Will the Fed Cut in December? | Macro Mondays: November 24, 2025

Key Concepts

Macro Mondays: A weekly show on Real Vision discussing macroeconomic trends.
Bitwise: A crypto asset manager.
Binance: A cryptocurrency exchange.
S&P 500 Weekly Seasonality: A pattern observed in the S&P 500's performance throughout the week.
Federal Reserve (Fed) Policy: Decisions regarding interest rates and balance sheet management.
FOMC Meeting: Federal Open Market Committee meeting where monetary policy is decided.
Balance Sheet: The Fed's holdings of assets and liabilities.
Supplementary Leverage Ratio (SLR): A regulation that dictates the capital banks must hold against their assets.
Repo Markets: Repurchase agreement markets, crucial for short-term liquidity.
TGA (Treasury General Account): The US Treasury's primary bank account at the Federal Reserve.
Quantitative Easing (QE): A monetary policy where a central bank purchases securities to inject liquidity into the economy.
Regime Model: A model used by Real Vision to assess the likelihood of growth, inflation, and liquidity trends.
Goldilock Scenario: An economic state characterized by moderate growth and low inflation.
Ukraine Peace Process: Negotiations and potential peace plans related to the conflict in Ukraine.
Bitcoin Market Structure: The underlying mechanics and liquidity dynamics of the Bitcoin market.
Nuclear and Solar Bets: Investments in the nuclear and solar energy sectors.
Business Cycle: The recurring pattern of expansion and contraction in economic activity.
ISM Manufacturing PMI: Institute for Supply Management Purchasing Managers' Index for the manufacturing sector.

Macro Landscape and Weekly Seasonality

The discussion begins with an observation of a peculiar weekly pattern in the S&P 500 over the past three months, showing strong Mondays and Tuesdays, followed by weaker performance later in the week. Andreas suggests this seasonality might be linked to the Trump administration's tendency to release positive news on Sundays/Mondays and tariffs on Thursdays/Fridays. This implies that Monday's positive performance is simply due to it being Monday, potentially foreshadowing a rougher week ahead.

Federal Reserve Policy and December Meeting

A significant portion of the discussion revolves around the upcoming Federal Reserve meeting in December and the market's anticipation of a rate cut.

Market Expectations: There's a notable jump in the probability of a rate cut, with some believing it will "save crypto." However, Andreas cautions that a rate cut alone is not a panacea.
Key Question: Balance Sheet: Andreas emphasizes that the balance sheet management is a more critical question for December than just interest rates.
Fractured Committee: The Fed committee is described as "fractured" and "polarized," with members explicitly stating pro-cutting (e.g., Wallop Bowman, Trump's lieutenants) and anti-cutting (e.g., Liza Cook, Michael Bar, who refer to financial excesses and valuation risks) stances. This is a departure from the consensus-driven Fed under J. Powell.
Political Game: A political dimension is highlighted, with members appointed by Biden generally leaning towards easing, and those appointed by Trump leaning towards tighter policy.
John Williams' Influence: John Williams, President of the New York Fed, is identified as a key figure. His recent statements favoring balance sheet expansion and near-term rate cuts have significantly moved market pricing. Andreas considers Williams a close ally of J. Powell, suggesting his remarks carry weight.
Data Dependence: Some undecided committee members are waiting for more data, particularly the November inflation report, which will be released on the day of the FOMC meeting.
Inflation Outlook: The Real Vision regime model shows a sharp decline in the probability of inflation rising year-over-year. This suggests a move from a "three handle" to a "two handle" inflation rate, indicating that inflation is not building. A soft inflation report would likely "seal the deal" for a rate cut.
Goldilock Scenario: The current environment is moving towards a "goldilock scenario" (moderate growth, low inflation), but growth needs to pick up to achieve a truly ideal state.
October/November Conditions: Parts of October and early November felt more like a "down-down scenario" with declining growth, inflation, and liquidity, partly due to the standoff with China impacting trading volumes and constraints in repo markets.

Geopolitical Developments: Ukraine Peace Process

A developing story concerning the Ukraine peace process is highlighted.

New Momentum: A leaked peace plan has injected new momentum into the negotiations.
US Involvement: The Trump administration appears to have seized this opportunity to push the process forward.
US Peace Plan: A US peace plan, criticized by some as being dictated by Russia, was taken to Geneva for discussions with Ukraine.
Agreement on a Plan: Reports suggest that an agreement on a plan has been reached out of the meeting with Ukraine.
Potential Market Impact: If successful, this could be a significant geopolitical game-changer with a positive outcome for markets, similar to earlier events in the year.
Soft Deadline: There is a soft deadline on Thursday for these talks, indicating short-term pressure to reach a resolution.

Listener Questions and Market Structure

The discussion then addresses listener questions, focusing on liquidity, market structure, and specific investment bets.

Liquidity and Repo Markets

Month-End Stress: The likelihood of elevated SOFR (Secured Overnight Financing Rate) stress at month-end is discussed. While the TGA has shrunk, adding liquidity, there's still a gap to reach pre-stress levels in the dollar money market.
Fed Intervention: Andreas expects the Fed to conduct "technical QE" to manage the balance sheet and repo markets, especially in relation to the Supplementary Leverage Ratio (SLR).
SLR Easing: Proposed revisions to the SLR are expected to lower capital requirements for systemically important banks (G-SIBs).
- Impact: This could unlock significant capital capacity (estimated at $250-$300 billion), potentially available for lending.
- Indirect QE: The Fed aims to incentivize banks to hold Treasuries, creating an "indirect QE" by easing capital requirements.
- Timing: Implementation is likely in the first quarter.

UK Government Budget and Investor Outlook

Sir William's Concern: A UK-based investor is concerned about the upcoming government budget, fearing a bond market revolt and recalling the Liz Truss era.
Wealth Tax/Mansion Tax: Potential wealth taxes (e.g., 1.12% on assets over £10 million) are discussed as revenue-generating measures.
Andreas's Assessment: Andreas believes Tesla, Bitcoin, and macro assets are not highly sensitive to this specific budget. However, he finds it increasingly difficult to be optimistic about the UK's fiscal outlook, expecting continued suffering in the gilt market and widening spreads between Treasuries and gilts. He bluntly advises the investor that they "chose the wrong place to live" but reassures that it might not be a "biggie" for their portfolio.

Bitcoin Market Structure and Asset Allocation

Liquidity Driver Shift: The question is posed whether liquidity will cease to be the primary driver for Bitcoin, with marginal liquidity potentially moving to other markets like data centers.
Fed vs. Private Sector Liquidity: A key question for 2026 is whether the Fed's reduced balance sheet activity and the shift towards private banks injecting liquidity will alter asset allocation. Private bank lending is seen as more directed towards the real economy, with less direct impact on asset inflation.
International Equities Outperformance: International equities have outperformed both US tech and Bitcoin, which might be linked to this trend.
December Decision's Importance: The December FOMC decision on the repo market and balance sheet is crucial. Andreas believes the Fed still has at least one more balance sheet expansion (technical QE), which should benefit Bitcoin for the next 3-4 months.
Structural Shift: The trend away from the Fed balance sheet towards the private sector balance sheet is a structural shift that Andreas is still trying to fully understand in terms of its impact on asset allocation.

Nuclear and Solar Bets

Correlation to Business Cycle: Investments in nuclear and solar are positively correlated to the business cycle, typically expanding during economic upticks.
Slowdown as Base Case: Andreas does not consider an economic slowdown to be the base case, despite market pricing suggesting otherwise.
Manufacturing PMIs: Early signals from manufacturing PMIs (Purchasing Managers' Indexes) from regional Federal Reserves are showing decent strength, with three out of four surveys performing well.
ISM Manufacturing Forecast: Andreas anticipates a potential spike in the ISM manufacturing index when it's released early next month.

Conclusion and Takeaways

The discussion concludes with a recap of the week's packed schedule at Real Vision and a reminder to sign up for their services. The main takeaways from the macro discussion include:

Fed Policy Uncertainty: The Fed's December meeting is pivotal, with a fractured committee and a focus on balance sheet management. John Williams' influence is significant.
Inflation Decelerating: Inflation is showing clear signs of disinflation, supporting the case for a potential rate cut.
Geopolitical Catalysts: The Ukraine peace process is a developing story with the potential to impact markets positively.
Liquidity Dynamics: The shift in liquidity provision from the Fed to private banks is a structural trend that warrants further investigation.
Economic Outlook: While market sentiment leans towards a slowdown, current data suggests a more resilient economic picture, particularly in manufacturing.
Investment Strategy: Investors should be mindful of the interplay between macro trends, geopolitical events, and specific asset class dynamics.