Reading the Fed: Why the Doves Still Rule

Editor’s Note: The office will be closed next week. I will be putting out a year‑end portfolio update at the beginning of January. For the rest of this week, I will be highlighting catalysts I believe will support a continued rally next year.

This morning, I’m revisiting an analysis I put together at the start of November. It’s focused on the rotation of voting members at the Federal Reserve next year. The makeup will be increasingly dovish—inclined to ease. And with the White House appointing a new chair in addition to replacing Board Member Stephen Miran, the outlook should increasingly skew toward easing.

That shift should improve the liquidity backdrop for both Main Street and Wall Street. That means easier access to money, boosting the outlook for spending and economic growth. And that should act as a long‑term tailwind for the S&P 500 Index.

Reading the Fed: Why the Doves Still Rule

• The media painted the latest Fed announcement as hawkish.

• Eight of twelve policymakers are dovish headed into December.

• Nine of twelve policymakers will lean dovish in 2026.

Most investors hear the Fed. Few actually listen. That’s where the edge is…

I’ll be the first to admit, watching most Federal Reserve officials speak can feel like watching paint dry. The conversation is often bland, tangled in economic jargon, and peppered with awkward jokes. But buried in the mix of data analysis and Johnny Carson-style monologue are clues. The more I listen, the clearer it becomes whether a policymaker leans toward raising or lowering interest rates.

That matters when you're trying to help investors gauge whether the policy outlook will support or weigh on the economy and markets. Easier policy means loans cost less, money flows more freely, and there's more of it to spend on assets like stocks and bonds. Tighter policy does the opposite—borrowing gets pricier, liquidity dries up, and businesses and individuals are forced to raise cash by selling assets.

Last week, after the Fed announced its latest decision, Chair Jerome Powell was asked whether the central bank might cut rates again in December. He gave his usual response: policy isn’t on a preset course, and a rate cut isn’t a foregone conclusion. He also noted there were “strongly differing views” among policymakers. That was clear as one dissented against cutting rates, while another wanted a larger cut. The media took this as a hawkish turn, prompting Wall Street to dial back expectations for a January cut.

But anyone paying attention to the lead-up could’ve seen this coming. Kansas City Fed President Jeffrey Schmid, who opposed the October cut, had already said he saw no reason to ease again. On the flip side, Board Member Stephen Miran, who wanted a deeper cut, had been vocal about his belief that rates need to come way down. Their opposing views weren’t new.

That’s why it’s critical to understand not just how policymakers lean, but who actually gets a vote on the Federal Open Market Committee (“FOMC”) each year. When you combine those two factors, you get a clearer picture of where rates are headed. Based on what I’m seeing, the composition of Fed voters is still dovish through year-end and well into 2026. That should continue to support a steady rally in the S&P 500 Index.

But don’t take my word for it, let’s look at what the data is telling us...

To understand Fed policy, you need to know how the voting committee works. The central bank includes 12 regional presidents and seven board members. But only the board and five regional heads vote each year. Knowing who those 12 are, and how they lean, offers a key clue about policy direction.

The fixed voters are straightforward: the Chair, Vice Chair, and five board members. They vote every year. The regional presidents change annually, but in practice, only four rotate. The New York Fed president always votes due to their role as FOMC Vice Chair. So, those annual switches can swing policy.

Here’s a snapshot of each Fed member, their position, policy leaning (dove, neutral, hawk), and voting status for 2025, 2026, and 2027:

The first thing I want to look at is who the 12 voters are for this year. I’ve noted that by putting a “Y” for yes or “N” for no next to each name. The first thing that jumps out to me is eight voters (two-thirds) lean dovish tendencies. Two are neutral, and two are hawks. That tells me the FOMC is more likely to ease in December than hold steady.

In 2026, the dovish tilt strengthens. Nine voters lean dovish, one is neutral, and two are still hawkish. Again, that points to a Fed inclined to cut rates—assuming conditions allow.

Two other changes in 2026 are worth flagging. Powell’s term as Chair ends in May, though his board seat runs until January 2028. Historically, Fed Chairs step down when their term ends, opening a board seat. Miran’s board term ends this coming January, meaning he’ll need to be replaced.

Both are dovish, with Miran arguably the most aggressive on easing. But given the White House’s push for lower rates, any replacements are likely to lean dovish too.

At the end of the day, a “suddenly hawkish Fed” makes for great headlines and drives plenty of clicks. But based on the makeup of the FOMC and the leanings of its members, the story looks different. The Fed should continue favoring rate cuts through year-end and into 2026. That bias should support economic growth and keep the S&P 500 on solid footing.

Pre-Market Levels:

S&P Futures -0.02%, Nasdaq Futures +0.06%, Dow Jones Futures -0.11%, Russell 2000 Futures -0.20%

Europe:

EuroStoxx 50 closed, UK FTSE closed, German DAX closed, French CAC closed, Italian MIB closed, Spanish IBEX closed

Asia:

Japan's Nikkei +0.68%, Japan's TOPIX +0.06%, China's Shanghai Composite +0.10%, Hong Kong Hang Seng +0.17%, South Korea's KOSPI +0.51%, Taiwan's TSE +0.76%

Currencies:

Dollar +0.09%, Euro +0.01%, Japanese Yen -0.40%, British Pound -0.14%, Canadian Dollar -0.03%, Swedish Krona -0.18%, Swiss Franc -0.26%

Risk:

VIX +4.90%, Bitcoin +1.26%, Ethereum +1.50%

Growth:

WTI Crude +0.10%, Brent Crude -0.02%, Nat Gas +3.22%, Copper +2.97%

Safety:

Gold +0.88%, Silver +4.02%

Sovereign Bonds:

U.S. Treasury 10-yr yield unchanged at 4.134%

U.S. Treasury 2-yr yield -1.1bps at 3.499%

German 10-yr yield -0.5bps at 2.862%

French 10-yr yield -0.4bps at 3.564%

U.K. 10-yr yield unchanged at 4.508%

Japanese 10-yr yield -0.9bps at 2.04%

Economic Calendar:

Markets in Australia, Canada, Europe, and New Zealand are closed

BOJ’s Ueda (Governor) Speaks

Japan – Tokyo CPI for December

Japan – Industrial Production for November

Japan – Retail Sales for November

U.S. - Baker Hughes Rig Count (1 p.m.)

Fed Releases Balance Sheet Updates on Commercial Banks (4:15 p.m.)