Analysis: Market Sentiment and Movements Ahead of the December 2025 Federal Reserve Meeting

On December 8, 2025, Reuters published an article highlighting market anticipation for a 25-basis-point Fed rate cut on December 10 [1]. This expectation has driven equity gains, with the S&P 500 climbing 4.05% from November 21 to December 5, aligning with the article’s noted trend [0]. The rally stems from the belief that lower rates reduce borrowing costs and enhance corporate valuations. Concurrently, the U.S. Dollar Index (DXY) weakened by 1.41% over the same period [2][3], as a rate cut reduces the dollar’s yield advantage for foreign investors. However, long-term U.S. 30-year Treasury yields rose to 4.807% on December 8—their highest level since September 2025 [4]. This reflects investor concerns about long-term inflation and debt supply, creating a disconnect between short-term rate-cut optimism and long-term yield anxiety. The article also mentions upcoming central bank meetings in Canada, Switzerland, and Australia, adding to global market complexity [1].

1. The market rally and dollar weakness are tightly linked to consensus expectations of a Fed rate cut, demonstrating how monetary policy anticipation drives short-term asset movements.
2. The rise in long-term bond yields reveals underlying investor concerns about inflation and debt sustainability, indicating potential fragility in current market sentiment.
3. The coincidence of multiple global central bank meetings introduces additional variables that could amplify market volatility regardless of the Fed’s decision.

Risks include a Fed policy surprise (e.g., pausing rates or delivering a smaller cut than expected), which could trigger a sharp equity correction and dollar strengthening [1]. Upcoming economic data (inflation, employment) could also shift rate-cut expectations, impacting markets [0]. Geopolitical tensions, such as slow Ukraine peace talks, present an additional volatility risk [1]. Opportunities may arise if the Fed meets rate-cut expectations, potentially sustaining equity gains and dollar weakness (beneficial for U.S. exporters). However, long-term yield concerns suggest caution.

As of December 8, 2025:

• The S&P 500 has risen 4.05% since November 21 [0].
• The DXY has fallen 1.41% [2][3].
• 30-year Treasury yields reached 4.807% (a September 2025 high) [4].
• Market sentiment is driven by expectations of a 25-basis-point Fed rate cut, but long-term yield increases signal underlying worries about inflation and debt.
  Key factors to monitor: Fed decision/forward guidance, global central bank actions, economic data, and geopolitical developments.