Guggenheim CIO: Fed to Cut Rates in December 2025, More in 2026 Amid Slowing U.S. Economy

The analysis is anchored in comments from Guggenheim Partners CIO Anne Walsh, published on December 4, 2025, regarding the U.S. economy and Federal Reserve interest rate policy [1]. Walsh assessed that the U.S. economy is slowing but its current GDP aligns with the historical long-term growth rate range of 2-3% [0]. She expects the Fed to cut rates in December 2025, followed by additional cuts in 2026 to reach a neutral rate.

Market reactions reflected anticipation of these rate cuts: major indices (S&P 500, NASDAQ, Dow) gained on December 3, 2025, and on December 4, interest rate-sensitive sectors including Financial Services (+1.54%) and Industrials (+1.16%) were the top performers [0]. External analysts echoed similar expectations: Citi’s Scott Chronert noted that a 25 bps December rate cut is already priced into stocks [0], while Bank of America projected two rate cuts in 2026, lowering the Fed Funds Rate to 3-3.25% [0].

1. Economic Alignment
   : The U.S. economy’s GDP remaining in the historical long-term growth range (2-3%) provides a supportive backdrop for the Fed’s potential rate adjustments [0][1].
2. Sector Sensitivity
   : The outperformance of Financials and Industrials on December 4 highlights strong market sentiment aligning with rate cut expectations, as these sectors are typically sensitive to interest rate changes [0].
3. Data Uncertainty
   : The delayed Q3 2025 GDP data (due to a government shutdown) limits full verification of Walsh’s current GDP assessment, which may be based on preliminary estimates or Q2 data (3% growth [0]).

• Risks
  : If the Fed does not cut rates as expected, stocks may react negatively [0]. A deeper-than-forecast economic slowdown could reduce the efficacy of rate cuts [0]. The ongoing government shutdown, which has delayed key economic data, increases market uncertainty [0].
• Opportunities
  : Rate cuts could support growth in interest rate-sensitive sectors, potentially driving further market gains if expectations are met [0].

Guggenheim CIO Anne Walsh anticipates the Fed will cut rates in December 2025 and 2026 amid a slowing U.S. economy that remains aligned with historical long-term GDP growth trends [1]. Market indices and interest rate-sensitive sectors responded positively to these expectations [0]. Citi and Bank of America have comparable rate cut outlooks, with the 25 bps December cut already priced into stocks [0].