Weekly Market Watch

Stockings Stuffed with Economic Data

Last week, global equities delivered mixed results with a midweek rebound keeping hope alive for a Santa Claus rally. Long-awaited U.S. economic data was largely on the nice list with inflation, payrolls and core retail sales reports coming in better than the consensus estimates.

Meanwhile, global artificial intelligence (AI) stocks started the week on the naughty list but bounced back thanks to some strong earnings reports and increased expectations for another rate cut. Stocks in Japan were also on the naughty list, after the Bank of Japan hiked its policy rate to the highest level in 30 years.

Market Outlook

Last week’s U.S. economic data was noisy — the payrolls report contained negative revisions plus an uptick in the unemployment rate, and inflation data may have been impacted by data collection gaps during the government shutdown. Commentary from Federal Reserve (Fed) officials highlighted their preference for a cleaner inflation report next month, which will be released ahead of January’s Federal Open Market Committee meeting. We believe the moderating trajectory of inflation will remain intact and that stickiness in goods inflation will be offset by services disinflation, providing a backdrop for additional Fed easing next year — a gift that may keep on giving for equity investors.

Chart of the Week

In the final weeks of 2025, companies reporting results before fourth-quarter earnings season indicate a positive outlook for 2026.

We expect continued earnings momentum to unfold in the new year as key themes such as AI and increased capital expenditures help profit margins make new highs.

Improving clarity on fiscal, trade and monetary policies should also serve as a tailwind for markets.

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