Market Returns December 2025 (including dividends)

 Economic & Policy Highlights

Interest Rates & Fed Outlook

• TheFederal Reserve met in December and cut rates 25 basis points
• 3 members of the Federal Reserve dissented, with 2 voting for no cut and 1 member wanting a 50-basis point cut
• The Federal Reserve announced they would begin buying T-bills again to maintain liquidity in the banking sector
• The Bank of England cut rates as inflation eased in the UK
• The European Central Bank (ECB) kept rates at 2% and signalled their rate cutting cycle was likely finished
• Mexico cut rates despite accelerating inflation
• Japan raised rates 25 basis points to 0.75%, the highest in three decades

Trade & Tariffs

• Mexico placed tariffs on China and other nations, with rates as high as 50% 

Employment & Growth

• Chinese retail sales grew 1.3% in November, the slowest on record, outside of COVID
• The White House warned they might limit compensation, dividends and stock buybacks of publicly traded military contractors
• US unemployment remained stable
• The EU cancelled their 2035 ban on combustion engines
• The Trump Administration ordered Fannie and Freddie Mac to buy $200 Billion of mortgage-backed securities (MBS), in a bid to lower mortgage rates

Consumer spending & sentiment

• Consumer sentiment surveys remained weak as affordability issues pressured the average American
• Despite poor sentiment, retail sales remained strong as shoppers prepared for Christmas

Geopolitical Volatility & Energy

• US Forces seized an oil tanker off the Venezuelan coast
• US military began a blockade of oil tankers in Venezuela
• Oil fell 1.9% over fears of a supply glut
• Gold rose 1.9% driven by increased investor interest and continued central bank activity
• China held military drills around Taiwan
• Ukraine asked the US for a 50-year security guarantee as part of their peace talks

Summary Impact 

• Major indices grinded sideways as the Santa Clause Rally failed to materialize
• Long bond yields continued to ignore central bank rate cuts, a worrying sign
• Stock market excitement over AI took a break, as sector rotation took over
• Investment grade credit spreads widened materially for Hyperscalers (AI)

Commentary:

US stocks were relatively quiet in December overall, with a positive move early in the month followed by declines afterward.  The much hoped for Santa Claus Rally failed to materialize as the market lost momentum into the last few days.  Despite a flat December market, under the surface, many changes were afoot.  Breadth continued to improve and a rotation away from technology stocks continued to gain steam.  International markets were somewhat stronger than US stocks in December, helped by a fall in the US dollar and a dose of AI fever which seemed to migrate to Asian markets.

As noted above, The US Federal Reserve cut short-term interest rates, but longer-term rates (10-year bonds) actually rose in yield during December.  Corporate credit spreads remained well behaved, other than the blowout in Hyperscaler bond spreads.

As the year drew to a close volatility remained suppressed below its normal long-term average and investor complacency remained elevated.  We believe this is all poised to change throughout the course of 2026.  The second year of the Presidential Cycle is typically associated with higher levels of volatility and the potential for larger market corrections.  Bond yields continue to climb globally in most major economies as governments enact pro-cyclical policies, paid for with debt.  Commodity prices remain in steady uptrends placing further pressure on cost inputs and inflation. A final note on inflation is the potential for China to stop exporting deflation, as they focus on developing greater domestic consumption and curtailing the over-production of export goods.

While governments are keen to run their economies’ hot, the limiting factor will be a potential resurgence of inflation which can pressure yields higher and inhibit rate cuts by Central Banks (something markets are depending on heavily).

We anticipate that market volatility will provide us with opportunities to put money to work with better risk/return prospects and we are positioned to respond to those opportunities when they arise.

Your portfolio continues to be anchored by reasonably priced companies with solid fundamentals, augmented by alternative assets with negative to low correlation and combined with exposure to fixed income.  Our goal is to manage portfolio risk both at the security and asset class level to generate superior risk adjusted returns.