The S&P 500 (Index: SPX) closed out the first week of December 2025 at 6,870.40, up 0.3% from where it closed the previous week.

The main focus of investors continues to be what action the Federal Reserve will take with short term U.S. interest rates. After putting on a show in recent weeks to try to convince markets that it might not continue reducing the Federal Funds Rate at the end of its next rate-setting meeting on Wednesday, 10 December 2025, evidence of continued anemic growth in the U.S. labor market announced during the past week is leading investors to expect the Fed will cut rates.

The CME Group's FedWatch Tool captures that sentiment. It held steady in the past week, indicating an 87% probability of a quarter point rate cut on 10 December (2025-Q4). Looking beyond the end of 2025, the FedWatch tool gives better than even odds for additional quarter point rate cuts on 29 April (2026-Q2) and 29 July (2026-Q3). A third rate cut anticipated for 9 December (2026-Q4) a week ago is no longer in the outlook, with the next potential rate cut pushed out into 2027.

Even though the probability of a rate cut is high, the Fed's minions arguing against a rate cut have succeeded in creating enough doubt that investors remain focused on the current quarter of 2025-Q4 in setting current day stock prices. The latest update of the alternative futures chart shows the trajectory of the S&P 500 falls in the middle of the redzone forecast range we added two weeks earlier, assuming investors would be focused on 2025-Q4 going into this upcoming trading week.
 

After the Fed meets, there will be little reason for investors to continue placing much attention on 2025-Q4. We think investors will quickly shift their forward-looking attention toward the slightly more distant quarter of 2026-Q1, since it will become the focus of timing for the next rate change actions by the Fed.

Whether that plays out as we think will depend on the random onset of new information. Speaking of which, here are the market-moving headlines that influenced investor expectations during the past week.

Monday, 1 December 2025

• Signs and portents for the U.S. economy:
  • Oil climbs over $1 a barrel on OPEC action, Ukraine attack
    • OPEC+ holds oil output steady, agrees capacity mechanism
  • US manufacturing stuck in doldrums as tariff headwinds persist
• Fed minions disagreeing with each other could hurt markets, expected to deliver rate cut in December:
  • Flurry of Fed dissents in coming meetings could pose market, political risks
  • BofA expects December Fed cut, two more in 2026
• Bigger trouble, mixed growth signs developing in China:
  • China's central bank vows crackdown on virtual currency, flags stablecoin concerns
  • China's November new home prices climb but resale values extend declines, survey shows
• BOJ minions getting excited to hike Japan's interest rates:
  • BOJ to consider rate hike in December, governor says; yen, yields rise
  • Global bonds slide after hawkish Bank of Japan comments
    • Yen rises and bonds fall after BOJ governor hints at rate increase
• Bigger trouble developing in Eurozone:
  • China export controls push European firms to move supply chains
• U.S. stocks end lower as yields rise at the start of December
  • Wall Street ends lower as yields climb; crypto stocks drop

Tuesday, 2 December 2025

• Signs and portents for the U.S. economy:
  • Oil eases amid uncertainty around Russia-Ukraine peace plan, oversupply worries
    • OPEC+ members to undergo annual oil capacity audit under new plan, sources say
  • Q3 earnings show firm revenue gains alongside softer low-income demand
• Chief Fed minion might linger after being ousted as Chief in 2026:
  • Trump says he will announce Fed chief nominee in early 2026
    • Powell could stay on as Fed governor after giving up chair role, like former chief Eccles
  • Major brokerages boost bets on December Fed rate cut ahead of policy meeting
• Bigger trouble developing in China:
  • China manufacturing is slumping despite boost from US trade truce
  • China floods the world with gasoline cars it can't sell at home
  • Chinese censors crackdown on online 'doom-mongering' of property sector
• BOJ minions rate hike plans to have global impact:
  • Japan's economic normalisation will affect global liquidity
  • Demand for Japanese bonds reassures jittery markets
• ECB minions say they have Eurozone inflation right where they want it:
  • Euro zone inflation ticks up, pointing to steady ECB rates
  • Euro zone inflation practically at target, ECB's Nagel says
• Wall Street rebounds, ends higher as Bitcoin, tech stocks rise
  • Equities rise on Fed rate cut optimism, Boeing jumps

Wednesday, 3 December 2025

• Signs and portents for the U.S. economy:
  • The AI frenzy is driving a new global supply chain crisis
  • Exclusive: More US soybean shipments to China due to load through mid-December
  • Oil rises as Moscow peace talks fail to reach breakthrough
• Fed minions stop losing money after three years:
  • Fed data suggests central bank has stopped losing money
• Bigger trouble, stimulus developing in China:
  • China's services growth slips to five-month low in November
  • China likely to chase 5% GDP growth in 2026 in bid to end deflation
  • Major Chinese banks cut high-yield deposit products to ease margin pressure
• Business recovery developing in Eurozone, ECB minions worry about 'upside suprises':
  • Euro zone business activity expands at fastest pace in 30 months in November
  • ECB's Lane flags 'upside surprises' to euro zone inflation
• U.S. stocks shrug off selloff to end higher after lower-than-expected jobs data
  • Indexes close higher as data keeps Fed rate cut expectations elevated

Thursday, 4 December 2025

• Signs and portents for the U.S. economy:
  • Lower interest rates would likely eliminate the need for 50-year mortgage, US Treasury adviser says
  • US private payrolls post largest drop in more than 2-1/2 years in November
    • US weekly jobless claims dive to a more than three-year low
  • Oil rises on expectations of Fed rate cut, Ukraine peace talks stalling
  • Americans head to dollar stores as affordability crunch pinches consumers
• Fed minions see steady unemployment rate, still expected to cut rates in December 2025:
  • Chicago Fed sees November unemployment rate steady at 4.4% as alternate data shows job losses
  • Economists double down on December Fed cut despite policymaker divide
• Bigger trouble, stimulus developing in China:
  • China's Real Estate Collapse Sends Local Debt To Record $18.9 Trillion
  • Exclusive: China state-owned banks soak up dollars to slow yuan gains, sources say
• BOJ minions think they've won something:
  • BOJ likely to raise rates in December, government to tolerate move, sources say
    • BOJ wins first showdown with Takaichi - what's next is less certain
    • BOJ's Ueda flags uncertainty on how far rates can go up
  • Japanese 10-year bond yields rise to highest level since 2007
    • Weak Japanese yen is ticking time bomb
    • Explainer. How will a rise in Japanese interest rates affect global markets?
• Wall Street ends mixed after struggling to stay afloat on lower-than-expected job cuts, Metaverse news
  • Investors cheer Meta's reported Metaverse cuts, a segment that has bled $73B in losses
    • EU hits Meta with antitrust probe over plans to block AI rivals from WhatsApp
  • Indexes end near flat, supported by Fed hopes but dragged by Amazon

Friday, 5 December 2025

• Signs and portents for the U.S. economy:
  • Oil prices hold steady due to stalled Ukraine peace talks and supply outlook
• More investment bankers expect Fed minions to deliver rate cut:
  • Jumped the gun, says Morgan Stanley; reverses Dec Fed rate call to 25bps cut
• Recovery signs developing in China:
  • China's November exports expected to have rebounded off US tariff truce
• JapanGov minion makes show of BOJ minions having independence from JapanGov minions as bigger trouble develops in Japan:
  • Japan's economy minister says up to BOJ to decide 'specific monetary policy means'
    • BOJ expected to choose 'constructive ambiguity' on future rate hikes
  • Japan October household spending falls at fastest pace in nearly 2 years
• Wall St closes with slight gains as data keeps Fed cut expectations on track
  • U.S. stocks end higher as NFLX-WBD acquisition fuels sentiment, investors assess inflation gauge

We're rapidly coming up on another period in which we'll need to add another redzone forecast range to the chart to track the most likely trajectory the S&P 500 will be taking in the weeks ahead. Unlike the current redzone forecast range that is set to end early in this upcoming week, we anticipate the actual trajectory of the S&P 500 will overshoot the projections of the dividend futures-based model for several weeks going into 2026. This is a consequence of the model's use of historic stock prices as the base reference points for making its projections of the S&P 500's future, in which the echoes of past volatility affect the model's forecasts. The redzone forecasts we add get around that inconvenience by bridging across the period in which those echoes affect the model's raw projections.

The Atlanta Fed's GDPNow tool projection of real GDP growth in the U.S. during the recently ended 2025-Q3 ticked down from +3.9% last week to +3.5% week. The tool won't shift to forecast 2025-Q4's GDP until 23 December 2025. The BEA's official initial estimate of GDP for 2025-Q3 will be released on that date.

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