Ever have that feeling when the party was absolutely rocking for days and then, almost overnight, the music slows down and half the room starts checking their phones? That’s pretty much what the stock market felt like heading into December this year.
After five straight winning sessions and a November that somehow managed to grind higher despite every growth stock on earth looking expensive, Monday decided to hit the pause button. Hard. And honestly? I’m not entirely shocked.
A Reality Check After the November’s Surprise Strength
Let’s be real for a second. November was weird. The S&P 500 scraped out a gain when almost nobody thought it would. Tech looked dead in the water mid-month, then suddenly Alphabet became the comeback kid, Nvidia shrugged off every valuation concern known to man, and even the Dow – yes, the boring old Dow – joined the fun.
Fast forward to December 1st and the vibe changed completely. The major averages opened lower, the winning streaks snapped, and stock futures Monday night were basically snoring near the flatline. Dow futures barely budged, S&P futures and Nasdaq-100 futures hovered within spitting distance of unchanged. Classic “risk-off” Monday.
In my experience, these little pullbacks right at the turn of the calendar month aren’t unusual. December has a reputation for being strong – third-best month since 1950, averaging north of 1% – but it rarely starts with fireworks. More often it starts with everyone taking a breath and wondering whether the good times can actually keep rolling.
What Actually Moved the Market Monday
The damage wasn’t catastrophic, but it was broad enough to notice.
- Bitcoin dropped 6% in its worst day since March – crypto stocks like Coinbase and Robinhood immediately bled 4-5%.
- Alphabet, November’s undisputed star, gave back 1.7% like it never happened.
- Palantir and Broadcom, two names that have been on absolute tears, finally took a breather.
- Gold climbed and bond yields ticked higher – classic flight-to-safety behavior.
Put it all together and you get a market that suddenly remembered three things it’s been trying to ignore: inflation isn’t dead, valuations are stretched, and we’re spending hundreds of billions on AI infrastructure with no guarantee the payoff shows up anytime soon.
The Fed Cut Everyone Is Pricing In
Here’s the twist though – traders are still almost certain the Federal Reserve delivers a rate cut at the December 17-18 meeting. The probability sits around 87-88% according to the CME FedWatch tool, way up from where it was just two weeks ago.
“Bulls still enjoy a strong tailwind from technical and fundamental factors as we approach year-end.”
Mark Hackett, Nationwide Chief of Market Strategy
He’s not wrong. Breadth has improved, money flow remains constructive, the S&P 500 reclaimed its 50-day moving average without much drama, and sentiment gauges are still surprisingly pessimistic for how far we’ve come. All of those are classic ingredients for a squeeze higher.
But – and this is a big but – the bear case has sharpened its knives. The main argument right now boils down to two words: AI sustainability. Are we really going to keep pouring capital into data centers and chips if the revenue ramp takes longer than expected? That’s the question keeping some big money on the sidelines.
December Seasonality – Myth or Magic?
Every year around this time someone drags out the “December is historically strong” chart, and every year the skeptics roll their eyes. So let’s look at the actual numbers instead of the memes.
Since 1950, the S&P 500 has averaged +1.3% in December. It’s positive roughly 75% of the time. The last seven trading days of the year plus the first two of January (the famous Santa Claus rally) have been even better.
But here’s what most people miss: December strength is heavily concentrated in years when the market is already up big. When we’re coming off a rough November or the fourth quarter is negative going into December, the average return drops dramatically.
We didn’t have a rough November – it was modestly positive – so the historical tailwind is still there. The question is whether current worries are strong enough to override seasonality.
What I’m Watching This Week
If I had to boil it down to three things that will decide whether we get a proper year-end melt-up or just chop sideways into 2026, here they are:
- The 50-day moving average hold. The S&P closed right on it Monday. A decisive break below would flip the short-term trend bearish fast.
- Treasury yields. If the 10-year pushes convincingly above 4.5%, growth stocks will feel it immediately.
- Bitcoin and crypto sentiment. Strange as it sounds, crypto has become a leading risk indicator. Another leg down there and equities usually follow.
Right now all three are in “wait-and-see” mode. That usually means low volume and choppy price action until something forces a decision.
The Bottom Line (For Now)
December started with a yawn instead of a bang, but that doesn’t mean the bulls are dead. We’ve got seasonality, a likely Fed cut, and technicals that still lean constructive. On the flip side, valuations are high, inflation readings haven’t been friendly lately, and the AI payoff story still needs more proof.
My personal lean? I think we grind higher into year-end, but it’s just going to be uglier and more volatile than November made it look. The path of least resistance remains up until proven otherwise – but I’m keeping stops tight and cash a little higher than usual.
Because in this market, five-day winning streaks can turn into five-day losing streaks faster than you can refresh your Bloomberg terminal.
Welcome to December, everyone. Buckle up – it’s probably going to be interesting.
