Avoid Blind Optimism — December Will Not Be a One-Way Rally

Since the key turning point on Nov. 20, the market has moved sharply. QQQ is up almost 6%, SPY is up 5%, and IWM (Russell 2000) is up nearly 9%.

Now what?

Will the market keep moving higher in December along the path I expected?

My short answer is yes. But we need to stay realistic about the details. I expect clear swings and pullbacks in the first two weeks of December. A strong, straight-line rally into year-end is very unlikely.

This view comes from three main reasons that may cause volatility and pullbacks:

1. High caution at the macro level:

The market may pause before two major events: the December 5 NFP report and the December 9–10 FOMC meeting. Large institutions often hedge or reduce risk before these announcements. This caution can create resistance for the market.

2. Year-end tax-loss selling:

Based on history, the first half of December often faces pressure. Fund managers sell their biggest losing positions to offset capital gains tax. This mechanical selling usually limits the market’s upside and does not ease until mid-month.

3. Noise from the Fed chair transition:

Kevin Hassett being a likely nominee may be positive for the long term (he is more dovish). But the official confirmation of continued rate cuts in December may trigger a short-term “sell the news” reaction. The market will need time to digest this major policy shift.

In short, I think the “easy rally” part of the new up-cycle may pause for now. We need to get through the first two weeks of December before the market can see a true Santa Claus Rally in the second half of the month.