Wall Street has been on a rally this holiday season, especially after Trump’s win in the presidential election.  AI boom and lower rates are also driving the stock market higher. However, the Fed’s fewer rate cut signal for 2025 took a toll on the stocks on Dec. 18. The Dow Jones suffered its 10th straight session of declines — its longest streak of daily losses since October 1974. The S&P 500 Index saw the biggest one-day percentage decline since Aug. 5 while the tech-heavy Nasdaq Composite Index logged its biggest daily decline since July 24 (read: Wall Street Dives on Less Dovish Fed: 5 ETF Zones That Win). 

This dip has made many ETFs attractive, and we call them “Secret Santa.” These funds are down more than 7% over the past month but have the potential to move higher with the Santa rally. This is because these funds have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting their outperformance. Energy Select Sector SPDR (XLE Quick QuoteXLE - Free Report) , Invesco DWA Healthcare Momentum ETF (PTH Quick QuotePTH - Free Report) , SPDR S&P Bank ETF (KBE Quick QuoteKBE - Free Report) , Invesco Dorsey Wright Industrials Momentum ETF (PRN Quick QuotePRN - Free Report) and Invesco S&P 500 Enhanced Value ETF (SPVU Quick QuoteSPVU - Free Report) could be the hidden gems heading into a Santa rally week.

These funds could surprise investors with big returns this Christmas, given the historical trends or a Santa rally. A Santa rally refers to the increase in stock prices in the final week of the calendar year (i.e., between Christmas and New Year’s Day) that extends into the first two days of the New Year. This looks more real this year, given the Trump trade boost and the Fed rate cut cycle. 

Trump’s pro-growth and pro-deregulation policies are expected to propel economic growth. Meanwhile, the Fed slashed interest rates for the third time in the past three months, bringing down the benchmark rate to 4.25-4.50%. Lower interest rates generally lead to reduced borrowing costs that help businesses expand their operations more easily and increase profitability. 

The U.S. economy has been expanding with rising consumer confidence and higher spending power. Economic output increased to the highest level in nearly three years this December. S&P Global's flash U.S. composite PMI, which captures activity in both the services and manufacturing sectors, came in at 56.6 in December, up from 54.9 in August. Retail sales rose faster than expected in November, reflecting continued resilience in consumer spending and strong economic momentum.

Secret Santa ETFs

We have highlighted the details of each ETF below:

Energy Select Sector SPDR (XLE Quick QuoteXLE - Free Report) – Down 11.3%

Energy Select Sector SPDR is the largest and the most popular ETF in the energy space, with an AUM of $33.9 billion and an average daily volume of 11 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. Energy Select Sector SPDR holds 22 securities in its basket, with a higher concentration on the top two firms. Energy Select Sector SPDR charges 9 bps in annual fees and has a Zacks ETF Rank #2.

Invesco DWA Healthcare Momentum ETF (PTH Quick QuotePTH - Free Report) – Down 8.1%

Invesco DWA Healthcare Momentum ETF follows the Dorsey Wright Healthcare Technical Leaders Index and holds a basket of 59 U.S. companies. It has AUM of $127.7 million and charges 60 bps in annual fees. Biotechnology takes the largest share at 52.3% while healthcare providers and services, and pharmaceuticals round off the next two with double-digit exposure each. Invesco DWA Healthcare Momentum ETF trades in a light average daily volume of 9,000 shares and has a Zacks ETF Rank #2.

SPDR S&P Bank ETF (KBE Quick QuoteKBE - Free Report) – Down 7.9%

SPDR S&P Bank ETF offers equal-weight exposure to 94 banking stocks by tracking the S&P Banks Select Industry Index. Regional banks dominate the portfolio with a 71.4% share, while diversified banks, commercial & residential mortgage finance, diversified financial services and asset management & custody banks take the remainder. SPDR S&P Bank ETF has amassed $2.3 billion in its asset base while trading in a heavy volume of 2 million shares a day, on average. The product charges 35 bps in annual fees and has a Zacks ETF Rank #2 (read: Tap Bank ETFs for 2025: Here's Why).

Invesco Dorsey Wright Industrials Momentum ETF (PRN Quick QuotePRN - Free Report) – Down 7.2%

Invesco Dorsey Wright Industrials Momentum ETF provides exposure to 43 industrial companies showing relative strength (momentum) and follows the Dorsey Wright Industrials Technical Leaders Index. It is widely spread across construction & engineering, aerospace & defense, trading companies & distributors, commercial services and supplies and building products. Invesco Dorsey Wright Industrials Momentum ETF has accumulated $415 million in its asset base and charges 60 bps in annual fees. It trades in an average daily volume of 26,000 shares and has a Zacks ETF Rank #2.

Invesco S&P 500 Enhanced Value ETF (SPVU Quick QuoteSPVU - Free Report) – Down 7.2%

Invesco S&P 500 Enhanced Value ETF follows the S&P 500 Enhanced Value Index, which measures the performance of stocks in the S&P 500 Index that have the highest "value score." The product holds 100 stocks in its basket with key holdings in financials, energy and communication services. Invesco S&P 500 Enhanced Value ETF has accumulated $96.9 million in AUM while trading in a light average daily volume of 4,000 shares. The product charges 13 bps in annual fees and has a Zacks ETF Rank #2 (read: Will Strong GDP Growth Drive Value ETFs in 2025?).