Weekly Outlook: Dec 15, 2025

The Fed cut rates last week, but the market’s reaction has been a vote of “no confidence.” Instead of a celebration, we are seeing a dangerous divergence. Long-term yields are rising (rejecting the cut), while Financials, which usually love a steepening yield curve, are falling. Could we read this as the December Fed Put being too small? Markets don’t want half measures and this signals that investors are now pricing in credit risk over growth. Amidst this warning, capital is likely retreating to a tried-and-true growth trade: a tactical bounce in NVIDIA.

The Bond Market Rebellion Forecast: 10-Year Treasury Yield (TNX) Moving Higher

CI Markets forecasts the 10-Year Treasury yield to rise this week. This is the engine of the current volatility. By pushing yields higher immediately after a rate cut, the bond market may be signaling that it sees sticky inflation, but markets seem to be wanting more from the Fed. This “bear steepening” is tightening financial conditions for the real economy, effectively undoing the Fed’s stimulus before it even hits the system.

The Credit Warning Forecast: Financials (XLF) Moving Lower

This is the key “tell.” Typically, banks rally when the Fed cuts and long rates rise (a steepening curve). However, CI Markets forecasts Financials (XLF) to trend lower. When banks sell off despite a more accommodative rate environment, it means the market is fearful of credit quality and a slowing economy. Investors are betting that higher long-term borrowing costs will hurt borrowers more than they help bank margins.