Image credit: Microsoft Copilot Designer

The S&P 500 (Index: SPX) sank in the early part of the third week of December 2025 as fears of whether the returns on investments being placed on AI-technology can overcome the debt that several high-profile firms like Oracle (Nasdaq: ORCL) are taking on to make them.

While the index bottomed at 6,721.43 at the close of trading on Wednesday, 17 December 2025, it went on to recover strongly by the end of the week. The index reached 6,834.50 by the close of trading on Friday, 19 December 2025.

That recovery in the latter part of the week came thanks in no small part to computer chipmaker Micron Technology (Nasdaq: MU) boosting its outlook on the strength of its AI-related order book and because the shutdown-delayed inflation data for November 2025 came in much lower than expected. The news about inflation would seem to clear a path for the Federal Reserve to continue reducing the Federal Funds Rate in 2026.

But that's in question. Because the Senate Democrats' shutdown fiasco affected the collection of a good portion of data for the November consumer price index report, there are questions about how well the Bureau of Labor Statistics was able to capture how prices changed.

If there's one thing Wall Street's bulls and bears can agree on, is that they want better quality data on which to stake their investments. If that's not already on their 2026 wish list for Santa Claus, it should be. 2025 has been a year in which the shortcomings of how government agencies collect and report economic data have been laid bare with much needing to be fixed.

That's enough editorializing! Here's the latest update to the alternative futures chart, in which we've added a new redzone forecast range to project the most likely trajectory stock prices will take through the end of 2025.

(Click on image to enlarge)

We add redzone forecast ranges to the alternative futures chart when we know in advance the dividend futures-based model's projections will be affected by the echoes of past volatility in stock prices. This is a forecasting challenge that arises because the model incorporates historic stock prices as the base reference points from which it projects the potential futures.

The new redzone forecast range bridges across the period in which past volatility in stock prices will cause the model to undershoot the path the S&P 500 will most likely take. One end of the forecast range is anchored on 18 December 2025, while the other will float based on the projections for 23 January 2026. We assume investors will focus their forward-looking attention on 2026-Q2 during this time.

That's because of the how the expectations for how the Fed will set the Federal Funds Rate in 2026 are changing. The timing of the next expected rate cut has been fluctuating in recent weeks and although the CME Group's FedWatch Tool anticipates quarter point rate cuts on 18 March (2026-Q1) and 29 July (2026-Q3), with no other rate cuts projected in 2026, that first rate cut has the potential to slide into 2026-Q2.

How far investors are looking into the future as they make their current day investing decisions can have a large effect on stock prices and often depends on the random onset of new information. Speaking of which, here are the market-moving headlines that influenced those decisions during the third week of December 2025.

The Atlanta Fed's GDPNow tool projection of real GDP growth in the U.S. during the recently ended 2025-Q3 is unchanged at +3.5% this week. The tool won't shift to forecast 2025-Q4's GDP until 23 December 2025, which coincides with when the BEA's official initial estimate of GDP for 2025-Q3 will be released.

On a programming note, this is the last edition of the S&P 500 chaos series for 2025, we'll be back with a new edition on Monday, 5 January 2026.

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