Markets in Freefall as December Rate Cut Hopes Fade—Is the Fed Bluffing?
Wall Street's sugar rush fades as rate-cut fantasies collide with reality.
The Fed's phantom pivot
Traders yank bets on monetary easing after hotter-than-expected inflation data—turns out free money isn't actually on the menu. S&P futures tank 1.8% in premarket as the 'soft landing' narrative develops engine trouble.
Crypto catches a bid
Bitcoin briefly spikes above $38k as degenerates rotate out of rekt tech stocks. 'Digital gold' narrative makes comeback tour—just in time for the traditional financial system's annual credibility crisis.
Bottom line
Central bankers' favorite parlor trick—talking dovish while doing nothing—gets harder to pull off when the data's screaming 'stagflation.' But hey, at least the volatility makes for great CNBC content.
Expanding on the macro side, Fed members are pushing back against a December cut, especially given the lack of new data on the jobs and inflation fronts due to the government shutdown. Minneapolis Fed President Neel Kashkari said yesterday he didn’t support the last interest rate cut, noting he’s undecided on the best course of action for next month’s policy meeting. The chart below effectively illustrates the sudden shift in market expectations. As of Nov. 13, the CME FedWatch Tool was pricing a 25 bps rate cut at just a 51% probability, compared to 63% the day before and over 95% a month ago.
Bitcoin has been hit especially hard by recent macro uncertainty, with bitcoin ETFs experiencing their second-worst day ever, in terms of net flows, yesterday. Bitcoin ETFs saw almost $870 million in outflows, suggesting that we’ll close the third consecutive week with negative flows. The last time bitcoin ETFs experienced three or more consecutive weeks of outflows was between February and March of this year, with BTC dropping below $80,000. The chart below shows bitcoin’s weekly ETF flows by product, with this week still pending inclusion.
Speaking of ETFs, one of the largest issuers (Grayscale) filed for an IPO yesterday. The filing revealed declining financials, with a 20% year-over-year decline in revenue for the first nine months of the year. Notably, AUM was also lower on Sept. 30 than a year prior, despite BTC rising 80% during the same period. Since bitcoin ETFs began trading in 2024, Grayscale’s GBTC has seen almost $25 billion in cumulative net outflows.
Finally, regarding cross-sector performance, every crypto index we track was negative on the day, with the sole exception of RWA (+1.2%). The worst-performing indices were Crypto Miners (-6.6%), solana Eco (-5.9%), and Crypto Equities (-5.8%). The fact that two of the worst-performing indices were equities is a further indication of broader risk-off sentiment driven by macro concerns.
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