Prof G Markets – December 11, 2025

Episode: What the Fed’s Third Rate Cut Means for 2026

Episode Overview

On this episode of Prof G Markets, hosts Ed Elson and Scott Galloway tackle the Federal Reserve’s third interest rate cut of 2025—the first meeting in six years with significant dissent on the Fed board. Chief Economist Mark Zandi of Moody’s Analytics joins to break down the decision, its political undertones, and what it might mean for the economy in 2026. The show then shifts focus to SpaceX’s forthcoming historic IPO and closes with a spotlight on MacKenzie Scott’s remarkable philanthropic giving.

Key Discussion Points & Insights

1. The Federal Reserve’s Third Interest Rate Cut ([02:47]–[09:31])

Market Reaction and Fed Board Division

• Fed drops rates by 25bps: The third rate cut this year, putting rates at their lowest in three years.
• Disagreement among Fed officials: First meeting in six years with three dissenting votes—two wanted to hold steady, Trump appointee Stephen Myron wanted a larger 50bps cut.
• Quote:
  “Pretty much down the strike zone, as they would say, Ed. Markets, investors expected the Fed to cut a quarter percentage point and that's exactly what they did.” — Mark Zandi ([03:50])

Why the Division? (Politics and Policy)

• Close to “neutral” rate: Disagreement reflects rates approaching “R-star”—the neutral equilibrium.
• Political pressure: Trump’s influence on the Fed is clear; Myron’s dissent is in line with Trump’s interest in lower rates.
• Tariffs and immigration: Both weaken growth but raise inflation—complicating the Fed’s calculus.
• Quote:
  “The President wants lower interest rates... That’s also playing a role and thus goes to the disagreements and dissent. So a lot of cross currents here.” — Mark Zandi ([06:25])

Data Deficiency Amid Policy Change

• Government shutdown impact: The Fed was missing critical jobs and inflation data due to government disruptions, making their decision more challenging.
• Labor market weakness: Even absent all data, existing indicators showed job creation stagnating and rising unemployment, especially among young people and minorities.
• Quote:
  “Job creation has come to a standstill. Unemployment is still low, 4.4%, but it is moving higher and it's moving very quickly higher for certain groups like young people...” — Mark Zandi ([07:45])

2. Economic Outlook for 2026 ([09:31]–[12:35])

Cross Currents and Fragile Growth

• 2025 recap: Modest growth, fueled largely by AI, but described as “fragile.”
• Widening inequality: Top third thriving; bottom two-thirds struggling with higher costs, stagnant hiring.
• Growth doesn’t feel good:
  “It’s hard to get very enthusiastic about how things are going when you're not creating any jobs and unemployment's on the rise.” — Mark Zandi ([10:49])
• Risks ahead: Absence of job growth is a red flag for 2026.

Fiscal Stimulus and Interest Rates in 2026

• Major fiscal stimulus incoming: “One Big Beautiful Bill Act” brings business and personal tax cuts, likely propping up growth.
• Fed outlook: Only one rate cut officially forecast for 2026, but changes in Fed leadership could shift the picture.
• Quote:
  “Hopefully with a little bit of luck and that fiscal stimulus, we kind of navigate through and avoid another year... without an economic downturn.” — Mark Zandi ([12:35])

Fed’s Political Future

• Leadership change: Powell out in May; possible replacement by Trump pick, likely Kevin Hassett.
• Fed independence at stake: Dismissal of Fed Governor Lisa Cook and political maneuvering could mean more cuts than forecast.
• Quote:
  “Now you got to throw into the mix kind of the political independence of the Fed and that would argue all else equal for lower rates.” — Mark Zandi ([13:59])

3. SpaceX IPO: Hype and Hesitation ([16:38]–[25:02])

Historic Public Offering Anticipated

• SpaceX targets $1.5T valuation & $30B raise: Poised to set record for largest IPO ever.
• Starlink and leadership: Starlink called “an incredible product”; strong operational leadership highlighted.
• Scott Galloway on SpaceX:
  “I think this is an incredible company… I think this could—I mean as you said, our pick for 2026.” — Scott Galloway ([18:33])

Why Not Invest? (Valuation & Ethics)

• Valuation concerns:
  “At 100 times revenues, you’re talking about Palantir-like valuation… Most of the juice will have been squeezed.” — Scott Galloway ([23:01])
• Musk’s divisiveness: Scott openly states he won’t invest due to concerns about Elon Musk’s values and political activity.
• Unassailable moats:
  “It’s very difficult to build a startup… two guys in a dorm room at MIT can’t build a viable competitor to a space launch company.” — Scott Galloway ([21:22])

Analog vs Digital Business “Moats”

• Slower, but more defensible growth for ‘analog’ (SpaceX) businesses versus rapid but riskier scaling for digital (OpenAI).
• Memorable moment: Galloway podcasting from outside a men’s bathroom at London’s Kensington Roof Gardens, joking about running for Senate and the awkwardness of his live podcasting location.
  “I have my camera out. I'm loitering outside the men's room. I'm pretty sure this will be the last time I'm calling you from Roof Gardens.” — Scott Galloway ([17:25])

4. MacKenzie Scott’s Philanthropy: A Standout Act ([25:08]–[30:13])

Record-Breaking Giving

• $7.2B given away in 2025: More than entire WHO budget, Suez Canal, Burj Khalifa, Hoover Dam, and Vegas Sphere—combined.
• Lifetime giving over $26B: Now among world’s top-10 philanthropists by total given.
• Focus of donations: Half to education, 90% to US-based causes, plus hundreds of millions to environment and social equity.

Why This Matters

• Comparison to other billionaires:
  “Elon Musk is worth over $490 billion. Last year, he gave away around $470 million, and that's less than 0.1% of his total net worth.” — Ed Elson ([28:44])
• Moral of the story:
  “Giving away $7 billion is far more impressive than making $7 billion.” — Ed Elson ([29:25])
• Scott’s humility: Recognizes her gifts, but also the everyday giving by millions, often unrecognized.

Notable Quotes & Memorable Moments

| Timestamp | Quote | Speaker | |-----------|------------------------------------------------------|---------| | [03:50] | “Pretty much down the strike zone...markets expected the Fed to cut a quarter percentage point and that's exactly what they did.” | Mark Zandi | | [06:25] | “The President wants lower interest rates... That's also playing a role and thus goes to the disagreements and dissent.” | Mark Zandi | | [10:49] | “It’s hard to get very enthusiastic about how things are going when you’re not creating any jobs and unemployment’s on the rise.” | Mark Zandi | | [13:59] | “Now you got to throw into the mix…the political independence of the Fed, and that would argue all else equal for lower rates.” | Mark Zandi | | [18:33] | “I think this is an incredible company… I think this could—I mean as you said, our pick for 2026.” | Scott Galloway | | [21:22] | “It’s very difficult to build a startup… two guys in a dorm room at MIT can’t build a viable competitor to a space launch company.” | Scott Galloway | | [23:01] | “At 100 times revenues, you’re talking about Palantir-like valuation… Most of the juice will have been squeezed.” | Scott Galloway | | [29:25] | “Giving away $7 billion is far more impressive than making $7 billion.” | Ed Elson |

Timestamps for Important Segments

• [02:47] — Market update and Fed policy breakdown
• [03:33] — Mark Zandi joins to discuss rate cut, dissent, and outlook
• [09:31] — 2026 economic projections and risks
• [12:35] — Impact of Fed chair transition, political influence
• [16:38] — Introduction to SpaceX IPO discussion
• [18:33] — Scott Galloway’s take on SpaceX & sector insight
• [23:01] — Valuation warning and investment hesitation
• [25:08] — MacKenzie Scott’s record philanthropy spotlight

Conclusion

This episode delivers sharp, candid takes on the week’s market-moving stories. Listeners get not only a breakdown of the Fed’s complex decision-making around rates and data, but also a preview of 2026’s economic terrain. Scott Galloway shines with irreverent humor and tough love for both rocket billionaires and market hype—even as he acknowledges the analog moats of businesses like SpaceX. The episode closes on a high note, celebrating the generosity of MacKenzie Scott and underscoring the often-overlooked acts of selflessness in a world transfixed by wealth accumulation.

For finance followers and curious listeners, this is a frank, topical episode—part macro lesson, part market drama, and part philosophical reflection.