Good morning investors! Today is the last day of 2025 as the market closes tomorrow for New Years.

Today we cover:

📊 Economy and News

The Chicago Federal Reserve estimated the U.S. unemployment rate held steady at 4.6% in December, matching November's official figure—which economists believe was distorted by technical issues from the recent government shutdown.

This twice-monthly estimate, based on public and private data, indicates minimal changes in hiring and firing rates, offering policymakers an early glimpse into labor market conditions.

The Bureau of Labor Statistics will release the official December data on January 9, with forecasts pointing to a slight dip to 4.5%.

Earlier this month, the Federal Reserve lowered its policy rate amid concerns over a softening labor market, though the move faced three dissents. The Fed has indicated potential pauses on further cuts pending more data.

However, according to released minutes from its highly divisive meeting, officials were in a split.

“Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation declined over time as expected,” the document said.

“With respect to the extent and timing of additional adjustments to the target range for the federal funds rate, some participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for some time after a lowering of the range at this meeting,” the minutes said.

Also, minutes suggest there may be more cuts in 2026.

Something from China: China to provide $9 billion in subsidies for consumer goods trade-in. Also, the country is set to cut VAT on short-term home sales to 3% from January 2026. Lastly, China’s factory activity expected to shrink for ninth month.

China has made the development of humanoid robots a strategic priority in its tech battle with the U.S.

📈 Stocks

S&P 500 6,896.24 (-0.14%)
DJIA 48,367.06 (-0.20%)
NASDAQ 23,419.08 (-0.24%)
BRENT CRUDE 61.33 (-0.37%)
* Prices as of Dec 31st, 12:20 AM UTC

Nvidia is reportedly in advanced negotiations to buy Israeli AI startup AI21 Labs for $2-3B. The deal is largely a talent acquisition for its ~200 experts in reasoning-focused LLMs, supporting CEO Jensen Huang's expansion in Israel—his "second home."

SoftBank has finalized its massive $40B commitment to OpenAI with a ~$22.5B final tranche. Valued at ~$260B initially, this secures SoftBank >10% stake and funds the Stargate AI data center network, aligning with Masayoshi Son's full pivot to artificial superintelligence.

Meta has bought Singapore-based (Chinese-founded) Manus to advance autonomous AI agents. With a $125M revenue run rate, Manus remains standalone; CEO Xiao Hong reports to COO Javier Olivan, boosting integration into Meta's products.

💵 Personal Finance

This year may signal a pivotal shift for the American housing market.

After years of stagnation marked by elevated borrowing costs and skyrocketing prices that sidelined many potential buyers, economists anticipate gradual improvements in 2026. Rising wages are expected to begin outpacing home price growth, enhancing affordability for more households.

Real estate firms like Redfin have termed 2026 the “Great Housing Reset,” while Compass views it as the dawn of a new phase. Even modest gains in transaction volume would represent progress after prolonged lows. The incoming Trump administration has indicated a strong focus on housing affordability this year, though specifics remain sparse.

The market has felt frozen in recent years, with fewer transactions despite persistent price increases, according to Compass chief economist Mike Simonsen.

In this emerging phase, adequate inventory nationwide could boost sales activity. Simonsen forecasts a rise in home sales volume in 2026, driven primarily by market dynamics rather than policy changes.

Post-pandemic demand overwhelmed supply, driving national home prices up nearly 55% from early 2020 through mid-2025, per National Association of Homebuilders data.

Many existing homeowners delayed selling to preserve low-rate mortgages secured earlier. As acceptance grows for rates over 6%, more listings could emerge in 2026, increasing supply and moderating prices.

This year showed early affordability signs, with price drops from peaks in states like Florida, Texas, and California.

Nationwide plunges remain unlikely, however. Simonsen projects roughly 0.5% growth in 2026—essentially flat.

Long-term affordability hinges on expanded construction, yet current building lags demand.

Rates dipped in late 2025, with the 30-year fixed averaging 6.18% recently—down markedly from near-7% early this year.

Simonsen expects persistence above 6% in 2026, barring surprises like sharper Fed cuts from cooling inflation or labor weakness. Rates loosely track the 10-year Treasury, influenced by Fed policy.

Job security heavily impacts buyer confidence. Prolonged softening could deter major purchases, given the long-term commitment of homeownership.

Rent surges eased in 2025, with growth stalling and some markets flat year-over-year for the first time in years.

Relief could prove temporary. Persistent barriers to buying—steep down payments and payments—sustain strong rental demand amid slowing new apartment deliveries.

Redfin projects 2-3% annual rent increases by late 2026.

President Donald Trump recently pledged the “most aggressive housing reform plans” in U.S. history this year.

Details are limited, but National Economic Council Director Kevin Hassett highlighted regulatory streamlining for faster approvals and incentives for states easing construction barriers.

A White House spokesperson affirmed homeownership as a core affordability priority, promising further announcements.

Recent ideas include 50-year mortgages and portable ones, but experts doubt quick implementation in 2026 due to executive constraints.

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