Asset Management
12/01/2025 Market Strategy
December 01, 2025
Into the Homestretch We Go
We Enter December with the S&P 500 Up 16.4% Year to Date
Key Takeaways
- We expect the Federal Reserve to cut rates by 25 basis points at its December 10 meeting. We think the policymakers will remain focused on signs of weakening in the labor market. We expect the Fed to cut rates further in 2026 if the flow of economic data show s inflation remaining contained.
- Q3 earnings season continues to show better than expected results. Thus far, with 485 (9 7%) companies of the S&P 500 having reported, earnings are up 13% on the back of revenue growth of 8.3%. Prior to the start of the season, FactSet put expected earnings growth at 8% from a year earlier.
- Of the 11 sectors, ten have reported positive earnings growth in Q3. Just one sector show s negative earnings growth and that’s in the single digits.
- This week just ten companies of the S&P 500 are scheduled to report; results for the final five are due the week of December 8.
With four months of sequential gains (notwithstanding interim periods of volatility) we enter the month of December with the S&P 500 just 0.6% below its most recent record high reached a little more than a month ago on October 28.
Ironically, the high consumer goods prices most people complain about reflect the stickiness of inflation that has yet to be worked out of the system.
S&P 500 Q3 earnings results with some 97% of companies having reported has produced earnings that have once again exceeded analyst expectations and to no small degree at that.
The current earnings season’s show S&P 500 earnings up 13% on the back of 8.3% revenue growth versus 8% earnings growth projected by FactSet’s bottoms-up measure of consensus analyst forecasts at the start of the earnings season.
The factors that have provided support to corporate earnings and economic growth in 2025 persist showing signs of resilience even as some slowing makes its way quite naturally through the data considering that the Federal Reserve has been reluctant to cut interest rates aggressively choosing to take the cautious road when cutting rates (just five times so far from September last year through October this year) in order to address inflation that remains stickier than expected while at the same time not upsetting the proverbial apple cart of jobs growth.
While the Fed has been able to push down inflation from a high of 9.7% in 2022 its target rate of 2% remains elusive with inflation stuck mostly in a range of 2.8% to 3%. The good news is that after raising rates 11 times followed by 14 pauses and with just five rate cuts thus far it has avoided pushing the US economy into recession.
There’s No Free Lunch
Despite what we and some others consider a fairly remarkable achievement by the Federal Reserve considering how high inflation was and how much tamer it is now, folks looking to get a mortgage, consumer loan seekers, highly leveraged investors and others including the Administration feel the Fed should lower rates at a much quicker pace and worry that current monetary policy could slow the economy further if the Fed remains cautious.
We expect the Fed will cut its benchmark rate by a quarter percent in December as a continuation of what we call a “down payment” process to signal to Wall Street and Main Street that indeed the Fed has the end of its tight monetary policy in its sights.
Should the Fed cut rates a quarter percent in December the market is likely to reflect the rate cut positively if not enthusiastically. In 2026 we expect the Fed will likely cut rates further if the flow of economic data suggests that inflation is slowing or if the unemployment rate rises further.
Ironically, the high consumer goods prices most people complain about reflect the stickiness of inflation that has yet to be worked out of the system. Cutting rates too quickly could stoke the burning embers that remain of inflation that peaked at 9.7% in 2022.
We’re All on the Upgrade Cycle Whether We Like it or Not
While concerns about how long it will take for technology’s hyper scalers to profit from their investment in AI, demand for their products and use by both business and the consumer today point to future profitability lying ahead for these companies.
The watershed of AI development appears to remain intact and as with prior “genies of technology” shows no signs of being about to return to the bottle it emerged from.
In our recent travels ahead of the Thanksgiving Holidays visiting with institutional investors, private investors, educators and students in and outside of the US we found while most were concerned with the disruption that comes with technological innovation of the watershed magnitude we’re now experiencing, most also agreed with us that at this point on the timeline of progress and innovation , “we’re all on the upgrade cycle whether we like it or not” when it comes to AI.
We also learned that while many found their experience with AI to be positive and an aid in increasing productivity they had concerns about privacy, job displacement, and vulnerability to hacking and misrepresentations.
In The Weeks That Remain of 2025
In the weeks leading up to the next series of holidays and the New Year we expect the flow of US government agency data to improve leading back to full coverage
As Q3 earnings season begins to move into the rearview mirror we’d expect the market’s participants to seek out catalysts in corporate news, holiday consumer spending data (anecdotal and otherwise) and the resumption of the data flow from government statistical bureaus.
Where We Stand Now
We remain positive on stocks and regard it as our favorite asset class.
We continue to favor cyclical sectors over defensive sectors. Our favorite sectors include: information technology, communications services, industrials, financials and consumer discretionary.
Regarding the consumer discretionary sector, we note that while surveys of consumer sentiment (soft data) reflect concern by the consumer near term about inflation and the health of the economy, the hard data or sales data persists in showing that the consumer continues to shop if somewhat selectively and at a slower pace reflective of some sensitivity to prices.
Beyond our aforementioned favorite sectors, the utilities sector should garner increased favor as interest rates move lower. The sector is considered by many investors as a bond proxy that can benefit when interest rates move lower. The sector also has appeal as a thematic sector with prospects for the revitalization of the US electric grid a necessity as AI and other technologies increases exponentially the demand for electricity.
In our view, portfolio diversification among asset classes held in portfolios remains an important consideration to meet the needs, goals objectives and tolerance to risk of private investors and the needs of mandate-driven institutions in an environment which remains in transition on a number of levels including: technological innovation, fiscal policy, monetary policy, geo and domestic politics around the world. Fixed income remains, in our view, complimentary to stocks as a source of income and for diversification among primary asset classes.
Name:
John Stoltzfus
Title:Chief Investment Strategist, Oppenheimer Asset Management Inc.
John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.
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