The United States saw its Personal Consumption Expenditures prices increase by 2.8% in the third quarter, matching expectations. This comes as the US economy expanded at an annualised rate of 4.3%, exceeding forecasts of 3.3% for that period.
Gold prices reached $4,497 driven by a weak Dollar, but eased after strong GDP figures showed near-term demand for the currency. Meanwhile, GBP/USD fell below 1.3500 as the USD recovered on the back of the robust economic data.
Crypto Market Trends
Bitcoin stayed above $87,000 amid persistent selling pressure affecting the wider cryptocurrency market, impacting Ethereum and Ripple. Risk-off sentiment continued to weigh on Dogecoin, reflecting a weak derivatives market with low Open Interest and funding rates.
Upcoming years may see shifts in the market, challenging existing assumptions about growth, inflation, and geopolitics. The focus remains on strategic picks within the brokerage sector, emphasising customer needs and market positioning for 2025.
Information provided here is for informational purposes and does not constitute financial advice. Thorough individual research is advised before undertaking any market activity, acknowledging that market volatility can lead to potential financial losses.
We see the economy showing mixed signals as we close out 2025. The strong 4.3% GDP growth from the third quarter is now being challenged by a sharp drop in December’s consumer confidence to 89.1. With core PCE inflation holding at 2.8%, the Federal Reserve’s path for 2026 remains highly uncertain.
Strategy for Market Volatility
This is a prime environment for long volatility strategies heading into the new year. The CBOE Volatility Index (VIX) has already climbed to 21.5, up from an average of 17 in the prior quarter, reflecting growing market anxiety. We believe purchasing VIX call options or call spreads for February 2026 expiration offers a cost-effective way to position for potential market swings.
With the S&P 500 hovering near all-time highs around 6,200, we see increased tail risk. The sharp decline in consumer confidence is a classic leading indicator for reduced spending, which could impact corporate earnings in the first quarter of 2026. Buying out-of-the-money put options on the SPY or QQQ ETFs provides a hedge against a potential market correction.
Gold’s rally to nearly $4,500 an ounce suggests a strong demand for safe-haven assets. Open interest in COMEX gold futures has swelled by 15% over the last month, showing significant new money is entering this trade. We anticipate this trend will continue, making long positions in gold futures or call options on the GLD ETF attractive.
The new tariffs on semiconductors from China create a clear headwind for the sector. We expect companies heavily reliant on Chinese supply chains to issue cautious guidance for 2026, creating downward pressure on their stock prices. Establishing bearish positions through put options on the SOXX semiconductor ETF could capitalize on this specific geopolitical risk.
