CPI data comes in soft… when and how many rate cuts might 2026 bring?… more drama surrounding the Fed Chair nomination… how today’s data impacts 2026… a trip down memory lane VIEW IN BROWSER This morning’s cool CPI report cleared the runway for a Santa Rally – and perhaps more importantly, for more rate cuts than expected in 2026. Now, markets have cooled a bit as I write mid-afternoon, but the inflation signal itself is the real takeaway. Diving into the details, the November Consumer Price Index (CPI), which strips out volatile food and energy prices, came in at just 2.6%, also below estimates, and down from 3.0% in September. As to where inflation showed up, here’s a graphic from The Wall Street Journal: 
Source: WSJ Notice “electricity” at the top – we’ll circle back to that later. Now, we should take this morning’s cool data with a grain of salt. Here’s the WSJ to explain why: Officials weren’t able to collect prices in the field during the long government shutdown that lasted until Nov. 12, and there was no October CPI report. Thursday’s November report didn’t break down month-over-month changes for October and November for most items, making it difficult to glean insights into the economy’s recent performance. Still, Wall Street is applauding the numbers as I write. Investors see the softer reading as a green light for the Fed to reprioritize stabilizing the labor market over continuing to battle runaway inflation – and that increases the odds of earlier and deeper rate cuts. We’ll dive into “deeper” momentarily. As to “earlier,” let’s jump to the CME Group’s FedWatch Tool. It tracks where traders think the fed funds rate is headed. Just two days ago, April was the first month when traders assigned majority odds to the next quarter-point cut, with March a toss-up. However, in the wake of this morning’s CPI data, March has pulled ahead. Traders are now assigning nearly 47% odds to a quarter-point cut in March – and almost 12% odds to a 50-basis-point cut. But if legendary investor Louis Navellier is right, this is just the beginning… How “deep” will rate cuts go in 2026? As we profiled in the Digest on Tuesday, there’s drama surrounding who will be President Trump’s pick to replace Jay Powell as Federal Reserve Chairman. “Drama” is the operative word – perhaps intentionally so. Let’s jump to Louis’ Flash Alert podcast this morning in Growth Investor: President Trump is making this Fed Chairman pick like an “Apprentice” episode. We know that Kevin Hassett (Director of the National Economic Council) is the favorite, but everybody apparently wants the job too. Louis says that current FOMC member Christopher Waller is another candidate who wants the role – and the implications for rate policy are decidedly dovish: Waller is supposed to meet with President Trump next week. He’s predicting up to another hundred basis points of rate cuts might be appropriate… Louis sums it up succinctly: The bottom line is [Trump] is working it. And we’re going to get the cuts. This is going to be big news next year and it’s going to get everybody excited. Stepping back, what matters most for markets from this morning’s news is that the direction is clearer. Between cooling inflation, rising unemployment, and a Fed chair that’s likely to be at least somewhat dovish, the debate is no longer whether cuts are coming – it’s how soon and how many. That’s why today’s CPI report landed with such force. It didn’t change the economic backdrop overnight – but it expanded the Fed’s flexibility within it. | Recommended Link | | | | Eric Fry found 41 stocks gaining 1,000%+ in his career by spotting big trends. He called the housing crash. Predicted the dot-com bubble. Now, he sees an AI bubble that could cause trillions in losses. But he also found six “AI Survivors”: human-centered businesses positioned to attract capital when trillion-dollar rotation begins. Complete analysis for free, here. |  | | Today’s rally isn’t just about relief, it’s about alignment Coming into this morning, Wall Street worried that the Fed viewed inflation and the labor market as equally pressing risks – a setup that would have kept policymakers stuck in neutral for months. Today’s CPI report helped break that stalemate, tipping the balance in favor of the labor market and giving the Fed room to act without fearing a resurgence in inflation. Earlier this week – before today’s CPI data cleared the runway – our hypergrowth expert Luke Lango laid out why the economy was already weakening enough to demand policy support. So, with inflation now cooperating, his argument carries even more weight. To unpack this, let’s return to Tuesday’s Daily Notes in Innovation Investor. Here was Luke’s big picture: The economy isn’t healthy right now. Luke pointed to the “not pretty” October and November data dump released on Tuesday after the delay caused by the government shutdown. After highlighting deterioration in the jobs market, he added: Average hourly earnings rose just 3.5%, the weakest pace since Covid. With CPI hovering near 3%, real wage growth is barely positive. That matters for consumer demand… As if that wasn’t enough, the December S&P Global PMI data poured cold water on any remaining optimism. The S&P Global Composite Output Index fell to 53.0, a six-month low… Taken together, the message is clear: the economy isn’t healthy right now. Now, Luke was quick to add that it can get healthier – but it needed the Fed’s help. Of course, Federal Reserve Chairman Jerome Powell’s “wait-and-see” stance from last week was the problem. Luke wasn’t buying it. Even before this morning’s numbers, Luke predicted the Fed would be more dovish than they were letting on: The Fed was effectively flying blind during the shutdown, relying on stale data. Now that the ugly numbers are rolling in, we expect a pivot — and Wall Street will get what it wants: more cuts in 2026. So, this morning’s CPI report validates Luke’s thesis. With inflation cooling meaningfully, the Fed just got the green light to move faster. Softer growth paired with easing inflation is exactly what markets have been waiting for – which is why today’s rally looks less like a sugar high and more like a signal that the policy backdrop for 2026 is falling into place. That doesn’t mean there are no risks. But it does suggest the clouds are parting. One longer-term issue worth keeping an eye on This brings us back to that Wall Street Journal graphic from earlier – and the standout category at the top: electricity. Rising power costs aren’t a mystery. As I detailed in yesterday’s Digest, they’re the result of explosive demand from AI data centers, cloud infrastructure, and the computing backbone required to support the next phase of technological growth. Now, while Luke is bullish today, he does flag this as a potential stumbling block further out: In 2027, AI-driven job displacement and rising electricity costs could spark political backlash and heavier regulation. That’s a real risk. But it’s not today’s risk. It’s a 12-plus-month problem. For now, we stay bullish. Bad data brings good policy — and good policy plus AI is still a powerful combination. For now, we stay bullish. Bad data brings good policy – and good policy, combined with AI, remains a powerful combination. For the latest AI picks that Luke expects to lead in 2026, check out his latest free research package right here. Finally, one more reason why the Fed might cut more than anticipated next year One reason today’s CPI report resonated so strongly is that it arrives at a moment when the Fed may already be behind the curve. Inflation is cooling – but the labor market is weakening faster than policymakers projected. That’s yet another reason the Fed may end up moving faster in 2026 than it’s currently letting on. To see why, let’s rewind to 2023. In my August 31, 2023, Digest, I cautioned that the Fed was walking a tightrope with the labor market – and that history showed it was a dangerous one. I compared unemployment to a seesaw, noting that once the unemployment rate finally begins to rise, after a certain point, that momentum can be difficult to stop. Just a few weeks after that Digest, the Fed released its then-latest dot plot. What was the median forecast for where unemployment would top out in 2025? 4.1%. Fast forward to today, and a different reality is emerging… On Tuesday, the unemployment rate clocked in at 4.6%. Not only is that above the median projection from fall 2023 of where inflation would peak this year (4.1%), but it’s also above where Powell said he expected it to top out (around 4.5%) at last week’s post-FOMC press conference. This is exactly the risk embedded in my 2023 seesaw analogy. Once unemployment starts tipping higher, history shows it can be very difficult for the Fed to stop it with precision. In that Digest, I also pointed out that every time since 1960 that the unemployment rate has risen from below 4% to above 4%, it has ultimately topped out at 6% or higher. As I wrote then: There is no example of the Fed being able to delicately nudge the unemployment rate up from, say, 3.6% to 4.2% or 4.8% at which point the rate stabilizes then happily rides off into the sunset. The Fed is just as aware of this history as I am. That’s why I believe it’s highly likely policymakers – whether they publicly admit it or not – will move to stave off further deterioration before the seesaw gains too much momentum in the wrong direction. To be clear, the takeaway from this trip down memory lane isn’t about doom-and-gloom – it’s about pressure When unemployment rises faster than the Fed expected and inflation is moving in the right direction, history suggests policymakers don’t get to move slowly for long. In that sense, today’s CPI report doesn’t just support the case for rate cuts – it strengthens the argument that the Fed may ultimately need to do more than it’s currently projecting to stabilize the labor market. That’s one more reason Wall Street reacted so positively this morning. For investors, the message remains the same one Luke has been emphasizing: near-term economic softening increases the odds of supportive policy, and that remains a constructive backdrop for growth and AI-driven markets in 2026. On this note, we’ll circle back to Louis for the final word: So, folks, I want you to enjoy the holidays… I’m so excited about a strong finish this year and what’s going to happen next year. So, it’s going to be wonderful. So, lock and load time here, folks. Have a good evening, Jeff Remsburg | 
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