Market Cautiously Treading Water as Year-End Approaches

December 30, 2025 — Equity markets have taken on a more reserved posture following last week’s impressive rally. Yesterday’s session brought modest selling pressure, with indices declining as traders cashed in on solid annual gains. The Nasdaq remains up approximately 21% for the year, while broader market benchmarks are comfortably in positive territory with double-digit returns.

Strong Economic Foundation Despite Near-Term Headwinds

The economic backdrop has proven more resilient than many anticipated at the start of 2025. Despite early-year tariff discussions (which were quickly unwound after market turmoil), recent GDP figures show the economy averaging +2.5% growth. This follows Q3’s robust +4.3% expansion — the strongest performance since mid-2023. Current growth rates are outpacing the +2.4% average recorded throughout 2024.

However, inflation dynamics warrant attention. The most recent CPI reading declined 30 basis points to +2.7%, though market observers question whether this reflects the complete picture. There’s a possibility that revisions could move higher once tariff impacts fully materialize on consumer goods. Similarly, the employment picture presents mixed signals. While jobless claims remain benign, new hiring has cooled, running approximately 100,000 positions below year-ago levels.

Housing Data Offers Positive Signal

Yesterday brought encouraging reports on the residential real estate sector. Pending Home Sales for November surged +3.3% following two consecutive months of declines, marking the third-strongest monthly reading over the past year. Case-Shiller Home Price data for October showed +1.1% growth, reversing three straight months of price erosion. These moves provide relief to sellers, though they complicate the narrative around disinflation.

What Investors Should Monitor Today

The Chicago Business Barometer will provide a fresh read on regional business sentiment following last month’s disappointing +36.3% print — the weakest since May 2024. The indicator has remained below the neutral 50-level for 24 consecutive months, so any reading above +40% would be constructive.

The Federal Open Market Committee (FOMC) meeting minutes release at 2pm ET carries substantial importance. The notes will reveal internal Fed discussions on interest rate direction. Notable positions include Fed Governor Stephen Miran’s continued advocacy for a -50 basis point cut (his third consecutive call), while regional Fed Presidents from Chicago and Kansas City supported maintaining the current Fed funds rate. Current market consensus leans toward a pause at the January meeting, with the committee skipping February and reconvening in March. Upcoming inflation and employment data will prove critical in determining subsequent policy moves through mid-March.

Market participants will scrutinize today’s minutes for alignment with expectations while watching for any surprising dissents that could signal shifting Fed sentiment heading into 2026.