December 22, 2025

Peace on Earth, Good Will to Men.

As we completed the last full trading week of 2025, it ended very well but first here are the numbers. The S&P 500 was flat up .09%, the Dow Jones Industrial Average lost a slight .06%, the Nasdaq was also flat up .04%. Internationally the FTSE 1000 had a great week up 2.57% and the MSCI-EAFE was positive but up only .10%. The 2 Year Treasury paid 3.425 and the 10-Year yield was 4.149%

So, what happened? Stocks finished the week with AI and big tech once again in focus. NVIDIA led heavy trading as investors weighed lofty AI valuations against signs the boom is building real infrastructure, not just hype. Oracle briefly rattled sentiment after reports it lost a funding partner, but analysts pointed to dividend names and longstanding demand drivers as cushions for the market.

In the closing stretch, Connor Smith of Barron’s writes “The stock market’s late-week rally continued last Friday to help lift the S&P 500 to a slight weekly gain. The Nasdaq Composite did even better. The S&P 500 closed 0.9% higher on the day to lock in a weekly gain of 0.1%. The index fell last week, so it avoided its first back-to-back weekly declines since June 20. The tech-heavy Nasdaq rose 1.3% on Friday, or 0.4% on the week. The Dow Jones Industrial Average rose 183 points, or 0.4%, but dropped 0.6% on the week. It was a quiet day for Wall Street traders. The University of Michigan’s consumer sentiment index, at 52.9, was a touch below expectations of 53.4, but Wall Street was still in a jolly mood following yesterday’s cooler-than-expected consumer price index. AI stocks led the charge, though industrials, healthcare, financials, and materials were all among the day’s winners.

David Donabedian, co-chief investment officer of CIBC Private Wealth, tells me he expects such unloved sectors to continue to benefit from a broadening of the stock market’s rally. He thinks the pieces are there for bull market to continue in 2026 thanks to a growing economy, improving earnings, and a friendlier central bank, though gains may be more muted than in recent years. Donabedian doesn’t think the AI rally is out of the woods, despite the two-day rally. “I think that the issues that have maybe caused this pause in the great AI rally here are likely to continue to be things that investors are focused on in 2026,” he says, noting the interplay AI adoption rates and hefty capital expenditures. “There’s a little bit of investors waving a yellow flag on the AI theme.”

In 2025 in review (more to come in my year end quarterly news to our clients), investors have faced a familiar “wall of worry”—from uncertain tariff policies to negative sentiment and mixed economic signals. Despite these headwinds, the S&P 500® Index has climbed 17.5% through October, reminding all that markets can rally even when the backdrop looks challenging.

Volatility has remained brief and limited this year, a reassuring trend for those concerned about market swings. Historically, stocks tend to perform well in November and December, this year did not disappoint. Going forward for the balance of the year, Dec. 24, specifically, will mark the start of the so-called Santa Claus rally period. Typically stocks rally in the final five days of a year and into the first two trading days of the new year. We shall see if old St. Nick delivers again this year.

The inflation news was very good coming in at 2.7%, plus the slight impact of the expert-feared tariff effect did not result in the recession, worldwide revolt, or loss of trading partners as predicted back in April. This plus a lowering of interest rates supports the optimism prevalent on Wall Street. We expect prices to continue to retreat and real income gains to address the “Affordability Concerns” Interestingly when inflation was roaring at 9% no one in Washington talked about “Affordability”.

My point if the administration is correct, they have walked a tightrope economically and this summer the fruits of those policy changes will be in full bloom.

Finally, a word on housing. Housing data showed US home sales up month to month in November but down from 2024 as prices keep climbing, which could temper consumer spending and mortgage activity. With a new Federal Reserve Chairmen coming in May of 2026, we will probably see rate come down and welcome relief to homebuyers to follow.

Enjoy your holiday.

Mike