Key Economic Developments Highlight Fed Division, Labor Market Cooling, and House Action on Private-Market Access

Matthew Rubin Chief Investment Officer

 

1. The Federal Open Market Committee appears divided on the path of interest rates and remains cautious about the 2026 outlook.
2. Jobless claims point to a cooling but still fundamentally steady labor market.
3. The House of Representatives passed the INVEST Act to expand access to private markets by widening investor eligibility and supporting new channels for raising capital.

 

1. Fed Sends Mixed Signals as Policy Debate Widens

Last week’s interest rate cut revealed disagreement within the Federal Open Market Committee. Two members supported keeping rates unchanged, while another argued for deeper cuts. This marked the first time since 2019 that three members dissented on a policy decision, highlighting the widening range of views on how quickly the Fed should adjust rates.¹ The statement released after the meeting suggested the central bank may pause rate cuts at its January gathering after three straight cuts.¹ Comments from Chair Powell reinforced this idea, even as he noted that future easing remained more likely than a shift toward tightening.

The outlook for 2026 is uncertain. The updated dot plot, an internal Fed chart that shows each committee member’s projection for future interest rates, predicted only one cut next year and another in 2027, though the points were widely dispersed.¹ Inflation remains near 3%, keeping policymakers cautious despite a recent slowdown in wage growth.² Tariff-related price pressures add another layer of risk. Based on current conditions, we expect the Fed to reduce rates once or twice next year, bringing the Fed Funds Rate into a range of roughly 3% to 3.5%.¹

2. Labor Market Shows Mixed Signals but Remains Stable

Initial jobless claims increased last week to 236,000, the highest level in roughly three months and above expectations.³ At the same time, continuing claims eased from 1.94 million to 1.84 million, suggesting that while more people are entering the system, the number already receiving benefits is not rising at a concerning pace.³ The broader labor backdrop also held firm. The unemployment rate stayed near 4.4%, and job openings in October edged up to 7.7 million, slightly above the 7.6 million individuals counted as unemployed.³

Taken together, the data show a market that is losing some momentum yet remains far from a downturn. Hiring conditions are softer, but they still reflect an economy that is adjusting rather than contracting. Wage growth also continues to outpace inflation. This should keep real incomes positive and help sustain consumer spending, a key pillar of overall economic activity.

3. INVEST Act Aims to Expand Access to Private Markets and Support Capital Formation

Last week, the House passed the INVEST Act with a bipartisan vote of 302 to 123, clearing a significant hurdle for a package aimed at directing more capital into private markets.⁴ Supporters say the legislation would broaden capital formation and investment opportunities for companies and investors by easing several long-standing restrictions. A central provision would allow individuals to qualify as accredited investors by passing an exam approved by the Securities and Exchange Commission, rather than relying solely on income or net worth.⁴ Lawmakers argue this shift could open private-market investing to a wider population and help more early-stage firms secure funding.

The bill would also raise the thresholds that trigger tighter disclosure rules for venture capital funds, increasing the investor limit from 250 to 500 and boosting the fund-size cap from $10 million to $50 million.⁴ Another measure would make it easier for venture firms to invest in each other, with the goal of allowing more capital to reach emerging companies across the country. Proponents note that the rise in large private startups has limited public-market access to high-growth opportunities, and they view the INVEST Act as a step toward rebalancing that landscape. The legislation now moves to the Senate, where its path forward remains uncertain.

For the period ending 12/12/25.
* Small-cap stocks are represented by the Russell 2000^® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.

Sources
¹ Bloomberg
² Bureau of Labor Statistics
³ U.S. Department of Labor
⁴ CNBC

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