December’s Markets Close Out a Resilient Year

December closed out a remarkably resilient year for investors, supported by easing inflation, a more constructive Federal Reserve stance, and broadening equity participation. These dynamics reinforced the prevailing soft‑landing narrative heading into 2026—an outlook that continues to influence financial planning, retirement strategies, and long‑term portfolio management for investors across Massachusetts and beyond.

Broadening Market Participation

After months of dominance by mega‑cap technology and AI‑related companies, December saw market leadership expand into a wider range of sectors. This broadening participation reflects a healthier market environment—an encouraging signal for diversified, long‑term investment management and portfolio management approaches.

Major Indexes Diverge

The month brought mixed results across major U.S. equity benchmarks. The S&P 500 ended essentially flat, the Nasdaq 100 dipped as investors took profits from a strong AI‑driven year, and the Dow outperformed as capital rotated into industrial and value‑oriented names.

The S&P 500 slipped 0.05%, the Nasdaq 100 declined 0.73%, and the Dow gained 0.73%.

Federal Reserve: Rate Cuts and Rising Debate

At its December 10 meeting, the Federal Open Market Committee issued a third consecutive 25‑basis‑point cut, bringing the policy rate range to 3.50%–3.75%. Fed officials noted “moderate” economic growth, softer hiring, and inflation that remains “somewhat elevated.” The shift in tone reflected the Fed’s growing effort to balance inflation progress with emerging labor‑market risks—key considerations for retirement planning, wealth management, and long‑term financial planning.

The Summary of Economic Projections signaled a shallow path for additional easing, with just two more cuts expected through 2027. Minutes released December 29 showed a 9–3 vote—the most dissents since 2019—highlighting uncertainty over how quickly inflation is cooling.

Inflation Continues to Ease

November’s Consumer Price Index report showed continued disinflation: headline inflation rose 2.7% year over year, its slowest pace since mid‑year. Core CPI increased 2.6%, driven by still‑persistent shelter and services costs. Monthly gains of 0.3% (headline) and 0.2% (core) came in below expectations, reinforcing a constructive inflation trend that supports planning around retirement income strategies, tax planning strategies, and long‑term asset management.

Cooling Labor Market

Hiring slowed in November, with payrolls rising just 64,000—well under this year’s average. The unemployment rate ticked up to 4.6%. Healthcare and construction added jobs, while transportation, warehousing, and consumer‑facing sectors lost ground. The Fed highlighted the labor market’s “movement toward better balance,” with downside employment risks becoming more apparent.

Services Stay Resilient; Manufacturing Contracts

The services sector continued to support growth, with the ISM Services PMI reading 52.6—its ninth straight month of expansion. However, the sub‑50 employment index pointed to softer hiring ahead. Manufacturing remained in contraction territory, with the ISM factory index falling to 48.2 on weaker exports and inventory adjustments.

Looking Ahead to 2026

As we begin 2026, most leading strategists still expect a soft landing characterized by modest growth, steadily easing inflation, and a measured pace of rate cuts. For long‑term, diversified investors, the core themes remain unchanged: stay invested, balance growth with high‑quality income, and approach periods of volatility as potential opportunities.

If you’d like help applying these market trends to your own comprehensive financial planning, investment management, or retirement planning strategy, the team at Needham Advisory is here to support you with personalized, fiduciary guidance as a fee‑only financial advisor in North Andover, Massachusetts.