DFG Navigator Archives | December 2025

Your Capital Markets Snapshot: Markets React Positively to Fed Messaging

Last week, markets responded positively to the Federal Reserve’s meeting, with the rally driven more by the central bank’s messaging than the widely expected 25 basis point rate cut. Small-cap equities outperformed, while tech stocks lagged due to concerns over AI spending and mixed earnings reports. The week closed with mixed equity performance, as cyclical and value stocks climbed, but growth and tech names lagged. The Fed signaled a likely pause in its easing cycle but remained open to further cuts if labor market weakness persists. Markets continue to price in lower rates for 2026, with current expectations pointing toward one to two additional cuts during the year. By committing to buy Treasury bills to support short-term liquidity, the Fed delivered what many market participants interpreted as a dovish move. The yield curve continued its recent steepening with shorter term rates slightly falling and longer-term rates rising. Oil prices fell sharply, while silver surged to record highs.

Your Capital Markets Snapshot: Markets Steady as Fed Rate Cut Expectations Rise

Last week, markets remained largely steady as investors awaited the upcoming Federal Reserve meeting, with the S&P 500 posting modest gains and remaining just below all-time highs. The probability of a 0.25% rate cut at the December meeting rose to over 95%, driven by contained inflation and a softer near-term economic outlook. The U.S. Treasury yield curve continued to steepen as short-term rates dropped sharply while longer-term yields rose, with the 10-year yield reaching 4.14% partially due to rising Japanese government bond yields and expectations for a more hawkish Bank of Japan. Labor market data was mixed: ADP reported the largest private payroll decline in over two years, but initial jobless claims dropped to a three-year low. Inflation data showed core PCE rising 2.8% year-over-year, slightly below expectations, while consumer sentiment improved modestly. Equity markets consolidated after a strong November, with the S&P 500 up 18% year-to-date and the Nasdaq up 23%. As we approach year-end, some potential markets will be closely watching this week’s Fed rate decision and the delayed November jobs report. Reviewing portfolios for potential rebalancing may be prudent as equity gains may have shifted expected allocations.

Your Capital Markets Snapshot: Markets Gain Momentum Heading Into December

Markets rebounded after early November volatility, with major U.S. indexes posting strong weekly gains. International equities also continued their impressive 2025 performance, supported by a weaker dollar and improving global growth outlook. US economic resilience continues, as recession expectations continue to fade and consumer spending remains resilient. Corporate profits are strong, with S&P 500 earnings on track for an 11% year-over-year increase and margins near record highs. AI-driven innovation continues to underpin tech sector strength, though concentration risks persist. The Fed’s resumed easing cycle has eased financial conditions, which helped mortgage rates decline. Inflation has moderated slightly, falling from 3% in 2024 to 2.7% in 2025. Treasury yields hovered near 4%, offering historically attractive income opportunities for bond investors. Seasonal trends of the S&P 500 suggest potential for a strong year-end finish, as December has historically delivered positive returns about 70% of the time of the last 30 years.

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