AE Wealth Management: Weekly Market Insights | 12/14/25 – 12/20/25
Weekly Market Commentary
THE WEEK IN REVIEW: Dec. 14-20, 2025
Markets waffle early in the first week after rate cut
After the Federal Reserve cut rates for the third (and final) time in 2025, markets stumbled to start the week as they slipped back into “Big Tech over valuation, AI bubble, weak economy” mode.1 As we’ve said before, this “Eeyore”-ish mindset is just a cover for people to take profits off the table and lock in gains. Once we start the new year, the narrative will likely suddenly change, and markets will probably be excited about AI, tech and the economy again.
In the meantime, don’t fall into this obvious trap. We are still near all-time highs and could rally to new records in the next 10 days. Use caution against both piling in or bailing out right now. It’s been a nutty year, and the last part of December will be a microcosm of 2025 — ups and downs and likely ending in an up.
Two months from now, Big Tech valuations probably won’t be as much of a hot-button issue as they are today.2 Once traders and portfolio managers lock in their gains, they’ll be right back buying the same names they’re selling today.
Unexpected inflation drop helps market end the week on an up note
The November consumer price index (CPI) reading is in at 2.7% — dramatically below the consensus projection of 3.1%.3 Markets spiked on Wednesday following the news, then dipped slightly before ending the day higher as solid earnings from Micron helped steady the wobbly tech trade.
By Friday, markets had firmed up to help us end the week above 6,800 on the S&P 500.4 Markets are off their highs, but not by much. With a little luck, we may yet run up to 7,000 on the S&P 500 by year end if third-quarter gross domestic product (GDP) comes in strong and calms some of the jitters surrounding economic and job growth.
Lower inflation was great news, but there were still some who said the report was incomplete because some of the underlying fields were blank or that tariff-induced inflation was on the way.5 Does it matter? For the longer term, yes, but for one month after a government shutdown, no.
What is important is how people feel. Prices rose so high and fast between 2021 and 2024 that people are still in shock. And salaries didn’t keep up, so of course, people will stress about high prices. This phenomenon will not correct itself overnight. Come to think of it, has there ever been a time when people felt they were making enough and that prices weren’t too high? It’s not in our nature — nor how the economy works.
In the Fed’s perfect world, we would have 2% or less annual inflation. That means prices would increase by 2% annually, so every year, everything would get more expensive. (The exceptions are commodities, which fluctuate wildly.) The shock of a 24% increase in just three years and stagnant wage growth that failed to keep up is what’s causing people to feel bad.6
We have two options to make things more affordable. The first option is a nasty recession with high unemployment, which most certainly will stop prices from going up because unemployed people tend to spend less.
The second option is strong economic growth coupled with wage growth that surpasses the inflation rate, so people don’t feel like they are left behind. We will take this option all day long, but that path is slower and we need to be patient. Right now, it appears there is a lot of support for strong growth in the first half of 2026. With that growth, wages will also rise and take the sting out of higher prices, at least in theory.
Coming this week
- Markets will be closed on Thursday for Christmas Day. Trading will likely be light the rest of the week, without much market action.
- The only data of note this week will be the delayed third-quarter GDP reading on Tuesday. Since we don’t have a lot of other data or news to work with this week, the report could be a big catalyst to move markets upward. As of Dec. 16, the Atlanta Fed was calling for third-quarter growth to come in at +3.5%.7 That will soothe the market’s fears of the economy slowing down.
- The only other data scheduled for this week will be weekly unemployment claims plus MBA mortgage applications on Wednesday.
- Looking ahead, next week should also be pretty quiet, with the possible exception of some last-minute jockeying on Dec. 31 as we close out the year.
Index Performance Returns % | |||||
| 1 WK | YTD | 1YR | 3YRS | 5YRS | |
| S&P 500 | 0.10% | 16.20% | 16.49% | 21.42% | 13.00% |
| NASDAQ | 0.48% | 20.70% | 20.31% | 30.26% | 12.81% |
| DJIA | -0.67% | 13.14% | 13.68% | 13.69% | 9.79% |
Interest Rates: | |||||
| 12/19/2025 | 12/12/2025 | ||||
| UST 10 YR Government Bond Yield | 4.15% | 4.19% | |||
| Germany 10 YR | 2.02% | 2.86% | |||
| Japan 10 YR | 1.95% | 1.95% | |||
| 30 YR Mortgage | 6.25% | 6.27% | |||
| Oil | $56.52/ppb | $57.54/ppb | |||
| Regular Gas | $2.87/ppg | $2.91/ppg | |||
| All data as of Dec. 19, 2025. | |||||
Sources:
1 Federal Reserve. Dec. 10, 2025. “Federal Reserve issues FOMC statement.” https://www.federalreserve.gov/newsevents/pressreleases/monetary20251210a.htm. Accessed Dec. 21, 2025.
2 Morningstar. Dec. 16, 2025. “Big Tech stocks are getting cheaper, and that could mean gains of up to 60%.” https://www.morningstar.com/news/marketwatch/2025121635/big-tech-stocks-are-getting-cheaper-and-that-could-mean-gains-of-up-to-60. Accessed Dec. 21, 2025.
3 U.S. Bureau of Labor Statistics. Dec. 18, 2025. “Consumer Price Index Summary.” https://www.bls.gov/news.release/cpi.nr0.htm. Accessed Dec. 21, 2025.
4 Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Dec. 21, 2025.
5 Jennifer Schonberger. Yahoo! Finance. Dec. 18, 2025. “‘Absence of data’ in CPI report flashes yellow for further interest rate cuts.” https://finance.yahoo.com/news/absence-of-data-in-cpi-report-flashes-yellow-for-further-interest-rate-cuts-163821729.html. Accessed Dec. 21, 2025.
6 Sarah Foster. Bankrate. Aug. 12, 2025. “Inflation stayed steady last month as Trump’s tariffs hit some prices — here’s what might feel most expensive.” https://www.bankrate.com/banking/federal-reserve/latest-inflation-statistics/. Accessed Dec. 21, 2025.7 Federal Reserve Bank of Atlanta. Dec. 16, 2025. “GDPNow™.” https://www.atlantafed.org/cqer/research/gdpnow. Accessed Dec. 21. 2025.
7 Federal Reserve Bank of Atlanta. Dec. 16, 2025. “GDPNow™.” https://www.atlantafed.org/cqer/research/gdpnow. Accessed Dec. 21. 2025.
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