To Summarize: In December, equities have posted gains, while bonds underperformed and commodities delivered mixed results. Despite ongoing concerns regarding inflation, markets are expecting two rate cuts by the Federal Reserve (the Fed) in the coming year. Although economic growth is slowing, it remains in positive territory. Meanwhile, holiday sales continue to rise, but both in-store traffic and discretionary spending remain subdued.
The big takeaway – Persistent inflation and slowing growth are shaping sentiment now, but market expectations for the coming year are more optimistic.
In the Markets: The markets kicked off the month with a mixed tone: smaller company stocks outperformed on hopes for better 2026 earnings, and global stock returns are up 2-5% for the quarter. Bonds struggled as the Fed signaled slower rate cuts, and oil and bitcoin fell while copper climbed. GDPNow shows economic growth cooling but not collapsing, supporting a gradual path for rate reductions.
Sticky Inflation Impacting Rate Cuts: Investors are now anticipating two rate cuts next year, one in the spring and another in the late third quarter, before the Fed pauses. This cautious approach reflects persistently sticky inflation, which has recently edged higher across goods and services. Surging copper prices, driven by global electrification and AI infrastructure demand, are a key factor keeping inflation elevated and shaping market expectations.
Retail Trends, Cautious Spending, and Selective Shopping: Amid ongoing uncertainty and weak consumer sentiment, in-store shopping has dropped significantly year-over-year, while online sales growth has slowed. Discretionary categories like electronics, furniture, and travel are especially impacted as consumers become more selective, prioritizing essentials and value over non-essential purchases.
Top Headlines: We’re reading about the widening AI value gap, how Warren Buffett’s retirement will shape Berkshire Hathaway moving forward, corporate real estate trends to watch for in 2026, and a bipartisan Senate bill that would boost transparency and oversight on pricing by PBMs.
Related resources:
- AI: The widening AI value gap
- Berkshire Hathaway: How the big changes announced with Warren Buffett’s retirement will shape the company moving forward
- Commercial Real Estate: Corporate real estate trends to watch for in 2026
- Healthcare: Senators introduce a bipartisan oversight bill for transparency in pricing by PBMs
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