December 10, 2025: Avoiding the 1970s, Embracing the 1990s

After a shaky November, U.S. stocks started December on a strong note. Confidence is bolstered by rising expectations of an interest rate cut at this week’s Federal Reserve Open Market Committee meeting. Just a month ago, the odds of a December cut were no better than a coin flip; today, Fed Funds Futures put those odds above 90%, making a cut seem almost certain.

Why cut rates now? Inflation remains about 50% above the Fed’s 2% goal (currently 3%), and unemployment, at 4.4%, though edging higher, is still well below the 50-year average of 6.1%. Meanwhile, the S&P 500 sits just shy of its October all-time high. So why ease policy?

San Francisco Fed President Mary Daly offers insight: “We don’t want to work so hard to not be the 1970s that we cut off the possibility of the 1990s, losing jobs and growth in the process. That would be trading one mistake for another.” In short, Fed officials believe the cooling job market reflects companies reducing hiring as they adopt productivity-enhancing technologies. These innovations could deliver faster growth with lower inflation. If that proves true, keeping rates high risks stalling both economic and job growth in the months ahead.

Weekly Market Update: December 10, 2025