Weekly Economic Update: December 30, 2025

Q3 GDP is finally reported — and it was big!

Thanks to the government shutdown in October and November, we didn’t get a chance to look at the third-quarter gross domestic product (GDP) until last Tuesday. The Atlanta Fed GDPNow indicator was calling for 3.6% annualized growth, which would have been a significant number — but the 4.3% growth that was actually reported was astounding.^1,2

There was all sorts of talk ahead of the report that the consumer was spent, confidence was in the tank and tariffs would finally begin to erode growth as inflation returned. If that’s all true, can you imagine what GDP would look like if the consumer starts spending and confidence returns? Oh, wait: The consumer is spending if you look at the current holiday season.³ And confidence is beginning to return, thanks to the lower-than-expected consumer price index (CPI) reading.^4,5 Maybe people can begin to feel hopeful once again.

Tariffs, which have been a go-to argument for some who are expecting inflation to return, haven’t hurt GDP and don’t seem to have made a dent in consumer spending this holiday season. There is also constant negativity from the media telling us prices will rise anytime now and letting us know how miserable we all are. But what we’re actually seeing are crowded parking lots, sold-out shelves, gas averaging under $3 per gallon and +4.3% GDP in the third quarter.⁶

Some are saying fourth-quarter GDP might be muted because of the government shutdown, with predictions around 3%.⁷ But just because government workers stayed home doesn’t mean they didn’t spend money. We’re going to buck the trend and say we’ll see another huge GDP print for the fourth quarter. Who wouldn’t want strong GDP growth compared to the alternative? Not us!

S&P 500 marches toward 7,000

The S&P 500 continued to climb toward 7,000 last week, closing just over 70 points shy of that milestone.⁸ Despite closing early on Wednesday for Christmas Eve and staying closed through Christmas on Thursday, the S&P 500 managed to notch three more record highs and just missed out on another record on Friday.

Is 7,000 points that important? Not really. We’re probably better off focusing on the fact that we will have three straight years of double-digit returns. But 7,000 on the S&P 500 is a milestone — and milestones make us feel good. Will it make a difference in your portfolio? Not really, but it will make people feel like we accomplished something this year. The Santa rally paused for a bit last week, but there is a real possibility of hitting 7,000 in the final three trading days of the year.

Coming this week

• It’s another short week for markets as we close out 2025. The stock market will trade full hours on Monday, Tuesday and Wednesday, then close for New Year’s Day before reopening on Friday.
• The only notable item this week will be the minutes from the last Federal Reserve meeting, which are scheduled to be released on Tuesday. We already know there was division within the Fed on policy, so there likely won’t be anything new there.
• Data will be scant this week. We’ll see pending home sales (Monday), the Case-Shiller home price index (Tuesday), and unemployment and MBA mortgage applications (Wednesday).

Sources:

¹ Federal Reserve Bank of Atlanta. Dec. 11, 2025. “Third-Quarter GDP Growth Estimate Increased.” https://www.atlantafed.org/cqer/feature/2025/12/11-gdpnow. Accessed Dec. 27, 2025.

² Bureau of Economic Analysis. Dec. 23, 2025. “Gross Domestic Product, 3^rd Quarter 2025 (Initial Estimate) and Corporate Profits (Preliminary).” https://www.bea.gov/news/2025/gross-domestic-product-3rd-quarter-2025-initial-estimate-and-corporate-profits. Accessed Dec. 27, 2025.

³ Luke Fountain. CNBC. Dec. 23, 2025. “Holiday retail spending rose 4.2% this season, driven by e-commerce and electronics: Visa report.” https://www.cnbc.com/2025/12/23/holiday-retail-spending-visa-report-2025.html. Accessed Dec. 27, 2025.

⁴ Trading Economics. “United States Michigan Consumer Sentiment.” https://tradingeconomics.com/united-states/consumer-confidence. Accessed Dec. 27, 2025.

⁵ U.S. Bureau of Labor Statistics. Dec. 18, 2025. “Consumer Price Index Summary.” https://www.bls.gov/news.release/cpi.nr0.htm. Accessed Dec. 27, 2025.

⁶ AAA. Dec. 27, 2025. “National Average Gas Prices.” https://gasprices.aaa.com/. Accessed Dec. 27, 2025.

⁷ Federal Reserve Bank of Atlanta. Dec. 23, 2025. “GDPNow™.” https://www.atlantafed.org/cqer/research/gdpnow. Accessed Dec. 27, 2025.

⁸ Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Dec. 27, 2025.

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