Market Note
Handicapping Dec Rate Cut Odds
November 21st, 2025
Chart Source(s): CME Fedwatch
The lack of visibility on Fed policy, exacerbated by a lack of official data in the wake of the government shutdown, is curtailing the opportunity set for Macro US FX/Rates trading. Additionally, risk sentiment generally has lacked much direction, because of the cloudy rate outlook.
The probability of a Federal Reserve rate cut in December 2025 sharply declined over recent weeks, falling from nearly 100% a month ago to approximately 30-40% as of yesterday, but now this morning Fed officials are taking on a more dovish tone, bringing the expectations back to ~75% for a cut.
The drop in expectations stems from mixed jobs data, revived inflation concerns, and the impact of government data blackouts.
Global Markets & Economic Data
- Markets Summary: Various technical, sentiment and fundamental headwinds are causing softness in risk assets. Thursday's US session featured post NVDA earnings rally reversal and the continued plummet in crypto prices.
- US: Delayed September US Non-Farm Payrolls data was well ahead of expectations, reducing the odds of a December Fed rate cut, but the Unemployment Rate hit a 4-year high at 4.4%. The Philly Fed manufacturing index improved but remains in contraction territory while the KC Fed manufacturing index was in expansion territory. October Existing Home Sales rose for a second straight month, but activity remains subdued.
- Switzerland/Europe/UK: Swiss Q3 GDP contracted -0.5% q/q. Eurozone Q3 GDP growth is estimated to be 0.2% q/q. UK Retail Sales and consumer sentiment data trended downwards.
- Japan/China: Japan approved a JPY 21.3T stimulus package, the largest since the pandemic that attempts to relieve inflationary pressures that are running above target at 3%. Japan's trade deficit narrowed, fueled by a surge in US auto exports. Chinese prices charged (for both services and manufacturing) jumped to a 3-year high.
Index Returns Summary
| Asset Class | MTD | YTD |
|---|---|---|
| MSCI World | -1.00% | +19.22% |
| MSCI Asia Pacific | +0.05% | +23.55% |
| MSCI Europe | +1.29% | +30.47% |
| MSCI China | +0.87% | +37.31% |
| Bloomberg Barclays Global Aggregate Index | -0.21% | +7.42% |
| Bloomberg Commodities Index | +1.68% | +10.32% |
| HFRX Global | -0.51% | +5.86% |
| HFRX Macro/CTA | -0.96% | +3.07% |
| HFRX Equity Hedge | -0.46% | +8.55% |
Index data as of November 14th, 2025
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Chart Source(s): With Intelligence
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Contact UsDisclaimer: This material has been prepared by MASTERPIECE ADVISORS for informational purposes only and should not be construed as financial advice. Investments in hedge funds are speculative and involve a high of risk. This material is confidential and may not be disclosed without the express written approval of MASTERPIECE ADVISORS.