The State of Markets: "All Eyes on the Fed"

The State of Markets: “All Eyes on the Fed”

Risk appetite continued to grow in markets last week. In particular, the S&P500 rallied back towards its all-time highs; Bitcoin began to retrace its recent losses; while various commodity prices were strong –> with silver reaching new record highs (see chart), some strength in the gold price and an upside breakout in copper.

The key question now, therefore, is: For how long will that positive risk appetite persist? And, in particular, are markets building towards a near term top, potentially on this Wednesday’s (widely expected) Fed cut? Or has the uptrend resumed in this bull run? NB Our latest views were laid out in last week’s Tactical Equity Asset Allocation update (our 1 – 4 month outlook for the US equity market).

With respect to the Fed meeting, the market is already priced for a 25bps cut (with an 86% probability -> so it won’t be a surprise). More critical will be the tone of Powell’s press conference and whether (i) it’s another hawkish cut; and/or (ii) he gives any guidance around the potential for ‘reserve management’ (i.e. Fed asset purchases).

Key US macro data next week includes NFIB small business optimism and job openings on Tuesday, followed by PPI inflation on Thursday. In Asia, Chinese inflation data is due on Wednesday (both PPI and CPI), with Chinese total social financing and money supply on Friday. Key European data includes German industrial production on Monday. Elsewhere there are central bank policy decisions from the RBA (Tuesday) and Bank of Canada (Wednesday) – as well as the Fed. There are also speeches by various central bank governors and on Thursday the IEA publishes its monthly oil market report. Please see below for a full list of next week’s key macro data, events, and earnings.

Key chart:  Silver candlestick chart shown with key moving averages 

Upcoming Important Data/Events This Week:

Key Research

Longview on Friday, 12^th December 2025:

“Tactical Asset Allocation, the Broadening and the Broken Western System (a.k.a. The King is Dead –> Long Live the King)”

Despite the return of volatility, the S&P500 closed out November in positive territory (just -> up 0.1% for the month). That was the index’s 7^th consecutive positive month (after closing down in February, March & April).

We used November’s weakness to rebuild tactical overweight equity positions (to complement our overweight risk positions in our longer term recommended strategic asset allocation portfolio). By way of reminder the recommended tactical portfolio uses a 1 – 4 month timeframe (& allocates to US equities, bonds & cash); the strategic global asset allocation product is a 6 month to 2 year portfolio (and makes recommendations across the main public asset classes and all DM & EM geographies).

Our tactical entry points were initially at 6,796 on Nov 5th (1pp OW), followed by an additional 2pp OW (at 6,587 on the cash index, on 18^th November). As fig 1 shows, the short term (1 – 2 week) risk appetite scoring system was on BUY at that time (NB S&P500 cash intraday local lows were at 6,522 on 21^st November).

Key North American Macro Data & Events:

Fig B: US NFIB small business optimism index 

Key European Macro Data & Events

Fig C: German inflation, headline & core (Y-o-Y %) 

Key UK Macro Data & Events

Fig D: BRC retail sales (Y-o-Y %) 

Key Asia-Pacific Macro Data & Events

Fig E: Chinese M1 & M2 money supply growth (Y-o-Y %)

This Week:

Tactical Equity Asset Allocation Update No. 263, 2^nd December 2025:

“US Equities & The Challenge of the ‘Midterms’”

Daily Dose of Macro & Markets:

Daily Dose of Macro & Markets 4th December 2025:

“US Economy: A Tale of Two Cities -> More Evidence”

Daily Dose of Macro & Markets 3rd December 2025:

“Falling Bank Capital Requirements –> Supportive UK Economic Growth”

Daily Dose of Macro & Markets 2nd December 2025:

“BoE: The Growing Case For More Cuts”

Weekly Risk Appetite Gauge:

Weekly Assessment of the Market’s ‘Appetite for Risk’, 1^st December 2025:

‘After That, What's Next?’

Last Week:

Longview on Friday, 28^th November 2025:

“How To Time the End of a Bubble”

EZ Quarterly Asset Allocation Update No. 64, 27th November 2025:

“Eurozone Growth: Risks Skewed to the Upside”

Global Macro Report, 26th November 2025:

“UK Budget: Problems –> But Not All Bad a.k.a. UK growth thesis remains intact”

Daily Dose of Macro & Markets:  

Daily Dose of Macro & Markets 27^th November 2025:

“Next Fed Chair: How Weak is the US Economy, Really?”

Daily Dose of Macro & Markets 26^th November 2025:

“Midterms & Markets – What The Last 100 Years Tells Us”

Daily Dose of Macro & Markets 25^th November 2025:

“European Nat Gas: The Fading Winter Risk Premium"

Weekly Risk Appetite Gauge:

'Weekly Risk Appetite Gauge', 24^th November 2025:

“Appetite for Risk’: Relief Rally Likely Brewing/Underway”