The US stock market is experiencing turbulence as the year comes to a close, despite being on track for a solid performance in 2025. The benchmark S&P 500 has edged lower in December, defying historical trends that typically see it as a strong month.
Economic Factors at Play
Two key themes have driven swings in US equities in recent weeks: scrutiny over massive corporate spending on artificial intelligence and shifting expectations about further interest rate cuts by the Federal Reserve in 2026. This week, questions about a data-center project from Oracle weighed on tech and other AI-related stocks, while tame inflation data gave stocks a lift.
Investor Reaction
Investors have been reacting to delayed economic data and Federal Reserve decisions. Employment data showed job growth rebounded in November, but the unemployment rate stood at 4.6%, its highest level in over four years. The US consumer price index increased less than expected in the year to November, leading to optimism that may be tempered by data collection distortions.
Looking Ahead
Economic reports in the coming week include third-quarter gross domestic product, durable goods orders, and consumer confidence. Focus will likely remain on the AI trade that has helped lift stocks this year, with the S&P 500 up more than 15% so far in 2025. However, AI-related worries, such as when massive infrastructure spending will generate returns, have dented the high-flying tech sector.
- The S&P 500 is set for double-digit percentage gains in 2025, despite a shaky December.
- The Santa Claus rally may still take place this year, with the S&P 500 rising an average 1.3% over the last five trading days of the year and the first two in January.
- Other sectors, such as transportation, financial, and small-cap groups, have helped pick up the slack, with money moving away from tech.
Remember, this is perspective, not prediction. It's essential to do your own research and consider multiple factors before making investment decisions.