Markets appear to be setting up for a classic Santa Claus rally as we head into the heart of the holiday spending season. Several tailwinds are lining up at once:

• Rates have eased meaningfully, with the 10-year Treasury back at 4%¹, removing a major valuation headwind for equities.
• Crude oil at $58² is effectively a tax cut for consumers and businesses, just as holiday spending ramps up.
• Growth remains firm with the Atlanta Fed’s GDPNow tracking at 4.22%³, suggesting the economy still has solid momentum beneath it.
• Fiscal stimulus is back in the mix, with talk of additional measures and $2,000 cheques providing a potential boost to consumer demand.
• The Fed blinked again, and markets took notice. Odds of a December rate cut have surged above 80%, adding more fuel to the fire. 

 

   Source: Realtor.com, Polymarket

 

From a technical standpoint, the backdrop is also constructive. Major indices are sitting on 100-day moving average support, remain in strong uptrends, and are now the most oversold since the April tariff-related pullback. Sentiment and positioning have been washed out after the recent 5% correction, which is typical of conditions that have previously fuelled the next leg higher.

 

Put together, this creates the conditions for markets to grind higher into year end and the S&P 500 to finish 2025 at or near an all-time high.

 

I've also included a piece from our CIBC Economics team entitled "Fed to shoot first, get answers later".

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan