Weekly Market Commentary -  Dec. 29, 2025

Week In Review

Despite a surprisingly robust third quarter GDP report that dashed hopes for near-term Fed rate cuts,

the unforeseen economic growth supported investor optimism for continued strength in corporate earnings and drove the S&P 500 to an intraweek record high of 6,945 on light trading volume. The initial estimate of real gross domestic product released by the U.S. Bureau of Economic Analysis showed the economy grew at an annual rate of 4.3% in the third quarter of 2025 versus a median forecast of 3.3%. The enduring prosperity made the timing of future interest rate reductions more uncertain and was the catalyst for continued sector rotation from rate-sensitive growth stocks into dividend-paying value stocks that may be more attractively priced in an equity market with extended valuations. Investor expectations for bond yield volatility and Federal Reserve policy shifts as measured by the MOVE index fell to multi-year lows, an indication of gradual rate normalization and continued favorable market conditions. 3 The S&P 500 posted its fourth weekly advance in five weeks, rising +1.4%.

This Week

The economic calendar will be very light for the holiday-shortened week, as both the stock and bond markets are fully closed for New Year’s Day. Still, the financial markets will review the minutes of the Fed’s December FOMC meeting to better understand policymaker sensitivity to the pace of future rate cuts and the impact on the U.S. dollar and Treasury yields. 4

Portfolio Themes

Notwithstanding the strong GDP report, cooling labor and inflation data and the presumptive appointment of a dovish Fed Chair suggests the odds for more interest rate reductions in 2026 are arguably higher than the Fed's more cautious forecast of one rate cut. Historical asset class returns during a non-recessionary cutting cycle can be attractive. Simplicity offers actively managed model portfolios that may optimize asset allocations, capture alpha and control risk as interest rates decline.

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Data: Unless otherwise noted, data for charts, graphs, and tables is sourced from YCharts. Portfolio Themes idea sourced from Capital Group.

1Style box returns use various Russell indices tied to specific areas of the market cap (vertical) and style (horizontal) spectrums. Indices are not typically available for direct investment, are unmanaged, and do not incur fees or expenses.

2 Index Statistics: P/E Ratio – Displays the forecasted P/E ratio of the representative index ETF. Yield - Dividend-per-share divided by current share price. Table statistics are updated weekly. MSCI indices represent broad global and international equity markets. Indices are represented by iShares ETF proxies (IVW, IVV, IVE, ACWI, and ACWX).

3 finance.yahoo.com, ICE BofAML MOVE Index.

4 MarketWatch. Past performance does not guarantee future results.

Weekly commentary and investment advisory services are provided by Simplicity Wealth, LLC a SEC Registered Investment Adviser. Registration does not imply a certain level of skill or training. The information provided is for informational purposes only and does not constitute any form of advice or recommendation. The information contained within has been obtained from various sources and is believed to be accurate at the time of publication.