The Paris stock exchange opened the session near equilibrium just two days before the U.S. Federal Reserve's monetary policy decisions, seen as the final hurdle before closing out the year on a high note and beginning to look ahead to a 2026 expected to be rich in new challenges. The CAC40 index remains close to 8,105 points, extending the lack of initiative that has characterized recent sessions.

Reflecting investors' heightened caution after a successful 2025 trading year so far, the Paris market moved within a particularly narrow trading range last week, fluctuating between 8,040 and 8,160 points, with limited swings from -0.1% to +0.4%.

Over the past week, the CAC registered a slight decline of around 0.1%, but the most optimistic analysts point out that the benchmark index is only 2.5% away from its all-time high, set above 8,314.2 points on November 13.

A similar dynamic is unfolding on Wall Street, where major indices posted marginal gains last week, bringing them back within sight of record highs, with the Nasdaq now less than 2% from its peaks.

In this climate of anticipation, investors are likely to remain on the sidelines awaiting the outcome, on Wednesday evening, of the Fed's final meeting of the year, which is widely expected to result in a third rate cut in 2025.

Barring a major surprise, nothing appears likely to alter expectations for another 25 basis point reduction in U.S. borrowing costs, given recent signs of a slowdown in employment and better control over inflation trends.

This would bring the total monetary easing by the U.S. central bank since September 2024 to 1.75 basis points, an unprecedented move outside of recessionary periods in the United States.

Even though it seems largely priced in, a rate cut accompanied by dovish messaging would likely boost interest in risk assets at year-end--a seasonally favorable period for equities--potentially paving the way for the much-anticipated "Santa Claus rally."

Some analysts believe it is not entirely out of the question for the S&P 500 to reach the symbolic 7,000-point mark by December 31, before setting its sights, at the start of 2026, on 7,500 points--a major psychological target cited by many strategists.

Once the Fed meeting is behind us, attention will inevitably turn to 2026, a year that will see a new chair at the helm of the Fed, expected to be Donald Trump's trusted economic advisor Kevin Hassett, although he has not yet been officially appointed.

Stock markets generally welcome rate cuts, but the prospect of an even more accommodative stance from the institution under a leader known for his dovish approach could initially unsettle market participants.

The recent string of rate reductions risks putting the still-resilient U.S. economy at risk of overheating, which could prompt the Washington-based institution to pause or even reverse course and hike rates again, potentially triggering a relapse into recession, some experts warn.

"We see good reasons for the Fed to start exercising more caution and slow down its rate cuts," predicted Henry Alle, market analyst at Deutsche Bank, last week.

In contrast, the economic indicators and corporate earnings calendar is expected to remain relatively quiet, although Oracle's quarterly results, due Wednesday evening, will be closely watched.

The software developer's stock soared nearly 40% after its last earnings release, following the disclosure of a massive cloud order backlog fueled by strong AI investment. However, the stock has since lost all those gains amid questions over the sustainability of the exceptional tech rally that has driven U.S. markets for the past three years.

As a result, investors will be paying even closer attention to the outlook provided by the California-based group.