As of December 4th, 2025, early morning market data and headlines on Investing.com suggest that global financial markets are beginning to price in a critical shift as we close out the fourth quarter. One major development is the increasing certainty around a potential rate cut by the U.S. Federal Reserve in the first quarter of 2026. The latest comments from Fed Chair Jerome Powell in yesterday’s interview at the Economic Club of New York hinted at growing confidence in the disinflation trend, which markets immediately interpreted as a signal that the central bank is ready to pivot more decisively in its monetary policy stance.
The yield on the U.S. 10-year Treasury has now dipped below 4.20% — a notable downward break following a weeks-long consolidation pattern. This decline, coupled with a steadily flattening yield curve, reflects not only investor confidence in upcoming rate cuts but also a cautionary stance toward potential economic slowdown. From my perspective, this shift in the bond market confirms what many macro analysts have been anticipating for weeks — that we’re likely past peak rates, and fixed-income investors are preparing for a soft landing scenario.
Equities are responding in kind. The S&P 500 futures were up about 0.4% premarket, continuing their strong rebound from the October lows. Tech stocks remain the primary drivers, with the Nasdaq leading gains once again — this time boosted by NVIDIA and Microsoft, both of which received bullish upgrades from J.P. Morgan this morning. With artificial intelligence demand still strong, and now possibly supplemented by looser financial conditions in 2026, the ‘AI trade’ seems far from over. That said, valuations are starting to stretch again, and I suspect increased volatility may soon return, especially if earnings don’t meet buoyant expectations later in Q1.
Commodities are showing mixed behavior. Oil prices have failed to sustain last week’s minor bounce, with WTI crude slipping below $73 per barrel despite OPEC+ reaffirming its voluntary production cuts. The market clearly remains skeptical about the demand outlook, particularly with China’s economic data again coming in below expectations. The Chinese Caixin Services PMI for November printed at 50.1 — barely above contraction territory — which is not encouraging for oil bulls. Personally, I see the ongoing weakness in China as a key risk going into early 2026, and not just for commodities. As the world’s second-largest economy underperforms, it casts a shadow over global demand across various sectors.
In the FX markets, the U.S. Dollar Index (DXY) is retreating further towards 103.5, as traders reduce their long positions amid improved risk sentiment. Interestingly, the euro is showing relative strength after Eurozone inflation data came in slightly hotter than forecast. Though the ECB is still expected to follow the Fed in easing sometime in 2026, the persistence of core inflation may slow their response, and this divergence could offer EUR bulls a short-term advantage.
Overall, markets today appear to be driven by a growing consensus: the global tightening cycle is entering its final phase, if not already over. However, from my vantage point, complacency could become a significant issue. Inflation might surprise on the upside as early as Q2 next year, especially if labor markets remain tight and geopolitical tensions escalate further. Therefore, while I recognize the logic behind today’s bullish moves in equities and fixed income, I remain cautiously optimistic and prefer to stay agile in allocation strategies.