Financial Market Update – Week of 12/29/25

Presented by Marc Aarons

 

I hope you’re doing well as the year comes to an end. Despite scaled-back trading, markets are closing out 2025 on an upbeat note. The S&P 500 and Dow notched record highs last week, propelled by stronger-than-expected economic data and easing price pressures. Meanwhile, a rally in gold and silver served as a pointed reminder that inflation risks and geopolitical tensions linger.

Here are the key takeaways from last week:

Stock Index Performance

• The S&P 500 gained 1.40%.
• The Nasdaq 100 rose 1.18%.
• The Dow Jones Industrial Average increased 1.20%.

Growth, Jobs, and Confidence

• U.S. GDP surged 4.3% in Q3 2025, exceeding consensus forecasts and marking the fastest expansion in two years. Consumer spending rose 3.5% due to higher-income households spending more on non-essentials, offsetting weaker spending by lower-income households who are being squeezed by inflation and the cost of paying down debt. Business investment rebounded, and net exports turned positive on energy and capital-goods shipments.
• The Conference Board’s consumer confidence index fell to 89.1 in December, the lowest since mid-2022, as Americans fretted over prices and job security. The persistent ‘vibecession’ (the disconnect between strong economic data and weak consumer sentiment) suggests inflation’s psychological toll lingers even as costs have moderated.
• Labor markets tell a split story. Unemployment hovers near four-year highs and continuing claims match late-2020 levels, while initial filings dropped for a second week. Notably, new college graduates are among the hardest hit; according to the St. Louis Fed, this demographic is experiencing an unemployment rate nearing double digits.
• One critical question for 2026 is this: Can consumers keep spending without real income gains? Investors are eyeing wage data, Personal Consumer Expenditures (PCE) inflation, and Q1 hiring for clues on whether the Fed can avoid choosing between rekindled inflation and rising joblessness.

The Week Ahead

• The Fed will release the minutes from its December meeting on Tuesday, December 30th, which will likely show how divided policymakers are about where interest rates should go in 2026. Markets expect about two more rate cuts next year, but officials who want to keep rates higher may disagree because inflation is still stubborn and Q3 GDP was strong.
• Indeed, liquidity usually tapers in the shortened week with the New Year holiday. Minimal data leaves markets vulnerable to volatility from geopolitical instability or technical rebalancing. U.S.-Venezuela tensions and thin volumes could amplify swings in gold, oil, and stock indices.
• Note that U.S. stock markets will operate with regular trading hours on December 31st and will be closed on January 1st.

 

With all of this said, we want to wish you a happy New Year! As always, we’re here to help you stay aligned with your goals as market conditions evolve. Don’t hesitate to reach out if you’d like to review your portfolio or discuss any questions.

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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