Can you feel it? We’re in that weird twilight zone between Thanksgiving leftovers and New Year’s champagne where the stock market suddenly decides whether Santa Claus is coming to Wall Street or not.
With the S&P 500 already up almost 17% for 2025 and December living up to its reputation as one of the strongest months historically, most of us were starting to get comfortable. But comfort is dangerous in this game. This week brings two events that could either pour rocket fuel on the year-end rally or throw a bucket of cold water on everything we’ve enjoyed since summer.
The Two Catalysts That Actually Matter Right Now
Let’s cut through the noise. Hundreds of things will happen this week, but only two have the horsepower to meaningfully move markets: the Federal Reserve’s final policy meeting of the year and earnings reports from Broadcom and Costco after the bell on Thursday.
Everything else? Mostly background static.
The Fed’s Last Dance of 2025
By now everyone and their dog knows the Fed is cutting rates by 25 basis points on Wednesday. The probability is sitting at basically 100% in the futures market. So the actual announcement? Yawn.
What actually matters is everything around it.
First, the updated dot plot. This is where each Fed governor anonymously tells us where they think rates will be over the next few years. The September dot plot showed three cuts penciled in for 2026. If that number drops to two or even one this week, stocks will throw a tantrum.
Second, dissents. We’ve had a remarkably unified Fed this year, but cracks are showing. If we get multiple dissents against the cut (or for bigger cuts), it signals serious division heading into 2026, especially with a new Chair coming in May.
The next Fed Chair walks into a nightmare scenario: inflation still above 2%, unemployment creeping higher, and a President who thinks rates should be near zero.
Speaking of which… the elephant in the room is Jerome Powell’s impending departure. President Trump has been crystal clear he wants someone more aggressive on rate cuts, and the leading candidate appears to be Kevin Hassett. The market is trying to price in what a Hassett Fed would actually look like.
My take? The December meeting matters less for what it does and more for what it reveals about 2026. If the Fed sounds even slightly more hawkish than expected, we could see the first real pullback since October.
Broadcom: The AI Reality Check We’ve Been Waiting For
Let’s talk about the company that quietly became one of the most important in the entire AI ecosystem.
Broadcom reports Thursday after the close, and this one has legitimate potential to move the entire semiconductor sector. Why? Because they’ve got their fingers in every major AI pie.
- They co-developed Google’s TPUs (the chips that just powered Gemini 3, widely considered the new LLM leader)
- They’re the primary custom AI chip partner for multiple hyperscalers
- Their networking business is the picks-and-shovels play for data center buildout
The custom AI chip market has been shrouded in mystery all year. We know Meta, Google, Amazon, and Microsoft are all building their own chips, but nobody’s been willing to talk numbers. Broadcom is the closest thing we have to a pure-play window into this trend.
Here’s what I’m watching specifically:
- Are custom AI chip orders accelerating or has the initial rush slowed?
- How much visibility do they have into 2026 spending from the big cloud providers?
- Is networking revenue (where most AI capex actually shows up) still growing 50%+ year-over-year?
The Street is looking for $17.5 billion in revenue and $1.86 EPS for the current quarter, but guidance is what matters. If Broadcom guides conservatively for 2026, it would be the first real crack in the “AI spending is infinite” narrative that’s driven tech stocks all year.
Conversely, if they sound bullish about rack-scale architecture adoption and continued custom chip wins, we could be looking at another leg higher for the entire AI complex.
Costco: The Consumer Health Litmus Test
While Broadcom tells us about capex and enterprise spending, Costco tells us about the actual human beings who keep this economy running.
I’ve always believed Costco is one of the best real-time reads on consumer health. Their membership model means they have incredibly sticky customers who shop regularly, giving us a clear view of spending patterns.
This report is particularly fascinating because we’re getting it right after Black Friday/Cyber Week, but before Christmas. Management commentary on:
- How holiday selling is shaping up
- Whether consumers are trading down to cheaper items
- The impact (or lack thereof) from tariff discussions
- Traffic trends versus basket size changes
Costco is actually suing the administration over certain tariffs, which makes their commentary especially interesting. Will management sound defiant? Concerned? Dismissive?
The numbers themselves are almost secondary. The Street wants about $67 billion in revenue and $4.28 EPS, both up nicely year-over-year. But the monthly sales reports mean we already have a pretty good idea what the top line looks like.
The real value comes from management’s tone about the consumer. Are middle and upper-middle class shoppers still spending freely? Or are we finally seeing cracks?
Putting It All Together
Here’s the bottom line: we’re at an inflection point.
The market has priced in a soft landing, continued AI mania, and a consumer that refuses to break. This week brings two of the best reality checks we’re going to get before year-end.
If the Fed sounds reasonably dovish and both Broadcom and Costco deliver upbeat commentary, we could see the kind of melt-up that makes portfolio managers look like geniuses for staying fully invested.
But if we get hawkish dots from the Fed, cautious AI commentary from Broadcom, or signs of consumer weakness from Costco… well, December might not be so jolly after all.
In my experience, the market rarely gives us this clean a setup. Two major catalysts in the same week, both with clear bull and bear cases. Whatever happens, we’ll know a lot more about 2026 by Friday morning.
Buckle up. This should be fun.
