After reviewing today’s latest financial data from Investing.com, several clear trends have emerged that, in my view, are reshaping short-term market sentiment heading into the final trading weeks of 2025.
The most striking development has been the continuous strength of the U.S. equities market, with the S&P 500 pushing to another record high early in Monday’s session. Investor enthusiasm remains buoyant thanks to last week’s lower-than-expected PPI and CPI prints, reinforcing expectations that the Federal Reserve could begin cutting rates sooner than previously projected — possibly as early as Q2 2026. The Fed’s final meeting of the year, set for Wednesday, is now priced in by the market to leave rates unchanged, but dot-plot revisions and Powell’s post-decision commentary are likely to be the focal point.
What reinforces the bullish bias, in my opinion, is how resilient consumer sentiment is proving to be. The University of Michigan’s preliminary December reading came in sharply above consensus, with inflation expectations moving significantly lower. This dual confirmation — moderating inflation and steady consumption — supports the idea that the U.S. economy could be gliding toward a soft landing, a scenario that just a few months ago seemed overly optimistic.
Tech stocks are leading the rally, driven by AI momentum and stabilization in the semiconductor sector, with Nvidia and AMD continuing to see strong inflows. Apple’s rebound, fueled by its emerging push into generative AI integration in iOS, also appears to be regaining market confidence after a relatively muted Q3. An interesting aspect to watch is the resurgence in mid-cap and small-cap names, which have largely underperformed for the year. The recent rotation suggests that investors are broadening their exposure, perhaps betting on a more cyclical upswing in 2026.
The U.S. dollar, meanwhile, has come under pressure, with the DXY index retreating significantly over the past 48 hours. This is directly tied to the shift in Fed expectations, putting upward pressure on both gold and emerging market assets. Gold broke above $2,030 again, and although it remains volatile, I think the combination of a weaker dollar and growing central bank buying (especially from China and India) gives it a supportive floor into the early part of 2026.
Crude oil markets also showed signs of life after weeks of decline. Brent crude bounced above $76/barrel amid renewed geopolitical tensions in the Red Sea and speculation that OPEC+ may revisit production cuts at the start of 2026. However, from a macro lens, the overriding theme remains one of balanced supply and softening global demand — particularly with weak industrial output data from Europe and China weighing on the longer-term trajectory.
Bond markets are signaling strong demand, especially at the long end, with the 10-year yield now near 4.15%, a full 75 basis points lower than the October peak. This reinforces a Goldilocks narrative — inflation is falling, growth is not collapsing, and the Fed may pivot dovish. If this proves accurate, risk assets could remain well supported into January.
From a positioning standpoint, I notice that investor sentiment is increasingly aligning with a “Fed pivot” risk-on scenario, but risks remain. Commercial real estate concerns, possible earnings downgrades in Q1, and the potential for inflation to remain sticky should not be dismissed.
Overall, the tone in the financial markets has clearly shifted more positively over the past two weeks, but whether this rally has legs depends heavily on this Wednesday’s FOMC outcome and the Fed’s guidance into 2026.