Piper Sandler’s Craig Johnson on 2026’s "Lowercase b" Bull Market and Santa Rally Status

On December 26, 2025, Craig Johnson, Chief Market Technician at Piper Sandler, joined CNBC’s “Closing Bell Overtime” to address the Santa Claus rally and 2026 market outlook [1]. Johnson described 2026 as a “bull market with a lowercase b,” indicating a tempered, selective upward trend rather than a broad-based, high-magnitude rally [1]. He supported the continuation of the Santa Claus rally (defined as the last 5 trading days of December and first 2 of January) due to improving market breadth and easing inflation, with leadership narrowing to AI, cyclicals, and select defensive stocks [2].

Market data leading up to and during Johnson’s comments shows the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite gained 2.3%, 1.8%, and 2.6% respectively from December 18 to 24, 2025, closing at record highs on Christmas Eve [0]. On the day of his appearance, thin holiday trading volume (1.44B for the S&P 500, down from the weekly average 4.72B) led to muted activity: the S&P 500 dipped 0.09%, the Dow held flat, and the Nasdaq fell 0.22% [0]. Johnson’s cautious bullishness aligns with broader strategist sentiment, including Ed Yardeni’s warning of a potential H1 2026 correction if bond yields rise significantly [2], and Brian Jacobsen’s note that 2026 will be a “prove-it year” for AI productivity gains [3].

1. Tempered Bull Market Definition
   : Johnson’s “lowercase b” characterization suggests 2026 gains will be limited in magnitude and breadth, contrasting with recent broad-based rallies. This implies a shift from index investing to selective stock picking in AI, cyclicals, and defensives.
2. Holiday Volume Impact
   : The minor market dip on December 26 likely reflects thin holiday trading rather than a rejection of Johnson’s outlook, emphasizing the need to avoid overinterpreting short-term holiday market moves.
3. Consensus Risk Factors
   : Strategists broadly highlight bond yield volatility and AI valuation sustainability as critical risks, indicating these factors will shape 2026 market performance regardless of seasonal trends like the Santa rally.
4. Santa Rally Context
   : While Johnson sees conditions supportive of the rally, historical data shows it fails ~24% of the time, which could signal a bearish start to 2026 if unfulfilled [4].

• Concentration Risk
  : Narrow leadership in AI, cyclicals, and defensives could lead to overvaluation in these sectors, increasing vulnerability to sudden pullbacks.
• Bond Yield Risk
  : Rising bond yields may trigger a H1 2026 market correction as noted by Ed Yardeni [2].
• AI Productivity Risk
  : Companies must deliver tangible AI productivity and margin gains to justify current valuations (Brian Jacobsen [3]).
• Santa Rally Failure
  : A failed seasonal rally could dampen investor sentiment early in 2026 [4].

• Selective investments in AI, cyclicals, and defensives may outperform if Johnson’s narrow leadership outlook holds.
• Easing inflation and improving breadth could support sustained, albeit moderate, market gains in 2026.

This analysis synthesizes comments from Piper Sandler’s Craig Johnson, 2025 year-end market data, and broader strategist perspectives. Johnson’s 2026 “lowercase b” bull market outlook signals tempered, selective gains, while his support for the Santa rally is underpinned by improving breadth and easing inflation. Market activity on December 26 was muted due to holiday volumes, and key risks include concentration in select sectors, bond yield volatility, and AI productivity uncertainties. Decision-makers should prioritize fundamental analysis and monitor these risk factors alongside seasonal trends.