Analysis of 2026 Macro Trade Bet Against Federal Reserve Rate Hikes

This analysis is based on the Seeking Alpha article [1] published on December 3, 2025, which recommended shorting the 3-month SOFR (Secured Overnight Financing Rate) December 2026 put at strike 96.375 as a 2026 macro trade betting against Federal Reserve (Fed) rate hikes. As of the article’s publication, market data [2][3][4] showed an 89-90% probability of a Fed rate cut at the December 10, 2025 policy meeting, reflecting prevailing sentiment that the Fed’s rate-hiking cycle has concluded.

SOFR futures are priced as 100 minus the expected 3-month SOFR rate, so the strike price 96.375 implies an expected rate of 3.625% by December 2026. Shorting this put would allow the trader to keep the premium if the 3-month SOFR stays below 3.625% (futures price above 96.375) at expiration. However, Bank of America’s projection [5] of core PCE inflation remaining above 3% through Q3 2026 introduces a layer of complexity, as persistent inflation could complicate the Fed’s path away from high rates.

The trade recommendation reflects broader market sentiment but takes a specific stance by ruling out any hikes in 2026, which could influence long-term investor positioning. In the short term, the recommendation is unlikely to cause immediate market moves, but medium-term traction could reduce demand for December 2026 SOFR put options, lowering their premiums.

1. Contrasting Signals
   : While markets expect an imminent rate cut in December 2025, Bank of America’s inflation projection suggests inflationary pressures could linger, creating tension between near-term sentiment and longer-term economic fundamentals.
2. Strategy Mechanics
   : The SOFR put short strategy leverages market pricing where a 96.375 futures price corresponds to a 3.625% rate, indicating the market is already pricing in stable to lower rates by 2026.
3. Low Probability, High Impact Risk
   : The author assigns a <5% probability to a Fed hike in 2026, but this low-probability event could result in significant losses for the short put position if realized.
4. Sentiment Alignment
   : The trade aligns with the broader view that the Fed’s rate-hiking cycle is over, but it adds a granular bet against any 2026 hikes, which could resonate with investors seeking long-term macro positions.

• Fed Rate Hike
  : If the Fed hikes rates in 2026, the SOFR futures price could drop below 96.375, leading to losses for the short put position.
• Late-2026 Liquidity Crunch
  : A liquidity crunch could increase market volatility, causing sharp moves in SOFR futures that may adversely affect the trade.
• Inflation Surprise
  : Higher-than-expected inflation could prompt the Fed to hike rates, despite current market expectations.

• Premium Retention
  : If the 3-month SOFR stays below 3.625% by December 2026, the trader keeps the full premium from the short put.
• Sentiment Tailwinds
  : The trade benefits from prevailing market sentiment that the Fed will not hike rates, potentially reducing downside risk.

• Trade Recommendation
  : Short 3-month SOFR December 2026 put at strike 96.375 to bet against Fed rate hikes in 2026 [1].
• Market Context
  : 89-90% probability of Fed rate cut at December 10, 2025 meeting; market assigns <5% probability to 2026 Fed hike [2][3][4].
• SOFR Pricing
  : 96.375 futures strike implies 3.625% 3-month SOFR rate by December 2026 [1].
• Inflation Projection
  : Bank of America forecasts core PCE inflation >3% through Q3 2026 [5].
• Missing Data
  : Exact December 2026 SOFR futures price, premium from shorting the put, and full article rationale [1].
• Monitoring Factors
  : Monthly CPI/PCE inflation reports, non-farm payrolls, Fed policy statements, and liquidity indicators [1].