🚀 US GDP rises 4.3% in Q3

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Market Overview
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Year To Date Performances:

1. The U.S. economy significantly outperformed expectations in the third quarter of 2025, with GDP expanding at an annualized rate of 4.3%, well above the 3.2% consensus forecast, according to a long-delayed report from the Commerce Department. Despite a government shutdown that pushed the release into late December, the data revealed a resilient consumer base with spending up 3.5% and a massive $166.1 billion surge in corporate profits, signalling robust demand even as the labour market showed signs of "decoupling" from topline growth. However, this economic strength came with a trade-off: the Federal Reserve's preferred inflation gauge, the PCE price index, climbed to 2.8% (with core at 2.9%), remaining stubbornly above the 2% target and suggesting that the central bank may maintain its restrictive monetary stance longer than investors had previously hoped.

2. U.S. holiday retail spending rose 4.2% year-over-year (nominal) this season, according to preliminary data from Visa, defying "gloomy" consumer sentiment and a 43-day government shutdown earlier in the quarter. A 7.8% surge in e-commerce largely fueled growth, though physical stores still captured 73% of total volume. The electronics sector (+5.8%) emerged as the top performer due to a massive upgrade cycle for AI-capable devices. Notably, this was the first "AI-integrated" shopping season, with roughly 50% of consumers using generative AI for price comparisons and gift discovery to offset the impact of tariffs and persistent inflation. While nominal growth was robust, Visa noted that inflation-adjusted "real" growth was a more modest 2.2%, as shoppers pivoted away from high-cost home improvement projects (-1.0%) to prioritize tech and apparel.

3. Starting the week of January 7, 2025, the Trump administration will officially resume administrative wage garnishment for federal student loan borrowers in default, marking the first time paychecks have been at risk since the pandemic-era pause began nearly six years ago. The U.S. Department of Education, led by Secretary Linda McMahon, confirmed that an initial wave of 1,000 notices will be sent to borrowers, with the number expected to scale rapidly as the department addresses a "default cliff" of up to 10 million people. Under federal law, the government can seize up to 15% of a borrower's disposable income without a court order, though protections ensure borrowers are left with at least $217.50 per week (30 times the federal minimum wage). While consumer advocates have voiced concerns over the timing—citing a weakening labour market and the recent expiration of the "on-ramp" grace period—the administration maintains that restoring involuntary collections is a necessary step toward fiscal health and national economic stability.

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