Weekly Commentary (12/1/25) – Markets Rally Sharply as Fed Cut Expectations Surge

The stock market posted substantial gains last week as investors shifted their anticipation of a December rate cut following dovish comments from multiple Fed officials.
For the week, the DJIA rose 3.20% and the S&P 500 grew 3.74%. The tech-heavy Nasdaq jumped 4.91%. International equities also participated strongly with the MSCI EAFE Index and emerging market equities (MSCI EM) up 3.25% and 2.49%, respectively. Small company stocks, represented by the Russell 2000, surged 5.55%. Fixed income, represented by the Bloomberg Aggregate, gained 0.38% as yields declined 4 basis points, leaving the 10-year US Treasury at 4.02%. Gold prices closed at $4,218.30/oz – up 3.40% and over 60% year to date. Oil prices moved up modestly to $58.55.
Last week's economic data was sparse and mixed, with most releases showing modest movements. The government shutdown's lingering effects continue to delay September reports. Manufacturing PMI remained in contraction at 48.2 – the ninth consecutive month below 50. Consumer confidence declined amid labor market concerns, while pending home sales showed unexpected strength, rising 1.9% month-over-month.
Trade developments took a backseat as tariff concerns faded from the spotlight, though the Supreme Court is nearing a ruling on tariff authority. President Trump and Chinese President Xi spoke by phone, agreeing to meet in Beijing in April. For now, markets seem content that trade tensions are manageable rather than escalating.  The week's most significant development was the Fed narrative shift. New York Fed President Williams and Fed Governor Waller both advocated for a December rate cut, with Waller noting labor market vulnerabilities.
With valuations stretched from the equity market’s recent strength, it is priced for perfection.  What happens if the Fed's path disappoints? The S&P 500 has overcome and digested every piece of negative news this year, suggesting investors are betting heavily on continued economic resilience and accommodative policy. The combination of elevated valuations and one-sided sentiment creates asymmetric risk – good news is priced in, while unexpected challenges could prompt reassessment.
This week brings important economic data, especially the delayed September PCE report on Friday – the Fed's preferred inflation measure. We'll also see ADP employment, ISM services PMI, industrial production, and consumer sentiment. The FOMC meets the following week, making this data particularly influential.
We continue to advise investors to remain disciplined in adhering to their investment policy. Patience and balance remain prudent even when momentum seems unhindered.
"In investing, what is comfortable is rarely profitable." – Robert Arnott