By:-  Subho Moulik, CEO at Appreciate.

“The Fed has been cautiously navigating a soft landing. Core PCE is at 2.8% yoy, and the labor market is gradually cooling, employment gains have slowed to 110-120K monthly, and the unemployment rate rose to 4.4%. Consequently, the Fed delivered a third and final cut of 25 bps on 10th December to bring the federal funds rate to the range of 3.5 to 3.75%. In September and October, the Fed had decreased the repo rate by 25 bps each in two consecutive policy meets to support the economy and the markets.

With the Fed funds rate at 3.5-3.75%, even US treasury yields (10Y) are likely to stabilise around 4% which is approximately 10% in INR terms in one of the lowest risk asset classes. Even as the Fed’s forward guidance on 10th December signalled a tougher road for further reductions, the market expects one to two policy rate cuts of 25bps each in 2026, dependent on labor market and inflation checks, in line with Fed’s dual mandate of maximum employment and stable prices. 

For Indian investors, the structural depth in terms of global AI infrastructure, energy transition, biotech, cybersecurity, consumer platforms with worldwide moats that the US equity market provides, is hard to match. A healthy mix of US-large cap, quality and AI adjacent exposure should be able to balance currency, sector and policy risks while still taking part in global innovation and earnings growth. Also, the INR depreciation trend vs the dollar means US assets could be a long-term hedge against wealth erosion, especially for future US linked costs like education, travel, global consumption.”