The calm before the Fed – Markets brace as they await JJ's presser

• It’s not the cut, it’s the TONE.
• Are the 2026 rate estimates too aggressive?
• Gold, Bonds and the VIX all bracing for the 2:30 presser.
• Feast of the 7 Fishes - #7 Salmon – Simple yet always good.

Get ready – because it’s here (Fed Rate Decision) and what happens next is anyone’s guess!

More waiting yesterday… the market did little more than twiddle its thumbs as the countdown ticked on. We’re now just hours away from the main event — the final FOMC decision of 2025 — and the tension is so thick, you can cut it with a knife.

No one should be wondering what happens to rates today (think: a 25-bps cut). The real suspense — the real drama — is in what JJ says next and HOW he says it.

Will he hint at more cuts? Will he slam the door shut? Or—brace yourself—will he leave the window cracked open for a rate hike down the road? Oh boy, - just make sure you grab your espresso before JJ begins speaking because once he starts talking, it is ‘game on’.

Oh, and the algo’s? They are just waiting for the headline…. will it sound dovish or hawkish? Because it makes a difference to how swiftly the algo’s react.

Just a side note – I will be joining Liz Claman on Fox Business at 3:20 pm to dissect and digest the headlines and the resulting move in markets. Hey, maybe nothing happens – that is an option that only time will tell.

As the bell rang at 11 Wall Street yesterday – this is what it looked like - the Dow lost 179 pts or 0.4%, the S&P down 8 pts or 0.1%, the Nasdaq added 30 pts or 0.15%, the Russell rose by 5 pts or 0.2%, the Transports lost 83 pts or 0.5%, the Equal Weight S&P ended lower by 15 pts or 0.2% while the Mag 7 gained 90 pts or 0.25%.

On the economic data front – we got the Jolts report yesterday – Job Openings and Labor Turnover Survey – and guess what? It did not play nice in the sandbox at all…..It blows the “cooling labor market” narrative out of the water.

Job openings jumped to 7.658 million, well above the 7.198 million estimate and well above last month’s 7.227 million. On the surface, that kind of strength suggests the economy is humming along and businesses still need workers. But in this environment — with the Fed trying to convince us that the labor market is in distress in order to justify a deeper easing cycle — a hotter-than-expected number complicates the ‘weakening labor market’ narrative.

Bottom line - A strong print like this is good for growth, but bad for the doves, it gives the hawks ammo, because it hints at a stronger labor market that is refusing to roll over and play dead - Not exactly what JJ wants to see heading into today’s announcement. I can’t wait to see how he handles that question….

Now, yesterday we went over the whole thing – what if they do and what if they don’t – so you should be ready for anything….nothing should surprise you….and nothing should cause you to change your mind on your long-term investments.

Ok – so what’s next?

While the expectation is for a cut, the broader sense is that JJ will lean hawkish, not dovish. The cut is the easy part — it’s everything that comes after that will drive the tone. All eyes then shift to the ‘quarterly projection’ for the DOT plot.

Will it suggest a slowdown in future moves? When can we realistically expect the next cut — January? March?

If the DOTs imply a longer glide path — or if JJ emphasizes caution, vigilance, or data dependency — then the algo’s are likely to be disappointed. And if that happens, we could see bond yields rise and stocks come under pressure as the dream of an ongoing easing cycle gets pushed out. That’s the risk!

But if JJ sounds more dovish — even subtly — and hints that more cuts remain “on the table,” then the algo’s may feel pacified and risk assets could stabilize or even push higher.

To be clear – the expectation is for a ‘hawkish cut’. Meaning yes, we are cutting today, but there are no plans to cut anytime in the future until and unless the data (especially the labor market data) collapses.

Yesterday, there were a handful of analysts calling for deeper cuts next year. Goldman and Bank of America see 2 cuts in 2026, JPM is talking as many as 3, and there are others calling for 4 cuts next year. This would come on top of the 175 bps in cuts we’ve already seen since the easing cycle began. Remember — after today’s move, the Fed Funds rate will sit at 3.50%–3.75%, which is exactly where four FOMC members believe the neutral rate lives.

So, you have to ask yourself: Do the guys calling for 4 cuts really think we need a fed funds rate at 2.50%–2.75%? Really?

Because for that to happen, the Fed would have to take policy well below what they themselves describe as neutral — it would be outside the historical norm, and it would imply an economy in real trouble.

And nothing — not the data, not the labor market, not corporate earnings, not credit spreads — indicates that we’re heading into that kind of environment. Not now. And, in my view, not next year either.

Consensus 2026 S&P 500 earnings growth is running in the mid-teens — call it 13%–15% — driven by continued AI/tech strength, improved margins from tech-driven efficiencies, and a reasonably solid macro backdrop: stable inflation, steady consumer demand, and a healthy labor market. GDP for 2026 is expected to be 2%+, which is solid, stable, and right in the ‘sweet spot’.

Now of course this could get flipped on its head if rates go up, if consumer demand weakens, if companies see margin pressure and forward guidance becomes more cautious/negative.

And remember – next year is a mid-term election year, so that has its own potential to create havoc and chaos – at least in the early part of the year.

But based on what we know today, the idea that we need to be at 2.50% Fed Funds next year feels like someone is living in La La Land — or at the very least, ignores the strength we continue to see in both the macro data and corporate America.

Bonds yields are up…. Yesterday the 10-yr yield ended at 4.18% and this morning it is yielding 4.20%. Remember – in late October the 10 yr was yielding 3.94%. The 30-yr ended the day yielding 4.81% and this morning it is yielding 4.82%. In late October, it was yielding 4.54%.

Oil continues to trade tight. This morning it is trading at $58.60 and remains withing the range we have been discussing $56/$60.

Gold is doing the same — churn, churn, churn. Yesterday it traded between $4,191 and $4,221, closing at $4,208. This morning it’s off $15 at $4,193 as the gold bugs sit tight waiting for the 2:30 pm presser.

Take a look at the chart: Draw the trendline resistance off the October high to today… then draw trendline support off the August low to today… and what you see is a tightening triangle that is about to get blown apart.

The only question left: Does gold break OUT and move higher, or break DOWN and move lower?

If JJ sounds hawkish, gold goes lower. Why? Yields rise/gold falls. Dollar strengthens/more pressure on gold. Liquidity expectations tighten/macro hedges (gold/precious metals) lose some appeal.

Conversely, if JJ sounds dovish, gold should break OUT, - Yields fall/gold rises, dollar weakens/gold rises, and we could see it challenge $4,250 in a heartbeat. The setup is there. The triangle is tight. And the next move is entirely dependent on tone, not the cut.

Bitcoin is trading at $92,500 while Ethereum is trading at $3,300.

Yesterday the VIX stayed quiet – this morning it is up 38 cts or 2.25% - pushing up thru resistance….and that makes some sense – considering all the ‘angst’ around today’s presser. If the VIX continues to push higher – stocks will go lower.

And this morning, US futures are DOWN – not big, but they are responding to the VIX…. The Dow -26, S&P -4, Nasdaq -33, and the Russell is -4. At this point there is nothing to do but wait…. After today, we will glide into year-end….and in my opinion end right about where we are today – which would not be a bad thing by any stretch.

European markets are also churning…. The UK is ahead by 0.3% while the other countries are under slight pressure. Again, its all about the FED and then the BoE and ECB next week and then they too will glide into year end.

The S&P closed at 6,840 down 6 pts — Early weakness could see us test 6820 ish…. – Trendline support is at 6,748 while resistance is up at 6,920.

Feast of the seven fishes – Baked/broiled salmon

This one is the easiest of them all. You need only a couple of things. – Salmon, Old Bay Seasoning.

Get you salmon – skin on – rinse under cold water….pat dry. Place nicely in a baking dish – season with Old Bay and bake on 375 for 15 mins…..Now Turn from bake to broil and broil the tops for a couple of more mins…. Careful not to burn. Remove and serve. Simple! No fuss, no mess and it complements all of the other dishes.