December was a mixed month for global markets as the year rounded out, with investors navigating shifting signals. As we roll into 2026, it is worth noting that equities closed 2025 near record levels globally after another solid year of gains. Investors continue to debate whether current equity valuations are justified; however, these concerns have largely fallen on deaf ears. Instead, bullish momentum, solid earnings, and earnings growth have continued to drive markets higher.

In the United States, markets were buoyed by a 0.25% Federal Reserve rate cut. Despite this supportive move, diverging views among Fed members and elevated uncertainty left the future path of interest rates unclear. Consumer prices came in softer than expected at 2.7%, raising confidence that the Fed may be gaining control over inflation.

Technology sentiment wavered in December after Oracle reported softer cloud computing sales and signalled plans to significantly increase investment in artificial intelligence. This sparked concerns around a potential AI bubble and triggered a tech-led pullback. In a separate development within the sector, Netflix announced it is pursuing the acquisition of Warner Bros. Discovery — a move that may eventually result in expanded content offerings for Netflix subscribers.

Closer to home, New Zealand welcomed Anna Breman as the new Governor of the Reserve Bank. It was not a quiet start, with the Bank announcing a relaxation of capital requirements and Breman highlighting risks associated with a sharp rise in market interest rates. GDP for the September quarter rose 1.1%, providing a welcome lift in overall economic sentiment.

Meanwhile, the New Zealand Treasury’s Half Year Economic and Fiscal Update extended the timeline for the Government’s return to surplus by a further year. As New Zealand heads into an election year, political developments and fiscal signals are becoming increasingly relevant for markets.

Across the Tasman, Australian GDP grew by 0.4% in the third quarter, undershooting expectations. The Reserve Bank of Australia maintained a hawkish stance, holding the cash rate at 3.6% and reiterating that inflation risks remain skewed to the upside. Despite this, equity markets held up reasonably well, although consumer confidence remained subdued.

Against this backdrop, the S&P 500 finished the month broadly flat. The tech-heavy NASDAQ declined by 0.5% amid ongoing volatility in the sector. In contrast, the FTSE 100 outperformed, rising 2.2% as UK inflation surprised to the downside and the Bank of England cut interest rates. Closer to home, the NZX 50 and ASX 200 delivered positive returns of 0.4% and 1.2% respectively.