The U.S. economy stumbled at the end of the year, new surveys showed, as rising prices tied to tariffs reduced customer demand and spurred businesses to further tighten the reins on hiring. ...

Core Viewpoint - The U.S. economy is expected to show resilience and potential growth in 2026, despite uncertainties in the labor market and inflation [3][4]. Economic Outlook - New York Fed President John C. Williams anticipates fewer economic fluctuations in the upcoming year, emphasizing the balance between price stability and low unemployment [4][5]. - The Federal Open Market Committee (FOMC) recently cut the benchmark Federal Funds Rate to a target range of approximately 3.50%–3.75%, marking the third quarter-percentage-point cut of the year [6][7]. Labor Market Insights - The labor market is showing signs of cooling, with job growth described as anemic and the unemployment rate steadily increasing [11]. - Williams noted that labor demand is softening more than supply, raising concerns about the overall health of the job market [11]. Monetary Policy Considerations - The FOMC's cautious approach to monetary policy has been influenced by tariff inflation and trade policy, leading to a "wait-and-see" strategy before implementing rate cuts [12]. - The recent interest rate cuts are aimed at supporting hiring while managing inflation risks, highlighting the delicate balance policymakers must maintain [10].

BlackRock Portfolio Manager of the Systemic Multi-Strategy Fund Jeff Rosenberg talks about the impact of the November US employment report on inflation and fixed income. He says markets reacted to the higher than expected unemployment rate. "If we look at November payrolls, 64,000 was pretty close to expectations and don't forget we will have another payroll number before the January meeting, that's going to make these other two much less important," he said on "Bloomberg Surveillance." ...

Labor Market Analysis - Initial market reaction to slightly higher than expected unemployment rate was quickly reassessed [1] - Labor force participation rate increase mitigates concerns about the unemployment rate [2] - November payroll number of 64,000 was close to expectations, and another payroll report before the January meeting will further diminish the importance of these figures [2] Consumer Spending and Earnings - Retail sales control group number was strong, indicating healthy consumer spending [3] - Average hourly earnings, while slightly weaker month-over-month, still show a 35% year-over-year increase, suggesting continued wage growth [3] - Real incomes and the wealth effect are supporting consumption, driving market movement [4] Monetary Policy and Bond Market - Potential Federal Reserve rate cuts, possibly starting in March, combined with fiscal stimulus, could lead to a sell-off at the long end of the yield curve [4] - Bond market signals that while the Fed controls the short end, the long end reacts to better growth, sticky inflation, and high capital demand, pushing up the term premium [5] - Average hourly earnings growth of 35% year-over-year is the slowest pace since May 2021, influencing CPI expectations [6] Inflation and Tariffs - Inflation data, particularly CPI, is crucial for assessing the Federal Reserve's policy pivot [6][7] - Tariff-related components are seen as drivers of underlying inflation stickiness, with the key question being whether this is a one-off event or an ongoing inflationary process [8] - There is a consensus that tariff inflation should be a one-off event, with wages being a more critical factor in the process of inflation [9] - Wage growth, while still present, is also showing signs of slowing down [9]

Group 1 - The market's initial reaction to the higher than expected unemployment rate may not be indicative of long-term trends, as upcoming payroll reports could overshadow this data [1][2] - The labor force participation rate has increased, suggesting that the employment situation may not be as dire as it seems, with November's job numbers aligning closely with expectations [2] - Retail sales data indicates strong performance, while average hourly earnings year-over-year remain high at 3.5%, despite a slight month-over-month decline [3][6] Group 2 - Real incomes and the wealth effect are supporting consumer spending, which could influence market movements, particularly if the Federal Reserve cuts rates in the near future [4] - The bond market is reacting to improved growth and persistent inflation, leading to a steepening yield curve, indicating a demand for capital and an increase in term premiums [5] - The upcoming Consumer Price Index (CPI) data is critical, as inflation remains a concern, particularly regarding the persistence of tariff-related inflation [6][8] Group 3 - There is a consensus that tariff-related inflation is likely a one-off event rather than a continuous inflationary process, with wage growth being a more significant factor in ongoing inflation trends [8][9] - Average hourly earnings, while still high, are growing at the slowest pace since May 2021, indicating potential easing in wage-driven inflation [6][9]

Experience suggests that labor market deterioration can occur quickly and non linearly and be difficult to reverse, in part because monetary policy lags several quarters. A quicker pace of easing policy, as I have advocated, would be appropriate, would appropriately move us closer to a neutral stance. Meanwhile, valuation concerns are bleeding into the emerging market space.MSCI's gauge of EM selling the most in three weeks. So let's get more market action now with Andrew Slimmon, Senior Portfolio Manager a ...

Experience suggests that labor market deterioration can occur quickly and non linearly and be difficult to reverse, in part because monetary policy lags several quarters. A quicker pace of easing policy, as I have advocated, would be appropriate, would appropriately move us closer to a neutral stance. Meanwhile, valuation concerns are bleeding into the emerging market space.MSCI's gauge of EM selling the most in three weeks. So let's get more market action now with Andrew Slimmon, Senior Portfolio Manager a ...

Joining us now for more on the markets and jobs, Joe Mato, president CIO at Newberger Berman. Joe, great to have you with us. Good >> to be here.Thank you. >> Um, it's interesting to get the jobs report now after the Fed decision. How important is this for you.>> I think the data is really important. I think the state of the labor market is one of the critical issues in terms of determining what the Fed path is going to be. And, you know, our sense is you're going to continue to see a grinding, weaker labor ...

Core Viewpoint - The state of the labor market is critical for determining the Federal Reserve's future actions, with expectations of a weaker labor market leading to a more dovish Fed stance than currently anticipated [2][3]. Economic Outlook - The expectation is for one more rate cut from the Fed, while the market is pricing in two or more cuts [4]. - Growth is expected to hold up better, and inflation is anticipated to improve, which will lead the Fed to adopt an accommodative policy [5]. - The fixed income market is projected to be less volatile in the coming year compared to the previous year, with a return to a carry trade keeping long-term rates stable [6]. Monetary Policy Divergence - There is a divergence in monetary policy globally, with some countries tightening while the US and China are expected to maintain accommodative policies [7]. - Recent Fed votes showed significant divergence among members regarding rate cuts, highlighting the importance of upcoming economic data [8]. Equity Market Expectations - The equity market outlook for 2026 is constructive, with expectations of increased nominal growth and strong earnings supported by fiscal stimulus and deregulation [8][9]. - Fiscal stimulus is expected to be front-loaded in the first half of 2026, which includes tax refunds and incentives for capital expenditures [10]. Fed Chair Impact - The credibility of the Fed chair is crucial for maintaining bond market stability, and the leadership of the new chair will significantly influence this credibility [12][14]. - All candidates for the Fed chair position are viewed as credible, and the independence of the Fed is seen as a gradual process rather than a binary state [13].

Group 1: Core Insights - Artificial intelligence is projected to remain central to investment strategies, with expectations of continued economic expansion and gains in the S&P 500 index [1][2] - Global GDP growth is estimated to be between 2.4% and 3.3%, indicating resilience in the global economy [2] Group 2: Stock Forecasts - Various brokerages have provided forecasts for the S&P 500 index in 2026, with targets ranging from 7,100 to 8,100 [3] - Notable targets include Citigroup at 7,700, Deutsche Bank at 8,000, and Oppenheimer Asset Management at 8,100 [3] Group 3: Real GDP Growth Estimates - Real GDP growth forecasts for the U.S. and other regions vary among brokerages, with Citigroup predicting 1.9% for the U.S. and Goldman Sachs at 2.3% [4] - Morgan Stanley projects a 3.2% growth rate globally, with 1.8% for the U.S. [4]