Markets and Economic Updates for December 2025: Shutdowns, Fed Moves, and Market Resilience

Each month, senior leaders from Hancock Whitney Asset Management host a webcast highlighting the most important developments across the economy and financial markets. The team discusses current events shaping investor behavior and market dynamics, along with forward-looking perspectives to help guide investment strategy. This month’s conversation covers the resolution of the longest government shutdown in U.S. history, the Fed’s next move amid incomplete data, and the continued resilience in both equity and bond markets. For more detailed analysis and insights, listeners are encouraged to access the full webcast recording.

Watch the December 2025 Markets and Economic Webinar

Key Highlights from the December Webcast:

• Government Shutdown Ends—But Only for Now
  • The 43-day shutdown, the longest in U.S. history, ended on November 12 with a temporary continuing resolution funding the government through January 30, 2026.
  • While several appropriations bills (e.g., agriculture, military) were passed, most remain unresolved, leaving a ~25% chance of another shutdown in early February.
  • Healthcare subsidies under the Affordable Care Act are still in flux; failure to extend them may lead to higher premiums starting    January 1.
• Economic Impact: Minimal but Data-Delayed
  • The economic toll of the shutdown is relatively small—an $11 billion permanent loss per CBO estimates—but its most significant consequence may be the delay in releasing critical data like Q3 GDP.
  • Q3 GDP (expected ~2.5–3%) is set to be released just before Christmas, but attention has shifted to a softer Q4 outlook with GDP tracking closer to 1%
  • Consumer activity has softened, especially among lower-income households, while auto sales and durable goods remain under pressure.
• Federal Reserve: December Cut Expected Amid Mixed Signals
  • Despite limited government data, Fed surveys (e.g., Beige Book) and other private sector reports point to labor market softness and a high probability that the unemployment rate is rising to levels likely to prompt Fed action.
  • A December rate cut is widely expected (near 100% probability), supported by Fed Chair Powell’s dovish leanings and recent media messaging.
  • Inflation concerns persist but are easing: private indicators show inflation moderating toward the Fed’s 2% target over recent months.
• Bond Market: A Remarkable Year Nears Its End
  • November added another +0.7% for taxable intermediate bonds, bringing YTD bond returns to 7.3%—on pace for the best year since 2002.
  • Fed easing, and supportive technical factors (e.g., Treasury issuance favoring T-bills) are contributing to strength.
  • Looking ahead, 2026 may offer more modest returns driven by income rather than price appreciation.
• Equities: Strong Year Continues Despite Volatility
  • November marked the seventh consecutive monthly gain for the S&P 500, a rare streak seen in only 4% of historical cases.
  • The month saw leadership rotate: tech stocks like Nvidia declined ~13%, while Alphabet rose ~13% amid AI-related momentum.
  • Small- and mid-cap stocks outperformed, buoyed by improving earnings expectations. Investors continue to “climb the wall of worry” with optimism for 2026 growth.
• Policy & Geopolitics: Trade Progress and Glimmers of Peace
  • A trade “ceasefire” with China was extended through November 2026, including mutual tariff reductions and agreements on rare earth and ship imports.
  • Additional trade frameworks were announced with Switzerland, Liechtenstein, and several Latin American countries.
  • Meanwhile, peace talks between Russia and Ukraine have shown meaningful progress, with U.S. envoys in Moscow and new proposals on the table.

 To explore these topics in more depth and hear the full discussion, be sure to listen to the full webcast recording.