Weekly Index Performance (Week Ending December 26, 2025)
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S&P 500: +0.5% for the week (Closing: 6,868.90)
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Nasdaq Composite: +0.7% (Closing: 23,854.72)
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Dow Jones Industrial Average: +0.3% (Closing: 48,279.22)
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Russell 2000: +0.4% (Closing: 2,537.61)
Volatility compressed further with the VIX closing near 14.5, reinforcing stability into year-end. Trading desks remained quiet as institutional rebalancing and tax-loss activity dominated flows in the shortened trading sessions.
Inflation & Policy: The Fed’s Gift That Keeps Giving
Markets extended the prior week’s rally following confirmation from multiple Fed officials that the “pivot” toward rate normalization remains intact. Futures now fully price the first 25 bps cut for March 2026. December CPI data, due early next month, is expected to confirm a continued easing trend—consistent with recent inflation surprises.
Treasury yields retreated modestly, with the 10-year finishing around 3.93%, its lowest level since early summer. The yield curve remains inverted but less so, reflecting growing confidence in a “soft landing” scenario.
Corporate & Sector Highlights
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Technology: Mega-cap tech led holiday trading, with NVIDIA and Apple both notching new highs amid strong AI adoption headlines.
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Communications: The pending Netflix–Warner Bros. Discovery merger remained a focal point. Regulatory review is progressing smoothly following the WBD board’s formal approval last week.
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Energy: Crude prices slipped below $72/barrel, capping a volatile December stretch. Lower fuel costs continue to support airlines and logistics stocks.
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Consumers: Holiday retail data suggests spending resilience, highlighted by strong travel and digital sales momentum.
Economic Backdrop: Still on Solid Ground
Economic inputs remain consistent with a soft-landing trajectory. Labor markets show gradual cooling without deterioration, manufacturing sentiment is stabilizing, and housing data continues to firm with mortgage rates below 6%.
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Initial jobless claims: 224,000
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New home sales: +2.1% month-over-month
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Consumer confidence: 103.4, a six-month high
Valuation & Positioning: Stretching into 2026
At near 22× forward earnings, the S&P 500’s valuations remain elevated but justifiable given declining real yields and improving breadth. Investors’ focus now shifts toward 2026 themes: productivity gains from AI, capital expenditures in energy transition, and the evolution of real rate dynamics.
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Bull Case: Moderating inflation, central bank easing, and strong household balance sheets support continued equity strength.
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Bear Case: Thin liquidity and elevated valuations heighten risk of near-term consolidation.
Looking Ahead: The Final Trading Days of 2025
Next week’s abbreviated calendar, ringing in the New Year on Thursday, will likely feature light volumes and limited data releases. Portfolio managers will finalize positioning for 2026, focusing on duration exposure, sector rotation, and tactical re-entry into lagging segments like small caps and cyclicals.
As we close 2025, markets stand near all-time highs, inflation appears tamed, and policy flexibility returns to the conversation. After a year marked by volatility and eventual vindication for long-term investors, the outlook for early 2026 looks balanced—and cautiously optimistic.
Merry Christmas and Happy New Year from all of us at Vistamark!
