Stock Markets and the Fed: Nothing to Gain, Everything to Lose?
Stock Markets and the Fed: Nothing to Gain, Everything to Lose?
By:Ilya Spivak
Do stock markets have anything left to gain from another all-but-certain Fed rate cut?
- The markets are convinced that the Fed will cut interest rates again this week
- Traders seem all but certain that three cuts will appear in 2025, as promised
- “Buy the rumor, sell the fact” dynamics may sting stocks, boost the US dollar
Stock markets seem fully primed for this week’s monetary policy announcement from the Federal Reserve. The probability that the central bank will deliver another 25-basis-point (bps) interest rate cut stands at an overwhelming 99%, according to pricing implied in benchmark Fed Funds futures.
The markets are almost equally convinced that another 25bps reduction is on the menu when the US central bank’s policy-steering Federal Open Market Committee (FOMC) gathers again in early December. Traders put the probability of that outcome at 90.8%, down a hair from 98.1% a week ago, but commanding in its conviction all the same.
Markets are set for the Fed to deliver on its 2025 rate cut outlook
What’s more, this level of certitude has mostly prevailed since Fed Chair Jerome Powell and company delivered this year’s first interest rate cut in September and updated the closely watched Summary of Economic Projections (SEP) to envision three cuts this year. With only two meetings left thereafter the path ahead seemed all but preordained.
This begs the question. Markets respond to event risk when the outcome differs somehow from the expectations already reflected in price levels, forcing a rethink on asset valuation. If this Fed meeting’s outcome is all-but fully reflected in stocks, bonds, currencies, and other sensitive assets already, has scope for a price response evaporated?
There is some room for speculative jostling beyond 2025. Fed officials penciled in just 25bps in cuts for all of next year, while the markets have priced in a meatier 65bps. That amounts to at least two standard-sized reductions, and a narrowly better-than-even 60% probability of a third one.
Stocks after the FOMC meeting: “buy the rumor, sell the fact”?
Traders have shied away from actively forcing a reckoning on this front, however. That may be because the US government shutdown has left them without the necessary evidence to prognosticate over a longer view. Policymakers don’t seem any more eager to step out on a ledge. In any case, an FOMC forecast update is not due until December.
If the 2026 disconnect between officials and the markets is addressed at all, it will probably appear in the post-meeting press conference with Chair Powell. Stock markets may wobble while the US dollar strengthens against other currencies if the Fed chief argues against traders’ dovish mythmaking.
Critically, that need not happen for a “risk off” reaction. With the markets seemingly priced for perfection, an outcome matching that baseline may amount to little more than defusing the threat disappointment. This may translate into a “buy the rumor, sell the fact” dynamic as the potential for speculative fireworks is drained from the asset prices.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastyfx, LLC (“tastyfx”) is a Commodity Futures Trading Commission (“CFTC”) registered Retail Foreign Exchange Dealer (RFED) and Introducing Broker (IB) and Forex Dealer Member (FDM) of the National Futures Association (“NFA”) (NFA ID 0509630). Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances as you may lose more than you invest.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2025 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.