"The beginning is the most important part of the work." ✍️

- Plato

SUMMARY

✅ U.S. stocks closed lower on the last trading day of the year but the S&P 500 still finished with a 16%+ gain in 2025.

✅ Moody’s economist Mark Zandi says a weakening labor market and rising political pressure could push the Federal Reserve to cut interest rates three times in early 2026, outpacing current market and Fed expectations.

✅ Alphabet delivered its strongest stock performance since 2009 in 2025 as aggressive AI investments, product breakthroughs, and talent acquisitions propelled Google past its megacap peers.

✅ Bitcoin ended 2025 down 5.5% as prolonged price consolidation and steady investor selling dampened momentum heading into the new year.

✅ Warren Buffett officially closed a historic chapter by stepping down as Berkshire Hathaway’s CEO after more than six decades of transforming the company into a $1 trillion conglomerate.

✅ India’s KFC and Pizza Hut franchise operators agreed to a $934 million merger aimed at boosting scale and profitability amid rising costs and intensifying competition in the fast-food market.

MARKET SNAPSHOT

↘ Dow 48,063.29 - 0.63%
↘ Nasdaq 23,241.99 - 0.76%
↘ S&P 6,845.50 - 0.74%

ECONOMY

Economist Sees Fed Surprising with Three Rate Cuts in Early 2026

Image courtesy of Alamy Stock Photo, Getty Images

Mark Zandi, chief economist at Moody’s Analytics, predicts the Federal Reserve could enact three quarter-point rate cuts in the first half of 2026, citing labor market weakness, inflation uncertainty, and mounting political pressure. This outlook is more aggressive than both market and Fed expectations, which currently signal a slower pace of easing.

Zandi points to a still-flagging job market as the key driver. Businesses may remain hesitant to hire amid trade, immigration, and other policy uncertainties, keeping unemployment elevated. “Until job growth strengthens, the Fed will continue cutting rates,” he wrote in a recent report.

Markets, in contrast, are pricing in two cuts—the first likely in April and the second toward September—according to CME FedWatch data. Fed officials themselves remain more cautious, with projections indicating just one cut for 2026, and minutes from the December meeting showing only tentative support for additional reductions.

Political dynamics could accelerate the Fed’s actions, Zandi notes. President Trump is expected to appoint another loyalist to the Fed as Governor Stephen Miran’s term expires, and he may attempt to influence the selection of a new chair when Jerome Powell’s term ends in May. Courts have so far blocked efforts to remove Governor Lisa Cook. Zandi warns that with midterm elections approaching, “political pressure on the Fed to lower rates further to support economic growth is likely to intensify.”

The FOMC meets next on Jan. 27-28, with market odds of a rate cut at that meeting currently around 14% according to CME futures.

TECH SPOTLIGHT

Google Wraps Up Best Year Since 2009, AI Push Drives Market Outperformance

Image courtesy of Reuters

Alphabet (GOOGL) closed out 2025 with its strongest Wall Street performance since 2009, jumping 65% for the year. After a rocky start, the stock’s momentum accelerated thanks to a string of AI product launches and strategic hires, pushing Alphabet ahead of its megacap peers. Among the eight tech giants valued above $1 trillion, Google was the biggest gainer, followed by Broadcom (+49%) and Nvidia (+39%).

The year began with skepticism over whether Google could maintain dominance amid rising AI competition from OpenAI’s ChatGPT and Sora services. The stock fell 18% in Q1—its worst quarterly drop since mid-2022—but sentiment shifted in Q2 with key AI initiatives. Josh Woodward, a 16-year company veteran, was promoted to lead the Gemini app, Google’s ChatGPT competitor. By August, the app’s image generator, Nano Banana, went viral, and by September, Gemini surpassed 5 billion generated images and overtook ChatGPT as the top app in Apple’s App Store.

Google also strengthened its AI talent pool through the acquisition of engineers from startup Windsurf for $2.4 billion in licensing and compensation, following the collapse of a planned OpenAI deal. Meanwhile, the company avoided the harshest antitrust penalties in a major court ruling, allowing it to maintain key revenue streams like Apple search preloads while sharing limited data with competitors.

The Gemini platform continued to grow with the recent release of Gemini 3, narrowing the usage gap with ChatGPT. According to Similarweb, ChatGPT’s share of generative AI traffic dropped from 87% to 68% over the past year, while Gemini surged from 5% to 18%. Analysts at Citizens note that the real impact of Google’s AI investments lies in enhancing its core search business through AI-powered features like AI Overviews, which improves query responses and engagement.

Beyond AI, Alphabet is positioned for growth in cloud computing, where it competes with Amazon Web Services and Microsoft Azure, and in autonomous driving through Waymo. Analysts expect Q4 revenue growth of roughly 15% to over $111 billion, with low-teens growth anticipated throughout 2026. Capital spending is projected to rise from $93 billion in 2025 to more than $114 billion next year as CEO Sundar Pichai responds to soaring demand, including a record number of $1 billion-plus cloud deals.

While risks remain—particularly if OpenAI, a key customer, scales back spending—analysts at Pivotal Research remain bullish, raising their price target to $400, about 28% above Alphabet’s Wednesday close. They note that any AI market shakeout would likely mirror the dot-com era’s “healthy weeding out,” leaving dominant players like Google in a stronger position.

CRYPTOCURRENCY

Bitcoin Ends 2025 Down 5.5% as Frustrated Investors Sell at a Loss

Image courtesy of brookings.edu

Bitcoin (BTC) closed out 2025 down roughly 5.5%, trading around $88,410 after a year of muted momentum. Price action has remained tight in recent sessions, reflecting one of the quietest two-week periods in the crypto market since last year. While stability reduces volatility risk, some investors are growing frustrated by the lack of directional movement.

On-chain data shows persistent selling pressure, with realized losses near $300 million per day, highlighting continued distribution by holders who entered near local highs. Bitcoin remains above its True Market Mean of $81,000, but this ongoing selling limits short-term upside potential.

Technical indicators suggest that BTC is poised for renewed volatility. Bollinger Bands are tightening, signaling suppressed movement that historically precedes sharp price swings. If selling pressure eases, Bitcoin could break out of its current range. Otherwise, consolidation near $88,210 may continue into 2026, with a risk of decline toward $86,247 if bearish momentum persists.

Traders and investors are watching closely as Bitcoin enters the new year, balancing cautious patience with the potential for a breakout after an extended consolidation phase.

Buffett transformed a failing textile company into a $1 trillion conglomerate by masterfully using insurance “float” to invest in stocks and acquire entire businesses. Along the way, he became one of the world’s richest individuals, with a net worth exceeding $150 billion. He has already donated Berkshire stock worth roughly $208 billion and has instructed his children to eventually give away nearly all of his remaining wealth.

This transition is not a traditional retirement. At 95, Buffett will remain chairman of the board and plans to continue spending time at Berkshire’s Omaha headquarters. However, he has said he will largely step back from day-to-day decisions, leaving operational control to his successor, Greg Abel.

Abel, who has served as vice chairman overseeing non-insurance operations since 2018, joined Berkshire in 2000 following its acquisition of MidAmerican Energy, where he was president. Buffett has said he still expects to be helpful, particularly during periods of significant opportunity.

CNBC’s Becky Quick noted that Abel has effectively been running Berkshire’s non-insurance businesses for years, managing operational challenges that Buffett preferred to avoid. She added that Buffett’s continued presence—and his roughly 30% voting control—will act as a protective buffer as Abel steps fully into the role.

In recent years, Abel has increasingly shaped how Berkshire’s wholly owned subsidiaries are managed. While Buffett has long favored a highly decentralized, hands-off approach, Abel has introduced more structure and oversight. Buffett himself has acknowledged that while managers value autonomy, Abel provides both independence and engagement, resulting in greater discipline.

Earlier this month, Berkshire announced an added management layer by appointing the CEO of NetJets to help support leaders across its consumer, service, and retail businesses and to reinforce Berkshire’s culture and values.

Despite these changes, shareholders should not expect a dramatic shift. Longtime investor Ann Winblad said the company may operate differently under Abel, but its core strategy will remain intact.

Still, Buffett’s continued influence could delay major decisions—such as initiating a dividend, expanding buybacks, or deploying Berkshire’s more than $350 billion cash pile—potentially until after his tenure as chairman ends.

Over the long term, analysts note that Berkshire may face increasing pressure from investors to behave more like a conventional corporation, especially without Buffett’s extraordinary track record to shield management from demands for quicker action.

Berkshire’s Class A shares hit a record high of $809,350 the day before the news, then fell 14.4% to a low of $692,600 in August. They recovered somewhat, ending the year at $754,800—up 10.9% for 2025. Class B shares followed a nearly identical path.

M&A SPACE

India’s KFC and Pizza Hut Operators to Merge in $934 Million Deal

Image courtesy of dfisolutions.com

India’s leading operators of KFC and Pizza Hut said Thursday they will merge in a deal valued at $934 million, creating one of the country’s largest fast-food franchise operators.

Sapphire Foods India and Devyani International—both franchise partners of Yum Brands—announced the merger as fast-food operators in India face rising costs, slowing same-store sales, and mounting margin pressure. The challenges come amid intense competition from local operators of McDonald’s and Domino’s Pizza, as Indian consumers cut back on discretionary spending.

Under the terms of the deal, Devyani will issue 177 shares for every 100 shares of Sapphire. The combined company expects to generate annual synergies of 2.1 billion to 2.25 billion rupees ($23.3 million to $25.0 million) beginning in the second full year after the merger.

Together, the two companies operate more than 3,000 outlets in India and overseas, including KFC and Pizza Hut dine-in restaurants. They compete with Westlife Foodworld, the operator of McDonald’s restaurants in India, and Jubilant Foodworks, which runs Domino’s Pizza in the country.

Both franchisees currently operate at a net loss, making scale critical to improving profitability, said Akshay D’Souza, an independent consumer goods consultant.

“If the combined entity can unlock even half of the projected synergies, it could become a profitable business with greater control over costs,” D’Souza said.

In the quarter ended September, Sapphire’s consolidated costs rose 10% year over year to 7.68 billion rupees, while Devyani’s expenses increased 14.4% to 14.08 billion rupees.

Devyani posted a net loss of 219 million rupees for the quarter ended September 30, compared with a profit of 170,000 rupees a year earlier. Sapphire reported a wider consolidated net loss of 127.7 million rupees, up from a loss of 30.4 million rupees in the prior year.

📉 ON THE MOVE AND NOTABLES 📈

✔️ Major benchmarks posted strong full-year gains, with the S&P 500 up 17%, the Nasdaq higher by 21%, and the small-cap Russell 2000 advancing 12%.

✔️ Oil prices, trading near $58 per barrel, closed the year down nearly 19%.

✔️ Mining stocks, including Newmont (NEM) and Hecla (HL), slipped as silver prices tumbled.

✔️ Taiwan Semiconductor (TSM) rose after Reuters reported that Nvidia (NVDA) had approached the company to increase production of the H200 chip, now permitted for export to China. Sources indicated that demand from China has surged.

✔️ Warner Bros. Discovery (WBD) shares fell following a CNBC report that the company plans to reject Paramount Skydance's (PSKY) bid next week. Netflix (NFLX), which is pursuing a competing bid, dipped slightly ahead of the open.

✔️ Bitcoin (/BTC) climbed but remains below $90,000, trading within a narrow range of $85,000–$90,000.

✔️ Tesla (TSLA) fell amid continued volatility, though the stock remains up 21% year-to-date, outperforming the S&P 500.

✔️ Nike (NKE) gained following a positive note from Stifel, which maintained a hold rating on the stock.

✔️ Futures indicate roughly a 16% probability of a January rate cut, according to the CME FedWatch Tool.

✔️ China’s official NBS Manufacturing PMI for December rose to 50.1, entering expansion territory and exceeding analyst expectations of 49.2. While factory activity improved, much of the growth reflected domestic demand rather than export strength.

✔️ Yields finished 2025 down more than 40 basis points from their 2024 close at 4.57%, supported in part by the Fed’s rate cuts.

💲What to Watch Ahead💲

Markets have lacked clear direction in recent sessions amid light holiday trading volumes and a sparse economic calendar. Activity and headline flow are expected to normalize quickly as 2026 begins. Key data releases next week include the closely watched December employment report, ISM surveys, and updated consumer sentiment readings.

🟢 January 2: November construction spending.

🟢 January 5: December ISM Manufacturing PMI.

🟢 January 6: No major data or earnings expected.

🟢 January 7: December ADP employment change, December ISM Services PMI, November Job Openings and Labor Turnover Survey (JOLTS), and expected earnings from Albertsons (ACI), Constellation Brands (STZ), Jefferies Financial Group (JEF), and Applied Digital (ADLP).

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