Financial Market Update – Week of 12/22/25

Presented by Marc Aarons

 

U.S. markets took a breather last week, digesting the Federal Reserve’s third straight rate cut alongside softer inflation data. The economic backdrop remains resilient but mixed, with Treasury yields easing while the dollar showed unexpected strength as investors weighed what comes next.

Here’s an overview of key takeaways for the week:

Stock Index Performance

• The S&P 500 edged up 0.10%.
• The Nasdaq 100 gained 0.59%.
• The Dow Jones Industrial Average decreased 0.67%.

The Big Picture

• The Fed has shifted into a slower, more conditional easing phase, but its projections point to only one additional cut in 2026 and policy rates anchored in the low‑3% area for several years, signaling confidence in a soft landing with no urgency to re-stimulate.
• November’s Consumer Price Index (CPI) registered 2.7% headline and 2.6% core year-over-year, with core up just 0.2% monthly and the three-month pace near 2%. Shelter inflation cooled to 3.0%, but core services excluding energy remained elevated at 3%, which explains the Fed’s “somewhat elevated” characterization.
• Treasuries staged a modest rally as yields fell about four basis points, with the curve steepening to its widest gap since January 2022 in a pattern consistent with markets pricing a shift from “higher for longer” to conventional late-cycle easing. The Dollar Index firmed to 98.7 as U.S. growth expectations stabilized relative to peers, yet gold held near record levels around $4,330 per ounce — underscoring persistent demand for hedges against policy and geopolitical uncertainty.
• Oil prices softened for a second consecutive week, with Brent crude just below $60 per barrel and West Texas Intermediate (WTI) in the high‑$50s, on improving prospects for a Russia-Ukraine settlement and concerns over global demand momentum. Analysts explain that sanctions, OPEC+ production policies, and shipping‑route disruptions provide a floor under crude.

The Week Ahead

• December has been unusually choppy for a seasonally strong month. Still, there is some hope and tentative signs of a Santa Claus Rally forming, depending on key data releases this week.
• Markets will focus on Personal Consumption Expenditures (PCE) inflation (Dec. 22) along with personal income and spending (Dec. 22-23), and consumer confidence (Dec. 23) readings to confirm whether disinflation is continuing and consumer resilience is holding.
• Keep in mind the stock market will close at 1 p.m. on December 24th and will be closed entirely on December 25th.

With that overview noted, happy holidays from our team! We’re watching the markets closely and ready to help you navigate whatever unfolds in the year ahead.

Please don’t hesitate to reach out with any questions or concerns.

Marc Aarons may be reached at 714-887-8000 or Email Marc

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