Good News Was Good News on Eve of Christmas Eve: Dec. 23, 2025

The strongest pace of US economic growth in two years, as reported on Tuesday, Dec. 23, bolstered confidence that corporate earnings can continue expanding robustly in 2026. Stocks continued their run as a result and came close in the early portion of the day to exceeding fresh records, but Treasuries sank as buoyant activity and a separate report from ADP signaled the continuation of a meaningful hiring recovery quelled the magnitude of interest rate reductions that fixed-income watchers are penciling in for the coming year. Indeed, the yield curve rose in bear-flattening fashion led by the Fed-sensitive shorter maturities; however, the ascent was modest because Wall Street still expects approximately 50 bps of accommodation in the next 12 months. Heavier borrowing costs didn’t generate the typical bullish reaction from the greenback for the second consecutive day, as participants realized that the US central bank is on the dovish compared to its global counterparts, with many at the end of their respective easing cycles. The hawkish numbers on Tuesday that depicted an accelerating landscape amidst rebounding payrolls, dented the cyclical areas of equities that effectively need looser financial conditions to appreciate significantly. Materials, industrials, consumer discretionary, real estate and the broader small-cap space are all declined despite notable gains of around 0.3% in the S&P 500, Nasdaq 100 and Dow Jones Industrial benchmarks. Commodities excluding lumber are caught bids in response to the solid data, although climbing debt servicing expenses hampered the critical construction input. Elsewhere, forecast contracts received investor attention, but volatility protection instruments and bitcoin prices slipped.

GDP Growth Exceeds Expectations

Third quarter Gross Domestic Product (GDP) sported the strongest growth rate in two years, as the 4.3% pace of progression exceeded the median estimate of 3.3% by a full percentage point and strengthened from the prior period’s 3.8%. The upside beat was supported by accelerating consumer spending, strong business capital expenditures, positive net exports and rebounding government outlays. Residential projects and a drop in inventories, however, were headwinds. Furthermore, a separate Durable Goods report from October missed projections due to sharp contractions in passenger and defense aircraft purchases, but the corporate investment category posted its third consecutive monthly increase, pointing to ongoing momentum with private-sector expansion plans.

Past performance is not indicative of future results.

ADP Report Eases Labor Market Concerns

ADP’s weekly employment indicator once again reflected a recovery in hiring, with the average seven-day payroll expansion in the last 28 days coming in at 11,500 during the interval ended Dec. 6. It’s the third consecutive increase and it eased slowdown fears since the winning streak follows four weeks in a row of declines in the reports spanning from Oct. 25 to Nov. 15.

Consumer Confidence Weakens Again

Sentiment among shoppers weakened in December, marking five consecutive months of declines, according to Tuesday’s release of the Conference Board Consumer Confidence Index. The metric sank from November’s upwardly revised 92.9 print for November to 89.1 for this month, missing the economist consensus estimate of 91.

Survey respondents once again reported broad unease about the economy, as the present situation index slipped from 126.3 to 116.8, although the expectations gauge was unchanged at 70.7. It was the 11th consecutive month below 80, which is the threshold at which the benchmark signals a possible recession. Folks mentioned worries regarding job security, employment availability, inflation, trade, tariffs, politics, and personal finances. 

Industrial Production Pretty Flat

Industrial production was relatively flat in October and November as the sluggish manufacturing and construction sectors weighed on monthly headline results. Mining and utilities were quite strong, but those smaller categories couldn’t offset the weakness in factories or in homebuilding. Still, the year over year (y/y) result of 2.5% wasn’t too shabby and was supported by sharp increases in December, February, June and July.

Holiday Spirit Boosts Equities

Late December generally features glass-half full perspectives across Wall Street and Tuesday was no different. Strong economic data that quells Fed easing expectations could be taken by investors as a reason to trim exposures, but considering that was the eve of Christmas Eve, participants were motivated to remain bullish heading into 2026. What supports stock prices over the long-haul are expanding earnings that essentially require a growing economy. To that end, the fastest pace of GDP in two years after three consecutive rate cuts and rebounding hiring is music to the ears of equity bulls that are geared up for a Santa Claus rally. If the reacceleration continues as we flip the calendar, the market doesn’t need monetary policy accommodation to continue appreciating, as there will be enough fuel from fiscal stimulus, lighter taxation, capex depreciation incentives, milder regulations and subdued energy costs to keep the run going amidst amplified top and bottom lines.

International Roundup

After October Decline, Canada GDP Turns Positive

Canada’s economy expanded 0.1% month over month (m/m) in November, a reversal from October’s 0.3% drop, according to a provisional estimate released by the country this morning.

The following categories contributed to the positive headline:

• Educational services
• Construction
• Transportation and warehousing

Conversely, the mining, quarrying, and oil and gas extraction group and the manufacturing component were headwinds.

Also on Tuesday, Statistics Canada announced its updated GDP estimate for October was unchanged from the original print depicting a 0.3% m/m GDP decline. In the manufacturing sector, durable goods and non-durable goods slipped 2.3% and 0.4% m/m but petroleum and coal product manufacturing expanded 2.5%. The updated print matched the consensus estimate but offset the 0.2% growth during September.

Singapore Posts Mild Monthly Inflation

Singapore’s Consumer Price Index climbed 0.2% m/m in November after being flat in the preceding month. Prices were up 1.2% relative to the same period in 2024, which was unchanged from October’s y/y increase, but was shy of the economist consensus estimate of 1.3%. Within the m/m headline, the largest price gains and the extent of the changes were as follows:

• Housing and utilities, 1.6%
• Health, 0.8%
• Information and Communication, 0.2%
• Food, 0.1%

Clothing and footwear, however, became 4.3% less costly, partially limiting the monthly ascent. The following categories and the scope of their price declines also dampened the headline increase:

• Transport, 1.4%
• Recreation, sports, and culture, 0.5%
• Miscellaneous goods and services, 0.4%
• Household durables, 0.1%

For the 12-month result, deflation in the electricity and gas category and slowing price pressures in the retail and goods group partially offset services becoming more expensive. 

Japan PM Proposes Response to Trade Protectionism

Japan’s recently elected prime minister, Sanae Takaichi, is urging the country to create a more competitive business environment in response to US and Europe trade protectionism and uncertainty regarding trade and international relations. When speaking Tuesday to economists in Tokyo, she called for investment tax incentives to boost corporate investments. She also maintained that the country must embrace a responsible and proactive fiscal policy while avoiding excessive fiscal austerity that could weaken the nation’s economy.