December rate hike is now '100%'. A week where real interest rates rose, gold and Bitcoin fell, and stocks rose

Hello, this is Toshi-Megane. This week, October inflation figures exceeded expectations, and a 100% probability of a December rate hike in the U.S. has been priced in. While interest rates rose and non-interest-bearing assets like gold and Bitcoin fell in unison, U.S. stocks rose despite the major news of Nvidia’s CEO resigning. Once again, I will walk you through ‘what happened’ and ‘what is likely to happen next week’.

🔶MARKET-HUB
https://glosedge.co.jp/market_hub/2026-11-14/market_hub.html

What happened this week?

The trigger was the October CPI (Consumer Price Index) on 11/10. Both the month-on-month increase of +0.4% (forecast +0.3%) and the core figure excluding food and energy at +0.3% (forecast +0.2%) exceeded expectations. On the same day, in a speech before the CPI announcement, Fed Governor Waller stated that if core inflation is +0.3% or more month-on-month, ‘a 0.5% rate hike should be considered’ (Reuters). According to CME FedWatch, the probability of a December rate hike is 100%, with about 87% for a 0.25% hike and about 13% for a 0.5% hike (as of the 11/13 close, CNBC).

The U.S. 10-year Treasury yield rose by 29.5 bp (basis points; 0.01%) to 5.154%, the largest increase since April 2025. The movement was in the outlook beyond December, and the rate hike amount through March, calculated from FF rate futures, increased from about +28.5bp to about +51.5bp in one week.

Breaking it down, of the +24bp nominal increase from 11/6 to 11/12, the real yield (nominal yield minus inflation) was +23bp (2.63% to 2.86%), while expected inflation, the inflation rate anticipated by the market, was +1bp (FRED). In other words, interest rates did not rise because ‘inflation is likely to rise further,’ but because the ‘Fed is likely to continue raising rates,’ causing the real interest rate—excluding inflation—to rise. The 2-year note rose by +37bp, more than the 10-year note, and the 3-year, 10-year, and 30-year Treasury auctions all resulted in a tail (meaning there were insufficient buyers, and the bonds were sold at a higher yield than initially expected).

This rise in real yields clearly impacted non-interest-bearing assets. The Dollar Index (the strength of the dollar against major currencies) rose +1.09% to 103.41, its highest level in about 19 months. December gold futures fell -4.60% to $3,887.60, near a 52-week low, and Bitcoin fell -10.0% to $68,167, breaking below its 200-day moving average. With Treasury bonds offering a 2.86% return even after accounting for inflation, the reason to hold non-interest-bearing assets like gold and Bitcoin has weakened.

While such a sharp rise in interest rates is usually a headwind for stocks, U.S. stocks moved differently. The S&P 500 rose +2.51% for the week to 7,561.67, with 399 stocks advancing. Furthermore, on 11/12, the same week, Nvidia’s Mr. Huang resigned as President, CEO, and Director effective immediately, and CFO Kress became interim CEO. The reason was not stated in the company’s filing (8-K) following the investigation initiated by the board on 11/8. Nvidia fell -12.75% for the week, single-handedly dragging the S&P 500’s performance down by -0.91 points, but the semiconductor index SOX rose +8.05%, and AMD and Broadcom rose by over 18% for the week, as money shifted to other semiconductor stocks. The spread on corporate bonds of lower-rated companies (high-yield OAS) also narrowed from 3.42% to 3.20%, indicating that the corporate bond market is not viewing the rise in interest rates as a source of anxiety.

However, some of the support for stocks has been used up. The forward P/E ratio, which shows how many times earnings a stock is bought for, returned to 18.2x, and the gap between earnings yield and 10-year Treasury yield more than halved in one week, from +0.81pt to +0.33pt. The earnings yield is the reciprocal of the forward P/E ratio and is a figure that views stocks in terms of ‘yield’ (approx. 5.49%). The smaller the gap with Treasury yields, the less attractive stocks appear compared to Treasury bonds.

As for Japanese stocks, the Nikkei 225 rose +6.46% for the week to 61,142.35 yen, recovering about half of the previous week’s decline. Even with the same recovery, the content of the indices differed: the Nikkei 225 was driven mainly by a recovery in forward P/E (+5.2%) due to buying back AI-related stocks, while the TOPIX was driven by an increase in forward EPS (expected earnings per share) (+4.3%) due to upward revisions of full-year forecasts in interim financial results. On 11/12, when the news of Nvidia’s CEO change broke, the Nikkei 225 fell 429 yen while the TOPIX rose +0.20%, showing that the Nikkei 225 is still swayed by AI-related news.

The probability of a rate hike at the Bank of Japan’s December meeting is 83.5% according to MogWatch (11/13), recovering from 62.8% the previous week. Even so, the dollar-yen rose from 158.43 yen to 159.69 yen. Due to the U.S. rate hike outlook, the 2-year Japan-U.S. interest rate differential widened from 2.78pt to 3.00pt, and the expectation of a rate hike in Japan manifested not as a stronger yen, but as a rise in bank stocks. However, the 160 yen level has been tested three times and pushed back each time, with the weekly high at 160.19 yen. While Finance Minister Katayama and Vice Minister of Finance Mimura continue to issue warnings, no information regarding intervention or rate checks has been confirmed.

What is likely to happen next week?

According to the ‘Market View’ in MARKET HUB, the focus for the next 1 to 3 months is whether rate hikes will continue after December, and how much stocks and corporate bonds can absorb the rise in real interest rates. There are three things to check.

The first is inflation and employment figures: the FOMC minutes on 11/18, the employment report on 12/4, and the CPI on 12/10, to see if the outlook for the rate hike amount through March (approx. +51.5bp) changes. The second is how stocks and corporate bonds react, specifically whether the high-yield OAS begins to widen as real yields continue to rise. The third is AI-related demand and capital. Nvidia’s earnings on 11/17 will be the first announcement under the interim CEO, and the listing of Anthropic has been reported for 11/19 (no official company announcement, based on reports). SoftBank Group recorded a loss of approximately 597.2 billion yen due to a review of its power generation facility plans for U.S. data centers, and the three megabanks also cited a slowdown in data center investment as a risk.

U.S. stocks: the S&P 500 is below its 50-day moving average (average of the past 50 days’ closing prices) of 7,667.46, and about 3.0% above its 200-day moving average of 7,340.32. In terms of seasonality, there is data showing that November in midterm election years has risen 15 out of 19 times, but this is just a past trend, and this November is down -0.24% as of 11/13.

Japanese stocks: the Nikkei 225 is below both its 50-day moving average (64,726.22 yen) and 200-day moving average (62,128.77 yen), and is -15.51% from its June high. The next materials are Nvidia’s earnings on 11/17, the December SQ on 12/11, and the Bank of Japan meeting on 12/17-18. In emerging markets, the pressure of a strong dollar is appearing as currency depreciation in the real, rupiah, and rand, and it is believed that whether the dollar index settles in the 103 range could change whether the differences between countries widen further.

Now, here is the forecast panel for next week (11/16-11/20) by our fellow investors. It is the average value after discussion among 16 people with different investment styles.

🔶 U.S. stocks (S&P 500): Probability of rise 51.6% (Assumed range 7,340-7,770)🔶
Japanese stocks (Nikkei 225): Probability of rise 50.0% (Judgment based on the closing price of Nikkei 225 futures the following Saturday morning, with the benchmark being the futures closing price of 61,000 yen on Saturday morning, 11/14. Assumed range 58,300-63,500 yen)🔶
U.S. 10-year Treasury yield: Probability of rise 48.2% (Rise = fall in bond prices. Assumed range 5.00%-5.30%)🔶 Dollar-Yen
: Probability of rise 49.9% (Rise = yen depreciation/dollar appreciation. Assumed range 157.55-160.80 yen)

All four markets are close to a toss-up, but for the U.S. 10-year Treasury yield, 11 out of 16 people placed it as ‘slightly more likely to fall.’ Another conclusion is that Nvidia’s earnings are a ‘material for volatility rather than direction.’

Asked two fellow investors

We had Seiichi Kaburagi (a long-term value investor who selects stocks based on company value) and Sae Ichinose (a Nikkei 225 options trader) review the content of this week’s meetings.

Ichinose: The topic is ‘Will stocks, interest rates, and the yen rise or fall next week (11/16–11/20)?’ First, let’s look at the average of the 16 participants and our own figures.

• 📈 S&P 500: Average 51.6% | Kaburagi 49% | Ichinose 54%

• 🇯🇵 Nikkei 225: Average 50.0% | Kaburagi 50% | Ichinose 51%

• 💴 USD/JPY: Average 49.9% | Kaburagi 50% | Ichinose 50%

• 🏦 US 10-Year Treasury Yield: Average 48.2% | Kaburagi 49% | Ichinose 46%

Kaburagi: We aren’t really supposed to be predicting next week, but the US 10-year Treasury was the most divisive topic this week. The point of contention is whether this week’s large +29.5bp rise will continue next week or pull back slightly. Haibara, who does technical analysis, believes the trend will continue because the yield closed at its highest level in the last 20 days while remaining above the 50-day moving average. Conversely, Shinonome, who focuses on global macro, argued that those who expected continued rate hikes have already sold their government bonds, and that the current yield already reflects that.

Ichinose: The deciding factor was the nature of the rise. Inflation expectations barely moved; what rose was the real yield, which is the yield after subtracting inflation. It reflects the market rewriting its outlook over the past week to assume the Fed will continue raising rates. We need new inflation data to push it any higher, but since there are no major inflation announcements like the CPI next week, the majority shifted toward a slight pullback. Furthermore, the MOVE Index (which measures expected volatility in the bond market), calculated from government bond options, is smaller than this week’s actual fluctuations. The options market doesn’t seem to think the rise will continue.

Kaburagi: At first, I thought yields would rise a bit more. This week’s 3-year, 10-year, and 30-year Treasury auctions all lacked buyers, so I thought if next week’s 20-year auction was also weak, yields would be pushed up further. But Tsuzuki, our bond expert, pointed out that even if the auction is weak, the upward pressure on yields would only be about 0.01–0.02%, which is very small compared to this week’s rise. I realized I was using a minor factor as a reason for a rise without verifying its magnitude, so I shifted slightly to the ‘fall’ side. Haibara remained bullish until the end, so we are still split on this.

Ichinose: For the 10-year Treasury, this is the ‘probability of yields rising,’ so in terms of bond prices, it’s the opposite. If yields fall, bond prices rise.

Kaburagi: Next is US stocks. The point of contention is whether the fact that stocks are no longer cheap will be a reason to push stock prices down next week. The ‘earnings yield,’ which is company profit divided by stock price, is like the yield you get when holding a stock. The current earnings yield is about 5.49%, and the 10-year Treasury yield is 5.154%. The difference is only 0.33 percentage points. Last week it was 0.81 points, so it has more than halved in a week. Since you can get a yield of over 5% by buying government bonds, the appeal of holding stocks, which come with price volatility, is fading. Kuronuma, who reads credit cycles, took this seriously and saw a slight advantage for stocks falling next week. He was the most bearish among the 16.

Ichinose: The bullish argument is the breadth of the market. Even in a week where Nvidia fell significantly, 399 stocks rose. It’s not a rise dependent on a single company. Nvidia’s earnings were categorized as a ‘factor of breadth rather than direction.’ Since its weight in the index is less than 10%, even if it moves significantly after earnings, the direct impact on the index won’t reach 1%. No one can read whether it will go up or down until after the earnings report.

Kaburagi: I also initially thought stocks were prone to falling slightly. Stock prices rose, and the forward P/E ratio (how many times the stock price is relative to the expected profit for the next year) increased from 17.7x last week to 18.2x. But Washio, our US stock strategist, showed that earnings forecasts have also been rising since the end of September. If profits increase, the P/E ratio will go down even if the stock price stays the same. I realized I was only looking at the rise in the P/E ratio and not the growth in profits, so I moved back to a position close to neutral. My current view is that there is no deciding factor for either an upward or downward move.

Ichinose: The point of contention for Japanese stocks is whether to count the fact that Nikkei 225 futures are below the 200-day moving average (the average of the past 200 days) as a sign of downward pressure. It was also pointed out that this week’s rebound was mainly due to AI-related stocks being bought back, which is different in nature from the TOPIX, which was supported by profit growth.

Kaburagi: On the bullish side, there was data showing that selling by those who had bought on margin had run its course the previous week. However, that was data as of the end of the previous week, and we won’t know until the 11/17 report whether they bought back in during this week’s rebound. With this point from Kuronuma, even those who were bullish lowered their probability.

Ichinose: Looking at options open interest (the volume of trades not yet settled), there is a huge pile of puts at 60,000 yen to prepare for a decline. Above, there is the 200-day moving average, a line where selling is likely to occur. Since the main pattern is consolidation between these levels, it’s a toss-up whether it goes up or down. I think it’s more important to consider the range it will stay within rather than whether it goes up or down.

Kaburagi: Finally, the USD/JPY. It hit the 160 range three times and was pushed back each time. The point of contention is whether to see that as a sign of a move toward a stronger yen, or just that there is little room for it to rise further.

Ichinose: At first, those leaning toward a stronger yen were prominent, but we re-evaluated that having little room to rise is different from moving in a downward direction. The widening interest rate gap between Japan and the US points toward a weaker yen, while the warnings from the Finance Minister and the expectation of a Bank of Japan rate hike point toward a stronger yen; it’s a toss-up. The worry that intervention would cause it to drop by several yen was expressed not as a probability, but by widening the lower end of the expected range.

Kaburagi: Let’s list the highlights for next week. First, the retail sales report on 11/17. It’s the biggest indicator next week, but market expectations haven’t been confirmed, so many treated it as a factor for volatility rather than direction. For the 10-year Treasury, whether it closes above 5.25% for two consecutive days was cited as the dividing line for the view of a pullback.

Ichinose: For Japanese stocks, many said that since the first news of Nvidia’s earnings will come out before the Tokyo market opens on 11/18, the week will be decided by the reaction that morning. Whether futures can maintain 60,000 yen at the close was also cited as a dividing line. For USD/JPY, it’s whether it can break above the 9/2 high of 160.38 yen at the close.

Kaburagi: The final check is the closing price on November 20th. For Japanese stocks, it’s the closing price of the futures on the morning of Saturday the 21st.

Conclusion

Kaburagi-san, Ichinose-san, thank you for your outlook for next week! This week was a week where interest rates rose in ‘real’ terms due to a single inflation figure, and the reactions between gold/Bitcoin and stocks were clearly divided. Next week, we have the major hurdle of Nvidia’s earnings, but the conclusion of our meeting is ‘width over direction.’ We will continue to track how much it fluctuates. See you next week. This was Toshi Megane!
Toshi Megane HP https://glosedge.co.jp/megane/

Bonus: A quick look at each market

• 🔷 US Stocks: The S&P 500 was up 2.51% for the week to 7,561.67. Even with Nvidia down 12.75%, 399 stocks rose.

• 🔷 Japanese Stocks: The Nikkei 225 futures (CME yen-denominated December contract) were up 4.91% for the week to 61,000 yen. The cash Nikkei 225 rose 6.46%, recovering about half of the previous week’s decline.

• 🔷 US 10-Year Treasury: Yields were up 29.5bp for the week to 5.154%. Almost the entire rise was on the real yield side.

• 🔷 USD/JPY: Up 0.80% for the week to 159.69 yen. It hit the 160 yen level three times and was pushed back each time.

• 🔷 Energy: The WTI December contract fell for the second consecutive week, down 2.50% to $88.56 at settlement. The IEA (International Energy Agency) indicated a surplus supply outlook for the first time since the war began.

• 🔷 Metals: The gold December contract was down 4.60% to $3,887.60, near its 52-week low. Silver was down 6.34% and copper was down 2.79%.

• 🔷 Agricultural Products: In the WASDE (USDA supply and demand report), soybean ending stocks were 300 million bushels, lower than expected, and the January soybean contract rose 3.27%, recovering the 200-day moving average.

• 🔷 Cryptocurrency: Bitcoin fell 10.0% to $68,167, breaking below the 200-day moving average. Physical Bitcoin ETFs saw outflows for 6 consecutive business days through 11/12 (totaling -$1.72 billion).

• 🔷 Emerging Market Stocks: EEM was up 2.68% to $60.92. While the Taiwan Weighted Index rose 10.01% and the KOSPI rose 4.56%, the Hang Seng Index fell 3.45%.

This article is for informational purposes only. It is not investment advice. Please make investment decisions at your own risk. The probability of rise and the assumed range are simulations by fellow investors (all of whom are fictional characters) and do not guarantee the future.