Stocks Likely to Stay Muted Into Year-End, but Watch These 2 Key Assets That Could Shape the Start of 2026

The S&P 500 broke to a new record high during the shortened Christmas trading week, successfully clearing a triple-top formation, while the Nasdaq 100 failed to follow. As year-end approaches and trading volume remains thin, a muted or modestly positive market environment is likely to persist. However, two commodities are moving in opposite extremes, creating potential uncertainty for the opening phase of 2026.

The S&P 500 closed at a historic high just ahead of Christmas and now sits only a short distance from the 7,000 psychological level. From a technical perspective, the breakout above the triple-top suggests the bullish trend could extend into year-end, especially with no major catalysts expected during the holiday period. In contrast, the Nasdaq 100 remains capped under a lower-high structure, as the recent rebound loses decisive momentum. This divergence likely reflects lingering risk aversion and renewed skepticism around AI, although downside pressure may remain limited given light trading conditions. Overall, major equity indices are expected to hover near current levels into early 2026, as large institutional investors shift attention back toward fundamentals and forward-looking growth assumptions.

Meanwhile, gold and crypto are sending far more extreme signals, complicating the broader market narrative.

Gold, which we flagged earlier this week as deeply overbought, continues to attract strong demand. After pausing briefly on Wednesday, prices surged to fresh highs on Friday, pushing RSI readings back above 93. The speculative intensity appears tied to U.S. dollar weakness and growing expectations for a more dovish Federal Reserve in 2026, despite resilient domestic fundamentals. Amid a broad global easing cycle, gold has now delivered three consecutive years of double-digit gains, accelerating to more than a 70% increase this year alone.

Even so, upside potential looks increasingly fragile. A strong U.S. economy, a yuan exchange rate above 7 per dollar, and renewed trade risks could all challenge further dollar depreciation. A weaker dollar would place pressure on export-driven economies, particularly as Trump's reciprocal tariff framework looms, suggesting policy intervention may not be far away. With currency risks rising, aggressive bets on continued dollar weakness could prove dangerous, limiting gold's near-term appeal.

Gold's enthusiasm stands in stark contrast to the chill gripping crypto markets. Bitcoin has been consolidating for more than a month and remains below the $90,000 psychological threshold. While the sector initially benefited from optimism around Trump's stablecoin legislation and plans for a U.S. strategic Bitcoin reserve, prices have since retreated sharply from October highs. The growing decoupling between crypto and equities is unusual, especially given their strong correlation in recent years and the S&P 500's fresh record. Extended consolidation rarely persists indefinitely, suggesting an inflection point may be approaching. One scenario is a renewed rally above $100,000, which could reignite broader risk appetite and propel equities to further highs. The alternative is a breakdown below $80,000, where a loss of key support could undermine confidence and weigh heavily on overall market sentiment.

Looking into 2026, the outlook becomes increasingly complex, with several unresolved questions. How aggressively will the Federal Reserve cut rates under a new chair, and could faster growth come at the cost of renewed inflation risks. Will the AI trade collapse under valuation pressure, or will monetization finally accelerate enough to justify current valuation. How will gold and crypto ultimately resolve their divergence, and will U.S.–China tensions resurface as ideological conflicts remain unsettled. For now, those debates belong to next year. As 2025 draws to a close, it may be best to enjoy the final stretch while markets pause before the next chapter begins.