S&P 500 Near 7,000 As Tariffs, Fed Loom

US equities entered the final stretch of 2025 hovering near record territory, with traders trying to extend the so-called Santa Claus rally while volumes thin into year-end. Reuters noted the S&P 500 eyes 7,000 after a year marked by tariff-driven volatility in spring and a late-year rebound.

The hard numbers tell the story: the S&P 500 finished Friday at 6,929.94 and has gained about 18% in 2025, while the Nasdaq Composite is up about 22% on the year. Investors are also watching rotation. Reuters highlighted that S&P 500 tech is down more than 3% since early November even as areas like financials and healthcare have firmed, a notable change from the AI-led run that dominated prior years.

Two near-term catalysts sit on the calendar, and both are about policy expectations rather than earnings. First, the Fed’s December meeting minutes land midweek, and may clarify how comfortable officials are after cutting 75 bps over the final three meetings of 2025 to a policy range of 3.50%–3.75%. Second, investors are increasingly sensitive to Washington’s effect on rates, a point underscored by Reuters’ look at the $30 trillion US bond market and the “term premium,” the extra yield demanded to hold longer-dated Treasurys.

Meanwhile, cross-asset signals remain lively even if equity index moves are muted. CBS reported silver rose more than 4.5% to $74.88/oz while gold climbed about 1.1%, extending a broader precious-metals bid tied to safe-haven demand and rate-cut expectations.

Use this quiet week to stress-test positioning for 2026: if the Fed minutes turn hawkish or the bond market term premium rises further, the most crowded growth trades could wobble, while rotation beneficiaries may keep grinding higher.

China’s Ministry of Finance used its year-end work meeting to signal that fiscal policy in 2026 will stay “more proactive,” with spending aimed at lifting domestic demand and building new growth engines. The message, reported by Reuters as more proactive in 2026, comes as trading partners push Beijing to rebalance away from exports and as the property downturn continues to sap confidence at home.

The “who” is straightforward: Finance Minister Lan Fo’an and the finance ministry are setting priorities for the first year of the 15th Five-Year Plan period (2026–30). The “what” is a clear pivot in emphasis. Officials said they will “vigorously boost consumption,” “actively expand effective investment,” support tech innovation, and strengthen the social safety net, including healthcare and education. China Daily also highlighted plans to expand fiscal expenditure and refine the mix of government bond instruments to improve effectiveness, alongside efforts to improve transfer payments to local governments, according to fiscal priorities for 2026.

Two numbers frame the stakes. Reuters reported advisers and analysts expect China to keep a growth target of around 5% in 2026, implying continued policy support if deflationary pressure persists. Separately, China Daily cited Sichuan as a case study where retail sales reached 2.64 trillion yuan from January to November, up 5.5% year on year, illustrating the kind of consumption momentum Beijing wants to replicate nationally.

Why now. The external environment is uncertain, and the domestic property slump has become a confidence problem as much as a construction problem. Policy makers are trying to shift demand toward households and high-value manufacturing. The “how” is likely a blend of higher central spending, targeted bond issuance, and more support for innovation, green transition, and urban-rural integration, while also tightening oversight of local-government debt risks.

For businesses and investors, the key is whether fiscal support translates into a broader domestic-demand rebound rather than another narrow industrial push. Watch for concrete quotas on special bonds, consumption-support programs, and any visible improvement in household sentiment as the plan year approaches.

After a year of tariff-driven uncertainty, Bank of America CEO Brian Moynihan says US trade policy is beginning to look more predictable, with tariff rates clustering near a stable range. Speaking on CBS’ Face the Nation, Moynihan argued the trade push is moving toward “de-escalation, not escalation,” according to tariffs settling around 15%.

The key shift is clarity. Moynihan said businesses were “shocked” in April when tariff plans were less understood, and that uncertainty disrupted planning and purchasing decisions. Now, as negotiations progress, Bank of America’s internal outlook sees a broad tariff floor: a 10% baseline has effectively gravitated toward about 15% for many countries, with higher rates reserved for those that do not commit to buying US goods or lowering non-tariff barriers.

Two carve-outs matter for 2026. First, Moynihan called China “a different question,” citing national security concerns spanning rare earths, magnets, batteries, and AI supply chains. Second, he flagged North American trade as its own track because the USMCA review is due next year. Bloomberg similarly summarized Moynihan’s view that the administration expects average 15% tariffs with selective escalation where negotiations stall.

Why it matters. If tariffs settle into a narrower band, corporate margins and pricing strategies become easier to model, especially for small and mid-sized firms that struggled with stop-start rule changes. The flip side is that a higher “floor” can still be inflationary at the margin, and the remaining exceptions, China tech inputs and USMCA, are precisely where supply chains are most sensitive.

Position for a world where the tariff rate is less of a daily headline but more of a steady tax on cross-border goods. The companies that win are the ones that can either pass through a 15% cost layer, re-source inputs, or gain share as weaker competitors freeze investment.

• Fed minutes this week could reshape expectations after 75 bps of cuts in late 2025. Watch for dissent and how “higher for longer” shows up in the language.
• Track the 10-year Treasury term premium. Reuters flagged it as rising again, a risk for long-duration equities if yields back up fast.
• Monitor any signal on the next Fed chair pick. Reuters said hints could sway markets into the new year.
• Watch tariff policy and legal risk. The Supreme Court’s tariff case has already coincided with sharp daily yield moves.
• Keep an eye on precious metals momentum. Silver at record levels can signal both inflation hedging and liquidity-driven risk appetite shifts.