GDP Surprise Fuels Market Rally but Raises New Rate Questions

The U.S. economy delivered a late-year shock that markets were eager to embrace. A stronger-than-expected GDP reading, showing annualized growth above 4 percent, arrived at a moment when investors were already leaning toward optimism. Instead of triggering fears of tighter financial conditions, the data helped extend a year-end rally that pushed major equity indices toward fresh records.

The reaction underlined a familiar but fragile dynamic: when growth is strong enough, markets tend to celebrate first and worry about policy later. The GDP figure mattered not just because it beat expectations, but because of its timing. Late December trading is often dominated by thin liquidity and positioning rather than fundamentals. In this environment, a clear macro signal can have an outsized impact.

For investors, this reinforced the narrative of a soft landing rather than an abrupt slowdown. Recession fears, which shaped market thinking earlier in the year, have steadily receded. The GDP surprise added weight to the view that the U.S. economy is slowing only gradually, giving companies room to grow earnings into the new year.