Investors split on next Fed move after rate cut

Binaya Dahal

Journalist

12 December 2025

The economic projection released by the US Federal Reserve (US Fed) after announcing its 25-basis-point rate cut has sharply divided investors over future policy moves.

The debate sparked after Fed officials pencilled in just one rate cut next year, unchanged from their estimation in September.

Head of Economic and Market Strategy at ClearBridge Investments, Jeff Schulze said there are foundations for more price reliefs.

“The Fed’s one rate cut outlook continues to be at odds with pre-meeting futures market pricing of two rate cuts in 2026,” Schulze said.

He urges investors not to be worried about the US Fed’s outlook for 2026 as Chairman Jerome Powell’s stint is ending soon.

“While we agree with the Fed that the need for further monetary support is limited, we caution investors to put less weight than normal on the dots since a new Fed chair will be at the helm starting in May,” Schulze said.

“The outlook from the Powell-led FOMC bears less than usual on future Fed policy decisions given the imminent change in leadership.”

However, Chief Investment Officer at Antipodes Partners, Jacob Mitchell has questioned whether inflation will remain subdued to justify future cuts.

“There is a disconnect emerging with US equities priced at 24x forward earnings. This is not only a significant premium to the rest of the world, but a 40% premium to its own long-term average of around 17x,” Mitchell said.

“This valuation premium appears increasingly at odds with the economic uncertainty that has prompted the Fed’s more accommodative stance.”

He adds that the scale of division was another striking aspect from the FOMC meeting after it drew three dissents.

“It is now the most divided Fed we’ve seen in more than six years,” Mitchell said.

“That level of internal disagreement signals heightened policy uncertainty, and policy uncertainty invariably breeds investment uncertainty in crowded parts of the market.”