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The Federal Reserve delivered its third consecutive rate cut on Wednesday, lowering the federal funds rate to 3.5%-3.75%. But this wasn't your typical dovish easing—it was what analysts are calling a "hawkish cut," accompanied by three dissents (in opposite directions) and guidance that just one more cut is likely in 2026.

For systematic investors, this week crystallized several competing narratives:

• Traditional equity markets near all-time highs

• Crypto consolidating after significant drawdowns

• Gold hitting new records above $4,200/oz

• Growing skepticism about AI investment returns

• Fed signaling the end of aggressive easing

Let's break down what happened and what it means for rules-based strategies heading into year-end.

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The Fed's Divided Decision

Wednesday's rate cut was far from unanimous. The Federal Open Market Committee voted 9-3, with dissents from both hawks and doves:

• Two officials wanted no cut (concerned about inflation)

• One official pushed for a larger 50bp cut (worried about labor market)

• Fed Chair Jerome Powell emphasized the committee is "well positioned to wait" and see how data evolves

Here’s what you need to know:

• Fed funds rate now at 3.5%-3.75%, the lowest in nearly three years

• Only one more 25bp cut projected for 2026

• Core inflation remains stuck at 2.8-2.9%, well above the 2% target

• Labor market showing cracks: unemployment at 4.4%, job growth slowing

The challenge? The Fed faces pressure from both sides of its dual mandate. Inflation remains elevated while the labor market softens—creating what some economists call "stagflation lite." For systematic investors, this environment favors strategies that can adapt quickly to regime changes rather than static allocations.

Crypto's Reality Check

While traditional markets celebrated the rate cut, crypto markets told a different story. Bitcoin is trading around $89,000-$92,000—roughly 30% below its highs earlier in 2025. Ethereum sits near $3,100, struggling to break above key resistance levels.

What changed?

• ETF outflows: Crypto ETFs experienced significant redemptions

• Macro headwinds: Higher-for-longer rates reduce appeal of risk assets

• Compressed volatility: Bitcoin's volatility has moderated but remains elevated

• Leverage washout: Overleveraged positions were cleared out in November

Show Image Source: TechStock², 2025 Bitcoin's consolidation around $90K reflects a market in reset mode after a 30% drawdown from earlier highs, with investors reassessing valuations.

Interestingly, this consolidation may be healthy. Historical analysis shows Bitcoin often experiences 30-40% mid-cycle corrections before resuming upward trends. For systematic crypto strategies, the current environment offers several advantages:

• Lower entry points for momentum strategies

• Reduced speculation and leverage in the system

• Clearer technical levels for trend-following models

• Improved liquidity and institutional participation

Gold's Historic Rally Continues

While crypto cooled off, gold surged to new highs above $4,200/oz, up more than 60% year-to-date. This rally occurred despite rising Treasury yields—breaking the traditional inverse correlation.

Drivers of gold's strength:

• Central bank buying (53 tons purchased in October alone)

• Geopolitical uncertainty (Middle East, Russia-Ukraine)

• Fiscal concerns about U.S. debt levels

• Inflation hedging as rates plateau

The gold rally highlights an important dynamic for systematic investors: traditional correlations are breaking down. Gold and Treasury yields moving together (rather than inversely) suggests markets are pricing in fiscal risk, not just inflation or growth concerns.

Tech's AI Reckoning

Oracle's disappointing earnings on Thursday triggered a sharp selloff in tech stocks, with the stock falling nearly 12%. The culprit? Revenue missed expectations and the company raised its AI infrastructure spending forecast—reigniting concerns about whether massive AI investments will actually generate returns.

The selloff rippled across mega-cap tech:

• Microsoft down on similar AI spending concerns

• Nvidia declining despite strong chip demand

• Meta falling as metaverse budget cuts dominate headlines

• Alphabet facing valuation scrutiny

Market implications:

• Concentration risk in the Magnificent 7 is being repriced

• Investors demanding clearer paths to AI profitability

• Rotation from growth/tech into value and defensive stocks

• S&P 500 breadth concerns as fewer stocks drive gains

For systematic strategies, this creates opportunities:

• Equal-weight approaches avoid concentration risk

• Factor-based models can capture value rotation

• Momentum strategies adapt as leadership changes

• Sector rotation models benefit from dispersion

Labor Market Softening Amid Data Gaps

The Fed's decision came amid an unusual data environment. The 6-week government shutdown (which ended mid-November) delayed critical economic releases, forcing policymakers to rely on stale September data.

What we know:

• Unemployment at 4.4% (highest since October 2021)

• Job gains slowing significantly through the year

• Manufacturing sector contracting for 9th consecutive month

• "Low hire, low fire" dynamic—companies not expanding or cutting aggressively

Updated October and November data will be released next week, potentially shifting the narrative significantly. For now, markets are operating with incomplete information—adding to uncertainty about the Fed's path forward.

Market Breadth and Concentration Concerns

The S&P 500 continues trading near record highs around 6,886, but beneath the surface, troubling dynamics persist:

• Magnificent 7 stocks account for disproportionate gains

• Market breadth remains narrow

• Small-cap stocks (Russell 2000) showing relative strength recently

• Defensive sectors attracting flows as growth stocks struggle

This concentration creates vulnerability. If any of the mega-cap tech names stumble (as Oracle did), the entire index can wobble. Systematic strategies that emphasize diversification, equal-weighting, or factor exposures beyond momentum can help mitigate this risk.

Strategy in Focus: LunarCrush Altcoin Top 15 AltRank

With Bitcoin consolidating around $90K after a 30% pullback, history suggests we may be entering altcoin rotation season—when capital flows from Bitcoin into higher-beta alternative cryptocurrencies.

LunarCrush’s Altcoin Top 15 AltRank Strategy is built for exactly this moment. Using LunarCrush's proprietary social intelligence system, it systematically tracks the top 15 altcoins ranked by combined social and market momentum.

The strategy uses 40-day average AltRank scores to filter out hype and identify genuine trends across social volume, sentiment, developer activity, and on-chain metrics. It holds an equal-weight portfolio (6.67% each) and rebalances as rankings shift.

In crypto, social signals often precede price moves. This removes the impossible task of manually researching thousands of altcoins while capturing emerging cycles early.

The trade-off: High volatility and 100% crypto exposure mean this isn't for everyone. It's designed for investors who want exposure beyond Bitcoin/Ethereum, can tolerate significant drawdowns, and prefer systematic, data-driven approaches over speculation.

When market leadership shifts, the strategy pivots automatically—no emotion, no guesswork.

Closing Thoughts

This week's developments—a hawkish Fed cut, crypto consolidation, gold at new highs, and tech's AI reality check—underscore why systematic investing matters. Markets are sending conflicting signals, traditional correlations are breaking down, and concentration risks loom large.

For systematic investors, the playbook remains consistent:

• Use rules-based strategies that adapt to regime changes

• Diversify across factors, not just asset classes

• Manage concentration risk through equal-weighting or factor tilts

• Let momentum and trend-following guide tactical decisions

• Maintain discipline when emotions run high

As we head into year-end and 2025, the winners won't be those who predict the unpredictable. They'll be investors who build portfolios that can thrive across multiple scenarios—capturing upside when trends favor them, managing downside when conditions deteriorate.

Markets reward patience, process, and discipline—not speculation.

Stay systematic,
— Surmount Markets Team