Yesterday afternoon felt like one of those moments when the entire market collectively exhaled.
You know the feeling—everyone’s been on edge waiting for the Federal Reserve to speak, traders glued to their screens, algos ready to pounce. Then Jerome Powell steps to the podium, delivers the expected quarter-point cut, and somehow still manages to sound just dovish enough that stocks rip higher and bond yields slide. Classic Fed magic.
I’ve been around long enough to remember when a “dovish cut” sounded like an oxymoron. Not anymore. Welcome to 2025.
The Fed Delivers—And the Market Says Thank You
Let’s start with the headline everyone already knows: the Federal Open Market Committee lowered the federal funds target range by 25 basis points to 3.50%–3.75%. That’s the third cut of the year, bringing the cumulative easing to 100 basis points since September.
What mattered more than the voting breakdown and the tone.
Nine of the twelve voting members supported the move. Two wanted to stand pat (Goolsbee and Schmid), and one lonely hawk—Stephen Miran—actually pushed for a 50 bp cut. If you were worried about a fractured committee heading into 2026, this feels pretty unified.
“Monetary policy is not on a preset course. We will continue to make decisions meeting by meeting.”
Jerome Powell, December 2025 press conference
Powell repeated versions of that sentence several times yesterday. Translation: don’t get too excited about 2026 cuts just yet.
Reading the New Dot Plot (Without Losing Your Mind)
The updated dot plot now shows most members expecting only one additional cut in 2026 and another in 2027. That’s notably fewer than the three or four many on Wall Street had priced in just a few weeks ago.
But here’s the thing I always remind myself: the dot plot has been wrong more often than my March Madness bracket. Remember when it showed four cuts for 2024 back in late 2023? Yeah…
Powell himself basically said the dots are less useful now because uncertainty around tariffs, fiscal policy, and immigration is sky-high. In my view, that’s code for “we’re data-dependent on steroids.”
- Inflation: making “good progress” but still above 2%
- Labor market: cooling “a bit faster than expected”
- Tariffs: could push prices up, but the Fed is willing to look through a one-time pop
Put it all together and you get a central bank that wants to ease—but very, very carefully.
Bond Market Reaction Tells the Real Story
Stocks grabbed the headlines (S&P 500 up 1.3% as I write this), but the bond market move was even more telling.
The 10-year Treasury yield dropped roughly 12 basis points immediately after the announcement, hitting the lowest level since October. That’s the bond market saying “we believe the Fed is done tightening for a long, long time.”
For growth stocks, real estate, and anything rate-sensitive, that’s pure oxygen.
Eli Lilly’s $6 Billion Bet on American Manufacturing—and AI
While the Fed dominated airtime, a separate announcement slipped out late Tuesday that I think deserves way more attention.
Eli Lilly is dropping more than $6 billion into a brand-new U.S. manufacturing site in Alabama dedicated to producing orforglipron—the company’s oral GLP-1 pill that could launch as soon as early 2026.
Yes, another multi-billion-dollar facility. At this point Lilly is basically building its own industrial revolution in the Southeast.
But the line that jumped out at me was this:
“…state-of-the-art technologies, including machine learning, AI, digitally integrated monitoring systems, and advanced data analytics to drive right-first-time execution.”
Right-first-time is straight out of the Six Sigma playbook—do it correctly the first time and you slash waste, speed up production, and protect margins. In a world where every new GLP-1 plant costs billions, that’s not a nice-to-have. It’s survival.
We don’t know yet whether Nvidia GPUs are powering the AI backbone (my guess is yes), but the broader point stands: physical AI and digital twins are moving from buzzword to factory floor faster than most investors realize.
Lilly stock has been in the penalty box lately—down nine straight sessions before today—but this announcement feels like the kind of long-term commitment that patient shareholders get rewarded for. I trimmed some near $1,100 last month, but I’m perfectly happy holding the rest for years.
What Happens Next? Three Scenarios I’m Watching
Scenario 1 – Soft Landing Becomes No Landing
If tariff fears prove overblown and labor keeps cooling gently, the Fed might pause after one more cut and just sit at 3.25%–3.50% for a couple of years. Equities keep grinding higher, credit spreads stay tight, gold takes a breather.
Scenario 2 – Reacceleration Forces a Pivot Back
If new tariffs do spark a meaningful inflation pulse in mid-2026, the Fed could be forced to hike again. Painful for bonds, painful for high-multiple tech, but great for banks and value stocks.
Scenario 3 – Something Breaks
Always have to keep this one on the radar. Commercial real estate, private credit, over-leveraged consumers—if any of those cracks widen fast, the Fed cuts aggressively and we get the “insurance cuts” many hoped for this cycle.
My base case is still Scenario 1, but I’m keeping dry powder for Scenario 3.
The Bottom Line
Yesterday wasn’t a screaming bullish. It was quietly bullish.
The Fed eased, acknowledged risks in both directions, and left itself maximum flexibility. Markets interpreted that as “they’ve got our back,” and honestly, they probably do—for now.
Add in corporate America continuing to invest billions in next-generation manufacturing (shoutout Lilly), and the backdrop for U.S. large-cap equities still looks constructive heading into 2026.
Of course, nothing is guaranteed. But if you told me a year ago we’d be sitting at 3.5%–3.75% fed funds with the S&P within striking distance of 6,000 and unemployment still under 4.5%, I would have taken that trade all day long.
Here’s to hoping the landing stays soft—and that the next surprise is a pleasant one.
Disclosure: The author holds shares of Eli Lilly in personal and managed accounts as of December 10, 2025. This article is for informational purposes only and does not constitute investment advice.
