Fed’s Latest Moves, AI Market Shifts, and Hollywood Complications

It’s Friday, and here’s a recap of what’s been happening in the economic and financial landscape over the past week.

This was the final Federal Reserve week of the year, and surprising few, St. Jerome delivered a rate cut. Some central bank officials were less enthusiastic, though. Investors took a hit on stocks like Oracle and Broadcom, concerned that the burgeoning AI sector might not be as sound as it seemed. Meanwhile, Treasury Secretary Scott Bessent is pushing back against woke banking regulations, and Paramount is still urging Warner Bros. Discovery to drop its Netflix subscription.

Fed’s Mixed Signals

After this week’s Federal Open Market Committee meeting, there were expectations for a “hawkish” cut in interest rates. Instead, it turned out to be much less hawkish than anticipated. The median forecast for the federal funds rate remains at 3.4% for next year and 3.1% after that, according to economic forecasts. A lot of folks thought those long-term projections would be nudged up more, yet only 3% expected any upward revisions.

Interestingly, inflation expectations for next year dropped from 2.6% to 2.4%. Fed officials even admitted they had overestimated inflation this year. This indicates that the Fed may be moving beyond its previous view that the lack of tariff-driven inflation today means we’ll see more of it in the future.

On a brighter note, the Fed upped its growth forecast for the next year, now predicting a GDP increase of 2.3%, up from 1.8%. The unemployment rate is still expected to hover around 4.4%. Sounds good, right? Inflation is receding, interest rates are going down, and growth seems robust while unemployment remains low. It almost feels celebratory.

Yet, it didn’t quite feel like a festive occasion. Fed Chairman Jay Powell appeared somewhat bewildered. Honestly, I felt a bit drained by it all. Two committee members voiced their disagreement, suggesting that the Fed shouldn’t be cutting rates while inflation is running high. A number of forecasts indicated that the Fed might have slashed rates too aggressively this year, and projections for next year were scattered, revealing a lack of consensus.

Powell chose not to comment on his potential resignation when his chairmanship ends next year. It’s starting to seem irresponsible to prolong this uncertainty. If he were to step down, the President would need to name a new governor, which only adds to the confusion, especially when people are claiming that uncertainty is a barrier to economic growth. What’s the hold-up, Jay?

AI Market Hits a Snag

This week saw a quick downturn in AI trading, beginning with Oracle and followed by Broadcom. Investor confidence shook as Oracle reminded everyone of their previous capital spending forecasts, announcing an additional $15 billion for fiscal year 2026. That reality check on expenses didn’t do them any favors, and reports that Oracle is postponing some data center completions for OpenAI from 2027 to 2028 didn’t help either.

Broadcom subsequently warned that the surge in sales of custom low-margin AI processors was weighing on profits. In other words, while demand is definitely there, the dreams are becoming costly. The result was a minor upheaval in tech stocks that felt more like a reminder of basic financial realities than a bubble burst.

Paramount, Warner, and Money Talks

The unfolding drama in Hollywood is straightforward. Paramount keeps claiming ‘money is not a concern’, while Warner Bros. Discovery is calmly questioning, “Whose money are we really talking about?” Paramount’s offer to WBD hinged on support from Larry Ellison as a financial safety net, but WBD’s board wasn’t thrilled by that lacking a personal guarantee and the funding being tied to a revocable trust setup. It felt like faint assurance, akin to “funding… potentially.”

The skepticism explains why WBD opted for Netflix’s proposal, considering it a cleaner, more trustworthy deal with a well-established company that has a solid financial standing. Paramount, in turn, is taking its case to shareholders and public opinion, arguing that they presented a better deal and that WBD failed to formally raise concerns.

Now it gets intriguing. Paramount seems to be in it for the long haul, while WBD is constrained by Netflix’s contract, and in the chaos, the market is doing what it usually does during conflicts: boosting the target’s stock price. It’s a classic standoff where everyone pretends to be calm negotiators, yet everyone knows it’s a matter of who will blink and yield.

Scott Bessent Takes on Bank Regulation

Years ago, after the financial crisis, Congress implemented the Dodd-Frank Act. Many critics raised concerns that giving regulators excessive power over banks could lead to the imposition of political agendas under the guise of safety. Supporters claimed that wouldn’t happen, but the past decade has seen many push for banking regulations to align with causes like climate change, diversity, and gun control in the name of “reputational risk.”

The underlying theory of “reputational risk” essentially suggested that it was damaging to undertake actions that progressive factions might oppose. While it may seem problematic, that’s where it stops. They even tried to introduce “transition risk”, predicting that a future compliance with anti-fossil fuel sentiment would render investments in oil and gas projects too risky.

However, Secretary Bessent argued this week that the trajectory of history doesn’t need to favor woke banking regulations. Speaking at the FSOC meeting alongside the council’s 2025 annual report, he insisted that economic growth and security shouldn’t be sacrificed for stability—they should be prerequisites. So, even if regulators obstruct lending and complicate market formations, that stagnation cannot be branded as wise.

At the moment, it seems like the regulators are fighting like a backed-up octopus. Yet, the directive is clear: the FSOC must return to its primary role, acting as a Financial Stability Council rather than a platform for enforcing cultural mandates. Ironically, those who have long argued against politicizing banking supervision now assert that keeping politics out is a form of “non-intervention.”

A Look Back at Historic Departures

This weekend marks two significant departures on entirely different scales. On December 13, 1577, Francis Drake embarked from Plymouth, marking the beginning of the first British voyage around the globe. In contrast, on December 14, 1972, the lunar module of Apollo 17 lifted off from the Moon to reconnect with the command module, concluding humanity’s initial foray onto our celestial neighbor’s surface. One journey expanded our worldview, while the other closed a chapter of exploration beyond our planet.