Visibility is the only currency that matters in a distorted market. On this December 22, 2025, investors are flying blind. The 43 day government shutdown that paralyzed the Bureau of Labor Statistics has finally broken, but the resulting data gaps have created a dangerous hallucination of stability. While the consensus celebrates a 16 percent annual return for the S&P 500, my internal models suggest we are entering a liquidity trap where price action no longer reflects value; it reflects the exhaustion of the dollar.
The Fed’s 3.5 Percent Gambit
The Federal Reserve just delivered its third 25 basis point cut of the year, bringing the benchmark rate to a range of 3.5 percent to 3.75 percent. Per the December FOMC minutes, this move was framed as a protective measure against a cooling labor market. However, the data is compromised. Because the BLS could not collect October survey data, the 2.7 percent CPI print released on December 18 is a statistical ghost. It ignores the reality of 4.2 percent energy inflation and a 9.1 percent surge in natural gas prices that hit households during the shutdown.
I maintain that the Fed is not cutting into weakness; they are cutting into a structural shift. The Shiller CAPE ratio for the S&P 500 has crossed 40 for only the second time in history. The last time this occurred was the 1999 dot-com peak. If you are buying the index at 6,900 today, you are paying a 23x forward earnings multiple for a market that has effectively priced in a perfection that the underlying macro data cannot support.
Asset Performance and Valuation Metrics
| Asset Class | 2025 YTD Performance | Current Price/Level | Key Resistance/Support |
|---|---|---|---|
| S&P 500 | +16.2% | 6,912.40 | 6,932 (Record High) |
| Gold (Spot) | +65.0% | $4,426.10 | $4,505 (Psychological) |
| Silver | +144.4% | $71.80 | $75.00 |
| US 10-Year Yield | -12.4% | 3.82% | 3.75% (Support) |
Gold as the Ultimate Ledger
Gold is not a hedge. It is the ledger that reveals the true cost of fiscal expansion. Trading at $4,426 per ounce this morning, the precious metal has outperformed every major asset class in 2025. This is the sharpest annual rise since 1979. While equity analysts point to AI productivity as the driver of the S&P 500, the 65 percent surge in gold tells a more sobering story about the debasement of the currency. Central banks are not just buying gold; they are rebasing their reserves to prepare for a multi-currency global trade environment.
Recent demand data from J.P. Morgan Global Research indicates that central bank buying averaged 585 tonnes per quarter this year. My conviction is that the $4,000 floor established in October is now permanent. Any correction below $4,200 is a gift from the market; it represents a brief window to exit fiat positions before the 2026 debt ceiling debates begin to dominate the narrative.
The Technical Exhaustion of the Santa Rally
The traditional Santa Claus Rally is being suffocated by institutional profit taking. On December 20, the S&P 500 touched a record high of 6,932 before immediately retreating. This is a classic distribution pattern. Large funds are liquidating into retail enthusiasm. Per the latest market flow data, insiders have been net sellers for seven consecutive weeks. They are not waiting for the new year to rebalance; they are exiting now because the 6,900 level represents the upper bound of a multi-year channel.
Technical traders should ignore the noise and watch the 10-year Treasury yield. At 3.82 percent, it is starting to move in lockstep with equities. This correlation breakdown is a red flag. Typically, yields fall when stocks sell off as a flight to safety. If we see yields rising alongside a market dip, it indicates that investors are losing confidence in the Treasury market itself. This is the nightmare scenario for the 60/40 portfolio, which has already seen its real returns decimated by the 2025 inflation spike.
Watching the January 13 Milestone
The immediate risk is no longer the Fed; it is the quality of the coming data. All eyes are now on the January 13, 2026, CPI release. This report will be the first to include the full retroactive corrections from the government shutdown period. If that report reveals that inflation was secretly compounding at 3.5 percent while the Fed was cutting rates, the 6,900 level will not just be a resistance point; it will be the high water mark for the decade. Watch the 2.7 percent core inflation level closely. Any print above 3.1 percent will force a violent repricing of the 2026 rate cut schedule.
