Stocks closed higher yesterday with the end-of-year rally starting to pick up steam.

I'd call it a Santa Claus rally, but technically that encompasses the last 5 trading days of December (which starts on 12/24 ? even though it's a half-day), and the first two trading days of January.

Regardless of what you call it, I'm expecting a strong finish to the year. And we're starting to see that kick in.

Last week's better-than-expected Consumer Price Index (CPI), continues to lift stocks. The headline rate for November was up 0.2% m/m vs. the consensus for 0.3%. The y/y rate moderated to 2.7% vs. the previous report's 3.0% and views for 3.1%. The core rate (ex-food & energy) came in at 0.2% m/m vs. estimates for 0.3%. The y/y rate eased to 2.6% vs. the previous 3.0% and expectations for the same.

The softer inflation numbers augur well for another rate cut sooner rather than later.

We'll get another look at inflation today with the Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge. The headline number was last up 0.3% m/m with the y/y rate up 3.0%. The core rate was last reported at 0.2% m/m with the y/y rate at 3.0%.

A confirmation of last week's CPI report could further lift the market.

The market is also getting a boost from big-tech and AI stocks once again. After a bout of volatility, they seem to be back on the move.

And it's about time. AI is only going to be the most transformational technology we've ever seen, touching virtually every area of business and ordinary lives. And will likely be one of the key drivers for stocks for years to come.

That's not just me saying this.

AMD CEO Lisa Su, characterized the demand for AI as "insatiable," and said her company alone could grow by 35% a year for the next 3-5 years because of that. In fact, she said the AI market is "faster than anything we've seen before." And she predicted the AI data center market could grow to "$1 trillion" by 2030.

Here's a few more, by NVIDIA CEO Jensen Huang:

"AI is the most powerful technology force of our time."

"AI will revolutionize every industry, from healthcare to transportation."

"We are at the beginning of a new computing era."

While it transforms the world as we know it, it also has the potential to transform one's portfolio.

And you can be sure that AI is just one of the reasons why the Fed increased their GDP outlook for next year.

Just 5½ more trading days left in the year. Two and a half days this week (half-day on Wednesday for Christmas Eve, and markets are closed on Thursday for Christmas). Then three more next week. (Markets are closed on Thursday for New Year's Day, but that's 2026 already.)

YTD, the Dow is up 13.7%; the S&P is up 17.0%; the Nasdaq is up 21.3%; and the small-cap Russell 2000 is up 14.7%.

And since I'm still expecting the S&P to finish up 20% (or more) for the year, that means we'll need another 3% to get there. (But nobody says it has to stop there.)

In the meantime, it's been another spectacular year. Even if it ended right where we are now.

But I'm expecting even more upside to go.

And when the year is finally done, I'm expecting another 20%+ gain again next year!

See you tomorrow,