US stock markets are making a dash toward all-time highs with just three trading sessions left in 2025, as the S&P 500 trades around 1% below the historic 7,000 milestone. The traditional Santa Claus rally period is in full swing.

December 26 Market Summary

Following the Christmas holiday, US markets returned with mixed action:

  • S&P 500: Closed at 6,929.94, down 0.03%
  • Nasdaq Composite: Ended at 23,593.10, down 0.09%
  • Dow Jones: Slipped 20.19 points to 48,710.97

For the week, the S&P 500 gained 1.4%, marking its fourth weekly advance in five weeks. Both the Dow and Nasdaq were up more than 1% week-to-date.

2025 Year-to-Date Performance

Despite economic uncertainty created by trade policies and tariff concerns, US markets have delivered strong returns:

  • S&P 500: Up 18% in 2025
  • Nasdaq: Over 20% gains despite briefly entering bear market territory in April

The resilience of US markets can be attributed largely to the artificial intelligence boom, with AI-related capital expenditures contributing 1.1% to GDP growth in the first half of 2025 – outpacing consumer spending as an engine of expansion.

Santa Claus Rally in Focus

December 26 historically holds a special place in stock market performance. According to research from Bespoke Investment Group, this date has been the most consistently positive trading day of the year for the S&P 500.

The traditional Santa Claus rally period encompasses the last five trading days of December and the first two trading days of January. Historically, this period has delivered positive returns about 75% of the time.

AI Trade Continues to Drive Markets

Key stocks linked to artificial intelligence continue to boost the broader market. Major tech companies investing heavily in AI infrastructure have been the standout performers:

  • Semiconductor companies leading gains
  • Cloud computing providers benefiting from AI demand
  • Data center REITs seeing increased investor interest

Precious Metals Hit Records

In a notable development, gold futures hit a new all-time intraday high of $4,579.60 per ounce, pacing for their 54th record close in 2025. Silver futures also notched an all-time intraday high of $76.15 per ounce.

Year-to-date performance for precious metals:

  • Silver: Up 162% in 2025
  • Gold: Up 74% in 2025

Investors have sought safe-haven assets amid concerns around trade tensions, geopolitical uncertainties, and sovereign debt levels globally.

Fed Policy and Valuation Concerns

The S&P 500 has recorded an average cyclically adjusted price-to-earnings (CAPE) ratio of 39.4 in December – a valuation level last seen during the dot-com bubble. This has prompted some analysts to urge caution.

Federal Reserve Chair Jerome Powell’s warnings about high valuations and the path of interest rates in 2026 have added to investor concerns about sustainability of current market levels.

2026 Outlook

Wall Street’s median target for the S&P 500 in December 2026 stands at 8,011, which would represent a 15.5% gain from current levels. However, investors should prepare for potential volatility given:

  • Elevated valuations relative to historical norms
  • Trade policy uncertainties
  • Interest rate trajectory under the new Fed guidance
  • Geopolitical risks in multiple regions

Despite these concerns, the structural support from AI-driven growth and corporate earnings resilience provides a foundation for continued, if more modest, gains in the year ahead.