Core Insights - Inflation is significantly impacting US incomes, comparable to the 2008 Great Recession, which may reduce consumer spending power ahead of the holiday shopping season [1] - The median income growth for individuals aged 25 to 54 is only 1.6% when adjusted for inflation, indicating weak income growth [1][10] - The unemployment rate increased to 4.4% in September, the highest since October 2021, affecting income gains for young workers [6][13] Income and Spending Trends - Households are ending the year with stagnant income growth and flat bank balances after adjusting for inflation [2] - Approximately half of workers aged 50 to 54 have experienced an earnings loss when accounting for inflation [8] - Consumers are facing a holiday season with limited budgets due to low income growth, despite strong stock market gains that are unevenly distributed [11] Inflation and Economic Indicators - US inflation rose by 3% year-on-year in September, the fastest rate since January, while wholesale inflation increased by only 0.3% [12][14] - Retail sales saw a nominal increase of 0.2% in September, but actual spending fell by 0.1% due to a 0.3% rise in prices [12] - Consumer confidence dropped to 88.7 in November, the lowest since April, with a significant decline in perceptions of business conditions and job availability [14]

Core Insights - The race for the next Federal Reserve chair is competitive, with Kevin Hassett, Kevin Warsh, and Chris Waller as leading candidates, all of whom have shown a focus on price stability while also responding to President Trump's demands for rate cuts [2][3][5][6] Candidate Profiles - **Kevin Hassett**: Currently the National Economic Council Director, he emphasizes Fed independence and sound monetary policies. He has criticized the Fed's past decisions and supports a significant rate cut in December [7][10][11] - **Kevin Warsh**: A former Fed governor, he has been critical of the Fed's current policies and argues for a reevaluation of inflation forecasts, suggesting that AI will positively impact productivity and reduce inflation [20][21][23] - **Chris Waller**: Currently a Fed governor, he supports rate cuts due to concerns about the job market and believes inflation is close to the Fed's target of 2% [12][13][14] Market Implications - The potential nomination of a candidate inclined towards lower interest rates could lead to a more dovish Federal Reserve, which may influence market expectations and economic conditions [26][27] - The emphasis on loyalty to President Trump as a criterion for the Fed chair raises concerns about the independence of the central bank, which could have significant implications for monetary policy and market reactions [27][28]

Economic Outlook - The report suggests a potential slowdown in third-quarter growth due to a miss on the retail side, leading to lower consumer spending expectations for the fourth quarter [2] - The market anticipates the Fed to cut rates due to concerns about economic weakness, outweighing inflation concerns [3] - Consumer confidence data indicates increasing concern about the job market, with more people reporting difficulty finding jobs [5][6] - A survey indicates that 57% of respondents anticipate a weaker economy in 2026, potentially impacting holiday spending [7] - Consumers are expected to reduce spending and prioritize needs over wants during the holiday season, potentially leading to a softer season compared to the previous year [8][9] Federal Reserve (The Fed) - The market speculates that the White House may be considering Kevin Hasset as a potential Fed chair, which could influence interest rate policy [10][11][12][13][14] - The president may prefer a Fed chair who is more inclined to lower interest rates [14] - The bond market's reaction to the potential Fed chair appointment is muted, while the dollar's reaction suggests anticipation of a more dovish Fed [14][15]

December. >> Yes, definitely in the cards. Um >> on the cards or erasing certainty now.>> Uh given the statement by Waller just now and Marley, it's getting very close to near certain. >> Yeah. >> And one factor to consider is that once the market probabilities are this high, >> yeah, >> Fed follows through >> and December's the blackout, sorry, Friday is the blackout period for the December meeting.>> So they have a few more days to correct course. >> Yeah. Um otherwise if the probability is 70 80 >> let's ...

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Core Viewpoint - Kevin Hassett is emerging as a frontrunner to be the next Chair of the Federal Reserve, aligning closely with President Trump's economic views and interest rate policies [1][74]. Group 1: Candidate Profile - Kevin Hassett is seen as aligned with President Trump's views on the economy and monetary policy, advocating for interest rate cuts [2][3]. - He has criticized the Federal Reserve for its handling of inflation during the pandemic, suggesting a need for operational changes [3][6]. - Hassett's potential appointment could reshape the Federal Reserve's approach to monetary policy, focusing on job creation and reducing interest rates [5][7]. Group 2: Selection Process - The selection process for the next Fed Chair is being led by Treasury Secretary Scott Bessent, with interviews ongoing for five candidates [4][10]. - An announcement regarding the new Fed Chair could come by Christmas, with the current Chair, Jerome Powell, remaining in position until May 2026 [11][12]. Group 3: Market Reactions - Following the news of Hassett's frontrunner status, equity markets reacted positively, with the S&P 500 rising by 0.8% and the Russell 2000 gaining over 2% [78]. - The two-year yield, sensitive to Fed policy, dropped to approximately 3.46%, indicating market expectations of potential interest rate cuts [78]. Group 4: Economic Implications - The next Fed Chair could adopt a narrative prioritizing job growth over inflation concerns, depending on economic conditions [7][8]. - If inflation trends towards the Fed's 2% target, there may be opportunities to lower interest rates, but persistent inflation could complicate this [8][9]. - The economic outlook remains uncertain, with potential fiscal stimulus from tax cuts expected to impact growth and inflation dynamics in 2026 [25][26].

Core Insights - Retail sales in the U.S. slowed in September, indicating a potential waning of consumer momentum as the economy heads into the fourth quarter [2][7] - The slowdown in retail sales could influence the Federal Reserve's decision on interest rates, with some economists suggesting it may lead to a rate cut in December [3][4] Economic Implications - Cooling consumer spending may signal a broader economic slowdown, which could affect growth prospects and the Fed's next interest rate decision [3][4] - The weaker retail sales report may indicate a drag on the economy, potentially leading to weaker third-quarter GDP results [8] Consumer Behavior - Certain retail categories, such as healthcare, furniture, and dining, saw sales increases, while categories like sporting goods, clothing, electronics, and online retail experienced declines compared to August [5] - Financial pressures on middle- and lower-income households are leading consumers to become more value-based shoppers [6] Federal Reserve Considerations - Federal Reserve officials are divided on whether to cut rates, with some citing high inflation as a reason to maintain current rates, while others point to a softening job market as justification for cuts [4] - The data released in September, which was delayed due to a government shutdown, provided clearer insights into the economy for Fed officials [2][7]

This story was originally published on CFO Dive. To receive daily news and insights, subscribe to our free daily CFO Dive newsletter. Dive Brief: Consumer confidence slumped in November to the lowest level since the imposition of sweeping U.S. tariffs in April as inflation persisted well above the Federal Reserve’s 2% target and reports of a pullback in hiring added to signs of a cooling labor market. The Consumer Confidence Index fell by 6.8 points this month to 88.7, with gauges of the labor market, b ...

Core Viewpoint - Treasury Secretary Scott Bessent has narrowed down candidates to replace Federal Reserve Chairman Jerome Powell, with a decision expected by Christmas, although Powell is likely to complete his term ending May 15, 2026 [1][2]. Candidate Summaries - **Michelle Bowman**: Federal Reserve Governor and vice chair for supervision, she was one of the first dissenters favoring rate cuts during the July meeting when rates were left unchanged [6]. - **Kevin Hassett**: Director of the National Economic Council, previously served as a senior advisor and chairman of the Council of Economic Advisers. He noted a less-than-expected 3% annual increase in consumer inflation, suggesting costs are falling [9][10]. - **Rick Rieder**: Chief investment officer of global fixed income at BlackRock, overseeing $3.2 trillion in customer assets. He expressed that being considered for the Fed chair would be a significant honor and emphasized the importance of monetary policy [10][11]. - **Christopher Waller**: Another dissenting Federal Reserve member who plans to advocate for a rate cut in December, expressing concerns about the weak labor market despite inflation not being a major issue [14][15]. - **Kevin Warsh**: Former Federal Reserve governor and critic of the central bank's forecasting abilities, particularly regarding inflation and economic growth [16][17].

Market Overview - The US stock market showed mixed signals on November 25, with the Dow Jones up 0.6%, the S&P 500 flat, and the Nasdaq down 0.3%, indicating ongoing concerns about high valuations in AI and tech stocks [1] - Despite a tech rally on Monday, all three indexes remain on track for monthly losses as investors weigh retail sales, inflation data, and the Federal Reserve's next move [1] Technology Sector - Tech shares led market volatility, with Nvidia shares falling over 4% after reports that Meta plans to invest billions in AI chips from Google, signaling increased competition [2][7] - Other tech giants like Alphabet and Alibaba performed well, supported by strong earnings and AI-driven growth momentum, which reassured investors about their resilience amid rising competition [8] Federal Reserve and Rate Cut Expectations - The market is pricing in over an 80% chance of a Fed rate cut at the December meeting, with Fed Governor Chris Waller advocating for easing to support economic growth [3][10] - A potential rate cut is viewed as beneficial for growth stocks, particularly in technology and consumer discretionary sectors, although uncertainty remains regarding the timing and scope of such a move [12] Retail Sales and Consumer Spending - Retail sales data presents a mixed picture, with September sales rising only 0.2%, below forecasts, while October data showed a rebound with sales excluding autos and gas up 0.6% month-over-month and 5% year-over-year, driven by online and food store sales [4][14] - The Producer Price Index (PPI) increased by 0.3%, raising the annual rate to 2.7%, indicating moderate but persistent price pressures [15] Earnings Season - The earnings season is gaining attention, with Kohl's and Best Buy reporting this week, providing insights into consumer demand ahead of the holiday season [5][21] - Investors are closely monitoring these results to gauge spending trends and assess whether consumers are holding back [5] Energy Market - Energy markets experienced significant declines, with Brent crude falling 1.9% to below $62 per barrel and WTI dropping 2% to below $58, both down nearly 5% over the past five sessions [17][22] - Natural gas prices also fell, with futures down 5.9% to trade under $4.40 per MMBtu, influenced by peace-talk progress and strong US production [19]