Massive hits on Oracle and Broadcom after earnings shake markets; the Fed begrudgingly cuts rates for the third time this year. Three Central Banks meetings: BOE (25bp cut), ECB (hold), BOJ (25bp hike), but as usual the commentary will be key. Exceptionally rich week on the macro front, with a ‘Super Tuesday’ featuring the November labour report followed by the CPI on Thursday and by the Core PCE Price Index on Friday. The biggest tail risk is the US Economy falling into a recession (25-30% chance in 2026), resurging inflation, revenues/earnings not matching forecasts, the unfolding of the AI capex trade, the Fed not delivering on its easing cycle, a surge in long bond yields coupled with a USD crash, followed by damages done by tariffs/government policies, adverse geopolitical outcomes, and valuations (very high multiples).

Major market events 15th – 19th December 2025

Economic data highlights of the week

Mon: CN Unemployment Rate (11/25), CN Industrial Production (11/25), CH PPI (11/25), GDP (3Q25), EU Industrial Production (10/25), US NY Empire State Manufacturing Index (12/25), CA CPI (11/25)

Tue: ZA – Holiday, JP Services PMI (12/25), UK Unemployment Rate (10/25), FR Manufacturing PMI (12/25), FR Services PMI (12/25), DE Manufacturing PMI (12/25), DE Services PMI (12/25), EU Services PMI (12/25), EU Manufacturing PMI (12/25), UK Services PMI (12/25), UK Manufacturing PMI (12/25), DE Zew Economic Sentiment (12/25), US ADP Employment Change Weekly, US Nonfarm Payrolls (11/25), US Unemployment Rate (11/25), US Retail Sales (10/25), US Average Hourly Earnings (11/25), US Services PMI (12/25), US Manufacturing PMI (12/25)

Wed: UK CPI (11/25), DE Business Expectations (12/25), EU CPI (11/25), US Atlanta Fed GDPNow (4Q25)

Thu: UK BoE Interest Rate Decision, EU ECB Interest Rate Decision, US CPI (11/25), US Philly Fed Manufacturing Index (12/25), US Initial Jobless Claims, US Fed’s Balance Sheet

Fri: JP BoJ Interest Rate Decision, UK Retail Sales (11/25), US Core PCE Price Index (10/25) 

Sat: CN PBoC Loan Prime Rate (12/25)

Performance Review

Source: Google

InflectionPoint reports:

* So much for the calm after the storm, as last week a hurricane brew on markets. The culprit was the reports from two leading AI names, Oracle and Broadcom, actually being punished for opposing reasons: the first because of widespread sceptisism on its future AI revenues, amid a significant increase in Capex from $35Bn to $50Bn, and the second because its profits just weren’t enough. While I’m not trying to be too cute, I honestly think both market calls were plain wrong – we shall see on this column in the coming months whether this was correct or rather a disaster in the making. For now, I can only learn a lesson from Oracle – I will definitely be much more careful in the future, especially with such a controversial stock. Watch out for Microsoft as well, which is much less Bill Gates these days, and much more Sam Altman. As a friend who has been a broker for all his lifetime reminds me, it’s the end of the year, and so a lot of portfolio managers are doing the yearly window dressing and securing their bonuses by selling their winners. Anyway, lots to follow on this week. We have a ‘Super Tuesday’ in US macroeconomic data, featuring the delayed Nonfarm Payrolls, plus – as if it weren’t enough – Retail Sales. On Tuesday we have two central banks meetings (UK and EU), and US CPI, and finally on Friday an epic meeting at the BoJ, plus the Fed’s favourite measure of inflation, the Core PCE Price Index. Mention the US Central Bank, and we’ve got to speak about Kevin: will Warsh or Hassett be the next FOMC Chair? Hassett has long been the President’s favourite, but the Interest Rate Decisions dominate the short end of the curve, not much so the long end. And that’s where the other Kevin may prove to be a better Chairman – by restating the Central Bank’s independence from the current Administration and therefore bringing the long end down. We shall see in due course. Regarding the AI Trade, I am pounding the table that it is alive and well, even though market pundits sometimes prefer to have a reality check rather than live on hopes; I second their approach, but stress that there can be (and in my mind there was) an overshooting in the correction as well, wiping out the entire yearly performance. Plenty of data to try to understand what the FOMC might do next year – Chairman Powell (named a ‘lame duck’ by Bloomberg Columnist John Authers) has said the committee is now in a wait and see mode, but I checked the expectations for the Fed meeting in June – the first one with a Kevin at its helm – and there you can see the first cut of 2026. Will it be the only one? Too early to tell – but not if you asked the President – for whom Interest Rates (and therefore debt servicing) are still too high. I lament the confusion on the missing employment data (and I am sure I’m not alone in this), and possibly we must wait until early January to understand where employment and consumer confidence actually are. Even the data for 3Q25 GDP will be released on Dec 23, so I guess that until January the market will have to digest all the data it missed or was delayed due to the US Government shutdown. The economic forecasts continue to be good, and if there is no recession, rate cuts are equities’ best friend. It is still very important that the independence of the Fed is preserved, as a guarantee of the US’s own credibility. Recent examples of rates being set by the government (such as in the UK in the 1990s) didn’t produce a great outcome. Returning to the economy, the most important data to watch will change: less inflation (with the latest CPI figures slightly better than expected, even though they were at 3%), and more jobs. The more general risk is related to a game of musical chairs with AI capex. It is difficult to assess at which stage we are in the development of AI, but if I have to guess, I would say we are in the third inning. Sundar Pichai is more bullish, thinking that we will see the real potential of AI in 10-20 years. As it can touch many more sectors than just communication, which was optical networking’s specialty, I think that the technology will be much more resilient and last for a longer period of time. The overall feeling is that earnings throughout the year were much, much better than investors thought, and the fear of the slowdown didn’t quite materialise – so far. The USD lost some of its earlier gains during the week and is now just trading around 1.175. regarding the Central Banks meetings of the week, I believe that the BOE will cut by 25bp, but will find it hard to go any further than that also in early 2026; the ECB will probably stay put, having reached the end of its easing process without the additional cut that some (including me) were expecting; and the BOJ will raise its rates to 0.75% for the first time in 30 years. That is having some disastrous consequences for long JGB holders, whose yields for their benchmark bonds now approaching 2%, ending 30 years of a very lose monetary policy. Both the Japanese Government and the BoJ Governor don’t want to increase rates too much, so what they will say will be more important than what they will do. The JPY is gaining about 1 Yen on major crosses, but all could change come Friday, so it will be very interesting to watch. Keeping equities to buy (with the famous 3% weekly stop), keeping US bonds to hold, and European bonds to buy (with the notable exception of France). Valuations matter: Japan has really impressed with its performance under new PM Sanae Takaichi, and it would be well worth considering to include the Asian country in portfolios, but I still recommend hedging the JPY. 

* GDP forecasts for 3Q25 seem to be good, with the Atlanta and New York Fed finally in agreement on a positive direction. The current P/E ratio of 22.5x is above the average P/E ratio of the last 5 years at 20.0x and the 10-year average at 18.7x. David Kostin believes that the multiple can hold over the next 12 months; it is the same assumption I had back in 1999, when the multiple was 24x. That multiple lasted for the good part of almost two years, and despite the fall in 1H00, technology stayed strong through the summer, until the Intel preannouncement in September sealed their demise and gave way to 2 years of bear market. One of the major differences of the current cycles relative to the dot.com boom is that then many companies were thriving on expectations of future sales and no earnings, now companies, even startups (if we can call Palantir in that way), do have tangible revenues and earnings, so the market, whatever happens, is on a much sounder footing now than then. Furthermore, then the Fed was hiking rates, and had reached the peak by the end of 2000, with the famous out-of-meeting jumbo cut on January 3, 2001, in response to the rapid deterioration of the economy due to the dot.com crash. Were AI to crash, we could probably expect more of the same. Anyway, this time around, i) rates are lower and ii) the Fed is a tailwind, not a headwind.

*  The Federal Reserve made the third cut of the year in December, with two dissenters, and reduced the rate to 3.50-3.75%. Chairman Powell, as mentioned, did not share any incremental thoughts in his speech last Tuesday, but he did mention that the US Central Bank was now in a ‘wait and see’ mode. With so many delayed data still to come out it’s difficult to assess what are the current statuses of inflation and occupation, though we will get additional clarity in about a month from now, when all the latest data will be available once again. As mentioned previously, there are 82.1% chances that the FOMC will cut rates again by/at the June 17 meeting, the first one without Powell and with a Kevin in its place. If we look at December 2026, at the moment the estimates sees rates at 3.00-3.25%, hence with 2 more cuts during the next year. Be cautious of aggressive Fed cuts, as they may signal an impending recession; non-recessionary interest rate cuts are generally welcomed by the equities market. We need (lower) yields and (higher) earnings to support some of the highest multiples since my heyday (the fated 1999-2000), but it is increasingly difficult to get these in the US. You can look forward to these in Europe, even though the European Central Bank might have finished its easing cycle in 2025. 

* Yields on US 10-year Treasuries have reached 4.17%, and were mostly stable last week, in line with most European government bond yields, which were stable or down. While in 1999 they were even higher, and the Fed was hiking, not easing, we definitely need yields to return below 4% to have a more constructive scenario, albeit gradually and not through a crash. We seem to be getting there, although I cannot yet recommend the US Debt on their public spending plans. The 2025 S&P 500 bottom-up earnings estimate has continued its strong bounce to 270.86 and is ahead of the original forecast by Goldman Sachs of $268 per share, while being well clear of the revised top-down estimate of $262. In 1Q25, earnings were strong; more of the same, so far, for 2Q25. 3Q25 has followed in sync; I cannot comment on GDP yet, but earnings were plentiful once again, firmly in double digits, also lifting the averages for 2025 and even 2026. I remain optimistic, particularly on technology (the main driver for the S&P 500). Estimates for 2026 also seem to be on the rise and well above David Kostin’s forecast of $280 per share, representing a 7% growth from his revised forecast of $262 for 2025. If we applied the same growth rate to his original forecast of $268, we would get a target of $286. He has now acknowledged that his forecasts can be two-sided, showing a possible upside relative to when they were first made. 

Source: FactSet

* The US GDP closed 2Q25 with a reading of 3.8%, according to the third and final estimate. The Atlanta Fed GDPNow model starts its forecast for 3Q25 in positive territory, with a current forecast of 3.6%, up from 3.5% last week, and as usual, ahead of the Blue Chips consensus, which is currently around 3%, and moving upwards. The New York Fed’s Nowcast model has a current forecast of 2.31%, stable from last week. I believe it is prudent to make an average of those two forecasts to get to the real number; it is particularly good that these are now converging. Introducing a forecast for 3Q25, with earnings expected to climb by 13.6%, compared with a forecast of 7.9% as of September 30th, and with revenues growing by 8.4% vs 6.3% as of September 30th. In 4Q25, earnings are expected to grow by 8.1% vs 7.2% as of September 30th, with revenues growing by 7.5%, vs 6.4% as of September 30th. For 2025, earnings growth is forecasted at 12.1% vs 10.6% as of September 30th, with revenues coming in at 6.9% vs 6.2% as of September 30th. Finally, it’s worth noting that the chance of a recession in the next 12 months, as calculated from the yield curve, according to the Federal Reserve Bank of Cleveland, is presently (October 2026) 21.44%. The peak was 68.76% in April 2024, and it was the only time since 1960 in which a recession did not materialise, given such a forecast. The current level is not too far from what economists are currently predicting: a 25% chance of a recession in the next 12 months.

Source: Blue Chip Economic Indicators and Blue Chip Financial Forecasts; Federal Reserve Bank of Atlanta

Source: Federal Reserve Bank of New York, New York Fed Staff Nowcast

Source: Federal Reserve Board, Federal Reserve Bank of Cleveland, Haver Analytics

Earnings, What’s Next?

The reporting season for 3Q24 is now ending. Here’s a list of companies reporting this week. 

Source: Earnings Whispers

Market Considerations

Source: Carson Investment Research, FactSet, ISABELNET.com

Source: Bloomberg Finance L.P., Deutsche Bank Research, ISABELNET.com

Source: Bloomberg Finance L.P., Deutsche Bank Asset Allocation, ISABELNET.com

Source: J.P. Morgan, ISABELNET.com

Revenue growth estimates for 2025 are forecasted to grow by 6.9% (6.2% on September 30th), and earnings growth estimates for 2025 are predicted to grow by 12.1% (10.6% on September 30th), so the future looks bright. Introducing forecasts for 2026, which sound again very positive, with revenue to grow by 7.1% (6.6% on September 30th) and earnings to grow by 14.5% (13.9% on September 30th). As mentioned, the Fed has cut its rates by 100bp in 2024, 75bp in 2025, and will continue easing. Apart from the cut from quite high levels, which will probably help make these lofty multiples seem more bearable than offering a real stimulus to the economy, it will be important to see the extent to which central banks are willing to cut rates and their timeframe.  

Four highlights this week. First, we have a chart from Carson Investment Research, which mentioned the strong performance offered by the US markets in the seconfd half of December. This is also echoed by a recent Goldman Sachs analysis. We can certainly say that we saw the worst of the month so far – but whether the second half will get better depends entirely on the macroeconomic data we will see this week, so fingers crossed and hang on tight. The second chart, from Deutsche Bank, paints a bullish picture: notwithstanding the market’s elevated multiples (which center on investors optimism for 2026 and the coming years), the S&P 500 is still at the bottom of the uptrend which began in 2022. Hence, there’s more space to the top. The third chart, again from Deutsche Bank, shows the massive rotation which happened in the market lately, with the indexes barely up, but with a strong performance of S&P 493 and small caps at the expense of Mag 7. The reckoning is not too far away, just in a month’s time, when all companies should show their hand (their earnings and guidance). This is a theme evoked in the fourth chart by J.P. Morgan, which plots the earnings growth of the hyperscalers versus that of the S&P 493. According to their forecasts, the growth of the former will be double of that of the latter in 2026.

For equities, be careful not to fall into ‘Buffett’s trap’. He famously said that there were moments when Berkshire Hathaway’s stock was down more than 50%, and nothing was wrong with the company at the same time. Timing and risk management are key. I remain optimistic in the long term; I have faith in the new CEO, but to follow the Oracle means filling very, very big shoes.  The late Angelo Abbondio, a legendary Italian investor, used to say that you can rely on fundamental analysis and on technical analysis, but the most difficult thing was to decide when to prioritise the first and when the second. In general, no stock can outperform all the time; some volatility has to be expected. Those who performed better earlier may not perform so well later.

Due to the persistent stickiness of inflation, monetary policy is again taking centre stage. Obviously, we should not overlook geopolitical scenarios in Ukraine and the Middle East: this will dominate the news for a while. Any escalation would be negative for the markets.  

I now recommend a long position in equities and a neutral position on US bonds. For EU Bonds, I advise going long (with the notable exception of France), while I still suggest putting together a portfolio that focuses on the safety of German Bunds, which are to be preferred in my view, given increased yields and reduced spreads. Are 70bps more worth swapping an AAA security for a BBB+?  

There are five main headline risks to what is otherwise a constructive view for 2025 and 2026: i) revenue/earnings not matching forecasts, particularly in technology; ii) any damage to the economy and trade done from Trumponomics, tariffs, and resurging inflation; iii) any negative geopolitical outcome (which could see an expansion of the current conflicts); iv) a negative Fed shock if it does not meet the market’s expectations on easing; and v) valuations, which are nearing levels only seen once before (at least during my lifetime!). 

Japan earlier in November reached an all-time high for the Nikkei 225 after the election of a new political leader for the leading party, the LDP. The choice was between Sanae Takaichi and Shinjiro Koizumi, and the first one prevailed. Takaichi was a protege of the late Shinzo Abe and now champions loose monetary and fiscal policy. The leading index shot up the week after her election, on the perspective that her pro-growth agenda would revive Japan’s economy. Her election, however, doesn’t bode well for the JPY and for JGBs. Remember that Japan, as well as Europe, has a valuation much more compelling (=lower) than that of the US, and could be a useful way to diversify, as UBS was advising not so long ago. I am now very positive on the country, although I would definitely hedge the JPY. The BOJ almost certainly will have to raise rates, possibly as soon as on Friday, but if the increase is gradual, next year the strong performance of the Topix could continue.

Portfolios

Finally, I want to introduce three portfolios that Tom and I published on Wikifolio. Tom’s a multi-asset portfolio, whereas the one I manage (with substantial input from Tom) is a global income and growth with a heavy US tilt. The third one is on Italian Equities. Check them out!

https://www.wikifolio.com/en/int/w/wf00inf8ig

Tom’s Multi-Asset Portfolio is up 23.4% in 2 years, with a Sharpe Ratio of 1.0

https://www.wikifolio.com/en/int/w/wf000ipggi

Our Global Income and Growth Portfolio is up 28.3% in 2 years, with a Sharpe Ratio of 0.7. Obviously, the devaluation of the USD had a big impact as all stocks are priced in EUR.

https://www.wikifolio.com/en/int/w/wf00ipiteq

My Italian Equities Portfolio is up 49.5% in about 1 3/4 years and has outperformed the FTSE MIB Index by 1400 bp in this timeframe, with a Sharpe Ratio of 1.5

https://www.wikifolio.com/en/int/w/wf00ipjpeq 

My Japanese Equities Portfolio is presently in test phase. An update will be provided soon.

Consulting

Finally, I have officially become an Italian Independent Financial Consultant (Consulente Finanziario Autonomo), registered with the Italian OCF since 19 March 2024 (protocol 2425). If you are interested in my financial advice or simply want more information, please contact me at giorgio.vintani@inflectionpoint.blog

Consulting accounts usually start from EUR 100,000. Please note that you should be based in Italy to avail yourself of this service. If you are interested, please feel free to drop me an email. I am happy to send you my presentation and track record upon request.

Happy trading, and I look forward to seeing you next week!

InflectionPoint

Disclaimer

All views expressed on this site are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. I assume no responsibility for any errors or omissions in the content of this site, and there is no guarantee for completeness or accuracy. The content is food for thought, and it is not meant to be a solicitation to trade or invest. Readers should perform their own investment analysis and research and/or seek the advice of a licensed professional with direct knowledge of the reader’s specific risk profile characteristics.