Market View: Week of Dec. 26, 2025

ECONOMIC REVIEW¹

The Q3 Gross Domestic Product report (GDP) was delayed, but showed economic growth was strong in the third quarter.

• Real GDP increased at a 4.3% annual rate in Q3, outpacing the consensus expected +3.3%.

• The largest positive contributions to real GDP growth came from personal consumption and net exports.

  • Government purchases and business investment in intellectual property and equipment were also positive.

• Inventories, home building, and commercial construction all weighed slightly on growth for the quarter.

Core Real GDP, which includes consumer spending, business fixed investment, and home building, but excludes more volatile categories like government purchases, inventories, and international trade, grew at a 3.0% annual rate in Q3.

• Core Real GDP was up 2.6% versus the third quarter last year.

One weaker aspect of the report showed that real GDP is up 2.3% from a year ago, which is slightly below the 2.4% growth rate since the pre-COVID peak.

• This still amounts to solid economic growth and was achieved in spite of a continued decline in inventories – a decline that may have come to an end in Q4, indicating economic growth should continue moving forward.

• Positively, business investment in equipment rose for the third straight quarter, which may improve productivity growth in the year ahead.

GDP Prices rose at a 3.8% annualized rate in Q3 and are up 3.0% from a year ago.

How does the most recent economic data impact you?

• Although the delayed GDP report may be a bit stale at this stage, it showed solid economic growth largely driven by strong consumer spending, ahead of a projected record year for holiday-season spending. On the margin, Core Real GDP up 2.6% from a year ago slightly trails the 2.8% growth rate for the metric since the pre-COVID peak (at the end of 2019), which may have tempered market enthusiasm for the reading.

• Corporate profits remain near record highs, rising 4.2% in Q3 and up 9.1% from a year ago. However, even with record high profits, the current range for long-term interest rates suggests the S&P 500 is still meaningfully overvalued.

• High nominal GDP – real GDP growth plus inflation – registering at an 8.2% annual rate in Q3 and up 5.4% from a year ago, with inflation above the Federal Reserve’s (Fed’s) target, may force the central bank to pause rate cuts unless and until there is more evidence that inflation is trending back to 2%.

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A LOOK FORWARD¹

With the New Year upon us in another holiday-shortened week, Pending Home Sales, S&P Case-Shiller Home Price Index, and minutes of the Fed’s December meeting will highlight the economic data releases.

How does this week’s slate of economic data impact you?

Year-end readings in a seasonally slow period for home building likely won’t move markets dramatically, but investors will closely parse the latest Fed minutes for any indication of where rates are heading in 2026.

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MARKET UPDATE²

Market Index Returns as of 12/26/2025	WTD	QTD	YTD	1 YR	3 YR	5 YR
S&P 500	1.41%	3.91%	19.32%	17.55%	23.62%	15.04%
NASDAQ	1.23%	4.27%	22.96%	20.41%	32.56%	13.84%
Dow Jones Industrial Average	1.20%	5.43%	16.47%	15.26%	15.76%	12.18%
Russell Mid-Cap	0.79%	1.76%	12.37%	11.27%	14.99%	9.02%
Russell 2000 (Small Cap)	0.21%	4.30%	15.13%	14.46%	14.79%	6.22%
MSCI EAFE (International)	1.20%	4.91%	31.28%	30.52%	17.12%	9.24%
MSCI Emerging Markets	2.14%	4.18%	32.87%	31.96%	16.12%	4.70%
Bloomberg US Agg Bond	0.21%	1.11%	7.31%	7.65%	4.65%	-0.32%
Bloomberg High Yield Corp.	0.16%	1.10%	8.40%	8.50%	9.71%	4.57%
Bloomberg Global Agg	0.55%	0.32%	8.26%	8.35%	3.99%	-2.03%

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OBSERVATIONS

• Major U.S. large-cap indices ended the week of Christmas with solid gains, showing the S&P 500 (+1.41%), the NASDAQ (+1.23%), and the Dow (+1.20%) all up more than one percent.

• Mid-cap (+0.79%) and small-cap (+0.21%) equities were both positive, but trailed the major averages, reflecting further caution toward economically sensitive areas.

• Developed international markets (+1.20%) kept pace with domestic large-cap averages, while emerging markets rebounded strongly from a minor pull-back last week, rising 2.14%.

• Fixed income indices were positive domestically (+0.21%), internationally (+0.55%), and across the credit spectrum (+0.16%).

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BY THE NUMBERS

Oil Prices Supported by Geopolitical Tensions
Oil rises as geopolitical tensions continue. Brent crude is up 1% to $60.89 a barrel, while WTI rises 1.15% to $57.39 a barrel. U.S. talks with Ukraine on ending the war with Russia haven’t delivered an agreement. President Trump offered few specifics on Sunday as to how a deal could be reached after a phone call with Russia’s Putin and a meeting with Ukraine’s Zelensky. Meanwhile, oil is being supported by heightening tensions between the U.S. and Venezuela.³

The NFL’s $212 Million Benchwarmer
Mike McDaniel had a clear directive when he was hired in 2022 as the head coach of the Miami Dolphins. It was up to the young offensive whiz in cropped pants and designer glasses to unlock the potential of Dolphins quarterback Tua Tagovailoa, a former first-round pick whose first couple of seasons in the NFL had been an undeniable flop. For a while, it all went according to plan. McDaniel and Tagovailoa formed the engine of the most explosive offense in the NFL, and the team rewarded Tagovailoa with a $212 million contract that would keep him in Miami for years to come.

But on Sunday, a one-sided loss to the Cincinnati Bengals served as the strongest evidence to date that those plans have completely blown up. In that game, Tagovailoa was relegated to wearing a headset and holding a dry erase board as the most expensive backup in NFL history. It leaves the Dolphins to reckon with the fallout from the costliest mistake in modern football: spending a fortune on a quarterback only to realize that he isn’t actually the answer.⁴