The big 3 indexes all closed higher yesterday, with the S&P notching a new all-time high close in the process.

The end-of-year rally continues.

And if we see the same again today, the end-of-year rally can now officially be called the Santa Claus rally, given that it technically starts on 12/24. (By definition, a Santa Claus rally 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.

Yesterday the Bureau of Economic Analysis (BEA) put the initial estimate for Q3 GDP at 4.3% vs. last quarter's 3.8% and views for 3.2%. A confirmation of the economy's resilience. We'll get the final reading on January 22.

Consumer Confidence came in at 89.1. That's above the originally reported 88.7 from the previous month. But it's below the upwardly revised estimate for last month of now 92.9, and the consensus for 91.9.

And the Richmond Fed Manufacturing Index improved to -7 from last month's -15.

Today we'll get Weekly Jobless Claims and the Survey of Business Uncertainty.

Yesterday, National Economic Council Director Kevin Hassett said that he believes the Fed is "way behind the curve in terms of lowering rates."

He has a point. Most of the G10 Central Banks have cut more than the U.S. Same goes for developing nations, and by even larger margins.

While the robust GDP numbers show the economy is doing more than fine, there is some stress in the labor market. Gladly, inflation is easing. Still too high. But easing. And given the Fed's dual mandate of maximum employment and stable prices, along with the Fed's own admission that there's greater risk to the labor market than inflation, they have the green light to cut again sooner rather than later.

While it probably doesn't matter that much if the Fed cuts again in January or March, they should not wait too much longer than that. As it stands now, the likelihood of a January cut is at 14.4%, while the odds favor a March cut at 45.1%.

That would get us closer to the so-called neutral rate where it can support full employment and stable inflation.

In other news, big-tech and AI stocks are back on the move. NVIDIA was up 3.01% yesterday, closing back above their 50-day moving average. YTD, they are up 40.9%.

Big-tech and AI have been a big part of lifting the indexes. But so have many other sectors as well, as the rally has broadened.

YTD, the Dow is up 13.9%; the S&P is up 17.5%; the Nasdaq is up 22.0%; and the small-cap Russell 2000 is up 13.9%.

There's just 4½ more trading days left in the year. One and a half days this week (half-day today 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.)

That should be plenty of time for the S&P to pick up another 2.5% to finish up 20% (or more) for the year, making it 3 years in a row of 20%+ gains.

In the meantime, Merry Christmas and Happy Holidays!

See you on Friday,