There’s less than a month left until the Fed’s final meeting of the year, and investors’ hopes for another rate cut are fading fast, at least according to the CME FedWatch Tool. Back in October, markets were pricing in almost a 100% chance of a cut; now that probability has dropped below 45%.

Even the end of the longest U.S. government shutdown in history didn’t help, and no wonder. Since no data was collected during that period, we won’t receive a flood of new reports, which means the Fed will have little new information on which to base its monetary policy decisions.

The rhetoric of Fed officials doesn’t help. For instance, the Kansas City Fed President warned that further rate cuts could entrench higher inflation rather than support the labor market. Meanwhile, Cleveland Fed President Beth Hammack indicated that she does not favor another rate cut in the near term.

This week, the speakers include Philip Jefferson, Christopher Waller, Michael Barr, Stephen Miran, and Lisa Cook. If they collectively signal that inflation concerns outweigh worries about slowing employment, risk appetite could continue to decline, hurting the S&P 500 index along the way.

The same story applies to the minutes from the last FOMC meeting. 

With Chair Powell making it clear in the press conference that we shouldn’t assume a December rate cut, the minutes are likely to come across as hawkish. As for the long-delayed September jobs report, which is set to be released this week, its impact should be fairly limited given that the data is already somewhat outdated.

Last but not least, the fact that Trump went “TACO” again and exempted food products from tariffs could actually be a worrying sign. At first glance, it appears to be a move to curb inflation and support purchasing power. But it might really suggest that everyday consumers are feeling significant pressure.

The good news is that expectations for rate cuts have dropped quickly, although they could rise just as fast.

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