The stock market is set up for a strong “Santa rally” this year after two years of negative returns in the seven-session trading period, according to LPL chief technical strategist Adam Turnquist.
“Momentum heading into year-end suggests a favorable setup for a positive Santa Claus Rally — a historically bullish signal for January and the year ahead,” Turnquist said in emailed commentary.
Recent strength in the S&P 500 (^GSPC)), along with wider market participation after a November pullback, are both signaling a bullish market approach heading into the Santa stretch of the last five trading days of 2025 plus the first two trading days of 2026, Turnquist said.
If the S&P 500 can notch a sustained breakout about 6,901, he said, it would generate a minimum technical-based price objective of around 7,270.”
At the same time, more economically sensitive sectors such as financials, industrials, and materials have all seen inflows from investors, taking precedent over defensive sectors such as energy and healthcare, signaling a bullish approach to risk from investors.
Concerns over sky-high AI and Big Tech valuations, persistent inflation and a struggling labor market could all weigh on a potential Santa rally, Turnquist said, but market momentum seems to be signaling a strong finish in 2025 and start to 2026.
“While overall market breadth remains somewhat narrow for an index near record highs, the trend is moving in the right direction,” Turnquist said.
