Week Ahead: Bulls, Bears, and Hope the Fed Isn’t Quietly Falling Behind the Cut

The tape ended the week like a tired prizefighter leaning on the ropes—not knocked out, just waiting for the bell. A 0.1% lift in the S&P 500 isn’t a rally so much as a heartbeat, with health care and energy keeping the pulse alive while tech tiptoed into next week’s Nvidia (NASDAQ:NVDA) verdict. But the real story isn’t in the daily prints—it’s in what happens now that Washington’s lights flicker back on and the data firehose is about to explode after 43 days of silence.

For the first time since early October, markets have something resembling a macro compass again. And the question in every strategist’s mind: are we about to discover the Fed is already behind the curve?

The shutdown’s end resets the macro game board. The backlog will get cleared, but the distortion will be enormous. We may never get an October unemployment rate. We may never get the October CPI print. Even when the delayed reports do drop, they’ll be riddled with noise—false signals, oversized revisions, data ghosts haunting an already skittish market.

Meanwhile, Powell will try to squint through the fog, dismissing Q4 weakness as shutdown flotsam and betting on a Q1 bounce. That’s fine in theory—but it also carries the risk of a central bank lulled into complacency just as the real economy starts shifting beneath its feet.

Because out there in the weeds, things aren’t quite lining up.

The NFIB survey has rolled over again—small-business earnings collapsing from -16 to -25 in a single month, the mood souring back to tariff-shock levels. Consumer sentiment is even more unnerving: Michigan’s current conditions index has never been this low, not even during the worst of the post-GFC funk. And the public’s one-year unemployment outlook has crashed beneath its Great Recession floor. You don’t need released data to know something under the surface is tightening.

Yet the macro paradox of 2025 is that even as survey sentiment wilts, the hard-activity trackers still look pretty sturdy. The Bloomberg Surprise Index is sitting at +0.25. The NY Fed’s GDP tracker is still pointing to a 2.1% Q4 print that belongs to a much rosier reality. In other words: the models say the plane is cruising; the passengers say they smell smoke.

And the Fed? They’re in a 50-50 coin-flip for December. The market is no longer pricing a clean easing glide path into 2026. A few hawkish nudges from FOMC speakers this week were enough to yank forward-rate expectations into something much knottier—and for an equity market priced like a Fabergé egg at 23x forward earnings, these subtle shifts matter.

Because here’s the uncomfortable truth: the most persuasive bull case for equities right now is simply that Fed tightening isn’t at the door. Historically, bull markets die when Powell’s predecessors slam on the brakes:

• Late ’90s → Fed hikes 150 bps → dot-com flameout

• 2007 → Fed hikes 425 bps → credit system buckles

• 2022 → Fed hikes 500 bps → pandemic bubble shot down

Every major bull market top has had the Fed’s fingerprints on the murder weapon.

Today? They’re easing. They’re biased to ease more. A dovish FOMC in 2026 could even out-ease the data, intentionally or otherwise. In theory, this is the stuff bull markets feed on—liquidity lubrication, valuation drift, an ever-wider runway for big-cap narratives.

But the bears aren’t hallucinating either.

The S&P at 23x forward earnings. One standard deviation richer than long-run norms. A concentration so extreme the top-10 names now are the market—over 40% of the index. And much of that premium is built atop the AI capex supercycle, where parts of the narrative are beginning to wobble under their own weight. Expensive can become very expensive—a lesson learned many times—but gravity always returns eventually.

So the week ahead is really about the market trying to price the void: the absence of data, the uncertainty around the Fed reaction function, the re-emergence of volatility as macro fuel pours back into the system.

We are stepping out of a blackout and into a blizzard. When the fog lifts, the economy could look sturdier… or weaker… or simply different enough that the Fed regrets not tightening or easing sooner. And in that gap—between what’s printed and what’s real—is where big macro swings live.

Let’s just hope, as the backlog clears and the true contours of Q4 come into focus, that the Fed isn’t once again forced to chase the curve rather than shape it.

The FX board has traded like a crowded airport apron this week—engines rumbling, trolleys zig-zagging, and everyone pretending the turbulence isn’t getting worse. Two currencies in particular, GBP and JPY, have been shoved to the far end of the terminal with “delayed” signs flashing over their heads. And while the USD has drifted modestly lower, the underlying flows and policy crosscurrents suggest the real macro chop is still inbound.

Let’s start with sterling, which has traded with all the conviction of a London late-autumn drizzle. UK data has been so underwhelming it might as well arrive stamped “Return to Sender.” Every soft print tightens the vice around the BoE’s next move, dragging UK front-end rates down the ladder and making December or January rate cuts feel less like a forecast and more like an inevitability—unless next week’s CPI pulls off a heroic surprise.

Layer in the simmering distrust over the government’s fiscal plans ahead of the Autumn Statement—tightening without touching income tax looks politically neat but economically flimsy—and confidence in Labour’s stewardship is leaking like a cracked water main. Sterling is behaving accordingly: soggy, heavy, and easily pushed around by the limp USD or firmer EUR on any given day.

On the other side of the ring sits JPY, and this story is starting to get genuinely uncomfortable. The dollar index may be down about 1% from its November intraday highs, but USD/JPY is marching to its own drummer—up 0.6% on the week and testing the territory where FX officials start glancing nervously at each other. We’re well above all the old 2022 intervention peaks, and though still shy of the 2024 trigger points, the air is getting thinner.

Tokyo’s language is shifting, but not enough. Comments like “watching FX with a strong sense of urgency” are just warm-up stretches; the real signal is when they pivot to “cannot tolerate”—the policy equivalent of Tokyo pulling the fire alarm. We’re not there yet, and the market knows it. The political backdrop doesn’t help either: PM Takaichi’s musings that deflation isn’t conclusively defeated, plus a looming JPY 15 trillion fiscal package, are not exactly the foundations of a yen renaissance.

And Monday’s Q3 GDP? That’s likely to confirm contraction, which only deepens the case for more fiscal spackle and reinforces the BoJ’s ultra-cautious stance. That constellation—soft growth, more spending, and a BoJ still allergic to tightening—means that intervention risks only become real closer to 160. Until then, USD/JPY remains glued to the sturdy 10-year Treasury correlation, and the hawkish Fed chatter this week ensured any softness in DXY didn’t translate into meaningful yen relief. Frankly, we expected the US yield drop to do more heavy lifting, but the market got blindsided by the Fed’s tone—fortunately, in an odd way, because it kept USD/JPY pinned to mid 154’s rather than ripping even higher.

Meanwhile, Japanese equities are a whole different gravitational field—foreign investors bought a record JPY 6.2 trillion in October. That kind of inflow doesn’t exactly build natural selling pressure for the yen.

Back in King Dollar land, the modest pullback feels more technical than fundamental—a classic “failed breakout” unwind. The end of the government shutdown means the data pipe finally unclogs, and we’re staring at the bizarre prospect of three NFP prints dropping before year-end. More data usually means more volatility, especially when the macro map still has empty squares where October CPI and unemployment should’ve been.

But the important point for FX traders is this: the USD pullback hasn’t been broad-based. Yen is still sliding. Sterling is flat. The dollar is correcting, not capitulating.

Bottom line

Sterling is walking with a limp into CPI week, the yen is drifting toward the danger zone with policymakers still whispering instead of shouting, and the USD is losing altitude but not enough to change the broader trend. With US yields still acting as the market’s gravity well—and with the Fed unexpectedly hawkish this week—both GBP and JPY remain vulnerable into year-end.

This is your FX prelude to the week ahead: the cross-currents are intensifying, the policy signals are muddier, and the market is preparing to step back into a world where data finally matters again.