When the Fed Cuts Rates, Why Do Markets Act So Rebellious?

Just when the Federal Reserve announced a 25 basis point rate cut on December 11, 2025, something peculiar unfolded across financial markets. Silver prices shattered historical records, vaulting above $61 per ounce. Treasury yields climbed instead of falling. Gold moved sideways with modest fluctuations. Bitcoin crashed unexpectedly from $94,500 to around $92,000. Investors watched in bewilderment as assets collectively defied the traditional playbook—a rate cut should boost risk appetite, right? Yet here we are witnessing rebellious market behavior that suggests something deeper is shifting beneath the surface.

The Fed’s Sixth Cut and Internal Cracks

The December decision marked the sixth rate cut since the easing cycle kicked off in September 2024. The median federal funds rate target now sits at 3.5%-3.75%. On the surface, it appears routine. Yet beneath this calm exterior, cracks are showing within the central bank itself.

Three dissenting votes—the most since September 2019—revealed fractured consensus. One official pushed for a larger 50 basis point reduction, while two others wanted to hold steady. The policy statement cited labor market weakness as the primary catalyst, signaling the Fed’s pivot toward preventing employment deterioration from bleeding into consumer spending and broader economic growth.

Looking ahead, the dot plot forecasts only a single rate cut for 2026. But economists are skeptical. Wen Bin from Minsheng Bank suggests that if the incoming Fed leadership takes a dovish turn, actual cuts could outpace these projections. Meanwhile, Trump’s relentless pressure on the central bank—calling the latest move “too small” and demanding it should be “doubled”—adds another layer of uncertainty. Will the next chair prioritize independence or compliance? The market is watching, and the answer matters enormously.

Treasury Yields Defy Gravity

Here lies one of 2025’s most rebellious market anomalies: U.S. Treasury yields rose rather than fell following the rate cut—the first such episode in nearly three decades.

Since the Fed launched its easing campaign, the 10-year yield has climbed approximately 50 basis points. As of December 9, it reached 4.17%, marking a three-month high. The 30-year mirrored this defiant trend, rising to around 4.82%.

Observers interpret this rebellion through three competing lenses:

The Optimist’s View: Market confidence that recession won’t materialize, justifying higher term premiums for positive growth expectations.

The Neutral Stance: Treasury yields simply returning to pre-2008 baseline levels after years of suppression.

The Pessimist’s Warning: Bond vigilantes are punishing U.S. fiscal disorder through higher borrowing costs.

JPMorgan’s Global Head of Rates Strategy, Barry, identifies two pivotal factors: First, markets had already priced in the Fed’s dovish pivot before the December announcement. Second, the central bank is cutting aggressively while inflation remains elevated, essentially choosing economic expansion over disinflation. This juxtaposition—looser policy amid sticky prices—confuses traditional signals.

Silver’s Historic Breakout

While Treasury traders hem and haw, the silver market erupts with clarity. On December 12, spot silver pierced $64 per ounce, erasing previous records. Year-to-date, the precious metal has surged a staggering 112%—nearly double gold’s gain.

Supply mechanics underpin this rebellion. The global silver market has posted a deficit for the fifth consecutive year. The Silver Institute forecasts a 2025 shortage spanning 100 to 118 million ounces. With the precious metal newly classified on the U.S. critical minerals list, trade restriction concerns add speculative fuel to the fire.

Yet demand tells the deeper story. Industrial applications, particularly photovoltaics, consume 55% of global silver. The International Energy Agency projects that solar deployments alone will generate 150 million additional ounces of annual demand by 2030. Lower rates reduce the opportunity cost of holding non-yielding assets, but it’s the structural supply-demand imbalance that truly propels silver’s rebellion against conventional rate-cut logic.

Gold: The Measured Response

Gold’s reaction proved far more subdued. COMEX futures edged up just 0.52% to $4,258.30 per ounce in the immediate aftermath.

Gold ETF holdings reveal nuance. SPDR, the world’s largest gold fund, managed approximately 1,049.11 tons as of December 12. While down slightly from October peaks, year-to-date holdings climbed 20.5%, signaling underlying demand strength despite muted price action.

Central bank accumulation provides steady structural support. In Q3 2025, global central bank gold purchases totaled 220 tons, up 28% quarter-over-quarter. China’s People’s Bank extended its purchasing streak to 13 consecutive months. These flows anchor gold’s floor even as shorter-term traders wrestle with competing forces: rate-cut tailwinds on one side, easing geopolitical tensions and weakening investment demand on the other.

Bitcoin’s Unexpected Collapse

The cryptocurrency realm offered perhaps the most rebellious narrative of all. Bitcoin spiked to $94,500 immediately following the announcement, then careened toward $92,000 within hours. It was a textbook V-shaped crash despite expansionary monetary conditions.

Within 24 hours, liquidations across crypto exchanges exceeded $300 million, wiping out 114,600 traders. This reaction inverted expectations for a traditional risk asset benefiting from looser policy.

Structural selling overpowers cyclical buying. While MicroStrategy and corporate buyers continue accumulating, the broader market wrestles with distribution pressure. Standard Chartered recently halved its year-end bitcoin target from $200,000 to approximately $100,000, arguing that the large-scale corporate buying wave may have exhausted itself.

Bitcoin exhibits clear decoupling characteristics—moving to its own rhythm rather than following the monetary policy script.

The Deeper Divergence

When different asset classes react in opposing ways to an identical policy stimulus, markets are sending a meta-message: monetary policy alone no longer choreographs asset price movements.

Fed officials raised their 2026 growth forecast from 1.8% to 2.3%, yet internal disagreement over the policy trajectory has widened measurably. The dot plot’s 3.375% median rate forecast carries “significant divergence” according to Cecilia Cui of Pictet Wealth Management—an unstable anchor in uncertain waters.

Compounding this, Trump’s intensifying critique of Fed independence threatens to reshape institutional credibility. A more “compliant” chair could further erode market confidence in the institution’s autonomy, potentially triggering additional rebellious asset behavior across multiple fronts.

The message is clear: as the Fed transitions leadership and economic data fluctuates throughout 2026, investors should expect more such anomalies. Those who can disentangle the true structural drivers—supply deficits, fiscal imbalances, geopolitical shifts, and policy credibility—from cyclical noise may discover profitable alignment amid this marketplace rebellion.