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The Fed Put by Williams resurrects S&P

ADMIN || 28th November 2025

Federal Reserve Bank of New York President John Williams said last week he sees room to lower interest rates again in the near term as the labor market softens, reviving investor expectations for a December rate cut. Before he spoke, Dec rate cut expectations were only 40% for a 25-bps cut. After his speech ended, the rate cut expectations rose to 80% & now stabilising there. Williams is considered a neutral voice in current FOMC but an influential one being heading Ney York Fed. The president of the New York Fed has historically been closely aligned with the Fed’s chair. So, his speech indicated that Fed Chair Powell might be able to stitch a coalition around a 25-bps cut in the Dec meeting along with most of the neutrals & doves.

But his speech seems coincidental with S&P having fallen precariously close to 6500 odd levels last week on fears of AI theme breaking down prematurely. Since his speech on Friday last week, S&P has recovered significantly to 6800+ levels currently. The Fed put was truly in place.

This comes as other forms of liquidity, such as excess liquidity, are still elevated enough to act as a safety net for equities and other risk assets. Despite the wobble in equities, this is unlikely to mutate into anything worse than a correction. We had a year end target of 7000 on S&P as per our report on 8th Nov & we are sticking to it:

https://macro-spectrum.com/trade-recommendation/buy-sp-500

Even the fiscal put is making a reappearance, with the blessing of Yellen’s successor, Scott Bessent. As the chart below shows, net bill issuance is rising again relative to the fiscal deficit.

We can see that when net bond issuance (blue line) rises above 100% of the fiscal deficit, and net bill issuance is correspondingly low or falling (white line), the stock market falters. On the other hand, when net bill issuance is more than 0% of the fiscal deficit and is rising on a 3-month basis, as it is today, stock-market returns are good, with the one-month forward return in line with the average, while the 3, 6 and 12 month forward returns are all above their average. The fiscal put is unlikely to be as potent this time as the domestic RRP is now empty, but it certainly won’t be an expropriator of liquidity, and therefore is supportive of risk assets.

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