October CPI came in at +0.4% month over month (0.3% expected), while core CPI rose +0.3% month over month (0.2% expected).
The gap was small, but the timing was critical: this is the last inflation report before the December 9 rate-setting meeting. Even more coincidentally, Waller had just drawn a line a few hours before the data came out: a core monthly reading of 0.3% or higher should prompt consideration of a one-off 50bp hike. The result was 0.3%—right on the threshold. After the CPI release, market pricing for a 50bp hike in December jumped directly from 0% to about 11.5%, while a 25bp hike was priced in at 88.5%.

My view: the Fed’s current direction should be understood as a hawkish cycle that is not over yet. It already hiked 25bp in September to 3.75%-4%, formally ending the rate-cut cycle that began in September 2024. The market is now pricing in 25bp in December and a cumulative 50bp by January next year (59.2% probability), while Deutsche Bank has even forecast 25bp hikes in December, January, and March, taking rates to 4.50%-4.75%. So what is truly being repriced is how high rates will go this cycle, not how much they will rise this time.

Three assets, from most fragile to most resilient:

BTC: The purest liquidity beta, and the first to take a hit
It fell below 73,000, hitting a low of 72,787; ETH was down 4.75%, SOL 4.9%, and ZEC 13%. The key detail is that open interest actually rose 5% to $341.5 billion, while 24-hour liquidations totaled $657 million, including $540 million in long positions. Leverage has not been flushed out, making a rebound prone to becoming a bull trap. With BTC dominance at 60.4% and the Fear & Greed Index at 24, I would neither chase shorts nor buy the dip in this setup; I’d wait for a retest. 73,000 is the dividing line: if it breaks, watch 70,000/68,000; a recovery to 76,000-77,000 would be needed to repair the structure. In one sentence on the medium-term outlook: in an environment of “hikes resuming + a stronger dollar + the 10-year yield breaking above 5%,” BTC has no independent trend; the true trend starting point is the day “the final rate hike is priced in.”

U.S. stocks: Mainly hit by valuation pressure, with earnings not yet damaged
October nonfarm payrolls rose by 165k (59k expected), and earnings have not deteriorated, so this is valuation compression, not a recession trade. The 2-year Treasury yield rose 15bp to 4.71%, the 10-year yield broke above 5%, and the dollar index rose 0.56%. Long-duration assets were hit first: the Nasdaq fell 1.13%, the S&P 500 0.70%, and the Dow 0.48%. The 10-year yield at 5% is a dividing line; historically, once it moves above 5%, U.S. stocks have a hard time rising in a sustained one-way move. If there really is a 50bp hike in December, the Nasdaq’s pullback could widen to 5%-8%; if the Fed hikes just 25bp and leaves room in its wording, the meeting could instead open a “bad news is fully priced in” rebound window.

Gold: The most undeserved drop, but also the most logical
The drop was undeserved because inflation should normally benefit gold; it was logical because real rates and the dollar both surged, with the opportunity cost outweighing safe-haven demand. Spot gold briefly fell below 4,020, down 2.9% intraday, and closed at 4,032; silver fell 3.16%. But gold was bought back as soon as it fell to 4,020, and its sensitivity to real rates is clearly lower in this cycle than in 2022 because the buyer base has changed (central bank purchases, de-dollarization). So I’d characterize this as a shakeout at elevated levels, not yet a trend reversal. 4,000 is a psychological level, and 3,950-3,980 is the previous high consolidation range. A break below that, combined with continued dollar strength, would be a real warning; 4,100-4,150 is resistance.

Another easily overlooked point: because data was not collected during the government shutdown in October 2025, this report has no year-over-year reading, only month-over-month figures. The inflation “anchor” is temporarily missing a piece, so the market can only price off monthly figures and PCE, which is itself a source of volatility.

Ranking: dollar/short-term Treasuries > gold (short-term bearish, long-term bullish) > U.S. stocks (valuation compression) > BTC (most vulnerable to liquidity).
Calendar: December 9 FOMC meeting, January meeting, and every core PCE release.

Personal opinion, not investment advice#WCTCS9

View Original

This page contains third-party content and does not constitute any advice, nor does it represent Gate's endorsement of such views. For details, please see disclaimer.