Five Rate Cuts Did Nothing — And What Finally Changed

From July to December 2025, the Alphameter spent 90 consecutive days in risk-off territory. The Federal Reserve cut rates three times during that stretch. The score barely moved. Here is what the cross-asset data actually shows — and what finally ended it.

The Setup

The 2024-25 cutting cycle began in September 2024 with five cuts between then and January 2025. Markets were expecting the classic playbook: lower rates, easier financial conditions, risk assets recover. The Alphameter disagreed.

Through the entire cutting sequence, the composite score oscillated between -6 and -37. Never once did it reach risk-on territory and hold it. The episodes were choppy — brief 2-3 day flickers of risk-on separated by risk-off readings. The regime was broken, and the Fed's rate decisions weren't fixing it.

Then came July 2025.

The 90-Day Episode

On July 31st, with the Alphameter already at -56, the regime flipped into its longest sustained risk-off episode since the 2022 hiking cycle. For 90 calendar days — through August, September, October, and into late November — the score stayed negative.

The Fed cut again in September (to 4.22%), October (4.09%), and November (3.88%). Three cuts in three months. On November 24th, the Alphameter hit -94. Five of six indicators were simultaneously pointing risk-off: AUD/JPY, Copper/Gold, Bond Yields, Sector Rotation, and DXY. That is as close to a unanimous risk-off signal as the model produces.

Cuts don't move regimes. Cross-asset conditions do.

What Was Actually Broken

To understand why cuts failed, you have to look at what the Alphameter was actually measuring.

AUD/JPY — the global carry trade barometer — stayed risk-off throughout. When institutional investors are confident, they borrow cheap yen and buy Australian assets. That trade was dead. It told us that regardless of what the Fed was doing, the global appetite for risk was not recovering. Sophisticated money wasn't moving.

Copper/Gold — the real economy vs safe haven ratio — was also flagging. Copper prices relative to gold were weak, signalling that industrial demand expectations were deteriorating. The market wasn't pricing in a growth recovery. It was pricing in stagnation.

A rate cut into that environment is the equivalent of pushing on a string. You can lower the cost of borrowing, but you cannot force people to borrow, spend, or take risk when the macro signals are pointing the other way.

What Finally Changed

The turn began in the first week of December 2025 — not because of the Fed, but because two specific signals shifted.

Copper/Gold flipped positive. Growth expectations quietly began recovering — possibly anticipating the China stimulus measures that were confirmed in mid-December, possibly reflecting early signs of supply-side tightening in copper markets. Whatever the cause, the ratio moved.

DXY weakened. Dollar strength had been one of the persistent anchors of the risk-off regime — a strong dollar is a headwind to global liquidity, making dollar-denominated debt more expensive for the rest of the world. When the dollar pulled back in early December, it released pressure across emerging market assets and commodities simultaneously.

Those two signals, combined with Sector Rotation beginning to favour cyclicals over defensives, brought the score from -94 to +31 in ten days. The Fed had done nothing new. The macro did the work.

The Lesson

This is not an argument that rate cuts are useless. In the right context — cutting into neutral conditions, with borderline cross-asset signals — they can be decisive. Our data shows that cuts into a neutral regime produce a regime flip within 20 days roughly 50% of the time.

But cuts into a fully established risk-off regime? The historical P(flip 20d) is just 12%. The macro has its own momentum. When AUD/JPY is broken, when Copper/Gold is weak, when the dollar is strong and sector rotation is defensive — the Fed's rate decisions are almost irrelevant to what happens next.

The regime ends when the cross-asset signals are ready. Not a day before.

What This Means Now

The Alphameter has been in risk-on territory since late March 2026 — the most sustained positive reading since the brief 50-day episode in May-July 2025. AUD/JPY is still not fully on board, which is worth watching. But Copper/Gold, Sector Rotation, and DXY are all aligned positive.

The question isn't whether the Fed will cut again. The question is whether the carry trade recovers. That is the signal that will tell us whether the current risk-on episode has legs — or whether it's another false start in what has been a very difficult two years for directional conviction.

The Alphameter will be the first to know.