Weekly outlook: “Everything revolves around the Fed”

The stock markets are starting the new trading week without any major changes. The focus here is on Wednesday's meeting of the US Federal Reserve. In addition, the markets are engaged in heated discussions about the successor to the Fed chairman, who is stepping down in May.

8 December, 2025. FRANKFURT (Deutsche Börse). The prospect of falling key interest rates in the US boosted the stock markets on Friday. With overall low price fluctuations, the Nasdaq 100 managed a weekly gain of 1.0 percent, while the market-wide S&P 500 rose 0.3 percent. Both indices are now just below their all-time highs reached at the end of October. The DAX (DE0008469008) is still a long way off this level. The German benchmark index rose by 0.8 percent to 24,028 points last week. The Stoxx Europe 600 (EU0009658202) gained 0.4 percent and ended the week at 578.77 points.

Interest rate cut as trigger for year-end rally?

The highlight of the new trading week will clearly be Wednesday's US Federal Reserve meeting. Although Martin Hartmann of Commerzbank sees a “divided Open Market Committee,” he, like the vast majority, nevertheless expects interest rates to be cut. “In the end, the Fed is likely to weigh the labor market more heavily than inflation when weighing the risks.” In the event of a key interest rate cut, the analyst believes that the stock markets should “still have potential” in December. He also looks to the stock market year 2026 “with cautious optimism,” as corporate earnings are expected to continue to grow in the coming year.

Will the Federal Reserve surprise the markets after all?

Helaba strategists are currently swimming against the tide. They believe that the market is overestimating the likelihood of a pre-Christmas interest rate cut on 10 December. The experts point out that the next monthly labor market report, which is decisive for the Federal Reserve, will not be published until 18 December. This is too long after the FOMC meeting for monetary policymakers to have a “preview” of the data. “We are leaving our forecast path for the US key interest rate unchanged for the time being,” says Helaba, for whom the projections for the future key interest rate are “almost more important” than the interest rate decision itself.

Fed chair succession becomes a hot topic

There is also much discussion these days about who will succeed Jerome Powell as chair of the US Federal Reserve. Kevin Hassett is considered a strong contender to take over from Powell, whose term ends on 15 May, 2026. Helaba describes the planned appointment as a “double-edged sword.” On the one hand, Hassett's strong loyalty to the US president qualifies him for the job, but on the other hand, the lack of respect from other FOMC members could make it difficult for him to push through “an unreasonably expansionary monetary policy in line with the wishes of his lord and master in the White House” during votes.

Uwe Streich sees another problem altogether. The analyst fears that the appointment of a candidate chosen by Donald Trump will lead investors to view the Fed's independence as limited or even non-existent. As a result, further rate cuts could be met with “significantly negative reactions” on the markets.

“There is considerable potential for movement building up.”

From a technical perspective, the DAX continues to move within a sideways range between around 23,000 and 24,640 points. Jörg Scherer, technical analyst at HSBC, points out that the index again formed a monthly candle with a small body in November. This is now the sixth candle of this type in a row, which means that “considerable potential for movement” is building up. “The breakout from this lethargy is likely to determine the medium-term direction of the DAX – now and probably also for 2026.”

Important economic and business events this week

Monday, 8 December

10:30 a.m. Eurozone: Sentix Economic Index for December. Economists continue to expect the index to remain below zero. After minus 7.4 points in November, a reading of minus 6.0 points is expected this time. DekaBank fears that dissatisfaction with the situation in Germany may have an impact.

Tuesday, 9 Dezember

8:00 a.m. Germany: October exports/imports. According to Commerzbank, lower exports to the US and China have contributed significantly to the recent stagnation of the German economy. Exports of goods to other eurozone countries, on the other hand, have risen significantly since the end of last year. Tuesday's figures will show whether this tailwind is continuing.

Wednesday, 10 Dezember

8:00 p.m. US: Fed interest rate decision. Fed Funds Futures are currently pricing in a 90 percent probability of an interest rate cut this week. As the US Federal Reserve has not yet given any indication that this is a misjudgment, Commerzbank analysts (not only) expect key interest rates to be cut by 25 basis points.

Thursday, 11 Dezember

2:30 p.m. USA: Initial jobless claims. After 191,000 new claims last week, Helaba strategists expect an increase to 215,000 for the week ending 6 December.