US stocks kicked off the last trading week of 2025 near all-time highs but faced hurdles due to low trading volumes. This week is shorter because of a holiday, with the Federal Reserve’s Meeting Minutes being the key event on Tuesday. Major indexes, such as the Standard and Poor’s 500, remain flat as the AI tech rally fades and the home building materials sector weakens. The Dow Jones saw slight gains, but a 1.7% drop in Nvidia shares held it back.

Year-End Review of US Stocks

Even with low trading volumes at year-end, the Dow Jones is likely to keep either a bullish or stable trend for eight months. The Dow has risen over 14% this year, while the SP500 is nearing a 17.5% gain since January. The release of the Fed’s Meeting Minutes will be closely monitored for insights on possible policy changes. Right now, expectations suggest there might be two quarter-point interest rate cuts over the next two years, with the possibility of more cuts by September 2026. The FOMC meeting minutes, released three weeks after policy decisions, offer important insights for the market. Depending on whether the tone is optimistic or dovish, there could be reactions affecting the USD. With indexes close to record highs but trading volumes very low, we are cautious about the next few weeks. The CBOE Volatility Index (VIX) is around 12, a level we haven’t seen since late 2024, making options premiums quite inexpensive. This indicates market complacency, which can signal potential issues as we enter the new year. Tomorrow’s Federal Reserve meeting minutes are the only significant event on the agenda, presenting a clear opportunity for market volatility. Futures markets are pricing a greater than 60% chance of two rate cuts by September 2026, which is more aggressive than what the Fed has indicated. If the minutes do not suggest a dovish shift, it could quickly reverse some of this year’s gains. Considering this uncertainty, we are looking into purchasing at-the-money straddles on broad market ETFs like the SPY. This strategy can profit from large price movements in either direction, without needing to predict how the market will react to the Fed’s tone. The focus is on volatility returning to a quiet market, rather than a specific direction.

Market Position Strategies

For those of us with significant long positions from the 2025 rally, buying out-of-the-money puts on the S&P 500 is a smart, low-cost hedge. We’re also seeing weakness in tech giants like Nvidia, which is a change from the trend in the first three quarters of the year. This could hint at a shift in market leadership as we move into 2026. However, we should keep in mind that the market’s response to Fed minutes can be short-lived, especially in a low-volume setting. Looking back at the minutes from the November 2024 meeting, there was an initial 0.5% dip in the S&P 500 that was quickly reversed. Therefore, any trades based on volatility should be planned with short-term expiration dates to capture immediate reactions. Create your live VT Markets account and start trading now.

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