Bespoke’s Paul Hickey on Fed Rate Cut Expectations and Market Reaction

This analysis is based on the CNBC interview with Bespoke’s Paul Hickey [1], published December 9, 2025, discussing the Fed meeting and October JOLTS report. Hickey emphasized a 25bps Fed rate cut on December 10 was “well telegraphed” [1]. The delayed JOLTS report (affected by a prior government shutdown) showed October job openings slightly up to 7.67M but with declining hiring (-218,000), rising layoffs, and falling quit rates—indicative of a cooling labor market [4][5].

U.S. stocks reacted modestly positively on December 9: S&P 500 (+0.26%), NASDAQ (+0.28%), Dow (+0.33%) [0]. This muted response reflected market pricing (89.4% implied probability of a cut via CME FedWatch [2]), as the news confirmed existing expectations. The JOLTS report’s age (two months old) prevented it from altering rate cut forecasts [2].

Market attention has shifted to the Fed’s Summary of Economic Projections (SEP, or “dot plot”) and 2026 rate trajectory [3]. President Trump’s comments about a potential dovish Fed chair replacement in May 2026 have added long-term policy uncertainty [2][6].

1. Priced-In Expectations
   : The modest market reaction underscores that well-telegraphed events have reduced immediate impact, highlighting the importance of forward guidance [0][1].
2. Mixed Labor Signals
   : The JOLTS report reveals a “no-hire, no-fire” labor market—slight job opening growth masks underlying cooling, a nuance often overlooked in headline numbers [4][5].
3. Dot Plot Significance
   : The Fed’s 2026 rate projections (dot plot) are now the primary driver of medium-term market sentiment, overshadowing the December rate cut itself [3].
4. Political Policy Risk
   : Potential changes to Fed leadership introduce uncertainty about central bank independence, which could amplify future market volatility [2][6].

• Hawkish Cut Scenario
  : If the Fed delivers the expected 25bps cut but signals fewer future cuts than markets anticipate, stocks could experience sharp sell-offs.
• Labor Data Gaps
  : Delayed and incomplete labor reports (due to the shutdown) increase the risk of unexpected revisions, clouding policy and market expectations.
• Political Interference
  : Pressure on the Fed for aggressive rate cuts could erode independence perceptions, leading to volatility [6].

• Dovish Dot Plot
  : A more accommodative 2026 rate trajectory in the Fed’s projections could boost equity markets and reduce borrowing costs, though this remains uncertain.

As of December 9, 2025, the market has priced in an 89.4% chance of a 25bps Fed rate cut, with modest stock gains reflecting this expectation [0][2]. The October JOLTS report confirms labor market cooling, supporting the Fed’s dovish tilt [4][5]. Market participants await the Fed’s dot plot, statement, and press conference for clarity on 2026 policy. Decision-makers should monitor upcoming labor reports and Fed guidance for more definitive signals.