Brew Markets: "Here Comes the Santa Claus Rally? & The Year in Brand Backlash"

Morning Brew | December 22, 2025
Host: Ann Berry
Co-host: John

Main Theme & Purpose

This episode of Brew Markets dives into two core themes:

1. The “Santa Claus Rally”—what it is, why it happens, and whether 2025’s markets might see it.
2. The Year in Brand Backlash—a look at four major companies (Southwest Airlines, Cracker Barrel, Duolingo, American Eagle) that faced significant public controversy in 2025, examining what drove the outcry and how it ultimately affected their business outcomes.

The episode weaves together sharp market analysis, memorable moments from corporate missteps, and a detailed rundown of breaking M&A headlines.

Key Discussion Points & Insights

1. Understanding the Santa Claus Rally (00:47–03:30)

• Definition & History:
  The Santa Claus Rally is the observed tendency for the stock market—specifically the S&P 500 and major indices—to perform positively during the last five trading days of December and the first two of January.

  • “79% of the time since 1950...the S&P 500 averages a 1.3% gain in that seven-day trading window.” — Ann (01:44)

• Reasons Why It Happens:

  • Holiday optimism among investors
  • Lighter volume with institutions on vacation
  • Tax-loss harvesting (selling losers before year-end, rebuying in January)
  • “Self-fulfilling prophecy”—investor expectations driving action

• Caveats:

  • It doesn’t happen every year (e.g., 2024 saw a “Santa Claus sell-off”).
  • Absence of the rally is sometimes a bearish signal.
  • “Santa doesn’t always deliver, but Wall Street still checks the chimney every year.” — Ann (02:55)

2. 2025’s Biggest Brand Backlashes (04:23–17:45)

Southwest Airlines—Bags No Longer Fly Free

Ticker: LUV
Timestamps: 04:23–08:12

• Policy Change:

  • In March, Southwest ended its hallmark “bags fly free” policy, adding a $35 fee for the first checked bag and $45 for the second.
  • “$35 for the first bag, $45 for an additional bag…that is a pretty chunky proportion of the actual ticket price.” — Ann (05:11)

• Customer & Brand Impact:

  • CEO claimed Net Promoter Score (NPS) rebounded, but survey data was less clear.
  • Longtime customers aren’t thrilled about this and the coming switch to assigned seating, but new features (like extra legroom) are on the horizon.
  • Despite the complaints, “revenue is up…share price is up 25% this year, including a bump after the baggage announcement in March.” — Ann (07:22)

Cracker Barrel—Logo Change Uproar and Operational Stumbles

Ticker: CBRL
Timestamps: 08:12–12:19

• Incident:

  • Changed iconic logo, removing the “man leaning on a barrel” (Uncle Herschel), sparking outrage.
  • Labeled “woke” and “un-American” in social media and by high-profile figures:
    “President Trump posting…‘Cracker Barrels should go back to the old logo, admit a mistake…’”—John (09:51)

• Company Reaction:

  • Cracker Barrel reversed its logo decision and openly admitted it as a mistake.
  • Additional attention to other operational changes: “The biscuits tasted different… they were pre making the biscuits, freezing them, reheating them the next day. And fans noticed it.” — John (10:56)
  • Internal turmoil: CEO Julie Messino resisted activist calls for her resignation, cut management layers, promised improvements.

• Business Impact:

  • Same-store sales down 4.7% YoY.
  • Share price “down 50% this year…down nearly 70% since the logo debacle.” — Ann (12:19)
  • “Cracker Barrel needs to figure something out. 70% down. In a year where the market's been so strong…” — Ann (12:19)

Duolingo—AI Layoffs and the Case of the Vanishing Owl

Ticker: DUOL
Timestamps: 12:19–15:59

• Incident:

  • An internal memo leaked: company would shift to “AI-first” strategy, reducing reliance on human contractors.
  • Mass backlash: “Duolingo had been an early poster child for AI taking jobs.” — John (13:27)
  • Deleted social media—vanishing their beloved (nagging) green owl mascot.

• Aftermath:

  • As public sentiment on AI layoffs has shifted industry-wide, the controversy today may not be as potent as it was in April.
  • In November, CEO said they’d return to Unhinged ads, and the owl would come back; good financials (revenue +41%, daily users +36%), BUT share price still “down 42% on the year”—reflecting broader anxiety about AI in education software.
  • “Whether it's Adobe or Salesforce…the narrative they cannot shake off is that AI is ultimately going to eat them alive. And there is no more prevalent fear of that than in the education sector.” — Ann (15:41)

American Eagle—The “Genesis Jeans” Campaign Fiasco

Ticker: AEO
Timestamps: 15:59–17:58

• Incident:

  • Ad campaign with Sydney Sweeney, tagline: “My body's composition is determined by my genesis. My jeans are blue.”
  • Backlash for perceived eugenics/racist implications.
  • “Accusations of the brand promoting eugenics and being racist. It did not go over well.” — John (17:09)

• Company Response & Results:

  • American Eagle doubled down on the campaign—added Martha Stewart and Travis Kelce as new faces, kept the “good jeans” slogan.
  • CMO: “In our industry, the biggest enemy is boring…campaigns that literally look like nice wallpaper.”—Ann quoting Craig Brummer (17:31)
  • Financials: Revenue +6%, comparable sales +4% YoY, Aerie (subsidiary) +11%.
  • Stock “up 65% this year…almost tripled since the controversial ad first ran”—Ann (17:54)

3. Breaking M&A News—Paramount, Warner Brothers Discovery, Oracle/Larry Ellison (20:02–21:36)

• Paramount’s Hostile Bid Evolution:
  • Oracle co-founder Larry Ellison now offers a personal guarantee (over $40 billion) for Paramount’s bid for Warner Brothers Discovery.
  • New transparency: detailed contents of the Ellison Family Trust (1.16 billion Oracle shares, ~$230B value).
  • Paramount matches Netflix’s $5.8B breakup fee; Netflix restructures its debt in anticipation of the acquisition.
  • “Very much Paramount and the Ellison saying, look, you can't argue with the numbers. The money's there if we want to put it into buying Warner Brothers.” — Ann (21:19)

4. Private Equity Deal: Janus Henderson Goes Private (21:36–23:49)

• Transaction:
  • Janus Henderson (global investment manager) to be taken private by a partnership between Trian (Nelson Peltz’s activist hedge fund) and General Catalyst (VC firm).
  • Purchase price: $49/share, $7.4B total.
• Why It’s Notable:
  • Rare hedge fund/VC partnership—intent to use “tech-enabled” strategies to transform Janus.
  • Deal backed by Qatar Investment Authority and Hong Kong’s Sun Hong Kai.
  • “Once this thing goes private, they are going to level up Janus’s access to global capital and get the benefits of even more scale.” — Ann (23:49)

Notable Quotes & Memorable Moments

• On the Santa Claus Rally:
  • "It’s not magic, and Santa doesn't always deliver. But Wall Street still checks the chimney every year." — Ann (02:55)
• On Southwest's Brand Evolution:
  • “At the end of the day, the market just likes new revenue streams as long as the attrition in the customer base doesn’t offset it completely.” — Ann (07:24)
• On Cracker Barrel’s Logo Backtrack:
  • “Logo was the lightning rod, but it opened up a conversation of like, what’s really happening there?” — John (11:13)
• On Duolingo & AI:
  • "Duolingo felt like it had the misfortune of being amongst the first to actually be, you know, unwittingly vocal about it." — Ann (14:46)
• On American Eagle's Risky Branding:
  • “In our industry, the biggest enemy is boring.” — Ann quoting American Eagle’s CMO Craig Brummer (17:31)

Timestamps for Key Segments

• Santa Claus Rally Explainer & Impact: 00:47–03:30
• Southwest Brand Backlash: 04:23–08:12
• Cracker Barrel Logo & Operational Backlash: 08:12–12:19
• Duolingo AI Controversy: 12:19–15:59
• American Eagle Ad Fiasco & Recovery: 15:59–17:58
• Market Close and Major M&A News: 20:02–21:36
• Janus Henderson Private Equity Takeover: 21:36–23:49

Tone & Language

The episode maintains a conversational, insightful, and occasionally irreverent tone—mixing sharp financial analysis with pop culture nods and moments of levity, embodying Morning Brew’s breezy, informative brand of financial journalism.

Summary Takeaway

This episode presents a snapshot of a market in flux—where historic trading patterns rub up against new uncertainties, and brand reputations can both devastate and buoy share prices. Whether it’s the pursuit of a Santa Claus Rally or the tightrope walk of brand identity in public companies, the show offers listeners a smart, up-to-the-minute tour of what’s shaping the markets heading into 2026.