The S&P 500 (Index: SPX) closed out the first week of December 2025 at 6,870.40, up 0.3% from where it closed the previous week.

The main focus of investors continues to be what action the Federal Reserve will take with short term U.S. interest rates. After putting on a show in recent weeks to try to convince markets that it might not continue reducing the Federal Funds Rate at the end of its next rate-setting meeting on Wednesday, 10 December 2025, evidence of continued anemic growth in the U.S. labor market announced during the past week is leading investors to expect the Fed will cut rates.

The CME Group's FedWatch Tool captures that sentiment. It held steady in the past week, indicating an 87% probability of a quarter point rate cut on 10 December (2025-Q4). Looking beyond the end of 2025, the FedWatch tool gives better than even odds for additional quarter point rate cuts on 29 April (2026-Q2) and 29 July (2026-Q3). A third rate cut anticipated for 9 December (2026-Q4) a week ago is no longer in the outlook, with the next potential rate cut pushed out into 2027.

Even though the probability of a rate cut is high, the Fed's minions arguing against a rate cut have succeeded in creating enough doubt that investors remain focused on the current quarter of 2025-Q4 in setting current day stock prices. The latest update of the alternative futures chart shows the trajectory of the S&P 500 falls in the middle of the redzone forecast range we added two weeks earlier, assuming investors would be focused on 2025-Q4 going into this upcoming trading week.

After the Fed meets, there will be little reason for investors to continue placing much attention on 2025-Q4. We think investors will quickly shift their forward-looking attention toward the slightly more distant quarter of 2026-Q1, since it will become the focus of timing for the next rate change actions by the Fed.

Whether that plays out as we think will depend on the random onset of new information. Speaking of which, here are the market-moving headlines that influenced investor expectations during the past week.

Monday, 1 December 2025

• Signs and portents for the U.S. economy:
• Oil climbs over $1 a barrel on OPEC action, Ukraine attack
• OPEC+ holds oil output steady, agrees capacity mechanism
• US manufacturing stuck in doldrums as tariff headwinds persist
• Fed minions disagreeing with each other could hurt markets, expected to deliver rate cut in December:
• Flurry of Fed dissents in coming meetings could pose market, political risks
• BofA expects December Fed cut, two more in 2026
• Bigger trouble, mixed growth signs developing in China:
• China's central bank vows crackdown on virtual currency, flags stablecoin concerns
• China's November new home prices climb but resale values extend declines, survey shows
• BOJ minions getting excited to hike Japan's interest rates:
• BOJ to consider rate hike in December, governor says; yen, yields rise
• Global bonds slide after hawkish Bank of Japan comments
• Yen rises and bonds fall after BOJ governor hints at rate increase
• Bigger trouble developing in Eurozone:
• China export controls push European firms to move supply chains
• U.S. stocks end lower as yields rise at the start of December
• Wall Street ends lower as yields climb; crypto stocks drop

Tuesday, 2 December 2025

• Signs and portents for the U.S. economy:
• Oil eases amid uncertainty around Russia-Ukraine peace plan, oversupply worries
• OPEC+ members to undergo annual oil capacity audit under new plan, sources say
• Q3 earnings show firm revenue gains alongside softer low-income demand
• Chief Fed minion might linger after being ousted as Chief in 2026:
• Trump says he will announce Fed chief nominee in early 2026
• Powell could stay on as Fed governor after giving up chair role, like former chief Eccles
• Major brokerages boost bets on December Fed rate cut ahead of policy meeting
• Bigger trouble developing in China:
• China manufacturing is slumping despite boost from US trade truce
• China floods the world with gasoline cars it can't sell at home
• Chinese censors crackdown on online 'doom-mongering' of property sector
• BOJ minions rate hike plans to have global impact:
• Japan's economic normalisation will affect global liquidity
• Demand for Japanese bonds reassures jittery markets
• ECB minions say they have Eurozone inflation right where they want it:
• Euro zone inflation ticks up, pointing to steady ECB rates
• Euro zone inflation practically at target, ECB's Nagel says
• Wall Street rebounds, ends higher as Bitcoin, tech stocks rise
• Equities rise on Fed rate cut optimism, Boeing jumps

Wednesday, 3 December 2025

• Signs and portents for the U.S. economy:
• The AI frenzy is driving a new global supply chain crisis
• Exclusive: More US soybean shipments to China due to load through mid-December
• Oil rises as Moscow peace talks fail to reach breakthrough
• Fed minions stop losing money after three years:
• Fed data suggests central bank has stopped losing money
• Bigger trouble, stimulus developing in China:
• China's services growth slips to five-month low in November
• China likely to chase 5% GDP growth in 2026 in bid to end deflation
• Major Chinese banks cut high-yield deposit products to ease margin pressure
• Business recovery developing in Eurozone, ECB minions worry about 'upside suprises':
• Euro zone business activity expands at fastest pace in 30 months in November
• ECB's Lane flags 'upside surprises' to euro zone inflation
• U.S. stocks shrug off selloff to end higher after lower-than-expected jobs data
• Indexes close higher as data keeps Fed rate cut expectations elevated

Thursday, 4 December 2025

• Signs and portents for the U.S. economy:
• Lower interest rates would likely eliminate the need for 50-year mortgage, US Treasury adviser says
• US private payrolls post largest drop in more than 2-1/2 years in November
• US weekly jobless claims dive to a more than three-year low
• Oil rises on expectations of Fed rate cut, Ukraine peace talks stalling
• Americans head to dollar stores as affordability crunch pinches consumers
• Fed minions see steady unemployment rate, still expected to cut rates in December 2025:
• Chicago Fed sees November unemployment rate steady at 4.4% as alternate data shows job losses
• Economists double down on December Fed cut despite policymaker divide
• Bigger trouble, stimulus developing in China:
• China's Real Estate Collapse Sends Local Debt To Record $18.9 Trillion
• Exclusive: China state-owned banks soak up dollars to slow yuan gains, sources say
• BOJ minions think they've won something:
• BOJ likely to raise rates in December, government to tolerate move, sources say
• BOJ wins first showdown with Takaichi - what's next is less certain
• BOJ's Ueda flags uncertainty on how far rates can go up
• Japanese 10-year bond yields rise to highest level since 2007
• Weak Japanese yen is ticking time bomb
• Explainer. How will a rise in Japanese interest rates affect global markets?
• Wall Street ends mixed after struggling to stay afloat on lower-than-expected job cuts, Metaverse news
• Investors cheer Meta's reported Metaverse cuts, a segment that has bled $73B in losses
• EU hits Meta with antitrust probe over plans to block AI rivals from WhatsApp
• Indexes end near flat, supported by Fed hopes but dragged by Amazon

Friday, 5 December 2025

• Signs and portents for the U.S. economy:
• Oil prices hold steady due to stalled Ukraine peace talks and supply outlook
• More investment bankers expect Fed minions to deliver rate cut:
• Jumped the gun, says Morgan Stanley; reverses Dec Fed rate call to 25bps cut
• Recovery signs developing in China:
• China's November exports expected to have rebounded off US tariff truce
• JapanGov minion makes show of BOJ minions having independence from JapanGov minions as bigger trouble develops in Japan:
• Japan's economy minister says up to BOJ to decide 'specific monetary policy means'
• BOJ expected to choose 'constructive ambiguity' on future rate hikes
• Japan October household spending falls at fastest pace in nearly 2 years
• Wall St closes with slight gains as data keeps Fed cut expectations on track
• U.S. stocks end higher as NFLX-WBD acquisition fuels sentiment, investors assess inflation gauge

We're rapidly coming up on another period in which we'll need to add another redzone forecast range to the chart to track the most likely trajectory the S&P 500 will be taking in the weeks ahead. Unlike the current redzone forecast range that is set to end early in this upcoming week, we anticipate the actual trajectory of the S&P 500 will overshoot the projections of the dividend futures-based model for several weeks going into 2026. This is a consequence of the model's use of historic stock prices as the base reference points for making its projections of the S&P 500's future, in which the echoes of past volatility affect the model's forecasts. The redzone forecasts we add get around that inconvenience by bridging across the period in which those echoes affect the model's raw projections.

The Atlanta Fed's GDPNow tool projection of real GDP growth in the U.S. during the recently ended 2025-Q3 ticked down from +3.9% last week to +3.5% week. The tool won't shift to forecast 2025-Q4's GDP until 23 December 2025. The BEA's official initial estimate of GDP for 2025-Q3 will be released on that date.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull and a bear watching a stage show featuring a Federal Reserve official who is announcing a rate cut"

According to Revelio Labs' public labor statistics data, seasonally adjusted total nonfarm employment in the U.S. fell by in November 2025. The firm's estimate of nonfarm employment is 159,231,610 for the month, down about 9,000 from its revised estimate of 159,240,592 for October 2025. Compared to November 2024 however, the estimate for November 2025 is up nearly 208,000.

Revelio Labs' data indicates total nonfarm employment peaked in April 2025 at 159,280,995 and has largely been slightly lower to flat in the period since. November 2025's estimate is within 0.03% of that peak.

Meanwhile, the BLS has released employment data through September 2025, putting its initial estimate of seasonally adjusted total nonfarm employment at 159,626,000 for the month, which represents a peak in its data series. This value is up 119,000 from the BLS' revised estimate of 159,507,000 for August 2025 and is almost 370,000 higher than Revelio Labs' estimate for September 2025.

Before we go any further, Revelio Labs' appears to have executed a major revision of its historical data, with large negative changes to its oldest data that tapers off to very small downward changes for the most recent months. The following chart captures both the BLS' and Revelio Lab's latest estimates of seasonally adjusted total nonfarm employment over the period from January 2022 through November 2025 and all Revelio Labs' estimates released in October, November, and December 2025.

Analyst's Notes

At this writing, Revelio Labs' has not produced any statement to account for its large downward revisions in its oldest data, which are substantial. In our featured chart, the firm's November 2025 estimate for January 2022 was reduced by over 1.6 million from its October 2025 estimate. Even so, the firm's estimate for January 2022 is over 1.9 million higher than the BLS' estimate for the month.

Without an explanation, we caution against using Revelio Labs' historical data in other analyses. We do observe that Revelio Labs' data does generally match the direction of employment changes in the BLS' historical series over the period covered in our chart, so its still likely useful for divining that aspect of how the total nonfarm employment level is changing over time.

The Bureau of Labor Statistics indicates it will next release its employment situation data on Tuesday, 16 December 2025, which will include newly released estimates for both October and November 2025.

References

Revelio Labs. Total Nonfarm Employment National. [CSV Data]. 4 December 2025.

U.S. Bureau of Labor Statistics. Total Nonfarm Employment. Current Employment Statistics - CES. [Online database]. Last Updated 20 November 2025.

Image credit: Big Data by Learntek on Flickr. Creative Commons CC0 1.0 Universal Deed. Public Domain.

The dividend futures-based model we invented to project the potential future trajectories the S&P 500 (Index: SPX) starts from a very simple observation:

Ap = m * Ad

In this relationship, A_p represents the change in the rate of growth of stock prices and A_d is the change in the rate of growth of dividends per share. The value m is an amplification factor that varies over long periods of time but can be nearly constant for short-to-intermediate periods of time.

Since we first formulated this relationship in April 2009, we've found that short-to-intermediate periods of time can be as long as decades. But eventually, the value of m does change and whenever it does it's a big deal because it means the market regime in which stock prices are set has changed.

The following chart tracks how the value of m has changed from January 2014 through the end of November 2025, which covers the period after we first developed the alternative futures chart we use to visualize the dividend-based model's projections. Our initial observations that set the value of m = 5.0 however go back to March 2010, when dividend futures as we know them today became a reality and made that estimation possible. We should also note that m was almost certainly at that same level for years before that point in time.

So what is m really?

A potential solution to that mystery was advanced by Xavier Gabaix and Ralph S.J. Koijen in their June 2021 working paper In Search of the Origins of Financial Fluctuations: The Inelastic Market Hypothesis. For us, this paper immediate leapt to the front of the pack for its potential explanatory power of what m represents because of a simple example they developed to explore one of their propositions. Here is a screenshot of the proposition:

Here is their example:

To think through the economics of Proposition 3, we found the following simple, undergraduate-level example useful. Suppose that there are just two funds: the pure bond fund and the representative mixed fund, which always holds 80% in equities (the magnitude suggested by Figure 1). Then, theta = .08, kappa = 0, so that zeta = 1 - zeta = 0.2 and and 1/zeta = 5. Then an extra 1% inflow into the stock market increases the total market valuation by 5%.

Or to put it more simply, a multiplier of 5 for this simple example, which puts it in the right ballpark for our observations.

It certainly is an intriguing possibility, especially if it can explain for how the value of m has changed in the period since 19 February 2020, during which the value of m has held at various constant levels for much shorter periods of time.

References

Xavier Gabaix and Ralph S.J. Koijen. In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis. National Bureau of Economic Research Working Paper 28967. [PDF Document]. June 2021.

A little over three years ago, Artificial Intelligence (AI) technology took off in the public consciousness with OpenAI's public release of ChatGPT.

That event took place in a period of relative chaos for the U.S. stock market. That period of chaos started with the S&P 500's plunge after February 2020 with the arrival of 2020's coronavirus pandemic in the U.S., which ended the period of relative order that had established itself in December 2018. The inflation phase of the bubble began after March 2020 with the passage of COVID stimulus funds, which initiated the inflation of the COVID/Biden Stimulus Bubble.

The deflation phase of that bubble began after it peaked in December 2021 and by June 2022, the level of the S&P 500 had returned to levels consistent with where stock prices would have been had the relative order that had been in place starting in December 2018 had simply continued. The following chart, which tracks the average monthly value of the S&P 500 against its underlying trailing year dividends per share shows the scale of that event in the context of the relative periods of order and chaos we've documented since December 1991.

Stock prices continued falling through September 2022 before starting to re-establish some semblance of relative order in the latter part of that year when stock prices began to recover. ChatGPT was rolled out in that environment on 30 November 2022, which helped contribute to the stock market's initial recovery phase that ran through late July 2023, then reversed through late October 2023. It wasn't until 29 December 2023 that what we define as the current period of relative order established itself.

From here, we can track the progress of the current period of relative order in the U.S. stock market on a more refined chart. Here is what that period of order looks like from 29 December 2023 through 2 December 2025:

This chart allows us to quantify what most analysts might identify as the AI bubble, but which we do not because of how we define what a bubble is. Here is our working definition:

An economic bubble exists whenever the price of an asset that may be freely exchanged in a well-established market first soars then plummets over a sustained period of time at rates that are decoupled from the rate of growth of the income that might be realized from owning or holding the asset.

Going back to our chart of the current period of relative order, we find it captures the inflation and deflation phase of the so-called "AI Bubble" that has occurred within it. The inflation phase runs from 29 December 2023 and continues until it peaks in 19 February 2025, just ahead of a market-shaking event for AI stocks. That event came in the form of China's Hangzhou DeepSeek Artificial Intelligence Basic Technology Research company's Friday, 21 February 2025 statement that they would release an open source version of their advanced AI system in the following week, which they followed through and did on Monday, 24 February 2025.

This event popped the proverbial AI bubble. Stock prices plunged until they started to stabilize in late March 2025, but by then, what passed for the AI bubble had all but fully deflated.

Shortly afterward, President Trump's 2 April 2025 "Liberation Day" global tariff announcement sent the S&P 500 plunging much lower, threatening to break the market's current relative period of order. It didn't because less than a week later, President Trump announced a 90-day suspension of the higher tariffs would seek to impose, which prompted a rapid recovery in stock prices that prevented order from fully breaking down.

However, it's not until late June 2025, after Nvidia (NYSE: NVDA) announced blockbuster earnings of its AI-chip systems that we see signs the AI-bubble may have begun a new inflation phase.

From our perspective, the so-called AI bubble doesn't yet deserve that designation. Although it has contributed to making the current relative period of order somewhat chaotic, stock prices remain within the range we identify has established itself during this period, for which we can used the tools of statistical analysis to quantify. The first inflation-deflation phase of the AI-bubble would at best cover 2.5 standard deviations of the variation of stock prices recorded between 29 December 2023 and 2 December 2025, or about 612 points. What passes as its new inflation phase, which we track from 20 June 2025 to the present, is similar in magnitude and is equivalent to about 9% of the current value of the S&P 500.

What would it take for us to officially recognize the AI Bubble as an actual bubble? We would need to see the 20-day moving average of the S&P 500 rise above the upper red dashed line indicated on our refined chart and stay there. For the upcoming milestone of the S&P 500's trailing year dividends reaching $79 per share, that would mean the index sustaining a level above $7,000 for at least 20 trading days to even begin to qualify. Which is to say the earliest that might happen would be early in 2026.

Celebrating Political Calculations' Anniversary

We hope you've enjoyed this analysis because we're celebrating our anniversary a little early this year! Our anniversary posts typically represent the biggest ideas and celebration of the original work we develop here each year, where we've only missed 2024 because we were tied up with other projects. Here are our landmark posts from previous years:

• A Year's Worth of Tools (2005) - we celebrated our first anniversary by listing all the tools we created in our first year. There were just 48 back then. Today, there are over 300....
• The S&P 500 At Your Fingertips (2006) - the most popular tool we've ever created, allowing users to calculate the rate of return for investments in the S&P 500, both with and without the effects of inflation, and with and without the reinvestment of dividends, between any two months since January 1871.
• The Sun, In the Center (2007) - we identify the primary driver of stock prices and describe a whole new way to visualize where they're going (especially in periods of order!)
• Acceleration, Amplification and Shifting Time (2008) - we apply elements of chaos theory to describe and predict how stock prices will change, even in periods of disorder.
• The Trigger Point for Taxes (2009) - we work out both when, and by how much, U.S. politicians are likely to change the top U.S. income tax rate. Sadly, events in recent years have proven us right.
• The Zero Deficit Line (2010) - a whole new way to find out how much federal government spending Americans can really afford and how much Americans cannot really afford!
• Can Increasing the Minimum Wage Boost GDP? (2011) - using data for teens and young adults spanning 1994 and 2010, not only do we demonstrate that increasing the minimum wage fails to increase GDP, we demonstrate that it reduces employment and increases income inequality as well!
• The Discovery of the Unseen (2012) - we go where so-called experts on income inequality fear to tread and reveal that U.S. household income inequality has increased over time mostly because more Americans live alone!

We marked our 2013 anniversary in three parts, since we were telling a story too big to be told in a single blog post! Here they are:

• The Major Trends in U.S. Income Inequality Since 1947 (2013, Part 1) - we revisit the U.S. Census Bureau's income inequality data for American individuals, families and households to see what it really tells us.
• The Widows Peak (2013, Part 2) - we identify when the dramatic increase in the number of Americans living alone really occurred and identify which Americans found themselves in that situation.
• The Men Who Weren't There (2013, Part 3) - our final anniversary post installment explores the lasting impact of the men who died in the service of their country in World War 2 and the hole in society that they left behind, which was felt decades later as the dramatic increase in income inequality for U.S. families and households.

Resuming our list of anniversary posts....

• The Toolmaker's Tool (2014) - we make the code we use for creating online tools available to all!
• Replacing GDP with the National Dividend (2015) - we explore our development of an alternative measure of economic welfare that can replace GDP.
• The Gamblers Who Invented Modern Encryption (2016) - we discover that a group of gamblers seeking to break the law in Missouri back in 1905 put together many of the elements that underlie secure electronic communications and financial transactions!
• The Isolation of El Niño (2017) - in which we advanced the development of a global economic indicator for Earth!
• Telescoping Median Household Income Back in Time (2018) - we find a way to nearly double the available supply of monthly median household income estimates with reasonable accuracy.
• Cashing Out of the S&P 500 (2019) - we develop a tool to answer the question of whether you can survive being retired if you're counting on cashing out your investment in the S&P 500!
• The Deadly Intersection of Anti-Police Protests and COVID-19 (2020) - it was the year of the coronavirus and political protests, so we combined the two in a way that only we could.
• The Birth of the Martian Economy (2021) - we don't mess around when we say we celebrate big ideas, and what's bigger idea to celebrate than the birth of an entire planet's economy?
• The S&P 500 Dividend Engine (2022) - we put the entire history of the S&P 500's cash dividends at your fingertips!
• The Origin of Ancient Alien Theory (2023) - how and when did the idea of aliens visiting Earth to do things like build pyramids get started?

Image credit: Multicolored soap bubble image by Alexa from Pixabay.

Dividend paying firms in the U.S. stock market saw more negative than positive changes in November 2025 when compared against the market of November 2024. That's disappointing because October 2025 saw dividend payers break an eight-month-long losing streak for this simple measure that indicates the relative health of the underlying U.S. economy by turning in a positive result.

Alas, there is no new winning streak taking hold. The single number that describes how dividend payers fared during the month is -22, with that many more unfavorable actions outweighing the kind of favorable actions that the owners of dividend paying stocks like to see.

Falling back into the recent pattern of the eight month-long losing streak, this net outcome was the result of a declining number of favorable changes like dividend increases and announcements of extra (or special) dividends payments for shareholders. Overall, there were 28 fewer favorable actions in November 2025 than there were in the same month a year earlier, of which, there were 19 fewer extra dividends and 9 fewer increases than had been announced in November 2024.

These unfavorable changes outweighed the favorable development of fewer companies decreasing their dividend payouts. There were just 10 such firms counted by Standard & Poor in its tally for November 2025, a decrease of 6 from the total recorded a year earlier.

The following table totals up all the favorable and unfavorable dividend actions for November 2025 and compares the figures with the values recorded for October 2025 and November 2024 to reveal how they changed month-over-month (MoM) and year-over-year (YoY):

The following chart visualizes the monthly counts of dividend increases and decreases from January 2004 through November 2025.

The bottom line? While November 2025's dividend metadata contained some positive developments, they were overshadowed, resulting in a net negative outcome for dividend paying companies in the U.S. stock market.

References

Standard and Poor. S&P Market Attributes Web File. [Excel Spreadsheet]. Accessed 1 December 2025.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bear dressed as a hockey goalie blocking shots by a skating Wall Street bull dressed as a hockey player trying to score goals in a net that says 'FAVORABLE DIVIDEND CHANGES'".