US durable goods orders fell by 1.4% in December. This was smaller than the forecast drop of 2.0%.
The outcome indicates a milder decline than expected for the month. The release compares an actual change of -1.4% with a forecast of -2.0%.
Manufacturing Momentum Into The New Year
The December durable goods report showed a decline of only 1.4%, which was significantly better than the -2.0% contraction we were anticipating. This suggests the manufacturing sector had more momentum heading into the new year than previously believed. We see this as a sign of underlying economic resilience.
This stronger-than-expected data from late 2025, combined with the recent January jobs report that added over 200,000 positions, paints a picture of a surprisingly robust economy. With the latest core inflation figures still hovering just above 3%, the case for an imminent interest rate cut from the Federal Reserve is weakening. This shifts our expectations for monetary policy through the second quarter.
In response, we are looking at buying call options on industrial and technology sector ETFs for the coming weeks. This positive economic data should translate into better earnings outlooks for companies sensitive to business investment. This strategy allows for defined risk while providing upside exposure to a potential market rally.
We must also reconsider the path of interest rates, remembering how markets reacted to the policy shifts throughout 2024 and 2025. The data implies that yields may not fall as quickly as we had priced in at the end of last year. Therefore, we are examining options on Treasury bond ETFs that would profit from yields remaining stable or ticking slightly higher.
Positioning For Lower Volatility
Finally, this kind of steady economic news tends to suppress market volatility. The VIX has been trading in a relatively low range, recently settling near 14, and we see little reason for a sharp spike based on this data. Selling premium through strategies like put credit spreads on major indices could be advantageous in this environment.
