To get straight to the point: The bearish factors may have bottomed out, but don't expect bullish news to arrive immediately.

Recently, some people have asked whether the December rate cut wave has already exhausted all expectations. My view is—most of the bad news at the macro level has been released, but that doesn't mean things will immediately turn positive. The market won't start celebrating just because things are “not that bad.”

**About rate cuts—they’re already on their way**

On December 1, the Fed halted quantitative tightening, which in itself is a signal. Whether they cut rates at every meeting or every few months, the easing cycle has officially kicked off.

Why is a rate cut inevitable? There are two reasons.

First, the banking system can’t hold out much longer. In a high-interest-rate environment, commercial banks face higher funding costs and can’t make much from lending, leaving some institutions with tight liquidity. In June, October, and recently, there have been large overnight repo operations—something we last saw frequently between late 2019 and early 2020, right before the previous rate cut cycle began.

Second, employment data is faltering. The Fed watches two indicators: employment and inflation. Although the government shutdown delayed official data releases, third-party data is already clear—November’s ADP employment numbers were not only far below expectations but actually plunged into the negatives. Goldman Sachs reports also indicate a weakening labor market. So as long as CPI doesn’t suddenly rebound, the Fed will basically keep easing.

**Three scenarios may play out in the first half of 2026**

Scenario 1: The job market collapses badly, triggering mass layoffs, and the Fed responds with a series of rate cuts.
Scenario 2: Employment data is mediocre—not disastrous, but not good either, leading to intermittent rate cuts and a step-by-step approach.
Scenario 3: CPI suddenly rebounds, inflation pressures resurface, and there are simply no rate cuts in the first half of 2026.

That said, when employment is weak, consumer spending usually can’t pick up either, so the probability of a CPI rebound isn’t very high.