Before we jump to the December forecast, let’s see what things were driving the stock market in November and then we will dive into the December forecast with 3 different scenarios on what can happen to the US stock market.

November recap – volatile but still (barely) bullish

Market action

• The S&P 500 had a choppy month: it fell about 5.7% from its October high and bottomed near 6,540 on Nov 20, before snapping back into month-end and finishing up ~0.1%, extending its winning streak to 7 straight months.

  
  

• Leadership rotated: tech/AI took a breather while healthcare and other cyclicals outperformed; the Nasdaq 100 broke its own multi-month winning streak even as the S&P 500 held up.

  
  

Macro backdrop

• The record 43-day government shutdown ended mid-November, but left a mess in the data:

  
  

  • The October CPI report was canceled outright.

  • November CPI will be released on Dec 18 and will not show some standard 1-month changes because October is missing.

    
    

• Labor data show a cooling but not collapsing job market: job openings hover around 7.67M, quits fell to multi-year lows, and layoffs picked up – consistent with slower, more cautious hiring.

  
  

• Throughout November, markets whipsawed as Fed cut odds for December fell below 30% then climbed above 80% by month-end, driven by FOMC minutes and dovish speeches.

  
  

Big earnings & sector stories

• Nvidia posted another monster quarter:

  
  

  • Record Q3 revenue of $57B (+62% YoY), with data-center sales up 66% YoY and Q4 guidance above expectations – reinforcing the “AI still booming” narrative.

    
    

• Walmart beat expectations and raised its full-year outlook again, helped by strong e-commerce and higher-income shoppers trading down into its ecosystem.

  
  

• Target went the other way: Q3 profits slid, guidance was cut, and management warned about weak holiday demand and pressure on middle-income consumers.

  
  

• Overall, Q3 earnings season was strong: ~13–14% EPS growth with ~83% of S&P 500 companies beating estimates, well above the long-run average.

  
  

Consumer & holiday spending

• Black Friday / Cyber Monday were record-setting in dollar terms:

  
  

  • Online Black Friday sales rose about 9% YoY, and total Cyber Week online sales hit roughly $44B (+7–8% YoY).

  • But part of the growth came from higher prices and larger tickets, while units per transaction fell, and lower-income shoppers hunted aggressively for deals – signaling a consumer that’s resilient but increasingly price-sensitive.

    
    

Net takeaway for November: equities bent but didn’t break. AI/tech cooled, healthcare and cyclicals stepped up, and the big macro story shifted from “data flood” to “data vacuum + Fed expectations.”

December 2025 – key things to watch

Starting point: the S&P 500 is trading around 6,840, just shy of its late-October record near 6,920, up ~13–17% over the past year depending on the exact measure.

1. The Fed’s “big finale” (Dec 10–11)

• Futures markets are heavily pricing in a 25 bp cut – the third of 2025.

  
  

• The real action is in:

  • The dot plot and 2026 rate projections.

  • Powell’s tone on whether this cut is a pause, a step in a longer cutting cycle, or the last one for a while.

    
    

2. Delayed inflation & labor data

• November CPI (Dec 18) will be odd: it comes without October as a base, so some monthly changes are missing. That raises the risk of overreaction to partial data by both markets and politicians.

  
  

• Fresh labor numbers (payrolls, revised JOLTS, claims) will be watched to see if November’s cooling trend is stabilizing or accelerating.

  
  

3. Holiday spending reality check

• We’ll move from soft indicators (Black Friday/Cyber Monday) to hard December/quarterly data and updated guidance from retailers like Walmart, Target, and Home Depot.

  
  

• The key questions:

  
  

  • Are consumers simply trading down and stretching via credit, or actually pulling back in volume?

    
    

  • Do retailers signal margin pressure going into 2026?

    
    

4. AI / mega-cap tech sentiment

• On the policy side, the White House’s “Genesis Mission” AI initiative and Trump’s decision to let Nvidia sell H200 chips to approved Chinese customers (with a revenue-sharing twist) keep AI at the center of both growth and geopolitical narratives.

  
  

• November showed investors are willing to question AI valuations; December determines whether that was just a healthy reset or the start of a deeper de-rating.

  
  

S&P 500 scenarios for December (from ~6,840)

These are hypothetical paths, not predictions or advice – just a framework to think about catalysts and ranges.

Negative scenario – hawkish surprise & softer macro

Drivers

• The Fed cuts 25 bp but leans hawkish in the statement and dots (fewer cuts penciled in for 2026, heavier emphasis on “higher for longer”).

  
  

• November CPI (plus other data) shows sticky core inflation or re-acceleration in key categories.

  
  

• Holiday updates from retailers confirm weak volumes and pressured margins, with more cautious 2026 guidance.

  
  

• AI enthusiasm cools further; some market participants lean into the “AI air pocket + stretched consumer” narrative for 2026.

  
  

S&P 500 path

• The index retests and breaks slightly below the late-November low (~6,540), sliding into roughly the 6,450–6,600 zone (about -4% to -6% from current levels).

  
  

• Volatility picks up (VIX back above 20), tech and AI leaders lead the downside, while healthcare, staples, and Treasuries outperform.

  
  

Neutral scenario (base case) – consolidation near highs

Drivers

• The Fed delivers the expected cut and sounds balanced: acknowledges progress on inflation, but stresses data-dependence and avoids promising an aggressive 2026 easing path.

  
  

• November CPI and labor reports come in close to consensus, reinforcing a “slow-growth, fading-inflation” soft-landing narrative.

  
  

• Holiday updates are mixed but not alarming – some retailers cautious (Target-style), others solid (Walmart-style), with the consumer still spending but more selectively.

  
  

• AI names stabilize; investors keep trimming the highest flyers but rotate into healthcare, financials, and other laggards, continuing November’s breadth improvement.

  
  

S&P 500 path

• The index chops sideways in a 6,700–6,950 range, with intraday swings around the Fed/CPI headlines but no decisive trend break.

  
  

• December ends with the S&P 500 roughly flat to modestly higher (say 6,800–6,900, roughly 0–1.5%), preserving the 7-month winning streak and leaving valuations elevated but not dramatically more stretched.

  
  

Positive scenario – classic year-end “Santa rally”

Drivers

• The Fed cuts 25 bp and leans dovish at the margin – dots or press-conference language imply slightly more 2026 easing than markets have priced in, or at least a low bar for further cuts if data soften.

  
  

• November CPI and labor data confirm disinflation + a cooling but stable labor market, reinforcing the “goldilocks” story.

  
  

• Holiday sales data come in better than feared (strong volumes, not just higher prices), easing worries about the consumer into 2026.

  
  

• AI sentiment re-ignites: policy moves like the Genesis Mission and the Nvidia–China chip deal are seen as structurally supportive, and any December earnings (e.g., key software names) reassure investors.

  
  

S&P 500 path

• SPX breaks decisively above the prior record (~6,920) and squeezes higher into year-end as FOMO kicks in.

  
  

• A +3% to +5% December would put the index roughly in the 7,050–7,200 zone, with breadth improving (small caps, cyclicals, and financials participating alongside mega-cap tech) and volatility staying subdued.

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