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In 2025, the S&P 500 traded around 6,835 and was up approximately 16% year to date (YTD). Market direction remained most sensitive to Federal Reserve expectations, inflation data and the earnings outlook, with returns also shaped by mega-cap tech leadership and the broader AI narrative. The index pulled back from earlier December highs, but it has so far held above key major moving averages (MA).

Key 2025 drivers included:

• ‍Fed expectations and inflation: Inflation cooled through the year but remained sticky around 2.5% to 3%. A Fed easing bias likely supported price to earnings (P/E) multiples and “risk-on” positioning. More recently, markets appeared increasingly rate-sensitive, with the decreased likelihood of an additional rate cut until March 2026.
• ‍Earnings and guidance: Corporate earnings remained strong quarter on quarter. Recent Q3 results reportedly saw over 80% of the S&P 500 beat earnings per share (EPS) expectations. For Q4, the estimated year-over-year earnings growth rate is 8.1%, despite ongoing concerns around import tariffs and potential margin pressure.
• ‍Index leadership and breadth: Returns were heavily influenced by mega-cap tech and AI beneficiaries, even as broader market breadth appeared less consistent at points through the year.
• ‍Policy headlines and volatility: Trade and tariff headlines drove sharp moves, particularly earlier in the year. Some investors pointed to the “TACO” trade, with rapid recoveries after policy proposals were softened. Over time, similar shocks appeared to have less impact as the market became somewhat desensitised.
• ‍Valuations and sensitivity: The forward 12-month P/E ratio for the S&P 500 is 22, above the 5-year average (20.0) and above the 10-year average (18.7). That gap kept valuation sensitivity, especially in AI-linked names, firmly in focus.

Current state

The S&P 500 is about 1% below record highs hit earlier in December. That could indicate the broader uptrend remains in place, with a move back toward the recent highs one possible scenario if momentum improves. Despite the recent retracement, the index remains above all key major moving averages (MA). The latest bounce followed lower than expected CPI numbers earlier this week, alongside continued, and to some, surprising optimism about what may come next.

What to watch in January

• ‍Q4 earnings from mid-January: Results and guidance may help clarify whether valuations are being supported by forward expectations.
• ‍AI narrative and positioning: With AI-linked mega-caps carrying a large share of market capitalisation, changes in sentiment or expectations could have an outsized impact on index performance.
• ‍US jobs and CPI data: The latest US jobs report reportedly points to the highest headline unemployment rate since 2021. Cooling inflation this week may keep markets alert to shifts in rate cut timing, particularly around the March decision.

S&P 500 daily chart

Major FX pairs

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AUD/USD

AUD/USD has been choppy in 2025. Since the “redemption day” drop in April, the move has looked more like a steady grind higher than a clean upside trend.

Key levels
Recent peaks in early September and mid-December highlight resistance near 0.6625. Support has been evident around 0.6425, where price bounced over the last month.

What is supporting the bounce
That support test coincided with stronger than expected jobs and inflation data, lifting expectations that the Reserve Bank of Australia (RBA) may raise rates during 2026 rather than cut again. The latest pullback looks contained so far, with buying interest already visible and price still above key longer-term moving averages.

What could drive a breakout
The pair remains range-bound, but the tilt is still constructive. If Chinese data stays firm, metals prices hold up, and the central bank outlook remains relatively hawkish, a break above resistance could gain more traction.

AUD/USD daily chart

EUR/USD

After early 2025 euro strength, EUR/USD has mostly consolidated since June in a roughly 270 pip range. This month tested 1.18 resistance, reaching highs not seen since September.

What price is doing now
The recent pullback still lacks strong downside conviction. Some technical analysts refer to the 1.17 area as a near-term reference level.

What could come next
If price holds 1.17 and buyers step back in, another push toward 1.18 is possible. One view is that the European Central Bank (ECB) could be less inclined to ease in 2026, which could be consistent with a firmer EUR/USD scenario. Broader analyst commentary also suggests the euro may stall rather than collapse against the US dollar, although outcomes remain data and policy dependent.

EUR/USD daily chart

USD/JPY

Year-to-date picture
USD/JPY is close to flat overall for the year. After US dollar weakness in Q1, the pair reversed higher and now sits just below resistance near 158.

Rates remain the main driver
Rate differentials still favour the US dollar. The Bank of Japan (BOJ) held steady for much of the period despite expectations it might act, and the recent rate increase was modest. Policy has only moved marginally away from zero.

What could shift the balance
Rate differentials remain a key influence. Without a clearer shift in BOJ policy, the JPY may find it difficult to sustain a rebound. Some market commentators cite 154.20 as a chart reference level.

USD/JPY daily chart

In 2025, the ASX 200 closed around 8,621 points and was up approximately 6% year to date (YTD) as of 19 December close. Market direction was most sensitive to Reserve Bank of Australia (RBA) expectations, commodity prices and China-linked demand, and (to a lesser extent) moves in the Australian dollar (AUD). The index recovered from November’s pullback, but remained below October’s record close.

Key 2025 drivers included:

• RBA policy expectations: Sentiment was shaped by shifting views on the timing and extent of rate moves. The November pullback reflected repricing towards a longer pause and higher uncertainty around whether the next move could be a hike rather than a cut, particularly as jobs and inflation data surprised.
• Resources and China sensitivity: With a meaningful resources weight, the index responded to iron ore stability, strong gold prices and relative firmness in base metals. China data and any perceived policy support (including signals from the People’s Bank of China (PBOC)) remained important for the export backdrop. A relatively stable AUD also reduced currency-related noise for exporters.
• Index composition and market structure: The ASX 200’s heavier tilt to materials and banks, and lower exposure to high-growth technology, meant it often lagged tech-led global rallies, but tended to hold up better when AI and growth valuations were questioned.
• Corporate earnings: Reporting season outcomes influenced valuation support. In September’s half-year reporting season, around 33% of ASX 200 companies beat expectations, which helped underpin pricing around current levels.

Current state

The ASX 200 was roughly 5% below its late-October record high close of 9,094 points. After the November retracement, support around 8,400 appeared to hold and buying interest improved. The 50-day EMA near 8,730 (a prior consolidation area) was a commonly watched near-term reference, noting technical indicators can be unreliable.

What to watch in January

• China and commodity demand: Growth, trade and any fresh stimulus inference from the PBOC may affect sentiment.
• Domestic inflation and labour data: CPI and jobs prints are key inputs into RBA expectations.
• Key levels and follow-through: The post-November rebound may need continued demand to sustain momentum.

What moved the Nikkei 225 in 2025?

In 2025, the Nikkei 225 traded around 39,200 points and was up approximately 21% year to date (YTD). Market direction was most sensitive to moves in the Japanese yen (JPY) and Bank of Japan (BOJ) communication, with the index consolidating after multi-decade highs. While broader signals remained constructive, consolidation can resolve either higher or lower.

Key influences included:

• JPY movements and earnings translation: A weaker JPY can boost the reported value of overseas earnings for some exporters, although it may also increase input and import costs. The net impact often depends on company hedging practices and varies by sector, with effects most evident in export-heavy industries such as automotive, industrials and parts of technology manufacturing.
• Gradual BOJ policy transition: The BOJ continued to step away from ultra-easy settings, but tightening was generally cautious. Markets largely priced a slow, conditional normalisation, which helped limit downside, even as policy headlines created bouts of volatility.
• Corporate governance reforms: Ongoing improvements in capital efficiency and shareholder returns supported interest from overseas investors. Share buybacks, stronger balance-sheet discipline and improved return on equity (ROE) contributed to re-rating in parts of the market.
• Global cyclical exposure: The Nikkei moved with shifts in global manufacturing sentiment and expectations for US growth, particularly during risk-on phases associated with AI-related capital spending.

Current state

After pushing to multi-decade highs earlier in the year, the Nikkei spent time consolidating but has remained structurally strong. Price sits above key long-term moving averages, and some technicians watch the 50-day exponential moving average (EMA) as a potential reference level (noting these indicators can be unreliable). Currency swings and shifting BOJ expectations were commonly cited as contributors to much of the second-half volatility, although pullbacks were generally met with buying interest.

What to watch in January for Japan

• JPY volatility: Sharper yen moves, especially if driven by BOJ or Federal Reserve expectations, could quickly change exporter earnings assumptions.
• BOJ communication: Small changes in language on inflation persistence or bond market operations may move sentiment.
• Global growth data: US and China manufacturing and trade prints remain key inputs for an externally focused economy.

2025 has seen a material decline in the fortunes of the greenback. A technical structure breakdown early in the year was followed by a breach of the 200-day moving average (MA) at the end of Q1. The index then entered correction territory, printing a three-year low at the end of Q2.

Since then, we have seen attempts to build a technical base, including a re-test of the end-of-June lows in mid-September. However, buying pressure has not been strong enough to push price back above the technically critical and psychologically important 100 level.

What the levels suggest from here

As things stand, the index remains more than 10% lower for 2025. On this technical view, the index may revisit the 96 area. However, technical levels can fail and outcomes depend on multiple factors.

US dollar index

The key question for 2026

The key question remains: are we likely to see further losses in the early part of next year and beyond, or will current support hold?

We cannot assess the US dollar in isolation and any outlook is shaped by internal and global factors, not least its relative strength versus other major currencies. Many of these drivers are interrelated, but four potential headwinds stand out for any US dollar recovery. Collectively, they may keep downside pressure in play.

Four headwinds for any US dollar recovery

1. The US dollar as a safe-haven trade

One scenario where US dollar support has historically been evident is during major global events, slowdowns and market shocks. However, the more muted response of the US dollar during risk-off episodes this year suggests a shift away from the historical norm, with fewer sustained US dollar rallies.

Instead, throughout 2025, some investors appeared to favour gold, and at other times, FX and even equities, rather than into the US dollar. If this change in behaviour persists through 2026, it could make recovery harder, even if global economic pressure builds over the year ahead.

2. US versus global trade

Trade policy is harder to measure objectively, and outcomes can be difficult to predict. That said, trade battles driven by tariffs on US imports are often viewed as an additional potential drag on the US dollar.

The impact may be twofold if additional strain is placed on the US economy through:

• a slowdown in global trade volumes as impacted countries seek alternative trade relationships, with supply chain distortions that may not favour US growth
  
• pressure on US corporate profit margins as tariffs lift costs for importers
  

3. Removal of quantitative tightening

The Fed formally halted its balance sheet reduction, quantitative tightening (QT), as of 1 December 2025, ending a program that shrank assets by roughly US$2.4 trillion since mid-2022.

Traditionally, ending QT is seen as marginally negative for the US dollar because it stops the withdrawal of liquidity, can ease global funding conditions, and may reduce the scarcity that can support dollar demand. Put simply, more dollars in the system can soften the currency’s support at the margin, although outcomes have varied historically and often depend on broader financial conditions.

4. Interest rate differential

Interest rate differential (IRD) is likely to be a primary driver of US dollar strength, or otherwise, in the months ahead. The latest FOMC meeting delivered the expected 0.25% cut, with attention on guidance for what may come next.

Even after a softer-than-expected CPI print, markets have been reluctant to price aggressive near-term easing. At the time of writing, less than a 20% chance of a January cut is priced in, and it may be March before we see the next move.

The Fed is balancing sticky inflation against a jobs market under pressure, with the headline rate back at levels last seen in 2012. The practical takeaway is that a more accommodative stance may add to downward pressure on the US dollar.

Current expectations imply around two rate cuts through 2026, with the potential for further easing beyond that, broadly consistent with the median projections shown in the chart below. These are forecasts rather than guarantees, and they can shift as economic data and policy guidance evolve.

Donald Trump has officially declared the Maduro regime in Venezuela a foreign terrorist organisation and ordered a "total and complete blockade" of the country's sanctioned oil tankers.

The U.S. has positioned 11 warships in the Caribbean to enforce the blockade, which could remove 400,000 to 500,000 barrels daily from global supply.

The move sent crude prices jumping over 2% and sparked renewed concerns about supply stability heading into 2026.

White House Chief of Staff Susie Wiles succinctly summarised the situation as: “Trump wants to keep on blowing boats up until Maduro cries uncle."

Brent crude jumped 2.4% to $60.33 per barrel, while WTI climbed 2.6% to $56.69.

If crude maintains its $60 per barrel price, analysts project the blockade, combined with potential Russian sanctions, could push prices toward $70 as Venezuela's already-devastated economy faces collapse.

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Bank of Japan to Hike Rates to Highest Level in Decades

The Bank of Japan is set to raise interest rates to their highest level in three decades this Friday, with Governor Kazuo Ueda expected to lift the benchmark rate from 0.5% to 0.75%.

While modest by global standards, this marks a landmark step in Japan's departure from decades of near-zero rates and unconventional easing.

The decision comes amid significant market turbulence. Japanese government bond yields have surged, with 30-year bonds hitting record highs and 10-year yields reaching 19-year peaks.

The volatility stems partly from concerns under new Prime Minister Sanae Takaichi, who recently approved a $118 billion stimulus package with over 60% financed through borrowing.

While Friday's hike appears certain, policymakers have signalled caution as they push rates toward levels estimated between 1% and 2.5%.

Ueda's post-meeting press conference will be closely watched for signals about future increases.

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Micron Forecasts Blowout Earnings on Booming AI Market

Micron Technology is projecting second-quarter earnings of $8.42 per share, nearly double Wall Street's $4.78 estimate.

Micron shares surged 7% in after-hours trading as markets reacted to the news that the AI-driven memory chip race is showing no signs of slowing.

As one of only three major suppliers of high-bandwidth memory (HBM) chips alongside SK Hynix and Samsung, Micron sits at a chokepoint in AI infrastructure.

The HBM specialised chips are essential for training and deploying generative AI models, and current demand is dramatically outpacing supply.

CEO Sanjay Mehrotra revealed that supply tightness will extend beyond 2026, with Micron expecting to fulfil only 50-70% of key customer demand in the medium term.

Micron projects revenue of $18.70 billion this quarter versus analyst estimates of $14.20 billion. The company has retooled their operations toward AI applications, even dissolving its consumer "Crucial" brand to concentrate on AI data centre demand.

HBM chips are now the bottleneck in AI system performance, and suppliers who can deliver at scale have the potential to capture large amounts of value over the coming years.

As the final trading days of December approach, investors are assessing whether seasonal factors may again influence year-end price action.

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• The Santa Claus rally has delivered gains in 70 of the past 97 years, but history is no guarantee.
• Technology, retail, and consumer discretionary sectors have historically led with 1.9-2.1 per cent average gains during the Christmas period.
• Recent market rallies, AI weariness, and a hawkish Fed put doubts around the Santa Rally.

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The seven-day Santa rally window runs from 24 December through 5 January 2026.

This period has historically outperformed average market conditions, driven by holiday optimism, thin trading volumes, year-end bonus spending, tax-loss completions, and institutional portfolio rebalancing.

5 assets in focus this Christmas

1. Technology stocks

Technology stocks have historically been standout performers during the Santa rally period, averaging gains of 2.1 per cent across the seven-day window, although results vary significantly year to year.

The Nasdaq Composite typically posts stronger returns than broader indices, with an 82 per cent historical win rate for December-January performance.

However, tech stocks do currently face a challenging setup. The Nasdaq gained 19 per cent year-to-date (YTD) but has come under pressure in recent months, with AI-related stocks experiencing sentiment dips.

Key drivers:

• E-commerce momentum: Black Friday 2025 spending hit a record US$11.8 billion, with sustained demand through December as last-minute purchases drive revenue for Amazon and digital payment processors.
• Holiday infrastructure: Cloud computing, semiconductors, and digital payments capture the backend of holiday spending surges, benefiting from both retail transactions and year-end enterprise spending.‍
• Concentration risk: Five companies (Nvidia, Microsoft, Apple, Alphabet, Amazon) account for 30 per cent of major index returns. Down periods for these companies, as seen during recent AI-sentiment-driven volatility, could bring down the sector as a whole.

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Source: Statista

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2. Gold

Gold enters one of its strongest seasonal periods from mid-December through February, having posted gains every year since 2015 during this window. 

The gold price is maintaining strength throughout December despite the dollar's resilience, positioning well as the Christmas jewellery season peaks.

Key drivers:

• Seasonal jewellery demand: Approximately two-thirds of annual gold production flows into jewellery fabrication. Christmas, Lunar New Year (February 2026), and the Indian wedding season create regular buying patterns as merchants stock up in December.
• Dollar weakness patterns: December has historically been the dollar's weakest month, with negative bias from 22 December onwards. Gold's inverse correlation to the dollar could provide upside momentum during this period.
• Real yields environment: With the Fed cutting rates to 3.5-3.75 per cent while inflation remains around 3 per cent, real yields stay relatively low, potentially supporting higher gold valuations.‍
• Central bank accumulation: Continued central bank purchases and year-end institutional portfolio rebalancing could provide additional support.

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3. EUR/USD

December has historically been the most bullish month for EUR/USD, with the world's most-traded currency pair posting an average return of +1.2 per cent over the past 50 years. 

The US dollar regularly shows clear weakness during the Santa rally period, particularly from 22 December onwards. However, the Fed's hawkish rate cut has provided some dollar support this year.

Key drivers:

• Holiday liquidity dynamics: Lower institutional trading volumes during the holiday period reduce dollar support as retail traders and smaller participants dominate. Thin markets can amplify moves in either direction.
• Year-end rebalancing: European and Asian investors often repatriate funds or rebalance portfolios at year-end, creating demand for non-dollar currencies that typically support EUR and AUD against USD.‍
• Dollar strength from hawkish Fed: The Fed's December rate cut came with guidance of fewer cuts in 2026. This has kept the dollar elevated despite lower rates, possibly limiting the ability of EUR/USD seasonal patterns to influence the market.

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4. Retail stocks

Consumer discretionary and retail stocks historically outperform during the holiday period, with the sector averaging 1.9-2.1 per cent gains during the Santa rally window. Holiday shopping accounts for 30-40 per cent of annual retail revenue for many companies, making this period crucial for full-year performance.

Key drivers:

• Record holiday traffic: A record 202.9 million consumers shopped during the Thanksgiving-Cyber Monday weekend, up from 197 million in 2024. November spending surged 3.8 per cent year-over-year, with total holiday spending projected to exceed US$1 trillion for the first time.
• High-income shoppers trend: Value-oriented retailers (TJX, Five Below) and those with strong omnichannel presence are capturing a disproportionate share of value over retailers targeting low-middle income earners.
• Post-Fed tailwind: The December rate cut provides marginal relief through lower borrowing costs, potentially extending holiday spending into late December as credit becomes more accessible.

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5. Bitcoin

Bitcoin's December performance has been highly inconsistent, with a median return of -3.2 per cent, contrasting with traditional Santa rally patterns. Currently, Bitcoin is trading around US$87,500, down approximately 30 per cent from its October all-time high of US$126,210. 

However, there are signals that the historically volatile asset could see a Santa-led bounce this year.

Key drivers:

• Institutional infrastructure in place: More than US$120 billion is now held in spot Bitcoin ETFs, which provides a framework that could support capital flows if risk sentiment improves, although inflows are not assured.
• Pro-crypto policy expectations: Discussion around potential developments such as a US strategic Bitcoin reserve and the CLARITY Act could influence sentiment going into 2026, although outcomes remain uncertain.‍
• Four-year cycle inflection point: The recent sell-off came roughly 18 months after the most recent Bitcoin halving, a point linked to turning points in some past cycles, with the four-year narrative potentially influencing market behaviour.

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Risks to watch

• The December Fed meeting delivered a 25 basis point cut, but the hawkish tone has set expectations for fewer rate cuts in 2026.
• The Nasdaq's 19 per cent YTD gain has pushed valuations to elevated levels as AI-stock sentiment begins to dip. 
• Five companies account for 30 per cent of index returns, placing portfolio concentration at concerning levels.
• Reduced holiday liquidity amplifies both moves and risks. Thin trading volumes can create exaggerated reactions to headlines, particularly around geopolitical events or economic data.

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Is Santa coming to town?

The Santa Claus rally remains one of the better-known seasonal patterns in financial markets, but a historical hit rate of around 72 per cent also implies meaningful years where it does not play out.

A more balanced way to view the Santa rally window is as one input among many. 

Seasonal observations can be considered alongside technical levels, fundamental drivers, and risk management — particularly given how quickly sentiment can change in thin holiday conditions.

And, if you can, take time away from the screens and enjoy the break.

REMX approaches key resistance after a sharp rebound

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• Instrument: REMX (VanEck Rare Earth and Strategic Metals ETF)
• Time horizon: Short-to-medium term
• Market read: Price action is often interpreted as neutral-to-constructive while holding above the ~$68 area, outcomes remain uncertain
• Chart reference levels: ~$75 (prior reaction/overhead supply area), ~$68 (support area), then ~$81 (next prior reaction area)

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Rare earth and strategic metals equities have been among the stronger-performing thematic areas in 2025, though recent price action suggests the rally has paused as investors reassess momentum. REMX has rebounded sharply from its April lows and is now consolidating below a technically significant resistance zone near $75, making it a key level to monitor.

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What is REMX?

REMX is an exchange-traded fund that provides diversified exposure to global companies involved in mining, refining, and recycling rare earth and strategic metals. For traders and investors who want sector exposure without relying on a single issuer, the ETF structure can help spread company-specific risk. Performance will still be highly sensitive to commodity cycles and policy/geopolitics.

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Portfolio snapshot

The ETF’s larger positions typically include a mix of rare earth producers and lithium-related names. Examples of top holdings (approximate weights, based on the fund’s most recent publicly available holdings data)

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Why rare earths and strategic metals matter

Rare earth elements (a group of 17 metals) are not necessarily scarce in the earth’s crust, but economically viable deposits—and especially processing capacity—are concentrated. This creates a supply-chain dynamic where policy decisions, trade restrictions, and downstream demand can have outsized impacts on pricing and sentiment.

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Key demand linkages include:

• EVs and wind power (permanent magnets and motors)
• Electronics (speakers, screens, storage)
• Defence/aerospace (guidance, radar, specialised alloys)
• Industrial catalysts (refining and emissions control)

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Technical outlook

After marking multi-year lows around $33 in early April, REMX rallied strongly and returned to levels last seen in mid-2023. The $75 area stands out as a prior multi-touch support zone (2021–2023), which increases the probability it acts as resistance on the first approach.

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REMX weekly chart

Price has repeatedly tested $75 over the past month without a confirmed breakout. The pattern of higher lows against flat resistance resembles an ascending triangle, often associated with building pressure; however, confirmation requires a decisive break.

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REMX daily chart

Scenarios to watch

• Bullish continuation: A daily close above $75 (ideally with expanding participation) would shift focus to $81 as the next resistance zone.
• Range continuation / pullback: Failure to clear $75 again keeps the risk of a retracement toward $68 support.
• Bearish breakdown: A sustained move below $68 would weaken the structure and raise the probability of a deeper mean reversion (next support levels should be mapped from prior swing lows).