The Macro Minute with Darius Dale How will markets navigate a divided Fed?
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Dec 8, 2025 Markets are grappling with uncertainty due to a divided Fed, making price fluctuations unpredictable. Rising dissent within the Fed complicates monetary policy, while concerns over bond weakness loom. Darius discusses the skepticism around AI's potential disinflation effects and the risks posed by fiscal policy changes. He suggests that a true rotation in market breadth hinges on convincing leadership at the Fed, possibly not happening until late 2026. For now, he recommends sticking with AI and mega-cap stocks over riskier small caps.
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Divided Fed Fuels Market Choppiness
- Deepening Fed divisions increase market uncertainty and make beta responses unpredictable.
- Markets will stay choppy until reserve management operation purchases are clarified.
Expectations For Rate Cuts Have Fallen
- Inflation concerns and missing data from the shutdown widened FOMC splits and trimmed expected cuts.
- Money markets now price only two cuts for 2026, and bond performance has weakened amid that uncertainty.
Fed's Past Errors Shaped Today's Risks
- Darius recounts the Fed's track record of three market crashes and high inflation tied to delayed policy reactions.
- He argues Powell's tenure and the Fed's past errors have contributed to today's affordability crisis.