December FOMC Preview: Rate Cut Priced in but Tone is Everything

If there’s one economic event investors should follow, it’s the action of central banks. Legendary billionaire investor Stanley Druckenmiller, who has never suffered a down year in more than 30 years on Wall Street, said it best when he said:“Earnings don’t move the overall market; it’s the Federal Reserve Board…focus on the central banks, and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.”The Federal Open Market Committee (FOMC) will announce the latest interest rate decision on Wednesday, December 12th at 2:00 pm EST. A half hour later, Federal Reserve Chair Jerome Powell will provide comments and take questions from the media.Recent Fed Funds Effective Rate History Between 2022 and 2023, Jerome Powell and the U.S. Federal Reserve Board raised interest rates aggressively to stave off high inflation, the highest that occurred in over 40 years. By late 2023, the Fed finally brought down inflation and paused any rate action. Finally, in September, the Fed cut interest rates for the first time in nearly three years, kicking off the current easing cycle.Image Source: Zacks Investment ResearchDecember FOMC: What to Expect The options market implies a post-FOMC move of +/- 1% in the S&P 500 Index. According to the betting market Polymarket, there is a 95% chance that the Fed will cut interest rates by 25 basis points.Image Source: Zacks Investment ResearchMeanwhile, the CME FedWatch Tool, which uses the 30-day Fed Funds futures prices to predict the next Fed move, predicts an 89.20% chance of a quarter-point interest rate cut.Image Source: Zacks Investment ResearchPowell Commentary: What to Look forWith a 25-bps interest rate cut all but priced in, Wall Street investors will shift their focus to Fed Chair Powell’s press conference. Currently, there are a handful of crosscurrents that Powell will likely discuss, including a softening jobs market, how tariffs are impacting inflation, and strong GDP. The key for investors will be to decipher whether Fed Chair Powell delivers a “dovish” or “hawkish” interest rate cut. In other words, will investors expect more interest rate cuts in early 2026? Finally, another important variable for investors to track is how the recent government shutdown will impact monetary policy moving forward.Following FOMC, investors should monitor how rate-sensitive stocks such as Carvana (CVNA), Lennar (LEN), Bank of America (BAC), Newmont Mining (NEM), and the Russell 2000 Index ETF (IWM) perform.Bottom LineOn Wednesday, the Federal Reserve will take center stage. With a rate cut widely expected, the real story will be expectations for 2026 and how the Fed balances softening employment data with ongoing economic strength.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report Newmont Corporation (NEM): Free Stock Analysis Report Lennar Corporation (LEN): Free Stock Analysis Report iShares Russell 2000 ETF (IWM): ETF Research Reports Carvana Co. (CVNA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks