Market Insights Recap — Week of December 22, 2025

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

2025 status check. Where are we? Where should we be? Now, our economy likely grew around 2% after inflation this year. Should post near 3% next year. But remember, we had to overcome tariff uncertainty, record government shutdown and five ongoing wars. Still did OK. 

Now inflation continues to hover around 3%. We think it's going to slowly drift higher. And at 2.7% reading for November release last week, it didn't have a full data set. So wage growth has not kept up with inflation since the virus shutdown. And that's contributing to lower consumer sentiment. Payroll growth temporarily has dropped to around zero to finish the year. That's a far cry from 200,000-plus each month the couple of years back. That has more to do with net immigration than any downturn in the economy. So mark labor growth as a watch, not a warning.

So no recession, though, when corporate profits are growing, and they're growing above 6% per year this year and likely higher next. How about interest rates? The Fed has cut their overnight Fed funds rate 1.75% since September of last year. Their efforts in creating easier money have not closed the door on inflation, unemployment or most importantly, interbank liquidity, the cash floating around in the system. The rest of the world is raising interest rates, and our 10- and 30-year treasury rates have followed along. Some indicators are suggesting that our higher rates are actually anticipating better economic growth next year. Now certainly more stimulus from the One Big Beautiful Bill will help, and those effects are going to start being felt around Valentine's Day. Longer-term maturity bonds still represent a reasonable real return over inflation. 

Stocks impressively brushed off tariff Liberation Day. The S&P 500 is up 16% this year. There's only a few trading days left, but we'd still need an impressive 4% Santa rally to reach a 20% gain. If we did, that would make three straight 20-plus years, a decent bull market indeed. Friday's pop higher was more options exploration than positive trend momentum. So we're still kind of waiting on that Santa rally to appear. 

This week, we get the first reading on third quarter GDP and durable goods orders, a rather small bull in rates, a solid if average bull in stocks and a new bull in commodities. A nice set of Christmas gifts, indeed; 'til next time.