Current Market Core Focus and Preview of the December FOMC Meeting

1. Current Market Situation

Market attention continues to hit new lows, with extremely cold sentiment, but this week will welcome the most significant macro event of 2025 — the December Federal Reserve FOMC meeting.

2. The Real Game Points of This Meeting (Far More Than Just a 25bp Rate Cut)

The 25bp rate cut itself is already a "given," fully priced in by the market, and will not trigger major fluctuations.

The real dividing line lies in three key variables:

1. The dot plot for 2026 (the market is most concerned about how many times rates can be cut next year)

2. Powell's statements at the press conference, with the hawkish-dovish degree determining short-term sentiment

3. Whether the pace of balance sheet reduction is adjusted (the most underestimated but significantly impactful potential variable)

3. Historical Lessons: Last Year's Painful Case

December 2024:

The market was extremely optimistic about rate cuts + Trump's victory, with high spirits, and the whole market opened champagne midway. As a result, Powell's statement at the press conference, "The pace of rate cuts in 2025 will be relatively cautious," directly extinguished all fantasies.

The dot plot only indicated "two rate cuts in 2025," and the market instantly shifted from excitement to a complete slump;

But the reality was that there were four rate cuts throughout 2025 — the dot plot can be conservative, but actual easing can exceed expectations.

This indicates that Powell's wording and the hawkish-dovish degree of the dot plot on that day may have a decisive impact on short-term market trends.

4. The Current Dilemma of the Federal Reserve

The Federal Reserve is finding it increasingly difficult to maintain its stance, and in the future, it is highly likely to face a binary choice:

Stick to a 2% inflation target → The economy is highly likely to slide into recession (a hard landing is almost a given)

Choose to maintain economic growth → Truly open the rate cut channel, and next year's market still has potential

Even if Powell himself wants to be hawkish, he must consider that the new chairperson in 2026 will likely align with Trump's policies, and a substantial easing cycle will inevitably arrive.

5. The Biggest Suspense: Expectations of Balance Sheet Expansion

Currently, almost no one is discussing "balance sheet expansion" (ending balance sheet reduction or even restarting QE), and any hint of movement will trigger a comprehensive liquidity return, which could be the biggest super positive factor, but for now, it can only be listed as suspense.

Summary

The December FOMC meeting seems to be a "given 25bp," but actually hides enormous variables.

The dot plot can indicate two cuts, but the reality can completely provide you with four or even more.

The current market is extremely sluggish, which is ironically the time most sensitive to good news — the real game has just begun.