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Hello Peter Anthony Hovis,

Wall Street Wants Rate Cuts. PCE Decides Whether They Get Them.

Happy inflation day!

Today, Wall Street investors and Federal Reserve officials will get a dated reading on the central bank’s preferred inflation gauge, the personal consumption expenditures price index.

Economists expect a third-straight 0.2% increase in the core index. If that’s the case, it’d mean the year-over-year figure to just below 3%. It doesn’t imply a runway inflation, but the number would be sticky and somewhat elevated.

The report carries a heavy weight because investors’ eyes are laser-focused on the Fed’s interest rate decision that is due next week. The anticipation of a rate cut has led to a monster recovery in the S&P 500, where the benchmark index is now just 0.5% off its record closing high.

There is a chance that the PCE report could re-adjust investors’ expectations for next week’s rate cut.

“Participants are consciously reducing risk exposure before a key data window,” said Dilin Wu, a strategist at Pepperstone Group. “Even with high odds, PCE still has the power to shift the market’s timing and confidence in the path of rate cuts.”

Dilin Wu, a strategist at Pepperstone Group (Photo: LinkedIn)

Speaking of the rate cut expectations, US government bonds sold off slightly after yesterday’s jobless report, implying that Wall Street reduced the odds of a rate cut just slightly.

Applications for US employment benefits fell last week to the lowest in more than three years, with initial claims decreasing by 27,000 to 191,000 in the week ended Nov. 29. That week included Thanksgiving. The data could be volatile around holidays.

Regardless, total claims fell sharply from the previous reading. Even the number of continuing claims declined.

(Source: Bloomberg)

“Initial claims can be subject to big swings at this time of year, so we won’t read too much into one week’s number,” Nancy Vanden Houten, lead economist at Oxford Economics, said in a note.
“Still, initial claims have remained in a range consistent with a relatively low pace of job losses despite recent layoff announcements.”

Not only that, Challenger, Gray & Christmas revealed that announced layoffs at US companies fell last month, but it was the highest for any November in three years.

(Source: Bloomberg)

These two job reports indicated that the labor market is cooling, but it is not collapsing. Could it be enough for the Fed to sound hawkish, even if they cut rates next week?

“There remain some negative payroll employment readings. But the US labor market is not collapsing based on timely data and reports that have leading indicator properties,” said Don Rissmiller at Strategas.
“We continue to believe the Fed will cut the fed funds rate again by 25 basis points in December.”

Regardless, Ulrike Hoffmann-Burchardi at UBS Global Wealth Management expects the Fed to cut rates twice by the end of the first quarter of 2026. That scenario would be bullish for stocks. Otherwise, the current rally could be challenged by fewer rate cuts than expected.

“We continue to expect two rate cuts by the end of the first quarter of 2026, with Friday’s personal consumption expenditure index likely to show price pressures under control,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.

In short, everything seems to hinge on the Fed’s future rate cuts.

Fever-Tree x Molson Coors: The Partnership That Could Unlock the US Market

Today’s Stock Pick: Fever-Tree Drinks ADR (FQVTY)

The days of high-volume, low-quality drinking are fading. They are being replaced by a new consumer mantra: “quality over quantity.”

As drinkers shift toward moderation and premiumization, legacy soda brands are struggling to keep up, but specialized “craft” mixers are capturing the margin. One company has positioned itself perfectly at the intersection of these trends, and thanks to a new strategic alliance, they are ready to export that premium model to the American mass market.

This brand is Fever-Tree Drinks.

Listen, ten years ago, hardly anyone cared what tonic or ginger beer got poured into their gin and tonic. The liquor was the star; mixers were just background noise.

However, the broader culture has changed.

Namely, the rise of “drink less, but better.” Younger consumers started trading quantity for quality, leaning into premium products, lower alcohol, and even non-alcoholic options.

This London-based company introduced mixers made with natural ingredients, wrapped in sleek packaging, and marketed with a sense of craft and sophistication. Suddenly, the supporting act was sharing the spotlight.

(Photo: Fever-Tree)

That trend sparked a cocktail revolution.

Mixers weren’t an afterthought anymore—they were front and center. And the brand that made it happen? Fever-Tree.

During the recent earnings call, CEO Tim Warrillow cited three global trends shaping the brand’s trajectory: premiumization, moderation, and the rise of longer, lighter drinks. Each trend fuels demand for Fever-Tree’s portfolio that spans tonics, ginger beer, and sodas.

The stock may have a powerful catalyst coming up.

The company recently announced a partnership with Molson Coors to tap into its network of 400 distributors.

This deal will bring Fever-Tree into the USA market.

It could fuel the next stage of growth.

Right now, the company’s revenue growth is modest. The recent half showed a 2% revenue growth. The US market saw a 4% growth, but the deal with Molson Coors started in June. The effect of the deal might be seen in the second half.

(Source: Fever-Tree)

Bottom line: Fever-Tree might see its USA market grow after signing the deal with Molson Coors, so the stock might jump in the second half. Keep an eye on this stock.

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