Core Insights - The Federal Reserve's recent meeting signals a cautious approach due to a weakening labor market, shifting focus from inflation to job growth [1][3][4] Labor Market - The labor market is showing signs of weakness, with job losses reported and initial jobless claims increasing [2][6][8] - Continuing claims have been rising for several quarters, indicating difficulties for individuals re-entering the workforce [7][8] - The impact of AI on productivity gains is being considered as a factor in workforce reductions [8] Consumer Health - The economy is experiencing a K-shaped recovery, where higher-income households are faring better than lower-income ones [10][12] - Retail sales during the Black Friday week were strong year-over-year, supported by rising home prices and the wealth effect [10] - Lower interest rates are allowing homeowners to access home equity, potentially unlocking trillions in consumer spending power [11][12] Market Outlook - The S&P 500 and other indices are reaching new highs, with expectations for a positive market environment heading into 2026 [13][15] - A rotation in investment focus is anticipated as cost of capital decreases, allowing for broader participation beyond the top-performing stocks [15][16] - Volatility is expected in the first half of 2026 due to uncertainties surrounding the midterm elections, but a strong economic and earnings growth outlook remains [18][19] Sector Preferences - Value stocks and international stocks are favored for 2026, particularly due to low energy prices and favorable fundamentals compared to U.S. large-cap stocks [20][21][22]