FOMC Day: What We Expect and How the Market May React

Today’s Federal Reserve meeting is one of the most important events of the year, not because of the decision itself, but because of the tone that will follow it. Markets have already priced in a near-certain 25 bps rate cut, but what comes next is far more interesting.

Here’s a quick breakdown of what to expect — and why the market may behave in strange but predictable ways.

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1. Rate Cut: Almost Guaranteed

Financial markets, prediction markets, and analysts are all aligned:

The Fed will cut rates by 0.25% today.

The economy has softened at the margins — job openings are down, hiring is slower, and the latest usable inflation data shows price pressures cooling. With a 43-day government shutdown delaying crucial data, the Fed is flying partially blind and prefers to err on the side of caution.

The rate cut itself is not the headline.

The tone behind it is.

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2. Expect a Hawkish Cut — Not a Dovish Pivot

This meeting will feature one of the most divided FOMCs in years:

• Some policymakers warn inflation is still too sticky

• Others see risks of a weakening labor market

• A rare mix of hawkish and dovish dissents has emerged

• Powell’s own term ends in May, adding political friction

• Uncertainty around upcoming Fed leadership clouds communication

All signs point to a hawkish cut:

Cut now → but signal that future cuts require more evidence.

Don’t expect Powell to promise a rapid easing cycle. He will emphasize caution — possibly even skepticism — about further reductions unless the job market worsens.

This tone may cause short-term volatility, especially during Powell’s 2:30pm press conference.

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3. Market Reaction: A Dip First, Then Stabilization

On FOMC day, markets often behave counterintuitively. This morning, both the VIX and 10-year Treasury yields ticked higher — not because the cut is in doubt, but because investors are hedging ahead of Powell’s uncertain messaging.

A typical pattern for today looks like this:

1. 2:00pm ET — Statement Release

• Market knee-jerk reaction

• Slight dip if projections show fewer cuts in 2026

2. 2:30pm ET — Powell Speaks

• Volatility spikes

• AI and semiconductor stocks swing sharply

• GOOG and MSFT more stable

• Dip opportunities appear

3. 3:00pm onward

• Market digests the messaging

• Volatility fades

• Uptrend often resumes into year-end

This is not a bearish setup — just a volatile one.

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4. What This Means for the Santa Rally

A common question today:

Does a hawkish cut kill the Santa Rally?

No — not at all.

Historically:

• Santa Rally occurs in ~78% of years

• It has survived many hawkish Fed moments

• It only fails during recession collapses (2000, 2007, 2008)

Today’s environment — soft landing, falling inflation, rate cuts beginning — is supportive of a year-end rally.

Even if we see a dip this afternoon, the broader trend into late December and early January remains bullish.

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5. How We Positioned Ahead of the Decision

Going into today:

• We set buy ladders on GOOG at support levels ($314, $312, $308)

• Trimmed weaker positions (ENPH, RKLB)

• Avoided unnecessary exposure in bank stocks like JPM

• Preserved cash above ~6% for post-FOMC opportunities

• Increased exposure in AI infrastructure names (CRDO, MRVL) earlier this week

• Stayed overweight in core AI leaders (NVDA, AMD, TSLA, GOOG)

This strategy aligns with today’s likely outcome:

Rate cut + hawkish tone → brief volatility → continuation of the bigger AI-driven uptrend.

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Final Thoughts

Today’s FOMC meeting is not about whether the Fed cuts — it’s about how Powell communicates in the middle of a divided committee, missing data, political pressure, and uncertain economic signals.

Expect volatility.

Expect confusion.

Expect opportunity.

But unless Powell delivers a shock far outside expectations, the bigger picture remains:

Soft landing + easing cycle + AI supercycle → bullish medium-term outlook.

We’ll know soon enough. For now, we are positioned exactly where we want to be.