December Economic Update

Market Summary

November began with broad, yet relatively modest market declines and delivered mixed signals with new private payroll data showed an unexpected drop, manufacturing activity remained in contraction, and tariff-related cost pressures continued to weigh on business sentiment. By the end of the month, the major US market averages had mixed results with the S&P 500 rebounding to add 0.13%, the Nasdaq 100 remaining in the red with a -1.64% decline, and the small-cap Russell 2000 posting a 0.84% return. (1)

Manufacturing, Trade, & Tariffs

The latest data show the U.S. manufacturing sector remains under pressure — the Institute for Supply Management (ISM) manufacturing index slipped to 48.2 in November, signaling contraction. New orders remain weak. A number of forecasters now see the broader economy entering a “mixed-signals” phase: service-sector resilience contrasts with manufacturing softness and hiring weakness. The broader economy continues to generate mixed signals: while some service-sector activity still holds up, trade uncertainty and high input costs are weighing on manufacturing and investment decisions. (2,3)

Fed and policymaker commentary highlighted trade policy and tariffs are feeding into firms’ unit costs and price-setting — a contributor to stickier inflation in some sectors with policy-driven cost pressures remain a major drag. In a November speech, a senior Fed official noted that many firms attribute roughly 40% of 2025–2026 unit cost growth to tariffs and emphasized the risk that price pressures could remain elevated even as the labor market softens. Meanwhile, tariffs are still adding to consumer-price pressures, meaning price inflation may linger even after trade policies stabilize. (4)

Labor Market

ADP reported private payrolls fell by 32,000 in November, a surprising drop that highlights weakening hiring momentum — notably among small businesses. This reading adds to signs the labor market is softening after a strong multi-year run. Planned job cuts moderated in November to 71,321, down from October’s spike but still elevated versus a year ago; layoffs remain concentrated in restructuring and a few large sectors. Weekly initial claims showed variability but other alternate estimates, including some Fed regional models, point to a still resilient but cooling employment picture. The earlier shutdown delayed official BLS releases, complicating comparisons. (5)

Looking Forward…

On December 10, we will receive the last interest rate decision of the year from the Federal Reserve. Both market participants and the Federal Reserve officials themselves are divided regarding whether the decision will be made to cut rates by another 0.25% or keep them at current levels. The Fed’s Minutes from their last meeting, which recaps why policy decisions were made and how which side participants voted, showed one of the most divided Fed Boards we have seen in decades with wide-ranging opinions for what the Fed should do in December.

With manufacturing contracting and hiring losing momentum, growth looks likely to be moderating into the first quarter of the New Year. Tariff-related cost pressures will likely mean inflation may not fall as quickly as a pure demand slowdown would suggest. That combination keeps policy decisions—and market volatility—in play.

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Monthly Financial Tip:

One way to save on auto insurance premiums is to raise your deductible. In some cases, that could lower your annual premium by 10% or more. Of course, you must be able to handle the larger deductible if damage occurs.

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Citations:

1. Schwab, Nov 30, 2025

2. Reuters, Dec 01, 2025

3. Deloitte, Nov 24,2025

4. Fed Bank of Atlanta, Nov 12, 2025

5. Reuters, Dec 03 & 04, 2025

Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

November Economic Update

Market Summary

Last month saw more tariff threats which were eventually back-pedaled, a Fed announcement with lowering interest rates and a cautionary outlook, and official data flows interrupted by a federal funding impasse, which leaves the outlook for the U.S. economy clouded. Aside from some positive earnings reports from the largest US tech companies, many other earnings reports raised yellow flags. Despite all of this, the major market averages gained spurring more valuation and bubble concerns. The S&P 500 gained 2.29%, the Nasdaq 100 4.8%, and the Russell 2000 added 1.76%. (1)

Tariffs

Tensions have eased between the US and China as Trump backed down from his previous threat. On October 10^th, the Administration threatened a 100% increase for Chinese imports set to begin on November 1st. Just days before the deadline, Treasury Secretary Scott Bessent said trade negations were progressing and that the additional tariff increase was taken off of the table. So for now, it appears this was yet another bluff by the Administration and they were likely never serious about imposing such egregiously high tariffs. (2)

Economic Indicators

The Bureau of Labor Statistics (BLS) was forced to delay the normal monthly jobs report (and other series) due to the federal government shutdown. The absence of timely labor-market data is complicating the outlook for employment and policy-making. The government did manage to release the monthly CPI number which came in at 3.0% year-over-year which was one tenth of a percent higher than the previous month. (3)

The Fed

At the Federal Reserve Board’s meeting on October 29, the Fed cut its target range for the federal funds rate by 25 basis points, bringing it to a range of 3.75 - 4.00 %, which was expected. The policy statement explicitly flagged the shutdown’s data blackout as a risk: “Available indicators suggest… job gains have slowed this year… inflation has moved up… uncertainty about the economic outlook remains elevated.” Fed Chair Jerome Powell noted that a December rate cut is “not a foregone conclusion” which was not anticipated by the market. (4)

Looking Forward…

With many market valuation metrics at or near all-time extremes, there is legitimate concern for a market bubble. Much of the growth we’ve seen over the past couple years has been fueled by speculative investing into AI companies with those valuations skyrocketing – in many cases with price/earnings ratios exceeding 200 when a typical growth company usually trades around a 40 P/E. While a few of these valuations may be justified with lofty growth forecast in the sector, there are many other companies who simple don’t earn enough to rationalize these prices.

Another concern is AI itself replacing jobs, with we have touched on in prior newsletters. With companies such as Target, Amazon, IBM, Microsoft, and others recently announcing laying offs, the question around job replacement is becoming more of a concern with each day that passes. In addition, consumer sentiment continues to fall with the University of Michigan’s sentiment index dropped to near all-time lows, signaling stress on “main street” (the average person).

All of that said, there is a scenario that has been floating around has been named the “K” shape economy, where the top 10% wealthiest individuals continue to prosper and hold up the markets while the bottom 90% struggle with inflation, jobless, and falling real incomes. This is a classic scenario in late-stage capitalism and something on the forefront of our minds with AI potentially being the catalyst for such a scenario.

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Monthly Financial Tip:

Are your antiques and collectibles worth more than they used to be? Their current value should be accurately stated on your homeowner insurance policy. Otherwise, an insurer may not reimburse you for their full value if they are lost or damaged.

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Citations:

1. Schwab, Oct 31, 2025

2. Business Insider Oct 26, 2025

3. Investing.com Oct 24, 2025

4. Federal Reserve, Oct 29, 2025

Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

October Economic Update

Market Summary

In spite of economic warning signs, a government shutdown, new tariffs being implemented, and stock valuations approaching highs not seen since just before the Dot-Com bust 25 years ago, the market shrugged off all of these concerns and moved high last month. The S&P 500 gained 3.49%, the Nasdaq 100 added 5.37%, and the Russell 2000 rose 2.99%. (1)

Labor Market

The looming federal government shutdown in late September forced suspension or delay of key economic releases (CPI, nonfarm payrolls). In light of the delays, the Labor Department recalled BLS workers to ensure the September CPI report is published (critical for Social Security COLA) despite the shutdown. With official data delayed by a government shutdown, the Carlyle Group issued a “shadow” jobs report estimating just 17,000 net jobs added in September (vs. consensus ~54,000). Consumer confidence slid as inflation and job concerns weighed on households. (2,3,4)

Tariffs

On September 26th, the Trump Administration released new industry-specific tariffs to begin on October 1st. These include a 100% tariff on any branded or patented pharmaceutical products, 25% on imported heavy trucks, 50% for kitchen cabinets and bathroom vanities, and 30% for upholstered furniture. It was also announced that the Administration is considering tariffs on foreign electronic devices based on the number of chips in each device as a means to encourage companies to shift their manufacturing to the United States. They are also targeting a wade range of consumer products from toothbrushes to laptop computers. (5)

Tariffs have been impacting farmers significantly as China has shifted their importing of soybeans from the US to Brazil in a retaliatorily move. Farmers have now found themselves with a significant supply with no one to sell their product. President Trump has indicated he may implement an aid package worth $10-$15 billion, a move critics argue that is far closer to socialism than capitalism. (6)

The biggest tariff news happened on the day of writing this newsletter when President Trump announced a warning of a “massive increase” in China tariffs which jolted Wall Street at the close of an already turbulent week marked by growing concern over a potential bubble in artificial intelligence companies. Several hours later and after the stock market closed, Trump announced there will be a 100% tariff imposed on every product made in China beginning November 1^st. This all comes on the heels of China announcing stricter export controls over rare earth metals which are essential for the production of many US goods including chip manufacturing used for artificial intelligence. (7)

A summit with China’s President Xi Jinping was scheduled for later this month, but Trump stated he saw “no reason” to meet, citing “hostile” export controls. His social-media post followed a string of actions by both Washington and Beijing aimed at restricting the flow of technology and materials between the two nations. Many believed the worst of the trade wars with China were behind us until this escalation proved otherwise. (7)

Looking Forward…

Tariffs will once again be at the forefront as we enter into a historically soft part of the year for the market. Both China and the EU have been pressing back firmly against the White House’s trade policies. Concerns over sky-high valuations, soft consumer data, and a rapidly weakening job market will also be closely watched. We may see a more volatile market over the next couple of months.

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Monthly Financial Tip:

Investing too conservatively in retirement could mean losing the chance to grow your money faster than the rate of inflation. Some fixed-income investments are earning less than 3% annually.

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Citations:

1. Ycharts, Invesco, Rueters

2. Wall Street Journal, Oct 09, 2025

3. Reuters, Oct 07, 2025

4. Associated Press, Sept 30, 2025

5. CNBC, Sept 26, 2025

6. Financial 26, 2025

7. Financial Juice, Oct 10, 2025

Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.