The Chicago Fed National Activity Index for the United States came in at -0.21 for December.
The previous reading was -0.04.
Economic Growth Signals Turning Lower
The Chicago Fed National Activity Index fell to -0.21 in December 2025. This points to slower-than-average U.S. growth. It also suggests the economy may stay weak into the first quarter of 2026. We are preparing for more market swings and a more defensive stance.
This view is supported by the January 2026 jobs report. Nonfarm payrolls rose by only 145,000, below expectations and the slowest pace in more than a year. Initial jobless claims have also edged up in recent weeks, averaging about 230,000. Together, these reports show that the slowdown seen at the end of 2025 is continuing into the new year.
In response, we may consider buying put options on major stock indices such as the S&P 500. This can help protect against a market decline caused by weaker economic conditions. These positions tend to increase in value if stocks fall as investors react to slower growth.
The chance of the Federal Reserve pausing, or even hinting at future rate cuts, has risen. The 10-year Treasury yield has dropped by almost 25 basis points over the past month to 3.65% as traders price in a more dovish outlook. We can also consider strategies that benefit from falling rates, such as call options on Treasury bond futures.
We also expect volatility to rise from today’s relatively calm levels. The VIX, near 17, may not fully reflect the uncertainty ahead. Buying VIX call options can be a cost-effective way to hedge against a sudden jump in market volatility.
In past slowdowns, such as 2015 and 2019, similar moves in the index came before choppy markets and a more dovish Fed shift. While a reading of -0.21 does not yet signal a recession, the negative trend from late 2025 is a warning. It makes sense to adjust our derivatives exposure for a weaker growth backdrop in the weeks ahead.
Positioning For Higher Volatility Ahead
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