WEEKLY MARKET SUMMARY
Global Equities: Stocks slipped to end 2025 but bounced back on Friday with a promising first day of trading for 2026. All major US large cap indices were down for the holiday-shortened week, with the S&P 500 ending -1.0% lower, the Nasdaq down -1.5%, and the Dow Jones Industrial Average slipping -0.7%. US small caps were also negative for the weekly session, closing -1.1% lower. Foreign developed market stocks ended with a modest gain of 0.5%, while emerging market stocks were the big weekly winners thanks to a Friday surge that delivered a 2.6% weekly gain.
Fixed Income: Strong jobs data contributed to a mid-week yield shock that sent the US 10-Year yield as high as 4.35%, before ultimately ending the week just under 4.2%. Fixed income investors are anticipating the Fed will pause on rate cuts early in 2026 but ultimately give in to political pressure, but the “bond vigilantes” are sending a clear message that the Fed’s ability to influence rates will be limited to the short end of the yield curve. The demand for higher long-term yields is an expression of the market’s dissatisfaction with the fiscal trajectory of the US government, which could be setting up for another shutdown on January 30th.
Commodities: US West Texas Intermediate Crude prices rose slightly during the week to end at approximately $57.33 per barrel, prior to the US military action in Venezuela. Precious metal prices were volatile during the week, with gold declining -4.4% in its largest weekly drop since June 2021 to end at $4,342/oz. Silver posted an even larger swing, falling sharply from an all-time high of $84/oz to end slightly above $72/oz.
WEEKLY ECONOMIC SUMMARY
Jobless Data Improves: Weekly jobless claims slipped below the psychologically important 200,000 level, dipping 16,000 to 199,000. The December jobs report will be released January 9th and should provide more clarity over the state of the US labor market, which had been an area of concern for the Fed and the catalyst for expected rate cuts in 2026. Investors are anticipating unemployment to be relatively unchanged from November’s 4.6% level.
Manufacturing Momentum Slips: The latest S&P Global US Manufacturing PMI report showed manufacturing activity fell to its weakest level in five months. The headline index reading of 51.8 is still expansionary but showing signs of stress as new orders declined for the first time in a year. Businesses expressed struggles with higher input costs due to tariffs, while exports fell for a seventh consecutive month.
Divided Fed: The minutes from the December Federal Open Market Committee (FOMC) meeting revealed a deep division among officials regarding the necessity and timing of future interest rate cuts. Aside from the three dissenting votes (two favoring no cuts and one advocating for a 50-basis point cut), officials were split on their views whether inflation or labor posed the larger threat. With so much uncertainty among the committee, the path for 2026 rate cuts will depend on the first quarter economic data, along with the delayed data that is still yet to be released following the prolonged government shutdown.
CHART OF THE WEEK
The Chart of the Week shows the largest six proven oil reserves by country. Oil prices are likely about to encounter increased volatility following the US incursion into Venezuela to arrest President Nicolás Maduro. President Trump stated the US will “run the country now” and extract “a tremendous amount of wealth” from Venezuelan oil reserves, which are the largest in the world at an estimated 300 billion barrels. However, much of the extraction and refining infrastructure in Venezuela is outdated and the extra-heavy tar-like oil from Venezuela’s Orinoco Belt needs to be diluted and refined to flow through pipelines. Therefore, it is unlikely that the US will be immediately flooding the market with oil and any price movement will likely be due to political risks and not supply-demand dynamics.
