The Dividend Cafe - Wednesday - December 10, 2025

Episode Date: December 10, 2025

Post-FOMC Meeting Market Reaction and Economic Outlook - December 10, 2023 In this episode of Dividend Cafe, Brian Szytel from The Bahnsen Group in Newport Beach discusses the market's reactions to the Federal Reserve's recent actions. On December 10th, 2023, the Federal Reserve concluded its FOMC meeting, cutting rates by 25 basis points and adding to its balance sheet, which boosted both the stock and bond markets. The Dow closed up 497 points, with the S&P and Nasdaq also showing gains. Szytel explains the significance of the steepening yield curve, which signals positive economic growth, and reviews the Federal Reserve's future interest rate expectations, unemployment, inflation, and GDP projections. The episode also addresses an op-ed by Muhammad Al Arian regarding the restructuring of The Fed. Overall, the episode provides an optimistic outlook on short-term risk assets and the economy. 00:00 Welcome to Dividend Cafe 00:16 Federal Reserve Meeting Insights 00:48 Market Reactions and Performance 01:25 Understanding Yield Curves 03:28 Economic Projections and Fed Actions 04:30 Op-Ed Discussion and Final Thoughts 05:17 Conclusion and Upcoming Topics Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome into Dividend Cafe. This is Wednesday, December the 10th. Brian Saitel with you from the Bonson Group here in Newport Beach, California. Sunny Newport Beach, California, I might add. Beautiful weather for December 10th. I'll tell you that. Nice to be in California these days. Upmarket across the board, basically. in both stocks and bonds. This was the conclusion of our Federal Reserve meeting, the FOMC meeting today. They did cut rates by 25 basis points while that was widely expected. I spoke about this last week, but adding to their balance sheet to start growing it again to provide some liquidity

in what was a somewhat stressed overnight lending market is exactly what they did. And it was a little bit more than expected. And that's why you saw a little rally on the stock market side after this announcement and a little rally also in the bone market as well. Dow closed up 497 points on the day, which is a little over 1% these days. You had the S&P up about two-thirds of a percent. You had the NASDAQ up one-third of a percent. So a big outperformance with some of the value names over some of the growth names. And then you had a steepening yield curve because you had the short end of the curve

come down about seven to eight basis points. So call it two-year treasuries. We're much lower. again, that was because of the balance sheet action I just mentioned, and then you had the long end of the curve drop about two to four basis points. So the 10 year on the day was only down about two basis points to 4.15. So steepening the old curve, that's usually a good sign for growth in the economy. And part of that is because of what is now turned from, like I said, quantitative tightening to now quantitative easing again. So they're going to add to the balance sheet at $40 billion

a month. And by treasuries, and that fuels the liquidity to markets, greases the gears of the credit market, so to speak. But that was the big news on the day. The rest of the market actually was fairly positive. The comments in there today were really not just about what the Fed did, but, you know, what the expectations are. They have a dot plot chart that factors in all of the different voting members of the Fed and where they think interest rates will beat at the end of 2026 and at the end of 2027. And what has been priced in now is about a 67% chance of two more rate cuts and about a 30% chance of three by the end of next year. What's happening to interest rates is they're moving lower. The 10-year Treasury, for example, just from year to date, is down about

50 basis points, so one-half of 1% since the beginning of the year. But it's actually higher. Remember that the 10-year is a little longer term on the interest rate side. And remember why I talked about the steepening of the yield curve, meaning that short-term rates are going down, at long-term rates are either staying the same or going down less or even going up. But on the 10-year case, it's actually 20 basis points higher than when the Fed started cutting rates. So it's a big difference of the steepening yield curve. Technically, from an economic standpoint, steepening yield curve is good. It's a positive sign. And actually, at the 10-year, is going to reflect expectations for nominal GDP growth and longer-term inflation expectations.

And the Fed does not control that part of the curve. Remember, they can only control the overnight lending rate. They can do things like buy assets. And even remember when years passed, they did something called Operation Twist, where they took their balance sheet and then changed the maturity on it. So they were buying longer term bonds. The goal was to try to move longer term rates lower in that. But for the most part, the Fed controls short term rates only. Longer term rates are based on what's actually going on in the economy fundamentally. In the SEC report and some of the other estimates out of the Fed, you had unemployment rate that's expected to be 4.4% in 26. That's exactly where it has been. So nothing changed there. And then you saw inflation actually

easing a bit for next year. They had a 2.6% estimate. It's not 2.4. So you've got unemployment holding in. You've got inflation a little lower. And then what they had is GDP rising. It was in a prior estimate of 1.8 and they moved up to 2.3. I don't throw in a lot of number. at you, but just understand what it means. We're talking about the employment market keeping in line and being fine. We're talking about inflation coming down a little more than expected. And we're talking about growth going up a little bit more than previous reports. Those are all good things across the board. And at the same time, they're adding to their balance sheet. Again, stimulative for risk assets. So more or less, the Fed was bringing some of the punch bowl back to the dance.

Depending on how you want to look at it, I guess that's a good thing, at least for short-term risk assets. Question in there today on the Ask TBG was about an op-ed from Mohammed Al-Aryan. Remember, he was at Pimco in years past and was now at Allianz and now essentially retired, but, or at least out of a corporate role like that, serves on some boards and universities and things. But he wrote something on an op-ed about the restructuring of the Fed, and the question it was if David agreed or disagreed with it. And generally, we're in agreement, some restructuring and some alignment with what reality is nowadays. to what it has been in the past because things change, I think is important. What wasn't in the

op-ed, and what we would like to read more about, though, is just how he would seek to do this, because, of course, the devil is in the details, as they say. I know that's a short answer, but that's the answer that you can give when not all the information was provided in the write-up. So that's what I've got for you today. I'm keeping it short and sweet. Enjoy your update in stocks and bonds, and I'll be back with you tomorrow here from Newport Beach, and we'll talk more through markets. We'll have a couple more pieces on the economic side tomorrow we get to go through and we'll see if we get some follow through here, both on interest rates and in stocks from what was otherwise a more doveish Fed statement today. Reach out with your questions and I'll be back

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