On the surface, it looks like the S&P 500 (Index: SPX) reached a new record closing high of 6,664.36 on Friday, 19 September 2025 because the U.S. Federal Reserve did exactly what investors expected to do.

The thing the Fed did that was so well-anticipated by everybody was to resume cutting the Federal Funds Rate after a nine month pause. The Fed's action to reduce this interest rate by a quarter point to a target range of 4.00-4.25% was, by far, the most noticeable market moving event of the week.

Being so well-anticipated, that action isn't what sent the S&P 500 to new record highs. The rate cut was effectively already built into stock prices.

The thing that did send stock prices 1.2% higher than their previous week's close was a new Lévy flight. Investors shifted their forward time horizon inward from the more distant future quarter of 2026-Q2 toward the nearer term future quarter of 2026-Q1.

The latest update of the alternative futures chart based on the dividend futures-based model shows that transition began on Monday, 15 September 2025 and continued throughout the week. By Friday, 19 September 2025, we observe investors would appear to be fully focused on 2026-Q1 as they set current day stock prices.

We think the reason for the shift of investor time horizon has to do with expectations for future rate cuts in 2026-Q1. After the Fed cut the Federal Funds Rate by a quarter point, the CME Group's FedWatch Tool projects two more quarter point cuts in 2025, coming on 29 October (2025-Q4) and 10 December (2025-Q4), then pausing for a cycle and resuming with another quarter point reduction on 18 March (2026-Q1).

Although the FedWatch tool indicates the Fed may pause in its new rate cut cycle, the open question is will it? We think the prospect the Fed will continue to cut the Federal Funds Rate at each of its rate-setting Federal Open Market Committee meetings through 2026-Q1 is sufficient to draw the forward-looking focus of investors inward to that less distant future quarter. Stock prices have risen in response because the outlook for year-over-year dividend growth in the quarter is more positive than what it is for 2026-Q2, where investors had, until this week, locked their attention since mid-August 2025.

Here are the market-moving headlines of the week that was, where both realized and potential personnel changes at the Fed helped fuel what investors expect may happen into early 2026.

Monday, 15 September 2025

• Signs and portents for the U.S. economy:
• Oil holds steady as investors assess attacks on Russian energy facilities
• US, China reach framework deal on TikTok; Trump and Xi to speak on Friday
• Fed minions expected to deliver rate cut, still need to decide how big:
• Fed faces key week of decisions with membership, political independence in doubt
• Trump calls for 'bigger' interest rate cut ahead of Fed meeting
• Bigger trouble, stimulus developing in China:
• China's economy slumps in August, casts doubt on growth target
• China's home prices extend decline, more policy support needed
• China August bank loans pick up but well below forecast as economy struggles
• What is "involution", China's race-to-the-bottom competition trend?
• China sets 2025 auto sales target below association forecast, vows tighter regulation
• China's coal output falls 3% in August on production curbs
• Exclusive: US Democrats press Trump for a trade deal that curbs China's production
• ECB minions thinking they shouldn't sweat small details on inflation, tell small Eurozone banks they need to clean up their books:
• ECB should not alter policy on small deviations from inflation target, Kazimir says
• ECB tells small banks to tackle old bad loans
• S&P, Nasdaq push to new record as stocks rise on Big Tech boost, Fed decision looming
• Alphabet enters $3 trillion market cap club as Big Tech's AI momentum builds

Tuesday, 16 September 2025

• Signs and portents for the U.S. economy:
• US manufacturing output unexpectedly rises on rebound in motor vehicle production
• US to consider new national security tariffs on auto parts
• US housing market to remain stuck in a rut as high rates choke demand
• Fed minions still expected to deliver rate September 2025 rate cut as they sort out personnel matters:
• Fed rate-cut optimism has bond investors focusing on duration, steeper yield curve
• Fed for now avoids shock to independence after Cook ruling; Miran sworn in as governor
• Trump administration to appeal court decision blocking firing of Fed Governor Cook, White House says
• Trump economic adviser Miran gets Senate nod to join Fed board
• US Treasury Secretary Bessent praises Bullard in search for Fed chief
• U.S. stocks closed in the red as FOMC meeting starts, Miran confirmed as Fed governor
• Wall St ends lower as investors turn cautious ahead of Fed rate decision

Wednesday, 17 September 2025

• Signs and portents for the U.S. economy:
• US single-family housing starts near 2-1/2-year lows as inventory bloat weighs
• US 30-year mortgage rate drops, refinances jump, MBA data shows
• Oil prices ease on US demand concerns
• Fed minions cut interest rate by quarter point for "risk management", hear there are going to be fewer Fed minions, expected to deliver more rate cuts:
• Fed lowers interest rates, signals more cuts ahead; Miran dissents
• No big push for a larger rate cut, Fed's Powell says
• Instant View: Fed lowers rates by a quarter of a point; Powell says was a risk management cut
• Wall Street Reacts To Powell's "Risk-Management" Rate Cut
• Fed Cuts Rates By 25bps; Powell 'Bends The Knee', Signals Dovish Path Ahead
• Fed's Powell said central bank is cutting 10% of its staff
• US rate futures lift chances of further easing in October after Fed cuts rates
• Bank of Canada also restarts rate cuts:
• Bank of Canada cuts rates to 2.5%, says ready to cut again if risks rise
• Bigger trouble developing in Japan:
• Japan's exports down in August as automakers grapple with US tariffs
• Wall Street ends mixed as Federal Reserve cuts 25 basis points
• Wall Street ends mixed, trade choppy after Fed's rate cut, outlook

Thursday, 18 September 2025

• Signs and portents for the U.S. economy:
• US holiday shopping growth to cool this year, Mastercard forecasts
• US Supreme Court to hear Trump's tariffs case on November 5
• Trump tariffs could fund bailout for US farmers, agriculture secretary tells FT
• Oil prices little changed as traders weigh US rate cut with worries over US economy
• Fed minions rate cut raises more questions than answers, ethically troubled Fed minion's job may still be on chopping block, new minion has little influence:
• US Fed starts easing path, other major central banks on hold
• Fed's rate cut comes with caveats, leaving investors lukewarm
• Trump asks US Supreme Court to allow firing of Fed Governor Lisa Cook
• Miran's Fed dissent makes a splash, fails to sway the outcome
• BOJ minions thinking about more rate hikes in Japan despite country's leadership change:
• BOJ may raise rates in October even if Takaichi wins leadership race, says ex-c.bank official
• U.S. stocks end at all-time highs as Intel-Nvidia deal, Fed's rate cut, lifts the markets
• Wall St hits record high after Fed indicates more rate cuts; Intel soars
• Nvidia bets big on Intel with $5 billion stake, chip partnership

Friday, 19 September 2025

• Signs and portents for the U.S. economy:
• Oil prices slip as robust supply outweighs Fed cut
• US drillers add oil and gas rigs for third week in a row, Baker Hughes says
• Trump and Xi make progress on TikTok deal, plan to meet in South Korea
• Fed minions say two more rate cuts in 2025, new minion calls for bigger rate cuts:
• Fed's Kashkari sees two more rate cuts this year as likely appropriate, given labor market risks
• Fed's Miran defends call for steep rate cuts, says Trump didn't direct his vote
• Bank of China won't match Fed rate cut for now:
• China expected to leave benchmark lending rates unchanged despite Fed easing
• BOJ minions hold off on rate hike, want to sell off ETFs:
• Morning Bid: BOJ holds, with a hawkish twist
• BOJ to unwind ETF holdings as split board signals hawkish shift
• BOJ Governor Ueda's comments at news conference
• Wall Street rallies to notch a record close after a strong trading week
• Wall St closes higher with indexes notching weekly gains

The Atlanta Fed's GDPNow tool projection of real GDP growth in the U.S. during the current quarter of 2025-Q2 ticked up to +3.3% after last week's forecast of +3.1% annualized growth.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull and a bear, both wearing business suits. The bull smiles and says I'M HAPPY ABOUT THE RATE CUT BUT LET'S SEE MORE while the bear looks skeptical".

Behind the scenes, we may be starting to get a handle on the remaining unknown frontier covering the last 10% for explaining why stock prices behave as they do thanks in no small measure to this Financial Times article, which provides an excellent entry point into what may well be a coherent theory for what causes changes in market regimes that the dividiend futures-based model can only quantify through observation. It's an exciting time and if it holds, one where we'll be extremely pleased to highlight the work of others!