S&P 500 Erases December Loss as Gold Hits Record

Michael Purves, Founder and CEO at Tallbacken Capital Advisors, discusses the latest market news including gold and silver hitting record highs and the merger landscape as Paramount Skydance adjusts its bid for Warner Bros.

The holiday-shortened week started with stocks moving higher in a broad advance that saw renewed appetite for the artificial-intelligence trade. Oil and gold rallied as the dollar fell.

Equities erased their December losses, with the S&P 500 set for an eighth straight up month - the longest winning run since 2018. About 400 of its shares advanced, with Tesla Inc. and Nvidia Corp. leading megacaps higher. A gauge of smaller firms climbed nearly 1.5%.

Despite bouts of volatility and concerns about the AI trade, tech has led the market to the upside this year, and it will probably be the difference between a positive and negative December, said Chris Larkin at E*Trade from Morgan Stanley.

“If a Santa Claus rally does kick in this year, St. Nick’s gift bag will likely need to be full of positive tech sentiment,” he noted.

It’s been a strong year for stocks and the big question is whether investors will carry that bullish mood into 2026.

Positioning in equities is rising and fund managers are maintaining record low levels of cash. Their expectations of a further rally are outweighing concerns over rich valuations. The Federal Reserve path is also being closely watched, with two US cuts priced for next year.

Fed Governor Stephen Miran told Bloomberg Television the central bank risks sparking a recession unless it continues lowering rates next year.

The S&P 500 hovered near 6,865. The yield on 10-year Treasuries rose two basis points to 4.17%. The dollar halted a three-day advance. Bitcoin climbed to around $90,000.

Oil rallied while gold and silver jumped to all-time highs amid geopolitical tensions.

“Everything is shaping up for a festive end to the year,” said Mark Hackett at Nationwide. “This week is being driven by technical tailwinds, a bit of stimulus optimism, and self-fulfilling prophecy, all of which are setting up a strong year-end and a solid start to next year.”

Hackett noted that the last two weeks of the year are typically the best on the calendar since 1950.

The so-called Santa Claus rally, which includes the last five trading days of December and the first two of January, has been positive roughly 80% of the time, by an average of 1.6% since 1928, he added.

“When this pattern is heavily discussed, it can become a bit of a self-fulfilling prophecy,” Hackett said. “An important caveat, however, is the consistent theme of the past five years that historical patterns have provided little direction, with last year delivering a negative return.”

Yet Hackett said that market action is encouraging, including healthy breadth, shifting leadership, and greater discernment by investors around valuations.

Buoyed by tech, the long-term valuation ratio of the S&P 500 is now at an all-time high. This metric has exceeded previous peaks that preceded major drawdowns, such as in the summer of 2000 before the dotcom crash, or in January 2022 when the market started to price a surge in interest rates.

“While 2025 was a volatile year with April’s tariff-driven correction, we don’t think we’re out of the woods when it comes to volatility for 2026,” said Clark Bellin at Bellwether Wealth.

While Bellin expects the tech sector to continue its corrective phase, he bets on a bottom sometime in the next few months. He also sees the Fed refraining from rate cuts until there’s a new chair mid-year, but says stocks can move higher during this time even without additional rate cuts.

Equity investor sentiment was bullish for a third straight week, although the gap over more pessimistic views has narrowed slightly, according to Deutsche Bank AG strategists.

The team including Parag Thatte said aggregate equity positioning declined last week, but remains modestly overweight.

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