As inflation and a high cost of living continue to impact many Americans, employers are paying more attention to the financial stress of their employees. According to a CNBC report citing a survey by the Employee Benefit Research Institute (EBRI), employers are more concerned about their employees’ financial well-being (1). While in 2019 only 22% of employers said that their concern was at 9 or 10 on a scale of 1 to 10, in 2025, 48% rated their concern at 9 or 10. That’s also up from 2024, when 43% said t ...

Comments today from Kansas City Fed President Jeff Schmid were bearish for stocks and bonds when he said, "In my view, further rate cuts risk allowing high inflation to persist even longer," so the Fed should hold rates at a "somewhat restrictive" level.The annual benchmark revision to 2025 US payrolls subtracted -862,000 jobs, a larger revision than the -825,000 expected.US Jan nonfarm payrolls rose +130,000, stronger than expectations of +65,000 and the most in 13 months. The Jan unemployment rate unexpec ...

Summary of Key Points from the Conference Call Company/Industry Focus - The focus is on the Federal Reserve and its impact on financial markets, particularly in light of the nomination of Kevin Warsh as Chair of the Federal Reserve [8][9]. Core Insights and Arguments - **Fed's Footprint**: Warsh argues that the Fed's footprint in financial markets has become excessively large, affecting both monetary and fiscal policy boundaries [8]. - **Balance Sheet Strategy**: While shrinking the Fed's balance sheet is possible, it requires reducing bank demand for reserves. A rapid shift in the Fed's footprint is unlikely [9][10]. - **Quantitative Tightening (QT)**: From 2022 to 2025, the Fed's balance sheet decreased from approximately $9 trillion to $6.6 trillion, primarily through passive QT, which has implications for reserve levels and short-term interest rates [10][11]. - **Reserve Management**: Any significant reduction in the Fed's balance sheet would necessitate a corresponding decrease in bank demand for reserves, which is currently elevated due to post-2008 liquidity regulations [17]. - **Treasury Coordination**: A smaller Treasury General Account (TGA) could allow the Fed to reduce its securities holdings without impacting reserve balances. The TGA has increased to nearly $1 trillion post-financial crisis and COVID [21][22]. - **Future Quantitative Easing (QE)**: The likelihood of future QE is constrained, with the Fed likely to only consider asset purchases under recessionary conditions that push policy rates to the effective lower bound [25]. Additional Important Content - **Communication Strategy**: Warsh critiques the Fed's communication strategy, suggesting that reduced communication could lead to higher market volatility and greater reliance on economic data rather than explicit FOMC signals [27]. - **Tariff Rates**: The effective tariff rate on US imports is currently around 11%, with potential fluctuations based on ongoing trade negotiations and legal challenges regarding tariffs [28][29][30]. - **US GDP Tracking**: The tracking estimate for 4Q GDP growth is at 1.6%, with private final domestic purchases tracking at 2.4% [43][44]. - **Retail Sales Forecast**: A forecast of a 0.5% month-over-month increase in retail sales for December, supported by auto sales and retail control, is noted [55]. This summary encapsulates the critical insights and data points discussed in the conference call, focusing on the Federal Reserve's strategies and their implications for the financial markets and broader economy.

Summary of Key Points from the Conference Call Industry Overview - **Labor Market Outlook for 2026**: The labor market is expected to experience mixed conditions across five key sectors, influenced by tighter immigration policies and economic factors such as trade uncertainty and fiscal stimulus [1][14][53]. Core Insights and Arguments - **Job Growth Projections**: Average job growth is forecasted at 50,000 per month in 2026, with a breakeven job growth rate lowered to approximately 20,000 due to immigration restrictions [15][53]. - **Unemployment Rate**: The unemployment rate is anticipated to stabilize at 4.5% through the first half of 2026, with a slight decrease to 4.3% by year-end [15][53]. - **Sector Performance**: - **Positive Outlook**: - **Education & Health**: This sector is expected to continue driving job growth, adding over 100% of net job gains in 2025, with a projected addition of about 60,000 jobs per month [21][24][26]. - **Construction**: Anticipated recovery due to easing mortgage rates and reduced tariff uncertainty, with a rebound in both residential and non-residential construction [30][31]. - **Trade, Transport & Utilities**: Expected improvement in job growth as import recovery aligns with stronger consumer demand and economic growth [40][41]. - **Negative Outlook**: - **Professional & Business Services**: This sector is facing job losses due to AI adoption, which is automating lower-wage roles while maintaining wage growth for specialized positions [32][34]. - **Neutral Outlook**: - **Leisure & Hospitality**: Job growth is expected to be offset by tighter immigration policies despite potential improvements in consumer demand due to fiscal stimulus [36][38]. Additional Important Insights - **Inflation Trends**: Inflation is projected to remain above the Federal Reserve's target, driven by supply-side pressures from tariffs, with core PCE inflation expected to end 2026 at 2.9% [52]. - **Economic Growth Forecast**: The average GDP growth forecast for 2026 is set at 2.8%, above the consensus of 2.1%, driven by fiscal and monetary policy adjustments [51]. - **Labor Market Risks**: The labor market is facing risks from immigration restrictions and AI-driven job displacement, which could impact job growth and sector stability [53]. Conclusion The labor market outlook for 2026 presents a complex picture with varying sector performances influenced by immigration policies, economic recovery, and technological advancements. The overall sentiment indicates cautious optimism, particularly in sectors like education and health, while challenges persist in professional services due to automation.

Summary of Key Points from the Conference Call Industry Overview - **Global Economic Performance**: The global economy is exhibiting resilience, with real GDP growth forecasted at 3.3% for 2026, maintaining a steady trend despite various challenges [7][8][9]. Core Themes 1. **Resilient Economic Performance**: - Global real GDP growth has shown continued resilience, with developed markets expected to grow at 1.9% in 2026, while emerging markets are projected at 4.1% [9][10]. - The United States is forecasted to grow by 2.5% in 2026, up from 2.3% in 2025, indicating a positive outlook [9]. 2. **Tariffs Impacting Global Trade**: - Tariffs are reshaping global trade dynamics, with the effective tariff rate on goods imports in the US reaching 30% for China, while other countries like Vietnam and India have rates of 20% and 18% respectively [14][15]. - The US is experiencing a shift in import shares due to these tariffs, affecting trade relationships [16]. 3. **Subdued Global Inflation**: - Global inflation remains subdued, with the US being an exception. Core PCE inflation is projected at 2.8% for December 2025, while global core goods inflation is significantly lower [19][25]. - The inflation rate for core goods has increased from -0.1% in February 2025 to 1.4% in December 2025, indicating rising prices in certain categories [21][25]. 4. **Global Monetary Easing**: - Central banks are in the midst of an easing cycle, with significant policy rate changes expected across various countries in 2026 [29][30]. - The easing is aimed at supporting economic growth amidst high public debt levels and geopolitical stresses [12][13]. 5. **Advances in AI and Productivity**: - Investment in AI is projected to significantly boost productivity, with AI investment expected to reach $299 billion by Q3 2025, up from $162 billion in Q4 2024 [33]. - A survey indicates that a growing number of firms are adopting AI technologies, which is anticipated to enhance labor productivity in the coming years [32][34]. Risks and Challenges - **Economic Risks**: - Potential risks include retrenchment in AI investment, geopolitical tensions, a sharp deterioration in the US labor market, and the impact of tariffs on economic growth [12][42]. - High public debt levels in many countries are raising concerns about fiscal sustainability and market stability [42][43]. Additional Insights - **US Labor Market**: The labor market is showing signs of softening, with job creation slowing and unemployment rates remaining a concern [38][63]. - **Consumer Sentiment**: Consumer sentiment is fluctuating, influenced by economic policies and market conditions, which could impact spending behavior [54][69]. - **Housing Market**: The US housing market is experiencing persistent softness, with affordability issues affecting demand [66][67]. This summary encapsulates the key themes and insights from the conference call, highlighting the current state of the global economy, the impact of tariffs, inflation trends, and the potential of AI in driving productivity.

Core Viewpoint - Kansas City Fed President Jeffrey Schmid has reiterated his opposition to further interest-rate cuts, emphasizing that additional easing by the Federal Reserve could lead to persistently high inflation [1] Group 1 - Schmid's stance reflects a concern that lowering interest rates further may exacerbate inflationary pressures [1] - The statement indicates a cautious approach towards monetary policy, prioritizing inflation control over potential economic stimulus [1]

Summary of Key Points Core Viewpoint - The January jobs report revealed that 130,000 jobs were added, significantly exceeding the economist estimate of 65,000, while the unemployment rate decreased to 4.3% from 4.4% [6][10][9]. Group 1: Job Market Overview - The average estimate for non-farm payrolls was 65,000, which reflects an increase from December's 50,000 [2]. - The unemployment rate was predicted to remain steady at 4.4%, but it actually decreased to 4.3% [6][10]. - Average hourly earnings were expected to remain steady with a gain of 0.3% [2]. Group 2: Benchmark Revisions - The Bureau of Labor Statistics (BLS) revised previous job counts, indicating an overcount of 862,000 jobs from April 2024 to March 2025, down from an earlier estimate of 911,000 [4][7]. - This revision highlights the challenges in accurately measuring job growth due to varying survey methodologies [5][41]. Group 3: Sector Performance - The healthcare sector was the largest contributor, adding 82,000 jobs, with significant gains in ambulatory services, hospitals, and residential healthcare [54]. - Social assistance added 42,000 jobs, primarily from individual and family services [55]. - The construction sector saw a gain of 33,000 jobs, with specialty trade jobs contributing 25,000 [56]. Group 4: Job Losses - The federal government experienced a loss of 34,000 jobs, continuing a trend that has seen a total decline of 327,000 jobs since October 2024 [56]. - The financial activities sector lost 22,000 jobs, with a total decline of nearly 50,000 jobs since May 2025 [57]. Group 5: Market Reaction - Following the jobs report, stock futures rose, indicating a positive market reaction, particularly in the Russell 2000 and S&P 500 indices [46][51]. - Treasury yields increased, reflecting market adjustments to the stronger-than-expected job growth [47][48].

Economic Indicators - The latest jobs report showed 130,000 non-farm payrolls added, significantly better than expectations, with a minor revision of last month's payrolls from 50,000 to 48,000 [1] - The unemployment rate decreased to 4.3%, down from 4.6%, indicating a positive trend in the labor market despite an increase in labor force participation [2] - Private payrolls increased by 172,000, while manufacturing payrolls saw a slight increase of 5,000 after previous declines [2] Wage and Inflation Data - Hourly average earnings increased by 4% month-over-month and 3.7% year-over-year, which is a tenth lower than the previous month but higher than expectations [3] - The wage growth data suggests inflationary pressures may persist, impacting interest rate expectations [3] Interest Rate Outlook - The strong jobs report has led to a firming of bonds and a potential delay in anticipated Federal Reserve rate cuts, with the 10-year yield rising as a result [4][7] - There is a consensus that rate cuts may not occur in the next two meetings, as the labor market shows strength [8] Housing Market - Mortgage applications remained unchanged at a 30-year fixed rate of 6.21%, with overall housing market activity still sluggish [8][9] - Recent data indicates a decline in home purchases by 2.4%, while refinances increased by 1.2%, suggesting ongoing challenges in the housing sector [9][10]

Group 1 - The year 2024 is characterized by advancements in AI and a gradual reduction in inflation [1] - The year 2025 is expected to focus on tariffs, a resilient economy, and sustained interest in AI [1] - Roberts Berzins has over a decade of experience in financial management, aiding corporates in financial strategy and large-scale financing [1] Group 2 - Berzins has contributed to the institutionalization of the REIT framework in Latvia to enhance liquidity in pan-Baltic capital markets [1] - His policy work includes developing national SOE financing guidelines and frameworks for private capital in affordable housing [1] - Berzins holds a CFA Charter and an ESG investing certificate, and has experience with the Chicago Board of Trade [1]

Market Overview - The S&P 500 experienced a 19% decline from its February highs to late April lows in the previous year, followed by a 17% increase for the year [1] - The Dow Jones Industrial Average (DJIA) has seen significant volatility, with a unique structure comprising only 30 components, making it less stable compared to the S&P 500 [1] Key Events Impacting the Market - A major factor in the market's decline was the "Liberation Day" tariffs announced by former President Donald Trump, which threatened tariffs on nearly 100 nations, significantly impacting international trade [1] - The market rebounded quickly after the president backed down from these tariffs, highlighting the sensitivity of market reactions to geopolitical events [1] Sector-Specific Insights - The rise of the Dow from 25,000 to 50,000 was largely driven by financial and technology stocks, including major players like Goldman Sachs, Apple, Microsoft, Visa, Amex, and JPMorgan [1] - Concerns exist regarding the potential for a bubble in the AI sector, particularly affecting companies like Apple and Microsoft, which are heavily involved in this space [1] Economic Factors - Financial services companies are facing risks from inflation, which peaked at 8.5% in March 2022, leading to increased loan defaults [1] - Current economic conditions are described as "hot," with GDP growth forecasts suggesting continued strength in the economy [1] Geopolitical Considerations - Ongoing geopolitical instability, particularly related to the war in Ukraine, is contributing to inflation concerns, especially in the energy sector [1] - The U.S. military presence in the Middle East may further complicate market stability, as geopolitical tensions can lead to rapid market corrections [1]