Dec. 2025 Market Report: Tariff Ruling, Valuation Peak & Gold’s Historic Rally

I hope this message finds you well. With our latest December 2025 Market Report, I’d like to share a brief video highlighting key economic developments and market movements as we close out the year.

Click on the video below to watch.

Key Highlights from the December 2025 Market Report:

Mixed Employment Signals

• November jobs report: 64,000 new jobs added
• October revised to show 105,000 jobs lost
• Unemployment rose to 4.6%, the highest level since 2021
• Data collection challenges from government shutdown persist

Supreme Court Tariff Ruling Looms

• Court expected to rule soon on legality of Trump tariffs
• Market largely expects tariffs to be upheld
• Some investors believe a tariff overturn could trigger rallies, especially in retail stocks
• If upheld, minimal market reaction expected as outcome appears priced in

Fed Cuts Rates Amid Economic Weakness

• December rate cut of 25 basis points to 3.5% to 3.75% range
• Fed projects one additional cut in 2026
• New Fed chair appointment in May 2026 may favor more dovish stance
• Current inflation running at approximately 3% annually

U.S. Stocks Reach New Highs

• Markets recovered from October/November pullback to hit all-time highs in December
• S&P 500 up approximately 20% for 2025
• Rally driven by Fed rate cut, AI optimism, and better than feared retail earnings
• Valuation observation: 32-33% of S&P 500 now in stocks trading above 10x sales, highest since 2000 tech bubble

Global Markets Show Strong Performance

• Non-U.S. stocks up approximately 30% in 2025, exceeding U.S. returns
• Driven by weaker dollar and lower valuations vs. U.S. markets
• Emerging markets showing highest expected earnings growth for 2026
• Historical analysis suggests possible multi-year period of international relative performance similar to 2002 to 2007

Gold Surges 70% in 2025

• One of best performing assets of the year in U.S. dollar terms
• Central bank accumulation continues, led by Russia, China, India, and Turkey
• Trend toward gold accelerated after 2022 Russian asset freeze
• Central banks shifting reserves from dollars to gold for security considerations
  

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Our Perspective

As we enter 2026, U.S. stocks face significant valuation considerations, with 32-33% of the S&P 500 now comprised of companies trading above 10x price-to-sales, a level exceeded only once before, at the 2000 tech bubble peak. International markets trade at lower valuations, with emerging markets showing the highest expected earnings growth for 2026.

The weakening labor market and Fed rate cuts reflect economic softening, though the severe warning signs that typically mark market peaks (major layoffs, corporate defaults, or bank failures) have not appeared. The pending Supreme Court tariff ruling and new Fed leadership in May represent key variables for the year ahead.

I encourage you to watch the full video for a comprehensive discussion of these trends. As always, please don’t hesitate to reach out if you’d like to review your portfolio strategy in light of these developments.

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