Markets in a Minute - Fed Dependance
By: Zac Martin
Author: Zac Martin, Investment Associate
Week Ending January 9th – Fed Dependance
Employment Situation: The biggest news that drove markets higher on Friday was the unemployment report. The unemployment rate dropped to 4.4% in December, down from 4.6%. Nonfarm payrolls also added 50k jobs to the economy, which was less than expected and less than the previous report of 56k. Overall payroll employment increased by 584k in 2025, down from 2Mln in 2024, with an average monthly gain of 49k. NFIB Small Business Hiring plans remain at a net positive, nonfarm payrolls could begin to recover, which would be a sign of a potentially stronger than expected economy. A potentially stronger employment situation could also cause the Fed to be less dovish then expected, given the committee’s recent concerns around weakening employment.
Federal Reserve: Friday the Department of Justice served a subpoena to the Federal Reserve regarding the recent building renovations, which prompted Fed Chair Jerome Powell to respond on Sunday evening. The president can most likely only remove a Fed Chair “for cause,” so an indictment on Powell could be cause for removal. The wider market impact could be minimal as Jerome Powell’s term ends in May. Indeed, the market expectations regarding future Fed policy have not shifted in light of this news, i.e. the status quo hasn’t changed (CME Fedwatch Tool below). However, if the market views any removal of the Chair as a loss of independence of the Federal Reserve, volatility could ensue.
The Week Ahead:
- Consumer Price Index (1/13): Current consensus estimates are that CPI ex. Food & Energy will reaccelerate to 2.7% from 2.6%, while headline CPI will remain unchanged at 2.7%.
- Producer Price Index (1/14)
- Retail Sales (1/15)
- Start of Q4 2025 Earnings Season (1/13&14): US large banks (JPM, BAC, C & WFC) are scheduled to start off Q4 2025 Earnings Season.
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