Stock Market Commentary December 2025

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Rate Cut in December?

In our November Market Commentary, we predicted that the stock market will end the year higher, despite some short term bumps in the road. November ended up being a bump in the road as most stock market indexes were negative (1).We believe the most important event in December will be the Federal Reserve meeting on December 10th.Now that the U.S. Government has reopened, the Fed should receive timely information regarding both inflation and the labor markets.In October, the Federal Reserve chairman said that they are monitoring job layoffs “very, very carefully” and also that a December rate cut at their December 10th meeting is “not a foregone conclusion”(2).

Generally speaking, in our opinion, the stock market likes rate cuts because the interest expense on business loans and credit cards is typically lowered, and potentially lower mortgage rates may help stimulate the housing market. Our best estimate at this time is that the Fed will cut rates in December because of a weakening labor market and that the stock market rally continues overall until year end, despite some short-term bumps in the road.

Will the Santa Claus Rally Arrive in December?

Past performance cannot predict future performance, but generally Speaking, December is a positive month for the major stock market indices.Some historical numbers show the S&P 500 increases 73% of the time in December to end the year on a high note. The Russell 2000 increases 83% of the time, which is the highest percentage of any month (3).The last 5 days of December and the first 2 trading days of January are typically considered the “Santa Claus Rally” time frame. Historically, the market has earned over 1.3% in this short time frame and has been positive 79% of the time (4). What is more noteworthy to us is if this time frame is negative, because historically it has been a bad omen for the calendar year ahead. Past performance cannot predict future performance, but we’ll be watching this and many other indicators as the year winds down (5).

There is a lot going on in the world and it’s a great time to touch base.If we haven’t spoken in a while and you would like to go over your numbers, or you’ve had any changes to your family, finances, employer/job, or risk tolerance, please contact us right away at (586) 226-2100 to schedule a review meeting. We would love to meet with you over the phone, Zoom, or face to face to strategize.

Sincerely,

Bob, Ken, Jim, Zach, James and Daniel