Weekly Hotline: December 5, 2025
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Markets moved little this week as investors brace for next week’s FOMC meeting and policy decision. Meanwhile, economic data continues to point to a weakening consumer, warning of a bumpy road ahead.
MACROECONOMIC UPDATE
- The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) decreased 0.5 percentage points to 48.2%. The sector remains in contraction (<50%) as manufacturers continue to grapple with rising prices, declining employment, and policy uncertainty.
- The ISM Services PMI ticked up 0.2 percentage points to 52.6% as it sits just above the threshold for expansion (>50%). This shows a continuing divergence between weakness in the manufacturing sector and modest strength in services.
- Consumer Sentiment ticked up from 51.0 to 53.3 in its preliminary December reading, remaining at one of the lowest levels on record. The Current Conditions Index fell from 51.1 to 50.7 – a new all-time low, and the Future Expectations Index rose from 51 to 55, still -25% below its reading from last December. Consumer attitudes sitting at historic lows is a significant warning flag, and if consumers continue to struggle the effects could ripple through the entire economy and the stock market.
- The Personal Consumption Expenditures (PCE) Price Index reading for September came out this week in a delayed release due to the government shutdown. The Overall reading increased from 2.7% year-over-year to 2.8%. However, the Core reading, which excludes the volatile food and energy components, decreased from 2.9% year-over-year to 2.8%. While this report is 3 months old, it is the latest data the Fed has from their preferred measure of inflation going into their meeting next week, making it crucial in determining if there will be a rate cut this month.
TECHNICAL UPDATE
- While the InvesTech Artificial Intelligence Index and Gorilla Index recovered slightly this week, they both remained below their peaks from early November. Momentum and speculation continue to be key drivers in today’s market, and an inability for these critical indicators to reclaim new highs could indicate that the stock market’s troubles are likely to continue.
- Bearish Distribution in our Negative Leadership Composite (NLC) continued to ease this week as downside leadership slowed its acceleration. We are continuing to watch this critical indicator for further downside confirmation – or a signal that the imminent risk could be decreasing if we see Distribution fully dissipate and the bullish Selling Vacuum accelerate upward.
InvesTech Model Fund Portfolio
There are no changes in our InvesTech Model Fund Portfolio this week. It remains defensively positioned with a net invested equity allocation of 50% (55% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 35% cash held in short-term Treasurys or a money market fund).
