The Chicago Fed National Activity Index rose to 0.18 in December, up from -0.04 the month before.
That is an increase of 0.22 points (from -0.04 to 0.18). The index measures overall U.S. economic activity.
December Activity Rebound
The December 2025 reading showed a clear rebound in economic activity. The index moved from negative to a solid positive level. At the time, this suggested the economy was heading into the new year with stronger momentum than expected. It also eased worries about a sharp slowdown.
More recent data has made the outlook less certain. January’s Consumer Price Index was hotter than expected at 3.3%, bringing inflation concerns back into focus. This has made the Federal Reserve’s next steps harder to predict. Markets are now less confident about rate cuts in the first half of the year. The strong growth seen at the end of 2025 may be helping keep prices under pressure.
Q4 2025 GDP, reported last month, supported this late-year strength with 2.7% annualized growth. Even so, weekly jobless claims have risen for three straight weeks. This may be an early sign that the labor market is cooling in early 2026. Overall, the story is mixed: strong past data, but early hints of slowing ahead.
For traders, this mix can mean higher volatility. Markets are weighing strong backward-looking data against weaker forward indicators. Strategies that can benefit from bigger moves—such as long straddles on the SPX—may be worth considering, especially since the VIX has risen from its January lows. With the data sending mixed signals, upcoming releases could still trigger sharp market reactions.
Rates Volatility Trading Focus
This uncertainty also affects rate expectations and can create opportunities in SOFR-linked derivatives. The MOVE index (a measure of bond-market volatility) has risen over the past two weeks, showing the market’s uncertainty about what the Fed will do next. In this environment, trading volatility may be more attractive than making a one-way bet on interest rates.
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