Why Wall Street says December may break from its usual strength
santa claus rally is often one of Wall Street’s most beloved holiday traditions. Stocks tend to rise after Thanksgiving, volatility decreases, and December typically has one of the strongest months of the year.
Strategists say Santa Claus may not come this year.
“None [of the months this year] “They behaved the way they did seasonally,” Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets, told Yahoo Finance.
And there are many reasons for this. This year has been a reminder that this is not a normal market cycle: February’s DeepSeek meltdown, President Trump’s surprise tariff announcement in April and months of doldrums over AI valuations created a bumpy ride for investors, who pushed stocks to record highs before volatility reemerged in recent weeks.
This has been a year where the traditional playbook doesn’t work because the rules of the game change in real time. AI has introduced a level of disruption and uncertainty that strategists say is fundamentally different from anything in the past decade.
This means volatility could be a bigger part of the story this December.
“I don’t know if we’re going to get that Santa Claus rally, but we’re definitely going to get another volatility trough or rally in volatility,” Silverman said, noting that more downside is building in the options market as investors buy more downside protection rather than relying on seasonal strength in stocks.
Omar Aguilar, CEO and chief investment officer of Schwab Asset Management, thinks similar risks are emerging beneath the surface.
“We’re seeing a lot of dispersion and inconsistency across a lot of things,” Aguilar told Yahoo Finance on Monday, pointing to new macro data arriving unevenly in the wake of the government shutdown and early signs of leadership rotation across sectors.
“We have seen some of the beginning of the unwinding of this momentum trade,” he said.
This is happening even as megacap tech has swung sharply in recent weeks, fueling both market rallies and pullbacks. As a result, the setup of the classic December advance is not as clear as usual.
“The catalyst opportunities that will move the market up do not seem to be as strong this time,” Aguilar said.
A potential Fed rate cut could shake confidence, but even that is not a guarantee, he said: “Perhaps the Fed’s rate cut will make an extra contribution to mobilizing the market. But it is still unclear whether this will happen in December.”
Rate cut expectations have fluctuated significantly in recent months, and stocks have tended to move in line with the changing Fed outlook.
