by Jason Bodner
December 30, 2025
Did you know that when astronomers study distant galaxies, they often discard the brightest signals first? The strongest bursts of light are frequently cosmic noise, interference from nearby objects, or distortions caused by Earth’s atmosphere. The most valuable information tends to come from the quieter and more consistent data buried underneath. Markets behave the same way. When headlines get loud and price action accelerates on thin participation, the signal worth watching is rarely the one making the most noise.
That brings me to this year’s belated Santa Claus Rally. From December 17 to 24, the S&P 500 gained 3.1% to reach a fresh all-time high. What’s even more impressive, nearly every sector advanced during that pre-Christmas week. On the surface, that is very encouraging. A less comforting detail is volume. Holiday trading volumes are predictably light, and any rallies built on low participation rates carry less conviction. Fewer investors are involved, which means a price can move without broad participation.
We see this clearly in the data. The Big Money Index (BMI) has rebounded sharply, rising to 67.2% from its November 20th low of 45%. That recovery followed a steady decline that began in mid-September.
This is a positive development, but Elevated Trading Volumes tell a different story, as holiday volumes collapsed – normal during abbreviated Christmas sessions, but still a damper on the Santa Claus rally.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Equity and ETF flow data echo the same message. Inflows and outflows both fell sharply. For that reason, the recent rally, while welcome, does not carry much long-term informational weight by itself.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
A more reliable way to assess the market’s current condition is to step back and examine what has happened since the November lows. The pressure in November was not caused by weakening fundamentals or a breakdown in the equity market. I believe it was driven by forced liquidations in the cryptocurrency market. A sharp decline in Bitcoin and other digital assets triggered margin calls in a highly leveraged environment. To raise cash quickly, traders sold their most liquid and profitable equity positions. That selling spilled into stocks, particularly high-performing growth names.
Then the pressure suddenly ended. After November 20th, inflows returned to equities. Since that point, 83.5% of all inflows have gone into small-cap and mid-cap stocks, companies with market capitalization under $50-billion. That matters. Capital was not hiding in cash or rotating defensively. It moved back into areas of the market that typically benefit the most when risk appetite improves.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Sector data reinforces this view. Since the November lows, six sectors have absorbed the majority of all new inflows: Health Care, Financials, Discretionary, Technology, Industrials, and Materials. Each accounted for at least 10% of total inflows. These are economically sensitive, growth-oriented areas of the market. Defensive sectors such as Staples, Communications, Utilities, and Real Estate remained in the minority. That imbalance is bullish. Investors were allocating capital toward opportunity, not protection.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The individual sector charts tell the same story. While nearly every sector rose during Christmas week, the strongest performance since the November lows came from Financials, Technology, Industrials, Materials, Health Care, and Discretionary. Each shows solid price trends accompanied by frequent green-bars, indicating unusual institutional buying. This pattern is consistent with renewed demand following a washout caused by mechanical selling rather than deteriorating fundamentals.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
November is typically one of the strongest months of the year. This time, November trading was disrupted by a collapse in crypto-currency markets that spilled into equities and distorted normal seasonality.
Once that forced selling ended, stocks stabilized and recovered. Despite recent gains, occurring on light volume, the broader setup suggests the market is positioned to finish the year on solid footing.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The current backdrop remains constructive. December is also seasonally strong, and momentum often extends into the early part of the following year. Interest rates are still in limbo, yet they continue to trend lower. Taxes are lower, following the Big Beautiful Bill. Consumer spending during the holidays was resilient. Earnings remain a powerful tailwind. In the third quarter, 83% of S&P 500 companies beat earnings expectations and 76% beat sales estimates. These fundamentals support a strong start in 2026.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Next year is a midterm election year, which historically produces modest returns. Political rhetoric will intensify, uncertainty will rise and markets may respond with higher volatility. Investors tend to reduce risk when outcomes are unclear. With elections not occurring until November, it is reasonable to expect periods of choppiness throughout the year, followed by strength into the seasonally favorable year-end.
For now, the political angle is one headwind against several meaningful tailwinds, so I remain bullish on equities, particularly growth stocks. The rotation into small-cap and mid-caps and into growth-heavy sectors signals confidence. Lower taxes and falling rates support margins, even if revenue growth slows. But revenues are not slowing. They are exceeding expectations, and earnings are doing the same. Those are powerful forces that continue to favor equity investors who focus on data rather than distraction.
History rewards investors who stay disciplined, trust evidence, and ignore swings during volatile periods.
As statistician Nate Silver put it, “The signal is the truth. The noise is what distracts us from the truth.”
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
What Could Go Wrong in 2026?
Income Mail by Bryan Perry
A Year-End Look Under the Market’s AI Hood
Growth Mail by Gary Alexander
U.S. GDP is Now Flirting With 5% Growth Rates in 2026
Global Mail by Ivan Martchev
Knocking on the Door of S&P 7000
Sector Spotlight by Jason Bodner
Santa Claus Arrives – Better Late Than Never
View Full Archive
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Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation and distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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