The U.S. economy posted surprisingly strong growth of 4.3% in late 2025, fueled by resilient consumer spending. This created a "Goldilocks" scenario of solid growth with a slightly cooler job market. However, stubbornly high inflation means the Federal Reserve is likely to keep interest rates steady for now, focusing on taming prices. The positive data could trigger a final, modest stock market rally to close out the year.
Here’s the simplified breakdown:
Surprise Boom: The U.S. economy grew a strong 4.3% in Q3 2025, beating forecasts thanks to robust consumer spending on everything from gadgets to socks.
The "Goldilocks" Scenario: Growth is solid, but the labor market is cooling slightly—a balance the Fed likes. However, inflation (2.9%) remains above the Fed's 2% target.
Market Impact: This could fuel a final mini stock rally in 2025's closing days, even with light trading. The Fed may now hold rates steady, focusing on inflation, with potential rate cuts forecasted for next year.
The Risk: Cutting rates next year could backfire by pushing long-term bond yields higher and weakening the dollar.
