How do you think about affordability in an economy like this?

Marta, we're tackling some big themes in today's Taking Stock. I wanna start with the jobs report that just came out. What do those numbers tell you about the labor market, and how are you thinking about twenty twenty six?

Well, at a headline level, we have a good news, bad news print. We had weaker job gains around fifty thousand relative to seventy thousand expectations, but a lower unemployment number. It came down to four point four percent. This data continues that low hire, low fire market trends that we saw in twenty twenty five, and I think there's reasons to believe it will persist. We have strong earnings that could offer a measure of protection against layoffs picking up, but a weaker hiring environment in the wake of that post pandemic hiring surge seems like a reasonable path to normalization.

And at the same time, Marta, if you open up a newspaper, if you scroll on your phone, it's hard to miss how much is happening globally. Venezuela, Mexico, Ukraine, the Middle East, there is no shortage of geopolitical risk this year. So how are you thinking about that? And does it actually matter to investor portfolios?

So obviously, these are critical developments on the world stage. But one mistake investors make is drawing a straight line from every headline directly to markets and their portfolios. Geopolitical events don't regularly impact individual investors, particularly here in the US. That's because what makes up portfolios for US individual investors is typically US stocks and US bonds, and you need to impact those underlying cash flows, think earnings, to see markets have reactions that last, and that's not what you're seeing here. We could see some impact over the long run-in select areas. Think about potentially commodity prices, select energy companies, investment banks. Though even in these cases, it's not a given.

Great context, Marta. And here in the US, people are constantly talking about the price of groceries and housing even as Wall Street suggests inflation isn't a major issue anymore. So how do you think about affordability in an economy like this?

Well, I think both the Main Street and the Wall Street perspective are true. When it comes to prices, consumers are looking backward and remembering what they used to pay for something, while economists are looking forward and saying that the growth of prices from here seems more manageable. I think we can think of this as an inflation overhang problem, and it's one of the reasons inflation is so insidious. Housing is a separate issue, and I would argue a more enduring problem.

It's gonna be hard to fix in a presidential cycle regardless of president Trump's recent announcements. Moreover, Fed cuts don't guarantee lower mortgage rates, which depend on rates further out the curve. And it's not just about mortgage rates. Housing prices have risen in almost vertical fashion since the pandemic.

This creates wealth, and it shuts people out of the market. Frankly, I see the housing problem as something we will need to grapple with for years to come.

And we know the political ramifications could be huge here, and that's something we'll be certainly watching very closely. Marta, thank you so much. We're gonna be back in two weeks with more taking stock and, of course, for the January Fed decision. Have a great weekend.