Fed's Waller Backs More Rate Cuts, Medline's Debut | Bloomberg Businessweek Daily 12/17/2025

This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus, global business, finance and tech news as it happens, Bloomberg Businessweek Daily with Carol Massar and Tim Sten of VAX live on Bloomberg Radio, Television, YouTube and Bloomberg Originals.

In a very good afternoon, everybody. Across Bloomberg platforms.

Yes, indeed. Carol Massar and Tim Stenovec back live here at Bloomberg headquarters in New York City. S&P 500 kind of a bummer. Down for a fourth consecutive day here. If you're long, this market, if you're short over the last four days, you're slammed. Two sides to every trade, Carol.

Very true. S&P 500 down about a percent right now. The Nasdaq composite down 1.5%. Mega-cap tech really taking a hit today. We're going to get much more from Charlie Pellet in just a minute.

Yeah, I'm looking at the S&P 500, though. You know, you dig inside the index, kind of an even split, 252 names to the upside, 249 to the downside. So we're going to talk about the trade, as you said, in just a sec. Also ahead this hour, the IPO market, not so shabby. The biggest IPO of the year, getting it out of the gate, rallying on its first day of trading. We're going to get a look back at the year. That was the time of year gainers to 2026. Plus, a strategy session on the next Fed chair and policy and how it could affect the investing landscape. Matt Lazard is in the house and so is Ali McCartney. So we'll talk about the Fed, fixed income, expectations for monetary policy, and then we'll talk broadly about financial markets. Hey, we're also going to get into what The New York Times has called — they called her actually the Connector of New York's powerful. Another report called her the Billionaire Whisperer. In New York City, we're talking about Kathy Wylde. She's the outgoing president and CEO of the Partnership for New York City. But she's part of the transition team for the New York City mayor elect. So curious to see what she is hearing. We know the New York City economy is so important, not just for the financial community but really for the overall country.

Yeah, we're going to talk to her in just a few minutes.

First up, though, as promised, a check on the day's trading top business stories. Here he is, Charlie Light.

I thank you very much, Jim. Stocks lower across the board, but Carol was alluding to Medline. Do want to bring you up to date right there because Medline shares are up right now by 31%. We are tracking it on Bloomberg Television and radio. Biggest IPO of the year. If you don't use their products, you certainly know their products. The company manufactures and distributes medical supplies such as gloves, gowns and exam tables used by hospitals and doctors. Out the gate at $29, right now Medline at $38.01, looking at a gain right now of roughly 31%. This on a day when stocks are selling off. The Dow, the S&P, NASDAQ all lower for declining days in a row. On the S&P right now at 6732, we're down 67 on that index, a drop of 1%. Dow industrials down 194, a decline of 4/10 of 1%. The Nasdaq composite index down 3040, a drop there of one and a half percent. Ten-year, 4.15% with a two-year, 3.49%. Gold up $31 an ounce, 4333, up by 7/10 of 1%. West Texas intermediate crude oil up 1.4%, 5604 for the barrel. Bitcoin down 2.4%, 85,600 right now. Recapping Medline, searching now at 3799. We'll be hearing from Micron Technology after the close of trading ahead of earnings. Micron down now by 3.9%. I'm Charlie Pellet, and that is a Bloomberg Businessweek.

All right, Charlie, thank you so much. Fed Governor Chris Waller backed further interest rate cuts to get the central bank's setting back to neutral, saying policymakers need not rush to do so. He made those comments earlier at a CNBC event.

All right. That again was Fed Governor Chris Waller at an event earlier today. He is under consideration to be the next Fed chair, expected to meet for an interview with President Trump later on today. Asked about that, he quipped that's kind of what he had heard yesterday. Meantime, at an event, Treasury Secretary Scott Bessent again rejected reported concerns about the qualifications of National Economic Council Director Kevin Hassett as a candidate to become the next chair of the Federal Reserve. So let's talk about the next era of the U.S. Central Bank and more. Here with us once again in studio, Matt Lazard. He's chief U.S. economist, head of U.S. economic research over at Deutsche Bank. Good to have you back with us.

Good to be back.

It does feel like we're trying to figure out who's next. You do actually write specifically about a Warsh nomination and what it would mean for the Fed. Does it really matter who ultimately will be Fed chair since it is one vote, an important vote?

Yeah, so, you know, we've had to, as this news evolves of just about everybody that's a frontrunner. So we wrote a Hassett piece before, you know, months ago. I think we were talking about Governor Warsh and why we thought he could have been a very good candidate for Fed chair. But the question of does it matter? I mean, the market is pricing it like it does matter. There's a premium in the June FOMC meeting. We're building in more rate cuts at that meeting than the surrounding meetings. So the market is pricing something happening as that transition takes place. I think we're a little bit more skeptical of how much it can matter. Clearly, I think Chair Powell has mattered recently. I think you don't get the December rate cut without Chair Powell essentially pushing it through what is a very hawkish committee at this point in time. But I think he built up that confidence and credibility within a committee over a period of time. Just somebody coming in from the outside with a more dovish view is not going to be able to get this hawkish leaning committee to cut rates aggressively up front.

Of the candidates who are the reported frontrunners, is there one who would send a signal to you or maybe send a signal to the markets that the Fed's independence is at stake?

Yeah, I think that there's lots of questions around this. I think when you kind of see surveys, Kevin Hassett raises some of the most concerns around Fed independence and commitment to get inflation back down to target. I think that's somewhat quite natural. I mean, he's been in the president's orbit for a period of time here. He's been an economic advisor for the president. He's been calling for aggressive rate cuts at this point in time. All these candidates are doing so at this point, as we heard from Governor Waller recently. And so I think whoever it is, the next Fed chair is going to have to earn the market's trust that they are going to be committed to bring inflation back down to target.

Hey, Matt, you know, The New York Times writes next Fed chair, in a no-win scenario, a selection process draws to a close and they go on to say the person picked to replace Jerome Powell will be thrust into a credibility problem that will be difficult to escape. Is that the case? And I also wonder, sometimes you get into a position and you realize the weight of a position, and we know what the Fed does means a lot, not just to the U.S. markets, but to global markets.

Yeah, I think it is the case that there's going to be challenge for this next Fed chair coming in. They come in almost with a mandate to cut rates meaningfully. The president has called for the Fed funds rate to be down close to 1%, near the lowest in the world. And yet, even though Governor Waller said that inflation is under control, core PCE inflation is at 2.8%. It's still 80 basis points above their target. We're now four and a half years in well above target inflation. All the markets are pretty sanguine about the inflation outlook. We do have a stronger growth outlook next year. We have fiscal stimulus that's coming through the pipe. It actually looks like a pretty good outlook from a growth perspective. And then a question of does that feed through into higher inflation pressures?

What about the labor market in your view? We got some data yesterday. It was weird to say Jobs Tuesday. It was partial data and we'll get some inflation data tomorrow. But the jobs market, how does it look?

The way we've been describing it, and I think yesterday was another case of this, it's a Rorschach test for how you think about the labor market. Each of these reports has good elements and bad elements. I think yesterday's report had strong job gains and a broadening out of job growth. We've seen the private sector rebound. The past three months have been 75,000-plus in terms of private sector job growth. So that's all quite solid. The weakness was in the household survey. You saw the unemployment rate rise to 4.6%. Broader measures of labor market slack picked up more. I think importantly at the December meeting, Chair Powell highlighted why we should discount that data. It's coming right around the government shutdown. We thought there would be distortions to that household survey. So Fed pricing hasn't really moved all that much on the data. I think far more important will be the December jobs report that we get in early January.

So the worst case scenario is we've got inflationary pressures, which sound like they could be coming in the new year because of some of the stimulus measures that we're certainly getting from the White House, Matt. But if we have more inflationary pressures, but we continue — if we get some confirmation from the December numbers that yes indeed there is job weakness and maybe it's continuing — that's a tough predicament.

It is. I think it's a direction of travel towards stagflation-type impulses for the economy. It is what most economists thought you would get out of very large tariff increases. And so I think it is beginning to work its way through the economy. I think what we've learned, though, is this Fed under Chair Powell, and undoubtedly the next Fed, if you have weakness in the labor market, they will respond. They responded last year by cutting by 100 basis points. They responded this year by cutting by 75 basis points. Our base case is that the labor market stabilizes enough over the next several months that the Fed does not cut in the first half of the year. But look, if you get confirmation that the unemployment rate is 4.6 or above, I think the Fed cuts in the first quarter.

All right. Good stuff. Getting ready for 2026. Come hang out with us in the first quarter. We would love to have you back, Matt. Thank you so much.

Thank you. Happy holidays. Happy New Year.

Matt Lazard, he's chief U.S. economist, head of U.S. economic research for Deutsche Bank. We're going to talk more about Fed policy, the economic data and what that means for markets in just a moment. Having said that, we are seeing stocks under pressure today.

Yeah. Taking a look at the S&P 500 down about one full percentage point right now. If I go deeper into the S&P 500, information technology, communication services and industrials are all taking it. The industrials move, Carol, is really interesting. If you look at the worst performers in the S&P 500, these are all companies that are tied to in a sort of tertiary way the AI boom. So you have Nova down 8.8%, Constellation down 8.1%, Energy down 7%, Vistra Corp down 7%. Oracle is the first big name that is sort of like, okay, this is a primary AI company now seen as a bellwether for AI. That's down a whopping 5% today and rode a wave up in a big way because of its connection and kind of lean into AI. But now, in terms of what it's doing to the company's balance sheet, investors are maybe saying, well, if this doesn't all come to fruition, what does it mean for a name like Oracle and some others? Let's not forget, we'll get a read on AI once again when Micron Technology reports after the closing bell. That stock up 165% so far here in 2025. And in today's session, we're seeing it down about 4% ahead of those earnings.

Deutsche Bank's Matt Lazard, all about the Federal Reserve and his view on what the next Fed chair has in front of him or her, depending on who it is. I'm guessing our next guest has some thoughts on the Fed and what it means for financial markets. Back with us, Ali Macartney, managing director of wealth management and private wealth adviser with Alignment Partners at UBS, just over $1 billion in assets under management. She joins us here in the studio. We're going to talk about the markets and today's moves and sort of big picture what you're looking at. But we got to start just with the Fed and how you're thinking about the next Fed chair next year.

The Fed is going to depend on policy and politics, right? I'm not sure which comes first. Markets seem to be about 50-50 on whether we have a cut in January. We think you see two cuts next year, one in the first half of the year, one in the second. It will be largely dependent on who's in charge, what the inflation is that we see coming into the market, whether it's from healthcare — we were talking in makeup shares about the increase in costs of healthcare for average people going up almost 100% — as well as tariffs push through from later this year. It is, in a sense, anyone's guess. The markets seem to be pricing and playing as if they know there are further cuts. It's just not clear when or how profound. If you look at the last Federal Reserve dot plot, you could sort of drive a truck through whatever neutral is. I think it was 2 to 4% was a bit of a range. I think you basically have tailwinds. We know that earnings are going to be decent to good. We know those are going to broaden out a lot from just the IT trade. So that's one of the things. Fiscal policy, especially in the first quarter, is going to be major as a result of both income tax rebates as well as corporate spending initiatives and accounting issues that are going to propel both earnings and cash on balance sheets.

And then again, the Fed will be part of this for sure, Ali, when you look at 2026.

Yeah. And I just think about this year, how we thought things were going to go initially when President Trump came back to the White House, how it played out with April Liberation Day. I think we were all whipsawed in terms of our expectations and ultimately how it all laid out. And I think we thought this was going to be a disastrous year. And yet I look at the major equity averages, not so shabby. Certainly, again, if you're a bull in this market. I don't know, is this a reminder that it's going to be maybe hard again next year to make calls, or is it different?

Well, was it hard to make calls this year?

So you had to get two things right. You had to understand what AI was going to become in terms of a movement from the chief constraint being chips to the chief constraint where we now sit, and I think what's moving the market today, which is energy and land for data centers. And you had to get Trump right. Those are difficult. You also could have simply been long on the concept of earnings, meaning you just throw money in the indexes. And you would have done fine. Next year, I think it becomes a little easier. While I can't say that I or we can get Trump right, I think we can get directionality and maybe dampen short-term volatility because we know it largely leads to what he wants, which is mid or longer term markets up. I think he does care about markets. The craziest thing about getting Trump right or wrong was he told us exactly what he was going to do via press conferences, via other people, social media. And so if you went with him, you got things right. I think this year things are going to be a little easier in the broadening out of earnings. If you look at the S&P 500 or the NASDAQ this year, what you got was the AI trade contributed to about 75% or 80% of what ultimately became the upside. The next best contributor is financials at 1.7%. Next year, I think you're going to get some broadening. I think industrials, materials, financials, healthcare are going to play into that.

What happens if the promise of AI doesn't come to pass?

That's the biggest risk case. I think the biggest risk case for next year for investors or economists or policymakers is that we got it wrong. It's not if you build it, they will come. It's a big bet. And today, that bet in terms of what's been coming out around financing — one of my biggest takeaways from a four-day conference two weeks ago that UBS threw is that this is all about debt financing. There is not enough private debt and there is not enough capital on the balance sheets of the non-hyperscalers to get us where we need to be in terms of AI. And so it has to be the debt capital market. Oracle is exhibit A. I literally left there going, oh, I understand what the constraint is now. I understand the difference between core and how they finance asset-backed triple-A companies and how the market has been responding. I understand the private debt market and the private equity market saying we can only do so much. And so capital markets and public individuals have to come in. So I do think that's the biggest risk. But I can also tell you from that conference and the conversations I've been having that this is truly revolutionary and moving to the bottom line in a way we've never seen before. The productivity increases and the changes to both costs and revenue generation are at an inflection point that can support different multiples.

And the Oracle story is Oracle's financing for a data center in Michigan progressing, but Blue Owl Capital, which has been a long-time partner in Oracle's rapid infrastructure buildout, opted not to contribute equity. So that's exactly what we're talking about right now. It is a closed, finite ecosystem. In order to get where we need to be going, it has to get much bigger. Ali Macartney, managing director of wealth management and private wealth advisor for Alignment Partners at UBS. Thank you so much. This is Bloomberg. It's 2:21 on Wall Street.

We check markets all day long. You're on Bloomberg. We have got the Dow, the S&P, NASDAQ, all trading in the red right now. The S&P 500 index is down 63. That is a drop of 9/10 of 1%. Volatility lashing Wall Street, pushing high valuation tech stocks and crypto lower. Right now, the Dow is down 171. The decline there of 4/10 of 1%. The Nasdaq composite index down 342 points, down one and a half percent. The Bloomberg Magnificent Seven index is slumping by 1.6%. Ten-year, 4.15%. The two-year currently yielding 3.48%. Gold is up 8/10 of 1% at $4,338 an ounce. West Texas intermediate crude advancing at 1.4%, $56.05 a barrel. Bitcoin now down 2.2%, $85,813. On earnings news, we heard from Lennar last night. Its forecast for quarterly home orders missed analysts' estimates. Lennar shares are down 4.8%. Among peers, D.R. Horton down 2.2%. Pulte Home down 1.5%. Toll Brothers, the luxury homebuilder, up now by just about 5/10 of 1%. First day of trading for Medline, shares are up by 32%. Foreign demand news 24 hours a day. Subscribe to Bloomberg News now, wherever you get your podcasts. I'm Charlie Pellet at Bloomberg Businessweek.

All right. Charlie, thank you so much. Carol Massar, Tim Stenovec live here at Bloomberg headquarters in New York City. Now, many, including those that are wealthy, are concerned about some of the priorities of incoming New York City Mayor Zoran Mamdani. Weighing on this was one billionaire who does not call New York City home. We're talking about Citadel founder Ken Griffin. He talked about the city yesterday at a conference in Paris.

I think that New York City is a red flag because people put aside good sense and common sense to elect somebody who is incredibly charismatic, who ran a really powerful campaign on social media, but who ultimately doesn't have the ability to deliver on the promises that he set forth. New York took a big setback during the de Blasio days, and I hope that Mamdani starts to think about how to pivot to a more thoughtful set of policies that will allow New York City to maintain its position not only as one of the greatest cities in America, but one of the greatest cities in the world.

And that, of course, was Citadel founder Ken Griffin there with Danny Berger, Bloomberg News. We want to get into our guest, Kathy Wylde. She is president and CEO, outgoing president and CEO of the Partnership for New York City, which represents much of the city's corporate leadership. So we're talking about real estate developers, private equity firms, banks, many, many companies. Bloomberg LP, by the way, is a member of the Partnership for New York City. She's also part of New York City Mayor elect Zoran Mamdani's transition team. And we have a lot of questions to ask her. Also with us is, of course, Bloomberg News senior reporter Miles Miller. All of us here in studio. I told you as you sat down that we have about an hour of questions, so we're going to start and we'll talk fast.

We will talk fast. Why don't you want to be a part of the transition team for the mayor elect of New York City?