Stock Market Rallies, Rotations, and Record Highs

Jeffrey Buchbinder (00:00):

Hello everyone and welcome to LPL Market Signals. Jeff Buchbinder here with my friend and colleague, Adam Turnquist. Adam happy almost, or merry almost Christmas. We're just a few days away. It's December 22nd, 2025 as we are recording this. And I think we're probably just going to do a little work today, a little work tomorrow, and then go spend holidays with, with the family. How are you?

Adam Turnquist (00:27):

Doing? Good and happy holidays. Got all my shopping done. Hopefully all the presents show up. I was a little late getting my orders in, but for you so far, they're on schedule. Hope for no snow, and that we get all the Christmas gifts delivered on time. And I stay on the nice list, we'll call it.

Jeffrey Buchbinder (00:44):

Well, Santa's used to snow, so Green Bay should not create too much of a challenge. And hopefully all your stuff gets there on time. I'm sure the kids are

Adam Turnquist (00:55):

Bouncing off the walls.

Jeffrey Buchbinder (00:56):

What's that?

Adam Turnquist (00:58):

Bouncing off the walls at this stage. They're ready.

Jeffrey Buchbinder (01:01):

Bouncing off the, my kids are teenagers, so the level of excitement is a little different. We celebrate Hanukkah, so we're already done, but you know, they tell us what they want, we get it, and it sort of takes away the suspense, you know, the excitement. We don't really get with waking up one morning and seeing what's under the tree. But it works. So thanks for still working, Adam, when a lot of people have already checked out. We'll recap the markets really quickly last week, frankly. I mean, it was an interesting week, but the market didn't move that much. Certainly the AI theme bounced around but we'll spend most of the time today with the chart check, rotating back toward record highs is our main theme. And then close it out with just a week ahead preview.

Jeffrey Buchbinder (01:49):

And here again, there's really not that much going on here in terms of data after we got through last week, which was quite interesting. So we'll talk a little bit about that. So I think what we had last week, Adam, you tell me if we're, if I'm off base, is that we had a sell off in the AI theme early, and then a combination of a rebound in the AI theme plus a better than expected CPI inflation report propel us back above breakeven for the week with the S&P Does that sum it up, or would you add to that?

Adam Turnquist (02:25):

I think that's a pretty good summary. When you look at just the drawdown we had and some of the lack of enthusiasm on a short term basis in ai, there's a lot of question mark, question marks coming out of earning season, even though the numbers were good, look at a company like Broadcom, for example, reporting pretty solid numbers. I didn't get into all the details, but it was a high bar and the stocks sold off. I think some of that selloff started to catch a bid and buyers came back into some of those more mega cap oriented trades. They've been underperforming compared to the non-profitable tech names, call it higher beta. That ratio chart, when you look at the two, is near this inflection point where you typically see a bounce in more of the mega cap names. So that's going to be a trend we're watching in terms of relative strength in that space.

Adam Turnquist (03:12):

And then you also had jobless claim. Jobless claims pretty solid. The non-farm payrolls report, we'll call it better than feared retail sales, at least the control group coming in better than expected. And that's supported this resilient consumer. We've seen that in the holiday shopping trends as well. So the economy call it at least seems to be holding up pretty well, even though there's some hiccups in the labor market. And some big question marks on that inflation report, though there were some even for economists, they had some pretty funny headlines in terms of how they labeled that, that CPI report last week.

Jeffrey Buchbinder (03:46):

Yeah, the government shutdown still affecting the economic data, so that, don't get too excited about that improvement in CPI. I don't think this economy is running at a two and a half percent inflation rate right now. We all wish it was or lower, but there was a little bit of sort of fudging <laugh>, I think nothing nefarious, but when you don't have the data, you either just plug in a zero or you have a two month inflation reading, right? And either way it's misleading and didn't give you a full picture. So, so yeah, we'll discount that a little bit, but still as you said, Adam, the jobs numbers, maybe a relief. And then the CPI on top of that certainly helped with this comeback. You ended up with consumer discretionary leading over the last five days. Interestingly, when you look at the names in there was a lot of travel leisure, hotels, maybe that's holiday related cruise lines, right?

Jeffrey Buchbinder (04:47):

A lot of the more discretionary, I guess, elements of consumer discretionary did quite well. And then you all said some big tech lead technology did outperform. It wasn't the top performer, but it was up near the top with a 0.5% gain. You had a strong week for Nvidia again, as the AI theme bounced back earlier in the week, there were concerns about the funding of the data centers. And then I guess on the other side, energy real estate and staples were laggards. It's been, you know, this cap economy people talk about that showed up in some of the performance and earnings of food companies I've noticed. So I think that's weighing on staples certainly. And then weak oil prices continues to weigh on, on energy growth still. So growth ended up outperforming last week and holding on to a lead year to date.

Jeffrey Buchbinder (05:45):

But frankly, not much of a lead, depending on which growth index you use. Growth is maybe ahead by a 0.2 or three points at most from the main major growth value indexes that we we follow. And then no change year to date, international has strongly outpaced us, right? 22% for the all country world, but 30 for the EFA and the EM index while the S&P 500 return is 18. So that gap hasn't really widened much lately, but it is a pretty big gap international diversification. One of the biggest stories of 2025 has been international diversification has worked. So how about rates? I think CPI obviously helped the treasury market. Adam, anything else you're seeing on the bond side or anything else you want to highlight here? Commodities, currencies.

Adam Turnquist (06:36):

So the big theme that we've witnessed, at least technically in the rates market is curve spreads breaking out. Whether that's the 10 year minus three month, 10 year minus twos and thirties, all of those curve spreads are starting to break out. We're seeing the front end more sensitive to changes in monetary policy expectations. That's normal. When we start to reprice rate cut expectations, the front end follows those. We've had a pretty big repricing just last week, I think the market now expecting somewhere around a 40% probability for three rate cuts in 2026. That's up from, from around two just in the prior week. But the longer end, longer duration, call it tens and thirties have not responded in the same way. So that's steep in the yield curve. The 10 year hovering dangerously close to 4.2%. We're going to talk about why that's an important level.

Adam Turnquist (07:29):

Give that a teaser for the chart coming up. That's one of the big themes. Credit markets still remain benign even though we've heard a lot about some of the credit default swap rates in Oracle and some of these other more idiosyncratic events. But credit really hasn't responded a whole lot. So no major yellow flags even flagging there. And then in oil markets, you can see WTI crude at 57 last week. We got down to right around $55. That's been a major support level for oil since really the spring. We had a bounce there in April, another bounce there in May. And that came right at the same time when escalations last week started to ratchet up between the U.S. and Venezuela. They have a basically a blockade on Venezuelan oil that further escalated over the weekend with the Coast Guard boarding some ships that were reportedly containing sanctioned oil tensions there remain high that could take out some oil from the market, global oil market that is, and giving oil a little bit of a geopolitical risk premium.

Adam Turnquist (08:33):

And that's, that's translated into record highs here in gold as well, which caught a bid last night and broke out to new highs. So important developments on the commodity side. As the dollar moves lower, we've pulled back from this key area of resistance right around a hundred. The dollar weakening still holding up though above major support around 96. That's going to be the level to watch on the dollar as we go into the new year. That's not only support from previous lows this year, but also this secular uptrend, the dollar's been in since really the oh nine lows. So certainly an important level for the dollar to hold here.

Jeffrey Buchbinder (09:08):

Yeah, I think I'm glad you highlighted oil and the dollar, frankly. And those are going to be two of the biggest stories I think in the first half of next year. Will oil, how will oil respond if we do get a peace deal between Russia and Ukraine? And then dollar, will it break through the support that we've been talking about really all year? Obviously that's important for the U.S. international investment decision. All right, let's go to your charts, Adam, this is the fun part. So you highlighted your section here rotating back to record highs. There's been a lot of talk about rotation. Certainly we really didn't get much of a rotation last week because, you know, I just mentioned it. We had some, you know, good big tech returns last week. But you know, we've seen small cap show a little life at times. We've seen some sectors besides tech show a little life. So I'm interested in your thoughts on, on what we're seeing along those lines. But we'll start with the S&P 500. And as I look at this chart, it looks like there's some big resistance coming here pretty soon. Do you think we have a shot at make, maybe getting to 7,000 by year end.

Adam Turnquist (10:18):

Running out of time for that, but I think we could definitely get there. And it's no surprise right now when you look at this chart, we're entering, we'll call it maybe this consolidation phase, we had nearly a 40% rally off the April low. So a consolidation phase with, call it a 5% draw down in November, that comes with the territory of these big moves. I think this is a, could be a healthy consolidation where you have overbought conditions reset, you have fundamentals and price squaring up a little bit. And this digestion period right now, when we look at the technicals going into year end, we get the S&P bounced back above the 20, the 50 day moving average. So the level to watch the upper end of that range, 6901 technically. And if we break that level, you measure the size of this range down to the lows witnessed in November, it gets you to an upside minimum technical based price objective of around 7270.

Adam Turnquist (11:14):

So some pretty meaningful upside. That's what the technicals would tell us in terms of if we get a breakout from this range. Now, if we start to roll over, you have quite a bit of support before you break the low end of that range. You have the 20 day, the 50 day, the a hundred day, and then again, those November lows kind of 6550 area. That would be the key level to watch. Now, when we look at the momentum in the market, it's mixed, and that's no surprise when you have more of a consolidation phase developing. On that bottom panel, we have the directional movement index. And when the red line crosses above the green line, that's indicative of a bearish trend developing vice versa, if the green crosses above the red and it's been mixed, we had the green above the red that flip flopped, but we really like to look at trend strength as well.

Adam Turnquist (12:00):

And that's that a DX line in black, that's at I think 1213 right now. That's very low. So that's suggesting maybe we were in this consolidation phase. If you look back when we started to break out to new highs in at, really at the end of June, it's a good example of why you combined trend direction and trend strength. You can see that green A DX or the DMI line well into positive territory at the same time that black a DX line started to accelerate. That's symbolic of trend strength improving. That's really what we're looking for on a breakout. So for now, I think you have to be a little bit cautious in relying on some of these momentum signals in the market. As we consolidate sideways. You're really waiting here for a breakout either above 6901 or again below maybe the low end of that range around those November lows.

Jeffrey Buchbinder (12:50):

So maybe that run at 7,000 has to wait a little longer. But as we noted in the outlook that we just released a couple weeks ago, we think we're going to get there and well beyond in 2026. All right, so turning more to the rotation and participation, Adam I thought this was very interesting because you got some really big, big numbers in some of these top breadth sectors,

Adam Turnquist (13:16):

Right? We've had a big improvement in market breadth. There's been a ton of talk about rotation, whether that's November when the market looked a lot more defensive. That was really the first sign of risk aversion We've seen since the recovery in April where investors were no longer buying the more cyclical sectors. They were turning to healthcare energy utilities in November. That's where leadership started to show up, and that was a bit concerning. Now, fast forward to today in this rally back toward record highs. We have areas like financials leading. Look at the banks breaking out to new highs. They've been making really some new impressive relative strength highs against the broader market. But overall, when you look at breadth, it's moving in the right direction. It's not to levels that are commensurate with a market making new highs. For example, the percentage of stocks above their 200 day just below 60%, when the S&P is typically in record high territory, that's nearly around 75%.

Adam Turnquist (14:11):

So we're a little bit low, but importantly, we're above that 50% threshold. And I always highlight it's all about the composition of breadth as well. So we look at what sectors are participating or what sectors are holding up. And you can see their financials right now have the best breadth on the S&P 500. We haven't said that in a long time. It's been healthcare last month. Even energy was doing quite well, not the sectors you want to see lead the market into new highs. The fact that we have this improvement in rotation into these more economically cyclical sectors certainly looks constructive as we go into year end. On the new highs list, you have materials, financials, communication services, rounding out the podium there on the bottom right. That's another area that, that we've been watching. Just where are the new relative highs coming or new 52 week highs that is, and it's a lot of these cyclical names finally starting to show up. Materials has not been on that list as far as we've had the list built out <laugh>. So it's certainly, I think, a constructive sign for the durability of this bull market.

Jeffrey Buchbinder (15:14):

Yeah, I also think when you have disparate sectors, like industrials is the easiest example. There's a lot of different types of industries and types of companies with industrials. So if you get good breadth metrics there, I think that's an especially good sign. And then, you know, consumer discretionary, maybe the good sign there is that people are getting excited about tax refunds, right? Because those are coming real soon and they're going to be big one big beautiful bill act support there. Maybe there's some life in CD because of that, even though the consumer is under a little bit more pressure here as you know, tariffs are digested, higher interest rates are digested and the job market slows. So good stuff there, Adam. Here's more on internals by sector. What is this telling us?

Adam Turnquist (16:02):

So we also look at the trends within the market. We talked about momentum on the S&P We talked about market breadth. We also break it down by trends. And we use various moving averages and how they're positioned to define objectively define a trend within the S&P 500. We break it down by stock and then sector. And as we show on the top left and the bottom left, that's the trends within the S&P 500. Simply the more green on the screen, the more or the higher percentage of stocks are in uptrends versus red, which is, is the downtrends. It got a little concerning as we went into October because we had more and more stocks entering some form of a downtrend. We had this big divergence, and then I think it was a pretty good indicator suggesting maybe the market's looking a little bit tired.

Adam Turnquist (16:49):

Now we're starting to see uptrends reassert themself. There's becoming more and more uptrends in the market over the last several weeks, and especially on a cap weighted basis. I'll break it down. On the bottom right, you can see confirmed uptrend, and that is the strongest definition of trend that we have in our model. 47% of the S&P based on cap is in a confirmed uptrend. The weakest form of a trend is a confirmed downtrend. If you move to the left there 28%. So on a cap weighted basis, the market looks a lot better from a trend perspective than the equal weight basis. You can see 36 verse 34 on that top panel on the bottom, you know, bottom row. So it is all about cap weighting. That's the world we live in. Of course, we don't, you know, most benchmarks are cap weighted, so moving in the right direction, we'd like to see that get of course above 50%. But that was a notable improvement over the last several weeks and something we've been looking for to try to understand how durable is this recovery off the November lows. And the more evidence that we see suggests this is a durable type of rally. and maybe we'll see potential new high by year end here.

Jeffrey Buchbinder (18:04):

And good reason to keep healthcare on our shopping list as well.

Adam Turnquist (18:08):

Yeah, good call out there.

Jeffrey Buchbinder (18:09):

Nice performance there lately. So let's get to the Santa Claus rally here that everybody's talking about. <Laugh>, frankly, I know you're getting a lot of calls from reporters on this one, Adam. So yeah, walk us through what the Santa Claus rally is and when does it start, how big it is and all of that.

Adam Turnquist (18:28):

So, we'll, we'll start with a shout out to Yale Hirsh. He was the founder, the creator of this Santa Claus rally, and his son Jeff Hirsh, has, has picked up the baton and done a lot with it as well. And it's, it's characterized by Yale Hirsh is the final five trading days of the year, plus the first two days, trading days of the new year. A lot of people attribute the Santa Claus rally as just this December rally or the second half, but technically those are the days, the last five plus, the first two, and we're just getting into that period. It kicks off on Wednesday. You can see the returns during this period are abnormally large for a seven day period, 1.3% on average over the last 75 years. For the S&P, the median is the same. You look at normal seven day return windows, they're only on average up about 0.3%.

Adam Turnquist (19:20):

So I don't have a great answer, even though I get asked the question all the time. Why is this phenomenon of this Santa Claus rally? I don't exactly know. Maybe it's window dressing, late window dressing into year end where some of the, maybe the tax loss harvesting selling is done that gets finalized, maybe call it mid-November or mid mid-December, and then you have more buying pressure into your end. I don't know if that's <laugh> the exact answer, but certainly an interesting period for the market. You could see kind of where we're at now in terms of the progression for December in orange there, generally following the seasonal period where the back half is the strongest part. We'll see if we get the follow through here with the Santa Claus rally coming up here on Wednesday.

Jeffrey Buchbinder (20:07):

Yeah, I also know that when you're coming into this period with strong gains, you're more likely to be up and more likely to be up bigger. So again, maybe not going to 7,000 before year end, but we certainly have a chance based on the seasonals to get over 6,900 on the S&P 500, I would say. So very positive there. I think another reason why we, we tend to see this Adam, is just because there's a lack of negative catalysts when the traders just kind of lock it in and shut down for the year. If there's nothing going on, I think the natural drift is higher rather than lower. Especially since, you know, the market goes up more than goes down and we're right. <Laugh> people are generally in a good mood at the end of the year.

Adam Turnquist (20:51):

Reasons, right? The weird thing though, last year and the year before Santa Claus rally periods were negative. And then you can see that on the far right here, we've never had three straight negative Santa Claus rally periods. So something to watch for this year. You can see every Santa Claus rally period since, since 1950. Here for the S&P 500, the average up one three. And we had, we had 2024, 2023 down. We'll see what we get this year. And then the implications for January, when you look at, when Santa shows up, you have a positive Santa Claus rally. January returns look pretty good, and next year returns look pretty good up on average, 1.4% for January next year up 10.4% when Santa doesn't show up and you end up on the naty list. This is the average though. January's tends to be down 0.1% next year, kind of subpar, but still positive at, at 6.1%.

Adam Turnquist (21:47):

Now of course, we know what happened last year. We had a negative Santa Claus rally in the market. Is is coming in here just fine. We had a gain January last year, I think of 2.7%. So this is a good time to provide the asterisk that <laugh>. Mm-Hmm. Seasonal data does not necessarily imply forward returns. And it's, there's, there's many other variables in the market that really dictate price action and performance. Of course, as we know the economy policy earnings, and I think you can argue all three of those are doing pretty well with a few question marks.

Jeffrey Buchbinder (22:21):

Yeah, generally speaking, I think all those things are supportive right now, but yes. Good, good asterisk, good reminder that these seasonals don't always work, but hey, we're going to keep showing 'em to you. So here's another one, small caps. This is the down line means small caps outperforming, right?

Adam Turnquist (22:39):

Right. And I find it interesting because it seems like the last few years we've heard this kind of call out for small caps to outperform and it's the year of small caps or year of value. And it is a strong seasonal period right now. Typically when you look at the S&P 500 versus the Russell Two, as we're doing here throughout history, this goes back the last 30 years. Small caps via the Russell Two tend to outperform starting in mid-October through the end of February. That's their relative performance window on a seasonal basis. And that's kind of playing out right now. And we'll see if this small cap rally continues. And of course, as we highlighted before, it's not just, you can't trade on seasonals, right? There's, especially with small caps, the rate environment, the economy much more sensitive. Those are going to be the biggest factors that drive small caps, but they've had quite a comeback as we show I think on the next, I believe it's on the next chart with the Russell 2000 basically going from record highs to near correction territory, back to record highs here.

Adam Turnquist (23:46):

And that momentum has stalled out a little bit. As you can see, we're kind of struggling to get through some of the previous highs, but certainly an impressive comeback for small caps. It has created a lot of excitement, especially as strategists are writing up their forecast for 2026. But I think you have to be respectful of the longer term trend here. When you look at the Russell 2000 versus S&P 500, it's, it's still in a downtrend. It's maybe getting close to reversing that downtrend breadth is improving within small caps here, 64% of the index above their 200 day, that's better than the S&P 500. And I actually look back at the spread between small cap breadth and S&P 500 breath, and it doesn't generally get much better than right now the, this kind of 6% delta that we witnessed this month, that's kind of the multi-year low you've seen in comparative breath, meaning you typically only get this far and then large caps tend to start expanding or broadening or kind of reasserting their leadership status. So a good run here for small caps, we'll see if it lasts <laugh>, I guess is the question mark.

Jeffrey Buchbinder (24:53):

Yeah. Also a reminder it's tax loss selling season. So small caps if you own, if you own individual small caps, it's a good time to just check those for losses because you still got a few more days and there might be some losses that you weren't aware of that you can take. So hopefully you don't have a lot of them, but good time to remind folks to do that if they have not already. All right, so continuing on this theme of leadership participation rotation and all of that this is I guess the different small cap index, right? The S&P 600, a higher quality small cap index,

Adam Turnquist (25:32):

Right? Versus the S&P 100. So up until the right means large caps, and this is kind of a refined large cap index. So the top 100 in the S&P versus the S&P 600 here is, is just large cap leadership. And zooming out a little bit from the previous chart just to show this longer term trend and then the fact that we've had these periods of small caps outperforming, that's when this ratio chart on the top panel pulls back. But it has not disrupted that trend. And it's interesting, you look at year end 2023, you had small caps starting to outperform. Everyone was excited about them continuing that. Then the longer term trend of large cap leadership reasserted itself, kind of the same thing going into 2025. You can see that ratio chart getting back down to the 200 day, all the excitement about small caps quickly ended.

Adam Turnquist (26:25):

And as we know, it's mostly been a large cap led market this year. And here we are going into 2026. We're almost at the same spot in terms of this trend right at the two day. This is going to be a big test for the ratio chart and the leadership trends. But I think you have to give the longer term trend here some respect. And until this trend starts to break and we, we see small caps really break down through the low end of that channel, I think you have to stick with large over small, even when you equal weights. We take out the mega cap distortion, that's what we're doing on the bottom panel. And it's basically the same story. It's, it's been up until the right minus a few periods of, of some small cap outperformance, but they've been relatively short lived over the last few years.

Jeffrey Buchbinder (27:08):

Yeah, that's really interesting. because Mega caps are going to be a bigger part of the 100 and yet the trend doesn't really change, which highlights the fact that the mag summit hasn't quite been so dominant over the last several months as certainly it was prior to that. So good, good look at that. We're not changing our large cap, small cap recommendation heading into next year. We are still leaning a little bit into large, not much a little bit. Alright, turn back to bonds, which you talked about a little bit earlier, Adam. We had the better than expected CPI certainly puts some downward pressure on yields, but I don't know what else is going on here. Maybe a little bit of Japan, but we've ticked back, ticked back up again a little bit,

Adam Turnquist (27:50):

Right? We're kind of hovering below, call it four 20. That's the te basically the neck line of this developing head and shoulders pattern. So you kind of, your left shoulder and this is a bottom formation, your left shoulder, your head, your right shoulder, we've reversed this shorter term downtrend for this pattern to be valid. You're going to need to, you want to see a close above 4.2%. You still have the 200 day there at 4 24 to clear, but if you measure the size of that pattern, you apply it to the breakout level, that would imply upside risk here in 10 year yields to right around four 50. I think that would be problematic for U.S. equities at least on a short term basis, especially if the move is rapid. And I think that would be more pronounced in small caps. If you think about how much floating rate debt small caps have, I think it's somewhere around 40% or so, Jeff, correct me if I'm wrong, it's recalling that from memory and it's been a long week of, of no sleep <laugh>. So it might be, might be somewhere near 40%, but small cap's definitely more sensitive to the rate backdrop. We'll if we get through this level right,

Jeffrey Buchbinder (28:59):

40% of the Russell 2000 doesn't make any profit.

Adam Turnquist (29:02):

Yeah. On top of it, right? <Laugh>, you know, there's some

Jeffrey Buchbinder (29:05):

Rate sensitivity there. You don't have profits, you don't have the free cash flow to just funnel into your business. So you have to rely more on credit.

Adam Turnquist (29:13):

Yeah. And then what's behind the move? You mentioned Japan, they raised interest rates last week as expected. I think they are likely, at least the market thinks I should say, they're likely going to continue raising rates. Japanese tenure yields are at the highest level since 2006. They've doubled this year. German yields are breaking out, look at longer duration German boons. So there is some added pressure from global markets of course, as those sovereign rates outside of the U.S. start to increase U.S. treasuries lose some relative value appeal. And there's some maybe rotational pressures there. You have the term premium as we highlight here on the bottom panel, which is simply a model that tries to define the added yield investors require for taking on duration risk. And there's a multitude of inputs into that model. I think global yields are part of that story inflation expectations that's been increasing really since October and it's kind of hard to see here, but it's gone from 50 to 76 basis points, not quite to new highs, but that's also propping up 10 year yields as the fed cuts. They're less responsive because of that term premium that's now positive in yields. I think it's going to be an interesting chart here if we can get through four 20 and what the implications are for equity markets, but I would suspect it would at minimum allude to more of a consolidation pattern here for the S&P.

Jeffrey Buchbinder (30:33):

Yeah, and then you have concerns about the politicization of the Fed say that 10 times fast, we'll just call it questions about fed independence. There you go. <Laugh> too big of a, it's easier to say than politicization. If you get that those types of worries next year as we get closer to the new fed share, you potentially have some pressure, upward pressure on the long end of the curve. So that's something, something to watch for sure. So big story today. Gold first time over 4,400 I believe today. So certainly new record high boy. It's just been breakout after breakout.

Adam Turnquist (31:09):

It's been unrelenting in this rally. We had a pretty good draw down in October. Off record highs, extremely overbought conditions. I think it looked more like profit taking pressure than any structural change to the gold story. And you think about the catalyst here, we have the Fed continuing to ease, we have geopolitical risk that remains ongoing and kind of rotating between Russia, Ukraine, and now Venezuela. We'll see how 2026 shapes up, but I don't think it's going to mark the end of geopolitical risk premium in gold. And then central bank buying, it's been another big year of central banks, it's been a pretty well telegraphed story as they diversify away from the dollar. It's really been prompted by Russia's invasion of Ukraine and some freezing of, of Russian reserve assets. So those stories continue, we'll see how the dollar plays out that I think the dollar hasn't been as impactful.

Adam Turnquist (32:04):

It's certainly a factor in gold, but even when you look at the brief periods where the dollar is kind of stabilized and rallied on a short term basis, it really did not weigh too much on gold prices. So here, when you look at the measured move, you take this kind of consolidation phase, we'll call it over the last few months and you apply it to this recent breakout. And I think that the kind of minimum technical based price objective right around 48 75 price is overbought right now. On the bottom panel we highlight the relative strength index RSI, but oddly enough, it sounds crazy to say a 77 isn't that high for this momentum rally in gold. We've been north of 80, 85 in gold, we're at a, I think a 23% premium to the 200 day that hasn't really marked the end of buyer or really the start, I should say, of buyer fatigue setting in the market. So I think there's, there could be some further upside here, even on a near term basis before maybe prices get a little bit too high, too fast and we get some consolidation phase. But for our outlook on, on the precious metal space, we've been favoring these kind of buy the dip opportunities and whether it's gold or silver or the, just the broader precious metals complex.

Jeffrey Buchbinder (33:21):

Yeah, it'll be an interesting race next year to see what happens. First Dow 50,000 or gold 5,000.

Adam Turnquist (33:27):

Yeah.

Jeffrey Buchbinder (33:29):

Alright, copper and prices pay diverging. This is an interesting chart. You're basically saying copper usually is tied to inflation, but it hasn't been lately,

Adam Turnquist (33:37):

Right? And copper continues to move higher. London copper already breaking out to new highs. There's this big concern about global supply shortages as there is some tariff risks next year for copper to have a more universal tariff that's creating a lot of the London copper moving back to the U.S. So there's huge stockpiles in the U.S. but, and it's not just a tariff trade. I think when you look at global demand for copper, it remains steady. It's part of the AI theme of course. You think about not only the infrastructure of of the AI data centers to build how much copper, but also just supplying them with power and the grid infrastructure that need is needed. A ton of copper that goes into that. And of course copper is pretty vast in its application use and prices have responded to that, that demand backdrop.

Adam Turnquist (34:25):

And you can see they're, they're marching higher here after a bigger recovery from this, from the summer when we stack it up. And you think about just copper as an input cost, right? And you look at the ISM manufacturing prices paid component. So what are manufacturers telling, telling us about what their, their prices are? That's in white and we've had a notable divergence really over the last several months with copper moving higher and the prices paid component moving lower. Usually these are pretty highly correlated, especially around the peaks and troughs. I think this is going to be another interesting one as we go into 2026 and we look at this commodity rally and it's, it's beyond copper, it's it's other metals. The only one that's kind of missing is, is really oil, how inflation looks and what are some of these leading indications for inflation, which of course is this price is paid component that generally fuels into consumer inflation.

Adam Turnquist (35:21):

Do we get an inflection or does this relationship kind of converge back to its normal positive correlation? And for now it, this divergence has become more and more notable and we'll see the inflation expectations when you look at break even rates and things like that, they still remain well anchored as kind of the fed's terminology. But of course those are heavily correlated to oil. And I think if oil starts turning higher, that whole inflation story could certainly become maybe more front and center, maybe even more than the labor market weakness from the fed's perspective.

Jeffrey Buchbinder (35:57):

Yeah, maybe this chart's telling you that the investment in data centers is going to result in productivity.

Adam Turnquist (36:01):

Yeah, there you go. That's another take

Jeffrey Buchbinder (36:03):

Because productivity would put downward pressure on inflation. This is a short term divergence I guess we're looking at with these, these charts. But maybe over the next several years you see inflation behave better than copper prices because there's so much pressure to get this data center power up and running to fuel the ai the ai boom. So something else to watch. We finally a lot of things to watch next year, but that's kind of what you do at the end of a year as New Year's approaches, right? You talk about what to watch in 2026 and certainly we highlight a lot of things to watch in 2026 in our just released Outlook publication, which you can find on lpl.com. All right, we're going to try, Adam, do the fastest week ahead preview ever. It's the holidays, holiday, short week. People aren't paying attention too much and we don't have a lot of real meaningful data because we got a lot of meaningful data last week. So anything you'd highlight here? Either this data or anything else frankly that people should be watching.

Adam Turnquist (37:05):

Probably going to be jobless claims <laugh>, I guess maybe it's, it's going to be, I mean, it it's going to be pretty light price action I think the rest of the week and maybe that a DP weekly employment change, which is an interesting one. It's a new one that's been added from the a DP labor market's going to be front and center. I think that's probably pretty clear. So just the jobless claims data and then of course the continuing claims I like to look at as well and where those are tracking.

Jeffrey Buchbinder (37:36):

Sure, no doubt the job market has slowed. Even though the last job report was good for November, we did have some downward revisions to new job creation and we had a little bit of an uptick in the unemployment rate. So it is absolutely a mixed picture in jobs and we have to watch that very closely as 2026 gets underway. But yeah, the other thing to watch is of course the holiday shopping totals the national retail federation's at 4%. So let's try right around there. Anyway, let's hopefully we'll get around 4% all in for holiday shopping this year, over last year. If I had to, you know, put a bias on it, either up or down, I'd probably say we have a shot at doing a little bit better. Inflation actually helps because that's a nominal number, but we'll see. That depends on a lot of factors.

Jeffrey Buchbinder (38:27):

So watch the holiday shopping totals as they start rolling in over the next week. So with that we'll wrap. Thanks Adam for participating in the last Market Signals of 2025. So we're going to take next week off, we'll be back with you I guess January 5th or we'll release the next episode on January 6th. So I just, I want to thank you all for not just listening today, but also throughout 2025. We really appreciate your support of our podcast. Certainly. let us know if there's something you're not getting here that you'd like. We're always happy to take feedback. But other than that my main goal here today other than just dressing like my background, was to wish you all a happy holiday season <laugh>. So Adam, happy holidays to you and the family. Good luck getting those kids under control, <laugh> and bouncing off the walls. So excited about Christmas.

Adam Turnquist (39:24):

Yeah, thanks for having me. Happy holidays everyone.

Jeffrey Buchbinder (39:25):

Thanks a lot. Happy holidays to all of you and we'll see you on January 5th. Take care.