Broad Range of Neutral
Fed: We are well positioned to determine the extent and timing of additional adjustments
Summary: The Fed cut rates again last week and Jerome Powll suggested that they will probably be in a wait and see position for the foreseeable future. Powell is on his way out though so his view will matter less and less going forward. Consumers continue to be relatively resilient. The debate over an AI bubble continues.
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Catalyst Watch
Below, we highlight key catalysts identified through earnings calls and management commentary and that we believe could meaningfully shape market expectations in ways that may create both risk and opportunity.
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Macro
The Fed lowered rates again
“We did some cutting. And then we paused for a while to work our way through what was happening in the middle of the year. And then we resumed cuts in September. And we’ve cut now three. We now cut a total of 175 basis points. And, as I mentioned, you know, we feel like where we’re positioned now puts – we’re well positioned to wait and see how the economy evolves from here.” – Fed Chair Jerome Powell
Powell now sees rates as within the “broad range of neutral”
“Yes, the adjustments since September bring our policy within a broad range of estimates of neutral. And, as we noted in our statement today, we are well positioned to determine the extent and timing of additional adjustments based on the incoming data and the evolving outlook and the balance of risks.” – Fed Chair Jerome Powell
There’s some difference in opinion on where to go next
“Everyone around the table at the FOMC agrees that inflation is too high and we want it to come down, and agrees that the labor market has softened and that there is further risk. Everyone agrees on that. Where the difference is, is how do you weight those risks and what does your forecast look like and where do -- ultimately, where do you think the bigger risk is?” – Fed Chair Jerome Powell
Powell will be gone soon though
“I think you have Kevin and Kevin. They’re both - I think the two Kevins are great. I don’t think he should do exactly what we say. But certainly we’re—I’m a smart voice and should be listened to...They don’t have to follow what I say. But we’re going to be choosing a new Fed person in the pretty near future.” – U.S. President Donald Trump
Consumers have been terrific
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But the environment may be getting more fragile
“And so as we look at the data right now, the data looks good, consumers look resilient, small businesses are resilient, but there’s less capacity to weather an incremental stress because cash buffers have normalized and price levels absolutely are high even as inflation has come down at least. So I would just say that I would characterize the environment as being a little bit more fragile.” – JPMorgan Chase & Co. (JPM 0.00%↑) Head of Strategic Growth Marianne Lake
As go labor markets, so go consumers
“And as the labor market goes, typically so will consumers, our outlook for next year would be for unemployment to grind a little higher and therefore, that to be reflected in consumption. And from there, it will depend. We could continue to have a resilient consumer for a few months. It could be for longer, but there’s less capacity to withstand stress.” – JPMorgan Chase & Co. (JPM 0.00%↑) Head of Strategic Growth Marianne Lake
GDP growth is expected to be moderate in 2026
“I think generally we’re likely to see that the fourth quarter GDP growth has slowed a bit. That my expectation, our expectation is that 2026 probably has a continued slowing of growth at a moderate level.” – Citigroup (C 0.00%↑) CFO Mark Mason
“If you look across the whole platform in the year [credit and debit spend] is up 4.3% in November this year versus November last year. If you think about that in a historical context, that’s consistent with the 2% plus growth rate in the economy.” – Bank of America (BAC 0.00%↑) CEO Brian Moynihan
Financials
Capital markets are doing well
“And then on the capital market side, all of you participate in that. I think as you look, we think it’s a constructive time and deals are getting done and people are out there bidding on stuff; it’s all pretty good.” – Bank of America (BAC 0.00%↑) CEO Brian Moynihan
M&A activity is near-record levels
“I think David and I have been pretty consistent over the totality of 2025 in that we were seeing high levels of client engagement coming through our franchise, perhaps even when others were noting uncertainty and lack of CEO confidence...On an announced basis for M&A, I think we will probably have the second biggest year in history. We’ve advised on over $1.5 trillion of activity so far this year. We feel very, very good about how the franchise is positioned heading into 2026.” – Goldman Sachs Group (GS 0.00%↑) CFO Denis Coleman
Recent turbulence has impacted IPOs more than M&A
“I would not say that we had significant disruption to the M&A business given government shutdown. I don’t even think it was really impacted that much as far back as Liberation Day. I think government shutdown is more relevant to things like equity underwriting, IPO calendar, and some of the other activity, which sort of had to take a pause for a period of time. I think that’s really just a Q4 issue. I think the overall outlook and expectation for equity underwriting calendar remains very positive, and we should continue to see good levels of activity into 2026.” – Goldman Sachs Group (GS 0.00%↑) CFO Denis Coleman
“The capital markets are wide open to some extent. We’re seeing a lot of investment-grade activity. We’re seeing good LevFin activity. Despite the shutdown, equity volumes and IPO volumes have held up.” – Citigroup (C 0.00%↑) CFO Mark Mason
Middle-market M&A has been picking up
“And the other thing that we’re just recently seeing, which is a bit of a change, and this is just this quarter, is we’re starting to see increased activity with strategic middle market buyers and M&A. They’ve really been on the sidelines all year because of tariffs. You know, private equity was transacting, and large deals were getting transacted. We haven’t seen a lot of bank deal funding for middle market M&A, and that’s kinda just picked up this quarter, which bodes well for next year.” – PNC Financial Services Group (PNC 0.00%↑) CEO William Demchak
Credit quality has been strong
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There are no signs of softening
“We haven’t seen anything at this point that would lead us to believe that there’s any sort of credit cycle or any softening. We watch it very, very carefully.” – American Express (AXP 0.00%↑) CEO Stephen Squeri
“An early leading indicator would be look at those subprime auto borrowers who also have a credit card. And are we seeing elevated delinquencies there? And we are not yet.” – JPMorgan Chase & Co (JPM 0.00%↑) Head of Strategic Growth Marianne Lake
CRE showing early signs of life
“And now commercial real estate, I would say, after years of it kind of bump along at the same level, you’re seeing some life to it in well-structured deals. But that’s a to do for next year. Right now, you’re just seeing the start of it.” – Bank of America (BAC 0.00%↑) CEO Brian Moynihan
Consumer
The holiday season has gotten off to a strong start
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Costco’s growth remains solid
“Net sales for the first quarter were $65.98 billion, an increase of 8.2% from $60.99 million in the first quarter last year. Comparable sales were 6.4%...when we look at what we’re seeing with the overall sort of patterns of how members are shopping and how they’re behaving, we’ve seen a very sort of consistent pattern and a consistency in the results.” – Costco Wholesale (COST 0.00%↑) CFO Gary Millerchip
The affluent consumer continues to spend
“And I think it’s not going to surprise anybody that leisure has been particularly strong in the luxury and in the premium sectors as you see higher income travelers continue to spend and feel confident about their net worth. The stock market has continued to be strong. You’ve seen interest rates a little bit lower. So as people think about their borrowings at the margin, perhaps a little bit more comfortable.” – JPMorgan Chase & Co. (JPM 0.00%↑) Head of Strategic Growth Marianne Lake
“Our consumer, as you know, tends to be at the higher income deciles, and those consumers continue to do well. So we certainly broadly feel good about where the consumer is.“ – The Walt Disney (DIS 0.00%↑) CFO Hugh Johnston
Lower-income consumers continue to show signs of pressure
“Despite the fact that the consumer macros in general, continue to be tepid, potentially still trending down a little bit, particularly for the bottom half of the income pyramid, whether that’s the developed markets or a number of the emerging markets.” – The Coca-Cola (KO 0.00%↑) CEO James Quincey
“We have seen the lower-end consumer be a little bit softer. That’s been pretty persistent throughout this year. And we’ve seen a little bit more strength in the middle and upper tiers.” – Restaurant Brands International (QSR 0.00%↑) CEO Joshua Kobza
“You know, we are a very middle-income, lower-income, main street America sort of consumer base in our portfolio. We also skew retail and a little bit more discretionary. And when you look at that, we continue to see consumers spending less, trading down, average order values down, and just a shifting in that space. That has persisted.“ – PayPal (PYPL 0.00%↑) CFO Jamie Miller
Lululemon’s customers are trading down
“In terms of the flow-through and what we’ve seen in the overall marketplace, we continue to see sort of pressure in the apparel space. We held share in premium athletic and lost some slight share in the performance apparel as we see guest behavior and trading down.” – Lululemon athletica Inc. (LULU 0.00%↑) CEO Calvin McDonald
Income bifurcation isn’t getting worse though
“Yes, there is a divergence in spend growth between higher income customers and lower-income customers, but that relative level of spend growth is a sort of relatively normal trend. And so it’s not diverging nor is it narrowing? It looks pretty normal. And so I don’t want to discount their concerns. They are real. And -- but the data is good for right now.” – JPMorgan Chase & Co. (JPM 0.00%↑) Head of Strategic Growth Marianne Lake
“Here’s still this divergence between the more affluent, the less affluent. Nothing is new there. Nothing has changed. It certainly isn’t spreading to any real extent. And spend patterns seem very, very consistent across age groups, across geographies and things like that.” – Wells Fargo & Company (WFC 0.00%↑) CEO Charles Scharf
Low-income spend is still growing
“The way they’re spending the money has a little bit of the elements of the K economy to it, not as much as people think if you actually watch what’s happened over the last few months in 3 terciles, the bottom terciles has been growing at a slower rate, still growing.” – Bank of America (BAC 0.00%↑) CEO Brian Moynihan
Technology
The AI bubble debate continues
“And so yes, there is significant investment. I mean, I think all of the CapEx forecasts that have increased over the last three to six months have certainly shown that there is confidence that those investments are going to lead to better capabilities going forward. And so yeah, from a standpoint of, do we see a bubble, we don’t see a bubble. What we do see is very well-capitalized companies, companies that have significant resources, using those resources at this point in time because it’s such a special point in time in terms of AI learning and AI capabilities.” – Advanced Micro Devices (AMD 0.00%↑) CEO Lisa Su
Google’s TPUs are gaining market share
“These XPUs, I may add, are not only being used to train and inference internal workloads by our customers, the same XPUs in some situations have been extended externally to other LLM peers, best exemplified at Google, where the TPUs use in creating Gemini, have also been used for AI cloud computing by Apple, Coherent and SSI as an example. And the scale at which we see this happening could be significant. And as you are aware, last quarter, Q3 ‘25, we received a $10 billion order to sell the latest TPU Ironwood racks to Anthropic. And this was our fourth customer that we mentioned. And in this quarter Q4, we received an additional $11 billion order from the same customer for delivery in late 2026.” – Broadcom (AVGO 0.00%↑) CEO Hock Tan
But many players don’t think they will ever displace GPUs
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Oracle is full speed ahead on GPU deployment
“In the last quarter, we handed over close to 400 megawatts of data center capacity to our customers. We also delivered 50% more GPU capacity this quarter than Q1...In terms of the results for Q2, we had another excellent quarter of execution. Remaining performance obligations, or RPO, ended the quarter at $523.3 billion, up 433% from last year and up $68 billion since the end of August, driven by contracts signed with Meta, NVIDIA and others as we continue to diversify our customer backlog...We now expect fiscal 2026 CapEx will be about $15 billion higher than we forecasted after Q1.” – Oracle (ORCL 0.00%↑) EVP Douglas Kehring
LLMs are good at giving answers but not as good at taking action
“What I anticipate, and this is already happening today, with large language models, they’re really ability to give you answers. That’s really where they’re very strong at is to be able to discern information out of different documents and give you a succinct way to get information. They’re not action platforms. Building an action platform takes years and years of work. Be able to do fulfillment. When somebody is asking for information, that’s great. But they’re asking the information to do something with it. This is where ServiceNow shines.” – ServiceNow (NOW 0.00%↑) COO Amit Zavery
Enterprise AI adoption is still in pilot phase
“But I would say in speaking to customers, this is not days and weeks, right? This is not days and weeks. It’s a few quarters depending on. Because enterprises, if they want to transform their business, which is a very important point, using an agent, whether it’s single-purpose agent or a multipurpose agent, you have scale, durability, availability, real-time learning, context switching for the agent versus human. There are a lot of factors to be considered. And yes, I created a pilot and it does something cute internally for productivity that I can write e-mail fast or I can do this Copilot or Codegen. But to truly create an agent that transforms your business, right, or creates a new business for you. My viewpoint is still a few quarters away.” – MongoDB (MDB 0.00%↑) CEO Chirantan Desai
LLMs are rapidly changing customer acquisition dynamics
“I think as the LLMs have taken traffic away from companies’ websites, when you lose traffic to your website, it means you lose people who fill out a form, which means you lose people who take a demo, which means you lose opportunities, and you ultimately lose revenue. And so you’ve lost control of what was a pretty stable demand environment. And everybody’s seeing that, and we’re included in that category.” – ZoomInfo Technologies (GTM 0.00%↑) CEO Henry Schuck
AI has improved code efficiency by 30% at Wells Fargo
“When you look at what we’ve been doing inside of Wells Fargo, we’ve rolled out these tools, Gen AI tools within our engineering workforce. We’re 30% to 35% more efficient in terms of writing code today.” – Wells Fargo & Company (WFC 0.00%↑) CEO Charles Scharf
AI is being deployed succesfully in cyberattacks
“It used to be months and it was weeks, days, hours now and sometimes seconds. We’ve actually -- and we called this out one of our threat reports, seen an attacker pivot from one system to another in 51 seconds, right? So incredibly quick. So AI is driving a lot of the tooling around this. And in this particular case, they were using a public LLM model, and they were basically just driving new attacks and creating sort of what I’ll call AI-type malware, that isn’t really malware. It’s more prompts, right? So it can hit a system, and then it can basically say, what system on my end? What’s interesting? What files are here? Look at the files. Like there’s no malware. It’s just prompting and then it’s creating scripts that will actually do that for the adversary on their behalf. So it’s unique every time it hits a new system, it’s unique, which again becomes a problem in the world, and that’s why you need AI to fight AI.” – CrowdStrike (CRWD 0.00%↑) CEO George Kurtz
The robotaxi wave is here
“The technology problem has been solved. Multiple vendors have solved that. It is now really how do you commercialize this and scale this for profits? We will have 10-plus cities by the end of 2026 where you can order an AV on Uber. I think we just announced this morning that Dallas is launching with one of our partners. And then last week we announced, I think Abu Dhabi, the driver is now out of the car. So the wave is coming, and we think we’re really extremely well-positioned to help both the AV providers make money and the consumers have the right experience.” – Uber Technologies (UBER 0.00%↑) Prashanth Mahendra-Rajah
AI is going to lead to lower head count
“When people say that whether AI is an opportunity to drive significant increases in efficiency and what it’s going to do potentially to headcount. It is extremely significant. And anyone who doesn’t say that is just either doesn’t know what they’re talking about, most people do, but they’re afraid to say it. because no one wants to stand up and say that we should have -- we’re going to have lower headcount in the future. It’s a difficult thing to say. Now it doesn’t mean that it’s going to happen next year, and it doesn’t mean that it’s going to happen in every area of the company, right?” – Wells Fargo & Company (WFC 0.00%↑) CEO Charles Scharf
Industrials and Transport
Tariff uncertainty has worked its way through the system
“I think the certainty of the path forward from 6 months ago to now is higher because the trade and tariff has largely worked through the system in terms of people’s understanding of what will happen. I think taxes is done.” – Bank of America (BAC 0.00%↑) CEO Brian Moynihan
Delta generates 50% of airline profits with only 20% of the capacity
“It’s certainly not sustainable, right? Where you have two airlines generating 100% of the profits of the entire industry. By the way, it’s not just this year’s phenomenon. It’s been happening for several years, with Delta being more than 50% of that profitability. We have 20% of seats in market yet. We generate over 50% of the overall profits.” – Delta Air Lines (DAL 0.00%↑) CEO Ed Bastian
High copper prices are slowly driving substitution to aluminum
“We have seen a transition, but you have to understand it’s a slow process. A lot of the applications for copper are replacing with aluminum, high technical specification that has to go through re-engineering, quality assessment. So it’s happening, but it’s progressing slowly.” – Alcoa (AA 0.00%↑) CFO Molly Beerman
Materials & Energy
Electricity still only has 20% of the global energy market
“But practically speaking, the world spends over $1.5 trillion a year on energy in totality, but only 20% of that energy is coming from electric power today. Over time, the world, number one, needs more energy to prosper. And based on almost all projections, the proportion of that energy that’s going to come from electric power is only going to grow and likely grow substantially. We see the early signs of that happening. You see that with utilities having larger CapEx budgets today than traditional oil and gas companies. You see that with hyperscalers contracting direct with us to provide the solutions for their applications. You see it with governments that are leaning in more strategically to the electric power system for new capacity, for resilience, and for incremental electrons to protect for national security.” – GE Vernova (GEV 0.00%↑) CEO Scott Strazik
U.S. nuclear re-industrialization gains momentum
“We’ve been very pleased, very appreciative, frankly inspired with the work with the US. government right now on recreating a nuclear industry in the US. We signed an MoU for up to $100 billion of SMR industrialization in the US earlier in the quarter when the government and ourselves were in Japan. We’ve got a lot of work still to do. We’re working our way through site selections right now, terms and conditions, but are gaining exponential confidence that in 2026, we can translate what today are MoUs into agreements that are going to accelerate the re-industrialization of nuclear in the US.” – GE Vernova (GEV 0.00%↑) CEO Scott Strazik
Real Estate
The housing market remains historically weak
“We’re in the third year, the worst housing market in almost 50 years. In 1978, there were 4.09 million existing homes sold in the U.S. when the U.S. had a population of 223 million people. We are on track to average 4.07 million existing homes sold over the 3 years from 2023 to 2025 with a population of 341 million, or 53% higher than 1978. This is a market we’ve never seen before.” – RH (RH 0.00%↑) CEO Gary Friedman
Nuggets of Wisdom
Powell listens to earnings calls (and must be a subscriber to The Transcript)
“So we do – through our vast network of contacts and just through our observation of what’s going on in the economy, we hear about this a lot. If you listen to the earnings reports for consumer-facing companies that tend to deal with low- and moderate-income people, they’ll all say that we’re seeing people, you know, tightening their belts, you know, changing products that they buy, buying less, and that sort of thing. And so it’s clearly a thing. It’s also clearly a thing that, you know, asset values – housing values and securities values are high, and they tend to be owned by people more at the higher end of the income and wealth. So as to how sustainable it is, I don’t know. Most of the consumption does happen by people who have more means.” – Fed Chair Jerome Powell