SFM Observer- December 2025

Glenn Sweeney |

SFM OBSERVER

December 2025 Recap

A CONCISE REVIEW OF THE MONTH IN THE INVESTMENT MARKETS

 Issued: January 7, 2026

 

The Dow closed the month of December at 48,102, gaining 386 points or 0.8% for the month. Equity markets ended the year on a relatively calm note after a volatile fall. While the much-anticipated Santa Claus rally was modest, stocks finished 2025 near record highs as investors continued to digest the Federal Reserve’s policy outlook for 2026.

December trading volumes were light, but market sentiment improved late in the month following clearer guidance from the Fed suggesting that rate cuts are likely later in 2026 if inflation continues to trend lower. Bond yields declined slightly, providing support to both equities and interest-rate-sensitive sectors.

 

Some interesting events from the month just passed:

  • The Federal Reserve cut interest rates by ¼ percent at its December meeting. Chairman Powell emphasized that while inflation is moving in the right direction, the Fed remains cautious and the job market is weakening. Markets are now pricing in two potential rate cuts in the second half of 2026.
  • Consumer spending during the holiday season was mixed. Higher-income households continued to spend freely on travel, luxury goods, and experiences, while lower-income consumers remained constrained by high borrowing costs and rising household expenses.
  • Artificial intelligence stocks experienced renewed volatility in December. After leading the market for much of the year, several high-profile AI names pulled back as investors questioned valuations and near-term earnings growth. Despite the pullback, AI remains a dominant long-term investment theme.
  • Mortgage rates drifted lower in December, with 30-year fixed rates falling back toward the 6% level. Housing activity remains subdued, but lower rates could lead to improved affordability and increased transaction activity in 2026.
  • Oil prices declined modestly during the month as global demand concerns offset geopolitical risks. Energy stocks lagged the broader market in December but finished the year with respectable gains around 8%.

 2025 Market Performance

 Total Returns – Calendar Year 2025

Index

Return

Dow Jones Industrial Average

+14.9%

S&P 500

+17.9%

NASDAQ Composite

+19.8%

Bloomberg Aggregate Bond Index

+3.1

 U.S. stocks posted strong gains in 2025, led by technology and growth shares. Bonds delivered modest positive returns as interest rates stabilized after several challenging years.

 

Looking Back at 2025

2025 will likely be remembered as a year of strong equity performance despite persistent inflation concerns, geopolitical uncertainty, and higher-for-longer interest rates. Investors who remained disciplined and diversified were rewarded, while those who attempted to time short-term market moves often struggled.

The past several years continue to reinforce an important lesson: markets rarely move in a straight line, but patience and a long-term strategy tend to win out over time.

 

Thank you for reading this issue of the SFM OBSERVER. If you have any comments or questions, please send us a reply. If you have a friend or associate who might be interested in the SFM OBSERVER, feel free to forward this email.

 

Wishing everyone a healthy, happy, and prosperous New Year.

 

Until next month,

 

 Glenn Sweeney CFA