Wealthion Macro Bites 12/18/25

Betting marketplace Kalshi assigns a 53% chance of National Economic Council Director Kevin Hassett becoming President Trump’s nominee for Fed Chair.  Our continued hunch is Trump is floating Kevin Hassett as a “straw man” proposal before pivoting to a less ideological option such as (current) Governor Christopher Waller or (former) Governor Kevin Warsh.  Along these lines, Governor Waller stated (prior to his Wednesday interview with Trump) there is still room to cut rates amid rising job market weakness, “I still think we’re probably, maybe we’re 50-100 basis points off neutral.”

The Shiller Cyclically Adjusted Price-to-Earnings (CAPE) ratio touched 40.16x this week.  In the past 154 years, this level has only been reached on three occasions:  Dec. ’99 (S&P fell 49% in 2 ½ yrs.), Nov. ’21 (S&P fell 25% in 10 mos.) and today (S&P ???).  A CAPE ratio of 40x means the market now trades at 2.3 times its 154-yr. average valuation and stocks have been cheaper than today during 98.9% of that span.

Chinese trade data reports 6,958t of rare-earth exports (including magnets) in November (+13% m/m & +23% y/y), the third highest monthly total on record (Bloomberg).  Separately, China’s Commerce Ministry said on Thursday it had granted “several” general licenses for rare earth exports (thought to be European firms), a new category of permit that aims to speed up rare earth shipments for non-military uses. 

In Wednesday’s PJM Interconnection (largest U.S. grid operator) electricity capacity auction, prices reached a new high of $333.44 a megawatt-day (+1,000% past 2 yrs.).  Power bills for the 20% of Americans living in PJM’s 13-state region are set to rise further in the face of soaring AI electricity demand.

Recession Watch: The ratio of the Conference Board’s Leading Economic Index (LEI) to its Coincident Economic Index (CEI) has been falling for 4 years and now stands at the lowest level (0.8540) since the depths of the GFC (0.8453).

Euro Stoxx 50 +0.3%, S&P futures +0.4% and Nasdaq futures +0.8%.  DXY dollar index +0.15%, spot gold -0.35% and spot silver -0.2%.