THE DEAN’S LIST: Edition 2

Dean’s note: This is the quietest week of the year. Trading floors thin out. Volume drops. Headlines slow down. And yet markets often drift higher. If that seems counterintuitive, you're starting to understand how this game works.

A clearer map of what matters this week - and why clarity often comes after the holidays, not during them.

Christmas week is strange for investors. Nothing much happens, and yet everything feels weighted with meaning. Maybe it's the year ending. Maybe it's the natural human impulse to take stock. Maybe it's the quiet after a year of noise.

Here's what we know: the S&P 500 is up over 17% in 2025, back near record highs. The broad pessimism evident from July through September was clearly misplaced - but markets saw through it. Foreign stocks measured by the MSCI EAFE Index are up about 27%, but most of the difference is the weakness in the dollar. We had a government shutdown that lasted 43 days. We had tariff anxiety. We had an AI rotation scare. We had the weakest jobs report in four years. And still, here we are - near all-time highs, closing out another year that defied the pessimists.

The Fed cut rates three times. Gold rose 70%. Unemployment crept up but didn't break. And the Fed admitted - out loud - that it's making decisions with incomplete information because a government shutdown created a two-month data hole.

Powell put it well: "When driving in fog, you slow down."

That's not a warning. It's wisdom. The fog is normal. Your job isn't to predict when it clears. Your job is to stay in the car.

Here's what's shaping money this week:

💲The Santa Claus rally window opens December 24 - historically positive 79% of the time
💲Q3 GDP arrives December 23 - two months late, but still the last major data point of 2025
💲Year-end tax moves have a hard deadline: December 31
💲2026 is a midterm election year - historically a weaker year within the presidential cycle

This is a week for reflection, not reaction. Let's dig in.

The Santa Claus rally isn't superstition. It's a documented pattern that's persisted for nearly a century:

Dean’s note:
I don't trade on the Santa Claus rally. I don't ignore it either. What I do is notice it - the same way you notice the weather. It's there. It tends to be mild this time of year. But I'm not selling my coat because it's sunny today. If the rally comes, enjoy the green numbers. If it doesn't, remember that last year's absence didn't ruin 2024's returns. Neither will this week ruin 2025.

For 43 days this fall, the federal government was shut down. Most people noticed the closed national parks. Fewer noticed what happened to economic data. October 2025 is now a permanent blind spot in America's official economic record.

Here's what got delayed, cancelled, or compromised:

➡️ October jobs report: Cancelled entirely. Household survey data lost forever.

➡️ October CPI: Never released. No all-items or core inflation data for the month.

➡️ Q3 GDP advance estimate: Cancelled. Initial estimate now arrives December 23—two months late.

➡️ Producer Price Index for October: Folded into November release.

➡️JOLTS data: Delayed and combined.

The Congressional Budget Office estimated that the shutdown reduced Q4 GDP growth by 1.0 to 1.5 percentage points on an annualized basis. Most of that gets recovered when spending resumes, but not all. The output from furloughed workers who didn't work is gone - you can't manufacture October twice.

What this means for you: The Fed made its December rate decision with stale and incomplete information. Powell acknowledged this, noting that payroll gains "may be overstated" and that the Fed's own estimates suggest the economy might be losing 20,000 jobs per month rather than gaining 40,000.

That's a huge difference. And it explains why the Fed sounded uncertain - because it was.

Dean’s note:
When the people driving the economy admit they can't see the road clearly, you adjust your expectations. Not your strategy—your expectations. The data will eventually catch up. The economy didn't stop existing in October just because no one measured it. But making big portfolio moves based on incomplete information is how people get hurt. Patience isn't passive. It's protection.

On December 23, we finally get the initial estimate for Q3 2025 GDP. It was supposed to arrive October 30. The shutdown killed that timeline.

The Q3 2025 GDP report arrived December 23 showing 4.3% annualized growth - well above the Wall Street consensus estimate of 3.2% and the strongest quarter in two years. The result confirms that the broad pessimism evident from July through September was misplaced. Consumer spending accelerated, exports rebounded, and government spending contributed as well.

Context matters here. Q2 came in at 3.8%, and Q3's 4.3% marks the strongest quarter since Q3 2023. Q1 was a mess, showing a 0.5% contraction largely driven by import distortions as businesses front-loaded purchases ahead of tariffs. The economy has been erratic but resilient, and Q3 proved that even better than expected.

What to watch in the release:

●  Consumer spending contribution - this has been the engine all year

●  Business investment - are companies still building, or pulling back?

●   Net exports - tariff-related distortions have made this volatile

●  Corporate profits preliminary data - a leading indicator of stock market health

By the time this number arrives, it's two months old, ancient history in market terms. But it still matters. It confirms or contradicts the story we've been telling ourselves about the economy's strength. And if Q3 was stronger than expected, it gives the Fed cover to slow down rate cuts even further. Just remember that the market is a discounter of known information so today’s prices reflect the clearest known expectations of the future. They don’t care too much about what happened months ago in the economy.

Dean’s note:
The GDP print on December 23 is the last major economic data point of 2025. Don't overreact to it. Even stale data can confirm or contradict the narrative. If Q3 was stronger than expected, it reminds us the economy isn't as fragile as the headlines suggest. If it was weaker, markets have probably already priced that in. The number matters less than what you do with it, which should be nothing dramatic.

Every December, Wall Street rolls out forecasts for the year ahead. The consensus for 2026 puts the S&P 500 somewhere between 7,400 and 7,800—roughly 10% to 15% higher than current levels. The herd is usually wrong, but which direction? Too high or too low?

But here's what the forecasts don't emphasize enough: 2026 is a midterm election year. And history has strong opinions about midterm years.

Since 1962, the average return for the S&P 500 in the 12 months before a midterm election is just 0.3%. Compare that to the historical average of 8.1%. That's not a typo - the year leading up to midterms has historically been a weak part of the four-year presidential cycle.

Why? Uncertainty. Markets hate not knowing who will control Congress, what policies will change, and how the balance of power will shift. The president's party has lost House seats in 13 of the last 15 midterms. That kind of volatility creates hesitation.

But here's the flip side: the 12 months after midterm elections have averaged 16.3% returns. Once the uncertainty clears, markets tend to rally hard.

What this means for 2026:
👉 Expect volatility, especially in the first half of the year
👉 Don't mistake political noise for economic signal
👉 The party controlling Congress after November 2026 won't determine your returns, economic fundamentals will
👉 If you can stomach the uncertainty, post-midterm periods have historically rewarded patience

Add to this: Jerome Powell's term ends May 15, 2026. The new Fed chair, likely one of the two Kevins, will be steering monetary policy through the midterm volatility. That's a lot of moving parts.

The biggest lesson from studying midterm cycles? What investors fear most often doesn't come to pass. The recession everyone predicted in 2022 didn't happen. The tariff crash didn't happen. The AI bubble burst didn't happen. For every genuine market disruption, there are dozens of feared disasters that never materialized. The challenge isn't predicting which events will matter - it's maintaining discipline and staying diversified across all conditions.

The Fog Is Normal

Markets close for Christmas this week. Trading floors empty. The noise quiets down.

This is the perfect time to remember something: the scoreboard is not the game.

Your portfolio number on December 31 is not your life. It's a snapshot—one frame from a movie that's still playing. If you're up this year, don't let it make you reckless. If you're flat or down, don't let it make you desperate. The goal was never to win December. The goal was to build something that lets you live the life you want.

I keep thinking about something I learned a long time ago: what you don't know about the future is far greater than anything anyone knows about the future. Powell doesn't know. The Fed doesn't know. Wall Street doesn't know. I certainly don't know.

The government shutdown created a data black hole. October is permanently missing from the economic record. The Fed is making decisions with stale information. Markets are pricing in expectations that may or may not be right. And yet - the economy is still growing. Earnings are still solid. Wall Street sees the S&P 500 at 7,500 to 8,000 by end of 2026.

The fog is normal. It's always been there. The people who succeed aren't the ones who wait for perfect visibility. They're the ones who stay in the car, keep their hands on the wheel, and trust the road ahead.

I don't know if we'll get a Santa rally. I don't know what 2026 will bring. But I know this: the people who stay calm, stay invested, and stay focused on what matters will be fine. They always are.

Merry Christmas. Happy Holidays. I'll see you in the New Year.

— Dean