Our latest episode of 7 Market Movers is live, with Doug Huber walking us through several surprising shifts as we kick off December. Despite delayed government data, markets are reacting to a sharp drop in jobless claims, strong corporate earnings, and growing confidence around a potential Fed rate cut. Doug also highlights what small caps and tech are signaling—and why the next few weeks of long-awaited economic reports could be especially important. 

Watch the full video here:

TRANSCRIPT:

Hello everyone, and thanks for joining me for this, the first week of December's 7 Market Movers video series. My name is Doug Huber, and I'm the Deputy Chief Investment Officer here at Wealth Enhancement. I'm happy to be back with you after a week's long hiatus for the holiday where I hope you all had a wonderful thanks giving with your family and friends.

Let's get into what's driving markets this week. This week continues to be a little bit of an unusual situation where we still are dealing with the fact that several major economic releases, including inflation data, the monthly jobs reports remain delayed following the earlier government shutdown of October into November. As a result, markets are still operating with less fresh data than their usual. So they're really relying on alternative data streams or making assumptions.

But we did get one meaningful update this week. We did see weekly jobless claims come in, dropping sharply to a 191,000, which is the lowest level in 3 years. So that number certainly reinforces the picture that the labor market remains resilient even as the broader economy is showing some signs of gradually cooling, and and that is evidenced by the fact that we also saw data that for the year of 2025, we've seen 1.1 million layoffs in in the corporate sector. So it's this really interesting juxtaposition of of trying to evaluate what are markets supposed to look at, and and we're seeing lower initial jobless claims.

We know there's been a lot of layoffs, and and will those continue, or or corporations gonna hang on to the employees they have? On the corporate side, earnings certainly played a bigger role this week given that limited, government data. We did see a few widely followed companies post strong results. For example, Snowflake, definitely delivered better than expected earnings and they had upbeat guidance driven by that continued demand for data infrastructure services.

Additionally, we saw Dollar General report results that exceeded expectations, which is positive as it shows the lower end consumer is still out there spending and in general kind of boosted sentiment around that consumer discretionary space.

In total, these earnings certainly help support the equity markets at a time when investors are otherwise kind of sitting on their hands waiting for some of that delayed economic data.

Big one that everyone's watching is what is the Federal Reserve doing? And so even without that new inflation data, markets are certainly increasing their expectations for a Fed rate cut in December, including several major institutions, Bank of America and others have now projected an easing move in this upcoming meeting. I think the market today is is projecting a 91% chance, of a of a cut in December. That being said, Boston Fed president Susan Collins warned that a more fragmented global economy could put upward pressure on inflation over time.

And with that, I think the markets started to say, well, hold on a second. So they're saying, hey, we we do expect in December, but with all this uncertainty, we now are actually going to push off or change our expectations for what might occur in 2026. So it'll certainly be important to continue to watch what the Fed does, I think that is going to follow suit to some of the economic data that actually comes out hopefully over this month and next.

In the equity markets, as I alluded to, we did see a constructive tone this week. Small cap stocks have certainly led the way. Russell 2000, which is a benchmark of those rallied as as traders have priced in a lower borrowing cost. Typically, small cap stocks benefit because they are more rate sensitive.

They tend to have more debt on their balance sheets. And so as rates go down, it gives them the ability to refinance that debt and or pay cheaper amounts for that leverage. And so you will see these these kind of trading spikes that if if investors believe rates are going to drop precipitously or or even just even a little bit, they tend to benefit small cap stocks. I think on the whole, we remain somewhat cautious of the of the small cap arena, especially at the very small end because that is an area that traditionally saw a lot of IPO activity.

Today, companies are staying private longer, and if and when the the IPO market warms a little bit, which we're seeing some signs of, they tend to come public a little bit larger. So we grow a little weary of some of the lower quality, lower market cap stocks, and so, it's something to watch, but you will see kind of trading activity occur in those as broad kind of indices swing in and out. Large cap tech contributed to gains still, really supported though by earning surprises, and improving risk sentiment on the whole. And so with a combination of that resilient labor data, some strong earnings, like I mentioned from Snowplay Snowflake, Dollar General, and others, you know, that that increase in confidence has certainly helped to to have a pretty positive tone in equities this week.

Fixed income treasury yields are are pretty range bound and have been. We've seen them drift a little bit lower this week as investors grew more confident in the prospect of that December rate cut. Like I said, that that that had dropped as low as, like, a 40% chance. It's now back up to a 91% percent chance.

So the market really is quite confident that we will see a cut. And so you saw the 10-year yield hover around 4.09% to 4.1%.

You know, it has drifted kind of between 4% and 4.15% over the last several weeks.

Credit markets remain steady. That is one thing that has been kind of a hallmark of the last 18+ months. Investment grade spreads, the amount you need to get paid to kind of invest in credit of investment grade companies over and above the US Treasury rate has remained quite firm, very low to historical standards indicating that the market does not see huge risk to that debt. Even high yield spreads for what might some might call junk companies. I think that's a little unfair, but companies that aren't investment grade rated, they've tightened modestly and remain very tight relative to historical standards, essentially saying corporate balance sheets look pretty good today.

Some closing thoughts. You know, the fact of the matter is jobless claims fell their lowest level more than 3 years. That looks to be a good sign. However, that is, in juxtaposition to a pretty hefty year for layoffs over 1.1 million and some uncertainty around what are we going to see from the fed released, data, the BLS data on on labor market. And so that will be watched very closely.

Obviously, the market is pricing in that December Fed rate cut. And if there is a surprise that they don't cut rates, that could have an impact in the short term to markets.

But I think longer term, the the directionality, everybody is very data dependent because we know the Fed is data dependent. Small caps and tech continue to lead this week, and it's good to hear have a have a positive backdrop to equities based on fundamentals of the fact that, you know, we are seeing pretty good earnings and good guidance for the future. So that's important. It's it's a sign that the economy is doing okay, and those that are kind of building projections for these corporations feel that the future looks relatively positive.

Again, treasury yields stayed pretty pretty tight for the week, but we will see them likely, especially on the front end the curve, continue to drop down as those rate cut expectations continue.

I think the biggest thing is that we do expect several important economic reports that have been delayed to come out in the month of December and early January. And so the next few weeks are going to be very important as we get some of these data numbers that have been delayed for almost two to three months. So it's those are important clues as to what's going on underlying the economy. We've all been kind of flying a little bit blind.

And so I think, you know, it'll be important to see what those tell us and how the market reacts s to that. So we'll continue to monitor that. You'll hear from us again next week. Hopefully, we'll have some more information available.

But, again, it's great to see everybody again. It's great to be back after the holiday week. We hope everybody had a nice break. And please tune in next week for our next, 7 Market Movers.

Thanks so much for joining us.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances.

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