Weekly Market Update: December 1, 2025

The odds of an interest-rate cut at this month’s Federal Open Market Committee (FOMC) meeting continue to gyrate. Recall that after the October FOMC decision, which lowered the federal funds rate to a range of 3.75% to 4.00%, the likelihood of another quarter-point reduction before year’s end was very high. These odds then plummeted on hawkish monetary policy commentary from some Federal Reserve officials and continued worries about inflation, exacerbated by the increased tariffs. However, recently released data on the labor market (more below) pushed the chances of a December interest-rate cut notably higher. 

The September jobs report painted a mixed picture on the state of the labor market. True, the nation added an estimated 119,000 jobs in September, more than double the consensus forecast and a sharp recovery from the August decline of 4,000. However, the unemployment rate rose to 4.4%, the highest level in more than four years. The prior two months’ jobs creation figures also were revised lower and recent ancillary data have shown an uptick in corporate layoffs. Investors should note that the October jobs report was canceled due to the inability to collect data during the government shutdown. 

The inflation data also has been sparse. The September Consumer and Producer Price Indexes, though, did show that inflation remains sticky at both levels. Here, too, the October inflation data was canceled, and the November figures will not be released until after the December FOMC meeting. Thus, the FOMC will have to make a decision on interest rates without a full slate of data. Our sense is that with a softening labor market and stubborn inflation, the central bank will want to avoid keeping monetary policy too restrictive and risk slowing growth too much, which could potentially lead to stagflation. 

Meantime, third-quarter earnings season was a success. More than 80% of the S&P 500 companies exceeded profit forecasts. This provided some support for equities amid the uncertain monetary policy back-drop. 

Conclusion: Equity market volatility has picked up amid uncertainty about the Fed’s next monetary policy move and worries about an artificial intelligence (AI) spending bubble. Given this setting, we recommend maintaining a portfolio consisting mostly of high-quality stocks and cash-equivalent securities. 

Sources: ValueLine.com