The Macro Minute with Darius Dale Is today’s likely “hawkish cut” by the Fed already priced in?
Dec 10, 2025
The discussion highlights the Fed's anticipated hawkish cut and its disconnect with equity markets compared to bonds. A divided FOMC complicates the policy outlook, influenced by a slowing economy and affordability pressures. The emphasis on the Fed's balance sheet reveals challenges ahead, particularly with funding stress. Risk management tools like KISS and Dr. Mo are explored as disciplined strategies to navigate the current market volatility. Finally, managing synthetic exposures for gold and Bitcoin investments is discussed, shedding light on potential pitfalls.
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Bonds Vs Stocks: Pricing Disconnect
- Bond markets have already priced a likely hawkish Fed cut while equities have not, creating asymmetric positioning across asset classes.
- Diverging FOMC views, a bottoming U.S. economy, and a K-shaped recovery complicate the policy outlook beyond today's decision.
Balance Sheet Trumps Rate Guidance
- The Fed's balance sheet clarity matters more than rate guidance because QT halting changes liquidity dynamics across repo and reserve markets.
- Rising month-end and year-end funding stress could force temporary or dovish actions that don't solve long-term reserve shortfalls.
Reserve Scarcity Fuels Recurrent Repo Stress
- System reserve scarcity drives recurrent disruptions around quarter-, year-, and month-ends, exemplified by October's repo stress.
- Temporary balance-sheet expansion helps near-term liquidity but fails to restore permanent reserve capacity for leverage growth.