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Key Points

• US stocks rose on Tuesday, with the S&P 500 achieving a record close of 6,909.79, up 0.5%, while the Nasdaq Composite gained 0.6% and the Dow Jones Industrial Average increased by 0.2%.
• Strong US economic growth data for Q3 showed a 4.3% annualized rate, surpassing expectations of 3.3%, leading investors to reduce expectations for near-term interest rate cuts by the Federal Reserve.
• Precious metals like gold and silver continued their impressive rally, reaching new highs, with gold futures briefly exceeding $4,500 and silver above $70, marking their best year in over four decades.
• Consumer confidence declined for the fifth consecutive month in December, reflecting ongoing economic concerns despite robust GDP growth and stock market gains.
• Commodities such as copper hit a record above $12,000 per ton, while natural gas prices surged up to 10% due to forecasts of a cold winter on the East Coast.

Summary

US stocks advanced on Tuesday, with the S&P 500 setting a new record close at 6,909.79, up 0.5%, while the Nasdaq Composite rose 0.6% and the Dow Jones Industrial Average gained 0.2%, marking a fourth consecutive session of gains. Despite strong economic data revealing a 4.3% annualized GDP growth in Q3—exceeding the expected 3.3%—investors scaled back expectations for imminent Federal Reserve rate cuts, with odds of a January cut dropping. Precious metals, including gold and silver, continued their remarkable rally, hitting new highs and on track for their best year in over 40 years, while copper also reached a record above $12,000 per ton. However, consumer confidence fell for the fifth straight month, indicating persistent economic unease. On the corporate side, Novo Nordisk’s stock surged after US approval of its Wegovy weight-loss drug. Meanwhile, discussions around revising the Fed’s 2% inflation target to a range-based system emerged, and government spending increased despite a reduction in federal workforce under the Department of Government Efficiency. As markets head into the Christmas holiday, early closures and full-day closures are scheduled for Wednesday and Thursday, respectively.

Key Points

• Conflict at the Fed: The Federal Reserve faced a rare conflict between its dual mandates of maximum employment and stable prices, reminiscent of 1970s stagflation, leading to internal divisions and dissents over interest rate policies.**
• Rate Cuts and Divisions: Despite divisions, Fed Chair Jerome Powell achieved consensus for three rate cuts in 2025, though future chairs may struggle with a divided committee if inflation persists alongside a softening job market.**
• Trump's Influence: President Trump’s economic policies, including tariffs and immigration restrictions, along with his pressure on the Fed to lower rates and threats to fire Powell, raised concerns about central bank independence.**
• Tariffs and Inflation Concerns: While initial tariff impacts on inflation were milder than expected, some Fed officials remain worried about sticky inflation in 2026, compounded by data gaps from a government shutdown.**
• Cautious Outlook for 2026: The Fed anticipates only one rate cut in 2026, balancing a cooling labor market and above-target inflation, while navigating uncertainties from fiscal policies and data disruptions.**

Summary

The past year at the Federal Reserve was marked by a rare conflict between its goals of maximum employment and stable prices, echoing 1970s stagflation, and resulting in significant internal divisions over interest rate policies. Despite this, Chair Jerome Powell secured consensus for three rate cuts in 2025, though future chairs may face challenges if inflation remains high and the job market weakens. President Trump’s economic policies, including tariffs and immigration curbs, alongside his pressure on the Fed and threats to remove Powell, sparked fears over central bank independence. Tariffs initially had a milder-than-expected impact on inflation, but concerns persist about sustained price pressures into 2026, exacerbated by data gaps from a record government shutdown. The labor market showed signs of cooling, prompting dissents within the Fed on whether to prioritize inflation or employment. Looking ahead, the Fed plans a cautious approach with only one rate cut expected in 2026, as it navigates a muddy economic picture, fiscal tailwinds, and ongoing inflation above its 2% target. A new Fed chair, likely favoring lower rates, will inherit these challenges amid questions about independence and economic forecasts.

Key Points

• Record Holiday Travel: US airlines anticipate a record 2.9 million passengers daily between Dec. 19 and Jan. 5, a 1.5% increase from last year, according to Airlines for America.**
• Rising Airfares: Domestic round-trip airfares for the holiday period are expected to average $900, a 7% increase from 2024, as reported by the American Automobile Association.**
• Airport Traffic Surge: New York and New Jersey airports expect 5.7 million travelers (1% increase), Chicago airports anticipate 4.8 million (6% increase), and Dallas Fort Worth prepares for 5 million (3.2% increase) during the holiday season.**
• Economic and Operational Challenges: Airlines faced economic uncertainty due to President Trump’s April tariff announcement and a government shutdown in autumn, leading to temporary flight cuts at 40 major airports due to staffing shortages.**
• Construction Delays: Ongoing airport overhauls in cities like New York and Chicago prompt agencies to warn passengers of potential construction-related delays and traffic congestion.**

Summary

US airlines are gearing up for a record-breaking holiday season, expecting an average of 2.9 million passengers daily from Dec. 19 to Jan. 5, a 1.5% rise from last year, according to Airlines for America. Domestic round-trip airfares are set to average $900, up 7% from 2024. Major airports are also bracing for significant increases, with New York and New Jersey expecting 5.7 million travelers (1% up), Chicago’s airports preparing for 4.8 million (6% up), and Dallas Fort Worth anticipating 5 million (3.2% up). However, the year has been turbulent for airlines, with economic uncertainty sparked by President Trump’s April tariff announcement and a government shutdown in autumn leading to temporary flight cuts at 40 major airports due to staffing shortages at the Federal Aviation Administration. Additionally, ongoing airport renovations in cities like New York and Chicago are causing potential delays, with authorities advising travelers to plan for construction and traffic congestion. Despite these challenges, bookings saw a recovery over the summer, setting the stage for a busy holiday travel period.