---
title: U.S. Equities Rebound as Cooling Inflation Strengthens Fed Pivot Expectations
description: U.S. equities rebound as November CPI cools inflation and strengthens expectations of a Fed pivot, supporting a selective, quality-focused market outlook.
---

[Quantel Resources](https://resources.quantel.ai)

# [U.S. Equities Rebound as Cooling Inflation Strengthens Fed Pivot Expectations](https://resources.quantel.ai/u.s.-equities-rebound-as-cooling-inflation-strengthens-fed-pivot-expectations)

 Written by [Jerry Yuan](https://resources.quantel.ai/author/jerry-yuan) | Dec 20, 2025, 11:00:00 AM

Cooling inflation has revived confidence in U.S. equities, with falling yields and strong AI-driven earnings supporting the rebound. The outlook remains positive but selective, favoring quality growth over broad market exposure.

 

#### **Cooling Inflation Reignites Risk Appetite**

On Thursday, U.S. equities rebounded sharply following the release of November CPI data, as cooler-than-expected inflation revived confidence in the near-term macro outlook and reignited risk appetite. Headline CPI slowed to 2.7% year over year and the core CPI to 2.6%, both well below consensus expectations, with monthly increases of just 0.2%. Despite concerns around data quality due to the government shutdown, markets focused on the broader signal: inflation pressures, particularly in services and shelter, continue to ease.

 

#### Risk-On Market Reaction Led by Technology and AI

The market reaction was decisively risk-on. The Nasdaq led gains as the AI complex recovered from earlier weakness, supported by strong Micron earnings and guidance that reinforced ongoing demand for AI-related memory and infrastructure. NVIDIA, Broadcom, and other AI beneficiaries rebounded alongside falling Treasury yields, with the 10-year drifting lower as rate-cut expectations moved forward. The S&P 500 reclaimed its 50-day moving average, easing recent technical pressure and stabilizing sentiment after several volatile sessions.

 

#### Federal Reserve Policy Outlook Shifts Toward Normalization

From a policy perspective, the CPI print strengthens the case that the Federal Reserve is approaching the next phase of normalization. While a January rate cut remains unlikely, markets are increasingly pricing in a higher probability of easing by March, reflecting a Fed that appears more focused on emerging labor-market softness than residual inflation risks. Crucially, this is not a recession-driven rate-cut narrative, but one centered on disinflation and insurance against downside growth risks, which is generally supportive for equity valuations.

 

#### **Constructive Near-Term Outlook with Ongoing Macro Volatility**

Looking ahead, the near-term outlook for U.S. equities remains constructive but measured. Inflation data that continues to trend lower should help anchor Treasury yields and stabilize valuation multiples, while earnings—particularly in AI-exposed segments—remain the key driver of performance differentiation. Macro-related volatility is likely to persist as markets debate the timing and pace of Fed easing and assess the reliability of recent data, but in the absence of a sharp deterioration in growth or financial conditions, pullbacks driven by sentiment rather than fundamentals are likely to attract buyers.

 

#### Quantel Asset Management’s View: Favor Quality Over Broad Beta

From Quantel Asset Management’s perspective, the November CPI report reinforces a favorable but selective market backdrop. We continue to see a supportive setup defined by slowing inflation, a Fed increasingly biased toward policy easing, and resilient earnings trends in structurally advantaged sectors such as AI infrastructure and high-quality growth. At the same time, elevated valuations argue for disciplined positioning and risk management rather than broad beta exposure. Overall, we maintain a cautiously positive stance on U.S. equities into the coming months, favoring fundamentally strong companies with durable cash flow visibility over short-term macro trading.

[View full post](https://resources.quantel.ai/u.s.-equities-rebound-as-cooling-inflation-strengthens-fed-pivot-expectations)

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