Markets pause, Fed tension boils

• Stocks slip as investors, traders and algo’s pause.
• Is the current narrative colliding with 2026 forecasts?
• Markets remain rangebound as the clock ticks.
• Bonds, Oil and Gold churn. Bitcoin and Ether remain under pressure.
• Feast of the 7 Fishes - #6 Feta Shrimp.

Stocks ended the day lower (doing essentially nothing)! The rally came to a halt as the ‘world’ awaits the FED’s final 2025 decision…as if we don’t already know what they are going to do…. but let’s be clear – there IS unrest in the house…. the tension IS building…..

First – let’s get the performance out of the way – Yesterday the Dow lost 215 pts or 0.5%, the S&P down 24 pts or 0.35%, the Nasdaq gave back 32 pts or 0.15%, the Russell ended the day flat, the Transports lost 45 pts or 0.25%, the Equal Weight S&P gave up 46 pts or 0.6% while the Mag 7 lost 316 pts or 0.9%.

So, what’s going on over at 20th St. & Constitution Ave. NW in D.C.?

Plenty. The Fed is knee-deep in internal debate, and this committee is more divided than we’ve seen in years. Two opposing forces are pulling hard — and this could go down as one of the most contested FOMC decisions in modern history.

Recall that after the last FOMC meeting, JJ reminded us that a December cut was not cast in stone. Yet the market doesn’t seem to care — Fed Fund Futures are pricing in a near-100% chance of a cut.

The Split: Doves vs. Hawks.

The doves want another cut. They argue job growth is slowing, layoffs are ticking up, and the labor market is fragile — easing now, they say, will help support growth and employment.

I’m not fully buying that. Yes, we’re seeing softening around the edges, but this isn’t the “economic disaster” some are trying to sell. Economic activity remains healthy — the data proves it. Unemployment is anchored at 4.4%, which still signals full employment. Q3 earnings season? Strong. Guidance? Robust. Plenty of winners, no disasters.

And now we are getting the ‘projections for 2026’ - the big banks coming out with their guidance – Deutsche Bank and Oppenheimer are projecting ~16% jump in the S&P. JPM has a 10% projection while Bank America is much more cautious with only a 4% move higher. Expect to hear more in the weeks ahead.

Now, the hawks worry that inflation is still too hot — 3% vs. the 2% target — and that easing too aggressively risks re-igniting the very thing we’ve spent two years trying to kill. That’s the camp I’m in. I’ve lived through 1980. I still have nightmares.

Because of this tension, expect dissent — real dissent — which is why this is shaping up as one of the most contentious decisions in years.

Then add in the “black hole” created by the recent government shutdown, which delayed key data releases. The Fed claims they’re flying partially blind. Maybe. I’m not convinced they’re as blind as they want us to believe.

Either way, we’re now less than 34 hours from the announcement.

What Happens If They Cut? Borrowing costs could ease for consumers and businesses. But let’s be honest: Mortgages may move lower. HELOCs may ease. Credit cards? Forget it. Bloomingdale’s isn’t cutting their 32.99% rate for anyone. If you think so—you need your head examined.

What Happens If They Hold? A hold means the Fed is prioritizing inflation control over stimulus. It could stabilize expectations, but it offers zero near-term relief to consumers and businesses with high borrowing costs.

And let’s clear up the mortgage myth: Once you’ve locked in a mortgage, a rate cut doesn’t magically lower your payment. It’s a fixed cost. The only way to benefit is by refinancing — and for that to make sense, you typically need at least a 1% drop. Anyone sitting at 7%+ should run the math. Below that? Probably not worth it.

Small Businesses have a different story. Businesses borrow differently — variable rates, credit-based pricing, lines of credit, SBA-backed loans, equipment financing, collateral requirements, the whole menu. So yes, a cut can help small businesses more than homeowners. But let’s not forget we’ve already cut 175 bps this year. A lot of relief is already in the system. And let’s remember – for 15 yrs the FED kept rates at zero, so THEY conditioned the mindset to expect ridiculously low rates as normal.

The bottom line? There’s a cost to money. Nothing is free (no matter what Mandami says). And some at the Fed know the risk of pretending otherwise.

Bonds continued to come under a bit of pressure – the TLT and TLH both off by about 0.3% while the AGG lost 0.15%. (Remember the AGG represents the total US investment grade bond market and includes treasuries, corporates and MBS, ABS & CMBS). This morning the 10 yr is yielding 4.15% and the 30 yr is yielding 4.78%.

Oil is trading at $58.95 and remains withing the range we have been discussing $56/$60. No reason to see it spike higher at all – plenty of supply all around us.

Gold –is doing the same…..yesterday it lost $7 to end the day at $4,190 and today it is up $14 at $4,204….it remains in a very tight range $4180/$4250 – you can see it on the chart – it is ready to break one way or the other….and we are about to find out how it reacts after JJ starts speaking…because it will be all about his tone….

Bitcoin is trading at $90,500 while Ethereum is trading at $3,100.

The VIX remains in the ‘complacent zone’ at 16.92 and is rubbing its head on trendline resistance at 17.13. A move up and through will see anxiety tick higher and stocks pull back just a bit, while a failure to pierce it will see anxiety subside and prices rise.

This morning, US futures are churning…. The Dow +56, S&P +4, Nasdaq -12, and the Russell is +3.

European markets are also churning…. Euro Stoxx, France and Spain all slightly lower while the UK, Germany and Italy are all slightly higher -NOTHING to write home about. They will pay attention to what JJ says and then try to extrapolate that to what the BoE and ECB will do next week.

The S&P closed at 6,846 down 24 pts — also leaving it in a tight range….6,800/6,850 – Trendline support is at 6,748, we are above all trendline resistance levels, so we have to look at the all time high of 6,920 as a possible level of resistance, if that fails to hold the bulls back – then as explained – look for the algo’s to take it to kiss 7000 before year end – because why not?

Remember – tomorrow will be all about what and how JJ says what he says….Will he cut rates tomorrow and promise more cuts in January & March? Most likely not, In my opinion that would be foolish – especially since he is a lame duck – the next move will be Kevin’s!

Feast of the seven fishes - #6 – Feta shrimp

This recipe came to us from my Greek Uncle (he married my godmother)

For this you will need: 2 lbs. of large cleaned and deveined shrimp, sliced garlic (a lot), thin sliced plum tomatoes, feta cheese, butter, s&p, olive oil & Madeira wine. * You can prepare all of this ahead of time and place in bowls to have ready for you when you are ready to cook. You have to make this right when you get ready to eat it…. if you are making it for a small group – you can put this over Orecchiette pasta (little ears) or white rice. When I make it on Christmas Eve – I serve it in a large bowl with plenty of toasted garlic bread.

Begin by heating up ½ stick of butter and some olive oil on med high heat. Add a handful of sliced garlic and sauté for 4 mins or so…do not burn. Next add in enough shrimp so that you cover the bottom of the pan – do not pile them on top of each other…. When they turn pink – flip them over.

Now add enough Madeira wine to “bathe” the shrimp – (do not drown or cover them in wine) – Turn heat to hi…. season with s&p, place sliced plum tomatoes all over and then top with crumbled feta cheese. Cover and allow the steam to soften the tomatoes and soften the cheese. No more than 3 mins. Remove and place in a large serving bowl. Repeat process until you have cooked all of the shrimp. Make sure that you have enough garlic bread for your guests.