Every once in a while we get one of those weeks where literally everything seems to happen at once. This is one of them.
The Federal Reserve meets Wednesday, central banks around the world are on deck, we get fresh labor-market signals, tech giants report earnings, and markets have to decide whether the “soft landing” party keeps rolling or someone just turned the music down. Buckle up.
The Main Event: Wednesday’s FOMC Meeting
Let’s not bury the lede. Pretty much everyone on earth expects the Fed to cut rates by 25 basis points this Wednesday, bringing the fed funds range to 3.50-3.75%. That would be the third cut since September and a grand total of 175 bps of easing in this cycle.
But here’s where it gets spicy: this one probably won’t be unanimous. Some hawks think inflation is still too sticky. Some doves worry the labor market is cooling faster than advertised. Polymarket is currently giving 22% odds of four or more dissents – something we haven’t seen since the early 1990s. I’m not saying it’s likely, but the chance alone tells you how fractured the Committee has become.
The real fireworks, though, will come at 2:30 PM ET when Chair Powell steps to the podium. Markets are desperate for clarity on 2026. The consensus view on the Street is that Powell will try to slam the door on aggressive cuts next year. Think phrases like “higher bar for additional easing” and “data-dependent pause.”
“Each rate cut raises the bar for the next one.”
Philadelphia Fed President Anna Paulson, November 2025
In my view, that’s exactly the tone he’ll strike. The Fed wants to keep some dry powder in case the labor market really rolls over in Q1, but they also don’t want markets pricing six more cuts like it’s 2008 all over again.
What to Watch in the Dot Plot and SEP
The updated Summary of Economic Projections will be dissected line by line. Here’s the cheat sheet of what most desks expect:
- 2025 GDP nudged slightly higher (maybe +0.3-0.4 pp)
- Core PCE inflation trimmed a tenth or two for 2025
- Unemployment path basically unchanged around 4.4%
- Median dot for 2026 still showing only one cut (to ~3.25-3.50%)
- Long-run neutral rate unchanged at 3.0%
If the 2026 median dot stays at one cut (or even flips to zero), risk assets will throw a tantrum. If it mysteriously jumps to two, you’ll see 10-year yields backing up in a hurry. Simple as that.
The Global Central-Bank Sideshow
While the Fed steals the spotlight, plenty of other policymakers are busy this week.
- Tuesday – Reserve Bank of Australia: Widely expected to hold, but recent hot inflation prints have markets sniffing a possible hike as soon as February. Watch the statement tone like a hawk.
- Wednesday – Bank of Canada: Also on hold, but Canadian 2-year yields ripped 16 bps Friday after another blockbuster jobs report. Traders now fully price a hike by October 2026.
- Thursday – Swiss National Bank: Trying to keep rates barely positive to avoid slipping back into negative territory. Another hold expected.
- Tuesday – BoJ Governor Ueda speaks in London: A tasty appetizer before the BoJ’s December 19 meeting that could finally deliver a hike.
It’s funny – while the Fed is still easing, half the developed world is suddenly worried inflation is re-accelerating. That divergence is going to keep currency and bond markets interesting.
Tech Earnings: Oracle vs Broadcom
Two heavyweight tech names report this week, and they couldn’t be more different right now.
Oracle (Wednesday after close) has been an absolute disaster lately – down roughly 34% from its highs as cloud growth disappointed and the Street lost religion in the AI pivot story. Consensus expects about 9% revenue growth, but the whisper number is closer to 7%. If they miss again, this thing could go sub-$150 in a heartbeat.
Broadcom (Thursday after close), on the other hand, is sitting just 3% off all-time highs. VMWare integration is going better than feared, custom AI chips are sold out for years, and the dividend yield is still decent. The bar is sky-high, but the momentum is undeniably bullish.
Personally, I think Broadcom prints a solid beat and the stock rips toward $300, while Oracle is 50/50 to gap lower. Either way, these two reports will tell us a lot about whether the AI capex boom is broadening or still concentrated in the usual suspects.
Key Data Points to Watch
Beyond the headlines, a handful of releases could move the needle:
- Tuesday – JOLTS (Sep/Oct combined): We’ve been stuck in this weird “low hiring, low firing” equilibrium. Private hiring is at multi-year lows, quits are subdued. Any further drop in openings below 7.1 million would reinforce the cooling narrative.
- Wednesday – Q3 Employment Cost Index: Expected +0.9% q/q. If it prints softer (Goldman is at +0.8%), doves will love it.
- Thursday – Initial Jobless Claims: Last week’s freakishly low 191k was holiday distorted. Consensus 220k, Goldman 230k. A number north of 240k would spook markets.
- Friday – UK monthly GDP: A downside surprise could reignite Bank of England cut pricing for early 2026.
Throw in China CPI/PPI (Wednesday) and Nordic inflation prints, and you’ve got plenty of secondary catalysts to keep volatility alive.
How Markets Are Positioned
Heading into the week, positioning feels surprisingly light. Equity funds are only modestly long, hedge-fund beta is below average, and systematic strategies have derisked into year-end. That actually leaves room for a squeeze higher if Powell sounds even mildly constructive.
On the flip side, rate-cut expectations for 2026 have been slashed from ~150 bps a month ago to barely 50 bps today. There’s not much cutting left priced in, so any hawkish surprise could hit bonds hard.
Currency markets are fascinating too. The US dollar has quietly ripped 4% in three weeks as global rate-cut differentials swing back America’s favor. A “pause” signal from Powell could easily push DXY toward 110.
My Base Case for the Week
Fed cuts 25 bps Wednesday, statement removes the “some further gradual easing” language, dot plot shows one cut in 2026, Powell pushes back hard on March. Stocks dip initially, then grind higher into year-end on dip-buying and FOMO. 10-year yield finishes the week around 4.50%. Oracle disappoints and gaps to new 52-week lows, Broadcom beats and runs.
Risks are obviously tilted toward a more hawkish surprise – that’s where the positioning skew lies. But if labor data keeps softening into January, the Fed can always walk it back. They’ve done it before.
Either way, this week feels like one of those inflection points that traders will talk about when they look back at the 2025-2026 cycle. Grab some coffee, silence the group chat, and enjoy the show.
Stay nimble out there.
