The last full trading week of 2025 arrives with markets in an unusual position: up strongly for the year but struggling in December. The S&P 500 has gained roughly 24% year-to-date, yet the index is tracking for its first negative December since 2022.

The week ahead will be defined by thin volumes, holiday closures, and the eternal debate about whether the Santa Claus rally will materialize.

Market Schedule

U.S. markets follow a shortened schedule:

  • Monday (Dec 22): Normal trading
  • Tuesday (Dec 23): Normal trading
  • Christmas Eve (Dec 24): Markets close at 1:00 PM ET
  • Christmas Day (Dec 25): Markets closed
  • Friday (Dec 26): Normal trading resumes

The week sees just 3.5 trading days, with many institutional desks operating on skeleton crews. Volume typically drops 40-50% below normal levels during holiday weeks, creating the potential for outsized moves on relatively small order flows.

Economic Calendar

The data calendar is appropriately light:

Monday: Conference Board Consumer Confidence (December) — expected to show modest improvement from November's readings.

Tuesday: New Home Sales (November) — housing data continues to be closely watched as mortgage rates hover in the mid-6% range.

Friday: Initial Jobless Claims — the weekly reading provides real-time labor market pulse.

No Fed speakers are scheduled, providing a communication blackout that could reduce volatility triggers.

What to Watch

Santa Claus Rally countdown: The seven-day Santa Claus rally period begins December 24 and runs through January 2. Historical data shows positive returns 79% of the time during this window, averaging 1.3% gains. Whether the pattern holds this year remains uncertain given December's weakness.

Year-end positioning: Portfolio managers making final adjustments for year-end reports could create unusual flows. "Window dressing"—buying winners and selling losers before statements go out—is a perennial phenomenon.

Tax-loss harvesting completion: Investors have until December 31 to realize losses for 2025 tax returns. The final days often see selling pressure in beaten-down names as tax deadlines approach.

Technical Picture

The S&P 500 bounced off key support near 5,850 last week, stabilizing after the Fed-induced selloff. The index remains above its 50-day moving average, and the broader uptrend from the October 2024 lows is intact.

Key levels to watch:

  • S&P 500 support: 5,850, then 5,700
  • S&P 500 resistance: 6,100, then all-time highs near 6,150

The Nasdaq Composite faces similar dynamics, with the 20,000 level serving as psychological support and resistance clustered around 20,500.

Sector Focus

Tech remains the key swing factor. The "Magnificent Seven" stocks—Apple, Microsoft, Google, Amazon, Nvidia, Meta, and Tesla—account for roughly 30% of S&P 500 market cap. Their direction will largely determine index performance.

Defensive sectors (utilities, healthcare, consumer staples) have outperformed in recent weeks as investors rotated away from high-beta growth. Whether this rotation continues or reverses into year-end will signal risk appetite heading into 2026.

What Could Move Markets

Geopolitical headlines: Holiday weeks sometimes see news events when attention is elsewhere. Markets are sensitive to developments in Ukraine, the Middle East, and U.S.-China relations.

Crypto volatility: Bitcoin remains volatile around the $90,000 level. Sharp moves in crypto can spill over to related equities (Coinbase, Strategy, mining stocks).

Unexpected Fed commentary: While no speeches are scheduled, any unplanned communication from Fed officials could move rates and equities.

Trading Strategy

For most investors, the optimal strategy for holiday weeks is simple: do nothing. Thin markets amplify volatility without improving information quality. Moves that look significant often reverse once normal trading resumes.

If you must act, consider:

  • Completing any planned tax-loss harvesting before year-end
  • Rebalancing portfolios if allocations have drifted significantly
  • Avoiding large new positions until volume normalizes in January

The Bottom Line

The week ahead is a holding pattern. Light volumes, limited catalysts, and holiday distractions mean the meaningful trading doesn't resume until January. Whether Santa Claus arrives or not, the real action awaits in 2026. Use this week to reflect on the year, review your portfolio, and prepare for what comes next—not to chase thin-market noise.