Markets attempted to rally this week on a strong start to the Q4 2025 earnings season and a crop of economic reports showing a resilient U.S. economy heading into 2026. Strong earnings results from chip and financial stocks as well as robust consumer spending amid elevated inflation and a slow labor market looked to put the major indices into the green for the week. However, stocks struggled to move higher on Friday on tariff news. The velocity and shear number of geopolitical events managed to steal attention from otherwise positive earnings and economic reports.
Week’s Key Items:
- Despite the hit to consumer wallets from higher prices for groceries, electricity, and shelter, consumer prices in aggregate held steady in December. The CPI Index rose 2.70% year-over-year (YOY), unchanged from November. Core prices, which exclude volatile food and energy, rose a modest 2.60% from the year ago period, also unchanged from November. Month-to-month, headline inflation was up 0.30% while core prices rose 0.20%.
- Lower mortgage rates and slower price growth helped push December existing home sales to their strongest gains in nearly three years after adjusting for seasonal factors. Sales rose at an annualized rate of 4.35 million, a 5.10% increase from November. Supply however slipped to just 3.3 months, below the six to seven months considered to be a healthy balance between supply and demand. More inventory is expected to come online in February which could help hold home prices steady just as we head into the busy spring and summer buying season.
- Retail sales rose solidly in November, highlighting the economy’s resilience amid a slow labor market. The government shutdown delayed report showed sales were up 0.60%, up sharply from October’s revised 0.10% decline. Spending was strong across multiple categories including specialty shops, autos, and apparel.
Early Earnings Strength Fails to Offset Washington Headlines
Stocks got an early boost this week following a strong start to the Q4 2025 earnings season and solid year-end economic reports. On Thursday, chip and bank stocks helped pull equities out of a two-day slump after Taiwan Semiconductor delivered a blowout fourth quarter report and guided capital spending higher in 2026 to between $52 billion and $56 billion. Further, the U.S. and Taiwan also reached a trade agreement in which Taiwanese chip and tech companies will invest at least $250 billion in production capacity in America. The company’s results seemed to soothe investor concerns that the AI buildout is not yet in bubble territory. Financial stocks also moved higher on strong earnings results from Goldman Sachs, which smashed records in equity trading with $4.31 billion in revenue. Investment banking fees also posted strong gains, up 25% YOY to $2.58 billion. The bank’s results helped the financial sector shake off an early week slump resulting from the Trump administration proposing a 10% cap on credit card interest rates. Despite the announcement, it remains unlikely Congress will back such a proposal, but the mere suggestion still spooked investors. Overall, the financial sector is well positioned for healthy gains in 2026, fueled by lower interest rates and more merger and acquisition deals particularly in the AI space. Although we are still relatively early in the reporting season, the early momentum could push earnings growth for the S&P 500 above analysts’ current forecasts of 8.80%. A better-than-expected earnings season, strong year ahead guidance and resilient consumer spending thus far puts equities in a good position for potentially another winning year. However, a steady stream of headlines out of Washington – which just this week included Iran, Greenland, and worries over the Fed’s independence – could draw investors’ attention away from near term fundamentals and toward traditional risk hedges such as gold and silver. With so many geopolitical risks playing out simultaneously, investor focus continues to oscillate back and forth between the economy and the world stage.
The Week Ahead
Key reports include S&P Flash PMIs, Consumer Sentiment, and Personal Income and Spending.
Raising Kids Amidst Wealth
Raising children with wealth in a way that fosters fiscal responsibility, motivation, and independent financial decision-making can be challenging. There are numerous books our advisors are happy to recommend to clients, and our team regularly holds multi-generation meetings with families to help guide these important conversations. Recent research in psychology and neuroscience provides insights that can help parents, grandparents, and caregivers be better prepared to guide our children’s and our grandchildren’s financial intelligence and their future. Various studies have found that poor communication is one of the top reasons that wealth transfers fail. Teaching the next generation well means having conversations about money, wealth, expectations, and stewardship early and often. While this article does not address every topic exhaustively, the ideas below explore approaches from experts in the field that parents and grandparents may find helpful to a family’s ongoing education and relationship with money.
The Pursuit of Happiness
A goal for many parents is to raise children who are happy. This can be tricky for parents who have the means to give their children everything, to remove challenges or obstacles children face, or to accommodate every desire and wish of their children and grandchildren. Child psychologist Dr. Becky Kennedy shares that optimizing for happiness – instead of resilience – may have unintended consequences. Focusing on making kids happy rather than helping them learn to tolerate discomfort and hard feelings, such as frustration, sadness, anger, distress, and jealousy can be a recipe for fragility and anxiety. In adulthood, these kids may not be prepared for hardships they may face. They may avoid challenges, shy away from new experiences, and struggle to bounce back from failure. Dr. Kennedy shares that she doesn’t strive solely for her kids’ happiness but instead wants her kids to learn to handle tough emotions to build resiliency, which is a foundation for true happiness. In short, parents should strike a balance between providing no guidance and leaving a child on their own to figure everything out or swooping in to solve problems for their child. As a modern parenting aphorism suggests, it’s better to prepare the child for the path than to prepare the path for the child. In practice, families can foster productive struggle by allowing children to face school, social, or other challenges independently, especially when the consequences are low stakes and manageable. If they struggle in a course or get a bad grade, parents can offer a tutor but should not do their work, call the school/teacher, or negotiate grades for them. Solving their own problems helps children to learn they can handle discomfort and challenges, thus helping to build a resilient foundation.
Harvard Professor Arthur Brooks who leads the Leadership & Happiness Laboratory at Harvard Business School describes a type of happiness that parents can foster in a healthy way and that does not center on immediate gratification. Instead, it emphasizes a long-term, enduring sense of well-being that grows from a combination of three elements: enjoyment, satisfaction, and purpose. Enjoyment involves being with friends, family, or others while doing activities that create lasting memories. Satisfaction comes from the joy experienced after a struggle or effort. Purpose gives a sense of meaning (separate from a family’s wealth) and the feeling that one’s life matters. Helping children prioritize activities that include these components can lay the foundation for a happier life.
Needs versus Wants
Since children learn how to handle money by watching the adults around them, modeling smart financial decision making can help set good patterns for life. Each family will have its own interpretation of needs versus wants, so it’s important to discuss this concept with your children. Failing to distinguish between the two can lead to future financial troubles or disappointments. Additionally, children who have been raised with wealth should have a clear understanding of their parents’ expectations or responsibilities. If children use a credit card that their parents cover, they may assume this arrangement will continue indefinitely. If parents own a large home or multiple homes, stay at luxurious hotels during vacations, or fly first-class or private when they travel, children may assume this lifestyle will continue for them in their adult life. Best-selling author Sherry Kuehl recently shared a letter from a 35-year-old reader who was outraged at her wealthy Boomer parents for purchasing a new, larger home while she remained in a small rental. Children who grew up with wealth may assume their parents will continue to provide them with a similar lifestyle. Parents should discuss and explain with their children what type of support, if any, they may provide their children once they transition into adulthood and beyond.
Financial Literacy and Stewardship
Generation X and older millennials are the most debt-laden generations in U.S. history, so it’s important that children understand how debt, loans, interest, and principal payments work and the pitfalls of poor financial decision-making. Financial literacy has been linked to lower debt levels, higher savings, and higher credit scores as children mature into adulthood. Education and open dialogue matter within families. Teaching the next generation about stewardship, wealth, and responsibility unfolds on different timelines for every child, often requiring growing independence and autonomy, confidence in their ability to earn their own money, emotional maturity, and strong family relationships before they are ready to embrace the responsibilities of generational stewardship and family legacy.