“Christmas doesn’t come from a store. Maybe Christmas perhaps means a little bit more.”
-Dr. Seuss
Here’s what you need to know this week:
- Stocks fall then rebound on a soft inflation report
- Santa tends to bring joy to markets, will he deliver this year?
- A quick glance at retirement contribution limits for 2026
*This will be the final newsletter of 2025 due to the holidays. All of us at Eternal Wealth Management wish you and your families a very Merry Christmas and a Happy New Year, and we look forward to growing with you in 2026!*
Disinflation
Stocks sold off to start the week before catching a major bounce on the heels of a much lighter-than-expected inflation report. The Consumer Price Index (CPI) report for November showed annualized inflation at 2.7%, much lower than the 3.1% that analysts expected:
While lower inflation is always welcome, analysts are taking this report with a grain of salt. The CPI report for October was canceled due to the government shutdown, and this November report is missing some key data, notably housing data for roughly 1/3 of US cities[1]. Experts say that it may take another month or two for CPI data to normalize again; however, investors still took the report as a good omen and stocks are once again approaching new all-time highs.
Santa Claus Rally
There are many strange trends and traditions in the stock market, and one of my favorites is the so-called “Santa Claus Rally”. This refers to the final five trading days of the year, as well as the first two trading days of the following year. These seven trading days are historically the best-performing seven-day sequence of trading days. This trend was discovered by analyst Yale Hirsch in 1972, and the Rally has produced a positive market gain 73% of the time between 1950 and now[2]. But why is does this happen?
The truth is that no one knows for sure. It is possibly a combination of the surge in expenditures around the holidays and optimism for the coming year. It is also possibly due to most of the large Wall Street players going on vacation, leaving most of the market activity to individuals, who historically have tended to be more bullish. And who knows, maybe Saint Nick throws a little magic towards the markets on his annual visit.
One interesting point about the Santa Claus Rally is that it can sometimes foreshadow how the market will perform in the January as well as the following year:
As you can see, the markets’ performance during the Rally, whether positive or negative, is often reflected in the coming January. Furthermore, a positive Rally often portends a year of strong growth, while a negative Rally often portends a negative year or anemic growth. Of course, it is important to note that this trend is not always accurate; in fact, last year saw no Santa Claus Rally, and this year is on pace to finish solidly in the green. While Santa Claus brings joy to many, it is important to remember that he is not a licensed fiduciary.
Retirement Contribution Limits
The IRS has announced increased contribution limits for retirement accounts for 2026. We will have a handy graphic summarizing all of the contribution limits and income caps ready early next year, but since we’ve received a lot of questions about the updated caps next year I’d like to take a quick look at the headline numbers.
For employer sponsored retirement plans such as 401(k)s, 403(b)s, governmental 457 plans and Thrift Savings Plans (TSPs), the employee contribution limit is increased to $24,500 up from $23,500 in 2025. Additionally, employees aged 50 and up are allowed a catch-up contribution of $8,000, up from $7,500 in 2025. There is also a new additionalallowed catch-up contribution of $11,250 for employees aged 60-63.
Contribution limits for IRA and Roth IRA accounts have increased to $7,500 for 2026, up from $7,000 in 2025. The catch-up contribution for investors aged 50+ has also increased to $1,100 for 2026, up from $1,000 in 2025. Roth IRA contributions are disallowed for single filers earning more than $168,000 and $252,000 for those married filing jointly[3]. Of course we can always help facilitate backdoor Roth conversions for high earners to get around this limit.
Like I said, we will have a more comprehensive summary of these limits in a handy downloadable graph early next year, but we want everyone to be aware of the main caps heading into the new year.
All of us hear at Eternal Wealth Management wish you a very Merry Christmas and a Happy New Year!
What Else
- President Trump announced a $1,776 “warrior dividend” to 1.45 million active military service members
- The House of Representatives will vote on extending Obamacare subsidies in January
- The Venezuelan blockade continues to escalate, and President Trump designated the Venezuelan government as a terrorist regime
- The US approved an arms package for Taiwan worth up to $11 billion, potentially raising tensions with China
- President Trump scolded Israel for violating their ceasefire with Hamas over the weekend
What We’re Reading
A wildlife photographer in Italy was documenting local deer and vultures when he stumbled across the discovery of a lifetime: 20,000 fossilized dinosaur footsteps. Archaeologists are stunned and called this one of the biggest fossil discoveries in European history. Click below to see photos of the fossils and read what paleontologists hope to learn from them:
What’s Happening Downtown
OKC Tours is launching a Downtown Walking Tour this Saturday, December 27th. The tour will cover all the key historic sites downtown and will end at the historic First National building. The tour starts at 1:30 PM and costs $20 per adult and $6 for children. Click below to learn more:
To read more from our blog, click here
Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, CFP®, Brandon Ingerson, Bill Daniel, Sam Postich, Jenni Hess
Sources: [1] CNBC [2] LPL Research [3] IRS