Weekly Market Update – December 12, 2025

Quick Takes

• Friday’s AI-led selloff left the S&P 500 and Nasdaq negative for the week. However, the small-cap Russell 2000 and non-US stocks bucked the trend and advanced for the week. Still, the S&P and Russell both set new all-time highs on Thursday, the first since October.
• Treasuries were mixed–short yields fell while intermediate and long yields rose–in the wake of the Fed’s third quarter point rate cut of the year. Markets were generally encouraged as the Fed raised economic growth projections while lowering the inflation outlook.
• In a heavy week of economic data, on balance the picture was quite positive. Job openings unexpectedly rose sharply in the fall and layoffs remained low, the US Trade Deficit for September unexpectedly narrowed to its lowest level since mid-2020, and the Federal Budget Deficit in November was about half of the deficit of November 2024.

Source: Bloomberg. Data as of December 12, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Dovish Fed Can’t Deliver Winning Week for Stocks or Bonds

The Federal Open Market Committee (FOMC) concluded its final monetary policy committee meeting of the year on Wednesday by delivering a third straight quarter-point (25 basis points) cut to its key policy rate. This brings the Fed Funds Rate to the lowest level since 2022 at a range of 3.5%–3.75%. The committee remained divided, with three members continuing to vote against the cut, which hasn’t happened since September 2019. Meanwhile, policymakers left their projections for the federal funds rate unchanged from September, signaling only one additional quarter-point cut in 2026. However, the projections also showed bullish expectations for economic growth, inflation, and unemployment. The Fed’s GDP growth forecast was revised higher to +1.7% for 2025 (up from 1.6%) and +2.3% for 2026 (from 1.8%), while their PCE inflation forecast is now expected to be slightly lower this year at +2.9% (versus +3.0%) and +2.4% for 2026 (down from +2.6%). Forecasts for the unemployment rate were left unchanged at +4.5% for 2025 and +4.4% for 2026. Markets seemed encouraged by those economic projections, as well as Fed Chairman Jerome Powell’s post-meeting press conference comments, and pushed the S&P 500 Index and the small-cap Russell 2000 Index to new all-time highs on Thursday, the first new record highs since late October. But a technology-led selloff on Friday put the S&P 500 down-0.6% for the week, and the tech-heavy Nasdaq Composite Index retreated -1.6%. Though it was also down on Friday, the Russell 2000 was able to advance +1.2% for the week, bucking the weekly decline for the large cap indices.

The fall in technology was led by a couple of former Artificial Intelligence (AI) leaders, Broadcom and Oracle. Shares of Broadcom slumped after the chip maker failed to meet high expectations in its earnings call after Thursday’s close. The chipmaker warned of margin pressures, and its backlog for AI product orders was underwhelming. Then on Friday morning, Oracle reported quarterly results, and investors weren’t happy with the firm’s need for heavy AI-related capital expenditures and the ability of OpenAI to deliver on its commitment to buy $300 billion in cloud services from Oracle. The cost of credit default swaps on Oracle debt, essentially insurance against a potential default, have risen to their highest level since the 2008 financial crisis. Overall, the broader Technology sector was down -2.9% on Friday alone, its worst day since October 10, which dragged it down -2.3% for the week.

Overseas equities performed much better than their US counterparts. The developed markets MSCI EAFE Index rose +0.9% following the prior week’s +0.8 and the MSCI Emerging Markets Index gained +0.3% on top of last week’s +1.4%. Other than the MSCI China Index, which fell -0.7%, virtually every other international equity index was positive for the week. The US Dollar Index was down -0.6%, the third straight weekly decline, which helps non-US assets.

US Treasury returns were mixed across maturities, as shorter-term yields generally declined—particularly after the Fed announcements on Wednesday—while longer-term yields largely finished the week higher (bond prices and yields move in opposite directions). Both the 10-year and the 30-year US Treasury yields climbed +5 basis points to 4.18% and 4.84% respectively. Meanwhile, the 2-year UST yield was down -4 basis points to 3.52%. With yields mostly up, the Bloomberg U.S. Aggregate Bond Index return was -0.2% following the prior week’s -0.5% return. Non-US bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, were up +0.2% though, following a minor -0.06% loss following the prior week.

Chart of the Week

According to the US Census Bureau, the US Trade Deficit for September unexpectedly narrowed to -$52.8 billion from -$59.3 billion in August (revised from -$59.6 billion). That was much better than the -$63.1 billion deficit expected and marks the smallest trade deficit since mid-2020. Smaller trade deficits help contribute to economic growth, while larger deficits inhibit growth. This significant reduction was primarily attributed to a notable increase in Exports, which increased +3.0% to their second-highest level on record. Exports of industrial supplies and materials increased $7.2 billion, with nonmonetary gold up $6.1 billion, and exports of consumer goods increased $4.1 billion, with pharmaceutical preparations up $3.1 billion. Imports increased a more modest +0.6%. Imports of capital goods decreased $5.6 billion, with computers down $4.7 billion. Adjusted for inflation, the real goods deficit decreased $4.7 billion, or 5.6%, to $79.0 billion.

US Trade Deficit Shrinks to Smallest Since 2020

The goods and services trade gap shrank nearly 11% from the prior month

Source: Commerce Department, Bloomberg.

The Week Ahead

The holidays are nearly upon us, but the economic calendar is still packed, including updates on both the labor market and inflation, the interplay of which has left Federal Reserve policy makers divided, with dissents in both directions at the last two monetary-policy meetings. 

The Bureau of Labor Statistics releases the November Employment Situation Report on Tuesday and the Consumer Price Index (CPI) on Thursday, both delayed because of the government shutdown. Before that, on Monday, the NAHB Housing Market Index will report builder confidence, and the NY Fed reports Empire State Manufacturing. Tuesday also brings ADP Employment, Retail Sales, and preliminary US Purchase Managers Indices (PMIs) from S&P Global. Wednesday has MBA Mortgage Applications and Business Inventories, and Thursday brings Jobless Claims and the Philadelphia Fed Manufacturing Index, in addition to CPI. Finally, Friday rounds out the week with Existing Home Sales, Core PCE, Personal Income & Spending, and University of Michigan Consumer Sentiment.

Did You Know?

CHEAP AND STABLE GASOLINE – On December 1, the national average price of a gallon of unleaded gas fell to $2.998 — the first sub-$3 price since May 2021. Over the last year, the national average price of gasoline has moved within a range of less than 9%, which is the narrowest one-year range since at least 2004. (Source: AAA)

BRR-RISING NATURAL – A cold snap in the US has resulted in December being forecasted to be the coldest since at least 2017, based on the number of heating degree days. As a result, on December 3, natural gas prices reached $5 per million British thermal units for the first time since December 2022. (Source: The Wall Street Journal)

WEALTH PARADOX – There are now nearly 24 million US millionaires, a number that grew by 1,000+ per day in 2024. A recent Harris Poll survey found that 74% of millionaires in America work with a financial advisor (compared to just 34% of the general public), and only 36% of those millionaires consider themselves “wealthy.” (Sources: USA Today, Northwestern Mutual)

This Week in History

BANK of US – On December 12, 1791, America’s first national bank, the Bank of the United States, opened. It immediately went on a wild credit binge, lending largely to speculators in the emerging US stock market. Then it over-reacted and stopped lending almost entirely, causing a credit crunch and helping to precipitate America’s first market crash. (Source: The Wall Street Journal)

Economic Review

• The U.S. Treasury Department recorded a Federal Budget Deficit of -$173.3 billion in November, about half of the deficit of -$366.8 billion in the same period a year ago. Wall Street was expecting a -$175.0 billion deficit. Receipts rose +11.3% (to $366.0 billion) on a year-ago basis, while Outlays fell -23.8% (to $509.3 billion), though timing shifts artificially lowered outlays by accelerating some expenses that were due on November 1 into October. The bottom line from the report is that in the first two months of fiscal 2026, the federal budget deficit was $457.627 billion, which is about -25% smaller than in the same period last year.
• The National Federation of Independent Business (NFIB) reported that their Small Business Optimism Index rose to 99.0 in November from an unrevised 98.2 the prior month, remaining above its 52-year average of 98. That was better than Wall Street expectations for 98.3. Of the 10 component indexes, six increased, while three declined, and one was unchanged. The improvements were led by Expect Real Sales Higher which jumped +9 points to a net +15%. Plans to Increase Employment was the second-best contributor with a +4-point increase to a net +19%. Expect Economy to Improve remains positive at +15%, but it led the downside, falling -5 points, as it continues to trend downward, thanks to elevated uncertainty. That was also reflected in the separate Uncertainty Index, which rose +3 points to 91. In November, the net percent of owners raising average selling prices rose +13 points from October to a net +34% (seasonally adjusted), the highest reading since March 2023 and the largest monthly jump in the survey’s history.
• The Employment Cost Index (ECI) rose a seasonally adjusted +0.8% in the third quarter, a tick under the expected +0.9% which is where it was for the second quarter. The ECI is the Federal Reserve’s preferred measure of wage gains. Year-over-Year, the index also declined slightly to +3.5%, from +3.6% the prior quarter. That is the slowest annual rate since the second quarter of 2021. Still, the Fed wants to see costs slow even further. Wages and Salaries account for about 70% of compensation costs, and it decelerated -0.2 percentage points to +0.8% for the quarter and -0.1 percentage points on an annual basis to +3.5%. The bottom line is that it was an inflation-friendly report that is supportive of rate cuts.
• In a report delayed by the federal shutdown, the Job Openings Labor Turnover Survey (JOLTS) showed that Job Openings beat Wall Street estimates by the largest amount since 2023. According to Bureau of Labor Statistics data, job openings were a surprisingly strong 7.658 million in September, versus 7.227 million the prior month (unrevised). The median estimate in a Bloomberg survey of economists called for 7.198 million openings. For October, job openings were 7.670 million, the highest level in five months and well above expectations for 7.117 million. The Number of People Quitting Jobs was 2.941 million, down from 3.128 million the prior month. The record was 4.5 million job quitters in late 2021. The Hiring Rate ticked down to 3.2% from 3.4%. The hiring rate typically ranges from 3.7% to 4.0% in a strong economy. The Quits Rate ticked down to 1.8% from 2.0% the prior month (unrevised), a five-year low. People tend to quit less often when the economy softens, and jobs become harder to find. The Layoffs Rate was up a tick to 1.2% from 1.1% the previous month, and below the 1.4% annual average from 2010 to 2019. Most of the new job openings were in retail, an industry that typically hires lots of temporary workers for the holiday season. Hotels, restaurants, and healthcare providers also posted more openings in the fall.
• The Conference Board Leading Economic Index® (LEI) declined by -0.3% in September to 98.3, in line with Wall Street expectations, and follows a -0.3% decline in August (revised higher from -0.5%). The federal government shutdown caused data delays, which led to the late publication of the index. Just three of the 10 indicators advanced in the month. Stock Prices, the Leading Credit Index, and Nondefense Capital Goods Orders were the positive contributors. Consumer Expectations of Business Conditions remained weak, as did the ISM New Orders. The Conference Board Coincident Economic Index® (CEI) rose by +0.1% to 115.1, following no change in August. The Conference Board Lagging Economic Index® (LAG) inched up by +0.1% to 119.6, after also increasing by 0.1% in August.
• The Census Bureau reported Wholesale Inventories rose +0.5% to $911.5 billion in September, well above expectations for a +0.1% rise, and up from a -0.1% dip the prior month (revised down from 0.0%). Year-over-Year (YoY) inventories were up +1.1%, down from the +1.3% annual rate the prior month. That is still well below the typical +4% to +6% annual increase in strong economies. Inventories are goods produced for sale that have not been sold yet. Wholesale Trade Sales fell -0.2%, after falling the same amount the prior month, after being revised down from +0.1%. That was far below expectations for +0.4%. Wholesale inventories data isn’t adjusted for inflation. The Inventory-to-Sales Ratio ticked up to 1.29 months from 1.28 months. The ratio reflects how long it would take a company to sell all the goods sitting on warehouse shelves.  
• Weekly MBA Mortgage Applications jumped +4.8% for the week ending December 5, after inching up -1.4% the prior week. The Purchase Index fell -2.4% after rising +2.5% the prior week. The Refinance Index spiked +14.3% after dropping -4.5% the prior week. The average 30-Year Mortgage Rate ticked up to 6.33% from 6.32% the prior week.
• Weekly Initial Jobless Claims rose +44,000 to 236,000 for the week ending December 5, worse than expectations for 220,0000. The prior week was revised higher to 192,000 from 191,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) sank -99,000 to 1,838,000 for the week ending November 28, which was better than expectations for 1,938,000. The prior week’s reading was revised lower from 1,939,000 to 1,937,000. 

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.