The stock market is on the brink of record highs as a third Fed rate cut seems inevitable. The S&P 500 is up 16.8% for the year, near its peak. The Fed’s balance sheet plans are crucial for the economy. Small businesses are struggling under higher rates, while upper-income consumers are driving spending.

The Fed may announce “reserve management purchases” to address financial market pressures. Credit spreads are low, indicating little concern about defaults. The central bank aims to avoid a repeat of the 2019 repo crisis. The Fed may start purchasing Treasury bills to ensure liquidity in the system.

Despite a tumultuous year, the stock market is set to reach record highs. The S&P 500 has surged 73% in the past three years, driven by enthusiasm for AI and despite the Fed’s higher rates. The Fed’s balance sheet growth and rate cuts will impact borrowing costs and market stability in the coming year.

Read more at Yahoo Finance: The Fed’s biggest decision this week could have nothing to do with interest rates