Hey Trader,
Christmas Eve 2018 was supposed to be a throwaway half day.
Half the desks were empty, the phones were quiet, but the S&P 500 dropped another 2.7% anyway.
By the closing bell it sat about 20% below its September high.
Santa delivered a bear market.
How did it get there? And does it give us a clue as to where we're headed?
Rewind six weeks…
The midterms in early November handed the House to the Democrats. Then on December 19th Jerome Powell raised rates and told reporters the Fed's balance sheet runoff would keep running on autopilot.
Traders heard a Fed that had stopped listening.
The Dow had its worst week since October 2008, and the S&P gave up 7% in five sessions.
In fairness to Powell, he didn't start the fire (it was always burning, since the…).
Stocks had been sliding since October.
His December hike landed on a market that was already bleeding and shoved it down in a matter of days.
Eight years later the calendar's lining up the same way, and for a while it looked like nobody cared.
The S&P 500 set its record on October 6th. Traders spent the next month crying out loud about AI spending, oil, inflation and the Fed, but the tape never really traded scared.
Democrats took the House and the Senate on November 3rd, and Wednesday brought a relief rally that sent the Dow up 1,569 points.
Then Thursday happened…
Traders decided a Democratic Congress could put the brakes on the AI data center buildout, and they dumped anything with a chip in it. Tech stocks lost 7.3% in one session, their worst day since March 2020, and every sector in the S&P finished red.
CNN pegged the damage at about $2.5 trillion.
Monday tried to wipe the slate clean.
Oil fell, shorts covered and the S&P jumped 2.35%, its best day since April.
The good mood lasted about one session.
This morning October's CPI came in at 0.4%, hotter than forecast. That pretty much locks in another hike from Kevin Warsh, who already raised rates a quarter point in September. Nvidia slid again too, after the company opened an internal investigation into reports about CEO Jensen Huang.
The Fed's last decision of the year lands December 9th, and from where I sit this market looks ready for another leg down.
So is there a saving grace?
Plenty of people on the Street say yes, and they say it trades under the ticker ANT.
Anthropic filed its price range yesterday morning.
It's selling 825 million shares at $70 to $78 apiece, enough to raise as much as $64.35 billion. The deal prices on November 18th and opens on the Nasdaq on the 19th.
CNBC says the book was covered at the range before the roadshow even started, and institutional demand is running hotter than it did for SpaceX at the same stage.
On top of that, Google, Nvidia, Microsoft, AMD, Broadcom, Micron and TSMC agreed to buy another $26 billion of stock at the IPO price. The bulls figure a blowout debut tells everybody the AI trade still has legs, and the chip names catch a bid right behind it.
I've already seen how that movie ended once this year.
SpaceX priced the biggest IPO in history in June at a $1.77 trillion valuation. By late July the stock had fallen about 50% from its post-IPO peak and Elon had lost his trillionaire badge.
When every fund manager who's been begging for a piece finally gets filled, the next question gets awkward fast: Who's left to buy?
They say nobody rings a bell at the top of a market.
November 19th might be the closest thing we get.
The bulls will tell you the economy can handle a Fed hike, and they'll wave October's jobs report around to prove it. Payrolls jumped 165,000 against a 65,000 forecast and unemployment slipped to 4.1%.
I've watched this movie too many times to buy a ticket.
The jobs numbers have overstated reality for years, and the corrections always show up after everyone stops paying attention.
In August 2024 the Bureau of Labor Statistics knocked 818,000 jobs off the prior year.
In September 2025 it came back with a 911,000-job cut, the biggest on record.
When the books finally closed on 2025, job growth the BLS first pegged at 584,000 for the year shrank to 15,000 jobs a month.
Between January 2025 and August 2026 the bureau revised its monthly numbers lower in 16 of 20 months, about 822,000 jobs that got announced, got cheered and then quietly disappeared.
So I take October's 165,000 with a big super large flake of salt.
Odds are it gets adjusted away sometime next year when nobody's looking.
Walk off Wall Street and you hear a different story.
The bankruptcy courts are busy. Epiq AACER counted 469,719 filings through the first nine months of 2026, up 11% from last year. Chapter 7 cases, where people liquidate and walk away, rose 13%. Small-business filings under subchapter V ran 50% higher in the first half than a year earlier.
The repo man's having a big year too. Fitch's 60-day delinquency rate on subprime auto loans hit 6.9%, the worst reading since Fitch started tracking it in the early '90s and well above anything from 2008. Manheim says repossessed cars rolling through its auctions in the first half ran 11% above last year and 36% above 2019. One industry estimate has repos on pace for about 3 million vehicles this year, closing in on the 3.2 million from the Great Recession.
Home buyers stepped back after mortgage rates spiked in September and October. HouseCanary's October numbers show single-family contracts down 15.5% from a year ago, inventory up 12.6% and price cuts at a multi-year high.
I’m seeing more realtors crying on TikTok and X about housing than I can count in an hour.
Then there's the building at 401 S. State St. in Chicago. It's been standing downtown since 1891. Somebody paid $68 million for it about ten years ago. It just sold for $4 million.
Out in Denver, the Denver Energy Center went for $176 million in 2013 and changed hands this year for $5.3 million.
CommercialCafe says distressed deals made up 19.4% of all commercial real estate traded since 2024, up from 6.2% in the three years before.
So what's keeping the lights on? AI spending and people with money.
ING figures AI investment accounts for roughly a third of U.S. GDP growth this year. On the consumer side, the top 20% of households own about 87% of the stock market, according to RBC, and RBC warns that a big correction would hit spending exactly where it's concentrated.
Both of those pillars stand on high stock prices.
If the market cracks, the wealthy get a lot tighter at the register and hyperscaler CFOs get a lot pickier with the capex budget.
So mark two dates:
November 19th, when ANT rings the opening bell.
December 9th, when Warsh steps to the podium.
The last time a midterm flip ran into a hawkish December, Santa showed up with a bear market.
I'm getting hedged before the 9th instead of waiting under the tree to see what he brings this year.
In the meantime, you need to take a look at what Mark Sebastian is doing with Anthropic in project Halo.
So far he’s put on 10 trades and made money on 7 of them. There are a bunch more coming as this IPO gets closer.
Tap this link to check out what Mark’s doing and jump in before he puts out the next trade.
Charles Delvalle
Editorial Director, Option Pit