01.12.2025 Macroeconomic analysis
Андрей АвраменкоMacroeconomic Deep Dive - December 1, 2025
Let me break down what these events mean and their implications for our portfolio.
---
1. FED RATE UNCERTAINTY: The Big Story
What's Happening
September 2025: 95% probability of December rate cut
November 2025: ~75% probability (down 20 points)
Current Rate: 3.75% - 4.00%
Expected Cut: 25bp → 3.50% - 3.75%
Why It Dropped from 95% → 75%
| Factor | Detail |
|-----------------------|------------------------------------------------------------|
| Inflation sticky | 2.8% vs 2.0% target - not coming down fast enough |
| Labor market mixed | Jobs softening BUT not collapsing |
| FOMC divided | Minutes showed "strongly differing views" |
| Fed speakers cautious | Boston Fed's Collins: "keep rates unchanged for some time" |
What This Means
The Fed is in a dilemma:
- Cut rates → Risk reigniting inflation (already 0.8% above target)
- Hold rates → Risk overtightening into weakening labor market
Translation for markets:
- More uncertainty = more volatility
- Tech stocks (like NVDA, TSM) are rate-sensitive - they BENEFIT from cuts
- If Fed holds in December, expect short-term pain for growth stocks
My Expectation
BASE CASE (60%): Fed cuts 25bp on Dec 9-10
- Inflation elevated but trending down
- Labor market softening gives them cover
- Market already pricing this in
RISK CASE (40%): Fed holds rates
- Inflation surprises higher
- Jobs report Dec 6 comes in strong
- Tech sells off 3-5%, then recovers
For our portfolio: Both NVDA and TSM would rally on a rate cut. If Fed holds, expect 3-5% pullback - but our thesis remains intact. This is noise, not signal.
---
2. FED STOPS BALANCE SHEET REDUCTION (Dec 1)
What Is This?
The Fed has been doing Quantitative Tightening (QT) since 2022:
- Letting bonds mature without reinvesting
- Shrinking balance sheet from $9T → $6.3T
- This removes liquidity from the system
On December 1, 2025, they announced they'll STOP this.
Why It Matters
QT Active (2022-2025):
- Less money in the system
- Higher borrowing costs
- Pressure on asset prices (stocks, bonds, real estate)
QT Stopped (Dec 2025+):
- Liquidity stops shrinking
- Less headwind for risk assets
- Mildly bullish for stocks
My Expectation
This is quietly BULLISH:
- Not QE (they're not buying), but they stopped selling
- Removes a negative pressure on markets
- Combined with potential rate cut = supportive environment
For our portfolio: This is a tailwind. One less headwind for tech stocks.
---
3. NVDA -13% IN NOVEMBER: Sector Rotation
What Happened
| Stock | November Return | Why |
|------------|-----------------|-----------------------------------|
| NVDA | -13% | Sector rotation, profit-taking |
| S&P 500 | +2-3% | Broad rally, value catching up |
| Financials | +5% | Rate stabilization benefits banks |
| Small caps | +4% | "Catch-up trade" to mega-caps |
What Is Sector Rotation?
Money doesn't leave the market - it moves between sectors:
2024-2025 Trade: AI/Tech mega-caps (NVDA +200%)
November 2025: Profit-taking → Money flows to:
- Value stocks
- Financials
- Small caps
- Industrials
Why It Happened Now
1. Valuation reset: NVDA hit $212 (ATH) in October, needed to consolidate
2. Profit-taking: Funds locking in gains before year-end
3. Broadening rally: S&P 500 up 15% YTD, but top 7 stocks drove most of it. Now others catching up.
4. Rate uncertainty: High-growth tech more sensitive to rate expectations
My Expectation
This is NORMAL and HEALTHY:
- After +200% in 2 years, a -13% month is a pause, not a crash
- Thesis unchanged (Blackwell ramping, CUDA moat, $300B backlog)
- Creates buying opportunity for TSM (which we just took)
For our portfolio:
- NVDA consolidation = we're NOT buying at the top
- TSM pullback (-2.5% in Nov) = good entry
- Rotation may continue into December, but AI demand is real
---
4. UPCOMING WEEK: Critical Events
December 1-10 Calendar
| Date | Event | Importance | What to Watch |
|----------|------------------------------|------------|------------------------------------|
| Dec 4 | Fed Vice Chair Bowman speaks | Medium | Hawkish or dovish tone? |
| Dec 6 | Jobs Report (November) | HIGH | Strong = no cut, Weak = cut likely |
| Dec 9-10 | FOMC Meeting | CRITICAL | 25bp cut or hold? |
| Dec 10 | Powell Press Conference | HIGH | Forward guidance for 2026 |
Jobs Report (Dec 6) - The Swing Factor
IF jobs STRONG (>200K, unemployment < 4.2%):
→ Fed may hold rates
→ Tech sells off 2-4%
→ Dollar strengthens
→ Our portfolio: short-term pain
IF jobs WEAK (<150K, unemployment > 4.3%):
→ Fed cuts 25bp
→ Tech rallies 2-3%
→ "Goldilocks" scenario
→ Our portfolio: short-term gain
IF jobs MIXED (150-200K):
→ Fed probably still cuts
→ Markets uncertain, volatility
→ Our portfolio: sideways
My Expectation for FOMC (Dec 9-10)
Most likely outcome (65%):
- Fed cuts 25bp to 3.50-3.75%
- Powell signals "data dependent" - fewer cuts in 2026 than expected
- Market reaction: initial pop, then settles
Risk scenario (35%):
- Fed holds rates, cites inflation concerns
- Market reaction: 3-5% selloff in tech
- But: rally into year-end once dust settles
---
5. WHAT THIS MEANS FOR OUR PORTFOLIO
Short-Term (This Week)
| Scenario | Probability | NVDA | TSM | Action |
|------------------------|-------------|-------|-------|----------------------------|
| Fed cuts, jobs weak | 40% | +3-5% | +2-3% | HOLD |
| Fed cuts, jobs mixed | 25% | +1-2% | +1-2% | HOLD |
| Fed holds, jobs strong | 25% | -3-5% | -2-3% | HOLD (buy if stop not hit) |
| Fed holds, jobs weak | 10% | -1-2% | -1% | HOLD |
Medium-Term (December 2025)
Bullish factors:
- QT stopped = less liquidity drain
- Rate cut likely = supports growth stocks
- Year-end rally typically strong
- AI demand unaffected by Fed
Bearish factors:
- Inflation sticky = fewer cuts in 2026
- Sector rotation may continue
- Geopolitical risks (China-Taiwan for TSM)
What I Expect
NVDA December: $170-190 range (consolidation continues)
TSM December: $280-310 range (stable with upside)
Portfolio: Flat to +5% for the month
By February 2025 (NVDA earnings):
NVDA: $200-220 (Blackwell revenue catalyst)
TSM: $310-330 (AI demand confirmation)
Portfolio: +10-15% from current levels
---
6. ACTIONABLE TAKEAWAYS
This Week
1. Watch Dec 6 Jobs Report - It will move markets
2. Watch Dec 9-10 FOMC - The main event
3. Don't panic if we see 3-5% drop on Fed hold - thesis intact
For Week 3 Decision
- If Fed cuts: Consider META (tech-friendly environment)
- If Fed holds: Consider PFE (defensive, 6.7% dividend)
- Either way: Diversify away from 100% semiconductors
Stop Losses
- NVDA $160: Still 9.6% below current - safe
- TSM $260: Still 10.8% below current - safe
- These are designed for thesis-breaking moves, not Fed volatility
---
Bottom Line
The macro picture is SUPPORTIVE but UNCERTAIN:
| Factor | Direction | Impact on Us |
|------------------|-----------|-------------------------------|
| QT stopped | Bullish | Tailwind |
| Rate cut likely | Bullish | NVDA/TSM benefit |
| Inflation sticky | Neutral | Fewer 2026 cuts priced in |
| Sector rotation | Neutral | Nov pain, but creates entries |
| AI demand | Bullish | Thesis intact |
My expectation: December will be volatile around FOMC, but we end the month flat to slightly up. The real catalyst is NVDA earnings in February and TSM earnings
in January.
Strategy: Stay the course. Don't trade around Fed noise. Our 12-month thesis doesn't depend on whether they cut 25bp this month or next.