Food, clothing, toys...rising prices are on everyone's minds -- especially at this time of year. The Federal Reserve and President Donald Trump are both having to fight the perception that average Americans are struggling with everyday costs, and it could be a make-or-break couple of weeks.

There will likely be no surprises about the Fed's interest-rate decision on Wednesday, with traders pricing in an overwhelming chance of a quarter-point cut. But investors will be watching for a likely split between policymakers, and also diverging economic projections, as the central bank weighs the risks of inflation and a slowing job market.

There was some relief about prices last week. The September 12-month PCE inflation rate -- the Fed's preferred gauge -- came in at 2.8%, in line with expectations. But that's old data and still well above the 2% target. Meanwhile, consumers are expecting a 4.1% increase in prices in the year ahead according to a University of Michigan survey.

High inflation expectations are a worry for President Trump as well. He's reported to be planning a national tour to tout his administration's economic achievements, with the political stakes high ahead of next year's midterm elections. The need to appear to be holding prices down could mean a softened stance on tariffs, or even a tougher position on big mergers if reduced competition threatens to lead to higher prices. Trump raised concerns Sunday about Netflix's planned acquisition of Warner Bros. Discovery saying he would be personally involved in the decision.

It's been a good year for Wall Street so far, with a nearly 17%-gain in the S&P 500, leaving the index sailing toward a third year of double-digit growth. Analysts currently expect that to continue into next year, but Main Street's affordability concerns could start to weigh, unless the Fed and the White House can show they have a grip on inflation.

-- Adam Clark

***Join Barron's senior managing editors Lauren R. Rublin and Ben Levisohn today at noon for a look at stocks in the news, what's ahead for the Fed, and how to prepare your portfolio for the new year. Sign up here.

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.

***

It's the Fed's Moment This Week as Rate Decision Looms

The Federal Reserve's preferred inflation gauge edged up in September, largely in line with economists' expectations, likely opening the door for Fed officials to cut interest rates on Wednesday. Fed-funds futures reflect an 86.2% probability of a quarter-point cut, according to the CME FedWatch tool.

   -- The core personal consumption expenditures, or PCE, price index, 
      excluding food and energy prices, rose 0.2% from August and 2.8% from 
      last year, the Bureau of Economic Analysis reported. Headline PCE rose by 
      a higher-than-expected 0.3% for September, and a 2.8% annual rise. 
 
   -- The September data, released Friday after the 43-day government shutdown 
      postponed government inflation readings, could factor less into the Fed's 
      decision-making than previous reports. The Fed will also release its 
      quarterly Summary of Economic Projections, with policymakers' forecasts 
      on future unemployment, inflation, and interest rates. 
 
   -- Fed Chair Jerome Powell, who has said that there are risks to both stable 
      prices and maximum employment, could signal no rate cuts early next year. 
      If Powell casts doubt on future rate cuts, that could throw cold water on 
      a December Santa Claus stock rally even if the Fed cuts rates. 
 
   -- StoneX market analyst Fawad Razaqzada wrote that the key question is 
      whether the Fed's move can trigger such a rally, which is when stocks 
      rise in the last five trading days of the year and the first two of next 
      year. The S&P 500 forecast is "cautiously constructive," Razaqzada said. 

What's Next: After December's widely expected cut, Dave Grecsek, Aspiriant's managing director of investment strategy and research told MarketWatch there is the potential for two to four more cuts in 2026, which could really drive up markets and trigger the Santa rally.

-- Nicole Goodkind, Dan Lam, and Janet H. Cho

***

Trump Will Outline His Economic Policies During National Tour

President Donald Trump's aides say he is frustrated that his economic messaging isn't registering with voters amid polling showing Americans disapprove of his handling of inflation. Seeking to reset things, Trump kicks off a national tour Tuesday in Pennsylvania to highlight his work on affordability and fighting inflation.

   -- Pennsylvania Republican Sen. Dave McCormick was among those on Sunday 
      rallying support for the efforts. McCormick cited pledges by companies 
      like Nippon and Hanwha to spend trillions of dollars in the U.S. and the 
      spending on AI and data centers. "There's more to come," he told Fox's 
      Sunday Morning Futures. 
 
   -- Trump appears frustrated by his administration's messaging on 
      affordability, his former chief of staff Reince Priebus told ABC's This 
      Week. And Former New Jersey Gov. Chris Christie, a Republican, told ABC 
      that public opinion against Trump on the affordability issue conflicts 
      with Trump's belief that he is the economy president. 
 
   -- Treasury Secretary Scott Bessent told CBS' Face the Nation that the 
      economy is better than expected now than what people predicted when 
      tariffs were announced in April. He predicted the U.S. will end the year 
      with 3% real GDP growth despite the longest government shutdown in U.S. 
      history. 
 
   -- Bessent told CBS that imported goods inflation is below overall inflation 
      as represented by the personal consumption expenditures index, which is 
      around 2.9%. Imported goods inflation is more like 1.8%, he said. It is 
      the service economy generating inflation, he said, and that has "nothing 
      to do with tariffs." 

What's Next: Priebus said getting the trade deals done is important but the administration may not wrap them up with Canada and China before the end of 2025. He said the question is whether the administration can convince voters it has made progress on the economy before next year's midterm elections.

-- Liz Moyer and Janet H. Cho

***

Netflix's Warner Bros. Discovery Deal Is Far From a Sure Thing

Netflix's plans to buy Warner Bros. Discovery won't be a slam-dunk regulatory approval, according to several observers. Politicians on both sides of the aisle have already raised concerns to the Federal Trade Commission and Justice Department about competition, and rival Paramount Skydance has complained about the bidding process.

   -- Netflix co-CEO Ted Sarandos said Friday the deal is pro-consumer, 
      pro-innovation, pro-worker, pro-creator, and pro-growth, expressing 
      confidence in getting the needed approvals. But The Wall Street Journal 
      and other news outlets said the Justice Department will investigate. Wolf 
      Research analyst Peter Supino said the deal's risks are real. 
 
   -- The Federal Communications Commission approved this year's merger between 
      Paramount and Skydance, shortly after Paramount settled a lawsuit with 
      Trump, paying $16 million. Paramount CEO David Ellison's father, Larry 
      Ellison, is close to President Trump. Paramount accused Warner Bros. of 
      favoring Netflix during the bidding process. 
 
   -- The deal also raised red flags abroad. U.K. House of Lords member 
      Baroness Luciana Berger called for an assessment of the tie-up's effect 
      on competition and consumer prices for the streaming market, investment 
      in film and TV productions, and the cinema sector. A trade group for 
      cinema operators opposes the deal. 
 
   -- Gimme Credit Senior Bond Analyst Dave Novosel said Netflix faces plenty 
      of competition not only from other streamers but other media content 
      generators such as TikTok, X, and Instagram. Wall Street says it's easy 
      to see why Netflix, the world's biggest streaming outlet, would want 
      Warner. 

What's Next: Hanna Howard, portfolio manager and research analyst at Gabelli Funds, said Netflix has several options. It can run Warner's HBO Max as a stand-alone streaming platform or merge it with its own app. It could offer a bundled product, as Walt Disney does with Disney+ and Hulu.

-- Angela Palumbo

***

Oracle, Adobe, Broadcom Report This Week Amid AI Frenzy

With artificial intelligence dominating discussions, investors will hear from Oracle, Adobe, and Broadcom among companies reporting earnings this week. Shares of most AI winners thus far have traded on hopes for the far-flung future, rather than the here, now, or near future, notes Trivariate Research President Adam Parker.

   -- As Parker detailed in a recent note, his firm created three baskets in 
      2023 -- 10 semiconductor stocks, 19 software, and 20 other companies like 
      Amazon, Dell Technologies, and Snowflake. They were then divided into 
      companies with high, low, and negative free cash flow. Analysts found 
      investors don't care about free cash flow. 
 
   -- Semiconductor companies now have significantly less free cash flow than 
      the other categories, yielding 1.7%. And yet semiconductor stocks have 
      outperformed the others since the spring. In other words, AI believers 
      aren't paying attention to free cash flow yield, a valuable metric to 
      gauge a company's current performance. 
 
   -- AI has been a big subject for third quarter earnings conference calls, 
      with more companies than normal talking about it, according to FactSet. 
      From Sept. 15 through Dec. 4 the term AI was cited on 306 earnings calls 

      conducted by S&P 500 companies, above the five-year average of 136 and 
      the 10-year average of 86. 
 
   -- FactSet called it the highest number of S&P 500 earnings calls mentioning 
      AI in the past decade (using current index constituents going back in 
      time). The previous record over the past 10 years was 292 citations the 
      second quarter 2025. Information technology and communications services 
      cited it the most. 

What's Next: Stocks in Parker's analysis, except MongoDB, are down from their 2025 highs, including Oracle, which is one of four companies with negative free cash flow yield. When it comes to AI stocks, the question isn't what have you done for me lately but what will you do for me...eventually?

-- Teresa Rivas and Liz Moyer

***

Carvana and CRH to Join S&P 500 After Reshuffle

What do a used car retailer, building materials provider and heating, ventilation, and air conditioning company have in common? All three are about to join the S&P 500, as part of a quarterly reshuffle.

   -- Carvana, CRH, and Comfort Systems USA will join the benchmark index, S&P 
      Dow Jones Indices said after Friday's market close. The admission 
      committee rebalances the S&P 500 each quarter, looking at factors such as 
      market value, profitability, and sector representation. 
 
   -- Auto parts provider LKQ, chemical company Solstice Advanced Materials, 
      and flooring manufacturer Mohawk Industries will be removed from the 
      large-cap S&P 500 and demoted to the S&P 600 small-cap benchmark. 
 
   -- Online used car retailer Carvana and construction aggregates and cement 
      provider CRH were the prime candidates to join the S&P 500. The changes 
      will take effect prior to the Dec. 22 opening bell, as index funds need a 
      short window to rebalance their portfolios without blowing up liquidity. 
 
   -- Comfort Systems USA, which provides mechanical and electrical contracting 
      services, such as HVAC and plumbing, was the more surprising pick. The 
      stock has grown more than fivefold over the past two years, with market 
      value of $35.3 billion as of Friday's close. 

What's Next: Joining the S&P 500 doesn't always bode well for a stock. While Expand Energy, TKO Group, and DoorDash have racked up double-digit gains since being added to the index earlier this year, Trade Desk and Block have tumbled 51% and 23% respectively, according to Dow Jones Market Data.

-- Evie Liu, George Glover, and Andrew Bary

***

-- Newsletter edited by Liz Moyer, Rupert Steiner

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

December 08, 2025 06:58 ET (11:58 GMT)

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