December Recap and January Outlook

The first week of January usually brings a slow news cycle as we all recover from the holidays. Not this year. 2026 kicked off with a geopolitical shocker: the announcement that the Trump administration had captured Venezuelan President Nicolas Maduro.

While the U.S. government has long disapproved of the Maduro regime—efforts that span back to the Biden administration—the swiftness of this action took many by surprise. Interestingly, the markets didn’t panic. Instead of a sell-off driven by uncertainty, the response was largely positive. By the end of the week, reports surfaced that American “Big Oil” was already in talks to rebuild Venezuela’s oil infrastructure.

But headlines are just noise without the data to back them up. Let’s look at what the numbers are actually telling us about the economy as we settle into the new year.

The Productivity Boom: Doing More with Less

For busy professionals like you, efficiency is everything. The most compelling story in the recent economic data isn’t just about jobs—it’s about productivity.

• Productivity is surging: It rose at a 4.9% annual rate in the third quarter of 2025.
• Output vs. Effort: While economic output rose to a 5.4% rate, total hours worked only increased by 0.5%.

Why this matters to you:

Increased productivity is the “magic sauce” of a healthy economy—it drives GDP and incomes higher over time without necessarily stoking inflation. Whether this is driven by the AI revolution, recent deregulation, or simply the payoff from automation investments made during the pandemic, the result is an economy that is growing smarter, not just harder.

The Data Snapshot

• Jobs: The labor market added 50,000 jobs in December. While this missed the expectation of 73,000, the unemployment rate dropped to 4.4%.
• Consumer Confidence: We are feeling better. The University of Michigan Consumer Sentiment Index rose by 2 percentage points, marking the second straight month of positive sentiment.
• Trade: The trade deficit fell 39% to $29.4 billion—the lowest level since 2009.

The Fed: Pause for Breath?

The Federal Reserve ended 2025 with a 25 basis point rate cut, but they are signaling caution. With the labor market growing (albeit slowly) and not shrinking, the Fed is unlikely to rush into further cuts.

The Outlook: Chairman Powell’s term ends this May. It is entirely possible we will see interest rates on “pause” until the June meeting under a new Chairman.

Chart of the Month: Consumer Sentiment Upswing

Consumer spending is critical to the economy, and after trending downward for most of 2025, consumers are finally seeing light at the end of the tunnel.

Equity Markets in December

• The S&P 500 was down 0.05% for the month, turning in 16.39% for the year.
• The Dow Jones Industrial Average gained 0.73% for the month and was up 12.97% for 2025.
• The S&P MidCap 400 fell 0.10% in December, shaving a bit off the year to end at 5.90%.
• The S&P SmallCap 600 dropped 0.26%, for a year end performance of 4.23%.

Source: S&P Global. All performance as of December 31, 2025.

Note: The “Magnificent Seven” tech giants continued to pull heavy weight, now accounting for nearly 35% of the market value.

Bond Markets in December

• 10-year U.S. Treasury: Ended the month at 4.17%, up from 4.02%.
• Taxable Bonds (Bloomberg U.S. Agg): +0.25% in December and +7.30% for the year.
• Municipal Bonds: +0.18% for the month and +4.25% for 2025.

The Smart Investor: Your 2026 Checklist

The start of the year is the perfect time to tune up your financial plan.

• Check Your Risk Tolerance: Markets finished positive, but volatility was up 31% over 2024 levels. If the “ride” kept you up at night, let’s review your allocation to ensure it matches your comfort level.
• Debt Management: Rates are likely to continue dropping eventually. If you have been waiting to take out a mortgage or home equity line for renovations or a practice loan, this may be the year to move forward.
• Holistic Review: Look at your plan from all angles—income, debt, and savings—to get a clear perspective before the year gets busy.

We are always available to help keep your financial journey moving forward smoothly.