Last night, the U.S. stock market opened with a harsh warning to the market, as the three major indices opened lower collectively. Even more surreal is that despite the economic data being cold, the bets on a rate cut in December soared to 80% overnight!

What logic is this market really playing with?

Let's first look at how bad the data is: The retail sales month-on-month growth in September was only 0.2%, while the market was originally expecting 0.4%, resulting in a direct cut in half. The Producer Price Index (PPI) year-on-year is 2.7%, which is quite unremarkable. With high inflation coupled with a pressured job market, American consumers have finally begun to tighten their belts.

But the strange thing is here — the worse the data looks, the more frenzied the market's desire for interest rate cuts becomes. Interest rate futures contracts show that the probability of a rate cut in December has surged to a high of 80%. Institutions have already started to position themselves in advance, laying out assets that will benefit from the rate cut cycle.

Currently, there are two main lines supporting market sentiment: one is the launch of Google's Gemini 3, which has ignited enthusiasm for AI concept stocks; the other is the upcoming Black Friday and Thanksgiving shopping season, with everyone betting on whether this wave can boost consumer data recovery.

The Federal Reserve now feels like it's dancing on a tightrope. Cutting interest rates? That's a done deal, but Powell is likely to soothe the market with rate cuts while signaling "don't get too excited too soon" in his speeches. They are really good at this game of expectation management.

To be honest, I think everyone should be wary of the "rate cut backlash" tactic. Looking back at September, after the rate cut was implemented, the dollar actually rose instead of falling, leaving many people confused. The key is not whether the rates are cut or not, but how the Federal Reserve communicates it and the tone they use. As long as the attitude is slightly hawkish, even if rates are actually cut, the market won't buy it.

The current situation is: the weaker the economy, the stronger the expectations for interest rate cuts; the market is focused on the AI boom and holiday consumption, with the Federal Reserve walking a tightrope between inflation and recession.

What do you think? Will there really be a rate cut in December as scheduled? Will the dollar rise or fall after the rate cut? How will crypto assets like BTC, ETH, and XRP perform? Let's discuss your predictions in the comments!