As we wrap up the year, I want to share a look at what’s happening in the markets and what we’re watching. U.S. stocks have continued climbing toward new highs, with the S&P 500 up almost 17% year‑to‑date, closing last week over 6,800. The recent strength has been supported by optimism that the Federal Reserve will likely cut interest rates by 0.25% at its meeting this week, with futures pricing in an 87% chance of a move. Recent comments from New York Fed President John Williams have signaled additional room to ease policy in the near term, which has also helped bolster market expectations.
Markets are encouraged by the prospect of a rate cut, but Fed officials remain divided over how quickly to ease policy, which could create some volatility ahead. Despite recent market gains, unexpected data may still trigger short-term swings. Inflation has cooled, based on the Fed’s preferred measure, the PCE, which is up 2.8% from a year earlier, while consumer spending has slowed. Meanwhile, private‑sector data showed ADP recorded a 32,000 job decline in November, a reminder that the labor picture has softened in spots. These developments indicate that inflation pressures are easing, but they also point to a more cautious economic environment where slower demand and uneven growth could shape the Fed’s next moves.
The good news is investors have been responding positively to the expected rate declines, and a supportive environment could help keep momentum going into early 2026. A seasonal plus, the seven‑day “Santa Claus rally” is named for the last five trading days of December and the first two of January. It has historically delivered an average 1.3% gain and has been positive approximately 79% of years since 1950. While this pattern is not guaranteed in any single year, the combination of easing inflation, expectations for lower rates, and generally constructive year‑end sentiment means a late‑December tailwind is possible again in 2025.
As always, my focus is on your long-term goals and helping you feel confident in every market environment. If you have questions before year-end, whether about investments, tax planning, or anything coming up in your financial world, I’m here and happy to help.
Wishing you a peaceful and joyful holiday season!
Tessa Steineman, CFP®, CDFA®