December 2025 Market Update: US Shutdown Ends, Japan Stimulates, China Slows
- US ends longest federal government shutdown in history (43 days)
- Japan approves JPY 21.3 trillion (~USD 135 billion) stimulus package
- China's economy loses momentum entering Q4 2025
- AI valuation concerns weigh on market sentiment
- Singapore rated "Very Attractive"; Semiconductors downgraded to "Neutral"
November 2025 Market Performance
Global markets delivered mixed results in November, with Latin America outperforming while Asia lagged.
Key Observations
Latin America was the standout performer at +5.7% in SGD terms. Japan declined sharply at -4.1% amid AI concerns and BOJ rate hike expectations. China and Asia ex Japan underperformed as economic data disappointed.
Global Events Summary
United States: End of the Longest Government Shutdown
The US federal government ended its 43-day shutdown on 12 November 2025 - the longest in US history. Funding has been extended to 30 January 2026. The shutdown disrupted economic data flow from key statistical agencies, leaving investors and policymakers without visibility on the US economy's health during this period.
Current US debt stands at USD 38 trillion, with approximately USD 1.8 trillion added annually. The estimated GDP impact is expected to exceed 0.1 percentage point, though this is expected to be recouped.
Japan: Economic Stimulus Package
Japan approved a JPY 21.3 trillion (~USD 135 billion) stimulus package under Prime Minister Sanae Takaichi. The package includes spending, tax breaks, and targeted investments in shipbuilding and AI sectors.
Tokyo core inflation reached 2.8% YoY in November, above the BOJ's 2% target. The 10-year JGB yield is at 1.82%, near 17-year highs. Firm inflation data is reinforcing expectations that the Bank of Japan may move towards a rate hike in coming months.
China: Q4 Momentum Loss
China's economy is losing momentum entering Q4 2025. Fixed asset investment shrank, industrial production rose much lower than expected, and retail sales marked their 5th straight month of slower growth.
The ongoing property market slump - now in its 4th year - continues to be a major growth headwind, making consumers reluctant to spend and worsening deflation pressures.
On AI and Semiconductors
Based on our reading of iFAST's December 2025 analysis, the current AI market appears fundamentally different from the 2000 bubble. AI capital expenditure is still largely funded from free cash flow rather than debt. Valuations remain well below past extremes. The Magnificent 7 show stronger fundamentals with 69.7% ROE compared to 28% for Dot-Com leaders.
However, caution is warranted. Some companies like Oracle and Meta have begun using debt financing. There is difficulty in estimating actual demand for AI, low visibility on monetization capabilities, and signs of a valuation bubble forming in semiconductor stocks.
iFAST appears to recommend investors take profits on semiconductor positions while acknowledging the long-term structural AI story remains intact.
On Regional Allocation
Singapore is rated "Very Attractive" - the highest rating. Japan, South Korea, Taiwan, and Digital Economy are rated "Attractive". The US and Semiconductors are rated "Neutral" with a cautious outlook.
On Japan
iFAST appears constructive on Japan, noting the stimulus package signals progress on expansionary fiscal policy, economic indicators are improving, and BOJ tightening expectations are building.
Different Market Structure
While valuations today appear more reasonable than in 2000, the market structure is fundamentally different. Robinhood retail traders, high-frequency quantitative algorithms, and cryptocurrencies did not exist during the Dot-Com era. These new participants and instruments can move in tandem, creating correlations that were absent 25 years ago.
December Positioning
As we enter the volatile year-end period, now is a good time to reassess. Consider "synthetic profit-taking" - shifting volatile positions into more defensive allocations while staying invested - or stepping aside entirely if you need a break.
Uncertainty remains elevated: Japan's inflation trajectory, potential BOJ rate hikes, mixed US employment data, and gold price swings all add to the noise.
Our Advice
A longer investment horizon helps smooth out short-term volatility. But for guidance specific to your portfolio, speak with your Financial Consultant.
