December 20, 2025 Market Update
Market Recap: An Early Christmas Present.
Stocks struggled early last week as investor worries about the vast sums being spent on infrastructure continued to grow. On Wednesday, the PHLX Semiconductor Index, which tracks 30 major chipmakers, fell 3.8% by the close. Equities rebounded on Thursday following a surprisingly cool inflation report, and by week’s end the major market indexes listed below finished the week not too far from where they began.
The bond market also experienced a sharp change in course that was sparked by the Labor Department’s November inflation report. Bond traders viewed the report as an early Christmas present providing the Fed with more room to continue cutting rates in 2026. This offset earlier concerns that a "hawkish cut" in early December might signal a pause in easing.
Taken together, last week’s trading suggests that Mr. Market is paying a bit less attention to the promise of AI and a bit more attention to the broader economic backdrop. Whether that shift proves lasting may depend on whether recent inflation data reflects genuine cooling or temporary distortions tied to the government shutdown.
Market Commentary. Compute this!
Quantum computing has been inching closer to practical reality and technology, while still early, carries real implications for digital assets such as cryptocurrencies that rely on encryption methods that were never designed to stand up to near-instant code breaking.
Most of today’s digital security depends on problems that are difficult for classical computers to solve. Quantum computers attack those same problems from a very different angle and could cut years of computation down to minutes. That possibility has pushed researchers, regulators, and some crypto developers to prepare for what is often called the “Quantum Threat.”
- Security experts estimate that sufficiently powerful quantum machines could expose digital wallets that have interacted on a blockchain, potentially making older transactions vulnerable.
- Bitcoin, Ethereum, and other major networks need coordinated upgrades to move to quantum-resistant encryption, a technical challenge that could take years.
- Financial institutions are already exploring “post-quantum” security standards, but adoption across decentralized systems is uneven.
For investors, the primary concern is not quantum computing itself but whether the crypto ecosystem can adapt to it and other technological advances. The transition to stronger encryption will take time, which is why traders may not focus on what could unfold several years from now. Long-term investors, on the other hand, need to pay close attention to these developments before including an allocation to crypto in their portfolios.
If you’d enjoy a deeper dive into this subject, take a look at this article by Larry Swedroe, one of my favorite online commentators.
In Case You Missed It: Happy Holidays to You (if You Work for Uncle Sam).
President Trump has issued an executive order declaring Christmas Eve and the day after Christmas as federal holidays this year. Major U.S. stock and bond markets will follow their usual calendar with an early close on December 24 and a full trading day on December 26.
Please Note. In light of the Christmas Holiday, there will not be a Market Update next Saturday, December 27th. Merry Christmas to all, and to all a good night!