There are many headwinds for short term interest rates to drop in 2026, The tariffs seem to be working with the October trade deficit at the lowest level since 2009, Is the 10% credit card interest cap a good idea? Who Benefits from the New Auto Loan Interest Deduction? & More

There are many headwinds for short term interest rates to drop in 2026

It is no secret that the President wants our interest rates to drop dramatically to improve the economy, which as a sidenote is really not that bad. However, even though he gets to appoint a new Federal Reserve Chairman, that doesn’t guarantee lower short-term interest rates. The Federal Reserve Chairman's term ends May 15th, which means a new chairman will be appointed by the President. But the Chairman running the Federal Reserve, no matter who they are, does not make a sole decision on interest rates. It is done as a vote from all members, and it takes a majority of the 7 members to move interest rates up or down. Other factors include Mr. Powell can stay until January 2028, when his term as governor expires. This means a new governor who is in favor of reduce interest rates cannot be appointed until January 2028. There will also be changes to other members come January 31st when there are term expirations. This will be another opportunity to appoint members that are aggressive on reducing interest rates. Also, sometime this month, the Supreme Court will rule on removing or keeping Governor Lisa Cook over legal issues. If she is removed, that’s another opportunity to bring in someone aggressive on lowering rates. At the January meeting, there will be a rotation for the voting Regional Bank Presidents, which will include New York, Cleveland, Philadelphia, Dallas and Minneapolis. Some of these new voting bank presidents have explained their concerns when it comes to lowering rates, especially with the inflation target of 2% still not achieved. Speaking of that 2% inflation target, that was set back in 2012, and it’s been above 2% since March 2021. All this to say, the direction of interest rates is uncertain. If we were to see unemployment rise and more signs of slowing in the economy, we probably would see more interest rate cuts. However, if things stay status quo, I still stand behind the fact the most we will see is probably two interest rate cuts in 2026.

The tariffs seem to be working with the October trade deficit at the lowest level since 2009

The October trade deficit was only $29.4 billion, which is far better than the expected deficit of $58.4 billion. Not only was it almost half the expected amount; but it was also the lowest deficit going back 16 years to 2009. The low trade deficit was due to imports falling to $331.4 billion, but exports also increased to $302 billion. Exports benefited from the high price of gold, silver and other metals as that increased exports by $10 billion during October. The big benefit on the reduction of imports came from pharmaceuticals dropping sharply probably because in late September the administration threatened 100% tariffs on overseas pharmaceuticals. The drug makers were apparently scrambling on what to do and trying to minimize the impact going forward. The Supreme Court will not make the decision on whether the tariffs are legal or not just because they are working; they will determine if the use of the International Emergency Economic Powers act to impose tariffs is legal or not. My hope is that they do agree with it, and if not, hopefully the administration can come up with some other way of keeping the tariffs in tack as they seem to be working very well.

Is the 10% credit card interest cap a good idea?

At first glance, the average person is going to say yes that is great because current credit card rates around 23 to 24% are ridiculous. However, when you dig deeper into credit cards and how they work, people have to realize the risks for defaults and late payments are rather high. Banks that issue credit cards are in business to make a profit for their shareholders and if there’s no profit to be earned, then there’s no point in a business offering that service. The current default rate on credit cards is about 3%, which means banks have to write off the entire balance of whatever that person owed. The higher default rates are seen in ZIP Codes with lower incomes and also for younger borrows who got in over their head. If the 10% cap on credit cards does go through, it will hurt people with lower incomes and those that have lower credit scores because banks would no longer be able to be profitable on those accounts, and they would stop offering credit to them. It would also affect many across-the-board as you could see a reduction if not elimination of points and cash rewards on credit cards, which would be disappointing for many. In my opinion, it is better to have the higher interest rate on credit cards like we have today, as it broadens the pool of people that can access this tool. Unfortunately, people need to use some self-discipline to not get in over their head and make sure they can pay their payments and hopefully not carry a balance on the card. If they can do that, they pay no interest and also can benefit from cash-back and other reward programs.

Financial Planning: Who Benefits from the New Auto Loan Interest Deduction?

The new auto loan interest deduction created by the July 2025 “One Big Beautiful Bill” allows taxpayers to deduct up to $10,000 per year of interest paid on a qualified auto loan during tax years 2025 through 2028. This is an above-the-line deduction, meaning it is available even if the standard deduction is taken. To qualify, the loan must be an auto loan for a new vehicle that had final assembly in the United States purchased in 2025 through 2028. Leases, personal loans, and cars purchased before 2025 do not qualify. The deduction is subject to income phase-outs, beginning at $100,000 for single filers and $200,000 for married couples, and fully phasing out at $150,000 for single filers and $250,000 for married couples. Most states, including California, do not conform to this federal deduction, meaning it won’t reduce state income tax. However California lawmakers have proposed a separate state deduction (AB 490), but it has not become law. For people who receive the deduction, the actual tax savings will likely range from a hundred to a thousand dollars because most auto loans don’t have anywhere near $10,000 of annual interest and only taxpayers in the 10%, 12%, and 22% bracket will qualify.

A small invention that changed the driving world

You probably never think about it if you know about it and others who don’t know about it probably just have never been told due to its simple convenience. What I’m talking about is the arrow on the gas gauge pointing to what side of the car to put gas in. If you know about it, you know how nice it is to pull up to the correct side of the pump and not have to back up and go to the other side or try to carry the hose over your car to pump your gas. This small invention came from a man by the name of Jim Moylan about 40 years ago. He worked for Ford Motor Company at the time and after pulling up to a pump in a car that he was unfamiliar with, and not realizing he was on the wrong side of the pump he had to get out in the pouring rain then back the car up and do it all over again. He immediately went back to his office and submitted the idea to the top executives at Ford. It was a hit and magazines at the time like Autoweek talked about the unsung genius who thought of this idea. Mr. Moylan never received any financial compensation, but to people in the industry it is known as the Moylan arrow. The idea was stolen by other car companies, and even many electric vehicles today have an arrow pointing to what side the charging plug is on. Sometimes in life, it’s the small things that make life easier and after it comes out so many people say why didn’t I think of that? I’m curious how many people knew about the Moylan arrow on their gas gauge?

JPMorgan Asset Management is increasing its use of AI

The headline may not be a surprise because we know AI is being used by many corporations, but JPMorgan is making a big move to no longer use proxy firms to analyze data for their asset management division. JPMorgan receives data on more than 3000 annual company meetings. The bank and other large companies have used proxy service firms such as Glass Lewis and Institutional Shareholder Services for many years. These two companies offer research, advice in voting and infrastructure for companies like JPMorgan that cast thousands of shareholder votes every year. I’m sure other companies will follow suit and eliminate the use of proxy firms, which are very costly. Some CEOs complain that they have undue influence on shareholder votes and can also have a conflict of interest. JPMorgan CEO, Jamie Dimon, has a large dislike for proxy firms saying they are incompetent and should be gone. As usual, he’s pretty direct and straight to the point on his feelings, but this will probably save the company millions of dollars in fees they pay to these big proxy firms.

Inflation report comes in positive

The December Consumer Price Index, or CPI, showed an annual increase of 2.7%, which was right in line with expectations and the prior month's reading. Core CPI came in at 2.6%, which was below the estimate of 2.7% and in line with the prior month's reading. There were several question marks around last month's report due to the impacts from the government shutdown and while this report may not be completely immune from distortions, it does provide further evidence that inflation is in a manageable spot. It would be foolish to say tariffs have had no impact on prices, but the data does show it has not caused problematic inflation for consumers. Apparel prices were up 0.6% compared to last year, and new vehicles were up 0.3% over that time frame. I'd consider those areas two of the more impacted areas from tariffs, and again we haven't seen big price spikes. Food prices have remained stubborn and were up 3.1% in the month of December. Food at home was manageable as there was a 2.4% increase, but food away from home climbed 4.1%. Utility prices also continue to be problematic as electricity prices climbed 6.7% and Utility (piped) gas service was up 10.8%. Gasoline prices helped offset some of this headwind as they were down 3.4%. I've talked about this many times, but shelter continues to be a big reason for changes to the CPI. It is still around 1/3 of the headline number and is over 40% of the core CPI. The most recent increase of just 3.2% is a large reason we have seen inflation continue to decline, and it is estimated we will see further declines this year, which should help push both headline and core CPI closer to the Fed's 2% target.

Lower EV sales continue to hurt car makers in the US

Under the last administration, electric vehicles were all the rage, and US car makers were doing everything they could to quickly ramp up production. No surprise to me as we said with the big push going on that it would not last. Last month, Ford Motor Company said they would take about a $19.5 billion charge mostly due to the electric vehicle business. Last week, General Motors also said it would take a $6 billion charge because of its rapidly shrinking money losing electrical vehicle business. GM said the charges reflect the shrinking EV capacity and slow demand for electric vehicles. General Motors also realizes going forward without the federal government subsidies and lower gas prices; electric vehicle sales will likely continue to decline. I don’t see any turnaround in sales for the other electric vehicle makers as they will face difficult competition ahead as Ford and General Motors will probably drastically cut the prices of electric vehicles to get them out of the factory and off the lots as soon as possible.

LinkedIn's secret to remaining in third place in social media

Being in third place in the competitive social media world behind Instagram and TikTok is something to be proud of. LinkedIn has seen time spent on the social media site increase 4% per year, which has outpaced YouTube at 2% growth and Facebook at about 1%. In case you’re curious, Instagram was the leader at around 13% and TikTok saw global time spent on their site increase just under 5%. By the way, does anybody still use Snapchat? It saw a decline of a 4% in time spent on their site, which has likely contributed to an 85% decline in their stock price over the last five years to under eight dollars a share. LinkedIn, which is now 22 years old, saw revenue jump to $17 billion in 2025, which was more than double the $7 billion just five years ago. The membership at LinkedIn has also doubled to about 1.3 billion. A big secret to their success is that you have a pretty good feeling of confidence that you’re dealing with real people because LinkedIn still requires that uses provide real names. It’s been proven that when people use their real names, they are less likely to post content that offends other people or is negative in a toxic way. Users as a whole like that and the number of people checking LinkedIn more than once a day has climbed to nearly 5%, up from 3.9% in 2020. You may not get the emotional rush, good or bad that you may receive on Instagram or Facebook, but LinkedIn is a safe place to go to get some good information and it seems you're less likely to see many of the crazy comments you get on other social media sites.

You may soon see drones zigzagging across our skies

Good or bad, it appears that drones are going to fly more than ever before. Walmart says it plans to roll out delivery by drone to an additional 150 stores in 2026 in a partnership with the company Wing, which is owned by Alphabet. Walmart currently has drone delivery in Dallas, Fort Worth and the Atlanta regions. The numbers are pretty staggering; Wing estimates around 40 million Walmart shoppers will have access to the service after the expansion, which is a huge increase from the 2 million customers that have access today. The drones are about 4 to 5 feet long, weigh 2 to 5 pounds, and fly at around 65 mph. They will be lowering packages from around 23 feet in the air and dropping it somewhere in your yard. I’m curious to see how accurate they will be and for people that have dogs, I wonder if they will have access to the package before you the customer gets it. It is not just Walmart implementing the rapid expansion of flying drones for package delivery; Amazon has been working on this along with DoorDash. I do wonder in just a couple of years with all these drones' zigzagging back-and-forth across our skies how many crashes there will be and how many birds will run into them? At this time Wing and Walmart declined to say what the cost per delivery is, but Walmart says they offer drone delivery free to Walmart plus members. If you’re not a member, the cost to you is $19.99 and deliveries can arrive in 30 minutes or less. I’m trying to think what I would need from Walmart or any retailer in 30 minutes or less that would be so important.