Danielle DiMartino Booth: Fed's Next Move as Dissent Builds, Where to Focus Now
Summary
Market Insights: The recent increase in the Producer Price Index (PPI) by 0.9% highlights the impact of tariffs on input prices, raising concerns about companies' ability to pass these costs to consumers amidst weakening purchasing power.
Economic Outlook: The gap between PPI and Consumer Price Index (CPI) suggests potential margin squeezes for companies, with discretionary spending under pressure as consumers adjust to higher prices.
Federal Reserve Dynamics: There is growing dissent within the Federal Reserve regarding the decision to keep interest rates unchanged, with some officials advocating for rate cuts due to signs of a weakening job market.
Tariff Uncertainty: Ongoing trade tensions, particularly with China, contribute to economic uncertainty, affecting corporate capital expenditure plans and small business confidence.
Labor Market Concerns: Recent downward revisions in payroll data and high unemployment among young adults indicate structural issues in labor data collection, suggesting a need for modernization.
Investment Strategies: Investors are advised to focus on quality and defensive positions, particularly in corporate debt and dividend-paying stocks, as economic uncertainties persist.
Consumer Spending Trends: A decline in credit card spending signals potential consumer weakness, which is unusual in post-war recessions and could indicate broader economic challenges.
Transcript
[Music] I'm Charlotte Mloud with investingnews.com and here today with me is Danielle D. Martino Booth, CEO and chief strategist at QI Research. Thank you so much for being here. Great to have you as always. >> And thank you for having me. It's great to be here. >> Of course. really good to be catching up with you after a little while and I think it's the perfect time to be talking because we've got so many different data points to go through today. I thought we could start with the latest producer price index data out of the US. I believe it was up 0.9% from June, which is the biggest increase in more than 3 years. So, I wondered if you could break down what's driving that rise there. Well, u clearly the tariffs are are having an effect on uh on on input prices and we've been hearing um we've been hearing from companies that they have been shouldering higher prices and indeed we saw that uh play out in in the data. Uh the the question now becomes one of uh pricing power and purchasing power. So how much are they going to be able to pass through uh to end users to consumers at a time when you know just in the month of July we lost 440,000 full-time jobs. Uh so purchasing power is clearly not improving. Uh so it it really does remain to be seen if this wide gap that we have between the producer price index and the consumer price index closes and or whether we end up seeing you know quite a bit of margin squeeze. >> Yeah, that's one of the points I was reading about just today that that gap between PPI and CPI data that we got earlier this week shows that it's not happening yet. That increase being passed on to the consumer. So, any further thoughts from you on when we might see that start to play out if it's not happening already? >> Well, I do think um I do think that we will see where companies feel they can push through price increases. I think we'll see that. Um we saw quite a bit of food inflation uh in the producer price index. And when you're talking about things like essentials and especially with very very low margin types of sales, you know, we we could see uh what we call the substitution effect uh begin where where households end up buying other things. It the classic is always that they trade down from steak to ground beef um or trade down from, you know, from beef to chicken and and we're going to see whether or not that that plays out. Again, you know, we have millions upon millions of Americans working multiple jobs, working in the gig economy, uh not necessarily by choice. You know, we've got a record percentage of Americans, young adults, living with their parents. Uh so clearly budgets are stretched and we will see where these price increases are able to be passed along. Bank of America puts out some very timely data on credit card, debit card spending, and we've seen a lot of what we call discretionary spending pressure, whether it be furniture, um, or maybe RV sales. RVs, uh, inflation has gone up quite a bit, but those sales have come down as well. So, again, it some difficult decisions for those who occupy the seauite, >> right? So, we'll see those businesses decide how that plays out, I guess, in the coming weeks and months. So, as we've been talking about, we got those two reports, CPI and PPI this week. I know you're always really good at going beyond the headlines. So, anything further you'd pull out from either of those that people might be missing right now? So, you know, I think it's interesting because uh there are several areas of the uh producer price index that flow through to the Fed's preferred uh core PCE measure and one of them is uh is portfolio investment portfolio management fees and we saw an appreciable rise and it it it really is a reflection of of asset price inflation and this is something that we uh this is something that we talked about in 2006, 2007, 2008, you know, how can the Fed better gauge asset price inflation? Well, there you go. If assets under management increase, then portfolio management fees are going to increase and we're going to see that flow through um in into the from the PPI into core PCE. And that is how the Fed makes monetary policy. Will this make policy makers more reluctant to to lower interest rates? We we saw about a 5 percentage point decline in probabilities for a September rate hike this morning, but it's still well north of 90%. >> Right. And we're definitely going to get into what's going on with the Fed. Just before we go there, I wanted to mention so these CPI and PPI numbers, they're coming on the back of the latest July jobs data which we got previously after which Trump ended up firing the Bureau of Labor Statistics Commissioner. So, I wanted to check in with you on that. Get your take on what that was all about. Does it make sense? What are you thinking about that? >> Well, you know, um I think it's important to have some context and and perspective. The the the revisions that we saw for May and June payrolls were certainly of of a very big magnitude and and came as a shock to market participants. But we've actually seen 24 out of the last 30 months end at July. We've seen downward revisions come out of the Bureau of Labor Statistics. To me at least, that is highly problematic because it's it's indicative that there is something broken in the way that the data is being is being measured. Whether this is response rates or in the case of May and June, you know, they they had huge downward revisions to government payrolls and that's data that they received directly from government agencies. So that was a bit of a of a headscratcher. Uh so there is something to be said for for looking at re-engineering how the Bureau of Labor Statistics gathers data. Now, if you were to replace the one individual with someone who was potentially going to be politically biased, that would be problematic in its own um of of its own valition. You don't want that to happen either. We want clean data and timely data to come out of of stat government statistical agencies. I think that that should be the goal here. >> Yeah. I I was going to ask you, okay, so do you think that this can be improved on? What are your your thoughts there? >> Well, the Census Bureau, for example, on a quarterly basis requires US employers to report headcount numbers. That's what we call hard data. And uh you know in the world that we live in today uh of big data of artificial intelligence uh you know as as high-tech is higher than it's ever been you know there's something to be said for modernizing uh that particular avenue of gathering the data. Can we can we maybe make it a monthly report that companies tell us what their headcount is? And in that way, we don't have to have data imputations and and the birth death model and all of the estimates that go into the critical payroll data. Perhaps we could have that be much more real time in in nature. And you know, the technology does exist. That'll definitely be interesting to watch how that plays out. So, thanks for going into that and I'll let us go over to the Fed now. So, we had the latest meeting a couple of weeks ago at this point, but I want to start there because of course that's something that you're closely watching. We had interest rates stay unchanged. Anything key you would pull out from that latest meeting? Well, I think that in in something of a repeat of July of 2024, uh I I think that there's certainly now more than just the two individuals who desent it, we've we've got a handful now of Fed officials uh who clearly think that like July of 2024, it was a mistake to not lower interest rates this July. uh you know we we got a you know the day after um the day after the Fed met which was a a Thursday you know the time Thursday morning rolled around you chair Jerome Powell had in his hands 24 hours in advance that payroll report that clearly demonstrated that there was nothing quote unquote solid about the job market and so I it's going to be very interesting to see if the Senate is is able to confirm uh Trump's nominee to replace Fed Governor Adriana Cougler in time for the se September 16th 17th FOMC meeting. Uh we've had several again Fed officials come out subsequent to this payroll report. Austin Goulby of of the Chicago Fed, Susan Collins of the Boston Fed saying that it's clearly evident that there are that there's weakening in in the job market and you could see a scenario playing out where it wasn't just two descents and two descents was remarkable by the way from governors but you could certainly uh you know scenario out a situation where there were five or six descents if we get that uh one nominee confirmed in time for this next meeting. >> Really, really interesting dynamics to watch and of course Pal is facing a lot of pressure to cut and he's kind of been saying, well, we want to see how how tariffs end up playing out. Does that line of thinking make sense to you? Is that something that he's going to be changing his tune on? Well, I think um I think certainly the this hotter than expected uh producer price index is certainly going to give uh credence to Powell's reluctance to be too aggressive on the rate cutting front. But again, it comes down to the ability to pass through these higher prices to the consumers, which brings us the the discussion all the way back around to to the labor market, which is the, you know, the Fed does have an employment mandate and the inability to to be able to shoulder higher prices. If if that's because the job market is weakening and we're seeing in the data that it is demonstrabably doing so then then yes, Chair Powell needs to revisit his thinking. And on the note of tariffs, I think the last time that we spoke was back in March, and there's been a lot that's happened since then in terms of the tariffs. Do you feel like we're getting to a point right now where we're in a bit of a a stasis or holding pattern with the tariffs and we can start to see how the impact plays out or or is there more turmoil to come there? You know, it's it's very hard to say. We've just had another 90-day pause uh with our largest trading partner, that would be China. Even though China Chinese exports to the United States have decreased, uh they're still enormous. And so there is a a certain layer of uncertainty that that remains and makes it difficult for decision makers across corporate America to to figure out what they're going to do in terms of growing or not growing their businesses. And so uh and and we've seen that we we've seen that play out in the data time and again with decreased capital expenditure plans. And you know that is a reflection of how very uncertain the environment is. And that applies also to small businesses. We saw the fifth highest reading on on uncertainty out of the National Federation of Business um just a few days ago. And so it's it's it's Main Street, it's Wall Street. M&A activity has has gone down appreciably. So there is there there's clearly uh uncertainty is acting as a huge governor on economic activity. I hope that we're getting to a more certain place, but I don't think that that conclusion can can be drawn. I think that's premature at this point. >> Yeah, it's a really tough topic to tackle. So thank you for going into that one. And going back to these dynamics between Trump and Powell, it looks like one of the big headlines this week is Trump saying he's going to launch a law or he may he may launch a lawsuit against Powell over these Fed renovations. Is that something you're you're paying attention to or is this more just just noise? Um, I from what I have from what I've read from legal experts, I am not a legal expert, but from what I have read, uh, legally speaking, President Trump doesn't really have a leg to stand on. And it's it's clear that the the words that he's using, you know, Chair Powell has exhibited gross incompetence. Uh it's clear that that Trump is trying to angle in for for suggesting that Powell can be fired for cause. Of course, gross incompetence would certainly be cause for firing somebody, but that's the only reason the Supreme Court ruled that you could get um that you could oust uh a Fed leader. We'll have to see. He, you know, the president also may be thinking longer term when it comes to Powell. Of course, any lawsuit would take time, but maybe he's thinking about, you know, how much have I have I angered this individual? Have is he angry enough to stay on past May of 2026 and finish his 14-year term as a a a reserve board governor that does not end until January of 2028? We shall see. >> Right. Yeah. There's those two separate terms going on with Powell there. and looking at his term as FedEure. That one is, I believe, May 2026 and probably a good time to be asking you, what is it looking like in terms of of the replacement there? What are we seeing? >> I I you name it, we're seeing it. Um, you know, Treasury Secretary Scott Bessant has uh has been very public recently and saying that he's cast a much wider net. He's looking at people across private industry. He's looking at people from Wall Street. He's looking at traditional economists. Uh so right now it's anybody's guess. At at one point it was, you know, which of the two Kevin will it be, so to speak, Kevin Wer, Kevin Hasset, and clearly that's no longer the case. We have a So it could be anybody at this point. He might be nominating Mickey Mouse. We have no idea. Uh but it it's it is interesting to see how publicly the administration is going about this. >> It is it is quite public. There's a lot of headlines going around about this, too. And from your perspective, is there anyone that you would want to see or or who you think would do a good job in that position? Well, um you my choice would certainly be um an an independent practitioner from the private sector, somebody who understood who who who understands better not just monetary policy, economics, but also the financial markets and and how monetary policy plays out in the real economy. I think that a lot of of of Fed policym in recent generations has been hampered by having far too many academics at the Fed and and not enough people who are on the receiving end of monetary policy. So that would that would be, you know, kind of my dream would be to have somebody who was a competent, levelheaded, independent, you know, somebody who could not be influenced by politics at all, but but a very successful individual from the private sector. That would be my choice. >> Okay. Okay. That's that's the dream there. So for for Fed meetings in 2025, we've got three left. You've been mentioning what your expectations are, but if we lay it out, what what do you see coming? >> Well, so again, back to Treasury Secretary Scott Bessent, you know, he mentioned that it would be appropriate to have a full repeat of 2024 to have uh had the mistake of not lowering rates in July uh be made up for in September with a 50 basis point uh rate cut. and that would lead us to the to the final two meetings of the year where we would anticipate another 25 basis points at each meeting. I think that that's perfectly realistic. There is another payroll report that's going to be released before the Fed meets again and there'll be a lot of focus on that to see whether or not we're contemplating 25 basis points or 50 basis points. And if we put all of this together, what are we looking at in terms of the health of the US economy right now? How are you looking at that? >> So, you know, I'm um I gauge the health of the US economy by the private sector and I'm I'm very excited for the day that we hear instead of hearing that this or that uh company is is going to be freezing headcount or reducing its staff or providing buyout offers. UPS, for example, just said it's got to extend its buyout period because too few of its workers accepted that. When we start to see opposite headlines, you know, companies are expanding, growing their work forces, jobs are being created, college graduates are not bemmoning the fact that they cannot get a job. when we start to see a reversal in the tone of the headlines, I think that that is is going to be the the true green shoot that we're looking for. >> That's really helpful. And I always like to bring this back around to investors. So, I think people are looking at all these data points, all this information coming at them and wondering, okay, of course, every person is different, but how how do I position? What do I make of all this? Is there any points that you would note there? So, you know, traditionally, uh, when the Fed starts to lower interest rates, it it it tends to be a turning point for markets. Um, that was not the case. Uh, that was not the case when the Fed lowered interest rates. I I think because the market had already started to factor in the fact that they were going to pause and they did. They paused. Um, so, you know, if interest rates were were at the precipice of coming down to the 1% that President Trump suggested, you know, that would that would not be a good sign uh for investors and because that level of interest rates would be indicative of an economy that weakened appreciably further and and and if that's the case that you know true recession recognition of recession on the part of investors that's never a favorable backdrop uh for risky investments. We're certainly not there yet. We're definitely not there yet with the stock market. Momentum is alive and well and and and driving AI stocks to the moon. Passive investing flows are still clearly uh overwhelming any kind of of of outflows. So, we're definitely not there yet. But again, there's tremendous amounts of of of debate going on about what the Fed is going to do next and how much easing we're going to see in in the future. And until there's a little bit more certainty, I I see no momentum is the hardest ship to turn, >> right? And and we have an audience that is very focused on gold, precious metals, hard assets, and looking for for safety in that types of areas. Any anywhere else like that, places of of safety that people might want to go if they're feeling nervous about what they're seeing? I mean, you know, you can always uh you can always put yourself in in in more defensive types of positions that that have income streams attached to them. So, if you're quite certain that companies are not going to be cutting their dividends uh and and you want exposure to the stock market, then make sure that you're also generating income from those holdings. Uh that that's one of my stock answers. Um the the same would go for you know we've been advising our clients to stay quote unquote up in quality. And that means if you are going to own corporate debt stay up uh you know in terms of of of the rating in in this type of an environment when we're seeing really just a parade of multi-billion dollar bankruptcies come through and the default rate going up. really helpful to get idea on how you look at that and I will let you go unless you had any final thoughts that you would leave people with maybe maybe data points that you're looking for next any final thoughts >> so you know I would be paying very close attention to the US consumer right now it is very unusual uh that we see credit card spending on a year-over-year basis decline and that is what we saw um that is what we saw in in the month of June um in act to a greater degree than any recession since 1970. So, uh the state the health of the US consumer, you know, all of these student loan headlines that you know you it's so easy to get bogged down in them. Pay attention because not every recession in in post-war history has even featured falling consumption. The recessions of 1970, 1982, and 2001, we actually saw the economy contract, but consumption never faltered. So, the fact that we're seeing consumption come under pressure, I think is something that people should be being paying very close attention to right now. >> Okay, really good point to end on there and thank you so much for coming on today to go through all of this with us. This is great and thank you for having me, of course. And once again, I'm Charlotte Mloud with investingnews.com and this is Danielle D. Martino Booth. Thank you for watching. If you like this video, make sure you hit the like button and subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below. [Music]
Danielle DiMartino Booth: Fed's Next Move as Dissent Builds, Where to Focus Now
Summary
Transcript
[Music] I'm Charlotte Mloud with investingnews.com and here today with me is Danielle D. Martino Booth, CEO and chief strategist at QI Research. Thank you so much for being here. Great to have you as always. >> And thank you for having me. It's great to be here. >> Of course. really good to be catching up with you after a little while and I think it's the perfect time to be talking because we've got so many different data points to go through today. I thought we could start with the latest producer price index data out of the US. I believe it was up 0.9% from June, which is the biggest increase in more than 3 years. So, I wondered if you could break down what's driving that rise there. Well, u clearly the tariffs are are having an effect on uh on on input prices and we've been hearing um we've been hearing from companies that they have been shouldering higher prices and indeed we saw that uh play out in in the data. Uh the the question now becomes one of uh pricing power and purchasing power. So how much are they going to be able to pass through uh to end users to consumers at a time when you know just in the month of July we lost 440,000 full-time jobs. Uh so purchasing power is clearly not improving. Uh so it it really does remain to be seen if this wide gap that we have between the producer price index and the consumer price index closes and or whether we end up seeing you know quite a bit of margin squeeze. >> Yeah, that's one of the points I was reading about just today that that gap between PPI and CPI data that we got earlier this week shows that it's not happening yet. That increase being passed on to the consumer. So, any further thoughts from you on when we might see that start to play out if it's not happening already? >> Well, I do think um I do think that we will see where companies feel they can push through price increases. I think we'll see that. Um we saw quite a bit of food inflation uh in the producer price index. And when you're talking about things like essentials and especially with very very low margin types of sales, you know, we we could see uh what we call the substitution effect uh begin where where households end up buying other things. It the classic is always that they trade down from steak to ground beef um or trade down from, you know, from beef to chicken and and we're going to see whether or not that that plays out. Again, you know, we have millions upon millions of Americans working multiple jobs, working in the gig economy, uh not necessarily by choice. You know, we've got a record percentage of Americans, young adults, living with their parents. Uh so clearly budgets are stretched and we will see where these price increases are able to be passed along. Bank of America puts out some very timely data on credit card, debit card spending, and we've seen a lot of what we call discretionary spending pressure, whether it be furniture, um, or maybe RV sales. RVs, uh, inflation has gone up quite a bit, but those sales have come down as well. So, again, it some difficult decisions for those who occupy the seauite, >> right? So, we'll see those businesses decide how that plays out, I guess, in the coming weeks and months. So, as we've been talking about, we got those two reports, CPI and PPI this week. I know you're always really good at going beyond the headlines. So, anything further you'd pull out from either of those that people might be missing right now? So, you know, I think it's interesting because uh there are several areas of the uh producer price index that flow through to the Fed's preferred uh core PCE measure and one of them is uh is portfolio investment portfolio management fees and we saw an appreciable rise and it it it really is a reflection of of asset price inflation and this is something that we uh this is something that we talked about in 2006, 2007, 2008, you know, how can the Fed better gauge asset price inflation? Well, there you go. If assets under management increase, then portfolio management fees are going to increase and we're going to see that flow through um in into the from the PPI into core PCE. And that is how the Fed makes monetary policy. Will this make policy makers more reluctant to to lower interest rates? We we saw about a 5 percentage point decline in probabilities for a September rate hike this morning, but it's still well north of 90%. >> Right. And we're definitely going to get into what's going on with the Fed. Just before we go there, I wanted to mention so these CPI and PPI numbers, they're coming on the back of the latest July jobs data which we got previously after which Trump ended up firing the Bureau of Labor Statistics Commissioner. So, I wanted to check in with you on that. Get your take on what that was all about. Does it make sense? What are you thinking about that? >> Well, you know, um I think it's important to have some context and and perspective. The the the revisions that we saw for May and June payrolls were certainly of of a very big magnitude and and came as a shock to market participants. But we've actually seen 24 out of the last 30 months end at July. We've seen downward revisions come out of the Bureau of Labor Statistics. To me at least, that is highly problematic because it's it's indicative that there is something broken in the way that the data is being is being measured. Whether this is response rates or in the case of May and June, you know, they they had huge downward revisions to government payrolls and that's data that they received directly from government agencies. So that was a bit of a of a headscratcher. Uh so there is something to be said for for looking at re-engineering how the Bureau of Labor Statistics gathers data. Now, if you were to replace the one individual with someone who was potentially going to be politically biased, that would be problematic in its own um of of its own valition. You don't want that to happen either. We want clean data and timely data to come out of of stat government statistical agencies. I think that that should be the goal here. >> Yeah. I I was going to ask you, okay, so do you think that this can be improved on? What are your your thoughts there? >> Well, the Census Bureau, for example, on a quarterly basis requires US employers to report headcount numbers. That's what we call hard data. And uh you know in the world that we live in today uh of big data of artificial intelligence uh you know as as high-tech is higher than it's ever been you know there's something to be said for modernizing uh that particular avenue of gathering the data. Can we can we maybe make it a monthly report that companies tell us what their headcount is? And in that way, we don't have to have data imputations and and the birth death model and all of the estimates that go into the critical payroll data. Perhaps we could have that be much more real time in in nature. And you know, the technology does exist. That'll definitely be interesting to watch how that plays out. So, thanks for going into that and I'll let us go over to the Fed now. So, we had the latest meeting a couple of weeks ago at this point, but I want to start there because of course that's something that you're closely watching. We had interest rates stay unchanged. Anything key you would pull out from that latest meeting? Well, I think that in in something of a repeat of July of 2024, uh I I think that there's certainly now more than just the two individuals who desent it, we've we've got a handful now of Fed officials uh who clearly think that like July of 2024, it was a mistake to not lower interest rates this July. uh you know we we got a you know the day after um the day after the Fed met which was a a Thursday you know the time Thursday morning rolled around you chair Jerome Powell had in his hands 24 hours in advance that payroll report that clearly demonstrated that there was nothing quote unquote solid about the job market and so I it's going to be very interesting to see if the Senate is is able to confirm uh Trump's nominee to replace Fed Governor Adriana Cougler in time for the se September 16th 17th FOMC meeting. Uh we've had several again Fed officials come out subsequent to this payroll report. Austin Goulby of of the Chicago Fed, Susan Collins of the Boston Fed saying that it's clearly evident that there are that there's weakening in in the job market and you could see a scenario playing out where it wasn't just two descents and two descents was remarkable by the way from governors but you could certainly uh you know scenario out a situation where there were five or six descents if we get that uh one nominee confirmed in time for this next meeting. >> Really, really interesting dynamics to watch and of course Pal is facing a lot of pressure to cut and he's kind of been saying, well, we want to see how how tariffs end up playing out. Does that line of thinking make sense to you? Is that something that he's going to be changing his tune on? Well, I think um I think certainly the this hotter than expected uh producer price index is certainly going to give uh credence to Powell's reluctance to be too aggressive on the rate cutting front. But again, it comes down to the ability to pass through these higher prices to the consumers, which brings us the the discussion all the way back around to to the labor market, which is the, you know, the Fed does have an employment mandate and the inability to to be able to shoulder higher prices. If if that's because the job market is weakening and we're seeing in the data that it is demonstrabably doing so then then yes, Chair Powell needs to revisit his thinking. And on the note of tariffs, I think the last time that we spoke was back in March, and there's been a lot that's happened since then in terms of the tariffs. Do you feel like we're getting to a point right now where we're in a bit of a a stasis or holding pattern with the tariffs and we can start to see how the impact plays out or or is there more turmoil to come there? You know, it's it's very hard to say. We've just had another 90-day pause uh with our largest trading partner, that would be China. Even though China Chinese exports to the United States have decreased, uh they're still enormous. And so there is a a certain layer of uncertainty that that remains and makes it difficult for decision makers across corporate America to to figure out what they're going to do in terms of growing or not growing their businesses. And so uh and and we've seen that we we've seen that play out in the data time and again with decreased capital expenditure plans. And you know that is a reflection of how very uncertain the environment is. And that applies also to small businesses. We saw the fifth highest reading on on uncertainty out of the National Federation of Business um just a few days ago. And so it's it's it's Main Street, it's Wall Street. M&A activity has has gone down appreciably. So there is there there's clearly uh uncertainty is acting as a huge governor on economic activity. I hope that we're getting to a more certain place, but I don't think that that conclusion can can be drawn. I think that's premature at this point. >> Yeah, it's a really tough topic to tackle. So thank you for going into that one. And going back to these dynamics between Trump and Powell, it looks like one of the big headlines this week is Trump saying he's going to launch a law or he may he may launch a lawsuit against Powell over these Fed renovations. Is that something you're you're paying attention to or is this more just just noise? Um, I from what I have from what I've read from legal experts, I am not a legal expert, but from what I have read, uh, legally speaking, President Trump doesn't really have a leg to stand on. And it's it's clear that the the words that he's using, you know, Chair Powell has exhibited gross incompetence. Uh it's clear that that Trump is trying to angle in for for suggesting that Powell can be fired for cause. Of course, gross incompetence would certainly be cause for firing somebody, but that's the only reason the Supreme Court ruled that you could get um that you could oust uh a Fed leader. We'll have to see. He, you know, the president also may be thinking longer term when it comes to Powell. Of course, any lawsuit would take time, but maybe he's thinking about, you know, how much have I have I angered this individual? Have is he angry enough to stay on past May of 2026 and finish his 14-year term as a a a reserve board governor that does not end until January of 2028? We shall see. >> Right. Yeah. There's those two separate terms going on with Powell there. and looking at his term as FedEure. That one is, I believe, May 2026 and probably a good time to be asking you, what is it looking like in terms of of the replacement there? What are we seeing? >> I I you name it, we're seeing it. Um, you know, Treasury Secretary Scott Bessant has uh has been very public recently and saying that he's cast a much wider net. He's looking at people across private industry. He's looking at people from Wall Street. He's looking at traditional economists. Uh so right now it's anybody's guess. At at one point it was, you know, which of the two Kevin will it be, so to speak, Kevin Wer, Kevin Hasset, and clearly that's no longer the case. We have a So it could be anybody at this point. He might be nominating Mickey Mouse. We have no idea. Uh but it it's it is interesting to see how publicly the administration is going about this. >> It is it is quite public. There's a lot of headlines going around about this, too. And from your perspective, is there anyone that you would want to see or or who you think would do a good job in that position? Well, um you my choice would certainly be um an an independent practitioner from the private sector, somebody who understood who who who understands better not just monetary policy, economics, but also the financial markets and and how monetary policy plays out in the real economy. I think that a lot of of of Fed policym in recent generations has been hampered by having far too many academics at the Fed and and not enough people who are on the receiving end of monetary policy. So that would that would be, you know, kind of my dream would be to have somebody who was a competent, levelheaded, independent, you know, somebody who could not be influenced by politics at all, but but a very successful individual from the private sector. That would be my choice. >> Okay. Okay. That's that's the dream there. So for for Fed meetings in 2025, we've got three left. You've been mentioning what your expectations are, but if we lay it out, what what do you see coming? >> Well, so again, back to Treasury Secretary Scott Bessent, you know, he mentioned that it would be appropriate to have a full repeat of 2024 to have uh had the mistake of not lowering rates in July uh be made up for in September with a 50 basis point uh rate cut. and that would lead us to the to the final two meetings of the year where we would anticipate another 25 basis points at each meeting. I think that that's perfectly realistic. There is another payroll report that's going to be released before the Fed meets again and there'll be a lot of focus on that to see whether or not we're contemplating 25 basis points or 50 basis points. And if we put all of this together, what are we looking at in terms of the health of the US economy right now? How are you looking at that? >> So, you know, I'm um I gauge the health of the US economy by the private sector and I'm I'm very excited for the day that we hear instead of hearing that this or that uh company is is going to be freezing headcount or reducing its staff or providing buyout offers. UPS, for example, just said it's got to extend its buyout period because too few of its workers accepted that. When we start to see opposite headlines, you know, companies are expanding, growing their work forces, jobs are being created, college graduates are not bemmoning the fact that they cannot get a job. when we start to see a reversal in the tone of the headlines, I think that that is is going to be the the true green shoot that we're looking for. >> That's really helpful. And I always like to bring this back around to investors. So, I think people are looking at all these data points, all this information coming at them and wondering, okay, of course, every person is different, but how how do I position? What do I make of all this? Is there any points that you would note there? So, you know, traditionally, uh, when the Fed starts to lower interest rates, it it it tends to be a turning point for markets. Um, that was not the case. Uh, that was not the case when the Fed lowered interest rates. I I think because the market had already started to factor in the fact that they were going to pause and they did. They paused. Um, so, you know, if interest rates were were at the precipice of coming down to the 1% that President Trump suggested, you know, that would that would not be a good sign uh for investors and because that level of interest rates would be indicative of an economy that weakened appreciably further and and and if that's the case that you know true recession recognition of recession on the part of investors that's never a favorable backdrop uh for risky investments. We're certainly not there yet. We're definitely not there yet with the stock market. Momentum is alive and well and and and driving AI stocks to the moon. Passive investing flows are still clearly uh overwhelming any kind of of of outflows. So, we're definitely not there yet. But again, there's tremendous amounts of of of debate going on about what the Fed is going to do next and how much easing we're going to see in in the future. And until there's a little bit more certainty, I I see no momentum is the hardest ship to turn, >> right? And and we have an audience that is very focused on gold, precious metals, hard assets, and looking for for safety in that types of areas. Any anywhere else like that, places of of safety that people might want to go if they're feeling nervous about what they're seeing? I mean, you know, you can always uh you can always put yourself in in in more defensive types of positions that that have income streams attached to them. So, if you're quite certain that companies are not going to be cutting their dividends uh and and you want exposure to the stock market, then make sure that you're also generating income from those holdings. Uh that that's one of my stock answers. Um the the same would go for you know we've been advising our clients to stay quote unquote up in quality. And that means if you are going to own corporate debt stay up uh you know in terms of of of the rating in in this type of an environment when we're seeing really just a parade of multi-billion dollar bankruptcies come through and the default rate going up. really helpful to get idea on how you look at that and I will let you go unless you had any final thoughts that you would leave people with maybe maybe data points that you're looking for next any final thoughts >> so you know I would be paying very close attention to the US consumer right now it is very unusual uh that we see credit card spending on a year-over-year basis decline and that is what we saw um that is what we saw in in the month of June um in act to a greater degree than any recession since 1970. So, uh the state the health of the US consumer, you know, all of these student loan headlines that you know you it's so easy to get bogged down in them. Pay attention because not every recession in in post-war history has even featured falling consumption. The recessions of 1970, 1982, and 2001, we actually saw the economy contract, but consumption never faltered. So, the fact that we're seeing consumption come under pressure, I think is something that people should be being paying very close attention to right now. >> Okay, really good point to end on there and thank you so much for coming on today to go through all of this with us. This is great and thank you for having me, of course. And once again, I'm Charlotte Mloud with investingnews.com and this is Danielle D. Martino Booth. Thank you for watching. If you like this video, make sure you hit the like button and subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below. [Music]