Market Minute: December 23, 2025 – Strong GDP, Taming Inflation, and What It Means for 2026

Robust Third-Quarter GDP Surprises

Data has been abundant as of late. As we head into the Christmas holiday, the U.S. economy grew 4.3% in the third quarter, above the consensus estimate of 3.5%. Potentially even more important, consumer spending rose 3.5%, following a 2.5% gain in the second quarter. Since consumer activity drives a large portion of economic growth, this is a meaningful report.

That said, digging deeper reveals that spending is concentrated on necessities like food and medicine, rather than big-ticket items. Tracking these trends will be critical in the coming months to decipher economic trends in 2026.

Inflation Trends Show Signs of Easing

We have been a little busy here at Innovative Asset Advisors Group, so there has been some other data I’ve been meaning to report. Through November, the Consumer Price Index (CPI) increased 2.7% year-over-year, while Core CPI (excluding food & energy) rose 2.6%. Inflation appears to be taming slightly, though some economists are cautious, waiting for subsequent releases to confirm these trends aren’t distorted due to the government shutdown.

All that said, the economy is seeing a lessening of inflation, an uncertain jobs market, and consumer spending driven by necessities.

Good News or Bad News?

As I have written about in the past, we always need to figure out when good news is good news or when it is…something else. This morning’s GDP report appears to be the date release of good news being bad news for the markets. If the economy is truly growing faster, there is potential that inflation may reignite, which does not bode well for future rate cuts.

Investor Takeaways

For investors, we continue to recommend developing your financial plan and focusing on long-term investing. Given the three-year run-up in the stock market, we believe it is advisable to ensure your equity allocation is not over your target and to focus on rebalancing to realize some of the gains that may be in your portfolio.

Looking Ahead

As we come to the end of the year, we are thankful for our clients and the trust they have placed in our firm. We are humbled by our early successes and look forward to continued growth in 2026. We wish all of you and your families a Happy Holiday Season.