Wall Street entered the Thanksgiving break with a sense of quiet confidence, indicative of a potential shift in market dynamics. The S&P 500 (SPY) rose by 0.5%, marking its fourth consecutive session of gains and successfully reclaiming its 50-day moving average. The Nasdaq 100 mirrored this trend, buoyed in part by Nvidia (NASDAQ:NVDA), which showed resilience following recent competitive concerns regarding its AI processors. The volatility index, or VIX, registered a decline for the fourth straight day, reflecting the longest downward streak since early September.
Despite a slight increase in the 10-year Treasury yield to approximately 4.02%, the overall optimistic sentiment remained unscathed. This positivity was further supported by initial jobless claims for the week of November 22, which exceeded economists’ expectations. Analysts from BMO suggest that this mixed but robust data could keep the Federal Reserve considering a potential 25-basis-point rate cut at their upcoming meeting on December 10.
Investor sentiment surrounding the Fed is also being influenced by speculation regarding its future leadership. Kevin Hassett, currently at the helm of the White House National Economic Council, is emerging as the leading candidate for the next Fed chair, a prospect that markets view favorably in light of President Donald Trump’s inclination towards lower interest rates. Money markets are pricing in about an 80% probability of a rate cut in December and anticipate three additional cuts by the end of 2026—this marks a significant shift from just a week prior when traders expected only three total cuts.
Nvidia remains central to market discussions, with Wedbush analyst Dan Ives labeling the company as the “Rocky Balboa champion of AI” due to its strong demand that continues to outpace supply. However, not all investors are aligning with this bullish outlook. Valerie Charriere from BNP Paribas Asset Management expressed skepticism about a typical year-end rally, citing potential weaknesses in AI valuations and ongoing uncertainties surrounding Fed policy as factors that could lead investors to pivot toward more defensive sectors.
Meanwhile, across the Atlantic, UK markets are grappling with a different set of economic adjustments. Chancellor Rachel Reeves announced an increase in the government’s fiscal buffer to £22 billion, funded by £29.8 billion in new taxation, targeting sectors such as gambling and high-end real estate. The pound and British gilts saw strengthening during her address, which followed an early market reaction to a premature release of the Office for Budget Responsibility’s economic analysis. Matthew Ryan from Ebury noted that this fiscal buffer might decrease the likelihood of further tax hikes, although investors are still weighing the compatibility of fiscal restraint with ongoing economic growth.
In a forward-looking perspective, long-term equity forecasts for 2026 are beginning to emerge, with Deutsche Bank predicting a potential rise of the S&P 500 to 8,000, JPMorgan targeting 7,500, and Societe Generale estimating 7,300. These projections follow a sharp pullback earlier in November and suggest that underlying demand may be reasserting itself. However, investors remain vigilant, navigating shifts in rate policies, global political risks, and the ever-evolving landscape of artificial intelligence.
