The major averages closed mixed. Unable to build on last weeks outsize gains. After the NASDAQ and S&P 500 gave a little back despite the Dow ending up for the week. Since last Fridays close the S&P 500 fell 43 points or .63%, the NASDAQ slipped 383 points or 1.62%, while the DOW jumped 503 points or 1.05% to finish the week. It being the end of the year. Forecasts for 2026 are starting to hit the tape. With early estimates for the S&P 500 closing around 7,900 next year.
Did Someone Say Interest Rates?
Analysts, ever an optimistic bunch, some would argue overly so. Are predicting just 1-2 cuts next year. With the Federal Funds rate ending 2026 around 3-3.25%. So, it would seem they have learned to curb their enthusiasm. Following their wild-eyed predictions of the last few years featuring half a dozen or more ¼% cuts. Another fairly sensible prediction that I will happily go along with for now. Despite the still endless calls for recession or worse. Not that there isn’t anything to worry about, as there always is. At this point in the business and economic cycle I don’t see any looming disasters.
Doom and Gloom is Popular
AKA if it bleeds it leads. Or the crowd pounding the table again for much lower interest rates. While howling about trade wars, recession and the real estate affordability crisis. Which was incidentally largely caused by the Fed’s ZIRP or Zero Interest Rate Programs. That said these things are worth considering. The Tariff Case currently working its way through the Supreme Court has significant economic, budget and trade implications. Based on current data a recession next year is a long shot to say the least. While real estate continues to struggle with an extended affordability crisis. Painful as it may be. Spiking the punch bowl again with sharply lower interest rates is not the ideal solution. Logic tells us that trying to fix a problem, with the cause of said problem is a non-starter.
Can Tariffs Really Fix the Deficit
Many would argue that in time they will. Others of course exclaim ruinous “inflationary trade war incoming”. This being much of the foundation for all the world ending economic forecasts this year and going into next. That have so far proven incorrect. But, will they stay that way? With almost a year’s worth of data the picture so far is mixed. Some countries have seen noticeable reductions in the trade surplus with the US through August 2025. Thanks to MishTalk for the chart below. Others, not so much.
Many if’s and’s and but’s remain. 2025 saw a lot of front running of tariffs as companies ramped up purchases to get ahead of them. Significant legal challenges to their legitimacy are ongoing. As 2025 saw a parade of “on again”, “off again” tariff implementation that had more in common with a Yo-Yo than actual trade policy. That said, I believe that the short answer based on the limited data is a “maybe”. The Supreme Court may render the whole issue moot with a negative declaration on their legality. When your running trade deficits pushing a billion a year. Per the Bureau of Economic Analysis or BEA. That have hollowed out the American middle class, through reductions in real or inflation adjusted wages. Amongst other items, something has to be done. Just like something has to be done about our 38 trillion plus deficits accumulated through endless stupid wars and epic waste, fraud and abuse. As continuing to do the same thing expecting a different outcome. Is the best definition of insanity I have ever encountered.
Have a great weekend everyone! See you next Friday.
Last Week’s Post: Are They Wrong
Follow me on Social Media