Yesterday, we warned you not to get distracted by the headline number. We told you the real signal was hiding in the details.
Today, the Fed proved us right.
Yes, they cut rates by 25 basis points. If you only read the Twitter headlines, you might think the pivot is here, and it’s time to leverage up. But if you look at why they cut, and more importantly, where they see us going in 2026, the picture gets ugly fast.
Here is the DWC breakdown of what actually happened, and why the “soft landing” might just be a slow bleed.
1. The Verdict: A House Divided
The most telling part of today isn’t the cut itself; it’s the fact that the Fed is fighting itself.
This was not a unanimous decision. We saw a 9-2 split vote, the most divided the committee has been in six years. You had hawks like Jeffrey Schmid wanting to keep rates flat, and doves like Stephen Miran screaming for a jumbo 50-point cut.
What this means for you: The Fed is flying blind. They explicitly admitted that the six-week government shutdown left them with “stale data” on inflation and jobs. When the central bank is guessing, volatility is guaranteed. The market hates uncertainty, and right now, the Fed is the definition of uncertain.
2. The Trap: The Dot Plot for 2026
This is the “red flag” we warned you about.
The market got its cut today, but the “Dot Plot” just poured cold water on the 2026 party. The median projection now shows only one more cut for the entirety of next year.
Ok, so let that sink in. The bulls were betting on a quick ride back down to cheap money. But instead, the Fed just signaled that rates will sit near 3.5%–3.75% for another 12 months. That isn’t “stimulus.” That is restrictive territory. For crypto assets that thrive on cheap liquidity, the “Higher for Longer” regime didn’t die today. It just bought a new lease.
3. The Liquidity Reality: Purgatory, Not Paradise
We know that Quantitative Tightening (QT) officially ended on December 1st. The “silent drain” is plugged.
But today, Powell poured cold water on the idea that this means a return to “money printing.” The Fed is moving to a “neutral” stance, reinvesting maturing bonds but not expanding the balance sheet.
They are calling it Reserve Management Purchases (RMP), a technical term for “keeping the lights on” without actually adding fuel to the fire. We are in liquidity purgatory: the headwinds are gone, but there is no tailwind to push us higher. We are drifting.
4. The Strategy: How to Position Now
So, we have a blindfolded Fed, a divided committee, and a liquidity environment that is “meh” at best. What do you do?
- Fade the leverage: The “easy money” pump isn’t coming in Q1 2026. The cost of capital is staying high.
- Watch the dissension: The split vote means the next meeting in January is live. If the labor market data (which comes out next week) is weak, the “50-point cut” camp might win. That is your buy signal, not today.
- Stay liquid: With the Fed guessing on data, we are one bad inflation print away from a “pause” that crashes the market. Keep dry powder ready for the volatility that the Fed’s confusion will inevitably create.
The Bottom Line: The Fed gave the market a cookie today, but they kept the jar on the top shelf for 2026. Don’t strain your neck trying to reach it.
Suggested YouTube Video: The Fed Announces QT Will End in December
This video from late 2024 is highly relevant, as it explains the mechanics of the “QT End,” which is now central to the liquidity environment discussed in the article.
