Fed cuts rates again, but Trump's tariff plan sparks inflation fears and market uncertainty

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Happy Friday! Elections can be stressful, so take some tips from new research on how to lower your blood pressure. Daily short, intense workouts can be your best bet to fight disease and improve longevity.

In today's big story, the Fed cutting interest rates yesterday was never really in doubt. What comes next isn't as clear.

What's on deck:

• Markets: Goldman Sachs announced its newest class of partners.
• Tech: The stock market is already indicating winners and losers among Big Tech.
• Business: Hiring experts are predicting a "Trump bump" for the jobs market.

But first, more relief … for now.

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The big story

The Fed's new conundrum

Americans got a bit more relief from the Fed, but questions are swirling about what the president-elect means for future plans.

The Federal Reserve cut interest rates by 25 basis points Thursday, its second-straight reduction since September in a move that was largely expected. Additional rate cuts aren't as clear, though, as Donald Trump's proposed widespread tariffs could slow down the Fed's plans.

Economists have said Trump's 10-20% blanket tariff on most imported goods will cause inflation to flare up as producers and importers pass the cost of the tax onto consumers. Prior to the election, Nobel economist Paul Krugman said Trump's tariff plans would result in an "inflationary shock that is bigger than almost anything else you could do through federal policy."

It's not just speculation from economists. The market is indicating inflation could lead the Fed to keep borrowing rates high. Treasury yields soared the day after the election, a sign Wall Street sees interest rates staying elevated.

Interest-rate traders have also recalibrated their expectations. The chances of a 25-point December rate cut went from 83% at the start of the month down to as much as 63% yesterday following the Fed's announcement, according to the CME FedWatch tool. (It currently stands around 75%.)

Still, speculating on what could come from a president-elect is a tricky game.

Greg McBride, chief financial analyst at Bankrate.com, told Insider Today that Fed Chair Jerome Powell didn't indicate a pause in cuts was coming in December during Thursday's press conference. Powell also emphasized the election won't impact the central bank's near-term actions, McBride added.

"Until there are policy specifics being passed into law, there is nothing for the Fed to put in their economic models and they won't speculate or assume anything in the interim," McBride wrote via email.

There's also the question of whether Trump's tariff would be as inflationary as some fear. During his first term, the former president issued tariffs against China that didn't cause prices to spike.

Trump's proposals this time around are much more aggressive, but it's not clear what will actually be put in place.

"Nobody knows what will be implemented and what is just posturing for negotiation," McBride added.

Dominique Lapointe, director of macro strategy for Manulife Investment Management, told Insider Today via email the firm's base case is still a 25-point cut in December. The Fed would change course in reaction to tariffs only if they are official and making an impact, meaning the central bank's policy likely wouldn't change until mid-2025, Lapointe added.

One thing that is clear: Powell's not leaving.

When a reporter asked the Fed leader if he would resign if Trump, who has been critical of him, asked him to step down, his response was simple: "No."

News brief

Top headlines

• Democrats wished the election was about jobs. Trump's win showed it was about prices.
• China announced a $1.4 trillion stimulus package to boost its economy on the heels of Trump's election.
• Airbnb reported its earnings. Here are four highlights.
• Trump said he will divide Russia from China. It's a tough bromance to break.
• Peter Thiel's 'contrarian' election prediction came true.

3 things in markets

1. Morningstar thinks you should stay the course with your investment plan. Trump's win sent the stock market surging, but that doesn't mean you should rethink your investing strategy, Morningstar Senior US Market Strategist Dave Sekera said. His call for restraint is partly due to how high stock valuations currently are, although he does see opportunity among small-caps.
2. The new Goldman execs who just got the call of a lifetime. Goldman Sachs tapped 95 people to join its exclusive partnership on Thursday, a record high under CEO David Solomon. Twenty-six of the new partners are women, a group closely watched after a series of high-profile female partner exits.
3. Trump's election might be Citi's saving grace. The bank has spent more than $7.4 billion addressing regulators' concerns, specifically about its data and risk problems. Donald Trump could ease that pain. The president-elect has signaled he'd cut down on Wall Street oversight, previously pledging he'd eliminate 10 rules for each new one.

3 things in tech

1. How Elon Musk swung Pennsylvania for Trump. The tech tycoon spent millions on the Keystone State to deliver it to Trump, launching a last-minute canvassing effort and untested ground-game techniques. Musk's strategy could usher in a "new era" in campaign spending, one political scientist told BI.
2. Big Tech's biggest winners and losers after Trump's victory. Which companies stand to gain the most under a new Trump presidency? BI looked at the two-day stock performance of many of the largest tech companies to find out.
3. Trump's plan to "never ban" TikTok will be tough to fulfill, legal experts say. The former president campaigned on the promise that TikTok would be here to stay. But legal experts told BI he's only got two options to try and save it — and neither of them are straightforward.

3 things in business

1. Retail giants prepare for Trump 2.0. Tariffs are the biggest concern for superstores like Walmart, Target, and Costco. If the president-elect follows through on his campaign promises, consumers could foot the bill of high tariffs through higher prices. On the other hand, tax cuts could spur spending — but they'd take many months to see results.
2. The job market under Trump. Hiring experts expect a "Trump bump" as employers get comfortable posting openings now that the election's outcome is clear. They forecast a postelection hiring rush and increased demand in some sectors, particularly tech.
3. David Zaslav is optimistic about Trump's effect on Big Media. The Warner Bros. Discovery CEO wanted a president who was more open to M&A, since his company has been eyeing consolidation for a while. A second Trump administration might provide that opportunity, Zaslav said on WBD's earnings call, but it's too early to be certain.

In other news

• The Polymarket 'whale' actually made $85 million, far more than originally thought.
• Harris couldn't escape Biden's unpopularity.
• Investors accuse the ex-CEO of the company that helped take Trump Media public of stiffing them out of millions of shares.

What's happening today

• Paramount, Sony, and other companies report earnings.
• Grammy Award nominations are announced.

The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Jordan Parker Erb, editor, in New York. Hallam Bullock, senior editor, in London. Ella Hopkins, associate editor, in London. Amanda Yen, fellow, in New York. Milan Sehmbi, fellow, in London.