US wholesale inventories rose by 0.2% in December, matching forecasts.
The data points to a modest monthly increase in stock levels held by wholesalers across the United States.
Inventory Data Signals Stability
The December 2025 wholesale inventory report came in exactly as expected, which tells us the economy is not experiencing any major shocks. This predictability suggests a period of lower market volatility in the coming weeks. We are viewing this as a confirmation that the economic slowdown from the middle of 2025 has found a stable footing.
This steady inventory data supports the idea that inflation is under control, a view strengthened by last week’s January 2026 Consumer Price Index report showing inflation at a 2.7% annual rate. As a result, expectations for a Federal Reserve rate cut later this year are growing, which should support equity index futures. Traders should watch options on the Fed Funds futures, as pricing for the June and September meetings will become more active.
With reduced economic surprises, the CBOE Volatility Index (VIX) has been drifting lower, recently hitting a six-month low of 13.5. This environment is favorable for strategies that profit from low volatility, such as selling covered calls or iron condors on broad market indexes like the S&P 500. We are seeing less demand for protective put options as a result.
The balance in inventories also points to specific sector performance. Industrial and materials sectors appear healthy, as they are not seeing an uncontrolled pile-up of goods. In contrast, the data, combined with a soft January 2026 retail sales report, suggests some weakness in consumer demand, which may create opportunities for bearish plays on consumer discretionary stocks.
Positioning For First Half 2026
Looking back, this stable but slow-growth picture is reminiscent of what we saw in 2019 before the pandemic. During that period, momentum and growth factors led the market while cyclical stocks lagged. We should position for a similar trend to develop through the first half of 2026, favoring technology and healthcare derivatives over those tied to banking or energy.
