A 25 bp cut on 10 December is largely priced in, so the market’s reaction will depend less on the cut itself and more on Powell’s guidance. If he signals confidence in disinflation and avoids hinting at a policy pause, risk assets can continue to advance. Liquidity conditions are already improving, and seasonality typically supports year-end strength, so an orderly grind higher is still possible.

The risk is a “sell the news” move if Powell stresses data-dependence or pushes back against aggressive easing bets. Positioning has shifted repeatedly in the past two months, and any sign of hesitation could trigger short-term volatility.

For 2026, the framework should be simple. Cuts will be determined by two forces: the durability of disinflation and the resilience of labour markets. If inflation trends towards the Fed’s comfort zone without sharp labour weakness, the easing cycle will likely be gradual rather than aggressive. Markets may need to adjust to a slower, steadier path after the front-loaded actions in 2025.

In short, the near-term upside remains intact but is highly sensitive to Powell’s tone, while 2026 should be viewed as a slower normalisation phase rather than a rapid return to ultra-loose policy.