Fed Cuts Spark Fresh Rally Potential

SocGen: Fed Cuts Set Stage for Equal-Weight S&P 500 Rally

It’s Fed Day, and despite market bumps, 2025 has been a standout year for investors. Societe Generale strategists believe the strength can continue as the Federal Reserve cuts rates in a non-recessionary backdrop.

So far, none of the 28 asset classes in SocGen’s recommended portfolio — from European bonds to gold — are negative this year. Looking ahead, they see room for more gains and are shifting allocations: raising equities to 50% from 44%, trimming cash to 5% from 10%, and slightly reducing bonds to 35%.

History shows that dovish Fed policy supports global equities. While U.S. growth exceptionalism is fading, earnings remain resilient — boosted by AI, stronger profits beyond tech, rising fiscal spending, and global supply-chain shifts.

Together, these factors point to ongoing EPS growth and the potential for the S&P 500 to climb higher, with any pullbacks staying shallow.

To capture a broadening market rally, SocGen highlights the S&P 500 Equal-Weight Index and a custom basket of profitable small caps with solid balance sheets. They also project the S&P 500 hitting 7,300 by the first half of 2026.

Their bullish stance extends overseas: doubling exposure to Japan, maintaining strong European positions, and adding slightly to emerging markets. They point to Germany’s fiscal push, Japan’s new pricing power, China’s next bull leg, and renewed strength across Europe — especially in Italy and Spain.