Weekly Economic Update: December 2nd, 2025
It looks like Santa is on his way!
It’s hard to believe Thanksgiving 2025 has already come and gone. We hope everyone had a happy, safe and relaxing holiday with family and loved ones.
You know who had a great holiday week? The markets! After the sell-off in the week leading up to Thanksgiving, markets rebounded sharply and are almost back to where they were at the end of October. The S&P 500 closed the week at 6,849.90, not far from the record of 6,890.89 on Oct. 28.1 The Dow was hot on the heels of 48,000 again, just shy of its Nov. 12 high of 48,254.82.2 And the Nasdaq closed at 23,365.69, near its record high of 23,958.47 back on Oct. 29.3
The Nasdaq and Dow suffered the most volatility, as Big Tech and artificial intelligence (AI) stocks were blasted with criticism that they were overpriced and committing too much revenue to AI infrastructure.4 Both indexes have all the marquee names we’ve heard about for years, so it was no surprise they faltered when tech did. The S&P 500, although a much better approximation of the broader market, did not avoid the pain. Just last week, it tumbled to slightly above 6,600.
What changed? For one, it now appears the on-again, off-again December rate cut is back on the table, after several higher-profile Federal Reserve officials publicly stated a 25-basis-point (0.25%) cut was appropriate in December.5 This appeared to undercut current Fed Chair Jerome Powell’s stance that a pause may be in order.
Whether some of these officials are auditioning to replace Powell as Fed chair in May or simply are concerned the economy needs a boost and that inflation is less of a concern, markets shifted materially to an expectation of a rate cut, with current odds running at 87.4%. (This is up significantly from last week’s odds.) Volatility has also fallen off a cliff from over 26 on Nov. 20 to under 17 on Nov. 28.6 For the time being, it appears calmness has returned to the markets. If you did not succumb to the panic, you are no worse for the wear. Please remember there will be bouts of volatility and sell-offs; these are healthy market phenomena. Stick to your plan and do not give in to hysteria. We are thankful we have climbed back and amazed at what a short, strong week in the markets can do for the overall mood. We’re also excited to know that Santa is on his way!
Old news, no news
The Bureau of Labor Statistics (BLS) released the delayed September producer price index (PPI) last week, but the Bureau of Economic Analysis (BEA) punted on the initial third-quarter gross domestic product (GDP) reading until Dec. 23.7,8 That’s after the final Fed meeting, which makes the data as useless as getting a Palm Pilot instead of an iPhone 17 for Christmas.
September PPI was milder than expected, and it was enough to swing markets in favor or rate-cut expectations at the December Fed meeting, which helped fuel last week’s rally. We’re still not convinced the lack of a quarter-percent rate cut was so integral to market valuations that it should have prompted a sell-off. We’re glad the rate cut is back on, but it seems the sell-off was driven more by greed to lock in gains after a surprisingly strong year.
We’re also doubtful there was some sort of market rotation happening because tech stocks have rebounded and underpriced stocks are where they started. That talk benefits traders. And not only that, but a rotation away from overpriced to undervalued stocks should, theoretically, be a zero-sum game. No, this past bout of volatility was seemingly plain-and-simple greed, since it had been fairly quiet and any excuse would do to bank some gains. Whether it was the rate cut going away or no data as a result of the government shutdown, we will probably never know — but this most recent sell-off was a strong reminder to stay the course and follow your plan.
Coming this week
- Monday and Tuesday will feature scant data, with some manufacturing and auto sales.
- The action will pick up on Wednesday with the November ADP employment report. However, due to ongoing delays following the government shutdown, there will be no Job Openings and Labor Turnover Summary (JOLTS) or nonfarm payrolls report this week. We will see weekly unemployment on Thursday, which will be a bit skewed due to the Thanksgiving holiday last week.
- Wednesday will also feature MBA mortgage applications. Then we’ll see personal consumption expenditures (PCE), personal income and spending — some of the Fed’s favorite data points — on Thursday.
- We’ll hear from Fed speakers all week. They’re always capable of making news that can move markets.
Sources:
1 Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Nov. 30, 2025.
2 Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed Nov. 30, 2025.
3 Yahoo! Finance. “NASDAQ Composite (ˆIXIC).” https://finance.yahoo.com/quote/%5EIXIC/. Accessed Nov. 30, 2025.
4 Tasmin Lockwood. CNBC. Nov. 21, 2025. “Global investors battle between long- and short-term wins amid Nvidia volatility.” https://www.cnbc.com/2025/11/21/global-investors-weigh-long-and-short-term-wins-amid-nvidia-volatility.html. Accessed Nov. 30, 2025.
5 Maria Eloisa Capurro. Yahoo! Finance. Nov. 24, 2025. “Fed’s Waller Calls for December Cut, Then Meeting-By-Meeting.” https://finance.yahoo.com/news/fed-waller-calls-december-cut-131525677.html. Accessed Nov. 30, 2025.
6 Yahoo! Finance. “CBOE Volatility Index (ˆVIX).” https://finance.yahoo.com/quote/%5EVIX/. Accessed Nov. 30, 2025.
7 U.S. Bureau of Labor Statistics. Nov. 25, 2025. “Producer Price Index News Release Summary.” https://www.bls.gov/news.release/ppi.nr0.htm. Accessed Nov. 30, 2025.
8 Bureau of Economic Analysis. “Release Schedule.” https://www.bea.gov/news/schedule. Accessed Nov. 30, 2025.
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12/25 – 4549318-1
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