Economic Update | Dec 24, 2025
Hosted by Andrew Toccaceli, RICP®, MRFC® and Coley Neel, CFA® | W.A. Smith Financial Group
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As 2025 draws to a close, let us reflect on a year marked by transition, resilience, and recalibration. The U.S. economy and financial markets navigated a complex backdrop of slowing inflation, shifting Federal Reserve policy, political uncertainty, and rapid technological change, but ultimately demonstrated an ability to adapt and move forward.
While volatility surfaced at times, the year reinforced the importance of disciplined, long-term investing in an evolving market environment.
The U.S. economy entered 2025 with momentum but gradually shifted into a slower, more measured pace of growth.
Inflation, which had dominated headlines in the prior 2+ years, continued to moderate throughout the year, easing pressure on consumers and businesses alike. While price levels remained somewhat above the FOMC’s long-term target, the direction of travel was encouraging and enabled policymakers to pivot their focus toward supporting economic stability, which remains an ongoing process.
The labor market, long a pillar of strength, showed signs of cooling as the year progressed, as measured by Non-Farm Payrolls and Jobless Claims data.
Job growth slowed, unemployment drifted higher, and revisions to prior employment data revealed a less robust hiring environment than initially believed.
Importantly, this softening reflected an economy transitioning from post-pandemic excess toward a more sustainable equilibrium (aka, normalization… not a collapse).
Monetary policy played a central role in shaping market sentiment in 2025.
After maintaining a steady-to-restrictive stance early in the year, the Federal Reserve began easing policy in the second half as inflation cooled and labor market risks increased. As of this writing, the Fed had delivered multiple rate cuts, signaling a shift toward a more accommodative posture while remaining firmly data dependent.
These FOMC actions were aimed at sustaining economic expansion without reigniting inflation, which is a delicate balancing act that markets continue to monitor.
Interest-rate movements influenced everything from equity valuations to housing affordability, reinforcing the Fed’s importance in shaping financial conditions.
Despite moments of uncertainty (such as “Liberation Day”), U.S. equity markets proved remarkably resilient in 2025.
Corporate earnings remained a key support, with many companies demonstrating fortress-like balance sheets, disciplined cost management, and the ability to navigate slower growth.
Technology and artificial intelligence-related firms once again led market performance, reflecting continued investment in innovation and productivity gains.
At the same time, leadership broadened (aka, breadth) at various points throughout the year, with value-oriented and cyclical sectors benefiting from shifts in interest rates and investor expectations.
Fixed income markets also regained relevance, as falling yields improved total return prospects and re-established bonds as an effective portfolio stabilizer.
Beyond traditional economic drivers, geopolitical tensions, trade policy debates, and fiscal concerns influenced markets throughout the year.
These uncertainties contributed to renewed interest in safe-haven assets, particularly gold and silver, which rose sharply as investors sought diversification and protection against macro risk.
It is important to note that while we have seen an increase in precious metals, they may be priced at unsustainable levels and could exhibit increased volatility in the coming months/years.
Meanwhile, episodes such as government shutdowns and delayed economic data releases added complexity to market interpretation, reminding investors that uncertainty itself can be a meaningful market force.
It also shows the importance of having access to timely and accurate data when making informed decisions.
If 2025 taught/reminded us of anything, it was that markets rarely move in straight lines.
Volatility often masked underlying progress, and periods of discomfort frequently created opportunities.
Diversification, patience, and adherence to a well-constructed financial plan once again proved to be essential ingredients for long-term success.
2025 is an example of why we work so hard to prepare a plan for you that will stand the test of time.
As we look toward 2026, the themes that defined 2025, evolving monetary policy, moderating inflation, technological innovation, and geopolitical uncertainty, will likely remain influential.
While no one can predict the path with certainty, history consistently shows that disciplined investing and thoughtful planning provide the best foundation for navigating whatever lies ahead.
As always, our commitment remains focused on providing you with Financial Peace of Mind and helping you stay grounded, informed, and confident in your financial journey, regardless of market conditions.
We are excited to continue the journey in 2026 and look forward to seeing you soon.
We wish you and your family the very best this Christmas and a healthy, prosperous New Year.
