Transcript

Amada Agati:  

"The 12 Days of Christmas" plays -The sleigh bells are ringing. The lights are twinkling and the holiday hustle is officially underway. As we unwrap the season of giving, one thing is certain, spreading cheer does not come cheap.

From partridges and pear trees to drummers drumming, the price of true love's wish list is climbing faster than Santa's sleigh on Christmas Eve. So grab your cocoa and cozy up because tis the season for the PNC Christmas Price Index edition of "Adding Alpha."

Now in its 42nd year, the PNC Christmas Price Index measures the change in prices consumers expect to pay for True Love's gifts from the classic holiday carol,

"The 12 Days of Christmas." Unlike the widely referenced Consumer Price Index compiled by the Bureau of Labor Statistics, the PNC CPI measures inflation through the lens of holiday gift giving.

Every year, our investment office tracks down prices from bird hatcheries, nursery suppliers, dance and theater troupes and jewelry stores to calculate and track the changing price of Christmas.

This year, the total for True Love's gifts wrap up at a tree-topping $51,476, or a cumulative $218,543 if you really want to make an impression by buying all 364 gifts in the repeated verses of the song.

On a percentage basis, the index is up about 4.5%, slower than the 5.4% increase from last year, but still well above the BLS headline inflation of 3%. This year's increase reflects labor-market pressures and economic uncertainty, not tariffs, because True Love's shopping list only includes domestically produced goods and services.

All that glitters is gold. Five gold rings --my personal favorite gift --soared 32.5% this year, the single largest increase by far, but a bargain compared to the 45% jump in gold prices.

The surge in gold prices wasn't just holiday magic. It was driven by macro forces that made investors flock to precious metals. 

Persistent inflationary pressures and expectations of Fed rate cuts lowered the opportunity cost of holding gold, making it more attractive than yield-bearing assets.

A frosty U.S. dollar, down 4% year over year, also made gold shine brighter.

Good news, though. There were no price increases this year for five of the gifts in the index, including the two turtle doves, three French hens, four calling birds, seven swans a-swimming and eight maids a-milking.

And although partridge prices were also unchanged, pear tree prices jumped again this year, this time by 14.3%. We think of the pear tree as a proxy for housing costs, which continued to increase despite average mortgage rates falling off the rooftop by more than 100 basis points versus a year ago alongside recent Fed rate cuts.

What's interesting is that the core version of the index, just like the core version of CPI, which excludes the most volatile component of the index, the swans for the PNC Index and Food and Energy in CPI is up 6.1%.

Swans typically have the most volatile price among items in the Christmas price index. However, this year, prices remained flat. That might actually be a positive signal for investors who've been bracing for investment, black swan sightings or finding coal in their stocking even as the market continues to hit new highs.

Tech-savvy Santas might avoid long lines and parking-lot adventures by shopping online, with its lower inflation rate of 3.1%. But the total shopping bill remains higher at $55,748.

The convenience of shopping from home is still very much being impacted by elevated shipping and packaging costs.

No matter what's on your list this year, consumer behavior remains the drumbeat for the U.S. economy. With 70% of U.S. GDP tied to consumption in some way, consumer health really is a critical driver for markets and the economy, slowly decelerating consumer inflation and other key categories and lower gasoline prices from a year ago should help shoppers offset some of the high prices from this year's PNC CPI.

So keep an eye on guiding stars like retail sales, savings rates and consumer sentiment as indicators of not only the success of this holiday season, but the market's path forward.

With the Fed's recent shift toward looser monetary policy, it will be very interesting to see where the Christmas price index shakes out in 2026.

Will we finally get the gift of substantially lower inflation, or will still elevated inflation be the proverbial lump of coal in shoppers' and investors' stockings?

You're just going to have to keep tuning in to find out. And in the meantime, happy holidays.