Is Kevin Hassett the frontrunner to replace Powell?
Summary
U.S. equities rose modestly last week. The S&P 500 gained 0.4% for a 3.0% quarterly return and 18.2% year to date. Markets hold a 90% likelihood of a 25 bp cut at this week’s Fed meeting, but policymakers remain divided. The 10-year yield rose to 4.14%.
Jerome Powell’s replacement
President Trump indicated last week that he has effectively chosen a successor for Chair Powell, whose term ends in May. He expects to make the announcement in early 2026. Kevin Hassett, the top White House economic adviser, is widely considered the front-runner. The administration has criticized Powell for being too slow to cut rates. The next chair is likely to align more closely with a lower-rates agenda that favors earlier and more frequent easing.
Consumer sentiment remains dour
A preliminary University of Michigan survey shows consumer sentiment improved slightly to 53.3 in December yet remains close to 2022 lows. Persistent price pressures, inflation fatigue, and uncertainty in the labor market continue to weigh on confidence, particularly for lower-income households.
The week ahead
The Federal Reserve’s meeting on Wednesday will set the tone for markets. A move other than a third consecutive 25 basis point cut would surprise investors. Markets will watch closely for signs of dissent among voting members and for any guidance on the 2026 outlook. Given the limited availability of current labor data, Chair Powell is expected to emphasize flexibility rather than commit to a firm path. This stance keeps the option open for another rate cut as early as January if incoming data weakens.
Government agencies have rescheduled several data releases for December. JOLTS data for September and October will be published December 9. The third-quarter Employment Cost Index is scheduled for December 10 and the September trade balance for December 11. October retail sales and the delayed November employment report will be released December 16. The November CPI reading, which incorporates some October data, will follow on December 18. On December 23, releases will include third-quarter GDP, October durable goods orders, and industrial production for October and November.
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