Latest / Paramount Wealth Perspectives / Soft Landing or Slowdown? Reading Jobs, Inflation, and the Fed - 9/8/25

Transcript

Soft Landing or Slowdown? Reading Jobs, Inflation, and the Fed - 9/8/25 · Paramount Wealth Perspectives

• 0:00
  Chris Coyle: Intro song
• 0:11
  Hello everyone.
• 0:12
  Welcome to Paramount Wealth Perspectives, your go-to podcast for the latest updates on global markets and current economic events.
• 0:19
  This is your host, Chris Coyle.
• 0:21
  I'm the marketing director and a financial advisor here at Paramount Associates Wealth Management.
• 0:26
  And today I'm joined by Scott Tremlett, chief Investment Officer here at Paramount Associates Wealth Management.
• 0:32
  Let's start with recent market performance.
• 0:34
  The s and p 500 gained 0.3% last week, closing around 64, 80 up 10% year to date.
• 0:41
  Scott, what stood out most in the data?
• 0:44
  Thanks, Chris.
• 0:45
  What stood out most to me was the labor market.
• 0:48
  Payrolls grew by just 22,000 in August.
• 0:51
  Far below expectations prior months were revised down, leaving us with a net loss of 21,000 jobs.
• 0:59
  The unemployment rate rose to 4.3%, although participation rates did nudge higher.
• 1:05
  We are not seeing mass layoffs, but hiring is clearly.
• 1:08
  Slowly.
• 1:10
  It's worth mentioning that the ratio of job openings to unemployed workers fell below one for the first time since 2021.
• 1:17
  A sign that the labor demand is softening, add higher jobless claims and weaker a DP payroll growth and is clear.
• 1:25
  Momentum is fading.
• 1:26
  Switching to talk about the fed markets are convinced rate cuts are coming in September.
• 1:32
  How do you see it?
• 1:33
  Markets expect at least a 25 basis point cut with growing.
• 1:37
  Odds of 50 futures imply over one point a half percent of easing through late 2026, but the Fed isn't just following markets, inflation, especially in services.
• 1:48
  Remain sticky.
• 1:50
  Chicago Fed President Austin Goolsby has said he wants to see the August CPI before making a September call.
• 1:58
  That number is coming Thursday.
• 2:00
  This is certainly a balancing act.
• 2:03
  Weak labor data says cut, but tariffs and fiscal policy are still pushing inflation higher.
• 2:09
  My view is the Fed takes the smaller step this month so they retain more flexibility for future decisions.
• 2:17
  And beyond September, what risks do you see in fed policy?
• 2:21
  Several risks.
• 2:23
  First, the risk of cutting too aggressively and reigniting inflation that would hurt their credibility, which was already challenged during the 20 21, 20 22 inflation surge.
• 2:34
  Second structural changes in the labor market.
• 2:37
  Lower immigration means we need fewer new jobs to hold unemployment steady.
• 2:42
  That makes the August payroll miss less alarming than headlines suggest.
• 2:47
  Third, politics with Fed leadership set the change in 2026.
• 2:52
  Some investors are betting on a more dubbish regime if that's driving market expectations.
• 2:58
  It could misalign with current policy makers.
• 3:01
  Finally, the Fed's own forecasts already assumed rising unemployment and a 3% inflation.
• 3:07
  By year end, so in their view, we're still on track.
• 3:12
  That makes a rapid fire cutting cycle less likely than markets expect.
• 3:17
  Bond markets are as sending signals too.
• 3:19
  Treasury yields and credit spreads shifted last week.
• 3:22
  How do you interpret that?
• 3:24
  First for our listeners, when bond spreads get wider, it means investors are more worried and want extra return for taking risks.
• 3:32
  When they tighten, it shows confidences up and investors are more comfortable lending at a lower extra cost.
• 3:40
  Back to your question, Chris yields on treasuries move lower after the weak payrolls data, but spreads on high yield and investment grade bonds tightened.
• 3:49
  That suggests investors expect easier fed policy, but they're not panicking about credit risks.
• 3:56
  In fact, demand for yield remains strong.
• 3:59
  To me that shows markets are pricing in a soft landing scenario, slower growth, but not a recession.
• 4:06
  Instead, we're seeing confidence in corporate balance sheets, even with policy uncertainty that leads to inflation itself.
• 4:13
  We've seen mixed signals in the data.
• 4:15
  What's your read on the trend?
• 4:16
  Inflation has definitely cooled from its 22 highs, but it's far from defeated.
• 4:22
  Good prices have leveled off, but services remain stubbornly high.
• 4:27
  Things like housing, medical care, and insurance are sticky.
• 4:30
  Tariffs are another wild card.
• 4:32
  Adding cost pressures that work against Disinflation, the Fed's challenge.
• 4:37
  Is that even if headline CPI comes down, underlying drivers could flare up again.
• 4:43
  That's why policymakers remain cautious about declaring victory.
• 4:48
  Now let's turn to sectors.
• 4:49
  Communication services rose over 5% led by alphabet's, 10% gain after a court ruling.
• 4:56
  Home builders also rallied while energy and financials dropped.
• 5:00
  What explains this split?
• 5:02
  It is rate sensitivity versus commodities and weak jobs data.
• 5:06
  Lower rate expectations boosted both tech and housing while weaker oil prices dragged on energy.
• 5:13
  Financials face headwinds from the weak jobs.
• 5:15
  Data financials typically benefit from rising yields and economic stability.
• 5:21
  Investors seem to be rotating capital into sectors that benefit from easing policy and away from those tied to global demand swings.
• 5:29
  Speaking of housing, mortgage rates are still high compared to pre pandemic levels.
• 5:34
  How do you see that affecting the housing market going forward?
• 5:38
  Housing has been remarkably resilient.
• 5:41
  Demand hasn't collapsed because supply is tight, but affordability is stretched.
• 5:46
  If the Fed follows through with rate cuts, mortgage rates could ease further, which would support the builders.
• 5:52
  Still structural issues remain lack of inventory, rising construction costs and demographic ships.
• 6:00
  So while rate cuts provide short-term relief, housing affordability is likely to stay a challenge.
• 6:06
  A broad politics stirred things up.
• 6:09
  Japan's leaders stepped down France facing a confidence vote and Argentina's election outcome.
• 6:15
  How do these filter into markets?
• 6:18
  They all raise fiscal risk.
• 6:20
  France's 30 year yield hit the highest level since 2011, even above Spain and Greece.
• 6:27
  In Japan, the yen weakened on expectations of looser fiscal policy limiting the bank of Japan's tightening.
• 6:35
  And Argentina's losses add stress to emerging markets together.
• 6:39
  They're pushing.
• 6:40
  Global Bond yields higher and amplifying volatility across the currencies.
• 6:46
  Oil prices dropped last week, but OPEC Plus is signaling production changes.
• 6:52
  Where do you see commodities heading?
• 6:54
  Oil is really caught between two forces right now on one side.
• 6:58
  Slower global growth is pressuring demand, and the other OPEC plus is trying to manage the supply.
• 7:04
  Longer term geopolitical risks from the Middle East to Russia add volatility.
• 7:10
  For investors, it means oil and energy stocks will stay choppy with sharp swings up and down.
• 7:16
  Gold, meanwhile has been strong as a hedge against uncertainty reflecting how investors are positioning defensively.
• 7:23
  Equity markets have been led by big tech.
• 7:26
  Do you see leadership broadening out?
• 7:28
  Yes.
• 7:29
  We have seen trading days with broadening and, and that is known to be healthy.
• 7:34
  Small cap stocks and cyclicals have had their days in the sun, but I'm not a true believer.
• 7:39
  There is a significant difference in earnings growth between the Mag seven and the other.
• 7:43
  493 stocks of the s and p 500.
• 7:47
  Broadening suggest investors are positioning for rate cuts to benefit from broader economy, not just a handful of mega cap names on paper.
• 7:56
  If breath continues to improve, it would make this rally more durable.
• 8:00
  The risk, of course, is that if the economy weakens too much, small caps and cyclicals could suffer.
• 8:07
  And in today's economy, sustainable earnings growth, sustainable revenues make a stock more defensive.
• 8:14
  That doesn't mean less volatility in the short run, but over a longer period earnings and growth.
• 8:20
  Both do matter.
• 8:21
  I'm not saying put all your eggs in the mag seven basket.
• 8:25
  I'm saying that the old school term broadening may not hold as much weight these days.
• 8:30
  There are many mid cap and other large cap companies that share characteristics with the mega cap growth earnings characteristics.
• 8:37
  You just have to find them.
• 8:39
  Stepping back, how would you describe investor sentiment right now?
• 8:43
  It's cautious optimism.
• 8:45
  On the one hand, stocks have been resilient up double digits, year to date.
• 8:49
  On the other, there's recognition that the cycle is maturing.
• 8:53
  Investors are hedging more rotating and pricing in significant fed cuts.
• 8:58
  Sentiment isn't euphoric.
• 9:00
  But it's not fearful either.
• 9:03
  It's a market waiting for clarity on inflation policy and global politics.
• 9:09
  That limbo explains why moves are sharp when the new data hits.
• 9:13
  Corporate earning season is picking up again, what are you watching Most closely tech earnings will be front and center this week.
• 9:21
  Companies like Oracle and Adobe give us a window into enterprise spending on AI and cloud computing.
• 9:28
  So far, the narrative has been strong demand.
• 9:31
  For AI infrastructure, but the question is whether that translates into broad revenue growth or just concentrated gains in just a few names beyond tech.
• 9:41
  I'm watching consumer oriented companies, retailers, travel and autos for signals about how households are holding up with the higher rate environment.
• 9:51
  Earnings will either confirm or challenge the idea.
• 9:55
  That the economy is just slowing, not slipping into a recession.
• 9:59
  Given this mix of US and global risks, how should investors position themselves?
• 10:06
  Definitely diversify strategically within US equities, there will be sector winners, especially in everything ai.
• 10:14
  I am a big believer in the private markets right now.
• 10:17
  Credit infrastructure and equity are all compelling diversifiers in my mind, and international equities.
• 10:23
  Don't forget about them.
• 10:25
  They do look stronger than they have in decades.
• 10:28
  With healthier growth and cheaper valuations, US bonds finally provide yield and downside protection if growth weakens further.
• 10:36
  The era of just buying an index is definitely fading and active management matters.
• 10:41
  Again, before we wrap up, what should Investors watch this week?
• 10:46
  The August inflation numbers are key producer on Wednesday and consumer on Thursday.
• 10:52
  A softer number would cement expectations for a September cut.
• 10:56
  Again, Oracle and Adobe earnings will be important for Gage and enterprise AI and software spending and global politics.
• 11:05
  From France's government turmoil to Japan's leadership vacuum will keep investors cautious.
• 11:11
  Scott, let me give you the final word.
• 11:14
  What's your big takeaway for investors listening today?
• 11:17
  For investors, the key is balance.
• 11:20
  The US economy is slowing but not stalling.
• 11:23
  The fed is leaning towards easing, but inflation risks limit how far they can go.
• 11:29
  Markets will stay volatile as data shifts week to week for investors, that means staying diversified, leaning into high quality assets and keeping a long-term focus.
• 11:40
  Chasing headlines is tempting, but discipline will matter most in the months ahead.
• 11:45
  Well, thank you, Scott, for taking the time to share your thoughts.
• 11:49
  Thank you to our audience for tuning in.
• 11:51
  And remember to please submit your questions via email to general@paramountassoc.com.
• 11:58
  For now, stay informed.
• 12:00
  Stay ahead and join us next time for more key updates shaping the global economy.