{"id":6996,"date":"2025-12-05T11:57:05","date_gmt":"2025-12-05T11:57:05","guid":{"rendered":"https:\/\/friscotimes.org\/?p=6996"},"modified":"2025-12-08T11:44:04","modified_gmt":"2025-12-08T11:44:04","slug":"stocks-facing-a-vast-wave-of-incoming-liquidity-the-sp-500-prepares-to-surf-to-a-new-record-high","status":"publish","type":"post","link":"https:\/\/friscotimes.org\/?p=6996","title":{"rendered":"Stocks: Facing a vast wave of incoming liquidity, the S&P 500 prepares to surf to a new record high"},"content":{"rendered":"\n
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The S&P 500 index ticked up 0.3% yesterday, and has risen eight times in the last nine trading sessions. It is now less than half a percentage point away from its record high, and futures were pointing marginally up again this morning. Nasdaq 100 futures were even more optimistic, up 0.39% before the open in New York. The VIX \u201cfear\u201d index (which measures volatility) has sunk 12.6% this month, indicating that investors seem to have settled in for a calm, quiet, risk-on holiday season.<\/p>\n

They have reason to be happy. Washington is preparing a wave of incoming liquidity that is likely to generate fresh demand for equities.<\/p>\n

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For instance, the CME FedWatch index shows an 87% chance that the U.S. Federal Reserve will deliver an interest rate cut next week, delivering a new round of cheaper money. Further cuts are expected in 2026.<\/p>\n

Furthermore, Wall Street largely expects President Trump to announce that Kevin Hassett will replace Fed Chair Jerome Powell in May\u2014and Hassett is widely regarded as a dove who will lean in favor of further rate cuts. <\/p>\n

Elsewhere, the Fed has begun a series of \u201creserve management purchases<\/a>,\u201d a program in which the central bank will buy short-term T-bills\u2014a move that will add more liquidity to markets generally.<\/p>\n

Banks, brokers, and trading platforms are also lining up to handle \u201cTrump Accounts\u201d<\/a>, into which the U.S. government will deposit $1,000 for every child. The trust fund can be invested in low-cost stock index trackers\u2014a new source of investment demand coming online in the back half of 2026. <\/p>\n

So it\u2019s no surprise that nine major investment banks polled by the Financial Times<\/em> expect stocks to rise in 2026\u2014by an average of 10%, <\/a>according to their estimates<\/a>. <\/p>\n

The Congressional Budget Office also estimates that the One Big Beautiful Bill Act will add 0.9% to U.S. GDP next year largely because it allows companies to immediately deduct capital expenditures<\/a> from their taxes\u2014spurring a huge round of corporate spending.\u00a0<\/p>\n

With all that fresh money on the horizon, it\u2019s clear why markets have shrugged off their worries about AI and Bitcoin. The only shock will be if the S&P fails to hit a new all-time high by the end of the year.<\/p>\n

Here\u2019s a snapshot of the markets ahead of the opening bell in New York this morning:<\/strong><\/p>\n