Stocks closed modestly lower on Friday, but higher for the week.

The S&P made a new all-time high on Christmas Eve. And made an even higher intraday high on the day after Christmas, before ending just -0.03% or -2.11 points below their record close the session before.

The end-of-year rally or Santa Claus rally continues. There's just 3 trading days left in the year. But there's 5 more trading days left for the so-called Santa Claus rally, which encompasses the last 5 trading days of December (of which 3 are left), and the first 2 trading days of January.

The last few weeks of reports have been friendly for stocks.

Three weeks ago, the Fed made their 3rd rate cut of the year, while forecasting another rate cut next year, raising their GDP forecast, and projecting inflation to ease.

Two weeks ago, we got a better-than-expected CPI inflation report showing the core rate (ex-food & energy), easing to 2.6% vs. the previous 3.0% and expectations for the same.

And last week's better-than-expected Q3 GDP put growth at 4.3% vs. last quarter's 3.8% and views for 3.2%. It was the strongest showing in two years (since Q3'23 of 4.7%), and the second best in 4 years (Q4'21 of 7% -- fueled by the post-pandemic economic recovery and government stimulus).

Q4'25 is not looking like a slouch either, with estimates by the Federal Reserve Bank of Atlanta's GDPNow forecast putting it 3.0%. A strong number, given the drag that the 43-day record government shutdown (which lasted all of October and the first part on November) had at the beginning of the quarter.

Investors cheered the news, helping to add to a stellar year of gains.

But that good news has legs as it foreshadows even better things for next year.

Moreover, there are plenty of other things to look forward to in 2026.

Many are pointing to the upcoming tax season and the expectation for large refund checks. Kevin Hassett, the National Economic Council Director said, "we are going to see the biggest refund cycle in the history of America, and people are going to get massive refund checks," and that "the numbers are striking."

He was referring to the tax provisions passed earlier this year that are retroactive to the beginning of 2025. That includes a higher standard deduction, bigger SALT deductions, no tax on (a portion of) tips, no tax on (limited) overtime, a senior bonus (which lowers tax on a portion of social security benefits for qualified recipients), and more.

Corporate America will also feel the benefit. Not just with more money in consumers' pockets (after all, roughly 70% of GDP consists of consumer spending), but also from increased R&D expensing, accelerated CapEx expensing, interest deduction relief, and enhanced small-business expensing.

The outlook for 2026 is one of growth.

That can also be seen in earnings estimates. Earnings growth for S&P 500 companies for Q4'25 is forecast at 6.9%; Q1'26 is at 10.2%; and Q2'26 is at 11.9%.

Add in the ongoing AI boom, and the forecast is for another double-digit year of market gains.

YTD, the Dow is up 14.5%; the S&P is up 17.8%; the Nasdaq is up 22.2%; and the small-cap Russell 2000 is up 13.6%.

In the meantime, with just 3 more trading days left in the year, there's still time for the S&P to pick up another 2.2% to finish up 20% (or more) for the year, making it 3 years in a row of 20%+ gains.

See you tomorrow,

Best,