As expected, it was a quiet week for the financial markets, which provided the optimal backdrop for equities to rise further. The S&P 500 touched another new record high as volatility levels hit their lowest level in a year. A big Q3 GDP reading helped to encourage investors that the U.S. economy was still humming even though some concerning signals still remain in the background. The coming week is likely to also be quiet before 2026 ushers in a return to normal.
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Market Moves
Weekly Market Snapshot:
- S&P 500: +1.4% – low volatility and optimism surrounding U.S. economic health helped propel stocks higher.
- Nasdaq 100: +1.2% – tech stocks continue to close out the year leading the markets higher.
- Russell 2000: +0.1% – small-caps have struggled over the past two weeks as investors return to 2025’s leaders.
- VIX: 13.6 – volatility hit a 12-month low, which isn’t uncommon around the holiday season.
- Gold: +4.3% – gold breaks through to another new all-time high as geopolitical uncertainty increases and the dollar slides to a near 3-month low.
- 10-Year Treasury Yield: 4.13% – Treasuries deliver marginal gains, but have been largely flat over the past month.
Drivers:
A strong Q3 GDP report created confidence that recession is not a short-term risk. With the resilient growth narrative in the background, inflation remains contained and the market is still pricing in two rate cuts in 2026. In general, the weeks around Christmas and New Year’s are among the best of the year. 2025 was no exception.
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Economic Highlights
A couple of the notable themes that stood out this week:
Q3 GDP Shows The U.S. Economy Keeps Growing
U.S. GDP in the 3rd quarter rose at a 4.3% annualized rate, the highest reading in two years, proving that the U.S. economy keeps growing despite concerns about consumer spending and tariffs.1 The year-over-year rate of 2.3% growth is up for the 2nd straight quarter.
The biggest components of the gain were consumer spending and net exports. Even as some data show pockets of weakness in the economy, GDP growth has been mostly durable and relatively strong throughout the current cycle. The decline in labor market growth is still a risk, but consumer spending has been the clear driver that’s keeping economic growth churning higher.
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Consumer Confidence Slips For The 5th Straight Month
The only other report of note was the December consumer confidence index. It slipped to 89.3, the 5th straight month of decline, and continues a downtrend that has been in place since the 2021 peak.2
This report is in contrast to what we’ve seen on the economic growth and consumer spending sides. Inflation and affordability have been consistent sticking points for everything from food to housing. With the labor market stagnant, this probably tells us there are concerns about job security and confidence in the longer-term outlook. While this is an inconsistent measuring stick at best, it’s generally difficult to maintain strong growth when consumers are getting more worried.
The Week Ahead
A few themes to watch next week:
In Summary
The markets are still optimistic about the current trajectory. This coming holiday-shortened week is likely to keep that intact. The turning of the calendar has historically resulted in some volatility as investors rebalance and reassess for the new year. Enjoy 2025’s returns, but be mindful that sentiment could change as we enter 2026.
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