Well, a hawkish, maybe even a very hawkish cut:

• Inflation is uncomfortably high.
• The job market doesn’t need immediate help.
• The dot plot “expected” yields at year-end and the terminal rate all moved up (I continue to think that the terminal rate will continue to edge higher).
• Kept pointing to the economy as a sign that they are apparently not being too restrictive.

Powell was offered the “out” that the Fed’s tone is based on expected impacts of tariffs or other future policies. He shot that down, over and over.

This is a Fed that is worried that inflation isn’t coming down fast enough, and while it might play in the back of their mind, they aren’t responding to potential fiscal policy. This is big and why neither bonds nor stocks have caught a bid.

Finally, he dealt Bitcoin a bit of a blow. He said that legally he can’t buy it now. Maybe I’m reading too much into it, but he didn’t sound like he would be helpful in convincing Congress to give them permission.

A tough Fed, which caught both bonds and stocks “offsides.” I think that the bond market reaction makes more sense, and equities might be overdone, but positioning has been so aggressively bullish on stocks, that it might be easy for the Grinch to steal the Santa rally!

Based more on positioning than anything else (although he dismissed the idea that the Fed is building in potential Trump policies), we can see more weakness in risk assets in the coming weeks.

The 10-year Treasury at 4.5% is in the middle of our 4.4% to 4.6% target range, which leaves me “neutral” here on 10s.

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