The Paris stock exchange opened the session close to equilibrium, just two days ahead of the U.S. Federal Reserve's monetary policy decisions. These decisions are seen as the final hurdle before closing out a successful year and beginning to look ahead to a 2026 that promises a host of new challenges. The CAC40 index remains near 8,105 points, extending the lack of initiative that has characterized recent sessions.
Reflecting heightened investor caution at the end of a successful 2025 trading year, the Paris market moved within a particularly narrow trading range last week, between 8,040 and 8,160 points, with limited fluctuations ranging from -0.1% to +0.4%.
For the entire past week, the CAC posted a decline of around 0.1%. However, the most optimistic analysts point out that the benchmark index is only 2.5% below its all-time high of over 8,314.2 points, reached on November 13.
A similar dynamic is playing out on Wall Street, where the major indices posted marginal gains last week, allowing them to return within sight of their all-time highs, with the Nasdaq less than 2% away from its peaks.
In this context of wait-and-see, it is likely that investors will remain relatively inactive as they await the conclusions of the Fed's final meeting of the year on Wednesday evening, which is expected to result in a third rate cut this year.
Barring any major surprises, nothing seems likely to alter expectations for a new 25 basis point reduction in U.S. borrowing costs, given recent signs of a slowdown in employment and improved 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--a pace not seen in the United States outside of recession periods.
Even though it appears largely priced in, a rate cut accompanied by a dovish message would likely boost interest in risk assets at year-end, a traditionally favorable period for stock markets, potentially paving the way for the much-discussed "Santa Claus rally."
Some analysts believe it is not entirely out of the question for the S&P 500 to hit the symbolic 7,000-point mark by December 31, before setting its sights on 7,500 points at the start of 2026--a major psychological target cited by many strategists.
Once the Fed meeting has passed, attention will inevitably turn to 2026, a year that will be marked by the arrival of a new Fed chair, expected to be Donald Trump's trusted economic adviser, Kevin Hassett, although he has not yet been officially appointed.
Stock markets generally favor rate cuts, but the prospect of an even more accommodative policy from the financial institution--with a leader known for his dovish approach--could start to worry market participants.
The recent flurry of rate cuts may, in fact, place the resilient U.S. economy in a situation of overheating, which could prompt the Washington-based institution to hit the brakes or even raise rates again, potentially triggering a renewed recession, some experts warn.
"We see good reasons for the Fed to start showing more caution and to slow its rate cuts," forecasted Henry Alle, market analyst at Deutsche Bank, last week.
On the economic indicators and corporate results front, the news is expected to be much quieter, although Oracle's quarterly earnings release scheduled for 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 book thanks to strong AI-driven investment. However, the stock has since given up all those gains amid questions about the sustainability of the exceptional cycle driving U.S. tech for the past three years.
The outlook shared by the California-based group on this occasion will therefore be scrutinized even more closely.
