In a holiday-thinned tape like this, price action behaves a bit like a sailboat on a glassy lake — the slightest breeze from the Fed reprice is enough to push the entire global equity complex forward. And that’s precisely what we’ve witnessed: a four-day melt-up that has global stocks holding their altitude not because the tape is deep and conviction-rich, but because the market has collectively decided that the Fed has shifted from “cut eventually” to “cut decisively.”
The quietly turned its November damage to a skinny 0.4%, a remarkable turnaround given we were staring at a near-4% monthly drawdown just a week ago. That’s what happens when the liquidity gods deliver even a whiff of dovish air — traders chase it as if it were the final oxygen tank on Everest. And in this hyper-concentrated market where a handful of megacaps effectively set the weather pattern for everyone else, you get this strange cocktail of relief, FOMO, and fragility. The foundations for a typical year-end rally are definitely present, but it’s the kind of rally where every veteran still keeps an eye on everyone else in the crowded, tech-focused environment.
The geographic dispersion says it all. Japan and Korea led Asia higher, powered by tech — the very sector the market spent the first half of the month accusing of valuation heresy before deciding, suddenly, that all is forgiven.
Even Bitcoin woke up and traded north of $91k, a classic “risk is back on the menu” tell in thin holiday markets. Meanwhile, S&P futures were steady, mainly because traders in the U.S. were on pause for turkey and televised football.
But underneath the calm, the gravitational force is the Fed reprice. Money markets now see an 80% chance of a , and nearly four cuts priced by 2026 — up sharply from three cuts just a week ago. That’s the kind of shift that bends asset prices quickly, especially in a market conditioned to treat dovish tones as a green light to push duration, tech, and beta— it was pure rate convergence. Everyone is sprinting toward the same conclusion: the Fed will deliver holiday cheer.
Even the UK budget drama offered its own little twist. On the surface, Rachel Reeves delivered more fiscal headroom — £22bn versus £9bn previously — and investors breathed a sigh of relief. But scratch the paint, and you find the headroom was mainly borrowed from the OBR’s rosier forecasts and that fiscal consolidation is backloaded so far into the future that 2026 barely notices. Gilts dipped a few basis points in relief, but anyone who’s traded UK paper long enough knows this is a temporary peace. The issuance profile is getting shorter, and that opens the door for other European sovereigns to follow suit. The latest soft glow in gilts is less “problem solved” and more “disaster avoided, for now.”
Oil added a little speculative froth after Putin hinted that U.S. peace proposals for Ukraine could serve as the foundation of an eventual settlement — though, with no draft in hand and holiday liquidity at its thinnest, the market treated it more like a narrative bookmark than a genuine shift. Traders aren’t ready to capitulate to the peace-deal fantasy, but they’re willing to price in a slightly higher probability that 2026 looks less geopolitically chaotic than the prior two years. In FX, that peace-premium narrative helps the euro, which is trying it best to settle above 1.16 and could have the legs for 1.17 even on a half-baked peace deal. But beyond that, December’s hard U.S. data still needs to soften meaningfully before can make a credible sprint toward my revised 1.18 year-end target( down from 1.20). Until then, this is a grind, not a breakout.
As for the yen, if there were ever a moment for Tokyo to swing its intervention hammer, Thanksgiving’s dead-zone liquidity would’ve been ideal. Instead, the stall in the low-156s has bled out the urgency, giving traders room to reset positioning without fearing a midnight BOJ haymaker. is still expensive versus the rest of the G10. Still, with most of the week’s dovish Fed repricing already baked in the cake, the risk-reward naturally slides toward neutrality in this holiday vacuum. That said, you can’t sleep during Tokyo — the hawkish tea leaves continue to dribble out of the BOJ, subtle but persistent, reminding the market that a December rate hike is still an option.
Step back from the noise, and you can feel the market leaning hard into the year-end rally template: falling yields, revived risk appetite, a weaker dollar, and beta behaving. But this isn’t 2017 or 2020 — the market is highly concentrated, highly narrative-sensitive, and still deeply aware that one wrong AI headline could trigger a reset, espeically around perceived capex guidance. So the rally is real, but in a concentrated AI environment, it is always carried on matchstick stilts. It’ll hold — as long as December doesn’t introduce a gust of AI headwind.
Trader Lens: Homogeneity Always Gives Me the Chills
The Street was hoping November would be a dovish sleigh ride, piling on long before the snow had dropped. Even the perma-bears—those grim prophets who usually see recession lurking behind every lamppost—were quietly pencilling in a year-end melt-up. The consensus became almost comically one-sided: glide through a clean November-to-January ascent, hope for a cheeky blow-off top, and then bail out in early February once AI earnings and capex guidance finally had a chance to wobble the narrative.
And that kind of homogeneity always gives me the chills. Markets rarely hand out presents with the bow already tied. And right on cue, Powell stepped out as the Halloween Ghoul-in-Chief, reminding everyone there was real disagreement brewing inside the Committee—and that a December rate cut was anything but a done deal.
Then bang—the first tremor struck. A full-blown factor-volatility earthquake erupted, triggering a 20-day factor-volatility blast, leaving traders teetering on wobbly stilts that eventually snapped during the big mid-November down day.
But what the Fed taketh, the Fed so often giveth back. And this time, you can send the thank-you cards to Williams, Daly, and Waller, who collectively hauled the tape off the floor. Their dovish recalibration flicked the rate-cut narrative back on, to the immense relief of Wall Street and, frankly, American consumers who had been staring down the barrel of tighter-for-longer.
And perhaps the most important shift is what’s happening within the AI narrative. Three years post-ChatGPT, AI is no longer just a fever dream of Silicon Valley founders; it is finally printing in earnings. Old-economy firms—your industrials, your supply-chain dinosaurs, your corporate plodders—are rolling out AI tools that are actually doing something: reducing costs, lifting margins, speeding workflows. This is the transition from narrative to measurable productivity.
And when you zoom out, the longer-cycle picture remains unchanged: the US still leads on the structural attributes that make applied AI scale—intangible investment, top-tier management quality, allocative efficiency, and an ecosystem that rewards speed. Add the AI productivity tailwind and you understand why the AI-factor premium keeps reasserting itself despite bouts of hysteria.
So yes, the Santa sleigh may glide into year-end, but don’t kid yourself: the smoothness of the ride owes everything to the mid-November washout. The market purged enough crowding, recalibrated skew, reset systematic flows, and broadened participation. Underneath the festive surface, the gears were grinding hard—and for once, the machine seemed to have realigned instead of seizing.
The AI cycle is maturing; factor volatility is calming; breadth is expanding; and the Street is grudgingly accepting that applied AI productivity is the next structural leg of US exceptionalism.
And that—ironically—is why this rally might just have more room than people think.