Risk Fades Over Holiday

Every equity sector was higher last week, heading into the final week of trading for 2025. Volatility dropped last week to the lowest point of the year. Investors are in a

risk-on mood following the positive economic data dump last week. The Credit subsection of the Chicago Fed National Financial Conditions Index has been steady and below warning levels for the past 24 months. Prior to previous recessionary periods, the Credit Index tends to spike above zero.

The consumer has been especially resilient in 2025. Despite tariffs and an over-inflated expectation of inflation, the consumer has been strong this year. The average level of

spending according to the Redbook Sales numbers is +4.4%. This year, Redbook Sales have stayed above 4.4% every week this year except for the very first week of the year. In fact, the 2025 average for Redbook Sales has been +5.8%. As long as the consumer remains solid, economic growth will be positive.

Further evidence of the consumer and strong economic growth was the release (finally) of the 3rd quarter GDP number. It was expected to come in at +3.3%, yet the number

was much higher at +4.3%. Some speculation about healthcare premiums driving the number higher might be a jump to conclusion. The move higher in health insurance premiums is real, however, much of that won't occur until 2026. The Atlanta Fed has already estimated 4th quarter GDP to come in at +3.0%, which would still be a strong number. The question now is what will 2026 usher in? There could be a changing of the guard from the Mag 7 leading the way to other sectors and asset classes stepping to the front of the pack.

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