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Economist Sumerlin confirms he's in the running for Fed chair, backs big interest rate cut
Economist Marc Sumerlin, one of nearly a dozen reported contenders for Federal Reserve chair, said Thursday he'd be interested in the job and believes an aggressive interest rate cut would be appropriate. Sumerlin, a former senior economist under then-President George W. Bush, said on CNBC that lowering the Fed's key rate would be an easy decision now. The current yield structure combined with weakness in the labor market and stable inflation "tells us that we could easily do a 50 basis point cut ... without disrupting anything at all. So it seems like pretty much a no-brainer to me." A basis point equals 0.01%, so 50 basis points would be half a percentage point. With the field looking wide open to succeed current Chair Jerome Powell, Sumerlin's position on rates puts him at least directionally in line with President Donald Trump. The president has repeatedly pushed the Fed to ease, advocating cuts of up to 3 percentage points, but the Powell-led Federal Open Market Committee has kept is benchmark funds rate unchanged since last lowering in December 2024. As far as the nomination sweepstakes goes, Sumerlin, currently managing partner for Evenflow Macro, confirmed that he was contacted by the White House last week. He noted that he is close friends with Treasury Secretary Scott Bessent, who has taken a leading role in the search for the next chair, saying the two have been discussing monetary policy "weekly for probably 12 years." "I got a call last Wednesday that said there was going to be a list [and] I was going to be on it. That's as much as I know right now," he said. "I'm waiting for more guidance on where we go from here." Sumerlin indicated that he would be interested in the nomination so long as certain conditions are met. "I think if it's the Fed chair, it's mission critical to the world. You have to be willing to do that," he said. "I've never met the president before. It would depend on us seeing eye to eye." Sumerlin stressed the importance of Fed independence, something that has come under question has Trump has taken the historically unprecedented step of criticizing Powell and his fellow policymakers publicly and in stark terms. He's called Powell a "loser" and "stupid" and has criticized the FOMC for being complacent. "You have to go into it knowing that every day you're going to walk in and just do the best job you can for the American people, and you're going to get criticism and be prepared to deal with that," Sumerlin said. "Ideally, you'd want to go in knowing that you're in synch. In synch goes both ways, and that would be part of the process trying to figure it out." In addition to Sumerlin, other candidates include current governors Michelle Bowman and Christopher Waller, National Economic Council Director Kevin Hassett and former Governor Kevin Warsh, along with about half a dozen others.
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Trump's meeting with Putin is a win-win for European defense stocks, no matter the outcome
European defense stocks have further to run regardless of whether U.S. President Donald Trump and Russian counterpart Vladimir Putin achieve a breakthrough on the war in Ukraine later this week, market watchers say. Trump and Putin are slated to meet in person in Alaska on Friday, with a view to discuss what it would take to end the more-than-three-year conflict that began with Russia's full-scale invasion of Ukraine in early 2022. Reports that the two heads of state would meet buoyed broader European equities on Thursday, but sank regional defense stocks . Concerns about Russian aggression had contributed to decisions by European governments and the NATO military alliance to drastically hike their defense budgets, benefiting security companies operating in the region . So far this year, the Stoxx Europe Aerospace and Defense index has surged by 52%. Following three consecutive days of losses after the Trump-Putin summit was announced, the index regained some ground, and was last seen trading 1.3% higher in Thursday's session. Market watchers told CNBC that a deal to end the fighting in Ukraine — which may not be on the horizon of Friday's meeting — was unlikely to throw Europe's defense growth off course. 'Win-win' for defense stocks In emailed comments to CNBC on Wednesday, Dmitrii Ponomarev, product manager at VanEck EU, pointed to a recent Financial Times report that Europe is "building for war," with arms sites expanding at roughly thrice the pace struck during peace time. He labeled this as "evidence that the current ramp is broader than Ukraine resupply alone." "No firm would add that much capacity if it depended only on Ukraine shipments; the bigger driver is NATO Europe's pivot to modernization and restocking under the new 5% of GDP long-term goal, of which about 3.5% is the truly comparable "core" defense spend, anchoring multi-year demand," he said. "Even with a peace deal, stockpiles don't magically refill: governments still face years of munitions and air-defense replenishment, so revenues likely shift from short-term surge programs toward steadier replenishment, sustainment, and long-horizon modernization." VanEck runs a $6.9 billion Defense ETF, which includes stakes in some of Europe's biggest defense stocks. Among the fund's top holdings are Italy's Leonardo , France's Thales and Sweden's Saab . Ponomarev said that companies that rely more heavily on deliveries to Ukraine or supplying short-cycle munitions "may feel a sharper de-rating if urgency fades" from any potential breakthrough emerging from this week's Alaska summit between the Russian and U.S. leadership. "[But] more diversified primes with long-cycle programs, services, and sustainment should be better placed to absorb near-term volatility," he said. Asked on Monday whether the European defense boom remained a long-term story regardless of the outcome in Ukraine, Christopher Granville, managing director of TS Lombard, said he "strongly agrees" that the momentum has further to run. "My call on European defense stocks since about 2023 — when it became clear that the Russian military was extremely powerful and was not going to be rolled out of those territories in eastern and southern Ukraine — has been buy on any weakness, on any temporary pullback, because this is a win-win for European defense stocks," he told CNBC's "Squawk Box Europe." Granville pointed out that either the negotiations would go off the rails on Friday — an outcome that he labeled "more than perfectly possible, if not likely" — or peace would be struck. The former would result in the need for America and Europe to replenish their arms inventories, he said, while the latter would lead to "a very powerful Russian military." "Although the words victory and defeat [would] be bandied around, [this would be] a Russian military which has to an extent, prevailed," he said. "That reality will force a continued increase in defense procurement by European governments, and it's also good for European defense stocks. Either way, it's a winner." Granville noted that markets had been discounting the second scenario's ability to benefit defense companies. "From time to time, those names pull back a bit — you should buy on that weakness in my opinion," he advised. 'At least a decade' of rearmament Defense company leaders have been telling CNBC in recent weeks that an end to the Ukraine war would be unlikely to derail the boost to European defense spending. In conversation with CNBC's "Worldwide Exchange" on Monday, Dimitrios Kottas, co-founder and CEO of Greek autonomous defense tech developer Delian Alliance Industries, said the timing of Europe's consensus to modernize defense capabilities was correlated with the invasion of Ukraine, but argued that this rearmament would last "at least a decade." "It's something that is driven by historical macroeconomic forces, [that are] much stronger than the current ongoing invasion in Ukraine," he said. Micael Johansson, CEO of Swedish defense giant Saab , meanwhile insisted the growth in European defense was "absolutely" a long-term trend. "I have a hard time seeing, after all that happened with the invasion in Ukraine and the aggressive neighbor that we have to the east … even if we get a ceasefire or peace deal that is reasonable with Ukraine, that [governments] would step back and say it's over," he said in an interview with CNBC toward the end of July. Earnings misses and downgrades The bull run this year hasn't been a continuously upward trajectory, even without questions surrounding the future of Ukraine. Shares of German arms manufacturer Rheinmetall shed 8% on Thursday, after the firm's earnings came in below expectations . The company said contracts had not been awarded during the reporting period given the election of a new government in Germany, but noted that an anticipated influx of orders in the second half of 2025 meant Rheinmetall was able to confirm its full-year guidance. Rheinmetall is one of the best performers in European defense this year, with its shares gaining roughly 160% over the course of 2025. In a Friday note, Deutsche Bank's Christoph Laskawi argued that Rheinmetall's second-quarter result "does not change the investment case by any means." "The order intake potential ahead remains significant and the win rate should be high which is the basis for sizeable revenue growth in the coming years," he said. Back in June , Citi's European Aerospace and Defence analyst Charles Armitage downgraded Hensoldt, Renk and Saab — whose shares have all more than doubled in value this year — to give them a "sell" rating. He argued at the time that the companies were "pricing in more growth than seems likely." A lot of optimism nevertheless still remains in the sector. "It's no surprise [defense] share prices have jumped sharply this year, maybe to unsustainable levels in the short term and a welcome resolution or ceasefire in Ukraine may see their prices soften," Neil Birrell, chief investment officer at U.K. investment management firm Premier Miton, told CNBC by email. "However, the spend on defence and related infrastructure is here to stay and will be taking place over the coming years and decades. The move to greater … regional self-reliance for defence, energy, food and raw materials is a very long-term one. Defence stocks will be big beneficiaries of that."
