Macro Brief — Dec 7th, 2025

The tension in markets this week is the gap between how jumpy prices feel and how steady the underlying data still look. The S&P 500 is hovering near record territory around 6,870, barely 1–2% off its recent highs, hardly the behavior of an index pricing in imminent recession. Short rates have stopped marching higher, long rates have settled, and yet day-to-day equity moves carry that uneasy, “something must be wrong” tone. What the numbers actually show is a late-cycle economy cooling under its own weight, not cracking under policy error.

Start with the consumer, because that’s where the story either holds or breaks. Black Friday online spending hit a record $11.8 billion in the U.S., up 9.1% from last year. Cyber Monday followed through with $14.25 billion of online sales, another record and roughly mid-single-digit growth year-on-year. That is not a demand backdrop consistent with households pulling back in fear.

It’s more like a mature consumer who is selective — waiting for discounts, trading down at the margin — but still very much spending when the value is clear. Layer that on top of a labor market where the unemployment rate is 4.4%, only a few tenths above year-ago levels, and you get a picture of normalization rather than distress.

Inflation has also moved into a very different regime than the one investors were fighting two years ago. Headline CPI is running at 3.0% year-on-year as of September, with core CPI also at 3.0%, down from the 5–6% prints that defined the post-pandemic spike. The Fed’s preferred PCE measure is lower still on most estimates, and markets are pricing a further easing bias.

Fed funds are still restrictive in real terms, but the next move expected at the December 9–10 meeting is a quarter-point cut, not another hike, with growing focus on how the balance sheet and reserve levels are managed rather than how high the policy rate must go. That mix — 3% inflation, mid-4s unemployment, and a central bank pivoting from “how tight?” to “how long?” — is classic soft-landing territory.

The yield curve has quietly been telling a more optimistic story than the headlines. The 2-year Treasury yield sits around 3.6%, while the 10-year is near 4.1%, leaving the 2s/10s spread roughly +50 to +60 basis points — a far cry from the deep inversion we saw when recession fears peaked. Historically, that re-steepening from below is exactly what you see when markets move from “something is going to break” to “growth will just be slower.” Long-term inflation expectations embedded in breakevens have eased back toward the low-2s, and rate volatility has cooled. A curve that is positive, with long rates anchored near 4% and short rates drifting lower, is not shouting “hard landing.”

Credit markets, as always, are the honesty check — and they remain remarkably calm. Investment-grade corporate spreads in the 3–5 year bucket are sitting near 0.7–0.8% over Treasuries, barely above the lows of this cycle. High yield is priced around 2.9% over governments on broad indices, a level historically associated with late-cycle but not pre-crisis conditions.

Defaults are up from the 2021–22 trough but remain modest in absolute terms, and primary issuance windows are open for solid credits. This is not what high-yield looks like when the system is bracing for a wave of downgrades and bankruptcies; it’s what it looks like when investors still believe they’re being paid adequately for taking corporate risk.

Layer on top commodities and hedges, and the picture stays consistent. West Texas Intermediate trades just under $60 a barrel (about $59–59.5), down from the $80s last year, which says global demand is cooling but not collapsing. Gold, meanwhile, sits around $4,200 an ounce, up roughly 60% year-to-date and not far from all-time highs, supported by central-bank buying, geopolitical jitters, and expectations for easier policy ahead. When oil is below $60, gold is near records, and credit spreads are tight, the market is usually expressing “slow growth with policy risk” — not a deflationary bust.

Equities are where the anxiety is loudest, but even there the signal is rotation, not retreat. With the S&P 500 near 6,900, valuations have come off peak extremes but still sit in that high-teens to low-20s forward P/E band for the index, with secular growers somewhat richer and cyclicals somewhat cheaper.

Within tech, semiconductors are reasserting leadership on the back of AI infrastructure demand and strong 2026–27 earnings visibility, while enterprise software and some long-duration growth names are digesting the reality of a world with a 3–4% risk-free rate instead of zero. At the same time, we’ve seen a handful of sizable M&A deals in healthcare platforms, automation, and AI-adjacent infrastructure in recent weeks — a reminder that CEOs are still willing to write large checks at today’s cost of capital, which is not what you see on the eve of a recession.

Put all of this together, and you get a macro environment that is undeniably late-cycle but still resilient. Growth is slower, but consumption is printing record holiday sales. Labor is softer, but unemployment in the mid-4s is a far cry from stress. Inflation is no longer the fire in the theater; it’s an annoyance the Fed can manage with incremental cuts and balance-sheet tweaks. The curve has crawled back into positive territory instead of digging deeper into inversion. Credit is firm, not frightened. Oil is cheap enough to relieve pressure but not low enough to scream “global downturn.” Gold is high because investors want hedges, not because the system is breaking.

How I’m positioned: I keep the barbell of secular growth and high-quality income. On the growth side, I favor semis, AI infrastructure, automation, and selective healthcare — businesses with visible multi-year cash-flow compounding that can justify premium multiples even at a 4% 10-year.

On the income side, 2–5 year Treasuries yielding in the mid-3s, IG corporates a spread above that, tax-equivalent munis, preferreds, and senior private credit offering mid-single to low-double-digit cash yields create a backbone of real income that didn’t exist a few years ago.

Internationally, I like Europe and Japan mid-caps at mid-teens multiples, funded partly from over-owned U.S. mega-caps, and maintain exposure to infrastructure and regulated utilities for inflation-linked cash flow.

The tape may feel nervous, but the numbers don’t read like a system on the verge of failure. Until those numbers change — until we see unemployment lurch higher, spreads blow out, or the curve invert again — I’m treating this as a market that is bending around a new cost of capital, not breaking under it.