How Does Santa Claus Manage the Global Economy? Has the 'Santa Claus Rally' Arrived?

TradingKey - This Christmas, Santa Claus seems to have delivered a substantial gift to the U.S. market: total holiday retail sales are projected to exceed $1 trillion for the first time; the U.S. stock market's "Santa Claus Rally" unfolded as expected, with the S&P 500 closing at a record high on Christmas Eve. According to forecasts, online spending will reach a record-breaking $253.4 billion this year. How does Santa Claus drive economic growth, and which sectors benefit the most?

How Much Can the Christmas Retail Market Earn?

Undoubtedly, one of the biggest beneficiaries of Christmas is the retail market .

For most retailers, the Christmas season is the most crucial sales period of the year; whether they can turn a profit or not largely depends on sales performance during this time. Statistics show that in sectors such as toys, jewelry, and others, revenue from November to December accounts for 30-40% of the annual total, but net profits can exceed 50% of the annual total.

This is because consumers' price sensitivity typically decreases when purchasing gifts during the holiday season. For items bought as gifts, consumers prioritize their perceived value over the price itself, which differs from the purchasing logic for everyday necessities. This consumer psychology also allows merchants to easily maintain relatively healthy profit margins.

Furthermore, as the entire November-December period is a peak shopping season, merchants manage discounts with greater precision. Despite events like Black Friday and Cyber Monday, they still ensure profit margins by optimizing their promotional strategies.

Based on this year's data, the retail industry will undoubtedly achieve success during this period. According to the National Retail Federation's (NRF) projections for 2025, U.S. holiday retail sales are expected to exceed $1 trillion for the first time, reaching $1.01-1.02 trillion, with a projected growth rate of between 3.7% and 4.2% compared to 2024.

This statistical period covers from November 1st, including Thanksgiving, Black Friday, Cyber Monday, and Christmas, and lasts until December 31st. Furthermore, this data excludes revenue from car dealerships, gas stations, and restaurants, purely measuring consumer spending on holiday-related goods such as gifts, apparel, and electronics.

Regarding this forecast, the NRF stated that despite U.S. consumers being more cautious this year, their fundamentals remain strong and will continue to drive U.S. economic activity. Consumers are expected to save on non-essential items and allocate funds towards gift purchases.

Christmas Spending Boosts E-commerce Growth, Logistics, and Gift Cards

According to Adobe's 2025 online shopping forecast, online spending during this year's holiday shopping season (November 1st to December 31st) is expected to reach $253.4 billion, marking a new historical high and representing a 5.3% increase over 2024's already record-breaking shopping figures.

Simultaneously, the growth in e-commerce spending has also boosted other industries, such as Buy Now, Pay Later (BNPL). During the 2025 Christmas season, the amount paid via BNPL increased by over 9%. This trend is attributed to ongoing inflationary pressures, prompting consumers to use installment payments to alleviate the financial burden of a single lump-sum payment.

The logistics sector will also benefit from holiday consumption. According to forecasts, the total volume of packages from November to December this year will be approximately 750 million, a year-over-year increase of 1-2%. Additionally, "reverse logistics" after Christmas will also generate a significant number of packages.

With increased inflationary pressure this year, practicality has become a key consideration for consumers when giving gifts, making gift cards the second most popular gift choice for U.S. consumers. NRF data projects that U.S. consumer spending on gift cards will reach $29 billion in 2025.

Capital Markets Receive a Christmas Eve Gift: S&P 500 Hits Another Record High

Historically, U.S. stocks typically rise from the day after Christmas through the first two trading days of January, a phenomenon known as the "Santa Claus Rally." This year, the Santa Claus Rally has commenced early.

On Christmas Eve, December 24th, Eastern Time, the S&P 500 index performed strongly, closing at an all-time high of 6932 points, a performance widely interpreted by the market as signaling the start of the "Santa Claus Rally." Notably, this marks the first time since 2013 that the index has set a new closing high on Christmas Eve.

The occurrence of the Santa Claus Rally is attributed by analysts to investment psychology. The festive atmosphere during the holidays tends to boost investor risk appetite and optimistic expectations. Coupled with positive outlooks for a stock market rally in January, investors are typically more inclined to buy ahead of the holiday period than at other times.

Moreover, this year, the onset of the Santa Claus Rally was also facilitated by the Federal Reserve's decision in December to cut interest rates by 25 basis points, lowering them to a range of 3.50%-3.75%. This move has led to increased liquidity in the U.S. equity market, benefiting U.S. stocks.