cheerful end-of-year bounce everyone calls the Santa Rally, or is the Grinch about to steal December again?
After the roller-coaster we just lived through in November, the honest answer feels more uncertain than usual.
A November to Forget for U.S. Tech
Let’s not sugar-coat it. The Nasdaq dropped more than 5% in the final week of November alone. The magnificent names that carried markets higher all year suddenly looked mortal. European and Asian markets held up better, but even there the tech sector bled.
Why the sudden mood swing? Simple. Investors started asking whether the trillion-dollar bets on artificial intelligence infrastructure were actually going to pay off anytime soon. When growth narratives wobble, prices follow—fast.
Yet history keeps whispering in our ear that December has traditionally been kind to equity investors, especially in the UK and Europe. So which voice do we listen to this year?
The Bull Case – Why Santa Could Still Show Up
First, the seasonal tailwind is real. If you look at the FTSE 100 over the past thirty years, December has been positive 24 times. That’s an 80% hit rate. Hard to ignore statistics like that when you’re trying to stay rational in December.
Second, central banks are finally in giving mood—at least some of them.
- The Bank of England has a 90% probability of cutting rates on December 18 after the latest budget avoided major inflationary surprises.
- Markets still assign roughly 83% odds to a Federal Reserve cut when they meet December 17-18.
- The ECB won’t cut, but their minutes actually sounded comfortable with current policy settings—sometimes “no change” is the most dovish signal of all.
Lower or stable rates in December usually translate into higher equity prices, especially when cash yields are no longer screaming 5%+.
Add the usual year-end bonuses, portfolio window-dressing by institutions, tax-loss harvesting that finally exhausts itself, and the psychological lift of flipping the calendar to a new year, and you have a respectable recipe for upside.
“December performance is often driven less by fundamentals and more by human nature—optimism, bonuses, and the desire to end the year on a high note.”
Seasoned London fund manager, speaking anonymously last week
The Bear Case – Plenty of Coal Still in the Sack
Unfortunately, November’s ghosts haven’t been exorcised yet.
The biggest overhang remains the AI spending narrative. Hyperscalers keep announcing eye-watering capex numbers for 2026, but revenue growth is not accelerating at the same pace. When return-on-invested-capital starts being mentioned in earnings calls, valuations get religion very quickly.
Even central bankers—usually careful with words—are now openly talking about “elevated valuations” and the risk of “sharp correlated corrections” in technology shares. If that isn’t a yellow flag, I don’t know what is.
Then there’s everyone’s favorite volatile asset: bitcoin and crypto.
After the post-election spike, bitcoin has rolled over again. Some very smart analysts are calling for continued weakness into year-end because:
- New retail investors who piled in during the November rally are now underwater and selling.
- Long-term holders may use year-end strength (if any) to distribute ahead of the 2028 halving schedule.
- Spot Bitcoin ETFs see persistent outflows when momentum fades.
Crypto still moves in sympathy with Nasdaq growth stocks. A continued bitcoin slide would hardly help sentiment in the risk-on basket.
What Usually Happens in December (Data Since 1950)
| Index | Avg December Return | % Positive |
| S&P 500 | +1.3% | 74% |
| Nasdaq | +1.7% | 72% |
| FTSE 100 | +2.1% | 80% |
| Stoxx 600 | +1.8% | 68% |
| MSCI World | +1.4% | 71% |
Those are decent odds. But notice how the numbers are noticeably lower when the preceding November was negative—and November 2025 definitely qualified.
Key Dates That Will Decide Everything
Mark your calendar, because the next three weeks are packed:
- December 10 – U.S. CPI print (the last big inflation number before the Fed)
- December 17-18 – Federal Reserve meeting + dot plot + Powell press conference
- December 18 – Bank of England & European Central Bank decisions (same day—maximum volatility)
- December 19 – European Leaders summit (any surprise fiscal announcements?)
- December 24 & 31 – Half-day trading and very thin liquidity
One dovish surprise and we moon. One hawkish comment and the bears come out of hibernation. Simple as that.
My Personal Take – Cautious Optimism
If you’ve followed my writing for a while, you know I’m allergic to overly bullish calls in December. Too many bad memories of 2018 and 2022.
That said, the setup this year feels different. Rates are clearly on a downward trajectory, corporate balance sheets remain rock-solid, and consumer spending—while slower—isn’t collapsing.
I think we get a modest Santa Rally—maybe 2-4% on global equities—unless the Fed shocks everyone by removing the December cut from the dot plot. That scenario, all bets are off.
Either way, volatility will stay elevated. Position sizing and cash reserves matter more than directional bets right now.
Whatever happens, December 2025 will close one of the wildest market years in recent memory. Buckle up, keep your risk manageable, and maybe—just maybe—Santa will leave something other than coal under the tree.
Here’s to hoping your portfolio ends the year in the green. I’ll be back with updates as those crucial December meetings unfold.
