CWS Market Review – December 23, 2025

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On Tuesday, the S&P 500 closed at yet another all-time high. The index finished the day at 6,909.79. I’ve been very impressed by the resiliency of this market. It just keeps going. Since the April low, the S&P 500 has rallied by 39%.

Traditionally, the market does well during the holiday season, and this appears to be no exception. The market was helped by a strong GDP report. Q3 turned out to be one of the best quarters for economic growth in the last three years. It’s starting to look like the Fed won’t touch rates at its next meeting, and possibly the one after that.

The 2026 Buy List Is Coming Soon

First, a reminder that on Friday, I’m going to email you the stocks for the 2026 Buy List. This will be our 21st annual Buy List.

The rules are the same. The Buy List has 25 stocks. At the end of each year, I add five new stocks, and I delete five current ones. At the start of the year, the 25 positions are equally weighted. For tracking purposes, I assume the Buy List is a $1 million portfolio.

Once it’s set, I can’t make any changes for the next 12 months. The new Buy List goes into effect on January 2, which will be the first day of trading for the new year. The “buy price” of each stock is assumed to be the closing trade on December 31.

According to the rules of our Buy List, the turnover rate is just 20%, and the average holding period for each stock is five years.

I’m often asked if I really don’t make any changes during the entire year, and the answer is yes. Over the years, a few stocks have been bought out, but we hold the shares from the acquiring firm, assuming it’s a stock-for-stock deal.

By the way, I think it’s an advantage being allowed to buy and sell stocks so infrequently. That’s because it forces me to find stocks that I’d be comfortable with owning for an average of five years. I have no idea what Bitcoin will be like in five years, but I have a pretty good idea of what Stryker will be doing.

I want to thank everyone who has supported our Buy List over the years. I’ve also gotten great feedback from investors.

If you wanted to buy one share of each Buy List stock, that would run you over $7,000. However, you can pick up one share of CWS for around $70. (I have to say that the Buy List isn’t exactly the ETF but it’s based off the Buy List, and it performs almost exactly the same.)

The Economy Grew by 4.3% in Q3

Now that that is out of the way, I wanted to get to today’s long-delayed Q3 GDP report. The government shutdown went into effect on October 1, right as the third quarter was ending. As a result, we haven’t seen any new GDP numbers in a long time.

Earlier today, the Commerce Department said that the U.S. economy grew by 4.3% during the third quarter of 2025. That number is annualized and adjusted for inflation, and it was much better than Wall Street’s expectation for growth of 3.2%. It seems that fewer workers are making more. If jobs growth has slowed down considerably, that suggests that, in the words of one analyst, productivity growth is “off the charts.”

Here’s a look at quarterly GDP growth over the past few years:

Consumer spending, which is the main driver of the economy, grew by 3.5% during Q3. The economy was also helped by government spending and higher exports.

The GDP report usually comes at the end of each month. The quarterly reports typically come with an initial estimate one month after the end of the quarter, followed by two more updates at the end of each subsequent month.

Today’s report was supposed to come out two months ago, and we were due to have one update out in late November. The government shutdown wrecked those plans.

Bear in mind that while today’s report was good quite good, it’s old news. The third quarter started nearly six months ago and ended three months ago. Several Wall Street firms already said they expected good GDP numbers for Q3. Well, they were right. In fact, the numbers turned out even better than expected.

But I’m now concerned what the GDP numbers will be like for Q4. According to the BEA, the Q3 report will be updated on January 22, but it didn’t say anything about Q4. Or if it did, I missed it.

Here are some more details from today’s report:

The personal consumption expenditures price index, the Fed’s primary inflation gauge, rose 2.8% during the period, and 2.9% for core which excludes food and energy. Both were above prior respective readings of 2.1% and 2.6% and remain well above the Fed’s 2% inflation gauge. Also, the chain-weighted price index, which accounts for changes in consumer behavior such as switching less expensive products for pricier items, rose 3.8%, a full percentage point above the forecast.

Though the report presented a largely positive view of the economy, markets reacted little as the data is backward-looking. Stock futures were slightly negative while Treasury yields held higher.

Elsewhere in the report, corporate profits soared by $166.1 billion, or 4.2%, compared with a gain of $6.8 billion in the second quarter.

The odds of a Fed rate cut next month have dwindled to nearly nothing. There’s a decent chance that the Fed will do nothing in March as well, but I want to see the Q4 GDP numbers first.

I also like to look at the growth of nominal GDP, meaning what’s not adjusted for inflation. Thanks to our recent bout with inflation, nominal GDP has grown rapidly. Over the last four years, nominal GDP has grown by nearly 30%.

We’re also coming up on the end of Q4 and soon after, we’ll have the Q4 earnings season. The first earnings reports, usually the big banks, will come out on January 13, which is just three weeks from today.

For Q4, Wall Street currently expects the S&P 500 to earn $69.90 per share. That’s the index-adjusted number. Every one point in the S&P 500 is about $8.5 billion. If Wall Street’s estimate is correct, then it would represent earnings growth of more than 14%. That would also be earnings growth of 12.9% for the year.

Earnings estimates for Q4 of 2025 declined significantly during 2024 but have increased in recent quarters.

For 2027, Wall Street sees the S&P 500 growing its earnings by 17.3% to $308.97 per share. That means the index is currently trading at 22.4 times next year’s earnings.

That’s all for now. The stock market will close early tomorrow, and it will be closed all day on Thursday for Christmas. There will not be a Tuesday issue next week, but on January 1, I’ll have our complete year-end summary.

I want to wish everyone a Merry Christmas and a Happy New Year. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on December 23rd, 2025 at 5:30 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.