The Next Fed Chair In Focus… And Mike Wilson’s 2026 Market Playbook 12/4/25

0:04Live from the Nasdaq market site in the heart of New York City's Times Square this is fast money. Here's what's on tap tonight. Meta moves. The tech giant reportedly making some big cuts to a key part of its business. What the pivot means for the company and will it be enough to get the stock in long-term rally mode? And next, we're going to talk about the big bids in for Warner Brothers Discovery. The latest on where things stand and who's most likely to come out on top. Plus, dollar store gains. What's driving today's jump in Dollar General. Expedited approvals. How the FDA is changing the line for drug development.

0:34And a builder breakdown. The Wall Street call that had shares of Lennar tumbling today. I'm Melissa Lee. Come to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Dan Nathan, Bono and Eisen, and Mike Wilson, CIO and Chief U.S. Equity Strategist at Morgan Stanley. Always great to have you here, Mike. We're going to get to those cuts in just a minute at Meta, but we start with the latest developments on the search for a new Fed chair. While former NEC Director Kevin Hassett has become a favorite, there are some rumblings that it's not a done deal yet. Let's bring Naaman Javers and see what he is hearing from the White House.

1:06Amen. Melissa, yeah, a lot of rumblings, I think, is the way to put it. And a lot of that is just scuttlebutt, right? Part of the questioning that's going on in Washington right now is, look, if the president has really picked it down to one person, which the president says he has, why is he waiting until next year to make this selection? You know, maybe that implies that he doesn't actually have a favorite choice, or maybe that implies he's waiting for something else or some other piece of timing. So what a lot of folks here are speculating about is this idea that maybe the president is holding out for Besson after all, right?

1:41He said publicly time and time again that he wants Scott Besson to be the Fed chair, but Besson won't take it because Besson is happy as Treasury Secretary. So there is this kind of line of thought that, well, maybe the president's holding out to see if he can kind of twist arms over the holidays or maybe make Scott Besson to see it his way. We just don't know at this point. I should point out, Melissa, that the White House thinks we're making way too much of this. They point to what the president said earlier this week, which is that he's going to nominate somebody in early 2026. And they say, you know, no sense speculating about that until the announcement comes.

2:16All right, Eamon, thank you. Eamon Javers. By the way, markets don't seem to have much faith that Kevin Hassett will be successful in carrying out Trump's rate cut agenda. In fact, since he emerged as a frontrunner to lead the central bank when the White House canceled interviews with potential candidates earlier this week. Yields on 10-year treasuries have actually gone up. So what do we make of these moves? There's also an FT article saying that the White House had surveyed Wall Street. Wall Street doesn't like Hassett. You know, I mean, it's an interesting sort of dynamic here setting up. Well, I mean, if you remember Scott Besson, who's been a remarkably successful hedge fund manager, who was probably as critical of the Fed in his time in the hedge fund manager's seat as anybody.

2:55The fact that the 10-year yield has gone up a little bit as this dynamic has gone down tells me, actually, the market believes he will be the Fed chair and he will be very focused on making the White House happy if you believe that a less independent Fed is bad for long-term rates because the market ultimately will decide that rates need to move higher if the Fed is not independent. I'm not suggesting Haskett's going to take that stance. I'm not suggesting the Fed is compromised. I'm saying that if you believe that the Fed will no longer be an institution that governs based upon pure macro and the fundamentals that drive the Fed today and the independence, then I think U.S.

3:29rates will go higher. I don't think there's any question they'll go higher, especially if also the rest of the world believes that it's not about the Fed and the discipline that they've adhered to forever, whether you believe in their policy or not. People have believed in the institution. So based on the bottom line here, Fed credibility is in question, so therefore the U.S. has to pay more money to people in order to buy treasuries because that credibility is threatening. I'm not saying Fed credibility is in question. I'm saying if Fed credibility is in question, rates will move higher. Okay.

3:57Look, Kevin Hassett is a credible Fed chairman. I mean, he has the credentials. This is like guys out of left field. I think that this is the classic trial balloon. They led the market to believe it was going to be Hassett. They allowed the poly market to go to 85%, and now they're going to observe. This is one variable I'm sure they're watching. They're probably also watching bond volatility. They're watching funding markets. They're watching the stock market. and this is going to be the trial. And that's why I think the president probably pushed off the decision until the beginning of the year.

4:24He's going to have conversations over the holidays. He's going to see how the market digests this. And he reserves the right to change his mind. So how do you think the trial balloon is being received? Fine. I mean, the stock market's okay. I mean, the bond market, you know, seems to be doing just fine. We're talking about yields going higher. They're barely going higher, you know. I think that you've got to think about two sides of this coin, right? So President Trump, back in his first administration, he nominated Fed Chair Powell. Fed Chair Powell has been there for all these years. I think his legacy is going to be that of independence, despite pressure for the last, what, seven or eight years.

4:57Right. Not not from the Biden administration. So at the end of the day, if he has someone in place that's going to do his bidding, I think you go across his cabinet and you look at every single one of these secretaries. None of them have pushed back about anything. So I think the idea, and this goes back to what Tim's saying, you know, if business leaders or other countries that do business with us, you know, are supposed to have free market capitalism. If they think that the Fed is under control of the Treasury and thus the executive branch, it does make for a lot of conflicts of interest. And we don't know how that's going to shake out.

5:28But it's something that we haven't had to deal with in 100 years. And then I know it's been floated. Maybe it's just a rumor that Besant gets to be the head of the Treasury and the head of the Federal Reserve. And at that point, I just think that those two interests are not going to be aligned with the idea that this is a great place to do business with here in America. Well, then that goes back to bond yields go higher. It sounds like any scenario, bond yields go higher, even though we all think rates are going to come down next year. Yeah, but I mean, like, let's take a step back on this Fed independence thing.

5:59OK, they're not fully independent from the market. I mean, the Treasury and the Fed have been working closer together since the GFC. But if it's the same person. That's a different story. I don't think that would be a good idea. But I think this idea that the Fed is fully independent today, no, they have an obligation to work with Treasury on the funding needs. And they've been doing that really since 2008, closer and closer every time there's a bit of a crisis, whether that's Powell, whether that's Hassett, or somebody else. I don't think that is going to change no matter who's in there. I think, as Dan reminded us, I think it's just fascinating that Powell was Trump's appointee, and that through a lot of difficult times, he was the right appointee.

6:38This is a Fed that's had some unbelievable challenges ahead of it. The new Fed chair will inherit a wildly divided Fed, and that's probably as interesting as anything. So I think what we're all saying here is I want to be clear. I think the Fed is doing its job. I think the Fed under the next Fed chairman will do its job. I do think that when you introduce speculation about Fed independence at times when there are also concerns about the macro, You get the dynamics that we had back either in April where we are really testing the 10-year and people. Let's be clear. As we announced policy that the rest of the world was somewhat shocked about, there was no question that there was a test in the long end of the U.S.

7:16bond market. I mean, I heard that from countless investors around the world, people I talk to all the time. I don't think outside of the sensational aspects of what was going on in April for everybody, we will see that kind of a challenge, even though global central banks around the world, and there's a lot going on in Japan right now, who are one of the biggest holders of treasuries, their yields are moving higher, ultimately making they had a great 30-year auction last night in JGB land, which the reason it's important to you folks at home is that Japanese investors are getting a lot more yield for their money and at some point may just start buying more Japanese JGBs than U.S.

7:51treasuries. But Fed independence is critical to the way I think our economy and our markets function. I don't think we're close to losing that. Bonwin, get your thoughts on this. Yes, I mean, I think the concerns that have been stated about Fed independence are credible. With that said, I think the other side of the coin is that this administration, while they do love loyalists, have also expressed that they are not willing to have elevated long-term debt yields. I mean, if you look at debt as a nominal number, or if you look at debt as it pertains to GDP, we're not in a position where we can have funding costs blow out.

8:28So I do think that that is also a factor there. The other thing is, whether it's Besset, whether it's Hassett, either appointee is going to have to convince the rest of the members to vote one way or the other. So I don't think it's a one man show. I can understand that the predictive markets at 75 or 80 percent show that we are leaning one particular way. But again, I think that's perception. I think the reality of the fact is that this is going to still have to be one united front and the decisions are likely still going to be data dependent, even if they are slightly affected with some political bent.

9:02All right. Let's get more on what the bond markets are saying about the potential of a Hassett led Fed. Steve Leesman's got more on this. Hey, Steve. Hey, Melissa. Yeah, there is concern about whether the prospective nominee, Kevin Hassett, is an asset or a liability for the bond market. Financial Times, of course, reported some big players in the bond market have told the Treasury of their concern with a candidate who seems very beholden to the president and his wishes for lower rates. Perhaps at the expense of higher inflation. I've also heard some of this from some big bond players as well.

9:31The problem is that you've got to squint to see this concern in the market. The bond market gets a vote here, and we'll take a look at how it's voted. Since the unconfirmed speculation, and I say unconfirmed about Hassett has picked up steam, the spread between the 2 and the 10 has grown somewhat wider. a little bit, 5, 6, 7 basis points. Traders bid the short end in anticipation perhaps of lower rates, selling the long run because of inflation concerns. But as Seymour said, there's a lot of other stuff going on. The move, however, has been modest. That could reflect what Bronwyn was saying. The market's understanding, rates are determined by a committee.

10:05And by the way, that committee gets more hawkish next year. The U.S. has$38 trillion in debt and in inflation above target. HACCP must understand the limits of policy flexibility here because the bond market gets of votes. So where are Fed front futures? Take a look here. Price for a 25 base point cut next week. But then take a look. Very gradual. Down to 340 by June, 306 a year from now. That is, the market may think the next Fed head is going to be beholden to President Trump, but it's not pricing in a Fed head who fulfills the president's every rate-cutting wish and dream. And Melissa, I would say if you look at the final five, it is probably objectively true that Hassett would be the least independent of all of them.

10:53But I don't see the market trading with a lot of concern about that. And maybe that's because the market thinks rates ought to go down. And that's the way they think Hassett will bring it. If it was the opposite, maybe you'd have a stronger reaction here. All right. Steve, thank you. Steve Leisman. You wanted to jump in. Well, first of all, I love when Leisman calls me Seymour. I think I'm going to start calling you that, actually. By the way, Leisman can call me anything. And I think he hit on a really important point. The fact is, most people in the market think that there's some rate cuts still to go.

11:31And that's just the practical reality. Not if you look at markets at all time high, not if you look at the job market. We've got a payroll number tomorrow. We had a midday call, as we often do. And the gentleman on my left here. Who, Wilson? Mr. Wilson, that's right. But Mike, we started having a conversation about Fed liquidity and also the short-term dynamics of monetary policy where they actually need to inject some liquidity to smooth out some shocks. So I just, you know, I think the market probably believes two more cuts at least, and then possibly an extended pause. And if you start to sense something very different and much more accommodative, that's the time to worry.

12:06So you're bullish next year. Yeah. How critical is what the market is pricing in terms of Fed rate cuts and who heads the Fed to your forecast? Yeah, I don't think it's so important who heads the Fed, but it is important that we get the Fed cuts. And I think it's important more than what the market's pricing and faster. So as we were discussing this afternoon, I do think that the market has been correcting now for two months. I mean, yeah, the S &P is down 2 percent, but there are a lot of stocks that are down 20, 30, 40 percent. crypto is another kind of reflection of that. So I believe that there's not quite enough liquidity in the system for the financial markets, but also an economy now that's demanding more capital.

12:42There's a lot of IG being raised in the credit markets and being spent. So that capital spending is another dynamic that needs more liquidity. And so we're looking, I'm following very closely, things like bond volatility, the funding market spreads. That is as important to me as the back end of the treasury market. So it's important to me for next year to be bullish is the Fed has to probably surprise on the upside, both in terms of cuts and in terms of the liquidity injection. But it's funny, Mike, you know, away from, let's just say, large cap tech that's been driving a lot of the gains in the S &P over the last couple of years.

13:11I'm looking at transports. I'm looking at industrials. I'm looking at financials. They're all trading at all time highs. I mean, so like, you know, we have spreads that are really tight. Like who needs what? I mean, you know what I'm saying? Like, I don't know. I mean, the labor market, that's fine. It gets a little weaker. You know, maybe we see a four and a half percent unemployment rate. Let's say we have tame inflation. I mean, why do we need 100 basis points of cuts? Well, we're very much on track. But in order to stay bullish for next year and get another 10 to 15 percent upside for our call, then we need more.

13:40OK, so that's what I'm assuming. Does if two cuts bring down the multiple in the S &P 500? Because if you get to 310, OK, expected 14 percent or so year over year earnings growth, you've got an S &P that's trading at 24 times. Yeah, but that's I mean, we're not looking for 310. We're looking for something higher than that. We're looking for 17%, 18 % earnings growth. And we look for multiples to actually come down. The multiple expansion happened this year in anticipation of what's going to be a much better earnings story next year. Not so much MAG7, but the other stuff that hasn't been earning.

14:07Yeah, I think that's right. And I listen to Mike and I listen to other strategists around the street. And I do my own work to the point where EPS growth is the story for the market next year. That's the word. And the word is that if the Fed cuts two times and there's a long pause, we're probably in a pretty good environment in anywhere from 13. I'm here in 13 to 8. 18 % EPS growth is fantastic. If you cut more than two times, I think there's a lot of ammunition for things to go even higher. Meantime, let's get to Meta. Shares popping more than 3%. Today's session reports that CEO Mark Zuckerberg is planning major cuts in the company's Metaverse unit that could amount to as much as 30%.

14:41In a statement to CNBC just moments ago, Meta spokesperson saying, Within our overall Reality Labs portfolio, we are shifting some of our investment from Metaverse toward AI glasses and wearables. Given the momentum there, we aren't planning any broader changes other than that. Fast Money friend Gene Munster of Deepwater Asset Management joins us now to discuss. Gene, great to have you with us. As I understand it, according to a source within Meta, the overall number next year in terms of what they guided for in the conference call in the last earnings season for significantly more CapEx, that is not changing.

15:12It's just a shift within that larger number. How do you view this? That would be a massive shift. Just to put some context on it, the expectations are they're going to spend about$19 billion, lose about$19 billion on reality labs. That's kind of the center of the bullseye of this conversation. And next year,$22 billion. So if they're going to continue to lose that kind of money, what we're talking about here is a shift of$6 billion that goes away from VR, essentially, towards more of the wearables type. And so that's a pretty big move. I still think that that number does come down. I think that the market is hoping that it comes down.

15:51My sense is it comes down. It's not going to come down by the full 30 % because there's spending. If you look at Alan Dye, the hire from Apple, he's probably, this is a Revenge of the Nerds comment coming up here, probably in the order of$500 million over five years with his whole package all in. So there's going to be some mix there. I want to kind of just quickly go beyond the headline and the story beyond the headline here, too, is what Zuckerberg is telling us by the news about this reshift, this refocus and the hire of Alan Dye is a shift in terms of how they define the metaverse. If we go back and look in 2021, he referred to it as immersive Internet, basically a VR first experience.

16:33And now, of course, it's more wearables. And so that's a big reset. And I think that they still got a long way to go. I mean, these glasses, we have them in the office. Nobody wants to use them for a reason because they don't really give you much today. And so I think when you put all this together, Zuck knows he's got to put some more juice behind these glasses and get them to work. And you look like Revenge of the Nerds. Thank you. Well, yeah. Sorry. Go ahead, Dan. Munster, Nathan here. All right. So let's talk about 2021. Let's talk about how famously wrong, you know, Zuckerberg was about the metaverse.

17:09Now, they kind of got a little bit lucky, kind of moving a lot of that spend out of reality labs and kind of getting focused on, you know, generative AI and what that might be for the company and, you know, how they serve ads and the like. And obviously that benefited. I know you've been very bullish. But what makes you think that this is a company without this big cloud service like an Amazon, like a Google and like a Microsoft, off that all of this spend, regardless of this rounding error out of Reality Labs, is going to be useful for them, that's going to get them to the place that they want to be and compete with the large hyperscalers?

17:41I don't know that, you know, the degree that all the spending is going to help advance wearables and make the utility kind of turn on. I do believe that what they're doing in AI more broadly is having a profound impact. I mean, the growth rate of their daily active users is accelerating off of just a remarkable three and a half billion daily user number. And so they're getting value of it. And I would just say, kind of when I put all this mixed together, we own this stock, we own it, I'm less optimistic today than maybe I was three, six months ago. And so I think that you're probably, money's better spent other places.

18:16But the big picture is that Zuck is really married to this wearables. We've tested them just to give some quick context about the state of the union of meta display. 50 queries, 50 prompts compared it to ChatGPT running their vision product on an iPhone. And it got right. It got half of them right. I mean, it was comically bad. And then when you compare that to GPT's version, it got 98 % of them, 49 out of 50 right. And so, Dan, I think that there's something there. He's hitting the reset button. We put it all together. Meta is going to be in a good place, but there are probably other companies in the Mag7 that are going to be in a better place a year from now.

18:55Does this funk that's happened basically since earnings, Gene, does it get out of it? I mean, does this sort of, when you say hit the reset button, does that reset the direction of the stock here or will it continue to face questions about how much it's spending, why it's spending as much as hyperscalers are spending and what it gets out of that spend versus a Google, which is selling chips. It's got cloud services. It's got all these different layers of how it's using its AI spend to benefit itself. Well, I just want to be clear. Meta is having a, their business is having a profound positive impact from AI.

19:30I think it's probably one of the best at scale. As far as getting out of the funk, the question of getting on the funk, it's in a funk because of that flip of the script from expense growth versus revenue growth. And any commentary, what we're seeing today, this around this 30%, still not clear what that means for expenses overall. But one thing that could re-accelerate it, fast forward to the end of January, is they start talking about that relationship between revenue growth and expense growth. When they start pulling back, that's a pretty big pie that they can dig into around reality labs. There's a lot of earnings growth that they can generate from that.

20:05So that's what I would look to, to flipping the script back to being more positive. I think in general, the MAG7 earnings is going to be favorable for the AI trade, the December earnings, and Metta will be one of those beneficiaries. Gene, always great to get your take. Thank you. Thank you. Gene Munster, Deepwater Asset Management. How are you feeling about Metta these days? First of all, I love the references to Revenge of the Nerds. I mean, Anthony Edwards' work is Gilbert Lowe. You mean you love your own reference? Yes, exactly. I mean, what is going on here? You have to praise your own joke?

20:34See more, see more. It wasn't my joke, it was his joke. He started out with Revenge of the Nerds, and it kind of got me thinking about a great movie that Dan watched all the time. Anyway, I think Metta looks really interesting here. I think there's, you know, a chart person would say, hey, wow, look at it. You kind of come right back up to the 50 and the 200. You've got a bear cross coming right there. There's some some things to maybe be watchful right now. The fact that Zuck has decided to focus back in on the year of efficiency in certain parts of the business is interesting. And I think it's interesting because I think the entire hyperscaler but Mag7 world, those that have the exposure to capex spend, are ones that are at least thinking about market interpretations but aren't going to change a thing other than things in a dead business.

21:16I mean, why not? I mean, Reality Labs, like, seriously, what are you wasting your time for when there's so much else to do in the rest of your business? Yeah. Bonoing? Meta? Yeah, listen, I think that it is somewhat of an implicit admission of guilt that they got the whole metaverse thing wrong. but I am happy to see that he's willing to pivot here. The cat-back spin, we all know that very well. I understand that it's somewhat of a concern, but at the same time, I like to see them be aggressive. My thing is, I think that they're making a play that the next thing, the next iPhone is going to be some wearable or non-phone-based, non-computer-based type of AI, VR combination thereof.

21:55And he's taking a shot to do that. As we've all said, they don't have the cloud business. They don't have some of the other levers that the other hyperscalers have, but I would say that they still have WhatsApp that they can monetize. So I am a little bit glass half full in terms of seeing that they're willing to kind of take a shot at what the next AI thing is. If we remember six months ago, everyone thought that Google was essentially going to be left for dead and that AI essentially was cannibalizing their business. And we didn't know where they were going to be. And lo and behold, over the next last two weeks, they're now the crown jewel with Gemini 3.

22:25So I think we're still so early on to know really how this is going to play out. I like to see them be aggressive and take their shot, and they have the balance sheet to do it. Yeah, well, Meta AI is not doing well, no matter what you want to say about increased engagement on the platform. And Llama seems to be a dumpster fire. Like, let's just be clear. And so when you think about that being open source and you think about how many users they have around the world outside the U.S., well, there's a lot of cheaper models being built and trained right now that are also open source. So to me, I think there's a lot of headwinds.