Weekly Update 1/2/2026: Market Achieve Solid Rise in 2025
- Fed officials debate further cuts
- Boeing gets more orders
Fed minutes and economic data
After the usual three-week delay, the minutes of the Fed’s December 9-10 meeting were released this week. The Fed voted to cut rates by 25 basis points (0.25%) for the third consecutive meeting as it sought to cushion an apparently weakening job market. While the cut did take place, many officials “indicated that the decision was finely balanced or that they could have supported keeping the target rate unchanged.” Some officials believed that progress towards getting inflation back to the 2% target had stalled, according to the minutes. The final vote was nine in favor of a cut and three against. Of those three, two wanted no change and one favored a larger cut. Each of the fall’s three rate cuts faced successively greater internal resistance. The minutes also added, “it would be appropriate to keep the target range unchanged for some time.”
Economic data published since the December meeting have looked favorable. The most recent consumer price index data shows it dropping to 2.7% in November, but delays and technical challenges caused by the recent government shutdown have brought the quality of that figure into question. Hiring has not collapsed with weekly initial unemployment claims falling below 200,000 this week. The National Association of Realtors reported that pending sales of U.S. existing homes rose by 3.3% last month to its highest level since February 2023. A better-than-expected 4.3% annualized GDP rate for the third quarter easily surpassed the second quarter’s 3.8% and 3.2% consensus forecast. Rising consumer spending, which accounts for two-thirds of GDP, was driven by spending on international travel, legal services, and computers & software. The Commerce Department will revise these delayed numbers once more and release its assessment of economic growth for the rest of 2025 early next year. Since President Trump returned to office, the economy has grown at an average pace of 2.5% through the first three quarters. The growth is similar to the 2.4% average pace recorded in 2024 during the Biden presidency.
With the government getting up to running speed, we should get more economic reports on a timely basis going forward. For example, next Friday, the Labor Department will release the unemployment and nonfarm payrolls reports for the month of December. The last labor market release was a jumble of two months and data was missing. Hopefully, this report will be “clean” as it will be one of the more important inputs to the regularly scheduled Open Market Committee meeting on January 28.
Stock Market Returns
With 2025 in the books, last year was the third consecutive period with double digit gains in the major equity indices. Excluding dividends, the S&P 500 grew 16% last year with the Dow Jones Industrial Average nearly 13%. Small caps struggled for most of the year as tariff fears weighed on prices, but they did get a pop from the Fed’s interest rate cuts later in the year. The real winners were overseas markets as the MSCI EAFE (Europe, Australasia and Far East) index jumped 28% with the MSCI Emerging Market index up an eye-popping 31%. Bonds also had a solid year with maturities short-to-long term mostly in the mid-single digit percentage gain range for 2025.
The key question is can the markets continue with another year of solid gains? Fed rate cuts are the tide that lifts all boats, but the Fed alone cannot stop an economic slowdown if one develops due to increased layoffs and further inflationary pressures. Tech stocks bounced back after an ugly first quarter of the year, but concerns are growing about spending for AI infrastructure. The consumer staples sector was the weakest S&P group last year, but they exude steady dividend growth and provide necessities that shoppers may embrace if the economic landscape starts to become unsteady. As usual, geopolitical events will garner headlines and the attention of lawmakers. How much influence will these effects have on commodity prices? While metals like gold, silver and copper had one of their strongest years on record in 2025, energy goods like crude oil and natural gas exhibited declines of 23% and 43%, respectively. The shifting political, financial and military relationship between the U.S. and its allies are likely have affects on multinational stocks but to what degree? We will tackle some of these topics in the quarterly commentary which will be distributed soon. Until then….stay tuned!
Company Events
SGK writes additional weekly commentary for clients of the firm detailing recent events and earnings of core equity holdings.
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