25.11.25 - Betting on a December cut amid consumer weakness
Producer prices released this afternoon added fuel to the market’s regained “Fed-cut-in-December” narrative.
The PPI rose 0.3% in September, in line with expectations, after a -0.1% decline the month before.
The Core PPI (ex Food & Energy) showed a much softer picture, increasing only 0.2% versus the estimated 0.4%, and down sharply from 0.6% in August.
On the consumer side, the cooling trend became more visible: Retail sales in September rose just 0.2% MoM, half the expected 0.4% and well below August’s 0.6%.
Consumer confidence continues to fall, tanking in November to 88.7 from 95.5 level in October.
This combination, softer consumer momentum and benign producer prices, gave traders additional confidence that the Fed may pivot sooner rather than later.
Markets: Volatility inside the equity market increased, with indices showing larger intraday swings, but the second half of the session stayed comfortably in the green.
Equities higher, led by consumer names
US 10-year yield lower, trading briefly below 4.0%
Gold: firmly above USD 4’100/oz
USD: under pressure
Cryptos: continued broad swings, Bitcoin at USD 87k
Volatility: VIX slipped back below 20
My View: Yesterday’s rebound extended modestly, supported by lower volumes and a renewed belief that the Fed may cut rates in December.
But this narrative selectively ignores the emerging weakness of the US consumer, the true backbone of the economy, accounting for nearly 70% of GDP.
The trend is clear: Spending is slowing, delinquencies are rising, debt levels remain stretched, more households are struggling to cover monthly bills.
At some point, markets will be forced to refocus on this reality. And when they do, the adjustment could be sharp and sudden, potentially triggered by a credit event, similar to what we saw only a few weeks ago.
For now, regained optimism prevails on the traders front. But beneath the surface, the consumer is flashing warning signs that should not be ignored.
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