Santa is on the roof

For those who have been wondering whether the Santa Claus Rally would occur this year, it appears that Santa is already on the roof. The stock market gained almost all of this holiday-shortened week on lighter volume. Can we expect the same next week?

Normally, investors can expect gains of 1-2% between now and the end of the first week in January. Markets were closed early on Wednesday and reopened on Friday. Six straight days of gains were a good start with the S&P 500 Index hitting a new record high.

I have advised readers not to put too much credence in these gains. The upward pressure on stocks stems more from global fund flows than from anything specific to the stock market. Still, it is a bit like having a snowfall on Christmas. It makes the holiday season a little more cheerful. And I hope you all had a wonderful week!

The big news had to be the third quarter release of Gross Domestic Product (GDP). Following a 3.8% gain in the second quarter, GDP grew by 4.3% on an annualized basis last quarter. That was way beyond economists’ estimates.

The gains were largely driven by robust consumer spending, but since then, momentum has faded amid a rising cost of living. The administration is steadfast in its belief that GDP will rise by 3% in 2026. The Congressional Budget Office has estimated that the government shutdown could shave anywhere from 1-2% off GDP in the fourth quarter.

That may be so, but a word of caution on the government data. There is no guarantee that the recent data released by the Bureau of Labor Statistics is as accurate or unbiased as it was in the past. Just so you know, the Congressional Budget Office has estimated that the government shutdown could shave anywhere from 1-2% from GDP in the fourth quarter.

While U.S. stocks did well this year, the real outperformers in 2025 were precious metals and other commodities. Over the festive dinner table this year, the topic of conversation among friends and relatives was not about crypto for a change. No, this year it was about gold and silver prices. “And what about palladium and platinum?”

Readers know that was my favored asset class throughout the year. The numbers speak for themselves: gold gained 70%, palladium 62%, silver 150%, and platinum 150%. A combination of central bank buying, inflation, tariff fears, and weakness in the dollar has catapulted this group to record high after record high.

Recently, new buying has surfaced due to the Section 232 investigations prompted by the White House. These investigations are a first step in determining whether tariffs should be applied to this asset class. If the answer is yes on tariffs, then expect more gains. But it is not just the rabbit and the hare (precious metals) that have attracted my interest; there is a turtle in this race that I am watching as well.

Copper, while ‘only’ up 35-40% this year, appears to me to have a bright future. As a mining guy back in the day, I know that most often, where there are copper deposits, there is also silver and gold. The three metals are highly correlated, although only silver and copper have industrial uses.

In the case of copper, its uses are endless. This lowly metal is everywhere. A great conductor of electricity and heat, it has been part of human history for thousands of years. Today, the combination of mining outages and the need for massive quantities of copper to build new power grids, energy infrastructure, electric vehicles, and AI data centers should support copper prices in the coming years.

There is not much I can say about the coming week. It should be a replay of this past week—few players, less volume, fewer trading days, and higher global cash flows. That should propel markets to higher highs, but remember the party should end at least temporarily by the middle of January. Happy New Year to one and all.

Bill Schmick is a founding partner of Onota Partners, Inc., in the Berkshires.  Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners, Inc. (OPI).  None of his commentary is or should be considered investment advice.  Direct your inquiries to Bill at 1-413-347-2401, email him at billiams1948@gmail.com, or visit his website at www.schmicksretiredinvestor.com. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.