Navjot Brar | Jan 12 2026 16:00
December closed out a year marked by moderating price pressures, steady support from the Federal Reserve, and resilient equity performance. The month reflected a classic late‑cycle backdrop that helped reinforce the prevailing soft‑landing expectations heading into 2026. We looked at how leadership broadened beyond mega‑cap tech and what the latest data signaled for the months ahead.
Broadening Market Participation
As the year wrapped up, gains expanded beyond the well‑known AI‑driven leaders. A wider range of companies moved higher, hinting at a more balanced market structure going into the new year.
Index Moves Diverge
Major U.S. indices delivered mixed results in December. The S&P 500 ended nearly flat after a strong year, the Nasdaq 100 saw modest declines following earlier strength in AI and semiconductor sectors, and the Dow gained ground as investors favored more defensive industrial names. These shifts underscored the contrasting paths across market segments.
Fed Signals a Gradual Path
The December FOMC meeting brought a third straight 25‑basis‑point rate cut, with officials describing growth as “moderate” and job gains as having “slowed.” Updated projections suggested a shallow easing cycle over the next two years and a longer glide toward inflation drifting closer to target. Meeting minutes also highlighted meaningful debate among policymakers, noting that the decision was “finely balanced.”
Inflation Trends Continue to Ease
November CPI results showed further cooling. Headline inflation reached its lowest level since mid‑year, and core readings continued to soften even as some service categories remained firm. Monthly increases for both headline and core came in below expectations, reinforcing the ongoing disinflation trend.
Hiring Slows as Labor Market Rebalances
Labor conditions softened, with the unemployment rate edging higher in November and payroll growth coming in below the year’s average. While layoffs stayed historically low, hiring momentum continued to ease, reflecting a labor market moving toward better balance.
Services Hold Up, Manufacturing Contracts
Service‑sector activity remained expansionary, supported by steady business activity and new orders. However, the employment component stayed below the break‑even threshold, pointing to slower hiring. Manufacturing data told a different story, with contracting readings signaling ongoing pressure from weaker demand and inventory adjustments.
Looking Ahead to 2026
Most strategists continue to expect a soft landing supported by modest growth, continued disinflation, and a measured pace of policy easing. Against this backdrop, long‑term investors may benefit from maintaining diversified exposure, balancing growth with quality income, and using volatility as an opportunity rather than a setback.
If you’re evaluating how these trends may shape your financial plan, we encourage you to reach out to your financial team for personalized guidance and support.
