Dow Jones futures are twitching, analysts are buzzing, and the market's doing its best impression of a caffeinated bunny rabbit. The big story? A possible December rate cut by the Fed, fueled by the idea that this will reignite the 2025 bull market. But before we all start popping champagne and maxing out our credit cards on AI stocks, let's inject a dose of reality (and data) into the conversation.
Rate Cut Hopes: Priced In or Premature?
The Bullish Chorus: A Closer Look
The narrative is compelling: the market had a "powerful, holiday-shortened week," with key indexes leaping above their 50-day lines. Vertiv (VRT), JPMorgan Chase (JPM), and Expand Energy (EXE) are all supposedly "actionable." Even Amazon (AMZN) is getting in on the act, with its Amazon Web Services re:Invent conference potentially boosting the cloud and AI ecosystem. And, of course, the constant hum of AI, AI, AI.
But let's break this down. The CME FedWatch tool gives an 82.7% chance of a 25-bps rate cut next month, and Polymarket echoes this with an 86% probability. Those are high numbers, no doubt. But probability isn't certainty. We're talking about *likelihood*, not a done deal. The market's tendency to price in future events as if they've already happened is a dangerous game.
Consider the "Tariff Dividend Checks" touted as potential market fuel, mirroring the 2020 stimulus checks. While those checks undoubtedly had an impact, the circumstances were radically different. We were in the teeth of a pandemic, with people stuck at home and desperate to spend money. Are we truly expecting a similar effect from tariff rebates? I'm skeptical.
Nvidia's Slip: Is the AI Tide Turning?
Cracks in the Foundation: Nvidia's Cautionary Tale
While many stocks are "flashing buy signals," Nvidia (NVDA) is a notable exception. The stock fell 1.1% amid concerns that custom Google chips could impact sales and margins. Now, a 1.1% dip might seem insignificant, but it's a red flag. Nvidia has been the poster child for the AI boom, and its struggles suggest that the narrative isn't as rock-solid as some would have you believe. You can see
NVIDIA Corporation (NVDA) Stock Price, News, Quote & History for more information.
And this is the part of the report that I find genuinely puzzling. Look at the ETFs: the VanEck Vectors Semiconductor ETF (SMH) *leaped* 7.9% last week, *despite* Nvidia being its largest holding. How do you have a sector ETF soaring while its top component is struggling? That discrepancy suggests either a short-term blip for Nvidia or a broader shift in investor sentiment away from the "purest" AI plays and towards companies that simply benefit from AI infrastructure.
The article mentions that the Dow Jones Industrial Average rose 3.2% last week. That's a good headline, but let’s add some context. What's the *variance* within the Dow? How many companies are pulling the average up, and how many are lagging? A rising tide lifts all boats, sure, but some boats are still taking on water.
AI Investments: Promises vs. Paychecks?
The AI Hype Machine: Reality vs. Perception
The AI executive order signed by President Trump is touted as a bullish catalyst. Amazon's potential $50 billion investment in AI infrastructure for government agencies is another supposed win. But let's be clear: government contracts are notoriously slow to materialize and can be subject to political whims. A promise of investment isn't the same as revenue in the bank.
The article claims that "most corrections do not turn into bear markets." Since 2009, there have been 31 corrections of 5% or more, with only four turning into bear markets. That's a compelling statistic, but the sample size is relatively small, and the period since 2009 has been characterized by unprecedented monetary policy. Can we really extrapolate those trends into the future with confidence?
I've looked at hundreds of these filings, and this particular comparison is unusual. It's comparing apples to oranges, or, more accurately, comparing the recovery from a global financial crisis to a potential interest rate adjustment.
A Glimmer of Hope, or Fool's Gold?
The market's recent rebound is undeniably encouraging. The Invesco S&P 500 Equal Weight ETF (RSP) rebounded 3.05%, almost to record highs. That's a positive sign of broad-based strength. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) bounced 3.9%, regaining the 50-day on Friday. That suggests that the rally isn't just concentrated in a handful of mega-cap stocks.
But it's crucial to remember that markets are driven by sentiment as much as fundamentals. The "fear of missing out" (FOMO) can be a powerful force, and it can lead to irrational exuberance. We need to be vigilant about separating genuine opportunities from hype-driven bubbles.
So, Hold Your Horses
The prospect of a December rate cut is certainly enticing, and it could provide a boost to the market. But it's not a guarantee, and it's not a magic bullet. The market's current rally is built on a foundation of hope and speculation, and that foundation needs to be carefully scrutinized. Don't get swept up in the euphoria. Keep your head, do your research, and remember that even in a bull market, caution is your best friend.
