Market Note: Above-Trend Growth, Broadening Leadership, and a Data-Heavy Path Ahead

By Hightower Great Lakes on December 15, 2025

Fed Outlook and Growth Momentum

Last week delivered a heavy slate of new information, including a Fed rate cut, key earnings reports from Broadcom and Oracle, and continued evidence of healthy market rotation.

Fed Chair Powell struck a notably constructive tone, emphasizing confidence in the economy’s trajectory into next year. He highlighted resilient consumer spending, continued corporate investment in AI infrastructure, and improving worker productivity as key supports for growth while also noting that productivity gains could allow the economy to expand without reigniting inflation pressures.

Despite the noise around policy and data volatility, the underlying growth picture remains strong. The economy is currently growing at approximately 3.6% and while the Atlanta Fed’s GDPNow tracker has been volatile, it continues to signal above-trend expansion.

Importantly, this growth is not confined to technology companies alone. A meaningful portion is being driven by the broader AI build-out, including infrastructure firms constructing data centers and companies modernizing and reinforcing the electric grid.

Looking ahead to inflation, the AI-driven productivity narrative remains an important offset. Rising efficiency should help absorb cost pressures over time, particularly as the economy moves beyond the one-time impact of tariffs.

These dynamics helped fuel last week’s market rally and reinforce the view that the Fed is not opposed to additional cuts, even if further easing is not strictly necessary given strong growth, easing rates, and strong corporate earnings.

Policy debate within the Fed remains active, as reflected by three dissents at the most recent meeting. However, as more complete economic data becomes available following the government shutdown, consensus may begin to firm.

The Fed has also added incremental liquidity by expanding its balance sheet, initiating $40 billion in Treasury bill purchases beginning December 12th. While officials noted that this pace will remain elevated for several months before slowing, the move provides an additional tailwind for financial conditions.

Finally, the dot plot currently points to one potential rate cut next year, though this remains data dependent. With growth holding above trend and productivity improving, the Fed retains flexibility and markets will continue to respond to each incremental signal along the way.

Broadening Market Leadership Signals Healthy Rotation

Markets continue to show a constructive rotation beneath the surface. While technology has paused after a strong rally, the move looks more like consolidation than a change in trend, and select opportunities are emerging as valuations reset. Importantly, this is not a broad risk-off shift but a healthy rebalancing across sectors.

Financials have moved to new highs, a development worth rooting for given the central role banks play in supporting both corporate investment and consumer activity. The Federal Reserve’s weekly H.8 report underscores this improvement, with loan growth accelerating for a seventh consecutive week, the strongest stretch since the second quarter of 2022, signaling that banks are increasingly putting capital to work.

At the same time, industrials are breaking out to new highs, while energy and consumer discretionary names are beginning to gain traction. Taken together, the rotation underway is a positive signal for market breadth and suggests leadership can continue to broaden in the months ahead.

Earnings Spotlight: Broadcom and Oracle

While Broadcom and Oracle both reported earnings that initially elicited similar market reactions, the underlying stories could not be more different. Broadcom’s results reinforced an already well-established investment thesis. For Q1 fiscal 2026, Broadcom expects AI revenue to double year-over-year to approximately $8.2 billion.[1]

Gross margins are expected to face some pressure as custom ASIC chips carry lower margins than other parts of the business; however, this is partially offset by Broadcom’s high-margin software segment.

Even with mix-related margin compression, the quarter reinforced a clear path toward roughly $14 in EPS by fiscal 2027, supported by strong AI momentum, a high-margin software segment, and $7.5 billion remaining under the share-repurchase authorization.[2] In short, Broadcom’s print strengthened confidence in long-term earnings power despite near-term margin noise.

Oracle’s earnings, by contrast, raised more questions than answers. While the company continues to show solid fundamentals in its cloud and AI businesses, investor concern is squarely focused on its balance sheet strategy.

Oracle has chosen to materially increase leverage to fund its cloud infrastructure buildout. Importantly, management did little on the earnings call to clearly articulate or defend the rationale behind the debt raise, leaving concerns around capital structure and risk unanswered.

Strategic M&A

IBM continues to execute smart strategic M&A with the acquisition of data streaming leader Confluent, a move that fundamentally enhances its AI offering by providing the necessary real-time data foundation for generative and agentic AI models.

This platform allows enterprises to modernize their operations, effectively eliminating reliance on legacy middleware tools that cannot handle the velocity of data required by modern AI. Crucially, the deal drives a favorable mix shift toward higher-margin software and bolsters recurring revenue.

By integrating Confluent’s cloud-native capabilities with watsonx and its existing portfolio, IBM is positioned to capture massive enterprise spending on AI and data infrastructure, setting up a strong operational and financial framework for 2026.

Upcoming

We head into next week with a dense calendar of economic data that should help further shape expectations around growth and policy. November nonfarm payrolls will be released on Tuesday, December 16^th, followed by retail sales and CPI on December 18^th, and core PCE on December 19^th, key inputs for assessing both labor-market momentum and the inflation trajectory.

On the earnings front, reports from Nike Inc (NKE), FedEx Corp (FDX), Lennar Corp (LEN), and Micron Technology Inc (MU) will offer valuable read-throughs on the consumer, global trade, housing, and semiconductors, respectively, adding important micro-level context to the macro backdrop.

Fixed Income

U.S. Treasury yields ended last week mixed across the curve following the Federal Reserve’s policy announcement. The Fed implemented its third 25 basis point reduction in the federal funds rate this year, while the updated Dot Plot signaled expectations for a more accommodative policy trajectory heading into 2026.

By Friday’s close, the 2-year yield was lower by 3 basis points, while the 10- & 30-year yields rose by 4 and 6 basis points, respectively. Credit markets softened modestly last week.

Investment grade spreads widened by 2 basis points to +113, while high yield spreads expanded by 5 basis points to +343. In the municipal market, tax-exempt yields generally tracked Treasuries, with the front-end declining 1-2 basis points, while intermediate and long maturities rose 2-4 basis points.[3]

Return for Selected Indices[4]

Click here to read last week’s Market Note (12/8).

Disclosures

Investment Solutions is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors.

All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Investment Solutions and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Investment Solutions and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

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[1] Broadcom: Earnings Call: As of December 11, 2025.

[2] Bloomberg: As of December 15, 2025.

[3] Bloomberg: As of December 14, 2025

[4] Bloomberg. As of December 14, 2025.