Investors mull mixed growth and jobs data as markets look to 2026

As the books closed on 2025, the festive “Santa Claus Rally” seemed to arrive on schedule. It was a year defined by the rise of artificial intelligence (AI), a shifting interest rate environment, and a global economy that proved far more resilient than many predicted last January.

Markets and the economy

Global stock markets generally finished the month on a positive note. Major US indices reached new milestones. While tech was the star for most of the year, December saw smaller companies and traditional sectors – like financials and industrials – showing signs of life, as investors look for value outside the big tech names. 

The dominant narrative was the Federal Reserve’s balancing act. After another quarter-point interest rate cut earlier in December, policymakers signalled they are happy with the progress made on inflation. This stability has helped bond markets find their footing, offering more predictable returns than the rollercoaster of previous years. 

Economic engines: Growth and jobs

The big news in December was the release of the final third quarter GDP figures, which were significantly delayed due to the US government shutdown in autumn. The data showed the US economy defied gravity over the summer, growing at an impressive annualised rate of 4.3%. This was much stronger than expected and was driven largely by resilient consumer spending and a massive wave of business investment in AI infrastructure. 

However, the US labour market is telling a slightly different story. While the economy is growing, the jobs market has transitioned into a cooling phase. The unemployment rate ticked up to 4.6% in December – the highest level since 2021. We are currently in a “low-hire, low-fire” environment. Businesses are not rushing to lay people off, but they have become more selective about new hires. Healthcare and construction remain the standout sectors for job seekers, while manufacturing and government roles have seen a pullback. 

What to watch in 2026

As we turn the page to 2026, the ‘soft landing’ many hoped for appears to have been achieved, but new themes appear on the horizon. First, we will keep an eye on the monetisation of AI; in 2025 companies invested in the tools, but in 2026, investors will demand proof that these tools are increasing corporate profits.

Second, watch the impact of trade policies; these can have an impact on both inflation and global growth. Finally, expect the return of volatility. With stock prices at record highs, there is less margin for error, and we may see more dramatic market swings. 

Recent developments in Venezuela and Greenland have made headlines but have not yet had a meaningful impact on markets. The situation in Venezuela briefly pushed oil and gold prices higher, while geopolitical interest in Greenland’s resources has attracted attention despite its slowing economy. For now, these remain more political than market-moving events – but they are worth monitoring as potential catalysts.

Ultimately, the lesson of 2025 was that staying the course often beats trying to outsmart the headlines. We look forward to navigating the opportunities of 2026.