Fed Daly's December Rate Cut Support: Market Expectations & Community Reactions

Fed San Francisco President Mary Daly (a non-voting FOMC member but Powell ally) backed a December rate cut, emphasizing labor market vulnerability over inflation risks [1][2]. This statement shifted market expectations: the CME FedWatch Tool now shows a 77-82.7% probability of a cut, up from ~40% earlier in November [3][4][5]. Reddit discussions highlight four key points: rate cuts will boost AI investments (score:17), 81% cut probability (matching Fortune’s data [4]), concerns about an AI bubble, and panic sell-offs as buying opportunities (score:1 each [6]). Sector performance data shows Industrials leading gains (+1.24%), followed by Consumer Cyclical (+1.07%), while Tech rose moderately (+0.48%) [7].

1. Daly’s influence: Despite being non-voting in 2025-26, her alignment with Powell makes her statement impactful for market expectations [1][2].
2. Community-market alignment: Reddit’s 81% cut probability aligns with Fortune’s report of CME FedWatch data, indicating grounded expectations [4][6].
3. Sector sentiment mismatch: Tech’s moderate gain (+0.48%) vs Industrials’ lead suggests investors prioritize broader economic stimulus over AI-specific gains [7].
4. Labor-inflation trade-off: Daly’s focus on labor market risk reflects a growing split among Fed officials, with some warning of inflation reignition [1][2].

• AI bubble concerns
  : Reddit discussions warn rate cuts may prop up an AI bubble until rates hit zero [6].
• Labor market fragility
  : Daly’s core argument highlights risks of sudden labor market deterioration [1][2].
• Policy division
  : FOMC splits could lead to market volatility ahead of the December meeting [3][5].

• Buying windows
  : Panic sell-offs from rate cut news present potential buying opportunities (per Reddit [6]).
• Lower capital costs
  : Rate cuts would reduce borrowing for AI firms requiring high R&D spending [3][7].
• Sector gains
  : Industrials and infrastructure sectors may benefit from immediate stimulus [7].

• Fed Daly’s stance
  : Supports December rate cut due to labor market vulnerability [1][2].
• Rate cut probability
  : 77-82.7% (CME FedWatch Tool [3][4][5]).
• Reddit key points
  : AI investment focus, 81% cut probability, bubble concerns, buying opportunities [6].
• Sector performance
  : Industrials (+1.24%), Tech (+0.48%), Communication Services (-0.26%) [7].
• Policy context
  : FOMC meeting on December 9-10, current Fed funds rate:4-4.25% [4].