U.S. equity markets closed December on a mixed and choppy note, as strong year-to-date gains gave way to profit-taking and thin holiday trading. Investor sentiment during the month was shaped by expectations for Federal Reserve rate cuts in 2026 and ongoing sector rotation following a powerful multi-year rally in 2023, 2024 and 2025. While short-term market volatility picked up late in the month, the broader backdrop remained constructive, supported by resilient corporate earnings and economic data overall, moderating inflation, and optimism that continued easing of monetary policy could help extend the economic expansion into 2026.