Weekly Market Update: December 30, 2025

Inflation showed signs of easing this past fall. Indeed, the November Consumer Price Index (CPI) report showed that the CPI and the core CPI, which excludes the food and energy components, rose 2.7% and 2.6%, respectively, on a 12-month basis, with both metrics coming in notably below expectations. The more benign price data, along with an uninspiring November jobs report and the forthcoming appointment of a likely more dovish Federal Reserve Chairperson by President Trump, keeps the possibility of lower interest rates during 2026 in place. This played a big role in yet another late-year “Santa Claus” rally for stocks. 

There also are signs that the economy is reaccelerating. The delayed third-quarter gross domestic product (GDP) report from the Commerce Department showed that output expanded by an estimated annualized rate of 4.3% in the three-month period, driven by personal consumption. There also is a sense that growth will continue in 2026, as the tax cuts from the One Big Beautiful Bill Act and regulation rollback may provide additional support for both consumers and businesses. 

Not all parts of the economy are performing well. Manufacturing as well as housing activity remains sluggish, with the latter hurt by still relatively high mortgage rates. High interest rates and still sticky inflation, along with simmering geopolitical turmoil in the Caribbean, The Middle East, and Ukraine, a weaker dollar, and rising national debt, have pushed investors into gold, platinum, and silver. All three precious metals recently hit all-time highs in price. 

Corporate America is positioned for another strong performance over the next 12 months. The Wall Street consensus is that earnings growth for the S&P 500 companies will average 13% to 15% in 2026. It also is worth noting that recent results from some prominent technology companies suggest that information technology (IT) spending by customers, which has slumped over the last few years, is starting to recover. If double-digit earnings growth is achieved, it would help justify the S&P 500 Index’s elevated price-to-earnings valuation. 

Conclusion: As the calendar turns to 2026, the variables (i.e., less-restrictive monetary policies and an improving economy) are in place for the stock market to take another, albeit likely uneven, step up over the next 12 months. 

Source: ValueLine.com