December 2025 Trading Outlook: Fiscal Flows, Bank Credit, And Fed Policy
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Alan Longbon2.93K FollowersFollow5ShareSavePlay(9min)CommentsSummaryThe S&P 500 (SPX) faces weak fiscal flows and back-to-back tax drains, signaling a high probability of near-term downward pressure.Federal outlays have sharply decreased, producing a 'red flush'—historically correlated with SPX declines—while upcoming tax collections further tighten liquidity.Fed policy is shifting toward easing, with rate cuts likely and QE (Reserve Management Purchases) set to resume in January 2026, supporting risk assets long term.Seasonal trends suggest markets may drop into mid-December, rebound with a Santa Rally, then face weak conditions until March 2026. Richard Drury/DigitalVision via Getty Images Introduction This report applies the sectoral balance framework to assess how fiscal and monetary dynamics are shaping risk asset performance. With inflation cooling, unemployment rising, and the Federal Reserve signaling a shift in policy, the interplay between fiscalThis article was written byAlan Longbon2.93K FollowersFollowTrading real estate, equity and bond markets using fiscal flow analysis, functional finance, demographics and the real estate cycle.I stand on the shoulders of giants such as the work of Professors Wynne Godley, Micheal Hudson, Steve Keen, and William Mitchell, Roger Malcolm Mitchell, Warren Mosler, Robert P Balan and many others.One can analyze a country in seconds with four numbers as a % of GDP and these are G P X C where[G] Federal spending.[P] Non-Federal Spending.[X] Net Exports[C] CreditOne can then derive a set of accounting identities that are correct by definition.GDP = G + P + XAggregate Demand = G + P + X + C or GDP + Credit.GDP = GDIG and X are regularly reported in official national account statistics and one can work out P as follows:P = G + XFederal Deficit ↑ = Private Surplus ↑ = Risk Asset markets ↑Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.Selling real estate, long cash and goldSeeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.