During December 1-5, 2025, US equity markets posted modest gains with low volatility, with the S&P 500 rising 0.3%, Nasdaq 0.9%, and the Dow Jones 0.5%, bringing the S&P 500 close to record highs. The rally was driven by growing expectations of Federal Reserve rate cuts, supported by softer economic data including weak ADP payrolls and manufacturing sentiment. Additionally, cooling inflation as measured by the PCE index also contributed to the positive sentiment.
In contrast to equities, the fixed income market faced headwinds, with Treasury bond yields climbing 7 to 12bps. The increase was attributed to global capital flows, particularly potential rate hikes by the Bank of Japan, and market speculation about the next Fed Chair nomination. Despite that, corporate credit traded firmer, with spreads 1 to 5bps tighter.
For this new week, we have the Federal Reserve's monetary policy meeting taking center stage, with markets widely expecting a 25bps rate cut and paying close attention to the post-meeting statement and press conference for future policy guidance. Additionally, the November Consumer Price Index (CPI) report will serve as a crucial inflation indicator that could influence both market sentiment and Fed decision-making.
