The latest from the Fed... Interviews with Donald Trump... The sector to watch as consumers tighten budgets... Historic underperformance... A way to profit from fear and greed...
The Federal Reserve just delivered more 'juice'...
In today's policy decision, the Fed cut interest rates by 25 basis points, leaving the target federal-funds rate in a range of 3.5% to 3.75%.
Markets were expecting this... with fed-funds futures traders pricing in a 90% chance that the central bank would lower interest rates.
While the Fed acknowledged that inflation "remains somewhat elevated," it said that "downside risks to employment" (which we've covered extensively) were the case for lowering interest rates.
Nine of the 12 voting members voted in favor of the 0.25% rate cut. But three voters dissented – the most since 2019.
Fed Governor Stephen Miran once again voted for a 0.50% cut, while Chicago Fed President Austin Goolsbee and Kansas City Fed President Jeffrey Schmid both voted to hold rates steady.
Altogether, six of the 19 Fed officials (including nonvoters) favored no cut at the meeting, while one (Miran) wanted interest rates even lower.
The Fed also announced that it would begin buying $40 billion in short-term Treasurys to ease stress on money markets, and added that purchases will "remain elevated" for a few months.
Looking ahead...
The Fed also released its quarterly Summary of Economic Projections today. The Fed sees inflation, as measured by the personal consumption expenditures price index, coming in at 2.9% for 2025, slightly below its September estimate of 3%.
The Fed sees the unemployment rate staying at 4.5% through the end of the year, the same as its projection from September.
While those projections were the same as or better than the past update's, they're worse than the inflation (2.4%) and unemployment (4.3%) rates the Fed projected for 2025 at the December 2024 meeting.
In short, the estimates didn't improve enough to do away with "stagflation" concerns.
As for Fed Chair Jerome Powell's press conference...
Powell reiterated that the labor market has softened, both in terms of the supply (because of lower immigration and labor force participation) and demand.
But Powell added that services inflation has come down, with tariffs seen as a one-time boost to prices.
As for the future path of rates, Powell simply said that the fed-funds rate is now "within a broad range of estimates" – where rates are neither boosting nor slowing the economy.
He added that he believes the Fed is in a good place to "wait and see" on the economy before making the next move on interest rates.
Even with the chance of a "pause" coming as the Fed goes back into wait-and-see mode, the rate cut was all investors wanted to see today. The S&P 500 Index went from about flat on the day to closing up around 0.7%.
Who the next Fed chair might be...
As you surely know by now, Powell's term as chair is up in May. Unless President Donald Trump makes a drastic change in direction, the current Fed chair has zero chance of being asked to keep serving in the role.
Trump wants someone who is favorable to lower interest rates, or certainly more inclined to lower them than Powell has been over the past year.
The White House's director of the National Economic Council, Kevin Hassett, has been rumored as the favorite over the past few weeks – with Trump saying he already knew who his choice was going to be.
But today, we learned that another early front-runner for the job, former Fed Governor Kevin Warsh, is getting a second interview. So will Hassett and two others at some point.
This comes after reports about Wall Street concern that Hassett might not be the best person for the job and would lack credibility both publicly and among other Fed officials. As CNBC reported today...
[Trump's] possible selection received some pushback from the markets recently, especially among fixed income investors concerned Hassett would only do Trump's bidding and keep rates too low even if inflation snaps back.
A CNBC survey of Wall Street investors published yesterday showed that 84% believe Trump will pick Hassett as the next central bank head, but only 11% think that he should be the choice. Current Fed Governor Christopher Waller was favored by 47%, followed by Warsh at 23%.
It's hard to know exactly what's going on in this process, besides Trump wanting lower rates. But he and Treasury Secretary Scott Bessent probably also don't want runaway inflation.
What to buy as consumers tighten budgets...
As we've been writing lately, a weakening labor market and the renewed presence of rising inflation isn't a great combination for an easy time on Main Street.
U.S. consumers drive about 70% of economic activity, and they are pulling back on spending... or at least are showing signs of changing spending habits to make the most of their budgets.
We can see this in the latest quarterly earnings reports from big retailers like Walmart (WMT) and Home Depot (HD), as we reported last month.
We also saw a drop in volume of items purchased compared with last year during the typical Black Friday-to-Cyber Monday spending spree for Americans. And we're seeing an increase in folks using "buy now, pay later" options for essentials like food.
Investors might be wondering how to survive and profit from this setup in their portfolios. Well, our Dr. David "Doc" Eifrig shared one idea in his most recent edition of Retirement Trader last Monday – consumer staples.
These are businesses that sell the essentials people will still buy in a downturn because they're what they "need" rather than what they "want." Think of a business like Walmart, which Doc used as an example...
Walmart thrives when folks are uncertain and want to save money. Even when times get tight for the average family, they still need groceries, clothes, toilet paper, and diapers. So they turn to Walmart's cheap prices.
If you're concerned about stock market downside ahead, consumer-staples stocks tend to perform better than most sectors in bear markets, too... although we're not seeing one of those quite yet.
As Doc pointed out last Monday, it already is notable that the performance of consumer-staples stocks – and a few other typically defensive plays – has been "improving" lately relative to other major S&P 500 sectors. As he shared...
Here's what we currently see...
Without getting too far in the weeds, the chart above is about looking at which sectors have been improving or not lately, and also where these sectors are headed in the short term... which matters to Doc's options trading strategy in Retirement Trader.
In this case, momentum is not favoring communication services – which includes businesses like AT&T (T), as well as AI names like Alphabet (GOOGL) and Meta Platforms (META) – and consumer discretionary stocks. Instead, momentum is favoring sectors like health care, energy, and... consumer staples.
Doc went on to recommend an options trade on a popular exchange-traded fund that represents the consumer-staples sector. It's a trade designed to deliver income up front as the strategy allows. As Doc explained...
Most folks looking at this chart would choose a sector in the leading category. These stocks are doing the best right now. And as you've probably heard before, new highs lead to more new highs.
But for our option-selling strategy, we want to target sectors in the improving cohort.
Since the timeline for our trades is about two months, we want to get into sectors that are starting to see momentum but aren't outperforming just yet. As you can see, these sectors are starting to creep toward a higher relative performance – hopefully right around our options' expiration.
Plus, when a sector is underperforming, investors are more fearful about it. Fear means we'll earn more income from the options we sell.
Existing Retirement Trader subscribers and Stansberry Alliance members can find Doc's full issue here.
There's certainly still fear around consumer staples...
Just last month, the consumer-staples sector hit its most "oversold" level since 2023, as our colleague Chris Igou wrote about in DailyWealth Trader. And the sector is underperforming U.S. stocks at a historic level.
Check out this chart from Barchart earlier this week that shows the State Street Consumer Staples Select Sector SPDR Fund's (XLP) performance relative to the benchmark S&P 500...
The figure down and to the right means XLP is underperforming stocks in general. Now, you might look at this chart and say, "Why should I buy that?" Well, it's an opportunity to profit from others' fear and position some money amid a greedy environment.
The steep drop-off on the above chart was during the run-up to the dot-com bubble. During this time, investors were taking risks and chasing returns elsewhere. You can make a similar argument today with the AI boom/bubble.
As Chris wrote in DailyWealth Trader on November 7, oversold levels like we've seen recently in consumer staples have led to strong returns from the sector in the coming year...
The last time we had an oversold reading like this, XLP rose 29.6% in 11 months... keeping pace with technology stocks over the same period...
Another similar case happened in March 2020. The market panicked in the early stages of the COVID-19 pandemic. XLP fell off a cliff along with most other sectors. Then, the snapback started... and XLP rose 42% by the end of the year.
Chris wants to wait until the sector re-enters a longer-term uptrend before making a trade in DailyWealth Trader, as he explained in an update for his subscribers last week. "When it's time to trade, we'll let you know," Chris wrote.
But with Americans pulling back on spending, if you're looking to put some new money to work or reallocate gains from other positions, add consumer-staples stocks to your potential buy list.
New 52-week highs (as of 12/9/25): Broadcom (AVGO), BHP (BHP), Ciena (CIEN), Cisco Systems (CSCO), Fanuc (FANUY), Lumentum (LITE), Pan American Silver (PAAS), Sprott Physical Silver Trust (PSLV), Sprott (SII), Skeena Resources (SKE), and iShares Silver Trust (SLV).
In today's mailbag, more thoughts on U.S.-Canada trade relations... and feedback on an alternative measure of inflation that was discussed in yesterday's mail... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Hi, As a follow up to Jeff S's note [last week], particularly on the impact of Trump's tariffs in Canada...
"Since the beginning of the first Canada-USA free trade agreement (FTA) from the 1980's and with every subsequent FTA since, Canada's economy has evolved to become more integrated with supply chains in the USA. The results have been more efficient supply chains with higher quality and lower costs for consumers, particularly in the automotive, energy, agricultural and forestry sectors.
"Also, it has made the Canadian economy far less self-sufficient, thereby leaving the Canadian economy far more vulnerable to changes in US trade policy. Since the Canadian economy is at least 10x smaller than the US, changes in US trade policy have tremendous negative leverage on Canada's economy.
"It will take many, many years of economic pain in Canada to transform the Canadian economy from one that has become heavily dependent on the US due to almost 40 years of historic FTA's." – Stansberry Alliance member Peter A.
"Thanks for the suggestion on the Chapwood Index. I have found it very interesting and insightful.
"On the topic of consumer strain from today's Digest, I definitely have been noticing a more stretched consumer. I look at the increase [in] popularity in [buy] now pay later (BNPL) purchases as one indicator. In addition, GoFundMe recently published their 2025 year in review report. They note a significant increase in funding for 'essential' items like car payments, utilities and groceries.
"A consumer more reliant on BNPL and crowdsourcing for 'essentials' does not portend to a strong economy.
"Thanks as always for your insights. It truly makes this banker and economy buff a more informed dude." – Subscriber Jeff A.
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
December 10, 2025
