What Happened Last Week
- Stocks Rebound: U.S. stocks rebounded sharply during the holiday-shortened week, reversing recent weakness.
- Fed Frontrunner Emerges: Kevin Hassett is likely the next Fed Chair, creating pressure on the dollar.
- Better Breadth: Last week’s rally was broad-based with strength outside of just the mega caps.
What We’re Watching This Week
- Economic Data: This week will see the release of some privately collected economic data.
- Positioning: Technically driven price action may remain the dominant market driver in the absence of tier one data.
- Fed Chair Race: Final confirmation of President Trump’s pick may be forthcoming, with major implications for monetary policy in 2026.
Investment Management Team’s Views
Equity markets ended November with a strong rebound in a holiday-shortened week, led by higher-beta areas such as tech and small caps. The NASDAQ-100 logged its best weekly gain since May as investors looked past the recent soft patch in the AI theme. For November, the index fell 1.6% overall – its first monthly decline since March. However, participation broadened meaningfully as the average S&P 500 stock rose 1.9% and small caps climbed 2.5%. Continuing this improved breadth into year-end and early 2026 would send a constructive signal, as firmer global growth, expected Fed rate cuts, and investors’ underweighting of cyclicals support it.
Drama over the next Fed Chair persisted, with Kevin Hassett emerging as the frontrunner to replace Powell when his term ends in May. His potential appointment pressured the dollar and steepened the yield curve, moves that could extend if he is confirmed. Markets now price in a better-than-90% chance of a cut at the December 10 meeting. With the Fed historically reluctant to surprise investors, a cut appears highly likely, though it may be delivered with hawkish messaging given the lack of economic data and uncertain outlook. Any post-meeting volatility could create opportunities to add to positions that benefit from lower short-term rates, given the likely changes to the Fed in 2026.
With a light slate of economic data and only a handful of earnings reports ahead, market focus will shift to price action and the potential for the recent market rotation to continue. Investors will continue to dissect last week’s rally, with technical flows remaining the dominant driver amid limited macro and corporate catalysts. We do receive a few private data releases on business and consumer confidence, as well as on November employment, although these are unlikely to change market expectations for the Fed next week.