Podcast Summary: "Jennifer Lee Talks Markets; Fed"

Podcast: Bloomberg Talks
Host: Bloomberg
Guest: Jennifer Lee, Senior Economist, BMO Capital Markets
Date: December 29, 2025

Episode Overview

In this episode, the Bloomberg Talks team sits down with Jennifer Lee, Senior Economist at BMO Capital Markets, to discuss the economic outlook for the US in 2026, the resilience of consumer behavior, the Federal Reserve’s leadership and rate policy, USMCA trade talks, and the relative strength of the US dollar. The conversation provides a data-driven, global perspective on potential risks and opportunities ahead, with a particular focus on how current uncertainty and recent government actions might shape the market landscape.

Key Discussion Points & Insights

Economic Outlook for 2026

• Greater Optimism Amid Lingering Risks:
  Jennifer expresses a cautiously optimistic tone for the US economy entering 2026, thanks to increased clarity around tariffs, but warns of “landmines” in the immediate months ahead, especially January.
  • “I’m a little bit more optimistic now than I was, you know, back in April...But that's not to say that there are lots of landmines in store for us in 2026...” (Jennifer Lee, 00:45)

Recent Economic Data & Key Indicators to Watch

• Thin Holiday Data, But Important Signals:
  • December Dallas Fed Manufacturing Index came in at -10.9 vs. expectations for -6 (01:20).
  • Pending home sales up 3.3% month-on-month, stronger than expected.
  • Jennifer highlights the recently released Q3 GDP growth at 4.3% (above expectations), calling it “pretty broad based,” especially on consumer spending in both nondurable goods and services (01:58).
• Skepticism on Clean Data:
  She points out that current data is still being revised and may not be reliable until “scrubbed.” The lasting impact from the government shutdown in Q4 2025 means Q1 2026 data could be messy or distorted.
  • "We can't break out the, you know, the bubbly just yet because we could be talking about shutdown again in the next couple of weeks." (Jennifer Lee, 02:58)
• Jobs & Inflation as Bellwethers:
  • Jobs data and inflation figures remain top indicators to watch. Jennifer’s focus is on how government revisions may impact the official economic narrative heading into 2026.

The US Consumer’s Resilience & Risks

• Strong Retail Sales, but Waning Confidence:
  Jennifer stresses that although retail sales data demonstrates robust consumer activity, there are signs of trouble based on confidence surveys.
  • Conference Board survey results show more Americans now believe jobs are “hard to get,” which could dampen consumer spending if job market weakness continues.
  • “Having a job, having a steady income—that’s going to be what is the main driver for the consumer and...for the Fed.” (Jennifer Lee, 04:16)

The Federal Reserve: New Leadership and Policy

• Transition at the Fed:
  In early January 2026, a new Fed Chair—known only so far as “Kevin”—will take over. Jennifer notes that consensus-building within the Fed is now especially important because not all officials agree on the timing or necessity of future rate cuts.
  • “He will have a very difficult job finding his way through the data...getting some sort of a majority within all the Fed voters...will be very critical.” (Jennifer Lee, 05:09)
• Interest Rate Path:
  No January 2026 rate cut is expected. Jennifer predicts three more cuts—but at a “slower pace,” likely in March, June, and September, all data-dependent (05:00-05:55).

Trade: USMCA Talks and Canadian Perspective

• Low Expectations for USMCA Talks:
  With USMCA renegotiations kicking off mid-January, Jennifer expresses uncertainty about the outcome and warns outcomes will hinge on how much “give and take” occurs.
  • “I think expectations...are kind of low right now. Not sure exactly what's going to happen, whether or not we're going to actually have an actual USMCA per se...” (Jennifer Lee, 06:10)
• Canadian Exposure:
  The outcome affects Canada significantly, with 75% of exports and 50% of imports tied to the US.

Global Central Banks and Rate Decisions

• Bank of Canada’s Pause:
  The Bank of Canada appears “done” with cuts for now, comfortable with current rates as inflation trends down. However, further cuts remain a risk if USMCA talks go poorly.
  • “Governor Maclen basically sounds like that they are done, that they're quite comfortable...But I think if there is a risk, the risk will be more cuts again, given how the USMCA fares.” (Jennifer Lee, 06:59)

US Dollar Outlook

• Surprising Resilience:
  Jennifer finds the US dollar one of the “toughest calls” and notes it remains resilient even as other markets bounce back. With most global central banks finishing easing cycles and some (like the Bank of Japan) preparing to tighten, the US dollar may weaken only “slowly.”
  • “Even though we do look for the US dollar to weaken, it's going to be a slow, slow, softish weakening trend, not a big drop.” (Jennifer Lee, 07:59)

Notable Quotes & Memorable Moments

• “I’m a little bit more optimistic now than I was, you know, back in April...But that's not to say that there are lots of landmines in store for us in 2026...”
  — Jennifer Lee, 00:45

• "We can't break out the, you know, the bubbly just yet because we could be talking about shutdown again in the next couple of weeks."
  — Jennifer Lee, 02:58

• “Having a job, having a steady income—that’s going to be what is the main driver for the consumer and...for the Fed.”
  — Jennifer Lee, 04:16

• “He will have a very difficult job finding his way through the data...getting some sort of a majority within all the Fed voters...will be very critical.”
  — Jennifer Lee, 05:09

• “Even though we do look for the US dollar to weaken, it's going to be a slow, slow, softish weakening trend, not a big drop.”
  — Jennifer Lee, 07:59

Timestamps for Important Segments

• 00:25: Episode introduction and guest welcome.
• 00:45: Jennifer Lee on 2026 economic outlook and tariff clarity.
• 01:20 – 03:00: Key data recap, focus on GDP, home sales, and manufacturing data.
• 03:31 – 04:40: US consumer resilience and warning signs in jobs confidence.
• 05:00 – 05:55: Changes at the Fed, rate cut speculation, and the importance of consensus.
• 05:55 – 06:43: USMCA trade talks and implications for North America.
• 06:43 – 07:49: Global central bank policy, Bank of Canada’s next moves, USMCA impact.
• 07:49 – 08:53: Outlook for the US dollar, global currency context.

Summary Conclusion

Jennifer Lee delivers a nuanced, straightforward analysis of the 2026 US economic landscape, balancing cautious optimism with detailed warnings about persistent risks—especially potential government shutdowns, volatile data, and unresolved trade issues. While consumer spending and GDP remain resilient, shakiness in job market sentiment—and the unknowns surrounding new Federal Reserve leadership—are flagged as reasons for vigilance. On the global stage, trade realignments and central bank policies will shape both Canada’s economic response and the long-term trajectory of the US dollar. For investors and policymakers alike, the central themes of uncertainty, data revision, and policy adaptation loom large as the new year begins.