The Fed’s Divided on Rates. Why Stock Markets Can Rise Through 2026 Anyway and 5 Other Things to Know Today.

It is a truism that markets are forward-looking—and on a day when the Federal Reserve will dominate headlines, investors may instead want to pay attention to 2026.

All indications are that the Fed is divided on the economy and where interest rates will go next year. Markets are also unsure—but that does not necessarily mean bad news for stocks.

While a Wednesday rate cut is baked in, the odds of another quarter-point reduction in borrowing costs in January stand around 20% and barely get above coin-flip territory through the first half of next year.

Conflicting signs from the economy are complicating the jobs of policymakers and traders. Slowing job growth screams lower rates, but inflation still above the 2% target builds the case for keeping rates near where they are.

The White House is another wild card. President Donald Trump will likely nominate a new Fed chair who is trigger-happy on cutting rates, but the president also launched an apparent “affordability tour” this week as inflation continues to bite voters.

The bond market sees lower rates in the shorter term, but yields on longer-term Treasuries have risen recently—a signal that borrowing costs may not be on an inexorable ride down after all. Prices for gold, a historic hedge against inflation, also remain near record highs.

Another market truism is “do not fight the Fed,” but investors should remember that stocks can still push higher even if borrowing costs do not come down much more.

The S&P 500 is closing in on a third year of around 20% gains, and the first rate cut in this cycle only came in September 2024. Earnings growth remains strong and some stock valuations are not as stretched as they could be.

Artificial intelligence trends also continue to buoy the market despite fears of an AI bubble —though the end of rate cuts could spell trouble on that front, as bubbles do not usually burst during rate-cut cycles. But that is another worry for well into 2026.

—Jack Denton

*** What’s Ahead for Markets in 2026? From “Liberation Day” tariffs to torrid rallies in AI stocks and gold, this year has been full of surprises. Join us on Dec. 11 at noon for discussions with investment strategists and money managers about the outlook for the economy and markets in 2026—and how to position your portfolio for success. Sign up here.

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What a SpaceX IPO Could Mean for Tesla Shareholders

Tesla investors got a reason to dream about what might be coming in the new year, and it involves the possibility that CEO Elon Musk’s commercial space company SpaceX could go public in what could be the biggest new listing of all time, according to Bloomberg.

• SpaceX aims to raise $30 billion in an IPO next year, Bloomberg reported, citing people familiar with the matter. That would target a valuation of $1.5 trillion for the company, which focuses on launch services, the Starlink satellite operations, and space exploration. SpaceX didn’t respond to a request for comment.
• SpaceX is privately held, but it is already the most valuable aerospace and defense company, valued at $400 billion. SpaceX was reported to be seeking an $800 billion valuation this past week, but Musk downplayed that saying SpaceX is already cash-flow positive. It doesn’t have a pressing need to raise cash.
• That is a disappointment to many investors who would like to own a piece of the company. The appeal is clear: It accounts for more than half of all global orbital launches and has a space-based broadband business, Starlink, with more than eight million subscribers.
• A SpaceX IPO would also fuel speculation that Musk could combine his far-flung tech empire under one roof. Tesla shareholders recently voted in favor of a shareholder proposal that would authorize a Tesla investment in Musk’s AI company xAI. The vote was nonbinding, and many shareholders abstained.

What’s Next: Tesla investing in either xAI or a SpaceX IPO could be one step on the path to a larger X Corp. Wedbush analyst Dan Ives said he’d be shocked if Tesla doesn’t take a stake in SpaceX. Ives also believes Tesla’s AI efforts, including robo-taxis and robots, will lead to significant earnings growth.

— Al Root

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Spending Outlook By JPMorgan Exec Outpaces Expectations

A top JPMorgan Chase executive’s words at a conference may reverberate through rival banks. Consumer and Community Banking Chief Marianne Lake said firmwide expenses would rise in 2026 thanks in large part to its investing in growth initiatives. A prominent analyst said other banks may have to up their game.

• Lake told investors at a Goldman Sachs conference that she now expects firmwide 2026 expenses of $105 billion. That would be 3.6% higher than Wall Street’s current estimates and 9% higher than expectations for full-year expenses in 2025, according to data compiled by FactSet.
• Lake said the biggest driver of higher expenses is “high-quality” costs, reflecting growth investments, such as product-marketing costs, higher incentive-related compensation for advisors who outperform, improvements to credit card offerings, and AI investments.
• Wells Fargo banking analyst Mike Mayo said that the outlook “should reverberate” as other banks may be looking to up their own spending to stay competitive. Lake added that higher expenses are also tied to a lesser extent to structural effects of inflation such as higher real estate costs.
• Lake said, too, that consumers and small businesses remain healthy, as do spending trends and measures of credit quality such as charge-offs and delinquencies. But the labor market and demand for labor, specifically, are weakening, and sentiment is low.

What’s Next: The number of available jobs swelled in September and October, providing additional evidence that employment isn’t collapsing. But that signal of economic strength isn’t expected to prevent Federal Reserve officials from deciding to lower rates when they conclude their December policy meeting later today.

— Rebecca Ungarino, Janet H. Cho, and Megan Leonhardt

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Pfizer Pursuing Next Weight-Loss Drug in Chinese Labs

Pfizer has joined the cavalcade of big pharma firms hunting for new weight-loss drugs in the laboratories of Chinese biotechs, in a bet on the exploding demand for weight-loss drugs, even as U.S. lawmakers ramp up efforts to undercut China’s growing biotech sector.

• Pfizer will pay $150 million upfront to Yao Pharma, a subsidiary of Chinese biopharma company Shanghai Fosun Pharmaceutical Co., for the rights to an oral GLP-1 drug now in early-stage human trials. Yao Pharma could receive milestone payments worth up to $1.9 billion plus potential royalties.
• Pfizer last month spent $7 billion, plus billions more in potential milestone payments, betting on the later-stage weight loss drugs being developed by the biotech Metsera. While Metsera’s drugs closest to market are injectables, the Yao drug Pfizer has licensed could offer an oral option.
• As the Chinese biotech sector has exploded in productivity, global big pharma companies including Merck, Regeneron Pharmaceuticals, AstraZeneca, and Novo Nordisk have rushed there to license promising new medicines, especially in the weight-loss market.
• Congressional lawmakers, meanwhile, have unveiled a new version of the National Defense Authorization Act that includes provisions from the BIOSECURE Act, a measure that will bar federal contractors and grantees from using services or equipment from certain Chinese biotechs.

What’s Next: Yao Pharma is currently running a Phase 1 trial in Australia of the GLP-1 that Pfizer has licensed. Yao will complete the trial, and Pfizer said it would test the drug in combination with other medicines already in its pipeline.

— Josh Nathan-Kazis and Janet H. Cho

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NextEra Sees Electricity Demand Soaring in Coming Decades

Renewable energy provider NextEra Energy expects electricity demand to grow six times faster over the next 20 years than it did over the prior two decades. Artificial-intelligence data centers will account for more than 40% of that growth.

• At an investor conference this week outlining its view of the U.S. power generation market, the company said Americans will be using nearly 60% more power by 2045 —about 6,800 terawatt hours—up from 4,300 terawatt hours in 2025.
• NextEra has coined an acronym for data centers: BYOG, or bring your own generation. The large load market demand from hyperscalers can be satisfied through data center hubs, which will be “powered at least partly by natural gas-fired generation,” Baird analyst Ben Kallo wrote.
• NextEra plans to develop 15 gigawatts of data-center hubs by 2035, with an upside case of 30 gigawatts. That could mean new business for power-generation equipment maker GE Vernova and for Tesla, which has a utility-scale battery storage business, Kallo added. It could also benefit oil companies such as Exxon.
• Exxon and NextEra are collaborating on carbon-abated, gas-fired power-generation projects to serve hyperscalers. UBS analyst Manav Gupta called Exxon Mobil an excellent partner for NextEra, because Exxon produces natural gas and has one of the strongest offerings for capturing and sequestering carbon.

What’s Next: NextEra expects earnings to grow about 8% annually over the next decade—roughly in line with its long-term record of near-double-digit growth. NextEra also issued initial 2026 earnings-per-share guidance of about $3.97, which is just shy of Wall Street projections.

— Al Root and Janet H. Cho

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Warner Bros Bidding War Escalates. Paramount Is Beating Netflix

The bidding war for Warner Bros. Discovery is ramping up and Paramount may have the advantage over Netflix after launching its hostile takeover bid earlier this week.

• Paramount CEO David Ellison met with Warner investors in New York on Tuesday as he tried to persuade them his company’s bid was better than that put forward by Netflix, The Financial Times reported.
• Media investor Mario Gabelli, who attended the UBS conference where Paramount gave a presentation said it was “highly likely” he would tender his client’s Warner Discovery shares to Paramount, in an interview with Bloomberg.
• Gabelli’s firms and fund hold more than 5.6 million shares in Warner Discovery, according to FactSet data. That’s only around a 0.2% stake but it suggests Paramount’s efforts may have some impact.
• Paramount went direct to investors Monday with a $30 a share tender offer for all of Warner Discovery. Netflix’s cash and stock bid offer for Warner’s studios and streaming businesses is valued at $27.75 a share.

What’s Next: There is plenty of time for more plot twists. Warner’s board has until Dec. 22 to decide if Paramount’s offer is better and Warner investors have until Jan. 8 to make up their own minds.

— George Glover and Callum Keown

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Dear Quentin,

We are writing a trust and have three homes.

Home #1: We are halfway through a 15-year mortgage on it. Our adult child rents the home. After it’s paid off, or upon our death, we want to gift them the home, since they paid the mortgage. (The gifting might be delayed to delay the step-up in basis.)

Home #2: There is a 15-year mortgage on it, with about 12 years left. The money was a cash-out refinance (on a previously paid-off home) used to purchase home #3. We live in this home.

Home #3: Our adult child rents the home. After the mortgage on home #2 is paid off, or upon our death, we want to gift them this home, since they paid the mortgage. We hope to do something similar in the future for our third offspring, but they are not settled yet.

Our lawyer wants what we understand to be a very standard clause in the trust where all the assets are added up and then split three ways (because we have offspring) and each offspring can use some of their inherited funds to “buy” the home they currently live in (and pay the mortgage on) at market rate.

For example, child #1 might have to use their inherited funds to “buy” their home for $500,000 (appreciated value) minus $25,000 (balance due). We are very against this, as this seems absolutely insane to us.

They have already paid the mortgage. It makes no sense to require them to “pay” it again. But the lawyer insists this is normal. Is it normal? (We won’t agree to it, even if it is normal.) What would you do in this situation?

— The Parents

Read the Moneyist’s response here.

— Quentin Fottrell

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner