The market finished with a whimper on Friday, which wasn't surprising since the rest of the nation had the day off. Still, there was a celebratory mood for Christmas week.

The market posted substantial gains in the week, led by large-cap growth -surprise!

 

 

Basic Materials (XLB), Health Care (XLV), and Real Estate (XLRE) caught bids, as there is a great sense cyclical stocks will outperform in 2026.

Bottom Fishing

Another theme that has been emerging for weeks and should play out nicely next year is bottom fishing. Big gainers on Friday are still down a lot for 2025, and big decliners were up a lot (Moderna, Inc (MRNA) and Texas Pacific Lane Corp (TPL) continue to crash).

Strong Remain Strong

I’m rooting for greater market participation, but the spike in names changing hands above their 20-day moving average plummeted, as breadth narrowed once again, bedecking those playing the rotation guessing game.

Cool, Calm, & Collected

Market mavens and historians began writing the story of 2025 weeks ago, and all agreed a significant chapter should be dedicated to extreme volatility. While it's true the financial media sent the stock market into a tailspin leading up to “Tariff Day,” their real story is the market’s resolve.

Last week, the Volatility Index (VIX) dipped five days in a row, closing below 13.5%. In recent years, this has foreshadowed monster returns in the months that follow. If this is a harbinger of things to come, buckle up and stay the course.

Holiday Spirit

The Goldman Sachs (GS) Sentiment gauge is flashing an overoptimistic signal. I think it’s a strong signal, not a contrarian one. Meanwhile, retail investors are more cautious and less bullish, but bullishness remains unchanged. I think that’s rational thinking, and again, not a contrarian one.

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