Following the longest recorded government shutdown in U.S. history, markets have ebbed and flowed near all-time highs for the S&P 500. While a historically strong earnings season provided some comfort, recent weeks of increased volatility have created some concerns around AI valuations and the overall economic environment.
These concerns are driven by what investors haven’t seen, primarily the key unemployment, housing, and inflation data that has gone unreported for the last two months during the government shutdown.
In late November, the White House announced that the Bureau of Labor Statistics (BLS) will release the November jobs report, including October payroll data, on December 16. The BLS also cancelled its October Consumer Price Index (CPI) report due to the inability to go back and collect data that wasn’t captured during the government shutdown. The November CPI report is expected December 18. Adding to the data clamor, the Commerce Department delayed its release of its initial third-quarter GDP estimate until December 23, nearly two months later than the report was initially scheduled.
While equity and fixed income markets have grown accustomed to waiting for results to be reported, all these delayed datapoints come at a very challenging time. The next Federal Reserve meeting to potentially adjust interest rates is scheduled for December 9 and 10, before the upcoming release of two months of key economic data.
While it’s possible data could be released sooner or the Fed meeting pushed to later in the month, the current timing of the meeting ahead of these reports is extremely challenging. Following its last meeting where the Fed lowered rates by 25 basis points (bps), Fed Chair Jerome Powell reiterated a December cut was “far from certain.” Adding to all this uncertainty, Powell will be ending his term in 2026, changing the makeup of the entire Fed in coming months.
With such a data vacuum going into the next Fed meeting, markets have generally pulled back as the chances of a future cut dwindles to roughly 20%. As of the end of November, markets have rebounded following more dovish commentary from some Fed Presidents, now pricing in a near 100% chance of a further 25 bp cut. December may prove to be a pivotal month, and a decision in either direction could come at odds with new data coming days or weeks later.
Overall, markets have been resilient in 2025 after a dramatic pullback in April, and December will be the next test as we head into 2026. While data is scarce, the consensus is the underlying economic metrics have yet to meaningfully deteriorate. Based on the information available, solid corporate earnings, steadily rising but still low unemployment rates, and slowly easing inflation trends may provide a solid foundation for continued upside over the next 12 months.
While elevated valuations remain a headwind, diversifying into international and fixed income continues to reward investors year-to-date. JNBA remains diligent and analytical as we continue to navigate both the short- and long-term impacts of ever-changing monetary policies.
As always, if you have any questions, please talk with your JNBA Advisory Team.
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors, LLC.
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