Economy
The economy grew at a faster-than-expected pace in the third quarter, according to the most recent data. The Bureau of Economic Analysis finally released the overdue gross domestic product (GDP) report, which showed economic growth of 4.3%, much higher than the anticipated 3.2% rate. The expansion was driven by higher consumer spending, particularly in healthcare, software, and AI-related expenses. A strong GDP number might suggest that the Fed will be more likely to wait on issuing the next interest rate cut. In addition to the GDP report, we also saw the number of people who filed for unemployment insurance last week decline.
Markets
Santa brought us a new all-time high for the S&P 500 in a short week of trading. The S&P rose by 1.4% to close out the week, and with just three trading days left, the index is up more than 17% on the year. Even without the "magnificent seven" stocks, the rest of the market is in a healthy rally as small cap stocks have risen by more than 2% in December. We'll have another short week with the markets closed on Thursday for the New Year holiday. Earnings season for the fourth quarter will kick off in two weeks. Looking ahead to 2026, analysts have high expectations. According to FactSet, they're looking for 15% growth rates for corporate earnings growth, which would be the third consecutive year of double-digit growth. While the largest contributors to growth are Mag 7 names (Nvidia and Meta), the other 493 companies in the S&P 500 are expected to see profits grow by more than 12%. Profit growth doesn't necessarily translate to stock market growth, but it certainly can help.
What We're Reading
Have a great weekend and a Happy New Year.
Dogwood Wealth Management