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Fed Governor Waller sees need for ‘more caution’ ahead when lowering interest rates

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1 month ago

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Christopher Waller, governor of the US Federal Reserve, during a Fed Listens event in Washington, D.C., on Friday, Sept. 23, 2022.

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Federal Reserve Governor Christopher Waller on Monday signaled that future interest rate cuts will be less aggressive than the big move in September as he expressed concern that the economy could still be running at a hotter-than-desired pace.

Citing recent reports on employment, inflation, gross domestic product and income, the policymaker indicated that “the data is signaling that the economy may not be slowing as much as desired.”

“While we do not want to overreact to this data or look through it, I view the totality of the data as saying monetary policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting,” Waller said in prepared remarks for a conference at Stanford University.

The Federal Open Market Committee at its September meeting took the unusual step of lowering its baseline interest rate by a half percentage point, or 50 basis points, to a target range of 4.75%-5.0%. In the past, the Fed has only done that during times of crisis, as it prefers to move in increments of a quarter percentage point, or 25 basis points.

Along with the cut, officials indicated the likelihood of another half point lopped off in the final two meetings of 2024, along with another full percentage point of cuts in 2025. However, Waller did not commit to a specific path ahead.

“Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year,” he said.

Key data points for the Fed have been mixed in recent days: The labor market posted stronger numbers in September after weakening through the summer, the consumer price index inflation gauge was slightly higher than expected, and GDP also has held strong.

In the final revision for second-quarter growth, the Commerce Department also punched up the level of gross domestic income gain to 3.4%, an adjustment of 2.1 percentage points from the previous estimate and closer in line with GDP. The savings rate also was adjusted much higher, to 5.2%.

“These revisions suggest that the economy is much stronger than previously thought, with little indication of a major slowdown in economic activity,” Waller said.

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Morgan Stanley picks China stocks to ride out a worst-case scenario in U.S. tensions

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10 hours ago

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November 17, 2024

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Elon Musk endorses Trump’s transition co-chair Howard Lutnick for Treasury secretary

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November 16, 2024

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Elon Musk at the tenth Breakthrough Prize ceremony held at the Academy Museum of Motion Pictures on April 13, 2024 in Los Angeles, California.

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On Saturday, Elon Musk shared who he is endorsing for Treasury secretary on X, a cabinet position President-elect Donald Trump has yet to announce his preference to fill.

Musk wrote that Howard Lutnick, Trump-Vance transition co-chair and CEO and chairman of Cantor Fitzgerald, BGC Group and Newmark Group chairman, will “actually enact change.”

Lutnick and Key Square Group founder and CEO Scott Bessent are reportedly top picks to run the Treasury Department.

Musk, CEO of Tesla and SpaceX, also included his thoughts on Bessent in his post on X.

“My view fwiw is that Bessent is a business-as-usual choice,” he wrote.

“Business-as-usual is driving America bankrupt so we need change one way or another,” he added.

Musk also stated it would be “interesting to hear more people weigh in on this for @realDonaldTrump to consider feedback.”

Howard Lutnick, chairman and chief executive officer of Cantor Fitzgerald LP, left, and Elon Musk, chief executive officer of Tesla Inc., during a campaign event with former US President Donald Trump, not pictured, at Madison Square Garden in New York, US, on Sunday, Oct. 27, 2024.

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In a statement to Politico, Trump transition spokesperson Karoline Leavitt made it clear that the president-elect has not made any decisions regarding the position of Treasury secretary.

“President-elect Trump is making decisions on who will serve in his second administration,” Leavitt said in a statement. “Those decisions will be announced when they are made.”

Both Lutnick and Bessent have close ties to Trump. Lutnick and Trump have known each other for decades, and the CEO has even hosted a fundraiser for the president-elect.

The Wall Street Journal also reported that Lutnick has already been helping Trump review candidates for cabinet positions in his administration.

On the other hand, Bessent was a key economic advisor to the president-elect during his 2024 campaign. Bessent also received an endorsement from Republican Senator Lindsey Graham of South Carolina, according to Semafor.

“He’s from South Carolina, I know him well, he’s highly qualified,” Graham said.

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Protecting your portfolio against risks tied to Trump’s tariff plan

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November 16, 2024

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Biggest Risks After the Rally: Trade & Top Valuations

Money manager John Davi is positioning for challenges tied to President-elect Donald Trump’s tariff agenda.

Davi said he worries the new administration’s policies could be “very inflationary,” so he thinks it is important to choose investments carefully.

“Small-cap industrials make more sense than large-cap industrials,” the Astoria Portfolio Advisors CEO told CNBC’s “ETF Edge” this week.

Davi, who is also the firm’s chief investment officer, expects the red sweep will help push a pro-growth, pro-domestic policy agenda forward that will benefit small caps.

It appears Wall Street agrees so far. Since the presidential election, the Russell 2000 index, which tracks small-cap stocks, is up around 4% as of Friday’s close.

Davi, whose firm has $1.9 billion in assets under management, also likes staying domestic despite the tariff risks.

“We’re overweight the U.S. I think that’s the right playbook in the next few years until the midterms,” added Davi. “We have two years of where he [Trump] can control a lot of the narrative.”

But Davi plans to stay away from fixed income due to challenges tied to the growing budget deficit.

“Be careful if you own bonds for sure,” said Davi.

Since the election, the benchmark 10-year Treasury yield is up 3% as of Friday’s close.

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