Market Update: December 16, 2025
The Federal Reserve delivered another quarter-point rate cut last week but signaled a likely pause in further easing as it awaits clearer signals on inflation and labor. The decision revealed a divided Fed—two members dissented in favor of holding steady, and the “dot plot” showed wide dispersion in forecasts, with the median outlook pointing to just one additional cut in 2026. Policymakers also lifted their 2026 GDP forecast to 2.3% from 1.8% while reaffirming that inflation may stay above the 2% target for several years. The Fed announced it would resume Treasury bill purchases to stabilize short-term funding markets.
U.S. equities posted mixed results, capped by a sharp selloff on Friday. Investor appetite rotated from large-cap growth toward more cyclically exposed areas. The Russell 2000 gained 1.2%, while the Nasdaq Composite fell 1.6% and the S&P 500 slipped 0.6%. Materials led the way—up 2.4%—as metals and mining stocks rallied alongside a surge in precious metals. Silver spiked more than 10% midweek before retreating, and gold rose 2.4%, nearing record highs. Conversely, technology dropped 2% as disappointing Oracle and Broadcom earnings reignited concerns over elevated AI capital spending.
In fixed income, the Treasury yield curve steepened—two-year yields dipped slightly, while ten-year yields climbed near 4.2% on firmer growth expectations. Abroad, oil prices fell despite new geopolitical tensions, as rising global supply overshadowed disruption risks. Meanwhile, the Reserve Bank of Australia and the Bank of Canada both kept policy steady, citing persistent inflation risks and resilient growth. In China, higher food costs pushed consumer inflation to a 21‑month high, even as weak producer prices and slowing demand lingered. Still, China became the first nation to post an annual trade surplus exceeding $1 trillion.
In summary: Markets navigated a week of shifting narratives, to include a cautious Fed, sector rotation within equities, and global divergence in policy paths; signaling that 2026 could begin with both optimism for growth and ongoing vigilance on inflation.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.