Weekly Market Update (Dec 21, 2025)

Market Hedwig
Dec 21, 2025
2 min read

HIGHLIGHTS

Strong tech earnings reignited the optimism in AI. Inflation data came in lower than expected (headline CPI 2.7% actual vs 3.1% expected).

Inflation: The CPI data may not fully reflect the actual situation as the government made adjustments to address the missing period during government shutdown period. It has introduced biases into the report.

EU: The economic growth is going to end the year better than expected, with inflation near 2% and completed rate cut cycle. German fiscal expansion is coming. Europe is going to face geopolitical challenges in 2026.

Japan: Amid the rates reaching 30Y high, Governor of Japan did not express caution and mentioned that the real rates remain negative. Markets are concerned about the weakness in yen, and expect the next hike will be in July.

MARKETS

Nasdaq	23,307.62	+0.48%
S&P 500	6,834.50	+0.10%
Dow	48,134.89	-0.67%
10-Year	4.15%	-4bps
Brent	60.47	-1.23%
DXY	98.72	+0.34%

*Data as of market close. 5-day change ending on Friday.

VIEW FROM THE STREET

Equity

Morgan Stanley: One of the most surprising result this year is the extraordinary performance of emerging market (EM) equities, which is 28% (vs S&P500 16%). Not only because of the weakness in dollar, but EM has also managed well under the geopolitical shifts and US aggressive tariffs.

J.P. Morgan: AI data center has become a key driver this year, which average household may already feel the effect in their electricity bills. We suggest watching electricity prices closely. Private infrastructure funds could be a great option to hedge against the inflation rebound while benefiting from the AI-led demand wave.

Fixed Income

Morgan Stanley: Fed is likely to focus on purchasing bills to reduce duration. This may apply downward pressure at the front-end of the curve. Inflation and expanding term premiums may apply upward pressure at the long-end rates.

Citibank: Other than rate cut, Fed also resumed balance sheet expansion through T-bill purchases of $40 billion per month. The accommodative Fed policy is supporting economic growth but increasing the risk of inflation and long-end bond yields at the same time.

Economy

Barclays: Due to the aftereffects of government shutdown, the data flow is confounded. We believe that job market is resilient and inflation would be elevated.

UBS: Commodities would be favorable in 2026. We expect the returns will be attractive, with supporting demand-supply imbalances, increasing geopolitical risks and global energy transition.

KNOWLEDGE TRANSFER

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DISCLOSURE

This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.