S&P 500 Near Record High as Global Stock Indices Rally on Fed Cut Hopes (Dec. 5

New York, December 7, 2025 — The S&P 500 is trading within a whisper of its all‑time high as investors bet on another Federal Reserve rate cut and a wave of liquidity pushes money back into equities worldwide. Global stock indices from the MSCI World to Europe’s STOXX 600 and Asia‑Pacific benchmarks have mostly advanced in recent sessions, extending what is shaping up to be a strong year for risk assets. ^[1]

Key takeaways (Dec. 5–7, 2025)

S&P 500 closes December 5 at 6,870.40, up 0.2% on the day and roughly 16½–17% year‑to‑date, just shy of a record closing high and capping a multi‑day win streak. ^[2]
MSCI World Index and other global benchmarks are also near record territory, with the MSCI World showing about a 16–17% YTD gain and a 1‑year return of roughly 17.5% through late November. ^[3]
The Fed is widely expected to cut rates again next week, with futures pricing around an 84% chance of a 25‑basis‑point move despite one of the most divided policy debates in years. ^[4]
Wall Street 2026 forecasts for the S&P 500 now cluster between 7,100 and 8,000, implying further upside from current levels—though recent analysis highlights how often such forecasts miss the mark. ^[5]
European and Asian indices are participating in the rally, with the STOXX 600 up about 14% so far in 2025 and Asia‑Pacific ex‑Japan indexes advancing even as Japan’s Nikkei digests rate‑hike worries. ^[6]
International equity funds are on track to outperform U.S. stock funds this year, with some estimates showing global/International funds up more than 25% versus roughly 12–13% for U.S. stock funds. ^[7]

S&P 500: Inches From Record High After Win Streak

Friday, December 5, was another quietly constructive session for U.S. large caps. The S&P 500 rose 0.2% to close at 6,870.40, while the Dow Jones Industrial Average added a similar 0.2% to finish at 47,954.99 and the Nasdaq Composite gained about 0.3%. ^[8]

That move brought the U.S. benchmark to the edge of its all‑time closing high, with the index now less than half a percentage point from setting a fresh record, according to multiple market wrap reports. ^[9]

A few key details from the December 5 trade:

Winning week: ETF‑focused analysis notes that the S&P 500 ended the week on a four‑day win streak, coming off its best week since May and pushing to “within inches” of its record. ^[10]
Leaders and laggards: Retail and tech names helped carry the benchmark higher. Ulta Beauty led the S&P 500 after a blowout earnings report, while names like Salesforce also advanced on strong AI‑driven demand. ^[11]
Calm, not euphoric, tape: Despite being so close to a record, the day’s moves were modest and volatility remained subdued, with intraday ranges well below crisis‑era levels. ^[12]

From a bigger‑picture standpoint, the S&P 500 has returned roughly 16½–17% so far in 2025, depending on the data source, extending a run of double‑digit yearly gains. ^[13]

World Indices: Global Rally Broadens Beyond the U.S.

The story of early December is not just about the S&P 500. World indices have moved largely in tandem, reflecting optimism that developed‑market central banks are moving deeper into an easing cycle.

Developed markets: MSCI World and FTSE All‑World

The MSCI World Index, which tracks large‑ and mid‑cap stocks across 23 developed markets, shows: ^[14]

1‑year return: about 17.5% (gross),
YTD return: roughly 16.4% as of late November,
Index level: around 14,160 with an index market cap above $80 trillion and a forward P/E near 20.

Daily data from early December indicate the MSCI World continued to grind higher, with December 3–5 sessions posting small but steady gains. ^[15]

Likewise, global benchmarks tracked by the FT and others show world shares “mostly advancing” after Wall Street edged closer to its all‑time high on December 5, underscoring the increasingly synchronized risk‑on tone. ^[16]

Europe: STOXX 600 still lagging but catching up

Europe has been a relative laggard versus the S&P 500 but has joined the recent upswing:

The STOXX Europe 600 is up about 14% in 2025, helped by German fiscal expansion and earlier European Central Bank rate cuts. ^[17]
Citigroup now targets 640 for the STOXX 600 by end‑2026, implying roughly 10.5% upside from recent levels. The bank expects earnings‑per‑share growth above 8% in 2026 after a flat 2025 weighed down by tariffs and currency headwinds. ^[18]
Strategists there favor cyclical sectors—banks, travel & leisure, basic resources and industrials—while moving tech to “neutral” on valuation concerns. ^[19]

Asia: Mixed picture as Japan lags ex‑Japan rally

In Asia, the picture is more nuanced:

On December 5, Japan’s Nikkei 225 fell about 1.3%, giving back weekly gains as investors priced in a possible Bank of Japan rate hike later this month and digested weak household spending data. ^[20]
The MSCI Asia‑Pacific ex‑Japan index gained around 0.4% the same day, and South Korea’s benchmark rose roughly 1.4%, showing risk appetite in the region remains healthy outside Japan. ^[21]

International funds outpacing U.S. funds

A notable shift in 2025 has been the outperformance of international stock funds versus U.S.‑only funds:

Recent mutual fund data show U.S. stock funds up about 12.6% year‑to‑date,
while international stock funds are up roughly 26.4%, aided by a weaker dollar earlier in the year and rebound rallies in Europe and emerging markets. ^[22]

For investors benchmarking against the S&P 500 and key world indices, the message is clear: the rally is no longer purely U.S. mega‑cap tech—global diversification has been rewarded in 2025. ^[23]

Fed Rate‑Cut Drama: Internal Split, Big Global Implications

The next catalyst for both the S&P 500 and world indices is the Federal Reserve’s December policy meeting, and it is shaping up to be one of the most contentious in years.

A deeply divided FOMC

A detailed Reuters preview describes an unusually divided Federal Open Market Committee ahead of next week’s meeting: ^[24]

Five of the 12 voting members have voiced opposition or skepticism about further easing.
Meanwhile, three members of the Board of Governors support another cut, highlighting a rare public split.
Markets are pricing in roughly an 84% chance of a 25‑basis‑point cut, which would be the third consecutive reduction this year.

Economists surveyed by the Financial Times and Chicago Booth similarly expect another quarter‑point cut, but anticipate multiple dissenting votes, underscoring how uncertain the central bank’s outlook is. ^[25]

Data complications add to the fog: a 43‑day U.S. government shutdown delayed key employment reports, leaving policymakers without an updated unemployment rate for October and pushing the November jobs report past the meeting date. ^[26]

Inflation data and rate‑cut hopes

What has emboldened equity bulls over the past few days is cooler‑than‑expected inflation data, particularly the Fed’s preferred PCE measure and other price gauges, which have drifted closer to the 2% target. ^[27]

On Friday:

Markets cheered “tame” inflation figures, sending the S&P 500 and Dow a bit higher and keeping them near their records. ^[28]
Investors see a lower path for real rates in 2026, supporting current valuations and fueling flows out of cash and money‑market funds into equity and bond funds. ^[29]

One widely read feature on incoming liquidity argues that the S&P 500 is “preparing to surf” a wave of cash as investors redeploy money sitting in high‑yielding cash instruments now that a cutting cycle is underway. ^[30]

S&P 500 and World Indices: What the Latest Forecasts Say

Beyond the immediate Fed decision, markets are already looking ahead to 2026 targets for the S&P 500 and other world indices.

Wall Street’s 2026 S&P 500 targets

A round‑up of major strategist forecasts compiled by Yahoo Finance shows year‑end 2026 S&P 500 targets in a wide range, from about 7,100 to as high as 8,000. ^[31]

From today’s level near 6,870, that implies roughly:

3–4% upside at the low end of the range, and
16% or more potential upside at the high end, if earnings and multiples both cooperate. ^[32]

Technical strategists are also weighing in. An Elliott‑wave based view, cited by ETF and brokerage commentary, suggests the current rally phase could carry the S&P 500 toward the 7,120 area before any significant correction—though such pattern‑driven targets are inherently speculative. ^[33]

European forecasts: STOXX 600 to 640

On the European side, Citigroup’s new 2026 target of 640 for the STOXX 600 implies about 10.5% upside from recent levels, on top of this year’s ~14% gain. The bank expects:

EPS growth to re‑accelerate above 8% in 2026 after a flat 2025,
further support from fiscal spending and the ECB’s easing, and
leadership from cyclical sectors over expensive tech names. ^[34]

World indices: MSCI World and global diversification

With the MSCI World Index up about 16–17% YTD and roughly 17.5% over 12 months, strategists note that global portfolios that stayed diversified have recovered strongly from past drawdowns. ^[35]

The index’s heavy weightings in U.S. mega‑cap tech—NVIDIA, Apple, Microsoft, Amazon and Alphabet together account for a substantial slice of the benchmark—mean its fate is still closely tied to the S&P 500, even as Europe and Asia play a larger role in returns. ^[36]

But forecasts are often wrong

A widely circulated analysis from MarketWatch serves as a reality check:

The best‑performing forecasting firm over the 2000–2024 period still had an average error of about 10 percentage points when predicting the S&P 500’s next‑year return.
Across all major Wall Street houses, the average miss exceeded 15 percentage points, more than twice the index’s long‑term average return. ^[37]

The article essentially concludes that “market forecasts are usually wrong” and argues that investors may be better off focusing on diversified index exposure and inflation‑protected assets such as TIPS rather than betting heavily on precise S&P 500 targets. ^[38]

What to Watch Next Week for S&P 500 and World Indices

Heading into the week of December 8, several catalysts could set the tone for both U.S. and global indices:

Fed decision and Powell’s press conference
- Markets care less about whether the Fed cuts by 25 bps—already widely priced in—and more about how divided the vote is and what guidance Chair Jerome Powell gives for 2026. ^[39]
- A dovish tone with limited dissent could validate current valuations; a hawkish surprise or no‑cut outcome could trigger a risk‑off pause.
Labor and inflation data
- With official labor reports delayed by the shutdown, investors will scrutinize alternative indicators such as jobless claims, the JOLTS survey and regional Fed data for clues on hiring, layoffs and wage pressure. ^[40]
- Any upside surprise on inflation could push yields higher again and challenge the “Goldilocks” narrative that has driven indices up this month.
Global central banks and policy divergence
- The Bank of Japan’s next move is especially relevant for Asia, as rising Japanese government bond yields have already rattled the Nikkei. ^[41]
- In Europe, markets will watch whether fiscal expansion in Germany and other countries continues to support cyclical sectors, as baked into bullish STOXX 600 forecasts. ^[42]
Liquidity flows and positioning
- Commentary on incoming liquidity points to large pools of cash still sitting in money‑market funds, which could migrate into stocks and bonds if confidence in the easing cycle grows. ^[43]
- At the same time, positioning is already optimistic, meaning any disappointment from the Fed or data could spark a sharp, if likely temporary, pullback.

What This Means for Investors Tracking S&P 500 and World Indices

For investors and readers following the S&P 500 and global stock indices between December 5 and 7, 2025, the message is nuanced:

Momentum is strong: Both U.S. and global benchmarks are near records after double‑digit gains this year. ^[44]
Policy is turning supportive but uncertain: Rate cuts in the U.S. and Europe have underpinned valuations, yet internal splits at the Fed and data gaps keep the path forward murky. ^[45]
Forecasts are optimistic, but history urges caution: Targets for the S&P 500 and STOXX 600 point higher into 2026, but the track record of such predictions is poor. ^[46]
Global diversification has paid off: International stocks and world indices have, for once, outpaced U.S.‑only funds this year, rewarding investors with broader exposure. ^[47]

As always, this article is for information and news purposes only and does not constitute investment advice. Anyone making portfolio decisions should consider their own objectives, risk tolerance and, ideally, consult a qualified financial adviser.