Market Reaction - US stock futures declined early on Monday, with Dow Jones Industrial Average futures falling 0.6%, S&P 500 futures down approximately 0.8%, and Nasdaq 100 futures leading the decline with a 1.1% drop [1] - The dollar experienced its largest decline in almost three weeks, dropping 0.3% as concerns over political interference in monetary policy resurfaced due to the Federal Reserve facing grand jury subpoenas [5][6] Federal Reserve Independence - Federal Reserve Chair Jerome Powell revealed that the Department of Justice had subpoenaed the Fed, suggesting a direct attack on the Fed's independence regarding interest rate decisions [2] - Analysts noted that the question of Fed independence is now a significant concern, with potential reevaluation at upcoming meetings [10] - Some analysts believe that while the situation is serious, it may not lead to substantial changes in monetary policy, as the Federal Open Market Committee (FOMC) is likely to maintain its stance [11][12] Economic Outlook - The market is preparing for the upcoming consumer inflation report, which is expected to influence the Fed's future decisions [2] - Current data indicates a 95% probability that the Federal Reserve will keep interest rates unchanged for the time being [3] Geopolitical Factors - Geopolitical developments, including tensions involving Iran and Cuba, are also contributing to market uncertainty [4] - Investors are focusing on the upcoming earnings season and key inflation data, with major banks like JPMorgan Chase, Bank of America, and Goldman Sachs set to report soon [4]

Market Overview - US stock futures declined, with Dow Jones Industrial Average futures down 0.7%, S&P 500 futures down 0.6%, and Nasdaq 100 futures down approximately 0.9% amid concerns over Federal Reserve independence following a criminal investigation into Chair Jerome Powell [1][2] - The dollar fell by 0.3%, marking its largest drop in nearly three weeks, as the Federal Reserve faced grand jury subpoenas from the Justice Department [17][18] Federal Reserve and Political Pressure - Powell stated that the Justice Department's subpoena is an escalation of President Trump's campaign to pressure the Fed into cutting interest rates, emphasizing that the Fed sets rates based on public service rather than presidential preferences [2][3] - Concerns over political interference in monetary policy have intensified, contributing to a rise in gold prices and a decline in the dollar [4] Upcoming Economic Data - Investors are preparing for updates on inflation, with consumer inflation data due on Tuesday, and producer prices and retail sales scheduled for Wednesday [5][8] - The market is largely pricing in no rate cut from the Fed this month, following a December jobs report indicating a cooling labor market without a sharp economic slowdown [5] Corporate Earnings and Market Reactions - Major banks are set to report earnings this week, with expectations of a record year for the industry and a projected 8.3% annual profit growth for S&P 500 firms [9][10] - Capital One shares fell 10% after Trump warned credit card issuers they would be in violation of the law if they did not cap interest rates at 10% [7][14] Geopolitical Developments - Markets are also monitoring unrest in Iran and potential military action from the US, which has led to fluctuations in oil prices as investors assess the impact on crude supply [6]

Core Viewpoint - The Federal Reserve is expected to lower interest rates aggressively in early 2026 due to labor market weakness, inflation uncertainty, and political pressure, according to Moody's Analytics chief economist Mark Zandi [1][2]. Group 1: Labor Market and Economic Conditions - The job market is still flagging, particularly in early 2026, which will lead to insufficient job growth and rising unemployment, prompting the Fed to cut rates [2]. - Zandi anticipates three cuts of a quarter percentage point each before mid-year 2026, contrasting with market expectations of only two cuts later in the year [1][3]. Group 2: Federal Reserve's Outlook - Current market pricing indicates a first cut not until at least April 2026, with a second cut likely around September, while Fed officials are even more cautious, expecting only one cut throughout the year [3][4]. - The Fed's individual officials' expectations suggest a tepid pace for any potential reductions, with recent minutes indicating that the decision for a cut was a close call [4]. Group 3: Political Influence - The potential for President Trump to reshape the Fed's hierarchy adds uncertainty, as he currently has three appointees on the board and is likely to appoint another loyalist soon [5][6]. - Trump's advocacy for lower interest rates may lead to increased political pressure on the Fed, especially with midterm congressional elections approaching [7].

Bank of America CEO Brian Moynihan pointed out that the U.S. economy is much bigger than the Federal Reserve, which shouldn’t merit so much attention. In an interview with CBS News’ Face the Nation that aired Sunday, he was asked about President Donald Trump’s upcoming nomination of a new Fed chair to replace Jerome Powell and what it means for consumers. “There’s too much fascination with the Fed,” Moynihan said. The economy is driven by the private sector, which includes small, medium, and large compa ...

Core Viewpoint - The race for the next chairman of the Federal Reserve is highly competitive, primarily between Kevin Hassett and Kevin Warsh, with fluctuating odds in prediction markets indicating a close contest for the nomination. Group 1: Candidates and Odds - Kevin Hassett has regained the lead in prediction markets, with approximately 53% of bettors favoring him for the nomination on Kalshi as of Tuesday afternoon, while Kevin Warsh has about 34% support [2] - On Polymarket, Hassett's odds stand at 54%, compared to Warsh's 36%, with other candidates like Christopher Waller and Scott Bessent receiving 6% and 2% odds, respectively [3] - Hassett's odds had previously peaked at 77% on Kalshi, while Warsh's were as low as 10%, indicating a significant shift in market sentiment [4] Group 2: Concerns and Opinions - Wall Street executives and corporate leaders have expressed concerns that Hassett may align too closely with President Trump, potentially compromising the Fed's independence [5] - Hassett has emphasized that interest-rate decisions should be based on factual data and stated that Trump's opinions would not influence his decisions as Fed chairman, although he acknowledges Trump's strong views [7] - The competition between Hassett and Warsh has led to the cancellation of interviews with other candidates, indicating the high stakes involved in the selection process [8]

National Economic Council Director Kevin Hassett, one of the finalists for the Federal Reserve chair job, showed support Tuesday for central bank independence.With President Donald Trump apparently in the final days of picking a successor to Jerome Powell at the Fed, Hassett declined in a CNBC interview to directly address his own candidacy but said forging consensus is an important part of the job."The Federal Reserve's independence is really, really important, and the voices of the other people at the [Fe ...

Core Viewpoint - The potential nominee for Federal Reserve chair, Kevin Hassett, indicated that while he would present President Trump's views on interest rates to Fed officials, those officials are not obligated to consider them in their decision-making process [1][2]. Group 1: Federal Reserve Chair Nomination - Trump is reportedly conducting final interviews for potential replacements for current Fed chair Jerome Powell, with a strong emphasis on appointing someone who will significantly lower the central bank's key interest rate from approximately 3.6% to 1% or lower [2][4]. - Kevin Warsh, a former Fed governor, is currently favored by Trump for the position, although Hassett has also been hinted as a potential choice [4]. Group 2: Independence of the Federal Reserve - Historically, U.S. presidents have refrained from publicly commenting on Fed decisions, as a politically independent Fed is believed to be more effective in managing inflation [3]. - Hassett emphasized the importance of the Fed's independence, stating that it ultimately operates as a committee that votes on decisions [5].

Democratic Senator Elizabeth Warren labeled President Donald Trump's top contenders to lead the Federal Reserve "sock puppets" on Thursday, singling out Kevin Hassett as someone who would not be able to maintain the U.S. central bank's independence. ...

Federal Reserve and Interest Rates - The Federal Reserve has lowered interest rates, which is seen as beneficial for families in terms of mortgage, car loans, and credit card payments [3][4] - The decision to lower interest rates was influenced by concerns over the job market and potential negative growth in labor availability [4][5] - There are ongoing economic pressures, with indicators suggesting instability, despite the Fed's actions [5] Political Influence and Fed Independence - The current economic chaos, attributed to tariffs imposed by the president, has delayed more aggressive interest rate cuts by the Fed [6] - The independence of the Federal Reserve is emphasized as crucial for effective economic management, with bipartisan agreement on this principle [7][8] - Concerns are raised about the potential appointment of a Fed chairman who may be influenced by the president, undermining the Fed's independence [9][10] Candidates for Fed Chairmanship - The leading candidates for the next Fed chairman include Kevin Worsh, Kevin Hassett, and Waller, with skepticism about their independence from presidential influence [9] - There is a call for Republicans to uphold the principle of an independent Fed, questioning their willingness to resist presidential control [10][11]

Economic Outlook & GDP Growth - Trend growth in GDP for 2026 is expected to be decent, with a slight pickup from this year's slightly below-trend performance [1][2] - AI spending is estimated to be about 1.5% of GDP, contributing about a quarter of the GDP growth [6][7] - Government shutdown is expected to reduce GDP growth by 1-1.5% [30] - GDP is running at about 4.2% for the third quarter and was about 4% in the second quarter [25] Inflation & Monetary Policy - Inflation is expected to be a bit elevated in Q1, with potential Fed cuts after the next Fed chair takes position [4] - The Fed is likely to cut rates in December, then potentially pause as growth picks up [3] - The Fed may implement two more cuts after December, but further dovish policy may be difficult to push through due to differing opinions among members [4][15] - Rates are closer to what FOMC members view as neutral, making further cuts more difficult [14] Labor Market - Job growth is expected to average around 80,000 for 2026, compared to the recent average closer to 60,000-70,000 [19] - A pickup in cyclical areas of the economy like retail, finance, leisure, and manufacturing is expected to support job growth [18] - September jobs report showed payrolls rose by 119,000 a month, though the unemployment rate ticked up to 4.4% [21] AI Impact - AI is considered an important but not game-changing factor in economic growth [7] - Concerns exist about overinvestment in AI, but it doesn't appear to be in bubble territory yet [9][10] - Companies are expected to continue investing in AI to avoid being left behind [11][12] Federal Reserve Leadership - Kevin Hasset is a front runner to be the next Fed chair [1] - Even with a more dovish Fed chair, getting committee consensus on policy may be difficult, especially with elevated inflation [13][14] - Fed independence is a lingering concern, but recent voting patterns suggest members are coming together [15][16]