Markets expect more rate cuts next year with probable new Fed chair
Policy circles lit up after word spread that U.S. Federal Reserve (the Fed) governor Chris Waller is now the inside favourite to replace Jerome Powell when the chair’s term ends in 2026. A career economist and long-time dove (someone favorable to rate cuts), Waller caught Wall Street’s eye last month when he and Michelle Bowman cast the first dual dissent since 1993, arguing for an immediate quarter-point interest rate cut. Betting markets reacted fast: odds on his appointment surged, and futures now imply a deeper easing track in 2026, even though next year still shows just under two cuts. The message is simple: if Waller gets the nod, lower rates stay on the table, and investors favouring equities will have another reason to cheer.
Eli Lilly (a U.S.-based pharmaceutical company) posted solid second-quarter numbers and even increased its performance expectations, yet the stock cratered by as much as 14%, the worst one-day hit since the dot-com bust. The culprit was orforglipron, Lilly’s much-hyped oral weight-loss drug. Trial data met stated targets but fell short of lofty hopes, especially as regards its efficacy versus that of similar drugs given by injection. Some investors slammed the exit door, wiping tens of billions from the firm’s value and dragging peers lower. The episode is a reminder that in the obesity-drug arms race, expectations are priced as if every study will be a home run; anything less is seen as bad news.
In a White House photo op, Apple pledged to lift its cumulative U.S. investment plan to $600 billion over four years, up from the already announced $500 billion. The splashy headline juiced Apple shares by more than 5% and helped pull the S&P 500 Index to fresh highs, even though the extra $100 billion appears to include money the company had already earmarked for spending. Minutes later, the other shoe dropped: U.S. President Trump floated a 100% levy on imported semiconductors unless the producer manufactures inside the U.S. Chipmakers with U.S. production got a wink and a nod; those reliant on Asian foundries suddenly face a two-front battle of capital expenditure and policy risk. Expect more “Made in America” press releases from semiconductor CEOs in the months ahead.
Looking ahead, investors are riding a wave powered by easy money, fast-moving prices and long-term tech and policy tailwinds. As long as this story holds, few seem concerned by warnings of a slowdown. With cash still flowing and big innovation cycles in full swing, the market mood stays optimistic, while seasonality effects are weakening.
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