Ever get that Sunday night feeling when the house is quiet, but you just know the coming week is going to be wild?
That’s exactly where the stock market sits right now. The major indexes just wrapped their second straight winning week, the S&P 500 is less than 1% from all-time highs, and yet futures are basically asleep on Sunday evening. It feels almost too calm—like the calm before the storm everybody has been whispering about for months.
Personally, I love these moments. The market is holding its breath, and we’re about to find out whether it exhales with relief or gasps in surprise.
What Happened Last Week (And Why It Still Matters)
Let’s be honest—most weeks in 2025 have felt like riding a rollercoaster designed by someone who really hates seatbelts. But the past five trading days were surprisingly civilized.
The Dow climbed half a percent. The Nasdaq tacked on almost 1%. And the S&P 500, everyone’s favorite benchmark, edged up 0.3%—enough to push it within spitting distance of its record high from earlier this year.
Friday’s catalyst? A softer-than-expected core PCE reading—the Federal Reserve’s favorite inflation gauge. When the number hit the tape (delayed from its original release date), traders did what traders do: they bought everything in sight. Four-day winning streak for the S&P and Nasdaq. Three out of four up days for the Dow. Classic relief rally.
“Markets are appropriately focused on an interest rate cut or hold coming out of the FOMC meeting… but investors are perhaps more interested in dynamics surrounding voting-member outlooks and future Fed leadership.”
Eric Freedman, Chief Investment Officer, Northern Trust Wealth Management
And that quote pretty much sums up the weird tension right now. Yes, everyone is obsessed with whether we get 25 basis points or zero. But the bigger question lurking underneath is: What does the Fed tell us about 2026?
The Rate-Cut Odds Are Now Overwhelming
Go look at the CME FedWatch Tool right now. I’m writing this. 88% probability of a December cut. That’s up from roughly 67% just four weeks ago.
Eighty-eight percent.
In trader speak, that’s basically a done deal. When odds cross 85%, the market starts pricing it as certainty. The only real debate left is how dovish the statement and dot plot will sound.
- Will Powell repeat the “mid-cycle adjustment” language from 2019?
- Will the 2026 dots show two cuts instead of one?
- Will any hawkish members suddenly turn into doves once unemployment ticks above 4.3%?
Those are the questions keeping portfolio managers up at night—not whether we get 25 bps next week.
Three New Faces Join the S&P 500
Friday night also brought a fun little surprise from S&P Global: three companies are getting promoted to the big league on December 22.
- CRH – the Irish building-materials giant that moved its primary listing to New York
- Carvana – yes, the used-car company that was left for dead in 2022 and is now up 4,000% from its lows
- Comfort Systems USA – an HVAC contractor riding the data-center construction boom
After-hours trading was kind to all three. Carvana jumped 9%. CRH added 6%. Comfort Systems rose a more modest 1-2%. Index-fund rebalancing will force roughly $30 billion of buying when the change becomes effective—another tailwind heading into year-end.
In my experience, these index-addition pops often mark the beginning of longer runs, especially when the underlying story is strong. Carvana’s turnaround saga is legitimately one of the wildest in modern market history. If you’d told me in late 2022 that they’d be joining the S&P 500 in 2025, I would’ve asked what you were smoking.
This Week’s Calendar: Quiet Until It Isn’t
Monday is basically empty—no major economic releases. The New York Fed drops its consumer expectations survey in the morning, but that rarely moves markets unless the inflation expectations number spikes.
Then the floodgates open:
- Tuesday: NFIB small-business survey
- Wednesday: CPI report (the big one)
- Thursday: PPI and retail sales
- Friday: Industrial production and preliminary Michigan sentiment
Oh, and somewhere in there the FOMC announcement, Powell press conference, and the infamous dot plot.
Earnings season also kicks back into gear with names like Oracle, Broadcom, Adobe, Costco, and Lululemon all reporting. Tech and consumer discretionary will be under the microscope.
So… Buy, Sell, or Chill?
Here’s my honest take after watching this movie play out too many times:
If the Fed delivers the expected 25 bps cut and keeps the door open for another move in early 2026, risk assets could easily run another 3-5% into year-end. The “Santa Claus rally” isn’t a myth when liquidity is gushing and short-term rates are falling.
But if Powell pushes back hard—if he says “we’re done for now” or the dots show only one cut in 2026—the correction crowd that’s been waiting patiently all year will finally get their moment.
Volatility is cheap right now. The VIX closed Friday under 13. That usually means complacency. And complacency is exactly when the market likes to remind everyone it has a pulse.
The stock market has a nasty habit of doing the most damage when the fewest people are expecting it.
We’re not quite at maximum complacency yet, but we’re close.
Positioning Thoughts Heading Into the Week
I’m personally carrying slightly above-benchmark equity exposure, but I’ve trimmed some of the high-beta 2025 winners and added to areas that have lagged:
- Energy stocks (still cheap on forward earnings and benefiting from cold weather)
- Regional banks (direct beneficiaries of lower rates)
- Small-caps via the Russell 2000 (most sensitive to borrowing costs)
- Gold miners (inflation hedge + rate-cut tailwind combo)
Cash level is around 8%—enough dry powder to buy any post-FOMC tantrum, but not so much that I miss the ride if Santa shows up early.
In other words, I’m cautiously optimistic. Which, let’s be real, is the most dangerous emotional state in markets.
Final Thought
We’re in that weird December window where the market can go absolutely nowhere for days… and then move 3% in a single session on a single sentence from Jerome Powell.
The fundamentals haven’t dramatically changed in the last month. Growth is slowing but not collapsing. Inflation is cooling but not cold. Corporate earnings are still expected to grow double-digits next year.
What has changed is sentiment. And sentiment is a powerful drug.
So buckle up. Or don’t—maybe take a walk, touch some grass, remind yourself that trees don’t actually grow to the sky.
Either way, this week is going to be fascinating.
See you on the other side.
