Analysis: Wharton's Siegel Predicts Fed "Hawkish Cut"—Market Reactions and Implications

On December 8, 2025, at 08:31 ET, Jeremy Siegel, Wharton professor emeritus and WisdomTree chief economist, appeared on CNBC’s “Squawk Box” to predict the Fed would implement a “hawkish cut”—a 25-basis-point rate reduction accompanied by hawkish guidance signaling caution about future rate cuts amid inflation concerns [1]. The interview preceded the U.S. stock market opening (09:30 ET), and immediate pre-market reactions showed modest gains: S&P 500 +0.19%, NASDAQ +0.31%, Dow +0.22% [0]. The NASDAQ outperformed slightly, reflecting positive sentiment toward rate-sensitive tech stocks.

Broader market context shows indices trading near 52-week highs (S&P 500 pre-market: $6870.40; 52-week high: $6920.34) [0], with investors having already priced in a December cut. Market focus has shifted to the 2026 rate path [2]. The CME FedWatch Tool now places 87% odds on a December 25-basis-point cut (up from 66.9% a month ago), with only 25% odds of a January 2026 cut [3]. Nomura forecasts four hawkish dissents against a cut and one dovish dissent for a larger cut, highlighting a deeply divided Fed [1].

1. Rate Sensitivity in Pre-Market Moves
   : The NASDAQ’s stronger pre-market performance underscores the influence of rate expectations on tech and growth stocks, which benefit from lower borrowing costs even with hawkish guidance.
2. Market Pricing vs. Fed Guidance Risk
   : Investors have priced in multiple 2026 cuts, creating a potential mismatch if the Fed’s “hawkish cut” guidance limits future reductions, which could cap market gains [2].
3. Divided Fed Uncertainty
   : The Fed’s internal division, noted by Fortune, combined with delayed economic data due to government shutdowns, adds complexity to Fed Chair Jerome Powell’s communication challenge, risking policy uncertainty [4].

• Policy Surprise Risk
  : A 13% chance of a Fed pause (per CME FedWatch) could trigger a sharp market sell-off [3].
• Guidance Mismatch
  : If guidance is more hawkish than expected (e.g., no 2026 cuts), rate-sensitive sectors (tech, real estate) may underperform.
• Dissent Impact
  : A high number of dissents could erode confidence in Fed policy consistency [1].
• USD Volatility
  : A hawkish cut may strengthen the U.S. dollar, impacting multinational companies and emerging markets [1].

This analysis synthesizes Siegel’s “hawkish cut” prediction, pre-market index reactions, CME FedWatch probability data, and dissent forecasts. Critical upcoming factors include the Fed’s December 10 decision, Summary of Economic Projections (SEP), dot plot, and post-meeting press conference remarks. Decision-makers should monitor real-time market reactions after the 09:30 ET market open and the Fed’s communication on 2026 rate paths.

[0] Ginlix InfoFlow Analytical Database
[1] ts2.tech - Fed, RBA, BoC and SNB: The Central-Bank Heavy Economic Calendar for 8–15 December 2025
[2] MarketWatch - The Fed meeting this week will determine if investors get new all-time highs or coal for Christmas
[3] Yahoo Finance - 4 Key US Economic Data to Shape Bitcoin Sentiment This Week
[4] Fortune - Jerome Powell faces a credibility issue as he tries to satisfy hawks and doves on the most divided Fed in recent memory