Equities Steady into Year-End as Commodities Diverge and Fed Outlook Dominates

Index Update:  The S&P 500 and Dow are poised to end the year with an eighth straight monthly gain, lifted by strong enthusiasm for AI-related stocks that helped drive indexes to record highs. However, overall annual returns remain below the past two years after Trump’s “Liberation Day” tariffs in April sparked a global sell-off and complicated the Fed’s policy outlook. Communication services outperformed, led by Alphabet’s 65% jump—its best year since 2009—bringing it near a $4 trillion valuation. Looking ahead to 2026, expectations for Fed rate cuts, a softer U.S. labor market, and the prospect of a more dovish Fed chair are likely to play a key role in shaping market sentiment.

Market Movers:  On Tuesday, the top gainers were Ekso Bionics Holdings, Inc. (+93.77%), followed by Antelope Enterprise Holdings Limited (+92.92%). On the contrary, SMX (Security Matters) Public Limited Company (-39.43%), and Diginex Limited (-29.06%) declined the most the same day.

Commodities Update:  WTI and Brent crude oil prices declined to about $57.7 and $61.1 per barrel, respectively, on the last trading day of 2025, putting both benchmarks on track for their steepest annual drop since 2020 due to oversupply concerns. Markets are focused on the upcoming OPEC+ meeting, which is expected to keep supply growth on hold in early 2026, along with geopolitical tensions and rising U.S. crude inventories. Despite some support from geopolitical risks, prices weakened through 2025 on expectations of a large surplus driven by higher global output and softer demand, with WTI falling nearly 20% for the year and Brent down about 18%. Gold dipped below $4,330/oz on the final trading day of 2025 but remains set for its strongest yearly gain in over 40 years, soaring about 65% on the back of US tariff policy, geopolitical tensions, Fed rate cuts, and strong central bank and ETF demand. Silver slid over 5% to $72/oz as investors booked profits after a record high earlier in the week, though it has still surged more than 150% this year—its best performance on record—driven by tight supply and growing strategic and industrial demand. Copper futures eased over 1% to about $5.7/lb amid year-end profit taking, yet the metal is on track for its biggest annual rise since 2009, gaining over 40% thanks to supply disruptions and strong demand linked to the energy transition and AI-related infrastructure.

Macro Updates:  The U.S. dollar was steady around 98.2 at year-end 2025, near a multi-month low and heading for its biggest annual drop since 2017 after falling about 9.4% over the year. The decline reflects fallout from Trump’s disruptive tariff rollout, expectations of Fed rate cuts, shrinking yield advantages over other currencies, and worries about U.S. fiscal policy and central bank independence. Markets are now focused on the upcoming appointment of a new Fed chair and Fed minutes showing most officials favor more cuts if inflation keeps easing, with traders pricing in two rate reductions in 2026.

Bonds Commentary:  The 10-year U.S. Treasury yield held around 4.12% on the final day of 2025, near a three-week low, as investors weighed the Fed’s uncertain rate outlook. Minutes from the December meeting showed policymakers split between supporting the labor market and fighting inflation, though most favored more rate cuts if price pressures keep easing. The Fed reduced rates by 25 bps earlier this month to 3.5%–3.75%, in a decision that drew unusually high dissent, while markets also await the appointment of a new Fed chair in early 2026. Overall, the 10-year yield has declined about 45 basis points this year.

Futures Update:  U.S. stock index futures edged lower on Wednesday after the major Wall Street benchmarks logged a third consecutive decline, with trading volumes muted ahead of the final session of the year and the New Year’s Day market holiday on Thursday. S&P 500 futures were down 0.2% at 6,927, Nasdaq 100 futures slipped almost 0.4% to 25,584.75, and Dow Jones futures dipped 0.1% to 48,582.0.

Following the weakness seen in the previous session, stocks showed a lack of clear direction throughout Tuesday’s trading day. The S&P 500 declined by 9.48 points, or 0.14%, to close at 6,896.25. From a technical perspective, the index is hovering near a key resistance zone and may experience a corrective move or consolidation in the near term. The 14-day Relative Strength Index (RSI) remains near the midpoint, indicating indecision at current levels. Key support is positioned around 6,805, while resistance is expected near 6,944.