Weekly Market Update – December 26, 2025

Quick Takes

• In light trading, stocks advanced during the holiday-shortened week. The S&P 500 gained +1.4% and set new record highs on Tuesday and Wednesday. The tech-heavy Nasdaq Composite and small-cap Russell 2000 gained +1.2% and +0.2%, respectively.
• Bond trading was quiet as well, but US Treasuries posted modest gains, with yields generally lower across maturities. The 10-year US Treasury yield slipped -2 basis points to 4.13%. The Bloomberg US Aggregate Bond Index returned +0.2% following +0.3% the prior week.
• The biggest economic report of the week was the GDP release, which showed the US economy grew at an annualized +4.3% in the Q3—the fastest pace in two years—driven by strong consumer spending, rising AI data center investment, and a shrinking trade deficit.

Source: Bloomberg. Data as of December 26, 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.

S&P 500 Rings in Holiday Cheer with Its Best Week in a Month

Stocks advanced during the holiday-shortened week, with the S&P 500 Index gaining +1.4% and setting new record highs on Tuesday and Wednesday. Trading volume was light thanks to a Christmas Eve half-day and a market holiday on Christmas, but optimism around artificial intelligence (AI) and upbeat economic data helped fuel gains. The technology-heavy Nasdaq Composite Index and small-cap Russell 2000 Index didn’t reach new record highs but still saw positive gains of +1.2% and +0.2%, respectively. Investors are watching for the Santa Claus rally, a historical trend where stocks often rise during the last five trading days of the year and the first two of the new year. This year’s Santa rally is just barely positive with a +0.13% change for the S&P 500 for Wednesday and Friday (Thursday was closed for Christmas).

Overseas equities saw healthy gains as well. The developed markets MSCI EAFE Index rose +1.2%, led by the MSCI Japan Index with a +1.8% gain following the prior week’s -2.6% tumble. The MSCI UK Index and MSCI Europe Index were both up +0.6% and riding five-week winning streaks. In emerging markets, the MSCI Emerging Markets Index was up +2.1% last week following a -1.6% loss the prior week. The MSCI Latin America Index rebounded +1.7% after the prior week’s -2.3% drop. The US Dollar Index was down -0.6%, its worst week since June, after a meager +0.2% increase the prior week. It is now down in six of the last eight weeks.

Bond trading was quiet, but US Treasuries posted modest gains, with yields generally lower across maturities. The 10-year US Treasury yield was down -2 basis points to 4.13%, and the 2-year US Treasury yield was unchanged at 3.48%. Despite a monthly loss, Treasuries are on track for their best year since 2020, thanks to three Federal Reserve rate cuts earlier in 2025. Corporate bonds outperformed government debt, supported by steady issuance and upbeat sentiment in the high-yield market. The Bloomberg US Aggregate Bond Index returned +0.2% following the prior week’s +0.3% return. Non-US bonds, as measured by the Bloomberg Global Aggregate ex US Bond Index, were up +0.8% following a -0.3% return the prior week.

Economic data last week showed continued resilience, though some cracks have emerged. The biggest headline of the week was the GDP report, which showed the US economy grew at an annualized +4.3% in the third quarter—the fastest pace in two years—driven by strong consumer spending, rising AI data center investment, and a shrinking trade deficit. That beat expectations for a +3.2% rate of growth and marked an acceleration from Q2’s +3.8% growth. Economists, however, expect growth to cool to +1.8% in Q4, in part due to the recent government shutdown. Other data painted a mixed picture. Durable Goods Orders fell -2.2% in October, worse than expected, though Core Business Investment (excluding defense and aircraft) rose +0.5%, its seventh straight monthly gain. Consumer Confidence dropped for the fifth month in a row, with the Conference Board’s index sliding to 89.1, signaling growing concerns about jobs and household income. However, weekly jobless claims showed resilience as initial unemployment claims falling to 214,000, better than forecasts, though continuing claims ticked up to 1.923 million.

Chart of the Week

Last week’s chart focused on the unexpectedly low annual inflation rates from the latest Consumer Price Index (CPI), in which both the headline CPI and core CPI readings were far lower than Wall Street expectations at +2.7% and +2.6%, respectively. For this edition of Chart of the Week, we cite PNC’s annual Christmas Price Index featured by J.P. Morgan Asset Management. Like the CPI readings, it too has decelerated from the prior year’s rate. However, it is still noticeably higher than the broader consumer price basket of goods and services. The PNC Christmas Price Index tracks the cost of each gift in the song “The Twelve Days of Christmas,” and in 2025, prices rose by 4.5%. That is down from 2024’s 5.4% increase. J.P. Morgan points out that these goods are all produced domestically, meaning no tariff-related impacts were felt. Christmas Index inflation was primarily driven by service-related gifts, which climbed +5.4% year-over-year (YoY), compared to a +2.8% rise for goods-related gifts. However, the steepest price hikes came from two goods. After two years of stable prices, the cost of five gold rings soared +32.5% from last year as heightened concerns over geopolitical risks, central bank accumulation, and rising deficits pushed gold prices higher. The cost of a partridge in a pear tree rose +13.5% YoY, entirely due to higher pear tree prices from increased labor and land costs. For those interested in new hobbies, all four of the entertainment gifts experienced price increases, led by +8.1% YoY and +3.5% YoY gains in the costs of ten lords-a-leaping and nine ladies dancing. Luckily, bird lovers can rejoice this year as the costs of two turtle doves, three French hens, four calling birds, and seven swans-a-swimming all stayed flat YoY.

Price of gifts from the song “The Twelve Days of Christmas”

PNC Christmas Price Index, % price change vs. 2024 levels

Source: PNC Financial Services Group, J.P. Morgan Asset Management.

The Week Ahead

It will be another short week with markets closed Thursday for New Year’s Day observation. Reports are mostly housing-related with Pending Home Sales on Monday and Home Price Indexes from S&P Cotality and FHFA on Tuesday. A couple of regional Fed districts report as well, with Dallas Fed Manufacturing on Monday and the MNI Chicago PMI on Tuesday. Friday has one report, S&P Global’s US Manufacturing PMI.

Did You Know?

SECONDHAND – 82% of US shoppers in an eBay survey said they’re more likely to purchase secondhand gifts this year compared with last year. Price-conscious consumers are less concerned about the stigma around used presents. (Source: The Wall Street Journal)

PREDICTION INVESTING SPECULATION – Prediction markets that allow users to “invest” in real-world  events have seen explosive growth. The two leading platforms – Kalshi and Polymarket – handled $9.6 billion in volume in November, representing a +29% increase from October and a +144% increase from a year ago. (Source: The Block, Bespoke)

TERRIBLE 2s – Year two of the four-year Presidential Cycle has historically been the worst for the stock market. Since 1928, the S&P 500 has had a median gain of just +0.6% in year two of the cycle versus median gains of 8%+ in years one, three, and four. The S&P fell -19.4% in year two of Biden’s term (2022) and -6.2% in year two of Trump’s first term (2018). (Source: Bespoke)

This Week in History

OPEC OIL SHOCK – On December 22, 1973, oil ministers of OPEC’s six Persian Gulf member countries announced at a meeting in Tehran that they would unilaterally raise the price of crude oil to $7 per barrel–and that it would go up again, to $11.65, on Jan. 1, 1974. In two-and-a-half months, OPEC had raised the price of oil by 128%. (Source: The Wall Street Journal)

Economic Review

• The US economy grew at a much better-than-expected rate in the third quarter as real Gross Domestic Product (GDP) increased at a +4.3% annual pace, according to the nearly two-month delayed initial estimate. That was a full percentage point above the +3.3% annual rate Wall Street was expecting, and up sharply from the +3.8% annual expansion in the second quarter. It is the fastest pace of economic growth since the +4.7% growth registered in the third quarter of 2023. The strong growth was driven by consumer spending and exports. Personal Consumption Expenditures (PCE), the main engine of the economy, increased +3.5% in Q3 versus +2.5% in the Q2. The PCE component contributed +2.39 percentage points to real GDP growth in the third quarter, or more than half the total GDP increase. Robust trade was another big contributor in Q3, as Exports jumped +8.8% in Q3 versus a -1.8% decline in Q2. Imports fell -4.7% after declining -29.3% in Q2. As a result, Net Exports added +1.59 percentage points to Q3 GDP growth. Government spending contributed slightly to growth, rising +2.2% (a +0.39 percentage points contribution to Q3 real GDP growth) following a -0.1% decline in Q2. Gross Private Domestic Investment decreased -0.3% versus a -13.8% decline in the prior quarter, which was a -0.02 percentage points subtraction from GDP growth. The GDP Price Index (GDP Price Deflator) jumped +3.8% in Q3 versus the +2.1% increase in Q2. The second estimate of +2.0% and is down from +3.4% in the first quarter. The Personal Saving Rate dropped to +4.2% from 5.0% in Q2. The bottom line from the report is that the US economy showed much stronger growth than expected for the second straight quarter, although inflation increased as well. 
• The Census Bureau reported Durable Goods Orders for long-lasting items such as televisions, appliances, and transportation equipment declined -2.2% in October, following an upwardly revised +0.7% increase (from +0.5%) the prior month, and missing Wall Street expectations to come in at -1.5%. However, Durable Goods Orders Excluding Transportation were up a +0.2%, just a tick below expectations for a +0.3% reading but down from the prior month’s upwardly revised +0.7% level (from +0.6%). The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, rose +0.5%, above expectations for a +0.3% reading but a slowdown from the upwardly revised +1.1% rise the prior month (originally +0.9%). Core Capital Goods Shipments, which are factored into GDP, jumped +0.7%, exceeding expectations for a +0.3% gain but were also a slowdown from an upwardly revised +1.2%% reading the month before (from +0.9%). The bottom line from the report is that business spending (nondefense capital goods orders, excluding aircraft) and shipments were still healthy despite the headline decline in Durable Goods overall. 
• US Industrial Production increased +0.2% for the month of November, a tick above expectations for +0.1% and up from the -0.1% decline the prior month (unrevised). Manufacturing Production was flat, short of expectations for a +0.1% increase, but up from -0.4% drop the prior month (unrevised). Manufacturing represents about three-quarters of total Industrial Production. Year-over-Year, Industrial Production was up +2.5%, following the prior month’s +2.2% annual pace. Capacity Utilization was up a tick at 76.0% from 7.59% the prior month (unrevised). Capacity Utilization reflects how much a manufacturing plant is being used to produce things. The key takeaway from the report is that manufacturing activity was flat, and most of the increase in industrial production was from mining output.
• The Conference Board’s Consumer Confidence Index fell in December to 89.1 from a sharply upwardly revised +92.9 in November (originally 88.7). That was below Wall Street expectations for an increase to 91.0. In the same period a year ago, the index stood at 109.5. The Present Situation gauge fell to 116.8 from a downwardly revised 126.3 (from 126.9) the prior month. The Expectations gauge — which reflects consumers’ six-month outlook — was unchanged from an upwardly revised 70.7. Sustained levels below 80 on the expectations index can signal a recession within the next year, while in good times the index can top 120 or more. Consumers’ views of both business conditions and the labor market deteriorated again. 
• After a two-month absence due to the government shutdown, the Federal Reserve Bank of Chicago resumed publication of its Chicago Fed National Activity Index (CFNAI), which showed that US economic activity improved in September to -0.21% from -0.31% in August (which was revised sharply lower from the originally reported -0.12). That was below Wall Street expectations for a reading of -0.17. Readings below zero indicate below-trend growth in the national economic activity. Two of the four broad categories of indicators used to construct the index increased from the prior month, and three made negative contributions. The Production and Income category improved to -0.10, up from -0.13 the prior month. The Employment, Unemployment, and Hours category contributed +0.01, a big improvement from -0.11 the prior month. The Personal Consumption and Housing category declined to -0.06 from -0.03. The Sales, Orders, and Inventories category contribution was down slightly to -0.07 from -0.05 the prior month. Overall breadth of the index worsened with 25 of the 85 individual indicators making positive contributions, while 60 made negative contributions. Improvements in the individual indicators were slightly better, with 52 indicators improving, up a tick from 43 the prior month. Of the improving indicators, 32 made negative contributions. The CFNAI three-month moving average decreased to -0.21 from -0.18 the prior month. During the last 20 years, there has been a 91% correlation between the three-month index level and the quarterly change in real GDP.
• The Richmond Fed Manufacturing Survey improved to -7 in December from an unrevised -15 the prior month. That was better than expectations for an increase to -10. All three component indexes rose but remain in contraction (negative) territory. The New Orders components jumped +14 points to -8, and the Shipments component improved +3 points to -11. The Employment index increased +6 points to -1. The average growth rates of Prices Paid dipped in December after a jump in November, while growth in Prices Received was up versus being nearly unchanged in November. Also positive, 8 of the 11 expectations index components increased.
• Weekly MBA Mortgage Applications dropped -5.0% for the week ended December 19, after falling -3.8% the prior week. The Purchase Index fell -3.7% after declining -2.8% the prior week. The Refinance Index dropped -5.6% after falling -3.6% the prior week. The average 30-Year Mortgage Rate fell to 6.31% from 6.38% the prior week.
• Weekly Initial Jobless Claims fell -10,000 to 214,000 for the week ended December 19, better than expectations for 224,0000. The prior week was unrevised. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose +38,000 to 1,923,000 for the week ended December 12, which was worse than expectations for 1,900,000. The prior week’s reading was revised lower to 1,885,000 from 1,897,000.

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.