Freeman highlights that consensus estimates now place the probability of a rate cut at around 85%, driven by cooling inflation expectations and slower employment momentum. But he warns that upcoming data from the US holiday shopping period will determine whether the Fed signals room for further easing.
Home Depot bankruptcy a red flag for US consumption
In a development that has received “surprisingly little attention”, Freeman points to the Chapter 11 bankruptcy filing of Home Depot, one of the world’s largest home improvement retailers. The bankruptcy reflects a combination of post-pandemic demand fatigue and persistently high construction costs, he said.
“This could have significant implications for how analysts interpret consumer strength,” Freeman noted, suggesting that the market may see a reaction once analysts factor in this distress signal.
Consumers are tapped out despite holiday momentum
While some early reports indicate a “robust holiday season”, Freeman believes the US consumer is stretched thin.
“American consumers are fairly tapped out on credit,” he said, adding that high prices—particularly for groceries—continue to weigh on sentiment. With consumer confidence sliding, sustaining demand beyond the holiday bump may be challenging.
Fed’s forward guidance to depend on early 2026 data
Freeman cautions that the Fed may be navigating with imperfect data due to temporary government shutdown disruptions. As a result, January–February economic indicators may hold the key to whether the Fed signals additional cuts in 2026.
Markets are pricing in optimism for 2026
Despite economic cross-currents, equity markets continue to price in strength. Freeman notes that professional investors expect strong gains for the Dow, S&P 500, and Nasdaq in 2026, suggesting that markets remain focused on forward earnings rather than near-term consumer strain.
“Markets are future-oriented and are hitting all-time highs. Traders seem convinced the next year looks good,” he said.