Zhang: Markets are seeing more angst with this decision

FOMC Decision & Market Angst - The options market is pricing in a 1% move on the S&P 500, which initially seems complacent, but is actually above average compared to the muted moves seen around recent FOMC announcements [1][2] - Market participants are showing more angst regarding this specific FOMC decision due to a record number of dissenting votes and the bond market pricing in only a 20-30% chance of a rate cut before June 2026 [2] - Investor angst is reflected in the VIX, which has increased in recent days [3] VIX & Volatility Play - A large trade involving over 52,000 contracts of the December 20 by 25 VIX call spread, costing $1.4 million (28 cents per contract), represents a bet that the VIX could reach 25% by December expiration [4] - This VIX trade could yield a net profit of nearly $25 million on a $1.4 million investment if the VIX reaches the target level [5] Dissenting Opinions & Market Impact - The market anticipates a potentially "hawkish cut" and changes to the FOMC, with data suggesting a 50% chance of three dissenters at the meeting [6][7] - Dissenting votes, reflected in the dot plot, are expected to have a greater impact on the broader market rather than the MAG7 stocks [8][9] - Small caps and value stocks are playing catch-up, while MAG7 stocks are lagging slightly, with concerns about the debt these companies are taking on to pursue AI initiatives [9][10] Financials & Rate Sensitivity - Financials, excluding JP Morgan's recent news, have generally performed well and are expected to be more sensitive to interest rates going forward [11] Oracle & Options Market - Oracle's stock pullback has led some investors to bet on an upside move if the company beats earnings expectations [12][13] - Nearly 2,000 contracts of the December 26 weekly expiration 225/240 call spread were traded at just under $5.50, representing a $1 million premium outlay with the potential to make 1.8% if Oracle is above $240 by the expiration date [13]