Today’s release of the December jobs report indicated broad-based job gains (travel and leisure, health care, government, and retail all up significantly). Recent CPI and PCE reports have shown that the Fed’s 2% inflation target is still a ways off. So, a softening jobs market has been the anticipated trigger for upcoming Fed rate cuts. Futures markets are now anticipating one (or possibly two) rate cuts in 2025, and the Fed on pause until June. 

Washington watch: Markets are awaiting clarity on fiscal and trade policies set to be implemented by the incoming administration: tariffs (real or negotiating tactic?), border policy (will it affect labor costs?), debt ceiling (will a long negotiation process bond issuance), and budgets (tax cuts and spending cuts are on the table—what will the net effect be on future deficits?). Stay tuned…

By David R. Pascale, Jr., Senior Vice President at George Smith Partners.