The expectation of rate cuts sparks a global frenzy—how much illusion is hidden behind the asset rally?

The market shifted from dullness to madness overnight. This sudden collective rise in assets wasn’t driven by improvements in economic fundamentals but by a simple change in expectations—the Federal Reserve may cut interest rates.

One statement from officials, and the market hit the limit up

On November 25, two heavyweight Federal Reserve officials almost simultaneously sent dovish signals, enough to change the entire market sentiment trajectory.

Fed Governor Waller openly expressed support for a rate cut in December. What is his core view? The labor market is softening, and inflation is no longer such a scary monster. He even provided specific figures—excluding tariffs, inflation is only between 2.4% and 2.5%.

More notably, San Francisco Fed President Daly made her stance clear. Seen as a steadfast ally of Fed Chair Powell, she usually maintains a “neutral to hawkish” position and rarely publicly opposes. But this time, she broke the norm, explicitly supporting a rate cut in December, with a straightforward reason: The risk of a sudden deterioration in the labor market far outweighs the risk of a spike in inflation, and the former is harder to control.

Analysts generally believe that the attitude shift of these “hawkish figures” is as significant as an official policy hint. The market is not only hearing a rate cut signal but also re-pricing the future policy direction.

A carnival of “all assets rising”

The dovish signals from Fed officials ignited a global asset buying frenzy. This rally isn’t a solo performance of a single asset class but a comprehensive, multi-asset symphony.

The three major US stock indices all closed higher. The S&P 500 rose 1.55%, marking the largest single-day gain in six weeks; the Dow Jones increased 0.44%; and the Nasdaq performed strongly, soaring 2.69%, its best single-day performance since May.

Technology stocks led the charge. Tesla surged nearly 7%, Google jumped over 6%, Amazon and Meta each rose more than 3%, driving the entire tech sector higher. Notably, the semiconductor index skyrocketed 4.63%, reflecting market optimism about the future of tech. Chinese concept stocks also performed well, with the Nasdaq Golden Dragon China Index up 2.82%, led by giants like Weilai, Xiaopeng, Baidu, Bilibili, and Alibaba.

Traditional safe-haven assets also joined the rally. Gold spot prices hit a high of $4,099.03 per ounce, up over 0.8 intraday. Commodity analysts interpret this as the market having fully priced in the December rate cut expectations, with lower interest rate expectations combined with a weakening dollar supporting gold prices. Oil reversed its previous three-day decline, closing over 1% higher.

In the cryptocurrency realm, Bitcoin broke the $88,000 mark, with the latest quote reaching $90.83K, reflecting strong demand for risk assets.

Most surprisingly, risk assets and safe havens rose together—something that should be impossible under normal market logic, yet it played out vividly on Monday.

How expectations can reverse within a week

Market expectations for Fed policy have undergone a dramatic shift.

According to CME’s “Fed Watch” tool, the probability of a 25 basis point rate cut in December has surged to 82.9%. This figure isn’t shocking in itself, but the speed of change is astonishing—just a day earlier, it was only 69.4%; a week ago, the market’s expectation for a December cut was only 42%.

What does this mean? It indicates that within just one week, market confidence in the Fed’s policy direction has nearly doubled.

Looking further ahead, the market expects a 65.4% chance of a cumulative 25 basis point cut by January next year, and a 22% chance of a cumulative 50 basis point cut. These figures suggest the market is beginning to price in a more aggressive easing path.

But risks are hidden within the prosperity

Despite the enthusiastic market response to rate cuts, Fed officials themselves have cast uncertainty over this frenzy.

While publicly supporting a December rate cut, Waller also hinted that after more comprehensive economic data in January, the Fed might adopt a “gradual meeting-by-meeting” decision-making pace, rather than locking in a longer-term policy path in advance. In other words, each meeting’s data will be reassessed, with no prior commitments.

This reflects the true outlook of the Fed on the economy—high uncertainty. Waller admitted that his biggest concern remains the labor market, which is why he supports taking action at the upcoming meeting.

Some market observers point out an ironic phenomenon: the sustainability of this rebound heavily depends on whether “economic data continues to worsen”. This is the so-called “post-cycle reverse logic”—the worse the economic data, the easier it is to support short-term rallies, as investors expect the Fed to intervene to rescue the market.

Is everything just an illusion?

Behind this global asset frenzy lies a deeper issue: the market has become deeply dependent on the Fed. One cry equals sugar, one fall equals rate cut expectations—this has become the norm in recent years.

The Fed’s rate cuts have evolved from an economic adjustment tool into a market stabilization mechanism, and investors’ expectations of policy rescue are self-reinforcing. How much of this rally is based on genuine economic recovery? How much is just betting on the Fed’s rescue? The answer may be more troubling than the speed of stock price rises.

Market analysis suggests this week will be volatile rather than directional. Rapid gains are often followed by rapid declines. In such an environment, continuous attention to economic data trends is essential, as they will determine the next revision of market expectations for the Fed.