The Most Wonderful Time of the Year

There's a feeling of optimism out there

Summary: The holidays are upon us and confidence is booming. But Jerome Powell doesn't seem to have a problem playing the Grinch. The Fed signalled fewer rate cuts in 2025 than they had previously expected.

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Macro

It's the most wonderful time of the year
"First of all, it looks like the consumer is starting to feel a little bit better than they were in prior quarters. I'll give you a little bit of our research. Our external research shows that consumer sentiment is trending positive. And there's a little bit of a feeling of optimism out there by the belief the labor market will improve...In contrast to previous quarters, we're seeing growth in visits from our guests making between $50,000 and $100,000 a year, which is really more of our casual dining brands." — Darden Restaurants (DRI 0.00%↑) CEO Ricardo Cardenas

"This holiday shopping season, we’re seeing increasing consumer confidence as people sought out in-store experiences – and went online – to purchase gifts and celebrate the holidays with friends and family. This spending growth demonstrates the adaptability of both consumers and retailers and the overall strength of the economy." — Visa (V 0.00%↑) Chief Economist Wayne Best

"First, the consumers are spending money at about a 4% growth rate over last year. The period around Thanksgiving Black Friday, Cyber Monday was up 10-ish percent, which is strong...So consumers are in pretty good shape." — Bank of America (BAC 0.00%↑) CEO Brian Moynihan

"And you always remind people of, we're sitting here nine months ago, and everyone's talking about just soft landing, hard landing, how bad things can get. And so all things considered, given where we are, it's a pretty good place to be. The consumer has been very, very resilient through all of this. What we see in terms of spending patterns is basically the same." — Wells Fargo (WFC 0.00%↑) CEO Charles Scharf

"I think the consumer is ready to put quite honestly, the election behind them and reengage in the economy. And it was -- it didn't matter your politics. It was just simply there was a resolution and you've seen kind of the animal spirits of the U.S. consumer reengaged in the economy in a meaningful way. We continue to see strong traffic results thus far from the first -- from Black Friday through just about today." — Simon Property Group (SPG 0.00%↑) CFO Brian McDade

But Jerome Powell seems determined to play Grinch
"The median participant projects that the appropriate level of the federal funds rate will be 3.9% at the end of next year and 3.4% at the end of 2026. These median projections are somewhat higher than in September, consistent with the firmer inflation projection." — Federal Reserve Chair Jerome Powell

The Fed is guiding to fewer rate cuts in 2025
"At 4.3% and change we believe policy is still meaningfully restrictive. But as for additional cuts we’re going to be looking for further progress on inflation as well as continued strength in the labor market, and as long as the economy and the labor market are solid we can be cautious about—as we consider further cuts and all of that is reflected, to your question, in the December SEP which shows a median forecast of down two cuts next year compared to four in September." — Federal Reserve Chair Jerome Powell

They want to be cautious
"With today’s action, we have lowered our policy rate by a full percentage point from its peak and our policy stance is now significantly less restrictive. We can therefore be more cautious as we consider further adjustments to our policy rate." — Federal Reserve Chair Jerome Powell

Policy uncertainty was part of the justification
"Some did identify policy uncertainty as one of the reasons for their writing down more uncertainty around inflation." — Federal Reserve Chair Jerome Powell

People are concerned about a trade war
"If you were to kind of go down this road of a trade war, it would be pretty negative for the overall economy. The U.S. economy would be a full percentage point smaller by the end of President Trump's next term." — Expeditors International of Washington (EXPD 0.00%↑) OnyxChief Economist Adam Karson

International