Economic Update 12-29-2025

Economic data included U.S. GDP for Q3 coming in stronger than expected, while industrial production was flattish, and durable goods and consumer sentiment weakened.

In a seasonally-light trading period, global stocks saw decent gains. Bonds ticked up slightly as yields fell. Commodities rose, led by precious and industrial metals.

U.S. stocks gained a bit during a lighter holiday trading week, with the S&P 500 and Dow reaching more record highs, and large cap stocks outperforming small caps. Every sector ended positively, led by a mixed bag of materials (with strength in metals for the year, boosting mining names), technology, and financials, although communications was not far behind, all with returns approaching or over 2% for the week. Lagging was the more defensive group of consumer staples, which was up just a few basis points. Real estate also gained about 1.5% for the week.

Foreign stocks saw gains as well last week, helped by a drop in the value of the U.S. dollar. Results in the U.K. and emerging markets outgained Europe and Japan. Some of the positive European sentiment appeared due to calls for further interest rate cuts in the U.K., as well as the German central bank forecasting some recovery in 2026, after a long stretch of lackluster, flattish GDP growth. In emerging markets, gains in South Korea and Taiwan (along with strong AI sentiment), were followed by South Africa and Mexico.

Bonds gained slightly as U.S. Treasury yields fell by a few basis points across the curve, with investment-grade and high yield credit outperforming government bonds, as did floating rate bank loans. Foreign bonds ended higher, especially in local terms, as the dollar fell back during the week.

Commodities earned positive returns last week, led by precious metals (platinum and palladium mostly), followed by industrial metals and energy. Crude oil ended up a fraction of a percent to $57/barrel, but remained down over -20% year-to-date as global production remains high. As the U.S. has pursued additional Venezuelan tankers, prices for gold and crude oil had ticked higher early in the week. The former has tended to be reactive to any potential conflict, while the latter is sensitive to Venezuela’s relative size in global oil markets. Natural gas prices remained volatile, due to changing weather forecasts, being up over 5% for the week, but down -15% for the trailing month.

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.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.