Three Reasons Why The Fed December Rate Cut Could Spark a 2025 Market Rally

Markets took a beating recently—individual stocks got crushed, and the big indices corrected hard. But before you panic and move everything to cash, here’s why things might turn bullish heading into next year.

The Fed Is Almost Certainly Cutting Rates in December

Forget the noise about economic data delays. Two major indicators are screaming the same message: rate cuts are coming.

The CME FedWatch tool—which literally tracks futures pricing to predict Fed decisions—pegs the odds at 82.7% for a 25-basis-point cut. Polymarket, the biggest prediction market out there, is even more bullish at 86%. That’s not speculation; that’s money putting its mouth where it is.

As legendary investor Stanley Druckenmiller once said, most traders obsess over earnings reports, but they’re missing the real game: central bank liquidity is what actually moves markets. When the Fed opens the tap, everything else follows.

Corrections ≠ Bear Markets (This Is Key)

Here’s a reality check that might calm your nerves: since 2009, there have been 31 market corrections of 5% or more. But only 4 of them turned into actual bear markets. The rest? They bounced back after dipping 5-6%.

Corrections are normal. Bear markets are the exception, not the rule. What you’re seeing now is textbook correction noise, not a regime change.

The Real Catalysts: AI Spending + Stimulus Checks

Trump just signed an AI executive order with Manhattan Project-level urgency. Meanwhile, Amazon pledged $50 billion in AI infrastructure investment. These aren’t one-off announcements—they’re the start of a multi-year capex wave that flows through Nvidia, AMD, and the entire chip supply chain.

Add to that the planned “Tariff Dividend Checks” for Main Street Americans. Remember those $2k COVID stimulus checks in March 2020? Markets went nuts. This could be similar fuel for a consumer-driven rally.

The Takeaway

Yes, corrections feel terrible when you’re in them. But the backdrop—a dovish Fed, historically normal pullback patterns, and genuine catalyst tailwinds—suggests the selling is overdone. Watch for that December rate cut announcement; it might be the spark that kicks off the real bull run.