What To Expect When You're Expecting Rate Cuts By Spencer Jakab
It's Fed Day and the central bank's rate setters are unusually divided . The chances of another quarter-point cut remain good, but the disagreement, and how Chair Jerome Powell explains the central bank's thinking, could make for a volatile trading session today. Stocks are headed for a softer open while benchmark Treasury yields are near a three-month high.
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Federal Reserve meeting days follow a familiar pattern: The rate decision, at 2 p.m. Washington time, is old news. It's the written statement, and especially the press conference a half hour later, that can set off market fireworks.
Today's meeting could provide extra thrills and chills
for fast-money types. What should more thoughtful investors who think years and decades ahead do, though? Historical perspective could be misleading.
The consensus is for a " hawkish cut , " meaning that the committee's decision won't be unanimous, and that Chair Jerome Powell could signal caution going forward.
A Fed regime change looms with the end of Powell's term in May. President Trump's key interview question for his replacement seems to be "will you keep cutting rates?" Likely nominee Kevin Hassett is saying the right things
about not bowing to political pressure, but the bond market reads lips. It's worried the Fed will let the economy run hot.
When the current rate-cutting cycle began last September, overnight rates were 1.75 percentage points higher than they'll probably be by this afternoon. Yet 10-year Treasury yields were somehow half a point lower. Futures tracked by CME FedWatch imply about two more rate cuts in the coming year.
A looser Fed could boost some assets in your portfolio, but not most bonds. That sounds like the 1970s when fixed income also struggled mightily after the central bank lost inflation discipline. Strategists at Bank of America are among those pointing to commodities as a place for investors to seek refuge.
Oil and precious metals were a rare winning trade back then. A $10,000 investment in gold at the start of 1971 turned into nearly $73,000 a decade later, adjusted for inflation. Oil surged, too. Large company stocks and real estate barely budged and 10-year Treasury notes lost more than a third of their value.
But there was more going on. The "Nixon shock" of 1971 untethered the dollar from gold. There also were two energy crises that stoked crude prices. Those won't repeat. Gold and silver are already up 62% and 109%, respectively, year-to-date. Oil isn't, but that market is glutted.
Even if the Fed throws inflationary caution to the wind, history probably won't repeat for commodities. It might for the S&P 500, unfortunately, but for a different reason: That index is more than twice as expensive today as in 1971 on a cyclically adjusted basis.
Two ways for U.S. investors to protect the purchasing power of their portfolios from an overcaffeinated Fed are inflation-protected Treasury securities, which didn't exist in the 1970s, and stocks that present better value.
Consider small-capitalization stocks and foreign equities that have been laggards during the large-cap tech rally of recent years. Those were harder and much more expensive to buy during the stagflationary 1970s, but they did better.
Investors have more options now. There's no need to use the same playbook.
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Stocks I'm Watching
Cracker Barrel : The restaurant chain's adjusted per-share quarterly loss was smaller than expected, but the company cut its annual outlook . The controversy over its scrapped new logo hit sales. Shares skidded 11% in off-hours trading.
GameStop : The videogame retailer's quarterly revenue fell , as hardware, accessories and software sales declined. Shares in the original meme stock dropped 6% premarket.
Oracle : The software maker's earnings, due after the close, will offer investors a window into its debt-fueled spending spree and the broader artificial-intelligence boom. Shares rose about 1% in premarket trading.
Adobe , another software company bidding to become an AI powerhouse, is also due to post results this afternoon, as is chip-design software maker Synopsys .
Aegon : The insurance and asset-management group said it would change its name to Transamerica
and shift its head office from the Netherlands to the U.S., while also unveiling a buyback plan. Shares skidded in Holland.
GE Vernova : The maker of gas turbines and other power equipment, which has been riding the AI boom, issued rosy financial guidance and raised its dividend and share-buyback authorization. Shares jumped in premarket trading.
Amazon : The e-commerce stalwart said it would invest $35 billion in India
over five years. The news came on the heels of Microsoft announcing its own $17.5 billion, four-year spending plan.
Chewy : The online pet-food retailer will report its results before the bell.
One Big Chart
A Billion-Barrel Oil Glut Is Forming at Sea
The oil market is grappling with whether sanctioned Russian and Iranian cargoes should still be counted as supply. This may explain why oil prices have been slow to react to a huge glut that is building on the ocean .
What I'm Reading The megadeal is back and so is Wall Street's immense appetite for debt. Big-ticket mergers and acquisitions, or those valued at $10 billion or more, hit a record dollar amount this year. ( WSJ ) Silicon Valley is trying to win over President Trump on state regulation of AI, creating a flashpoint within Republican circles. ( WSJ ) President Trump doesn't have many good things to say about Europe these days. Neither do some of America's most powerful CEOs. ( WSJ ) IBM has been working on next-generation quantum computing technology for decades and now has major breakthroughs in its sights. ( Barron's ) How is retirement wealth affected by bad childhood experiences? ( Center for Retirement Research ) Today in Markets History
On this day in 1984, Sandy Lerner and Leonard Bosack founded Cisco Systems to make improved network-switching equipment. The duo were professors in different academic departments at Stanford University who were frustrated by their difficulty in communicating by computer.
Beyond the Newsroom
WSJ | Buy Side: From olive oils to oversized cookies and lobster rolls, experts weigh in on the best food gifts .
About Me
Business and finance have fascinated me for a long time. Before writing this newsletter, I edited The Wall Street Journal's Heard on the Street team for a decade, wrote two investment books and managed a team of stock analysts at a global investment bank.
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December 10, 2025 06:36 ET (11:36 GMT)
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