Market Overview - The three major indices are on a four-session winning streak, with expectations for a potential Santa Claus rally starting in the last five trading days of the year [1][2] - There is a historical concern as the last two years did not see a Santa Claus rally, and this year could break that trend [2] Trading Conditions - The S&P 500 is expected to have a trading range of about 30 to 35 points, with current volatility at approximately 13.7% [3] - A more defensive rotation is observed in the market, with interest rate-sensitive stocks, consumer staples, real estate, and financials leading the way [5] Economic Data - Mortgage applications have decreased by 5% week-over-week, with the 30-year mortgage rate hovering around 6.3% [7][12] - Jobless claims came in at 214,000, better than the expected 224,000, indicating a mixed picture in the jobs market with an unemployment rate of 4.6% [8][10] - The four-week moving average for initial claims is around 216,000 jobs, reflecting some normalization after previous outlier reports [11] Inflation and GDP - Recent economic data has exceeded expectations, contributing to equity gains, with GDP numbers coming in 1% above forecasts [13] - CPI inflation is reported at 2.7% on the headline and 2.6% on core, suggesting that inflation may not be a significant concern for the Fed [21] Commodity Market - Gold and silver have reached all-time highs, indicating a shift towards commodity trading amid geopolitical risks and central bank policies [22][23] - The gold-silver ratio suggests that gold is currently outperforming silver, which may indicate positive market sentiment and economic growth [24][25] Future Outlook - There are expectations for potential fiscal policies around housing in 2026, especially in an election year, which could influence market dynamics [17] - The market is currently pricing in two Fed rate cuts, with the first not expected until June, but there is uncertainty about how the market will react if these cuts are backed out [20]

Key Takeaways from CEWC Readout — Cushion, Don't Lift Industry Overview - The report focuses on the **China Economics** sector, providing insights into the macroeconomic environment and policy direction for 2026. Core Insights and Arguments - **GDP Forecast**: The 2026 GDP forecast remains unchanged at **4.8% real** and approximately **4.1% nominal**. The emphasis is on "less deflation, not reflation" [5] - **Fiscal Policy**: The initial fiscal envelope is flat compared to 2025, with a front-loaded issuance strategy allowing for a potential **0.5 percentage point** GDP top-up midyear [5] - **Monetary Policy**: A dovish bias is indicated, with limited interest rate cuts expected in the range of **10–20 basis points** [5] - **Growth Drivers**: Public capital expenditure and urban renewal, along with advancements in AI and green transitions, are identified as key growth anchors. However, private capital expenditure remains weak [5] - **Housing Market**: There are plans for inventory buy-ups and mortgage subsidies, likely through reforms in the provident fund, though the specifics regarding scope, size, and duration are unclear [5] - **Anti-involution Measures**: A stronger push towards a unified national market, state-owned enterprise (SOE) reform, and stricter subsidy regulations are noted, although execution challenges are anticipated [5] - **Policy Style**: The approach is characterized by cushioning rather than lifting, focusing on continuity rather than a pivot in policy [5] - **Supply and Demand Mix**: The current policy mix remains supply-centric with a slight nudge towards demand, emphasizing the need to "expand domestic demand + optimize supply" [5] - **Consumption Initiatives**: Ongoing goods trade-in programs and vague plans for service vouchers and social welfare support are highlighted, with a watch on developments in the second half of the year [5] - **2026 Outlook**: The year is expected to be a "slow burn" with small, reactive policy steps aimed at stabilizing activity and prices [5] - **Base Toolkit**: The toolkit includes front-loaded infrastructure investments via local government special bonds, housing guardrails with optional mortgage interest subsidies, and selective service consumption adjustments in the latter half of 2026 [5] - **Execution Watchpoints**: Key areas to monitor include the pace of fiscal issuance, design of mortgage subsidies, inventory purchase mechanisms, and progress on anti-involution and market unification efforts [5] Additional Important Points - The report emphasizes the importance of execution in fiscal and monetary policies, indicating that the effectiveness of these measures will be critical in achieving the desired economic outcomes [5] - The overall sentiment reflects a cautious optimism, with a focus on gradual improvements rather than aggressive policy shifts [5]

From @WSJopinion: The Trump diagnosis ignores the biggest threat to Europe’s well-being. That is Europe’s generous social-welfare states and the cascading fiscal, economic and social ills they create.https://t.co/FQmB1fkiC0 ...

From @WSJopinion: The Trump diagnosis ignores the biggest threat to Europe’s well-being. That is Europe’s generous social-welfare states and the cascading fiscal, economic and social ills they create.https://t.co/bf1bPff0oV ...

And for more on that, I want to welcome into the program Joe Leavia, counselor to Treasury Secretary Bessett. Joe, thanks so much for joining me. Always great to see you.>> Thank you. Thank you. >> The Fed yesterday increased their outlook for the economy next year.They now see GDP growth of 2.3%. Fed Chair Powell said that he thinks that any price increases from tariffs could peak in the first quarter. where they see inflation falling to 2.5% next year, but the unemployment rate is expected to hold at 4.4% ...

And if I could follow up on the outlook there, it it it seems like with the additional GDP growth coupled with easing inflation and a fairly steady unemployment rate, this seems like a pretty optimistic outlook uh for next year. Um what's given rise to that. Is this an early bet on AI.Is there some sense of uh improve improving productivity out there. What's what's driving that. >> So a number of things are driving uh what's happening in the forecast.And I I would say if you if you look broadly at outside f ...

December 4, 2025 10:06 AM GMT China Economics | Asia Pacific What If China's Richest Province Lowers Its GDP Target? Guangdong's GDP growth has been 1.1ppt lower than national avg. per year since 2022. Even if Guangdong cuts its 2026 target to 4%, the national target could remain at 5%, but with policies only to provide a "cushion" to domestic demand, not a "lift". This keeps reflation on a slow burn. What's new? Investors we spoke to are discussing the possibility that Guangdong – one of China's richest pr ...

Market Overview - US markets are facing a futures trading outage due to a cooling issue at CME Group, impacting equities, treasuries, and commodities trading [2][4] - November has been a volatile month for equities, with significant moves in European tech, healthcare, and defense sectors, as fears of an AI bubble have emerged [5][6] - The European stock market managed to achieve gains in November, marking the fifth consecutive positive month for the stock 600 index [6] Sector Performance - The healthcare sector performed best in November, with notable gains from companies like Roche and Bayer, driven by strong trial data [6][7] - Roche's stock rose nearly 20% after a successful breast cancer drug trial, while Bayer had its best day since 2009 due to an anticoagulant drug study [7] - Conversely, tech stocks faced declines, with ASML down over 15% amid a broader selloff in AI-related stocks [8] AI and Investment Outlook - AI is expected to remain a structural growth theme through 2026, although concerns about overinvestment and electricity shortages could temper expectations [10][15] - Investment in data centers and the entire AI value chain is crucial, with approximately 35% of S&P 500 earnings being allocated to this area [14] - The market is anticipated to experience volatility in AI trends, but setbacks may present buying opportunities [15] Economic and Fiscal Policy - The US economy is projected to benefit from fiscal policies and central bank rate cuts, which are generally positive for market conditions [18][22] - Germany's growth forecast for 2026 is estimated at 1.3% to 1.5%, with expectations of improved market sentiment if fiscal policies are effectively implemented [27][30] Emerging Markets - The Indian stock market is showing strong growth potential, while China's growth is cooling but remains above 4% [43] - Asia is expected to attract substantial investment, with potential for better performance than Europe and the US in the coming year [45] Gold Market - Gold prices are forecasted to rise to $4,500, driven by demand from central banks and retail investors, as well as concerns over currency diversification [40][41]

Summary of Global FX Outlook 2026 Company and Industry - **Company**: J.P. Morgan - **Industry**: Foreign Exchange (FX) Market Key Points and Arguments 1. FX Outlook for 2026 - The outlook is bearish on the dollar in the first half of 2026 due to Fed asymmetries, twin deficits, and global recovery, but weakness is constrained by US resiliency [6][37][38] - Expected currency levels include EUR/USD at 1.20, USD/JPY at 164, and USD/CNY at 7.05 [6] 2. Drivers of FX Returns in 2025 - DM FX returns were influenced by external and fiscal balances, while global FX/EM returns were primarily driven by carry [5][8] - Liberation Day marked a significant weakening of the dollar, leading to a pro-risk environment characterized by strong performance in global/EM carry trades [5][10] 3. Lessons from 2025 - The dollar's strength was short-lived, with key risks materializing earlier than expected, leading to a shift from bullish to bearish sentiment [4][10] - Fiscal differentiation played a crucial role, with the Euro's rise linked to positive German fiscal developments [14] 4. Macro Landscape for 2026 - The macro environment is characterized by synchronized central bank inactivity, ongoing fiscal policy focus, and the impact of AI adoption [6][12] - The US policy mix remains a source of FX risk, with a focus on fiscal policy rather than tariffs [6][12] 5. AI and Market Dynamics - AI is expected to influence markets through financial and macro channels, potentially supporting US growth but also reviving de-dollarization discussions [29] - The macro effects of AI are still developing, with job displacement not yet materializing significantly in labor market data [29] 6. Fiscal Policy and Tariff Volatility - Fiscal policy surprises are anticipated, particularly in the US, with potential for stimulus surprises due to mid-term elections [28] - Tariff volatility is expected to decrease in 2026, although some tactical volatility may arise from IEEPA rulings [60][67] 7. Dollar's Carry Appeal - The dollar's nominal carry appeal remains high despite Fed easing, influencing asset owners' FX hedging decisions [50] - The dollar's performance is expected to be influenced by various macro scenarios, including potential Fed hikes in 2027 [49][50] 8. Risks and Scenarios for the Dollar - The dollar could weaken if US growth moderates sharply or if the Fed's reaction function turns dovish amid political pressures [48][39] - Conversely, a stronger US growth scenario could lead to a bullish outlook for the dollar [48][58] 9. Conclusion on FX Trends - The FX landscape heading into 2026 is marked by lower dispersion across style factors, indicating less conviction on differentiating currency returns [30] - High-yielding currencies are expected to perform better in a procyclical growth environment, while low-yielders may lag [6][37] Other Important Content - The relationship between equities and FX is complex, with significant implications for the AI equity-USD link in the upcoming year [15] - The evolving dollar smile indicates that US-RoW relative cyclical dynamics are becoming more influential on the dollar's performance [15]

Core Viewpoint - The current economic environment is characterized by a midcycle slowdown, which is seen as an opportunity for the Federal Reserve to lower interest rates, potentially benefiting risk assets [2][3][5]. Economic Indicators - Inflation expectations remain stable at 2.5%, while real yields are approximately 1.5% with a 4% Treasury rate, indicating weaker growth [2]. - Global leading indicators have been stable but below trend, suggesting a mega cap growth environment, with expectations for lower rates and fiscal support to boost global activity [5]. Market Dynamics - There is a shift in focus towards neglected market sectors, particularly value sectors compared to technology, which may require a catalyst such as policy easing and increased activity [6][7]. - The market is experiencing volatility, often linked to policy uncertainty, but a better risk environment with less volatility is anticipated as rate cuts and fiscal policies are expected to improve economic outcomes [9]. Future Outlook - The expectation is for a reacceleration towards trend-like growth rather than a new higher growth level, which should be conducive for risk assets [3]. - The potential for rate cuts and fiscal policy support globally is seen as a positive signal for the market, particularly towards the end of the year and into the next [8][10].