Can weak US jobs data rescue the Santa rally?

Weak US jobs data could be the catalyst markets need to extend the Santa rally, according to Chris Beauchamp, Chief Market Analyst UK at investment and trading platform IG. A softer payrolls report would reinforce expectations of early-2026 rate cuts and support risk assets into year-end.

“Today’s delayed payrolls report could be the catalyst markets need to extend the year-end rally. If the numbers show the US labour market is cooling sufficiently, it would confirm the Fed’s easing path remains on track. That’s exactly what investors want to hear as we head into 2026.

“The market has already priced in aggressive rate cuts for early next year. A soft headline jobs number, weaker wage growth, or rising unemployment would simply reinforce this view. More importantly, it would support the argument that current policy is too restrictive and rate relief is imminent.

“The implications are straightforward. Weaker jobs data should pressure the dollar further, provide support for equities, and extend the recent bounce in rate-sensitive assets. The technical setup suggests markets are primed for this move, with year-end positioning already tilted towards reflation trades.

“But the risks are asymmetric. Markets can digest modest weakness without much drama. A hot surprise, however, would reignite inflation fears and threaten both equity valuations and the seasonal rally. With December liquidity already thin, any unexpected strength could trigger outsized moves.”