Market Insights Recap — Week of December 15, 2025

Hello. I'm Steve Orr, Chief Investment Officer for Texas Capital’s Private Bank.

Decent readings, Fed up and hitting the ceiling. What do they mean for our portfolios? What should we be thinking about?

This is catch-up week for the Bureau of Labor Statistics, releasing November jobs data and the consumer price index. No October CPI, thanks to the government shutdown. Our economy remains on track for 2%-plus growth this quarter and may post that for the full year of 2025.

Now, only three of our 10 recession checklist items are in the red this month. That's normal. There's always some areas doing better and some doing worse. Now the key here is there's never been a recession when corporate profits are growing. The S&P 500 is on track for 6 to 8% profit growth this year and next. So there's no changes needed to portfolios due to any kind of economic outlook changes.

Are you fed up with higher interest rates? Higher, you say? Yes, the Fed did cut a quarter point last week as demanded by rates markets. This rate-cutting cycle that started in September of last year has dropped rates 1.75% to a range of 3.5 to 3.75%. But meanwhile, longer-term rates are half a percent higher since the Fed started cutting. Generally, when the Fed cuts short-term rates, longer-term rates follow because the economy's not doing so well, or maybe already in recession. But the key here is not only is the economy doing well, but the rest of the world's central banks are fighting inflation by raising their rates. And our Congress continues to spend money better than a drunken sailor.

So more important for markets last week is the Fed's announcement of reserve management purchases. Now this is fancy lingo for the Fed buying about $40 billion in Treasury bills over the next month. Now think about the Fed coming in and buying Treasury bills. That's going to push down short-term rates. They're going to continue to do that probably through April. Well, who likes cheaper, more available money? The stock market, of course. And over the last six weeks, stocks have been hitting a ceiling just kind of in a consolidation, even though the Dow did poke to new highs after the Fed cut rates. But under the surface, we've had a very helpful rotation away from the big Magnificent Seven, NVIDIA, Google, Microsoft, those folks, to more of the real economy stocks. This is good. Means the economy's doing better, means traders and market participants are more confident about 2026 and 2027 earnings.

And so when in doubt, though, always go back to Marty Zweig's rules. Don't fight the Fed; they're cutting rates. Don't fight the tape. Most of the last few weeks, the tape's kind of been in consolidation, short-term neutral, but we're trying to break through this ceiling here. Again, very good longer-term bull structure here. So we can stay patient with our positions; 'til next time.