Latest / The Financial Exchange Show / The Fed isn't sure what to do. That's not a bad thing.

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The Fed isn't sure what to do. That's not a bad thing. · The Financial Exchange Show

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  Speaker 2: Day after the FED meeting, and we are trying to
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  Speaker 2: fully digest exactly what Ja Powell and his Purple Tide
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  Speaker 2: told us yesterday. It's Chuck, Mike and Tucker with you
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  Speaker 2: and Mike, I think, quite honestly, if if you know,
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  Speaker 2: if we were to go back and listen to what
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  Speaker 2: Paul Aline and I were discussing, I think it was
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  Speaker 2: almost exactly what the Federal Reserve showed in their Summary
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  Speaker 2: of Economic Projections, where basically they said, hey, we think
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  Speaker 2: GDP's going to come in a little bit weaker than
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  Speaker 2: we expected one point seven percent versus two point one
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  Speaker 2: percent that they predicted in December. Paul and I said, yeah,
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  Speaker 2: something in the high ones is probably where you'll land unemployment.
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  Speaker 2: We said, yeah, maybe they show it ticking up a
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  Speaker 2: little more. They did up to four point four percent
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  Speaker 2: this year from four to three. He came in at
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  Speaker 2: two seven, core at two eight. And so again, I
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  Speaker 2: I'd like to say that I don't want to our
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  Speaker 2: own horn, but you do.
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  Speaker 3: I do love to toot my own horn.
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  Speaker 2: And I, Paul and I freaking nailed what we thought
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  Speaker 2: the Fed would say yesterday about where they think the
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  Speaker 2: economy is going to go They're they're basically telling you, hey,
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  Speaker 2: economic growth, we now think is going to be a
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  Speaker 2: little bit slower this year but not recessionary, and inflation
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  Speaker 2: is going to be a little bit higher this year
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  Speaker 2: but not crazy high. And as a result, unemployment's going
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  Speaker 2: to go up, you know, a marginal amount more nothing
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  Speaker 2: you know, huge, but a touch more. That's what they
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  Speaker 2: told us in their summary of economic projections. Jay Powell
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  Speaker 2: during his press conference, I think pretty much gave us
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  Speaker 2: the same answer over and over again, which is, hey,
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  Speaker 2: we're six weeks into the new administration or eight weeks in, sorry,
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  Speaker 2: and we still have to see how these policies are
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  Speaker 2: going to play out before we decide to make any
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  Speaker 2: moves in either direction.
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  Speaker 3: Yeah.
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  Speaker 4: I was gonna ask that did the did the comments
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  Speaker 4: in your mind? And I listened to most of the
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  Speaker 4: Q and A. Did the comments from Jerome Powell in
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  Speaker 4: your mind contradict or further anything from the actual SEP
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  Speaker 4: and the and the release at two pm, because you
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  Speaker 4: did see, you know, equity markets were up for the
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  Speaker 4: day anyway, but starting around two thirty really surged upwards
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  Speaker 4: and you know, brought us into the close a full
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  Speaker 4: percentage point higher than where we started the day. What
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  Speaker 4: about Jerome Powell's press conference, I guess reassured investors in
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  Speaker 4: your mind compared to just the release itself.
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  Speaker 3: I don't know.
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  Speaker 2: I don't think Powell said anything particularly notable, quite honestly.
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  Speaker 3: I mean I always listened to the whole thing, or
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  Speaker 3: as much as I like.
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  Speaker 2: I generally listen for like forty five minutes, and then
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  Speaker 2: if I see any big moves after I stopped listening,
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  Speaker 2: I'm like, okay, Like, let me see what he said,
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  Speaker 2: just because more often than not, it's him repeating the
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  Speaker 2: same thing twenty times in response to different questions that
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  Speaker 2: he gets yep, things that I wrote down in terms of,
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  Speaker 2: you know, his his quotes here. Very difficult to have
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  Speaker 2: a precise assessment of how much inflation is coming from
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  Speaker 2: tariffs and how much from other sources. Surveys are suggest
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  Speaker 2: seeing the tariffs are driving inflation expectations. The right thing
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  Speaker 2: to do is to wait for clarity on what the
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  Speaker 2: economy is doing, simply because we don't know if the
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  Speaker 2: hard data will catch up to what the soft data
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  Speaker 2: is telling us. Things that we've talked about on this
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  Speaker 2: show as well, we should start our own central bank,
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  Speaker 2: and I don't know how you just go about starting one,
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  Speaker 2: but we should try or something. Let's see the cost
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  Speaker 2: of waiting to do anything are manageable given that the
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  Speaker 2: data we're seeing from the economy is still solid. Again,
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  Speaker 2: this gets it something that we've talked about on the show,
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  Speaker 2: which is, yeah, the data may start to deteriorate, but
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  Speaker 2: to this point you're continuing to get you know, no
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  Speaker 2: major deviations from what you had previously. This trend, by
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  Speaker 2: the way, continued this morning, with initial jobs claims coming
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  Speaker 2: into two hundred and twenty three thousand, a very modest
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  Speaker 2: uptick from two hundred and twenty one thousand last week.
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  Speaker 2: The continuing claims came in at eight one point eight
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  Speaker 2: nine to two million, up a little bit from one
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  Speaker 2: point eight five to nine million last week.
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  Speaker 3: Existing home sales better than expected.
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  Speaker 2: Part of this is the seasonal adjustment on this Because
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  Speaker 2: last year was twenty nine days in February this year
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  Speaker 2: was twenty eight. So you came in an annualized rate
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  Speaker 2: of four point twenty six million. You're probably not gonna
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  Speaker 2: be out that next month, just because of how the
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  Speaker 2: seasonal adjustments work on this stuff. But that was better
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  Speaker 2: than expected. Still, and so I think we still have
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  Speaker 2: a situation where as Jay Powell said, you know a
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  Speaker 2: few times, hey, there's no real change in the data
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  Speaker 2: to this point that we're getting. The surveys are suggesting
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  Speaker 2: people are nervous about a worsening, but it has not
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  Speaker 2: yet materialized in the broad based data that we've been getting.
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  Speaker 4: He was asked specifically about a removal of a sentence
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  Speaker 4: from their step about the equal balance of risks on
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  Speaker 4: inflation and recession, but when asked about it, he said, no,
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  Speaker 4: we still basically see those as equally weighted, but both
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  Speaker 4: of them perhaps are are more severe. That wasn't the
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  Speaker 4: sense I got from the responses during the press conference.
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  Speaker 4: My sense from everything else that he said was that
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  Speaker 4: the chairs of the Federal Reserve, the governors of the
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  Speaker 4: Federal Reserve, are more concerned about recession right now than
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  Speaker 4: they are inflation.
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  Speaker 5: Was that your takeaway as well?
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  Speaker 2: I don't know I got this, sen So i'll quote
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  Speaker 2: here because this is one of the things that I
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  Speaker 2: did write down. There can be situations where maximum employment
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  Speaker 2: and price stability are intentions. So basically saying hey, we're
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  Speaker 2: feeling pressure on both sides of that, and we say
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  Speaker 2: that we'll manage, and we have a plan for how
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  Speaker 2: we'll manage based on how far each one is from
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  Speaker 2: its goal. So let's say that unemployment goes up to
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  Speaker 2: ten percent and inflation goes up to four, Fed's gonna
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  Speaker 2: cut his unemployment's the bigger problem, yeap. Likewise, if unemployment
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  Speaker 2: goes up to five and inflation goes up to ten,
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  Speaker 2: Fed's gonna hike his inflation is the bigger problem. And
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  Speaker 2: he said, and how long it takes to get back
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  Speaker 2: to those goals since our tools can only work in
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  Speaker 2: one direction at once. By the way, we do not
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  Speaker 2: have a situation right now where we feel that there
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  Speaker 2: is a conflict between these things. And that to me,
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  Speaker 2: I can't remember which way you thought he was leaning,
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  Speaker 2: but that to me was more, Hey, we're not cutting
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  Speaker 2: right now because we still have a little bit higher
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  Speaker 2: than we want it to be. And even if we
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  Speaker 2: might be worried about where unemployment goes, it's not a
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  Speaker 2: problem today. So we're going to continue to focus on
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  Speaker 2: the inflation side and not cut further, you know, than
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  Speaker 2: we did last fall, when maybe they you know, jump,
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  Speaker 2: I think they probably regret going fifty BIPs. Yeah, in
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  Speaker 2: fifty basis points in September, and wish they had just
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  Speaker 2: gone twenty five, twenty five, twenty five. But when Jeremy
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  Speaker 2: Siegel is yelling for you to do one hundred and
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  Speaker 2: fifty bases points and cuts in a week.
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  Speaker 4: Pressures on, baby, I get it. How about the word
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  Speaker 4: transitory is back on the table.
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  Speaker 3: I love it. I love that the word transitory is permanent.
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  Speaker 5: So Craig Tory, Yeah, that's that's pretty fun.
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  Speaker 4: Craig Torres from Bloomberg asked the question, and he basically said, look,
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  Speaker 4: you screwed up last time in the use of the
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  Speaker 4: word transitory, yes, and so why are you using it again?
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  Speaker 4: That was the gist of his question. I'm summarizing, and
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  Speaker 4: he was nicer about it, but that was just the question.
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  Speaker 4: And I think if I'm putting myself in Powell's shoes here,
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  Speaker 4: I think his answer is, yes, we are thinking about
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  Speaker 4: this inflation as transitory again, And if he's being really
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  Speaker 4: honest with himself, I think it's probably that. Hey, they
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  Speaker 4: were kind of proven eventually right on the transitory discussion
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  Speaker 4: back from twenty twenty two. They just understated just how
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  Speaker 4: severe it would be in the short term.
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  Speaker 2: Well, that's a lot to that charity, I think, because
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  Speaker 2: the problem people had with transitory is I think people
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  Speaker 2: thought like, hey, this will be three to six months,
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  Speaker 2: and instead it was two and a half years, right.
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  Speaker 4: And they also thought it would be like four and
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  Speaker 4: a half percent inflation.
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  Speaker 3: Instead it was nine.
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  Speaker 2: So there were some some problems there. I mean, look,
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  Speaker 2: I don't want Jay to start having to make up
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  Speaker 2: new words and everything.
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  Speaker 3: This is one of those places where I wish he
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  Speaker 3: would just not say anything.
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  Speaker 2: Agree, And he's pretty good at not saying things like
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  Speaker 2: you know, he could be asked, you know, hey, how
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  Speaker 2: long do you expect this inflation to last? Well, we're
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  Speaker 2: still looking to see, you know, exactly what policies get
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  Speaker 2: put in place and how in what their impacts may be,
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  Speaker 2: and will assess.
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  Speaker 3: As we go. Like you, you don't need to get
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  Speaker 3: into transitory.
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  Speaker 5: Would you like the best example of j Powell not
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  Speaker 5: saying anything?
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  Speaker 3: I know what it is already?
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  Speaker 4: The reporter from the AP asked him, quote, President Trump
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  Speaker 4: fired two members of the Federal Trade Commission, an independent agency,
• 9:19
  Speaker 4: and this could be a kind of legal fight about
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  Speaker 4: the administration's power to fire independent people. If those firing
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  Speaker 4: stand is that a threat to the Fed's independence could
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  Speaker 4: do the same thing to the FED board. Here's J
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  Speaker 4: Powell's answer. So, I think I did answer the question
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  Speaker 4: in this very room some time ago, and I've no
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  Speaker 4: desire to change that answer and have nothing new for
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  Speaker 4: you on that today. And then, by the way, the
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  Speaker 4: LA basically just shut up, stop asking that question.
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  Speaker 3: The reporter goes okay, like a Mulligan on the question, and.
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  Speaker 5: But you don't get no. You have to sit down
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  Speaker 5: after that response.
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  Speaker 2: First time I've ever seen J. Powell laugh at a
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  Speaker 2: press conference, it was kind of weird. It's kind of
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  Speaker 2: like you know when you're a kid and you see
• 9:57
  Speaker 2: like your teacher at the grocery store and you're like, oh, know,
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  Speaker 2: you existed outside of the class, right right. It's kind
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  Speaker 2: of like that seeing J Powell laugh. Yeah, you're like, oh,
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  Speaker 2: I didn't know you had that in you, Jay.
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  Speaker 3: But uh yeah.
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  Speaker 2: Overall, I don't think that we got much from this meeting,
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  Speaker 2: which is what you would expect. Again, the economic data
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  Speaker 2: has not really changed in the last eight weeks. There
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  Speaker 2: have been some stuff around the edges, but nothing crazy
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  Speaker 2: that we've seen.
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  Speaker 3: Uh.
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  Speaker 2: The the stuff that he said about, Hey, the soft
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  Speaker 2: data is bad, but we're gonna, you know, wait to
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  Speaker 2: see how the hard data catches up or you know,
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  Speaker 2: does the soft data catch does the hard data catch down,
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  Speaker 2: or does the soft data catch up? I guess is
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  Speaker 2: how you could phrase it. And from there, you know,
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  Speaker 2: we're gonna have to see how things go. And clearly,
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  Speaker 2: with the summary of economic projections, the FED says, yeah,
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  Speaker 2: we think this is going to result in some lower
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  Speaker 2: growth and higher inflation. But it also feels like it's
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  Speaker 2: kind of a low confidence read and that's fine, like.
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  Speaker 4: Which they acknowledged, right our confidence is shot because this
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  Speaker 4: is really really difficult to read right now. They they
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  Speaker 4: didn't say my confidence, our confidence is shot. They know
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  Speaker 4: it'd been bad. They just said uncertainty is extremely high,
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  Speaker 4: right now. That's the right acknowledge that to make The.
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  Speaker 2: Quote that I took from them was it's hard to
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  Speaker 2: say when we'll have a forecast that we can trust.
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  Speaker 4: Okay, finally, that's that's FED speak for confidences shot.
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  Speaker 2: Yes, yes, it's basically we're not sure what to do,
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  Speaker 2: so we're just gonna wait and see. And by the way,
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  Speaker 2: that's fine. The FED can just wait. Most of the time,
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  Speaker 2: the FED is better off just waiting and seeing. Occasionally
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  Speaker 2: it's the wrong move, but usually doing nothing's the right
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  Speaker 2: thing when it comes to the FED.
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  Speaker 4: So conclusion, equity markets up yesterday. FED still thinking about
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  Speaker 4: two rate cuts this year, but much more uncertainty than
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  Speaker 4: where they were in December of last year. They think
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  Speaker 4: the risk of both recession and higher inflation is now
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  Speaker 4: higher than they did just three months ago.
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  Speaker 3: Let's take a quick break.
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  Speaker 2: When we come back yesterday or last night, president Trump
• 11:57
  Speaker 2: saying hey, Jay, I want you to start cutting rates,
• 12:00
  Speaker 2: we'll talk about why he's saying that and what it
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  Speaker 2: means going forward.
• 12:04
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  Speaker 3: Mike.
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  Speaker 2: So yesterday, I think it was around ten pm or so.
• 13:09
  Speaker 2: I don't know the exact time, but President Trump, in
• 13:13
  Speaker 2: a social media post said, quote, the FED would be
• 13:16
  Speaker 2: much better off cutting rates as US tariffs start to transition,
• 13:20
  Speaker 2: ease their way into the economy, do the right thing.
• 13:24
  Speaker 2: April second is Liberation Day in America, So again very
• 13:28
  Speaker 2: publicly saying yes, I want you to cut interest rates.
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  Speaker 2: And a couple things on this that I think you
• 13:35
  Speaker 2: that I take away from it. The first is I
• 13:37
  Speaker 2: think that what I am seeing is like from whether
• 13:40
  Speaker 2: it's from the three main players in the administration on
• 13:44
  Speaker 2: the economic side are Trump, Lutnik, and Besson, and it's
• 13:50
  Speaker 2: pretty clear to me from all of them that they're
• 13:52
  Speaker 2: almost trying to I know, this sounds kind of weird,
• 13:56
  Speaker 2: and this again, they're almost trying to job own the economy.
• 14:02
  Speaker 5: Slower, which is a weird gars recession.
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  Speaker 2: I'm kind of And the reason that I say this
• 14:09
  Speaker 2: is normally, if you ask, like a Treasury secretary, hey,
• 14:11
  Speaker 2: are you worried about the economy going into recession?
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  Speaker 3: The answer is no, like, we're not worried about it.
• 14:15
  Speaker 2: Now you get, well, we might see one, but we'll
• 14:17
  Speaker 2: just have to see how it plays out.
• 14:19
  Speaker 4: Like, when have you ever heard that from a Treasury Second,
• 14:22
  Speaker 4: you've talked about that a lot, you have never heard
• 14:24
  Speaker 4: that ever from a Treasury secretary, like acknowledging publicly or
• 14:27
  Speaker 4: the president that their policies that they are putting into
• 14:31
  Speaker 4: place may cause recession.
• 14:33
  Speaker 5: And I think I'm trying to get the read on that.
• 14:36
  Speaker 4: Maybe it's a thinking that, hey, if it happens early on,
• 14:39
  Speaker 4: we can still pass this off as the prior administration's
• 14:42
  Speaker 4: fault and a means to an end, Whereas if it
• 14:45
  Speaker 4: happens a year from now, it's firmly in our camp.
• 14:47
  Speaker 3: I guess I'm not sure, So I.
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  Speaker 2: Think that the read as far as you know what
• 14:52
  Speaker 2: they're trying to do, I think I have a pretty
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  Speaker 2: good handle ont In it.
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  Speaker 3: They want rates down.
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  Speaker 2: So that basically the the playbook to try to fix
• 15:02
  Speaker 2: the economy. The way that they're viewing it is, hey,
• 15:05
  Speaker 2: we want to reduce fiscal spending so that we're not
• 15:08
  Speaker 2: running seven percent deficits. But if we reduce fiscal spending
• 15:12
  Speaker 2: and rates are still high, it's a huge drag on
• 15:14
  Speaker 2: the economy. So we want rates down to potentially stimulate
• 15:17
  Speaker 2: the economy as we're attempting to cut the deficit, to
• 15:21
  Speaker 2: hopefully provide enough boosts so that the economy doesn't go
• 15:24
  Speaker 2: into any kind of meaningful recession. And on top of that,
• 15:28
  Speaker 2: we can then take the existing debt that we have
• 15:30
  Speaker 2: out there and try to, you know, either as it
• 15:33
  Speaker 2: comes due or you know, in some kind of renegotiation,
• 15:37
  Speaker 2: say hey, we can get lower interest rates and turn
• 15:40
  Speaker 2: out the debt to longer term to reduce interest expense
• 15:44
  Speaker 2: and fix things on that side. I think that's very
• 15:47
  Speaker 2: clearly what they're trying to do is reduce annual outlays
• 15:52
  Speaker 2: as a percentage of GDP and reduce interest costs, and
• 15:56
  Speaker 2: also through that reduce interest cost you know, offset what
• 15:59
  Speaker 2: would other WANs some potential weakness in the economy. And
• 16:02
  Speaker 2: I said, look, it's Look, it's a really ambitious attempt
• 16:06
  Speaker 2: to try to restructure the way the US economy is
• 16:09
  Speaker 2: set up right now, I don't know if it's gonna
• 16:12
  Speaker 2: work or not. It might and we might be sitting
• 16:14
  Speaker 2: here three four years now being like, wow, this is crazy,
• 16:18
  Speaker 2: Like I can't believe they pulled this off, And we
• 16:20
  Speaker 2: might be sitting here three to four years from now
• 16:21
  Speaker 2: going well, that didn't really work, Like back to the
• 16:24
  Speaker 2: drawing board. You know, we'll see what we'll see what
• 16:26
  Speaker 2: we can do next. So I don't know, but I
• 16:28
  Speaker 2: think those are the pillars when you when you hear
• 16:31
  Speaker 2: from those three guys. The other one who I think
• 16:35
  Speaker 2: is involved, and you can read his white paper on
• 16:37
  Speaker 2: this very topic. His name is Stephen Mirron, and he
• 16:41
  Speaker 2: puts something out maybe a year and a half ago,
• 16:43
  Speaker 2: like on this very topic. He's now running the Council
• 16:45
  Speaker 2: of Economic Advisors for the President, and it was specifically
• 16:49
  Speaker 2: talking about TERRORFF implementation and lowering debt costs and all
• 16:52
  Speaker 2: these things together. I think the playbook is out there
• 16:54
  Speaker 2: for what they want to do. It's just a question
• 16:56
  Speaker 2: of is it gonna work or not?
• 16:58
  Speaker 3: And I don't know. It may it may not, And
• 17:01
  Speaker 3: we'll have to see.
• 17:02
  Speaker 4: Yeah, I think the playbook, especially on the government spending side,
• 17:04
  Speaker 4: like you could make a pretty compelling argument that the
• 17:07
  Speaker 4: only reason we didn't enter into recession in twenty twenty
• 17:11
  Speaker 4: two or twenty twenty.
• 17:12
  Speaker 5: Three was in large part because of government spending.
• 17:15
  Speaker 4: And I think there's plenty of people that would argue
• 17:17
  Speaker 4: that's not a terribly efficient use of taxpayer funds. I'd
• 17:20
  Speaker 4: rather see the private sector play a bigger role, And
• 17:22
  Speaker 4: I'm on board with that argument. And so, yeah, if
• 17:25
  Speaker 4: you reduce deficits, reduce government spending, there is a possibility
• 17:28
  Speaker 4: of an economic slowdown, and lower interest rates and lower
• 17:30
  Speaker 4: taxes would help that out. So I'm with you. I
• 17:34
  Speaker 4: understand that argument. Where the entire thing gets much more muddied,
• 17:38
  Speaker 4: and where business executives I think are questioning it a
• 17:41
  Speaker 4: whole lot more is around the tariff side, because there
• 17:45
  Speaker 4: I don't see the same clear path of what are
• 17:49
  Speaker 4: we trying to accomplish here, And so that's the piece
• 17:53
  Speaker 4: that I remain confused on. Is Okay, when it comes
• 17:56
  Speaker 4: to the strategy of you know, tariffs on China, how
• 17:58
  Speaker 4: does that differ in terms of what we're trying to
• 18:00
  Speaker 4: accomplish to those on Canada, Mexico, Europe, et cetera. And
• 18:05
  Speaker 4: I think that's where that's where you hear the lard
• 18:08
  Speaker 4: loudest cries coming from the business community to say, Okay.
• 18:11
  Speaker 3: We get what you're trying to do. In the government
• 18:13
  Speaker 3: side of things.
• 18:13
  Speaker 4: We might disagree with the tactics you're using and we
• 18:16
  Speaker 4: might have issues with that, but we can I think,
• 18:19
  Speaker 4: read into what's trying to be done there on the
• 18:21
  Speaker 4: tariff implementation side. I think you have a lot of
• 18:24
  Speaker 4: CEOs raising their hands and saying do it or don't
• 18:27
  Speaker 4: do it, but tell us what the end objective is
• 18:31
  Speaker 4: and give us some sense of where these are going
• 18:33
  Speaker 4: to be over the next few years, because otherwise we're
• 18:36
  Speaker 4: just going to put our hands up and do nothing.
• 18:38
  Speaker 3: Right if here's the thing.
• 18:40
  Speaker 2: If and again like I don't know, we don't know
• 18:44
  Speaker 2: how any of anything and any of this is going
• 18:46
  Speaker 2: to play out on the tariff side, But you don't
• 18:51
  Speaker 2: make long term decisions to relocate production to the US
• 18:54
  Speaker 2: based on short term tariffs, yep, Like they would need
• 18:57
  Speaker 2: to be in place for an extended period of time.
• 18:59
  Speaker 2: And if so, then you can say, Okay, I'm going
• 19:02
  Speaker 2: to build this factory because I'm going to you know,
• 19:04
  Speaker 2: have X level of protection and I can expect to
• 19:07
  Speaker 2: be able to, you know, have it be profitable once
• 19:10
  Speaker 2: it's completed. If that's not the case, then you wouldn't.
• 19:13
  Speaker 3: Necessarily see that.
• 19:14
  Speaker 2: So I think there are a lot of balls in
• 19:17
  Speaker 2: the air right now, and I know it's boring to
• 19:19
  Speaker 2: hear me just continue to say, Look, we're gonna need
• 19:21
  Speaker 2: to see how it plays out, but we are like
• 19:24
  Speaker 2: it's it's gonna take some time to see how this
• 19:25
  Speaker 2: all unfolds, and we'll see what happens. Let's take a
• 19:31
  Speaker 2: quick break here. When we return, we've got Wall Street
• 19:34
  Speaker 2: Watch after this.
• 19:40
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:42
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:52
  Speaker 1: Street Watch a complete look and what's moving market so
• 19:55
  Speaker 1: far today right here on the Financial Exchange Radio Network.
• 20:02
  Speaker 6: Well, markets are extending their gains from yesterday's rally at
• 20:06
  Speaker 6: the moment on the heels of a FED meeting and
• 20:08
  Speaker 6: the commentary from FED Chairman Jerome Powell. Right now, the
• 20:12
  Speaker 6: Dow is up by about a half a percent, or
• 20:14
  Speaker 6: one hundred and ninety five points, s and P five hundred,
• 20:18
  Speaker 6: up by four tenths of a percent or twenty three points,
• 20:20
  Speaker 6: and the Nasdaq is up just over half a percent
• 20:23
  Speaker 6: or ninety seven points. RUSSED two thousand, edging two points higher.
• 20:27
  Speaker 6: Tenure treasure yield is down by five basis points at
• 20:30
  Speaker 6: four point two zero percent, and crude oil up about
• 20:34
  Speaker 6: one percent higher, trading just below sixty eight dollars. A
• 20:37
  Speaker 6: barrel big news in the sports world this morning, impacting
• 20:41
  Speaker 6: a local Boston sports team after Bill Chisholm, managing partner
• 20:46
  Speaker 6: at Symphony Technology Group, has agreed to purchase the Boston
• 20:50
  Speaker 6: Celtics from the Grousbeck family for evaluation of six point
• 20:54
  Speaker 6: one billion dollars, marking the largest sale for sports franchise
• 21:00
  Speaker 6: in North America. Meanwhile, Tesla announced it was recalling more
• 21:04
  Speaker 6: than forty six thousand cyber trucks due to the potential
• 21:07
  Speaker 6: for an exterior panel to fall off while driving. Tesla
• 21:11
  Speaker 6: stock is actually edging a quarter percent higher. Elsewhere, shares
• 21:16
  Speaker 6: in TMU parent company PDD holdings up by one and
• 21:19
  Speaker 6: a half percent after the Chinese e commerce company reported
• 21:23
  Speaker 6: lower than expected earnings in the fourth quarter. The recent
• 21:26
  Speaker 6: quarter also marked the company's slowest quarterly revenue growth since
• 21:30
  Speaker 6: twenty twenty two. Darden Restaurants posted mixed quarterly results, beating
• 21:34
  Speaker 6: on earnings but missing on revenue expectations. The parent company
• 21:38
  Speaker 6: Do All Garden also saw its comparable restaurant sales increase
• 21:42
  Speaker 6: less than expected. However, that stocks seeing a nice game
• 21:45
  Speaker 6: today over of over seven percent. Building products distributor QXO
• 21:51
  Speaker 6: agreed to buy Beacon roofing supply and a deal worth
• 21:54
  Speaker 6: about eleven billion dollars including debt. That stock up by
• 21:57
  Speaker 6: eight percent. Boston Beer Shared up by four percent after
• 22:01
  Speaker 6: City upgraded the stock to buy from neutral, saying this
• 22:04
  Speaker 6: year could bring a return to volume growth for the
• 22:07
  Speaker 6: Twisted Tea and Truly parent company. Kava up by five
• 22:11
  Speaker 6: percent after the Mediterranean fast casual chain was upgraded by
• 22:15
  Speaker 6: JP Morgan to overweight from neutral. Online news car retailer
• 22:19
  Speaker 6: Carvana upgraded by Pip Sandlers, who overweight from neutral, where
• 22:24
  Speaker 6: the firm said Carvana is insulated from terraff threats and
• 22:27
  Speaker 6: is now in position to grow. That stock up by
• 22:30
  Speaker 6: nine percent and after today's closing bell, we'll see a
• 22:33
  Speaker 6: few noteworthy earnings reports from FedEx, Nike, and Micron Technology
• 22:39
  Speaker 6: I'm Tucker Silvan, that's Wall Street.
• 22:41
  Speaker 3: Watch, Mike.
• 22:42
  Speaker 2: We had a piece in Bloomberg talking about what we're
• 22:45
  Speaker 2: seeing in the energy sector so far this year.
• 22:48
  Speaker 3: Man.
• 22:48
  Speaker 2: It points out that out of the eleven sectors in
• 22:51
  Speaker 2: the S and P five hundred, energy stocks are the
• 22:53
  Speaker 2: strongest performing.
• 22:54
  Speaker 1: Now.
• 22:54
  Speaker 2: They have some strange bedfellows right now because the top
• 22:56
  Speaker 2: four sectors at the moment are energy, healthcare, utilities, and materials.
• 23:03
  Speaker 2: Those are not things that typically go together. Energy materials yep. Sure,
• 23:07
  Speaker 2: health care and utilities, sure, but not usually the four
• 23:10
  Speaker 2: of them together. And so one could, you know, ask
• 23:13
  Speaker 2: the question, what the heck is going on here? And
• 23:16
  Speaker 2: the answer, if we're being entirely honest, is I don't
• 23:20
  Speaker 2: really know.
• 23:23
  Speaker 5: Yeah.
• 23:23
  Speaker 4: Well, especially too, I'll point out that that is on
• 23:26
  Speaker 4: top of oil prices being down for the year, right, oil.
• 23:29
  Speaker 3: Prices have fallen, and yet energy stocks have risen.
• 23:32
  Speaker 4: Now not substantially from the beginning of the year, but
• 23:34
  Speaker 4: you know, oil prices did get as high as eighty
• 23:37
  Speaker 4: bucks a barrel on West Texas crewed back in January.
• 23:40
  Speaker 4: They're now sitting below seventy and have been lower than that.
• 23:43
  Speaker 4: And so it seems to me that there's a bet
• 23:46
  Speaker 4: being played on you know, they're cozying up to this administration,
• 23:50
  Speaker 4: which is definitely true. I mean, there was a meeting
• 23:52
  Speaker 4: just yesterday about you know, drilling and different objectives. But
• 23:57
  Speaker 4: I think the lesson from the first Trump administration was that, hey,
• 24:01
  Speaker 4: loosening of policy and restrictions around drilling is not always
• 24:04
  Speaker 4: great for oil companies.
• 24:06
  Speaker 2: No, if you end up with lower oil prices, that
• 24:09
  Speaker 2: can in fact be very bad for oil companies, even
• 24:12
  Speaker 2: if it might be very good for us driving around
• 24:14
  Speaker 2: on a daily basis. Interesting things just when you're looking at,
• 24:18
  Speaker 2: you know, kind of how different sectors have played out
• 24:19
  Speaker 2: so far here to date. Worst performing sector here to
• 24:22
  Speaker 2: date consumer discretionary, followed by technology. So again the stuff
• 24:27
  Speaker 2: that's kind of worked the last you know, two years
• 24:30
  Speaker 2: is the stuff that is lagging the most.
• 24:32
  Speaker 4: With consumer discretionary include I know it includes Amazon, Does
• 24:35
  Speaker 4: it also include Costco and Walmart?
• 24:37
  Speaker 2: No, So those fall into the staples bucket. If you're
• 24:40
  Speaker 2: looking at discretionary and what's in there, it's it's Amazon
• 24:44
  Speaker 2: and Tesla with that basically make up the vast majority
• 24:47
  Speaker 2: of it inside of there, and so you know, no
• 24:50
  Speaker 2: surprise on that front. The fascinating thing. And again this
• 24:55
  Speaker 2: is as of yesterday. So as of yesterday, those two
• 24:58
  Speaker 2: were the only two sectors of the S and P
• 25:00
  Speaker 2: five hundred that are down for the year. Every other
• 25:05
  Speaker 2: S and P five hundred sector all nine of them
• 25:08
  Speaker 2: positive year to date. Actually, no, I'm sorry, communication services
• 25:13
  Speaker 2: is also it looks like just off a touch, no,
• 25:17
  Speaker 2: communication service is up a quarter percent.
• 25:18
  Speaker 3: Sorry, I was just eyeballing it.
• 25:20
  Speaker 2: So you've got you know, nine out of the eleven
• 25:23
  Speaker 2: sectors up for the year in the S and P
• 25:25
  Speaker 2: five hundred, but it's down more than three percent. Because
• 25:29
  Speaker 2: those two sectors make up such a big chunk of
• 25:33
  Speaker 2: the overall waiting you might be like, okay, like you know,
• 25:36
  Speaker 2: how much of the S and P do they actually
• 25:38
  Speaker 2: make up? The consumer discretionary sector is about ten percent,
• 25:45
  Speaker 2: so it's not huge, but tech is still thirty one
• 25:49
  Speaker 2: and so those two sectors combined are forty percent of
• 25:51
  Speaker 2: the S and P. And when one of them, the
• 25:53
  Speaker 2: bigger one, is you know, down eight percent, it creates
• 25:58
  Speaker 2: a lot of drag when a third of the SN
• 26:00
  Speaker 2: is down almost eight percent for the year, and that's
• 26:02
  Speaker 2: how you've gotten what you've gotten, you know, so far,
• 26:04
  Speaker 2: this year with US equity market performance so kind of
• 26:08
  Speaker 2: interesting that you know, we look at this year and
• 26:10
  Speaker 2: you're like, hey, the S ANDP is down three and
• 26:12
  Speaker 2: then you take a look under the hood and you're like, oh,
• 26:15
  Speaker 2: nine out of the eleven.
• 26:15
  Speaker 3: Sectors are up.
• 26:16
  Speaker 2: But the big guys are the ones that have been struggling,
• 26:19
  Speaker 2: and they've just created enough drag that the overall index
• 26:22
  Speaker 2: is in negative territory.
• 26:23
  Speaker 4: Yeah, that MAGS seven group very much struggling this year
• 26:26
  Speaker 4: in the face of this uncertainty. Let's go back to
• 26:28
  Speaker 4: the energy sector for a minute, like play out a
• 26:31
  Speaker 4: best case and worst case scenario for this sector if
• 26:33
  Speaker 4: I will hear you know, I think on the energy
• 26:37
  Speaker 4: side of things, you could very much see a friendly
• 26:40
  Speaker 4: administration to domestic drilling and exports of US produced energy
• 26:46
  Speaker 4: products such as gnat gas, right Like, I could absolutely
• 26:49
  Speaker 4: see gnat gas exports working their way into some sort
• 26:52
  Speaker 4: of trade deal depending on where this all goes. On
• 26:56
  Speaker 4: the negative side, these oil companies to operate here domestically,
• 27:01
  Speaker 4: have a lot of exposure to Canada. They have a
• 27:04
  Speaker 4: lot of exposure to trade generally, and need things like
• 27:07
  Speaker 4: steel and aluminum to drill more oil and get to
• 27:12
  Speaker 4: that place. And so there was a meeting yesterday at
• 27:14
  Speaker 4: the White House with the Trumpet administration and oil executives,
• 27:17
  Speaker 4: and that was the focus. It was really on, Hey,
• 27:20
  Speaker 4: what are these terrafts going to look like on Canadian
• 27:22
  Speaker 4: produced oil, on aluminum and steel, that we need to
• 27:25
  Speaker 4: build pipelines and sure do what you're asking us to do. Again,
• 27:31
  Speaker 4: I would tend to think, again, this is a this
• 27:34
  Speaker 4: is a sector that the Trump administration has looked at favorably,
• 27:38
  Speaker 4: and so if there were going to be carve outs
• 27:39
  Speaker 4: for any one sector, I guess I wouldn't be shocked
• 27:42
  Speaker 4: to see it carved out.
• 27:43
  Speaker 3: On the energy side.
• 27:44
  Speaker 2: No, the question then still remains. Look, lower oil prices
• 27:48
  Speaker 2: typically push energy companies to drill less, just because, again
• 27:53
  Speaker 2: just from a pure you know, dollars and cents perspective,
• 27:56
  Speaker 2: it makes sense. And so again the question is you've
• 28:01
  Speaker 2: got these two things where you say we want lower
• 28:03
  Speaker 2: energy prices but more domestically produced oil. Can you have
• 28:07
  Speaker 2: both of those at the same time. Historically it hasn't
• 28:11
  Speaker 2: been the case in the United States. Normally, lower energy
• 28:14
  Speaker 2: prices means you're importing more from overseas because domestic producers
• 28:18
  Speaker 2: are higher cost like the US is never going to
• 28:22
  Speaker 2: be able to produce oil as cheaply as Saudi Arabia.
• 28:24
  Speaker 3: Right, it's different.
• 28:26
  Speaker 2: Processes, you know, Like there's some major differences obviously in
• 28:31
  Speaker 2: terms of what you're doing there. And so I think
• 28:33
  Speaker 2: that these are the questions that we're trying to sort through,
• 28:37
  Speaker 2: and quite honestly, like as to answer of how does
• 28:40
  Speaker 2: it affect energy stocks, I'll be the first to say
• 28:44
  Speaker 2: I have absolutely no idea. I mean, as Mike said
• 28:47
  Speaker 2: earlier this year, oil prices were up around eighty dollars
• 28:51
  Speaker 2: a barrel, and if you look at the S and
• 28:54
  Speaker 2: P five hundred energy sector, it was basically in the
• 28:57
  Speaker 2: same place then that it is now with oil prices
• 29:00
  Speaker 2: being fifteen percent cheaper. So it's not even something where
• 29:06
  Speaker 2: you have a direct one to one correlation in short
• 29:08
  Speaker 2: term periods of oil prices to energy stocks. And so
• 29:13
  Speaker 2: even if you know exactly where oil is going to go,
• 29:16
  Speaker 2: which I mean lock, first of all, can we talk
• 29:20
  Speaker 2: because I don't think anyone knows exactly where it's gonna go.
• 29:23
  Speaker 2: And second, even if you know exactly where it is
• 29:25
  Speaker 2: gonna go, how do you know how how exactly it's
• 29:29
  Speaker 2: gonna impact energy stocks in their prices because there's not
• 29:33
  Speaker 2: always the same relationship. There so a lot of complexity
• 29:37
  Speaker 2: as as you try to navigate what's going on on
• 29:40
  Speaker 2: that side of things. Let's take a quick break here.
• 29:45
  Speaker 2: When we return, let's talk a little bit about Europe.
• 29:49
  Speaker 2: Everyone's talking about Europe now with you know, the announcement
• 29:52
  Speaker 2: of potentially some new fiscal stimulus and things like that,
• 29:55
  Speaker 2: focusing on their defense and infrastructure. Let's talk about factor
• 30:00
  Speaker 2: fiction when it comes to, you know, the resurgence of
• 30:03
  Speaker 2: the European economy.
• 30:05
  Speaker 1: The Financial Exchange streams live on YouTube. Like our page
• 30:10
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• 30:12
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• 30:17
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• 30:20
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• 30:24
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• 30:27
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• 30:38
  Speaker 2: Hold the obituary. Europe comes to life as US stumbles.
• 30:42
  Speaker 3: This is the.
• 30:42
  Speaker 2: Piece from the Wall Street Journal and Greg ipp I'll
• 30:47
  Speaker 2: quote here. Europe's economy and markets have underperformed the US
• 30:52
  Speaker 2: for years now. A newly inaugurated President Trump promised to
• 30:55
  Speaker 2: sledgehammer Europe with tariff while juicing US growth with lower taxes,
• 30:58
  Speaker 2: less regulation and cheaper energy. As usual, the Davos consensus
• 31:01
  Speaker 2: got it wrong. Since then, the moods across the Atlantic
• 31:03
  Speaker 2: have switched places. European stocks are up nicely while the
• 31:06
  Speaker 2: American market has had a correction, and on Wednesday, the
• 31:09
  Speaker 2: Federal Reserve officials revised their outlook for inflation up and
• 31:12
  Speaker 2: growth down.
• 31:14
  Speaker 4: Given chuck that we have that plus the Financial Times
• 31:16
  Speaker 4: piece asking if this is the start of a European
• 31:19
  Speaker 4: exceptionalism in markets and then misquoting how markets have performed.
• 31:23
  Speaker 3: Later in that piece, it misquoted how markets performed.
• 31:27
  Speaker 4: Yeah, so they say the MSCI Europe Index is up
• 31:29
  Speaker 4: nine percent in the year. It's about right, compared with
• 31:33
  Speaker 4: the S and P five hundred and nine decline of
• 31:35
  Speaker 4: nine percent. So yes, the S and P, Yeah exactly,
• 31:40
  Speaker 4: So yeah, misrepresenting what markets have actually done. That US
• 31:43
  Speaker 4: equities are down four percent about year to date and
• 31:46
  Speaker 4: down nine percent from their peak. So yes, misrepresenting it
• 31:50
  Speaker 4: a bit. But given the fact that we're seeing this
• 31:52
  Speaker 4: now printed everywhere starts to get me concerned that maybe
• 31:56
  Speaker 4: it's over overplayed.
• 31:57
  Speaker 2: Yeah, it's look, we did this last year with I
• 32:02
  Speaker 2: think it was last year when the S and P
• 32:04
  Speaker 2: five hundred lost money in like its first three or
• 32:07
  Speaker 2: four days or something. I don't remember if it was
• 32:09
  Speaker 2: last year of twenty twenty three, but one of those.
• 32:11
  Speaker 2: And either way, like each of the last two years
• 32:13
  Speaker 2: were fantastic for US equities, but nonetheless you got the
• 32:16
  Speaker 2: pieces printed. Hey, here's what you know, a bad January
• 32:20
  Speaker 2: or a bad start to the year means for stocks.
• 32:22
  Speaker 2: And ultimately I can tell you what it meant for stocks,
• 32:24
  Speaker 2: which was boop kiss like it.
• 32:26
  Speaker 3: Didn't mean anything.
• 32:28
  Speaker 2: So I think that you look at this and could
• 32:31
  Speaker 2: this be a turning point for you know, how capital
• 32:35
  Speaker 2: performs in the US versus how it performs overseas. Of
• 32:40
  Speaker 2: course they could, but like that, that could happen anytime
• 32:42
  Speaker 2: that you see, you know, things moving one way or another,
• 32:45
  Speaker 2: and I think the sorry, there's also there's also a
• 32:48
  Speaker 2: chance that this is absolutely nothing, because you know, Europe
• 32:52
  Speaker 2: has long been plagued by problems of follow through and
• 32:56
  Speaker 2: getting political cooperation across its members. And you know this
• 32:59
  Speaker 2: is before you even get to the fact that its
• 33:02
  Speaker 2: demographics are significantly worse than ours, its regulatory structure is
• 33:07
  Speaker 2: more difficult to operate, and like that there are a
• 33:08
  Speaker 2: lot of, you know, reasons why US equity growth has
• 33:12
  Speaker 2: been stronger than European equity growth over the last you know,
• 33:15
  Speaker 2: couple of decades, and so yeah, like this this could be,
• 33:19
  Speaker 2: you know, something in the start of some kind of
• 33:21
  Speaker 2: new long term trend. But one month does not prove anything.
• 33:27
  Speaker 2: Like anything in the markets can look good for a month,
• 33:30
  Speaker 2: whether it's like the Long Island blockchain company or whatever
• 33:34
  Speaker 2: the heck. You know, like the newest fad is it's
• 33:37
  Speaker 2: not to poop pooh, what's going on in Europe, but
• 33:41
  Speaker 2: it is to poop poo what's going on in Europe
• 33:43
  Speaker 2: because you just don't know anything right now.
• 33:45
  Speaker 4: Right the only thing that is seemingly changed in Europe
• 33:49
  Speaker 4: today compared to a few months ago was a willingness
• 33:53
  Speaker 4: to spend.
• 33:54
  Speaker 5: Like, that's what's changed, right.
• 33:56
  Speaker 4: Germany had that vote and they are now looking at
• 33:58
  Speaker 4: expanding defense as well as infrastruction actual spending.
• 34:00
  Speaker 3: That is a meaningful change. But if you think that.
• 34:03
  Speaker 4: The majority of the gains that US equities have reached
• 34:06
  Speaker 4: compared to European stocks over the course of the last
• 34:09
  Speaker 4: decade is only because the US government has spent more,
• 34:14
  Speaker 4: then I think you're missing the ball there right. There's
• 34:17
  Speaker 4: been a different regulatory environment, there's been different innovations that
• 34:20
  Speaker 4: have played out, and so I would, you know, I
• 34:23
  Speaker 4: guess temper some of those expectations. It's not to say
• 34:26
  Speaker 4: that that won't be met with the follow through, but
• 34:28
  Speaker 4: there's a lot more that needs to happen to make
• 34:30
  Speaker 4: Europe a much more desirable place for investment.
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• 35:41
  Speaker 2: Mike, we got a piece of the New York Times
• 35:44
  Speaker 2: Signs of an office market bottom quote the worst is
• 35:48
  Speaker 2: probably over, Mike. I was told that we were going
• 35:51
  Speaker 2: to have like catastrophe because of the commercial real estate market.
• 35:58
  Speaker 3: And what happened? The world was going down? What what?
• 36:03
  Speaker 3: What happened?
• 36:05
  Speaker 4: Jamie Diamond said he wanted all of his employees back
• 36:07
  Speaker 4: in the office. So and then so did like you know,
• 36:10
  Speaker 4: a few other thousand executives.
• 36:13
  Speaker 2: So I don't know anything about like the ins and
• 36:17
  Speaker 2: outs of what's going on in like the New York
• 36:20
  Speaker 2: real estate market. I'm there's only so many hours in
• 36:23
  Speaker 2: the day. You can't learn everything about everything. I try,
• 36:26
  Speaker 2: but you just you can't. So you get these pieces
• 36:29
  Speaker 2: here that are talking about Oh, quote, you know, sales
• 36:32
  Speaker 2: of office buildings across the country total sixty four point
• 36:34
  Speaker 2: three billion dollars last year, up twenty one percent from
• 36:37
  Speaker 2: twenty twenty three, So you know, there's there's more sales
• 36:40
  Speaker 2: that are going on. In twenty twenty four, six point
• 36:43
  Speaker 2: five million more square feet of US office was least
• 36:45
  Speaker 2: than vacated. That's the highest amount in any years. It's
• 36:48
  Speaker 2: twenty nineteen. So like you're seeing some signs there. So ultimately,
• 36:54
  Speaker 2: again I can only tell from what I read. I'm
• 36:56
  Speaker 2: not an expert on this market. It says you still
• 36:59
  Speaker 2: have sales prices that are moving down in order to
• 37:01
  Speaker 2: you know, get these buildings moving.
• 37:04
  Speaker 3: But they are.
• 37:05
  Speaker 2: All the claims, you know that that we're going around
• 37:09
  Speaker 2: of hey, this is going to be like this horrible
• 37:11
  Speaker 2: thing we said at the time, like hey, maybe this
• 37:14
  Speaker 2: creates some drag over like the next five to seven years,
• 37:17
  Speaker 2: but it's tough to you know, understand how it becomes
• 37:19
  Speaker 2: a bigger thing that seems to be what we're seeing here,
• 37:21
  Speaker 2: and that there is no catastrophe that played out maybe
• 37:25
  Speaker 2: on a building by building level, there are certainly areas
• 37:27
  Speaker 2: that you know, are harder hit but as far as
• 37:30
  Speaker 2: the impact on the US economy, have you not, Like,
• 37:33
  Speaker 2: have you noticed anything?
• 37:35
  Speaker 4: Yeah, I think you go back to one big lesson
• 37:38
  Speaker 4: when it comes to sensational stories like COVID was at
• 37:41
  Speaker 4: the time. Whenever somebody tells you it's going to permanently
• 37:45
  Speaker 4: change the way of life, treat that with the high
• 37:49
  Speaker 4: degree of skepticism.
• 37:50
  Speaker 2: I remember when we were told we were never gonna
• 37:52
  Speaker 2: hug again, when I just want to give you a
• 37:56
  Speaker 2: big hug mic that that wasn't that was a hugger.
• 37:59
  Speaker 4: That wasn't about COVID, Like you know, that was a
• 38:01
  Speaker 4: conversation between you and your family way pre COVID.
• 38:05
  Speaker 3: I didn't want that to come out.
• 38:08
  Speaker 4: But yeah, don't buy into the fact that it's different
• 38:12
  Speaker 4: to this time.
• 38:13
  Speaker 3: It is my lesson from all this quick break.
• 38:15
  Speaker 2: Our two coming up in just a little bit.