Macro Mondays: All Eyes on Rate Cuts?

Host: Mik Rosenwald
Guest: Andreas Steno Larsen (Steno Research)
Date: December 8, 2025

Episode Overview

This week, Mik Rosenwald and Andreas Steno Larsen deep-dive into the macro landscape with a focus on the U.S. job market, the upcoming Fed meeting, and what rate cuts might mean for 2026. The conversation combines actionable insights with their trademark candid, occasionally irreverent approach. Listener questions address commodities, specific equity plays, and the nuances of Fed liquidity management.

Key Discussion Points

1. Setting the Scene: Macro and Geopolitics Preview

• The hosts preview year-end thematic reports and highlight their independent perspective.
• [01:36] Andreas: "I think the base case is that we'll see a very, very soft Federal Reserve next year... If we see rate cuts during 2026 into an economy that is doing okay, you'll have plenty of opportunities across risk assets."

2. The Trump Administration and the Markets

• Trump’s administration is now emphasizing U.S. bond performance over equities, partly due to rising bond yields and fiscal maneuvers.
• Discussion of ongoing attempts to balance the federal budget amid tariffs and shifting revenue sources.
• [05:18] Mik: "Is this the goalpost now? What does this even say, Andreas?"
• [06:31] Andreas: "I think a lot of people expected the Bund market to riot against this Trump administration this year...we've actually seen much better performance in the US than elsewhere in bond space."

3. Deep Dive: U.S. Labor Market Dynamics

ADP Employment Numbers

• Net job creation slightly negative; previously would have stoked panic under Biden, but post-migration reforms and shifting labor force dynamics change the baseline.
• [07:14] Andreas: "If the average break even rate is 30k, you should expect some prints below zero now and then without panicking."
• AI is starting to visibly impact job creation, especially in information and professional services.
• [09:39] Andreas: "For once, I actually think there is some... merit to it this time around as AI is able to replace a lot of manual jobs in services."

Temporary Hiring Trends

• A surge in temporary hiring, possibly related to ICE deportations and the general uncertainty created by tariffs.
• Executives may prefer temp hiring amid policy and demand uncertainty.
• [12:34] Andreas: "Typically we see temporary hiring early in a reacceleration phase. If you have a muddy outlook but see improvements, you temporarily fill that gap."

4. The Fed Meeting: Rate Cuts and Liquidity Drama

Market Expectations

• Most anticipate a cut, but guidance may be limited as Powell nears the end of his tenure.
• Key focus: liquidity deficits in the funding system ("funding gap" of ~$250 billion).
• [14:13] Andreas: "We've seen hiccups in these repo rates…we simply have a lack of bank reserves. On my best estimates, we're talking about a gap of 250 billion."

Liquidity Solutions

• Light QE (buying $40-50bn T-bills/month) is possible but too slow for the acute shortage.
• Likely to see a "term repo" approach for short-term liquidity until regulatory changes kick in.
• [17:02] Andreas: "I think the smartest solution to this is to announce some kind of a term repo at this meeting...fill the gap from the Gap with a temporary solution instead of a more permanent one."

5. Kevin Hassett, Fed Politics, and 2026 Outlook

• Questions about whether Hassett’s likely ascension as Fed Chair will lead to a dovish pivot.
• The makeup of the Fed committee is more decisive than just the chair.
• [18:36] Andreas: "No matter the next Fed chair, they're still going to vote. The committee is still going to vote on these decisions. So even if Kevin Hassett is a loyalist...it's still a democracy, that committee, and he's only got one vote."

Market’s Rate Cut Pricing

• The market is underpricing the likely number of rate cuts according to Andreas.
• [22:39] Andreas: "It's not enough. It's not enough. And I'll stress that again here, way too few cuts priced in."

6. Listener Q&A: Commodities, Equities, and More

Commodities Plays (23:10)

• Industrial commodities, especially copper and mining, look attractive due to tariffs, dollar moves, and global supply dislocations.
• [23:41] Andreas: "You have a huge idle inventory of copper in the US now because every executive...told everyone to get copper into the US before those fucking tariffs arrived."

AI Infrastructure Stocks (IRIN) (25:06)

• Remains a strong cyclical play, but highly dependent on the capital expenditure cycle.
• [25:06] Andreas: "Iron will prove to be one of the most cyclical plays on AI also going forward up and down with the cycle, but the cycle is still pointing up."

Fed Liquidity Management (26:38)

• Skeptical of Fed trying to fill the gap with slow T-bill purchases; regulatory relief via supplementary leverage ratio (SLR) is likely a better solution.
• [28:00] Andreas: "They want other ways of solving this repo market mess…this supplementary leverage ratio guidance for next year, which is in my opinion a big deal."

Notable Quotes & Memorable Moments

• [03:20] Andreas (on trade ideas): "Summertimes may be good. Summer times may be shit."
• [09:39] Andreas (on AI and employment): "For once, I actually think there is some... merit to it this time around as AI is able to replace a lot of manual jobs in services."
• [17:29] Mik (on repo liquidity): "Yeah, sounds like just what we need, Andreas..."

Key Timestamps

• 01:36 – 2026 Macro Themes & Fed Softness
• 05:18 – Trump Pivot: Bonds vs. Equities
• 07:14 – U.S. Labor Market Data Deconstructed
• 09:39 – Impact of AI on Jobs
• 12:34 – Why Temp Hiring Spikes Amid Uncertainty
• 14:13 – The Fed’s Liquidity Pinch and Solutions
• 17:02 – Why Term Repo Outshines Light QE
• 18:36 – Fed Leadership: More than Just the Chair
• 22:39 – Market Rate Cut Expectations: Too Pessimistic?
• 23:41 – Commodities Spotlight: Copper, Tariffs, and Trades
• 25:06 – Cyclical Plays on AI Infrastructure
• 26:38 – Fed Liquidity & Supplementary Leverage Ratio

Tone & Style

• Original Tone: Irreverent, informative, candid, with practical, unreserved trade talk—“sometimes maybe good, sometimes maybe shit.”
• Listener Focused: Directly addresses live questions, keeps technical segments accessible, and weaves in personal anecdotes (e.g., AI changes within Steno’s own shop).

Summary Takeaways

• Macro Setup: Markets are underpricing the degree of monetary easing likely to come; the Fed faces structural liquidity issues that may require creative, short-term fixes.
• 2026 Themes: Commodities, risk assets, and certain industrial equities could benefit from a dovish Fed and global supply dynamics.
• AI's Disruption: The impact is becoming visible in the job market, aligning with decades of “robots replacing humans” narratives—but this time, for real.
• Fed Policy: Expect the committee’s internal politics to matter more than the chair’s identity, especially as personnel and guidance evolve through the election cycle and into 2026.

For more in-depth analysis, check out Andreas Steno Larsen’s upcoming liquidity primer and follow Macro Mondays for the latest on macro trends, policy, and actionable ideas in an ever-evolving economic landscape.