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David Tepper says the Fed has to cut rates at least two or three more times to keep credibility

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David Tepper, founder and president of Appaloosa Management.

David Orrell | CNBC

Appaloosa Management’s David Tepper said investors should believe the Federal Reserve when it says it will lower interest rates because the central bank has now to keep credibility.

“You just read what these guys are saying,” Tepper said on CNBC’s “Squawk Box” Thursday. “Powell told you something… He told you some kind of recalibration. He has to follow through somewhat. I’m not that smart. I just read what they say and do they have conviction. They usually do what they say, especially when they have this level of conviction.”

The Fed last week sliced half a percentage point off benchmark rates, starting its first easing campaign in four years with an aggressive move despite a pretty stable economy. In addition to this reduction, the central bank indicated through its “dot plot” the equivalent of 50 more basis points of cuts by the end of the year.

Fed Chairman Jerome Powell said the cut was a “recalibration” for the central bank and did not commit to similar moves at each upcoming meeting.

“Probably two or three interest rates, 25 basis point cuts, they have to do, or they lose credibility,” Tepper said. “They’re going to do something besides the 50. You know, another 25, 25, 25 seems like it’s going to have to be done.” (1 basis point equals 0.01%)

‘I don’t love the U.S. markets’

Still, Tepper said the macro setup for U.S. stocks makes him nervous as the Fed eases monetary policy in a relatively solid economy like it did in the 1990s. The super-sized rate cut last week came despite most economic indicators looking fairly solid.

“It was around the 90s in that market where the where the Fed cut rates into Y2K in a good economy,” he said. “Rich in ’97 ….richer after long term credit, and bubble mania in ’99 early 2000 so I don’t love this. I’m a value guy.”

Gross domestic product has been rising steadily, and the Atlanta Fed is tracking 3% growth in the third quarter based on the resilience in consumer spending. Meanwhile, most gauges showed inflation is still well ahead of the Fed’s 2% target. However, there has been a slowdown in the labor market, which partly prompted the oversized rate reduction.

‘Sure as heck won’t be short’

The widely followed hedge fund manager said while the central bank’s move gave him hesitation, he certainly is not betting against U.S. equities because of the immediate benefits of easy policy.

“I don’t love the U.S. markets on a value standpoint, but I sure as heck won’t be short, because I would be nervous as heck about the setup with easy money everywhere, a relatively good economy,” Tepper said. “It would make me nervous, not to be somewhat long the U.S.”

Tepper, who is also the owner of National Football League’s Carolina Panthers team, revealed that he’s going all in on China on the back of a rate cut and a flood of support measures the government recently announced to shore up a flailing economy.

He added that he prefers Asian equities and European equities to U.S. stocks.

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U.S.-China agree on framework to implement Geneva trade consensus

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U.S. Treasury Secretary Scott Bessent speaks with the media as he departs to return to the U.S., while trade talks between the U.S. and China continue, in London, Britain, June 10, 2025.

Toby Melville | Reuters

The U.S. and China have reached consensus on trade, representatives from both sides said following a second day of high-level talks in London, according to an NBC transcript.

“We have reached a framework to implement the Geneva consensus and the call between the two presidents,” U.S. Commerce Secretary Howard Lutnick said.

That echoed comments from the Chinese side, shared via a translator.

Lutnick said he and U.S. Trade Representative Jamieson Greer will head back to Washington, D.C., to “make sure President Trump approves” the framework. If Xi also approves it, then “we will implement the framework,” Lutnick said.

Earlier, U.S. Treasury Secretary Scott Bessent told reporters he was headed back to the U.S. in order to testify before Congress on Wednesday.

This is breaking news. Please check back for updates.

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Gundlach says to buy international stocks on dollar’s ‘secular decline’

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Jeffrey Gundlach speaking at the 2019 Sohn Conference in New York on May 6, 2019.

Adam Jeffery | CNBC

DoubleLine Capital CEO Jeffrey Gundlach said Tuesday that international stocks will continue to outshine U.S. equities on the back of what he believes to be the dollar’s secular downtrend.

“I think the trade is to not own U.S. stocks, but to own stocks in the rest of the world. It’s certainly working,” Gundlach said in an investor webcast. “The dollar is now in what I think is the beginning of [a] secular decline.”

Gundlach, whose firm managed about $95 billion at the end of 2024, said dollar-based investors who buy foreign stocks could enjoy “a double barreled wind” if the greenback declines against foreign currencies and international equities outperform.

The dollar has weakened in 2025 as Trump’s aggressive trade policies dented sentiment toward U.S. assets and triggered a reevaluation of the greenback’s dominant role in global commerce. The ICE U.S. Dollar Index is down about 8% this year.

“I think it’s perfectly sensible to invest in a few emerging market countries, and I would still rather choose India as the long term hold there,” Gundlach said. “But there’s nothing wrong with certain Southeast Asian countries, or perhaps even Mexico and Latin America.”

The widely-followed investor noted that foreigners invested in the United States could also be holding back committing additional capital due to heightened geopolitical tensions, and that could create another tailwind for international markets.

“If that’s reversing, then there’s a lot of selling that can happen. And this is one of the reasons that I advocate ex U.S. stocks versus U.S. stocks,” he said.

The investor has been negative on the U.S. markets and economy for some time, saying a number of recession indicators are starting to “blink red.”

Gundlach predicted that the Federal Reserve will stay put on interest rates at its policy meeting next week even as current inflation is “quite low.”

He estimated that inflation is likely to end 2025 at roughly 3%, although he acknowledged the difficulty in predicting future price pressures due to the lack of clarity in President Donald Trump’s tariff policy.

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BlackRock’s smallest deal of 2024 may end up being its most consequential

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