Economic Outlook - The economic outlook for 2026 presents mixed signals, with potential for a stronger economy than anticipated, particularly in the first half of the year [2] - The Federal Reserve is expected to maintain a pause on interest rates through most of the first half of next year, with a gradual increase in the probability of rate cuts by April or June [3][4] Consumer Behavior - Despite low consumer confidence and sentiment, there is a notable willingness to spend, supported by healthy balance sheets and low unemployment rates [6][8] - Tax refunds are expected to be larger in 2026, which may further encourage consumer spending [8] Corporate Investment - The introduction of accelerated depreciation at the corporate level is a significant tax change that could impact investment, although the extent of its awareness and utilization remains uncertain [10][11] - There is potential for this depreciation to stimulate investment beyond just AI, which has been a primary focus, indicating a broader opportunity for growth in various sectors [13]

Labor Market and Economic Outlook - The labor market remains stable, with jobless claims consistently between 200,000 and 240,000, indicating no overheating but also no deterioration, setting a positive outlook for 2026 [2] - A dovish rate environment could potentially reverse job losses attributed to technology [2][3] Federal Reserve and Inflation - The Federal Reserve is expected to lower the Fed funds rate to the low 3% range, supported by a favorable inflation report and downward pressure from housing costs on the CPI [3] - The CPI is projected to remain in the low 2% range, allowing for further rate reductions by the Fed [3] Fiscal Stimulus and Tax Policy - Changes in tax policy may provide fiscal stimulus, benefiting both individuals and corporations through larger refunds and lower tax rates [4] - Upcoming Supreme Court rulings regarding tariffs and potential government shutdowns could disrupt the economic landscape, impacting the effectiveness of fiscal policies [5][6] Balancing Risks and Tailwinds - The economic outlook is characterized by a balance of positive factors, such as tax refunds and lower gas prices, against negative factors like potential student loan payments resuming and expiring ACA subsidies [7] - The ACA subsidies are a significant political issue, with implications for the upcoming midterm elections, affecting healthcare costs and overall economic sentiment [8] Housing Market - Rental and home prices have stabilized, with no longer experiencing double-digit inflation, although they remain expensive for many Americans [9]

Market uncertainty is more than just Fed or domestic policy related; often, geopolitics can have an even bigger impact on the fate of the markets than either of those factors. While not as severe as t... ...

Group 1 - The dollar index (DXY00) fell by -0.09% on Monday, with modest losses ahead of the US Nov payrolls report [1] - The Dec Empire manufacturing survey unexpectedly contracted by -22.6 points to -3.9, weaker than the expected 10.0, indicating a dovish factor for Fed policy [3] - Fed Governor Stephen Miran stated that the Fed's policy stance is unnecessarily restrictive on the economy, citing a benign inflation outlook and labor-market warning signs [3][4] Group 2 - The Fed is boosting liquidity in the financial system by purchasing $40 billion a month in T-bills, which is putting additional pressure on the dollar [2] - Concerns about President Trump's potential appointment of a dovish Fed Chair are also negatively impacting the dollar, with Kevin Hassett seen as the most likely candidate [2] - The markets are currently pricing in a 22% chance that the FOMC will cut the fed funds target range by 25 basis points at the January 27-28 meeting [4] Group 3 - The EUR/USD rose by +0.09% to a 2.5-month high, supported by the weakness in the dollar and positive economic news from the Eurozone [5] - Eurozone's Oct industrial production rose by the most in 5 months, which is bullish for the euro [5] - Divergent central bank policies are providing support for the euro, as the Fed is expected to continue cutting interest rates while the ECB has likely finished its rate-cutting campaign [5]

Speaking of new jobs, Kevin Hasset versus Kevin Worsh. Do you have an opinion. >> I either I do not make personnel decisions.You know, I think I think I think Kevin is I think Kevin is a fantastic name. Uh, [laughter] you know, it's it's a great >> I'll ask another way. So, so Kevin Hassets, you know, there's been some he's been dogged lately by by being too close to Trump. There's some, you know, there reports that there's been some concern uh voiced to the president around the fact that I don't know, mayb ...

Core Viewpoint - The small-cap sector is showing significant momentum, with the S&P 500 up 17.1% and the Russell 2000 up 14.8%, indicating a potential for strong earnings growth in 2026 [1] Small Cap Performance - Small caps have experienced a profits recovery, with positive growth and upward revisions in earnings expectations [3][4] - Historical data suggests that after significant moves in the Russell 2000, there is a tendency for continued positive performance, with a 29% increase expected a year later [5] Investor Behavior - There is a notable increase in buying activity from various investor types, including retail and institutional investors, driven by the momentum in small caps [6] - The supportive Federal Reserve policy, including rate cuts, is beneficial for small-cap companies that are more leveraged [7] Market Conditions - The overall market sentiment has improved due to reduced uncertainty regarding tariffs and favorable earnings recovery [8][9] - M&A activity is increasing, particularly in the healthcare sector, which is positively impacting small-cap sentiment [9] Valuation Insights - While small caps are trading slightly above average valuation multiples, micro caps are trading 80% above average on sales multiples, indicating potential overvaluation in the micro-cap segment [11] - The expectation is for small caps to outperform larger caps, with earnings growth driving returns rather than price appreciation [16] Earnings Growth Expectations - Earnings growth for small caps is projected to be around 20%, compared to mid to low teens for large caps, suggesting better returns for small caps in the upcoming year [16]

Group 1: Dollar Index and Federal Reserve - The dollar index rose by +0.11% amid short covering ahead of the FOMC meeting, with expectations of a 25 bp cut in the federal funds target range [1][3] - The unexpected rise in October JOLTS job openings to 7.670 million, a 5-month high, indicates a stronger labor market, which is a hawkish factor for Fed policy [1][3] Group 2: Federal Reserve Chair Selection - President Trump plans to announce his selection for the new Fed Chair in early 2026, with Kevin Hassett seen as the likely candidate [2] - Hassett's nomination is viewed as bearish for the dollar due to his dovish stance and support for President Trump's approach to interest rate cuts [2] Group 3: Euro and German Trade Data - The euro fell by -0.05% against the dollar, influenced by the dollar's strength and weaker-than-expected German trade news [4] - German October exports rose by +0.1% m/m, below expectations of +0.2% m/m, while imports fell by -1.2% m/m, weaker than the anticipated -0.5% m/m [5] Group 4: Japanese Yen Performance - The yen declined by +0.60% against the dollar, reaching a 2-week low due to comments from BOJ Governor Ueda regarding bond yields [6] - The stronger-than-expected US October JOLTS job openings report contributed to higher T-note yields, further pressuring the yen [6]

Group 1: Economic Outlook - The biggest risk to businesses identified by CFOs is consumer demand, with 41% citing this concern [1][2] - CFOs show confidence in the economy, with over half believing the US will not face a recession in 2026, although more than a quarter anticipate a significant economic pullback in either the first or second half of the year [2] Group 2: Optimism and Sentiment - 68% of CFOs express optimism about the direction of the US economy, with nearly 5% indicating they are very optimistic, while just over a quarter are somewhat pessimistic [3] Group 3: Artificial Intelligence Investment - 68% of CFOs believe their companies are investing the right amount in artificial intelligence, but a quarter feel their companies are underinvesting [3] - The survey provides a nuanced perspective on the returns from AI investments, indicating varied expectations among CFOs [3]

US Economy - The US economy's current state is under discussion [1] - The impact of Fed policy on the economy is being analyzed [1] Investment Assets - Assets favored by @profstonge are being examined [1] Key Factors - The importance of AI and deportations in understanding the economy is highlighted [1] - The rise of communism among elite educated children is noted [1]

Joining me, Dan Clifton is Strategus Research Partners head of policy and Dave Zervos is Jeffrey's chief market strategist, a CNBC contributor, not Fed Chair, Dave, unless you have anything you want to, you know, tell us about your conversations over the weekend. >> I've got no comment on that. >> We can talk about all the other >> stuff. I understand. It is truly great to see you guys and I appreciate you being here today. Do Do you I know Dave, you've been pounding the table about this for a long time. yo ...