Good morning! Today we’re decoding president-elect Donald Trump’s call for lower interest rates, a contradictory Fed outlook, job openings and much more. First time reading? Join 190,000 self-directed investors gaining an edge every morning. Sign up here. 

Higher for longer vs. too high for too long

When you treat the stock market as a scoreboard for the American economy, lower interest rates will always be attractive.

That seems to be at least part of the calculus for president-elect Donald Trump, who revived his war of words with the Federal Reserve as he called for less restrictive monetary policy at a Tuesday press conference in Mar-a-Lago.

The problem, though, is that both Wall Street and the Fed itself don’t anticipate interest rates coming down much in 2025. 

“We are inheriting a difficult situation from the outgoing administration, and they’re trying everything they can to make it more difficult,” Trump said. “Inflation is continuing to rage, and interest rates are far too high.”

The same day Trump made his comments, odds of a cut slipped further thanks to stronger-than-expected jobs and ISM Services reports.

The Fed has slashed rates 100 basis points over the last several months to bring the benchmark level to the 4.25-4.5% range, close to a two-decade high. Importantly, policymakers adjusted rates with inflation moving up, not down, which betrays the economic uncertainty that lies ahead.

As of Tuesday, markets see less than 5% odds for a rate cut this month, according to CME data. Markets also give a 17% chance that rates don’t move at all by December.

The Fed, for its part, has forecasted just two rate cuts in 2025 as part of its latest economic outlook.

Again, if you only focus on asset prices, lower interest rates always sound like a good idea. Cheaper capital means more flows for financial markets.

That’s good news for anyone with a retirement account, stock portfolio or crypto wallet — all of which, in turn, translates to political favor for Trump, a figure markets already seem to love. 

Now, Trump’s simultaneous critique of high inflation and high interest rates reveals a certain tension in his messaging. He wants the economic boost and wealth creation of lower interest rates, but he hasn’t articulated the inflationary effect that easy-money policies might have.

Trump has previously called Fed Chair Jerome Powell — who he appointed in 2017 — “political” for easing rates before the election. Recently he said he wouldn’t try to end Powell’s term prematurely. 

That said, Trump has also expressed an interest in having “at least a say” in monetary policy.

Then again, in the same hour on Tuesday, Trump also called for the US to absorb Canada, seize the Panama Canal and Greenland, and rename the Gulf of Mexico the Gulf of America. 

All or none of that might come to fruition. 

Inauguration day and the next Fed meeting arrive before the end of January. Trump, for all his gumption, faces a unique puzzle if he’s serious about nixing Powell’s higher-for-longer monetary policy regime. 

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Elsewhere:

📈 Job openings climbed more than expected in November, but fewer Americans left their jobs and hiring continued to slow down, according to new data from the Bureau of Labor Statistics. At the end of November, there were 8.1 million jobs open, higher than the 7.84 available at the end of October and the most since May 2023. (Yahoo Finance)

⏰ JPMorgan wants staff in-office every day. Executives at the bank are discussing a plan to bring its 300,000 employees back to the office five days a week. Most of the company already works in person, but some back-office staff are currently only required to come in three days a week. (Bloomberg)

📉 Tesla stock tumbled 3.5%. Bank of America strategists this week downgraded the stock from “Buy” to “Hold,” noting that markets are increasingly pricing in “future growth drivers.” That said, the firm still lifted its price target for the stock from $400 to $490. (Barron’s)

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