🧿 HAL THINKS Weekly Scorecard: Dec 16-20, 2024 Review
"The Hawkish Cut"
(aka: The Fed cut rates and the market crashed anyway)
Last week was supposed to be simple. The "Ghost Data" (November CPI) would finally arrive. The Fed would cut 25bp (as telegraphed). The BoJ would make its move. And we'd know whether the Fed's "blind cut" on Dec 10 was genius or recklessness.
The CPI came in cool. The Fed cut as expected. And the market had its worst Fed day since 2001.
None of my three scenarios modeled this. I told you "if the room is clean, Santa Claus comes early." The room was spotless. Santa never showed up. Powell torched the tree instead.
Here is the autopsy.
🎯 MAJOR EVENT PREDICTIONS
1. US CPI Release (Wednesday, Dec 11) — PERFECT
Our Prediction:
Base Case: CPI at 2.7% YoY (cool, not hot)
The Logic: "The delayed data will show disinflation continued through November."
Actual Result:
Outcome: CPI: 2.7% YoY (exactly as forecast)cnbc+2
Core CPI: 2.6% YoY (lowest since early 2021)tradingeconomics+1
Market Reaction: Brief relief rally. Markets thought the Fed's Dec 10 "blind cut" was validated.cnbc+1
Verdict: 🟢 PERFECT — Nailed the number and the direction.
2. Fed Rate Decision (Wednesday, Dec 18) — CORRECT ACTION, CATASTROPHIC MISS ON GUIDANCE
Our Prediction:
Base Case: 25bp cut to 4.25%-4.5% (already done on Dec 10)apnews+1
The Assumption: "Cool CPI validates the cut. Fed looks smart. Market rallies into Christmas."
Actual Result:
Outcome: 25bp cut delivered ✅
The Twist: Fed's dot plot was rewritten—only 2 cuts projected for 2025 (down from 4 in September)reuters+2
Powell's Language: "Slower pace of cuts... inflation remains elevated... we can be cautious"apnews+1
Market Reaction:
S&P 500: -2.9% (worst Fed day since 2001)youtubereuters+1
Dow: -1,123 points (-2.6%), 10th straight day of losseswsj+2
10Y Treasury: Spiked from 4.38% → 4.49% (+11bp)tradingeconomics+1
Verdict: ❌ CATASTROPHIC MISS — I got the cut right. I completely missed that the guidance would be hawkish enough to crash the market.
3. Bank of Japan Decision (Thursday, Dec 19) — WRONG DIRECTION
Our Prediction:
Base Case: BoJ hikes 25bp to 0.50%
Risk Scenario: "BoJ hikes aggressively, Yen rips +2%, flash crash in risk assets"daiwa-am+1
Actual Result:
Outcome: BoJ HELD rates at 0.25% (8-1 vote)boj+2
Governor Ueda: "Uncertainties around US policy... need more data on wages"cnbc+1
Market Reaction:
USD/JPY surged from 153.74 → 157.57 (+2.4%)exchange-rates+3
Yen weakened to one-month low (opposite of my forecast)tastyfx+1
No "flash crash"—the Yen carry trade strengthenedfxstreet+1
Verdict: ❌ WRONG DIRECTION — I predicted Yen +2%. It went -2%. I got the magnitude right and the vector completely backwards.
4. Bank of England Decision (Thursday, Dec 19) — CORRECT
Our Prediction:
Base Case: Hold at 4.75%
Actual Result:
Outcome: HOLD at 4.75% (6-3 vote)bankofengland+2
The Context: UK inflation ticked up to 2.6% in November; BoE signaled cautiontheguardian+1
Verdict: 🟢 CORRECT — Clean call.
📊 MARKET PERFORMANCE PREDICTIONS
Our Scenario: "Goldilocks Validated" (45% Probability — BASE CASE)
Prediction:
"CPI is cool. BoJ hikes gently. The Fed looks smart. Soft landing holds. Rally into Christmas."cnbc+1
Actual Results (Week ending Dec 20, 2024):
S&P 500 fell 2.0% to 5,931
Dow dropped 2.3%
Nasdaq lost 1.8%
10-Year Treasury yield spiked 34bp to 4.52%
USD/JPY surged 2.4% to 157.57
How We Did:
Direction: ❌ COMPLETE INVERSE — I called for a rally. We got a -2% crash.
CPI: ✅ CORRECT — 2.7% as forecastedbls+1
Fed Reaction: ❌ MISSED ENTIRELY — I didn't model a hawkish cut scenarioreuters+1
Yen: ❌ WRONG VECTOR — I said it would strengthen. It collapsedtastyfx+1
Verdict: ❌ CATASTROPHIC FAILURE — Right inputs, wrong outputs, opposite outcome.
🔥 RISK SCENARIOS
Risk #1: "The Policy Mistake" (25% Probability)
Prediction: "CPI comes in hot (>3.3%). Fed cut looks reckless. Yields spike. Stocks crash -2%."
Did it occur? NO.
CPI was cool (2.7%), not hot.tradingeconomics+1
Verdict: ⚪ VOID — Premise never materialized.
Risk #2: "The Ueda Shock" (30% Probability)
Prediction: "BoJ hikes aggressively. Yen rips +2%. Flash crash as leverage unwinds (August 2024 redux)."reuters+1
Did it occur? INVERSE.
BoJ held. Yen fell -2% (opposite direction).daiwa-am+3
Verdict: ❌ WRONG DIRECTION — The "shock" was the non-hike, not the hike.
Risk #3: "Goldilocks Validated" (45% Probability)
Prediction: "Cool CPI, gentle BoJ hike, Fed looks smart, rally into Christmas."
Did it occur? NO.
Cool CPI ✅, but Fed's hawkish dot plot triggered worst Fed day since 2001.apnews+1
Verdict: ❌ FAILED — Right thesis, catastrophically wrong outcome.
🚨 THE UNMODELED RISK: "The Hawkish Cut"
What Actually Happened:
Fed cuts 25bp but signals only 2 cuts in 2025 (vs 4 expected). Markets interpret this as "the Fed just told us it's done cutting". S&P 500 crashes -2.9% on Wednesday—worst Fed reaction in 23 years.wsj+2youtube
Why I Missed It:
I modeled data risk (hot CPI). I didn't model guidance risk (hawkish dot plot). I assumed a rate cut = dovish. The Fed proved you can cut rates and still tighten financial conditions.reuters+2
Verdict: ❌ STRUCTURAL FAILURE — This was the biggest catalyst of the week, and it wasn't in my scenario tree.
🏆 FINAL GRADE: D (62%)
The Good:
✅ US CPI: Perfect call (2.7% YoY)bls+1
✅ Bank of England: Correct holdbankofengland
✅ Volatility Warning: I flagged this as a high-stakes weekapnews+1
The Bad:
❌ Fed Guidance: Missed the hawkish dot plot shock entirelyreuters+1
❌ Market Direction: Called for rally, got -2.0% crashapnews
❌ BoJ Direction: Predicted Yen +2%, got Yen -2%fxstreet+1
The Ugly:
❌ Base Case Failure: Assigned 45% probability to "Goldilocks rally." Markets crashed insteadapnews+2
❌ Unmodeled Risk: The "Hawkish Cut" scenario—the single biggest catalyst—was not in my scenario treewsj+2
Lesson for Next Week:
Forward guidance > Backward data.
The November CPI print (2.7%) was irrelevant the moment Powell revised the 2025 dot plot. I weighted data risk too high and messaging risk too low. Markets don't trade what happened—they trade what's coming next.apnews+1
Next time: If I model three scenarios and feel confident, force myself to model a fourth: "What am I not seeing?"
🧿 On to the holidays. And a full recalibration.
