Weekly Macro Report, December 6 2025

1. Economic Growth & Outlook

The S&P 500 has gained roughly 13% year-over-year by mid-October 2025, reaching around 6,870 in early December. US real GDP grew at a robust 3.8% annualized rate in Q2 2025, supported by strong consumer spending and investment. The effective federal funds rate fell to 3.89% by early December 2025 from above 4% in prior months, with futures implying a gradual decline. This signals expectations for moderated rate pressure ahead, supporting steady near-term growth, stable employment gains, and inflation trending close to target levels.

2. Labor Market

The U.S. unemployment rate rose to 4.4% in September 2025, its highest since October 2021, with the unemployed count increasing by 219,000 while employment grew by 251,000. Job gains persisted in healthcare and food services, but losses occurred in transportation and federal government sectors. Labor market slack is modestly expanding, suggesting the Federal Reserve may maintain current rates to monitor inflation risks before considering adjustments. Payroll growth projections for coming quarters have been revised downward, indicating cautious Fed policy amid mixed labor signals.

3. Interest Rates

As of early December 2025, the 10-year Treasury yield climbed modestly to 4.11%, reflecting steady government borrowing costs. Investment-grade corporate yields rose to just under 5%, maintaining elevated borrowing expenses for businesses. Meanwhile, 30-year mortgage rates remain elevated above 6.8%, continuing to pressure housing affordability for homebuyers and households. These interest rate levels present a challenging environment: higher financing costs constrain corporate investment and dampen household purchasing power, while offering bond investors comparatively attractive yields.

4. Yield Spreads

As of early December 2025, the US yield curve shows a modestly positive 10-year minus 2-year spread at 0.58%, indicating moderate economic growth expectations. The 10-year TIPS real yield stands around 1.84%, reflecting steady inflation-adjusted return expectations supportive of ongoing investment. Meanwhile, US investment-grade credit spreads tighten near 1.02%, signaling solid investor risk appetite and confidence in corporate credit fundamentals.

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5. Inflation Dynamics

As of September 2025, U.S. headline CPI rose 3.0% year-over-year with shelter costs driving core CPI, which held at 3.0%, while energy contributed notably to the headline rise. Producer Price Index (PPI), typically a CPI leading indicator, increased 2.7% annually, suggesting persistent upstream price pressures. The 10-year breakeven inflation rate, reflecting market expectations embedded in TIPS, remains near 2.9%, signaling steady inflation outlook amid resilient shelter and energy price momentum compared to broadly stable global inflation trends in OECD peers.

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6. Money Supply

The U.S. M2 money supply reached a record $22.3 trillion in October 2025, rising 4.6% year-over-year and 0.4% month-over-month, slightly below the long-term average growth rate. Meanwhile, year-over-year CPI inflation stood at 3.0% in September 2025, driven notably by surging energy prices. M2 expansion is trailing the combined pace of real GDP growth (2.1%) and inflation, indicating liquidity growth roughly aligned with economic activity and presenting a broadly neutral inflationary effect. The M2 increase is currently driven by elevated demand deposits and money market fund balances.

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7. Consumer Sentiment

In December 2025, the University of Michigan Consumer Sentiment Index rose modestly to 53.3 from 51.0, while the Expectations Index increased more sharply to 55.0, widening the spread to +1.7 points. This positive gap diverges from the usual negative spread, reflecting improved household outlooks on personal finances and labor market prospects despite ongoing price pressures. Meanwhile, the US yield curve spread between 10-year and 3-month Treasury yields remained slightly positive at about 0.4%, signaling cautious optimism in macroeconomic growth expectations. The parallel between rising consumer expectations and a modestly upward-sloping yield curve underscores a tentative confidence in the near-term economic path.

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8. Housing Market

Mortgage rates stabilized near 6.2% in late 2025, roughly one percentage point below early-year levels, enhancing buyer purchasing power. Home prices saw modest gains, with the median U.S. sale price rising about 2.1% year-over-year in November, while inventory remained elevated at around 1.17 million units, marking a balanced market with 4.4 months of supply. Existing home sales edged up by 1.2% in October but remain subdued overall. This combination signals improved supply conditions easing price pressures, yet affordability challenges persist as transactions slow and buyers remain cautious.

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9. Stock Market Sectors

Technology and Health Care led US sector ETFs gains in early December 2025, driven by AI catalysts despite Nvidia's recent 12.6% drop. Communication Services also showed strength on meta platforms and wireless providers, reflecting evolving industry oligopoly dynamics. Conversely, Consumer Discretionary and Utilities lagged amid consumer spending pressures and persistently high valuations, with consumer staples underperforming as well. Financials showed moderate gains supported by strong bank earnings. Energy hovered amid stable oil forecasts, while Real Estate remained most undervalued but challenged by mixed fundamentals and interest rate concerns.

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10. Stock Market Valuation

As of early December 2025, the S&P 500 trailing PE is around 28.9, with the Shiller PE elevated near 40, reflecting a premium versus historical averages. The Buffett Indicator remains near record highs, signaling a valuation gap relative to GDP. Compared globally, US equities trade at a notable premium, driven primarily by strong earnings growth exceeding 13% year-over-year, robust profit margins, and market concentration in mega-cap technology firms. International peers exhibit lower multiples amid more moderate earnings momentum and less dominant sector leadership.

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11. Stock Market Internals

As of December 5, 2025, the VIX declined to 15.41 from 16.08 three days earlier, marking a 4.3% drop and signaling reduced market stress. Momentum and Growth factors continue to lead returns, while Value and High Dividend Yield underperform modestly, reflecting selective risk appetite. The combination of falling volatility and strong Momentum suggests investor confidence is rising, with a tilt toward growth-oriented assets amid seasonal strength in December.

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12. Global Equity Performance

US equities led global markets through Q3 2025, with the S&P 500 up 7.8% and the Russell 2000 surging 12%, driven by robust corporate earnings and significant AI-related investment. Emerging markets, particularly India and China, outperformed with gains near 30%, benefiting from valuation appeal and cyclical momentum. European equities, led by Germany and the UK, rose over 13% year-to-date but traded at lower P/E multiples, reflecting more modest growth expectations and a rotation toward value sectors amid easing monetary policy.

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13. Commodities

Gold climbed nearly 60% year-to-date, reaching around $4,200 per ounce in early December 2025, supported by supply tightness and investor anticipation of Federal Reserve rate cuts. Silver outperformed with a 95% gain this year, surpassing $56 amid declining mine production and rising industrial demand, especially for EV and AI components. On the base metals side, copper surged over 21% in 2025, recently breaching $11,500 per ton due to expected US tariffs and production cuts in China aimed at curbing overcapacity. These dynamics reflect ongoing supply constraints and geopolitical influences shaping markets.

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14. Crypto Market

Bitcoin currently trades near $91,000, holding above recent lows despite a 30% drop from its October peak around $126,000. Ethereum fluctuates just above $3,000, having recovered from a mid-year drop but still down roughly 39% from its August high near $4,950. The total crypto market cap hovers slightly above $3 trillion amid broad risk aversion tied to rising yields and macro uncertainty. Institutional influxes into Bitcoin ETFs contrast with Ethereum's ongoing network upgrades and regulatory pressures, underscoring Bitcoin’s role as a digital store of value and Ethereum’s focus on DeFi and smart contract innovation.

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15. Currencies

The US dollar strengthened against the euro, reaching around 1.164 USD/EUR by early December 2025, reflecting resilient US economic data and a policy rate of 4.25%. The Japanese yen weakened to about 155 per USD amid ongoing low 0.5% rate policy, dampening trade competitiveness in Asia. The British pound gained slightly to near 1.33 USD, supported by a 4.00% UK rate. The Chinese yuan held firm around 7.10 per USD on policy support, sustaining trade stability. The Canadian and Australian dollars slid modestly versus the USD, pressured by divergent monetary policies and inflation concerns, while the Swiss franc softened amid a zero interest rate environment. These dynamics indicate capital flows favoring higher-yielding USD assets, while inflationary pressures and trade balances will guide upcoming monetary decisions globally.

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16. Debt Levels

As of mid-2025, U.S. federal debt is around 121% of GDP, exceeding the Euro Area's roughly 87% but below Japan's 235%. Household debt remains elevated but stable near recent years. Compared to peers, U.S. debt levels are distinctly high, underscoring sustainability concerns. The chief risk is rapidly rising interest costs on this large federal debt, potentially surpassing 12% of government revenues within a decade. Policymakers face mounting pressure to address fiscal deficits, while investors must account for heightened fiscal risk and potential bond market volatility.

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17. Economic Calendar

In the month ahead, the December 10 Consumer Price Index will provide critical inflation data, influencing the Fed’s stance on whether to adjust rates amid persistent price pressures. The December 5 Employment Situation report will reveal labor market strength, informing the Fed on wage trends and job growth. Finally, the two-day FOMC meeting on December 9-10 will synthesize these data points, shaping the federal funds rate outlook with potential signals on monetary policy direction. These events will be decisive in assessing economic momentum and rate path risks.

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An error appeared while loading the data. Maybe there is a technical problem with the data source. Please let me know if this happens regularly @silvan_frank.