Favorite Fifteen – December 2025
By Vigilant Wealth Management on December 22, 2025
The Investment Policy Committee has finalized this month’s Favorite Fifteen chart pack. Below please find the link to the slides for December 2025.
As is customary at year-end, we reflect on the year behind us and assess the path forward. 2025 was a year defined by elevated uncertainty. Policy volatility, particularly in the first half of the year, often obscured otherwise persistent economic growth. Later, a government shutdown further complicated the landscape by disrupting the flow of economic data. Despite this noise, risk assets performed well, supported by resilient consumption, solid corporate earnings, and unprecedented levels of private-sector investment related to artificial intelligence.
Looking forward, our base case anticipates a “Goldilocks-like” environment extending into the first half of 2026, characterized by decelerating but still positive growth, gradually easing monetary conditions, and a modest fiscal tailwind. At the same time, uncertainty is unlikely to abate. A new Federal Reserve leadership regime, the lagged effects of tariffs, and persistent inflation pressures are expected to shape the macro narrative. Offsetting these headwinds, businesses are poised to continue investing heavily in AI and related infrastructure, while household balance sheets enter the year in relatively healthy condition, supporting continued, though moderating, consumer spending.
Global Economic Activity: Global economic activity (Chart #2) remained in expansion in November, led by sustained strength in the Services sector and slightly positive activity in Manufacturing. The Economic Surprise Index (Chart #1) remains positive, signaling economic data continues to beat expectations, led by Emerging Markets.
U.S. Growth: The Weekly Economic Index (Chart #3) points to trend-like growth around the low-2% range. The GDP NowCast (Chart #4) shows Q4 GDP moderating slightly from Q3’s strength, but remains robust, supporting our outlook for growth in 2026. The ISM Monthly Report on Business (Chart #5) illustrates the U.S. economy remains bifurcated, with Manufacturing activity contracting while Services remains in clear expansion.
Consumer Spending: Consumer spending data (Chart #6) has been impacted by the government shutdown, the U.S. Census Bureau released monthly retail sales data for October 2025 on December 16th but has not released the data for November. The October data suggests retail sales growth has slowed, increasing just 0.1% month over month. However, there are some alternative data sets like the National Retail Federation (NRF) Retail Monitor that suggests consumer spending has remained steady in November, flat month over month and growing 4.5% year over year (excluding auto dealers and gas stations).
Labor Market: (Chart #8) Household survey data for October were not collected, and the standard October jobs release was canceled. October nonfarm payrolls were instead published later as part of the combined October—November release. The labor market showed net stagnation over the October–November period, with weak job creation overall and notable losses in specific categories, particularly government jobs. The unemployment rate rose to 4.6% in November, the highest level since late 2021. However, The government shutdown materially disrupted both data collection and release timing, which complicates month-to-month comparisons and trend interpretation.
Inflation: (Chart #9) The November Consumer Price Index (CPI), released on December 19, resembles Swiss cheese given the number of gaps in the data. Due to the prolonged 43 day federal government shutdown, the Bureau of Labor Statistics (BLS) did not publish an October CPI report, marking the first time this has occurred. As a result, the November release lacks a conventional month to month comparison, and the BLS has explicitly stated that it cannot provide clear guidance on how to interpret the missing October observations. At face value, the report suggests easing inflation, with headline CPI slowing to 2.7 percent year over year in November from 3.0 percent in September. However, important caveats remain. Price collection for November began late, immediately following the shutdown and very close to the Thanksgiving and holiday period. This resulted in fewer collection days and incomplete seasonal coverage. Holiday promotions, including Black Friday discounts, likely biased prices lower, an effect that was magnified by reduced data collection. Housing and shelter components, which account for roughly one third of the CPI basket, were particularly affected. In some cases, the BLS relied on placeholders or incomplete observations, complicating the reliability of shelter inflation readings and potentially distorting the data for several months.
Bond Market: The treasury yield curve (Chart #10) continues to normalize as short-term yields decline alongside Federal Reserve rate cuts, while longer-term yields remain relatively anchored amid ongoing inflation and deficit concerns. This dynamic has resulted in a gradual steepening of the curve. Credit spreads (Chart #11) remain historically tight, reflecting solid corporate fundamentals, healthy balance sheets, and limited near-term default risk.
Corporate Profits: Corporate earnings expectations (Chart #13) remain robust, supported by stronger than anticipated third quarter results. Consensus forecasts for 2026 earnings growth have been revised higher to over 14 percent, reflecting continued confidence in profit expansion even as the broader macroeconomic environment moderates.
Stock Market: Equities reached new record highs earlier this month (Chart #12), supported by strong profit growth. The forward price to earnings ratio (Chart #14) remains well above its 20 year average, suggesting that further upside will likely depend on continued earnings follow through and sustained momentum in the AI driven growth theme.
