Markets Lean Toward December Rate Cuts, But Macquarie Flags Growth-Rate Disconnect Risk

The financial landscape reveals a notable split between how markets price Federal Reserve actions and how Macquarie Asset Management is positioning for growth.

Market participants rely on tools like the CME FedWatch to assess implied probabilities of rate changes, which reflect collective expectations for FOMC decisions. However, these tools currently lack specific forecasts for December 2025 rate cuts, instead emphasizing methodological tracking over concrete predictions. This uncertainty means investors are grappling with probabilities rather than certainties, as market pricing incorporates a range of potential outcomes.

In contrast, Macquarie is taking a more assertive stance with its "growth offensive" strategy. The firm anticipates further rate cuts in 2025, leveraging strong global growth, particularly in developed economies, and bets on assets like real estate, infrastructure, and equities that thrive on lower rates and AI-driven productivity gains. This approach aims to capitalize on favorable conditions while explicitly targeting sectors poised to benefit from monetary easing.

The core tension lies in this divergence: markets are cautious and data-driven, pricing in uncertainty, while Macquarie is aggressively committing capital based on its growth thesis. For investors, this highlights a critical decision point-following market sentiment might suggest waiting for clearer rate signals, but Macquarie's strategy offers potential upside if its growth assumptions hold. However, risks remain, including inflation pressures from tariffs and China's weak housing market, which could force central bank pauses or dampen returns. Balancing these perspectives is key, as Macquarie's optimism may overlook frictions that could alter the economic trajectory.

This contrast underscores the importance of aligning investment strategies with either probabilistic market views or proactive growth bets, depending on risk appetite and time horizon.

Inflation & Labor Data: Mixed Signals for Fed Action

According to the latest CPI report, September's price and jobs reports delivered mixed signals to policymakers. Consumer prices rose 0.3% month-over-month, pushing annual inflation to 3.0%. Energy costs drove the monthly surge, with gasoline jumping 4.1% in a single month. Even core inflation-excluding volatile food and energy prices-held steady at 3.0% annually, suggesting broader price pressures remained entrenched.

Meanwhile, labor market momentum slowed unexpectedly. Nonfarm payrolls added just 119,000 jobs in September, falling short of both analyst expectations and the prior month's pace. Healthcare, food services, and social assistance sectors led hiring, while transportation and federal government jobs declined. Unemployment held steady at 4.4%, but the shortfall underscored moderating momentum rather than outright weakness.

The Fed now faces conflicting data: persistent inflation suggests caution on rate cuts, while labor market moderation reduces immediate recession risks. Markets will turn to November's delayed jobs report-set for release on December 16-as the next key indicator of labor resilience. For now, the central bank must balance inflation vigilance against cooling hiring trends.

Rate Cuts as Catalyst

Macquarie Asset Management sees falling interest rates directly enabling its growth offensive in real estate and infrastructure assets.

Lower borrowing costs make financing new property development and infrastructure projects significantly cheaper, improving projected returns for these capital-intensive sectors. This aligns with their stated strategy of favoring assets that historically perform well when rates decline. The anticipated Fed rate cuts in 2025 are a core assumption underpinning this positioning.

The firm also views AI-driven productivity gains as a crucial offset to persistent risks in China's property market. While acknowledging the housing sector's weakness could pressure long-term returns, Macquarie believes AI enhancements to operational efficiency could generate strong earnings growth in their global portfolio, particularly outside China. This productivity boost acts as a secondary engine supporting their investment thesis.