Beyond Markets The Week in Markets: Two technical indicators suggest further strong equity gains next year
Dec 8, 2025
Recent job cuts among small firms and declining inflation data strengthen the case for a Federal Reserve rate cut. Wall Street predicts a 9% return for the S&P 500 next year, with two technical indicators hinting at even greater gains. The tech sector, particularly companies embracing AI, shows significant share price increases. Historical patterns suggest that tech pullbacks often precede strong rebounds, illuminating possible paths for AI startups amidst competitive pressures.
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Small Firm Job Losses Signal Fed Easing
- ADP showed small firms cut 120,000 jobs in November, signaling labour weakness despite larger firms adding jobs.
- Mark Matthews expects the Fed to start cutting rates, forecasting 75bps of easing by March which should help markets.
Core PCE Cooling Strengthens Cut Case
- September core PCE inflation eased to 2.8% year-on-year and ticked down month-on-month, supporting a rate cut case.
- Excluding portfolio services would lower core inflation further to 2.6%, reinforcing disinflationary momentum.
Modest Cuts Historically Lift Stocks
- Historically, modest Fed easing (10–100bps in 12 months) precedes S&P gains, with an average 13.3% rise after such cuts.
- Excessive cuts (>300bps) usually coincide with recessions and poorer market outcomes.