Rating: Positive
Stock Market Performance
Why we watch it:
The stock market tends to be forward looking and it is a leading indicator of economic growth.
Recent Highlights:
US equities finished December on a neutral note, with the S&P 500 flat. Domestic mid-cap equities decreased -0.3% and domestic small-cap equities decreased -0.6%. The S&P 500 is up 2.7% over the last three months and up 17.9% over the last 12-months.
The international index (MSCI ACWI ex-US) was up 3.0% in December. The index is up 5.1% over the last three months and up 33.1% over the last 12-months.
US equity markets capped 2025 with double-digit returns for the third year in a row, witnessing one of the most rapid recoveries on record after approaching April’s bear market territory. Despite the lack of a Santa Claus rally, the S&P 500 posted 39 record closing highs amid geopolitical, tariff and inflation driven tensions combined with a government shutdown and labor market concerns.
Positive Since November 2023
Rating: Positive
Consumer Spending
Why we watch it:
Over 70% of the U.S. economy is based on personal consumption. A reduction in consumer spending will cause slower growth in the economy.
Recent Highlights:
Consumer spending increased 0.3% in September, which met expectations. Consumer spending can be volatile from one month to the next.
The first estimate of Q3 2025 consumer spending recorded a 3.5% increase.
Personal income increased 0.4% in September, above expectations.
Positive Since June 2022
Rating: Neutral
Manufacturing Activity
Why we watch it:
The health of the economy is dependent on the health of the manufacturing sector. Historically, it has been the path to development and an important driver of economic growth. Domestic manufacturing activity is tracked by the Institute of Supply Management (ISM), which releases a monthly index while global activity is tracked by J.P.Morgan and IHS Market in association with ISM and IFPSM. The index monitors data like employment, production inventories, new orders and supplier deliveries. It is based on surveys of more than 300 manufacturing firms, and it’s considered an important economic measure. The index value ranges between 0 and 100. A value below 50 may indicate a slowdown in the economy, especially if the trend persists over several months. A value above 50 likely indicates a time of economic growth. Similarly, Global Manufacturing PMI is produced by IHS Markit in association with ISM and IFPSM. It is compiled by IHS Markit from responses to monthly questionnaires sent to purchasing managers in survey panels in over 40 countries, totaling around 13,500 companies. It has the same value ranges as the ISM manufacturing report.
Recent Highlights:
ISM manufacturing reported 47.9 in December, below expectations. This reading is below the 50.0 break-even point, signaling contraction. New orders reported 47.7.
Global PMI posted a reading of 50.4 in December, down slightly from November’s reading of 50.5. This reading remains above its 50.0 neutral mark and recorded its 5th consecutive month above the neutral mark of 50.0. December saw increased expansion among consumer, intermediate, and investment goods sectors, despite an easing in output growth due to a stagnate new order intake measurement. India, Vietnam, and Greece were among the highest ranked countries signaling PMI expansion, while Japan and Germany were among the larger industrial nations registering a decline in manufacturing.
Neutral Since March 2025
Rating: Neutral
Consumer Price Stability
Why we watch it:
Mild inflation is good for the economy, because it promotes consumption without destroying the value of people's savings. If you know something will be going up slightly in price down the road, you'll be more likely to purchase it now. If this effect is mild, it doesn't hurt savings rates very much. Deflation, however, punishes an economy because it hurts consumption. If you know something will be cheaper tomorrow or next year, you're more likely to wait until tomorrow to buy it. The Fed’s inflation target is 2 %.
Recent Highlights:
Headline CPI increased 0.2% in November. Over the last 12 months, CPI rose 2.7%. Both were below expectations.
Core CPI, which excludes food and energy, increased 0.1% in November. Over the last 12 months, core CPI rose 2.6%. Both were below expectations.
Neutral Since: December 2023
Rating: Neutral
Housing Market
Why we watch it:
The economy typically benefits directly and indirectly from increased housing activity. It is estimated that for every $100 in value resulting from housing construction, an extra $40-$80 is added to the economy due to housing-related spending.
Recent Highlights:
Total existing home sales increased 0.5% in November to a seasonally adjusted annual rate of 4.13 million units.
The median existing home price in November was $409,200. Unsold inventory is at about a 4.2-month supply. A three to six-month supply is considered a healthy balance between supply and demand.
New home sales increased 20.5% in August to a seasonally adjusted annualized rate of 800,000. The median sale price of new homes sold in August was $413,500. Unsold inventory is at about 7.4-month supply as of August 2025. Note that the new home sales report is typically very volatile and the data is frequently revised.
The 30-year fixed mortgage rate ended December around 6.15%.
Neutral Since October 2022
Rating: Positive
Volatility
Why we watch it:
VIX is the symbol for the Chicago Board Options Exchange's volatility index. It’s a weighted mix of the prices for a blend of S&P 500 Index options, from which implied volatility is derived. In other words, it measures how much people are willing to pay to buy or sell the S&P 500. The VIX goes up when there’s turmoil in the market, and goes down when investors are content or at ease with the economic outlook.
We like to watch the VIX, because it measures the cost of buying insurance for stock protection (through options). When the cost of protection is high, volatility is usually high, and the potential for declining stock values is higher.
Recent Highlights:
The VIX started December around 16.4 and ended the month at 15.0. Volatility was relatively flat throughout the month, reaching the lowest levels we have seen in 2025. The historical average is 19.2.
Positive Since September 2025
Rating: Positive
TED Spread
Why we watch it:
The TED Spread is the banks’ cost of borrowing short-term money minus the Treasury’s cost of borrowing short-term money. The difference between the three-month SOFR interest rate and the three-month Treasury Bill interest rate measures the degree of riskiness of the bank lending market. When the spread is significant, banks worry about being repaid when loaning money to other banks, thereby creating uncertainty. This can cause slower growth in the economy.
Recent Highlights:
The current spread at the end of December was 0.20% (3-Month SOFR 3.87% – 3-Month Treasury Bill 3.67%, as of December 2025). The current TED spread of 0.20% is below the historical average spread of about 0.57%.
Positive Since June 2020
