David Rosenberg says the Fed will cut in December, Shoots Itself in the Foot

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Rosenberg Research 8.0
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David Rosenberg 9.0

David Rosenberg says the Fed will cut in December, Shoots Itself in the Foot

ndx

Consumer picture soft, savings rate falling, recession in real household incomes, economy heavily dependent on stock market wealth effect which is concentrated in top 10%

yields

we will be at 3% by late winter and on our way down towards 2 to 2 and a half by the end of next year Fed is behind the curve, should be at neutral already given falling inflation and rising unemployment

3 calls

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slightly better than random

8/22/2025 6:46:15 PM	medium term sharp down	21 days later	-5.64%	+8.46%
8/20/2025 10:34:54 PM	medium term cautious down	20 days later	-6.88%	+3.44%

David Rosenberg

Nominal neutral rate is 3%, Fed has no business being 100bps above neutral given trend in underlying inflation and unemployment rate

Unemployment rate trending higher, Fed's full employment rate is 4.2% but current rate is above that, labor market slack has built up
Does one rate cut help lower income Americans or do we need multiple cuts?

Reference to structural problems with income/wealth inequality and purchasing power decline

Host
David Rosenberg

One rate cut makes only small difference for lower income; need more income support beyond tax policies

Walmart data shows pressures spreading from low to middle income consumers, high-end consumers shifting to Walmart indicating reduced demand pressures
David Rosenberg

Fed is behind the curve, expects December rate cut with more to follow

Key Fed officials (Waller, Staley, Williams) signaling cuts; need to convince markets more cuts are coming to stimulate economy
How is US consumer doing given upcoming retail sales data?

Reference to auto sales down 7% month-over-month and weak chain store sales

Host
David Rosenberg

Consumer picture is soft, only sustained by equity wealth effect at high end

Real consumer spending up 2% but real disposable income down 1% since April, savings rate falling rapidly, recession in real household incomes since April
How to interpret labor market given headline unemployment rate?

Most people have jobs but need to understand underlying trends

Host
David Rosenberg

Unemployment rate change matters more than level; trend is upward from 3.5% to 4.5%

Most past recessions started with unemployment rate at current levels; it's a lagging indicator and looking at it for future economic direction is like looking in rearview mirror

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