It is a truism that markets are forward-looking—and on a day when the Federal Reserve will dominate headlines, investors may instead want to pay attention to 2026.
All indications are that the Fed is divided on the economy and where
interest rates will go next year. Markets are also unsure—but that does not necessarily mean bad news for stocks.
While a Wednesday rate cut is baked in, the odds of another quarter-point reduction in borrowing
costs in January stand around 20% and barely get above coin-flip territory through the first half of next year.
Conflicting signs from the economy are complicating the jobs of policymakers and traders. Slowing job growth screams lower rates, but inflation still above the 2% target builds the case for keeping rates near where they are.
The White House is another wild card. President Donald Trump will likely nominate a new Fed chair who is trigger-happy on cutting rates, but the president also launched an apparent “affordability tour” this week as
inflation continues to bite voters.
The bond market sees lower rates in the shorter term, but yields on longer-term Treasuries have risen recently—a signal that borrowing costs may not be on an inexorable ride
down after all. Prices for gold, a historic hedge against inflation, also remain near record highs.
Another market truism is “do not fight the Fed,” but investors should remember that stocks can still push higher even if borrowing costs do not come down much more.
The S&P 500 is closing in on a third year of around 20% gains, and the first rate cut in this cycle only came in September 2024. Earnings growth remains strong and some stock valuations are not as stretched as they
could be.
Artificial intelligence trends also continue to buoy the market despite fears of an AI bubble—though the end of rate cuts could spell trouble on that front, as bubbles do not usually burst during
rate-cut cycles. But that is another worry for well into 2026.
—Jack Denton
***What’s Ahead for Markets in 2026? From “Liberation Day” tariffs to torrid rallies in AI stocks and gold, this year has been full of surprises. Join us on Dec. 11 at
noon for discussions with investment strategists and money managers about the outlook for the economy and markets in 2026—and how to position your portfolio for success. Sign up here.
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What a SpaceX IPO Could Mean for Tesla Shareholders
Tesla investors got a reason to dream about what might be coming in the new year, and it involves the possibility that CEO Elon Musk’s commercial space company SpaceX could go public in what
could be the biggest new listing of all time, according to Bloomberg.
- SpaceX aims to raise $30 billion in an IPO next year, Bloomberg reported, citing people familiar with the matter. That would target a valuation of $1.5 trillion for the company, which focuses on launch services, the Starlink satellite operations, and
space exploration. SpaceX didn’t respond to a request for comment.
- SpaceX is privately held, but it is already the most valuable aerospace and defense company, valued at $400 billion. SpaceX was reported to be seeking an $800 billion valuation this past week, but Musk downplayed that saying SpaceX is already cash-flow positive. It doesn’t have a pressing need to raise cash.
- That is a disappointment to many investors who would like to own a piece of the company. The appeal is clear: It accounts for more than half of all global orbital launches and has a space-based broadband business, Starlink, with more than eight million subscribers.
- A
SpaceX IPO would also fuel speculation that Musk could combine his far-flung tech empire under one roof. Tesla shareholders recently voted in favor of a shareholder proposal that would authorize a Tesla investment in Musk’s AI company xAI. The vote was nonbinding, and many shareholders abstained.
What’s Next: Tesla investing in either xAI or a SpaceX IPO could be one step on the path to a larger X Corp. Wedbush analyst Dan Ives said he’d be shocked if Tesla doesn’t take a stake in SpaceX. Ives also believes Tesla’s AI efforts, including robo-taxis and robots, will lead to significant earnings growth.
—Al Root
Spending Outlook By JPMorgan Exec Outpaces Expectations
A top JPMorgan Chase executive’s words at a conference may reverberate through rival banks. Consumer and Community Banking Chief Marianne Lake said firmwide expenses would rise in 2026 thanks in large part to its
investing in growth initiatives. A prominent analyst said other banks may have to up their game.
- Lake told investors at a Goldman Sachs conference that she now expects firmwide 2026 expenses of $105 billion. That would be 3.6% higher than Wall Street’s current estimates and 9% higher than expectations for full-year
expenses in 2025, according to data compiled by FactSet.
- Lake said the biggest driver of higher expenses is “high-quality” costs, reflecting growth investments, such as product-marketing costs, higher incentive-related compensation for advisors who outperform, improvements to credit card offerings, and AI investments.
- Wells Fargo banking analyst Mike Mayo said that the outlook “should reverberate” as other banks may be looking to up their own spending to stay competitive. Lake added that higher expenses are also tied to a lesser extent to structural effects of inflation such as higher real estate costs.
- Lake said, too, that consumers and small businesses remain healthy, as do spending trends and measures of credit quality such as charge-offs and delinquencies. But the labor market and demand for labor, specifically, are weakening, and sentiment is low.
What’s Next: The number of available jobs
swelled in September and October, providing additional evidence that employment isn’t collapsing. But that signal of economic strength isn’t expected to prevent Federal Reserve officials from deciding to lower rates when they conclude their December policy meeting later today.
—Rebecca Ungarino, Janet H. Cho, and Megan Leonhardt
Pfizer Pursuing Next Weight-Loss Drug in Chinese Labs
Pfizer has joined the cavalcade of big pharma firms hunting for new weight-loss drugs in the laboratories of Chinese biotechs, in a bet on the exploding demand for weight-loss drugs, even as
U.S. lawmakers ramp up efforts to undercut China’s growing biotech sector.
- Pfizer will pay $150 million upfront to Yao Pharma, a subsidiary of Chinese biopharma company Shanghai Fosun Pharmaceutical Co., for the
