by Louis Navellier
December 16, 2025
With the recent record-long government shutdown putting a hiatus on some economic data in October and November, it’s hard to know what economic benchmarks to trust. It’s clear that Fed Chairman Powell does not trust the jobs data, so I wonder how the Fed might feel about the other indicators, like inflation, since there is more evidence of impending deflation than rising inflation. For instance, CNBC reported that home prices declined 1.4% in the past three-months, and home listings rose 13%, so the inventory of homes for sale is rising, despite falling prices. Furthermore, rental prices have fallen for four-consecutive months, according to the Costar Apartment Monthly Rent Report, so the main shelter cost component (“owners’ equivalent rent”) should show a decline in the November Consumer Price Index (CPI) report.
Unfortunately, the October CPI never came out, due to the federal government shutdown, but if deflation appears in some key parts of the release of the November CPI – due to falling housing and energy prices – it’s my view that the Fed should cut key interest rates further, perhaps even in an emergency meeting.
Last week, there were three dissenting votes on the FOMC’s rate policy, with one member (Stephen Miran) favoring a larger (0.5%) rate cut, and two FOMC members voting for no rate cut at all – namely, Chicago’s Austan Goolsbee and Kansas City’s Jeffrey Schmid. Interestingly, Schmid also abstained from cutting key interest rates at the October FOMC meeting, so he is now the most hawkish FOMC member.
The bottom line is that there is no reason for the Fed to remain restrictive when the U.S. economy is not creating many new jobs, so the Fed should cut key interest rates at least two more times in 2026 before moving to a “neutral” rate. Furthermore, the inflation risk has fizzled. Due to falling home prices, excess rental properties and falling crude oil prices, there is a potential deflation risk that the Fed must consider.
In other economic news, the Commerce Department announced last Thursday the U.S. trade deficit plunged 11% in September to $52.8-billion, substantially below the economists’ consensus estimate of $63.1-billion. The U.S. trade deficit is now at its lowest level in the past five-years, as U.S. exports surged 3% in September to $289.3-billion, the second highest level on record, while imports rose just 0.6%, to $342.1-billion. If energy prices move higher, then the U.S. trade deficit is expected to shrink even further.
On the jobs front, ADP’s latest private payroll data showed that 4,750-jobs per week are being created, based on a four-week moving average. This anemic job growth is not enough to significantly change the unemployment rate, so unemployment and weak job growth are expected to remain the Fed’s top priority.
In other job news, the Labor Department reported weekly jobless claims surged 44,000 to 236,000, which was the strongest weekly rise since March of 2020. However, the previous week was unusually low and was skewed by a seasonal adjustment, which is why the four-week moving average is much more reliable. The four-week moving average of weekly jobless claims rose slightly to 216,750 in the latest week. The best news was that continuing claims for unemployment declined by 99,000 to 1.838-million.
Global Tensions Continue in China, Europe and Latin America
The Wall Street Journal featured an article entitled “China’s Growth Is Coming at the Rest of the World’s Expense.” While the U.S. still dominates worldwide GDP growth, China’s soaring exports are curtailing GDP growth with most of its trading partners. Specifically, the Journal said, “China is swallowing up a growing share of the world’s market for manufactured goods. This reveals an uncomfortable truth: Beijing is pursuing a ‘beggar thy neighbor’ growth model at everyone else’s expense.”
China’s worldwide trade surplus for the first 11-months this year rose to a record $1.076-trillion. This record surplus has occurred despite a 29% drop in exports to the U.S. A weak Chinese yuan is fueling this export surge, so if China devalues its currency, its exports are anticipated to continue to rise.
Speaking of China, the Trump administration approved Nvidia’s H200 chip sales to China, with a 25% tariff. This is a big deal for Nvidia and could account for up to $8-billion in quarterly sales. The analyst community had been estimating no sales to China, due to trade wars, but now that Nvidia sales to China have been approved, the analyst community will revise their consensus Nvidia earnings estimates higher.
In Europe, British Prime Minister Keir Starmer warned that if Britain pursued a customs union with the European Union (EU) it would jeopardize its trade deals with India and the U.S. Since British products have a low 10% U.S. tariff, while EU products have a 15% tariff, Britain would risk losing its better trade deal, as the EU is slowing losing its influence due to infighting and weak economic growth.
Closer to home, the U.S. has seized a sanctioned crude oil tanker off the coast of Venezuela. Obviously, this seizure is going to make it much harder for Venezuela to export crude oil, so with the U.S. Navy disrupting crude oil exports and Venezuela’s export of illicit drugs, the pressure on President Maduro is mounting. President Trump’s comment that Maduro’s “days are numbered” is unquestionably true.
I should add that the amount of crude oil stored in oil tankers has risen 24% in the last 12-months. There are now 1.4-billion barrels of crude oil stored in oil tankers on the water, according to The Wall Street Journal. As a result, crude oil prices are expected to remain soft until worldwide demand picks up.
In the wildest business news last week, the Journal also reported that Elon Musk and Jeff Bezos are rushing to put data-centers in space. Bezos’s Blue Origin is reportedly working on the technology required for orbital AI data-centers, while Musk’s Space X is planning to use an upgraded version of its Starlink satellites to host AI computing payloads. Since the Starlink transmission rates are far lower than copper or fiber-based internet, I am a bit confused as to how wireless transmission rates could replace wired rates.
Maybe Bezos and Musk envision massive satellite receivers that could be competitive with wired internet, but the data-center boom on earth will continue, as space-based AI data-centers are about a decade away.
Navellier & Associates; own Nvidia Corp (NVDA), in managed accounts. Louis Navellier and his family own Nvidia Corp Nvidia Corp (NVDA), via a Navellier managed account, and Nvidia Corp (NVDA), in a personal account.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
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A Look Ahead by Louis Navellier
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My Top 10 List of Best Books in 2025 (Part 1)
Global Mail by Ivan Martchev
Venezuela (or Japan) Could Fuel a Year-End Move
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Growth is More Likely After Seeming Disasters
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