From my perspective, the 25bp cut on December 10 is basically locked in, and the market has already priced in most of it over the past few weeks. The volatility we've seen recently—especially across tech, semiconductors, and small caps—was really just the market reshuffling positions ahead of this decision. So when the Fed finally delivers the cut, I don't expect the same kind of violent reaction. Instead, I'm watching for Powell's tone to determine whether this marks the real start of a 2026 easing cycle or just a one-off move to "normalize" policy.
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For me, the key question isn't whether the Fed cuts this week, but how they guide the path for 2026. If Powell signals confidence in inflation coming down sustainably and hints at further gradual cuts next year, that could be the catalyst for a more durable bull run. But if he sounds cautious—emphasizing data dependence or upside inflation risks—the market might cool off temporarily, even though the first cut is already here. In that scenario, the rally would likely resume later, once data provides clearer confirmation.
I'm also keeping in mind that early-cycle rate cuts don't always mean the market goes straight up. Historically, the strongest bull markets tend to form when earnings growth re-accelerates at the same time monetary policy turns supportive. Right now, earnings expectations for 2026 look solid, especially for AI-related sectors, consumer tech, and selected cyclicals. If the Fed signals it's comfortable easing, and earnings momentum holds, that combination could provide the foundation for the 2026 bull run to really take shape.
Overall, I see this week as more of a confirmation than a trigger. The anticipation phase is over; now it's about whether the Fed gives the market enough visibility into next year's easing path. If Powell keeps the tone balanced but supportive, I think risk assets can continue to grind higher. But if he pulls back on forward guidance, we might see a short-term pullback—one I would treat as a buying opportunity heading into 2026.
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