We're building up for a classic year-end rally
In the quiet pause of a Thanksgiving-shortened week, global markets held their ground after a four-day climb, reflecting a deeper shift in how traders are reading the Federal Reserve's intentions. The expectation of faster, more numerous rate cuts through 2026 has rekindled risk appetite across equities, cryptocurrencies, and currencies alike — a reminder that financial markets are, at their core, engines of collective anticipation. The recovery from November's losses is real, but it rests on a foundation of belief: that central banks will act, that earnings will hold, and that no new disruption will rewrite the story before year's end.
- Just days ago, global equities were down nearly 4% for November — now that loss has been trimmed to a fraction, driven almost entirely by a dramatic repricing of Fed rate cut expectations.
- Traders have shifted from expecting three total cuts to four by end-2026, and money markets now assign an 80% probability to a December cut — a recalibration that has rippled from Bitcoin above $91,000 to a pausing dollar.
- With Wall Street closed for Thanksgiving, Europe and Asia carried the session — Japan, South Korea, and Germany's DAX all posted gains, while Puma surged 16% on takeover speculation, adding a corporate subplot to the macro narrative.
- Asset managers are openly framing this as the setup for a classic year-end rally, pointing to macro stability, reasonable earnings outlooks, and the still-unfolding effects of prior rate cuts as the three pillars holding the thesis together.
- Uncertainty has not disappeared — UK fiscal tightening raises growth questions, Putin's overture on Ukraine negotiations rattled oil prices, and the entire rally remains contingent on the Fed actually delivering what markets are now pricing in.
Global stock markets paused on Thursday, consolidating the gains built over the previous four trading sessions. The MSCI All Country World Index barely moved on the day, but the more telling fact was how far it had already traveled — from nearly 4% down for November to a loss of just 0.4%, all within a week. The catalyst was a meaningful shift in how traders were reading the Federal Reserve: money markets now priced in roughly an 80% chance of a quarter-point cut in December, and positioned for three additional cuts through 2026, up from three total cuts expected just eight days prior.
That recalibration spread across asset classes. Bitcoin climbed back above $91,000. The dollar's recent advance stalled. Risk appetite, which had been subdued through much of November, began to stir again. With US markets closed for Thanksgiving, the session belonged to Europe and Asia — Japanese and South Korean tech stocks led regional gains, Germany's DAX rose 0.3%, and the broader Stoxx 600 notched its fourth straight day of modest advances. Puma provided the day's most vivid moment, surging 16% on reports of competing takeover interest.
Daniel Murray of EFG Asset Management Switzerland articulated what many were sensing: the conditions for a year-end rally were assembling. Stable macro backdrop, reasonable corporate earnings, and the lagged effects of prior rate cuts still filtering through the economy — three pillars supporting a thesis built on continuity rather than surprise.
Yet the world offered its usual complications. In Britain, the pound and FTSE 100 were flat after the prior day's budget-driven rally, as the tax increases underpinning Chancellor Rachel Reeves's fiscal buffer raised questions about growth. Oil prices swung on signals from Moscow that US peace proposals for Ukraine might form a basis for future talks. Platinum touched a one-month high on Chinese demand optimism. The cross-currents were real — and the durability of the recovery, as ever, would depend on whether the expectations now baked into markets were ultimately met.
Global stock markets paused to catch their breath on Thursday, holding the gains they'd accumulated over the previous four trading days. The MSCI All Country World Index—a broad measure of how equities are moving across the planet—barely budged, but the real story was in how far it had already climbed. Just over a week earlier, this same index was down nearly 4% for the month. Now, after a week of steady buying, it had trimmed that November loss to just 0.4%. The reason for the turnaround was straightforward: traders had begun betting that the Federal Reserve would cut interest rates faster and more aggressively than they'd expected before.
Money markets were now pricing in roughly an 80% probability that the Fed would lower rates by a quarter point in December. More significantly, traders were positioning for three additional cuts by the end of 2026—a meaningful shift from the three total cuts they'd been expecting just eight days prior. This recalibration of expectations had rippled across asset classes. Bitcoin, which had been battered along with equities earlier in November, climbed above $91,000 for the first time in a week. The dollar, which had been strengthening, paused its advance. Risk appetite, which had been dormant, was stirring again.
With US markets closed for Thanksgiving, the day's action came primarily from Europe and Asia. Japanese and South Korean equities outperformed their regional neighbors, with technology stocks leading the way in both markets. Europe's Stoxx 600 index rose 0.1%, marking its fourth consecutive day of gains. Germany's DAX climbed 0.3%, buoyed partly by Puma, which surged 16% after the athletic apparel maker attracted takeover interest from multiple bidders. The moves were modest—this was consolidation, not euphoria—but the direction was consistent.
Daniel Murray, chief executive of EFG Asset Management Switzerland, captured the mood succinctly: the market was setting up for a classic year-end rally. His reasoning hinged on three pillars. The macroeconomic environment appeared stable enough to carry into 2026. Corporate earnings outlooks looked reasonable. And the lagged effects of previous rate cuts were still working their way through the economy, providing an additional tailwind. It was a scenario built on the assumption that things would hold together—that no new shocks would derail the narrative.
But the world remained complicated. In Britain, the pound and the FTSE 100 were essentially flat after the previous day's rally following Chancellor Rachel Reeves's Autumn budget announcement. Reeves had carved out a larger fiscal buffer, which initially pleased bond markets, but the tax increases required to fund that buffer cast doubt on future economic growth. Bill Diviney, head of macro research at ABN AMRO, offered a measured assessment: the government had done what was necessary to keep bond markets cooperative, though the backloaded nature of the fiscal consolidation carried some risk.
Oil prices fluctuated on news that Russian President Vladimir Putin had suggested that US proposals for ending the war in Ukraine could serve as a foundation for future negotiations, though no final agreement had been drafted. Platinum, meanwhile, touched its highest level in more than a month, lifted by optimism over new demand following China's launch of a new futures contract on a domestic exchange. These were the cross-currents running through markets—genuine economic signals mixed with geopolitical uncertainty, all of it feeding into the calculus of traders trying to position for what comes next.
The broader picture was one of consolidation after a meaningful move. Equities had recovered from their worst November levels on the back of shifting expectations about monetary policy. Whether that recovery would accelerate into a sustained year-end rally, or whether it would prove temporary, depended on whether the Fed actually delivered the rate cuts traders were now pricing in, and whether the macroeconomic backdrop remained as stable as current sentiment suggested.
Citas Notables
The macro environment continues to hold up well into 2026, corporate earnings outlook looks pretty decent, and you get the added tailwind of rate cuts.— Daniel Murray, CEO of EFG Asset Management Switzerland
The UK government did what it needed to do to keep UK bond markets on side, though there is naturally some risk to this more backloaded fiscal consolidation.— Bill Diviney, head of macro research at ABN AMRO
La Conversación del Hearth Otra perspectiva de la historia
Why did markets suddenly shift their expectations about Fed rate cuts so dramatically in just a week?
The shift wasn't really sudden—it reflected a change in how traders were reading the economic data and Fed communications. A week ago, the consensus was that the Fed would be cautious. By this week, enough evidence had accumulated that inflation was cooling and growth was slowing enough that markets repriced the probability of more aggressive easing.
So this rally is built entirely on the assumption that the Fed will cut rates. What happens if they don't?
That's the real risk. If the Fed signals it's going to be more patient, or if inflation data comes in hotter than expected, you'd see an immediate reversal. The rally has been fueled by rate-cut expectations, not by earnings growth or fundamental improvements in business conditions.
Bitcoin jumped above $91,000. Is that a sign of genuine risk appetite returning, or just momentum chasing?
Probably both. Bitcoin tends to move with risk sentiment—when traders feel confident, they buy riskier assets. But the move also reflects the fact that a lower-rate environment is theoretically better for assets that don't generate cash flows. It's a real signal, but it's fragile.
The UK budget announcement seemed to help markets initially, but there's skepticism about the tax increases. Why the mixed reaction?
Because the budget solved an immediate problem—keeping gilt yields from spiking—but created a longer-term question about growth. Higher taxes can dampen economic activity. Markets were relieved in the moment, but the underlying tension between fiscal responsibility and growth remains unresolved.
What's the most fragile assumption in this year-end rally scenario?
That the macro environment holds up. If corporate earnings disappoint, or if economic data weakens faster than expected, the entire narrative collapses. Right now, traders are betting on stability. Any sign of deterioration would trigger a sharp repricing.