By Rick Schwerd | December 5, 2025

Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for our next update on December 19.

Markets Prove Resilient

U.S. equity markets showed resilience and provided hope for a broadening in positive performance following the deepest pullback since the tariff-induced April lows. Concerns about the durability and viability of the Artificial Intelligence (AI) buildout drove much of the November sell-off in the tech sector.

The tech-heavy NASDAQ fell nearly 9 percent from its late October high to its mid-November low. However, a nearly 5 percent surge last week and continued strength to start December brought the index to within 2 percent of its all-time high. The NASDAQ remains the best performing major U.S. index this year, up 21.5 percent.

Areas that have underperformed this year have also shown strength recently. Healthcare outperformed the S&P 500 by 5 percent over the last month, gaining a little more than 6 percent. Small cap stocks also joined the rally, gaining approximately 3.5 percent during the month. Broadening within a rally is generally seen as being healthy for markets.

Predicting short-term market moves can be humbling. However, with the market broadening, the NASDAQ is bouncing back and many AI-related stocks are well off their 52-week highs, providing room to run. More clarity on Fed policy has also set up the potential for a Santa Claus rally into year-end.

Fed December Decision Comes into Focus 

Part of the November sell-off was driven by shifting expectations for an additional quarter-point rate cut at the Federal Reserve’s meeting next week. At their October meeting, markets placed the odds of a December cut at approximately 90 percent. A lack of economic data due to the government shutdown and several hawkish comments by Fed officials pushed those odds into the 40 to 50 percent range, which weighed on markets.

Odds of a rate cut rebounded quickly following dovish mid-November comments from Fed Governor Christopher Waller. Chances of a cut next week are now running at 87 percent, which would bring the federal funds target rate down to a range of 3.50 to 3.75 percent. Odds of at least one additional cut over the next two Fed meetings are nearly 90 percent. With a new Fed Chairman set to take charge next May, these odds may also prove volatile.

Labor Market Remains Steady, but Stagnant

The November labor market report will be released next Friday due to the recent shutdown. We did receive the ADP National Employment Report, which showed a drop of 32,000 jobs, driven largely by weaknesses in small businesses.

Initial jobless claims report showed a drop of 27,000 from the prior week to 191,000, the lowest level since September 2022. Continuing claims edged down as well, suggesting employers are reluctant to lay off workers even if they aren’t hiring aggressively.

A student of economics could write their thesis on the unique factors affecting the current labor market. Immigration has shifted from historically extreme levels over the last four years to possibly net negative this year. Roughly 200,000 Baby Boomers leave the workforce per month. Add in AI and automation, tariffs and a sharply declining birthrate and it becomes difficult to get a clear read on the labor market. It is something to watch closely as we move forward.

As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out to us at (518) 415-4401.

About the Author: With almost three decades of financial industry experience, Rick serves as a Senior Investment Officer at Arrow Bank, formerly named Glens Falls National Bank and Saratoga National Bank. He oversees individual and corporate retirement plans, personal trusts, investment management accounts, foundations and not-for-profit relationships.