Former St. Louis Fed Pres. Bullard: Expect the Fed to be on hold until September
Former St. Louis Fed President James Bullard joins 'Squawk Box' to discuss the May jobs report, state of the economy, impact on the Fed's interest rate outlook, and more.
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Miami Herald
an hour ago
- Miami Herald
Legendary fund manager sends blunt 6-word message on bitcoin
It's been a wild ride for markets since President Trump announced widespread tariffs on April 2. Trump's so-called "Liberation Day" announcement included higher tariff rates than hoped, leading to investors reworking their expectations for the U.S. economy. There's evidence that a potential U.S. economic slowdown may already be underway, and despite ongoing tariff negotiations, risks remain that tariffs may push the economy into stagflation or outright recession. That risk continues to cast a shadow over risk assets, including stocks and cryptocurrency, which tend to perform best when wallets are fat and consumers and businesses are increasing spending, rather than ratcheting back. Related: President Trump sends harsh message to Federal Reserve on interest rate cuts The stock market sell-off was big, with the S&P 500 and Nasdaq Composite falling 19% and 24% from early-year highs, respectively. Bitcoin fell alongside stocks, losing 27% from its January high through April 8. The drop in risk assets was unsettling, but created opportunity for risk-tolerant investors to 'buy the dip.' Since President Trump paused most of the reciprocal tariffs announced on April 2 on April 9, the Nasdaq and bitcoin have surged higher by 28% and 39% respectively. The gains have been impressive, but not everyone is convinced it will be clear sailing from here. Veteran Wall Street bond manager Bill Gross has navigated good and bad markets since 1971. He co-founded Pacific Investment Management Co., or PIMCO, a huge firm with $2 trillion under management. He formerly managed over $270 billion via PIMCO's Total Return Fund, earning him the "Bond King" nickname before moving to Janus Henderson Investors from 2014 to 2019. Gross offered a blunt message about bitcoin this week, and given his track record, his opinion is worth considering. Image source: Bloomberg/Getty Images There's been considerable debate about what will happen to the economy next. Many think tariffs will tax cash-strapped consumers later this year, lowering economic growth, even as businesses press pause on projects awaiting trade deal clarity. Others believe the risks of tariffs derailing activity are overblown and temporary. The jobs market arguably remains healthy, given that the unemployment rate is relatively low at 4.2%. However, unemployment is up from 3.4% in 2023, and companies announced 93,816 job cuts in May, up 47% year over year, according to Challenger, Grey, & Christmas. Related: Analyst resets stocks, gold outlook after rally The uptick in joblessness prompted the Federal Reserve to cut interest rates by 1% last year; however, the Fed has paused on additional cuts over fear that reducing rates could swell inflation, given that tariffs are only beginning to be felt on prices. The Fed's hesitancy to cut interest rates has drawn sharp criticism from the White House, ostensibly because it recognizes tariffs may slow GDP, worsening unemployment. If the economy were to drop off, and the Fed remained unwilling to budge on interest rates, Congress may be unable to adjust fiscal policy fast enough to bridge the gap, given our deficit and mountain of debt. The U.S. deficit is over $1.8 trillion, representing roughly 6.4% of gross domestic product. Meanwhile, total public debt outstanding is approximately 122% of GDP, far higher than its 75% level in 2008 during the Great Recession. The economic uncertainty has led to bitcoin and gold finding willing buyers as market participants look to diversify risk. Bill Gross's 50 years of Wall Street experience mean he's seen many market pops and drops, including the Nifty 50, skyrocketing inflation in the 1970s, the S&L crisis in the late 80s and early 90s, the Internet boom and bust, the Great Recession, Covid, and the 2002 bear market. More Experts Fed official sends strong message about interest-rate cutsBillionaire fund manager sends surprising message on trade deficitHedge-fund manager sees U.S. becoming Greece In short, Gross has been around the block, making his take on bitcoin worth paying attention to. Gross believes bitcoin is valuable because individuals and others widely hold it, and its supply is capped. "There are now approximately 19.4 million Bitcoins priced at about 107,000 each. The supply of total coins is capped at 21 million over the next few years of "mining," wrote Gross recently on X. "While hard to estimate, approximately 90-95% are held by individuals, institutions, and the moment there is "value" to a Bitcoin." However, Gross appears to think that bitcoin's value may be reflected in its price after its recent rally. "It is in the "meme stock" world for the most part - more valuable than a Trump coin but subject to excessive volatility with underlying value hard to measure," wrote Gross. "There are better risk/reward opportunities," added Gross bluntly. "Any asset category using high leverage is a future risk not only to the asset itself but to the financial system as a whole." Related: Veteran fund manager resets stock market forecast amid Musk, Trump fallout The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Miami Herald
6 hours ago
- Miami Herald
President Trump sends harsh message to Federal Reserve on interest rate cuts
President Trump upped the ante on the Federal Reserve hours after the latest jobs report, angrily demanding Fed Chair Jerome H. Powell slash the federal interest rate to create greater demand for consumer loans and better terms for business investment. And POTUS wasn't shy about it. Related: Veteran fund manager resets stock market forecast amid Musk, Trump fallout The president pounded out a furious message to the central bank chair, once again calling him "Too Late" Powell in Truth Social media posts. The lashing included references to rate cuts in Europe, plus a debatable declaration that there is "virtually no inflation (anymore)." The President's June 6 comments came as the Department of Labor reported that hiring remained stable in May with employers adding 139,000 jobs, gains that were slightly higher than expected but down from April. The unemployment rate stayed the same at 4.2%, as expected by most economists. Image source:While stocks bounced on the jobs report and recession concerns eased a tad, there is still a strong sense of caution due to the recession and, in some corners, even stagflation concerns. The $36.21 trillion U.S. debt, one of the major points of debate of Trump's "Big Beautiful Bill," now in the Senate, also made the president's screed. "If 'Too Late' at the Fed would CUT, we would greatly reduce interest rates, long and short, on debt that is coming due…Very Simple!!! He is costing our Country a fortune. Borrowing costs should be MUCH LOWER!!!,'' wrote President Trump. Related: Jobs report shifts Fed interest rate forecasts President Trump, just days before the June 6 jobs report, blasted the central bank chairman as "unbelievable" and a "disaster" on Truth Social for Powell's delay in lowering interest rates, a move Trump maintains is choking economic growth. Minutes from a meeting of the Federal Reserve Bank leaders, which was held in early May and released on May 29, show the central bank voted to undertake open market operations "as necessary" to maintain the federal funds rate in a target range of 4.25% to 4.50%. The Board of Governors of the Federal Reserve System also voted unanimously in early May to approve establishing the primary credit rate at the existing level of 4.5%, meaning interest rates for lenders, consumers, and the rest of Americans likely won't fall in the short term. This led to Trump's increasing displays of frustration against Powell. Veteran fund manager Chris Versace wrote on TheStreet Pro that the market will likely rethink the three 25-basis point rate cuts expected per the CME's Fed Watch Tool. "With Atlanta Fed President Raphael Bostic signaling ahead of this data that he sees room for just one rate cut, the growing likelihood is more Fed heads will fall into that camp based on the aggregate data published this week." Versace says. " We also have to wonder if Bostic's comment helps lay the groundwork for the Fed's upcoming set of economic projections that it will publish alongside its next policy decision on June 18.'' Related: Analyst resets stocks, gold outlook after rally The chances of more than one rate cut in the second half of 2025 will likely increase if May CPI and PPI inflation data released this coming week support "May inflation data we've seen thus far and there is no meaningful progress on trade deals,'' Versace says. The president isn't buying it. "Too Late" at the Fed is a disaster! Europe has had 10 rate cuts, we have had none,'' Trump posted. Note that Europe has actually had eight central bank cuts recently, not ten. "Despite (Powell), our Country is doing great,'' Powell said. "Go for a full point, Rocket Fuel!" The "Rocket Fuel'' moniker is apparently a new one from the White House. A spokesperson for the Federal Reserve, responding to a comment about the full point cut, said, "We don't have anything to share here." Related: Veteran fund manager who predicted April rally updates S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
7 hours ago
- Yahoo
AGNC Investment: Its High Yield Looks Tempting -- Why the Stock May Be Ready to Rebound
With a high yield and monthly dividend payout, AGNC often draws the attention of income-oriented investors. However, AGNC has struggled in recent years due to rising mortgage rates and an inverted yield curve. The setup for the stock now looks a lot more favorable. 10 stocks we like better than AGNC Investment Corp. › AGNC Investment (NASDAQ: AGNC) has one of the highest dividend yields in the market, sitting at about 16%. But with a stock price that's steadily declined the past few years, investors are right to ask: Is the payout sustainable, and more importantly, is the stock a buy today? For those unfamiliar, AGNC is a mortgage real estate investment trust (mREIT) that owns agency mortgage-backed securities (MBS), primarily guaranteed by Fannie Mae and Freddie Mac. Because these securities are backed by government agencies, they carry virtually no credit risk. But AGNC's business is far from risk-free, and here's where the story gets complicated. The biggest issue facing AGNC the past few years has been higher mortgage interest rates. There have been two main issues that have pushed up rates. One is that the Federal Reserve aggressively raised benchmark interest rates a couple of years ago to combat inflation. This resulted in mortgage rates also climbing. However, that was not the only reason mortgage rates shot up. Spreads between MBS yields and Treasury yields also began to significantly widen. During the COVID-19 pandemic, the Fed was a huge buyer of MBSs, driving down yields and narrowing the yield spread between MBS and Treasuries. However, after the pandemic, it stopped purchasing MBSs and began letting them roll off its balance sheet as they matured. About the same time, banks also began to back off buying MBS as bond prices fell, and the collapse of Silicon Valley Bank, which was heavily concentrated in long-duration MBSs, only pushed banks further away from the MBS market. During this period, the value of AGNC's MBS portfolio, as measured by its tangible book value (TBV), plunged. From the end of 2021 through the end of 2023, AGNC's tangible book dropped 45% from $15.75 to $8.70 per share. It has slipped a bit further since, and stood at $8.25 at the end of Q1 2025. Ultimately, where AGNC's TBV goes, its stock is sure to follow. Despite the rough stretch that AGNC has seen, the setup for the stock now looks a lot more favorable. Fed Chairman Jerome Powell has signaled that more rate cuts could be on the table, and the Fed's own projections point to lower rates in the years ahead. That should be a much better environment for AGNC. Fed rate cuts could benefit AGNC in two main ways. First, it would likely reduce its short-term funding costs; AGNC tries to borrow money to invest in MBSs with longer maturities and higher yields. Second, lower rates could help increase its TBV by boosting MBS valuations. The past few years, the Treasury yield curve was inverted, which means that shorter-term Treasuries, like the two-year, had a higher yield than long-term Treasuries, like the 10-year. Not surprisingly, this is not a good environment for a company that generates its income from the spread between short- and long-term rates. Now, AGNC actively hedges out its funding costs to better align them with the duration of its MBS assets. However, it's not able to fully offset the pressure from an inverted curve over an extended period of time. With the yield curve flipping from inverted to positive (long-term yields being higher than short-term yields) late last year, though, AGNC stands to benefit from wider spreads. AGNC's portfolio is also well-positioned if MBS yields begin to fall. More than 80% of its holdings carry coupons of 6% or lower, which helps limit prepayment risk. Prepayment risk is highest when homeowners begin to refinance into lower-rate mortgages, forcing mortgage REITs to reinvest in lower-yielding MBS. While high dividend yields are attractive, they can also be a warning sign. However, AGNC has maintained the payout through a very difficult environment, albeit sometimes at the expense of a lower tangible book value. It's not fair to say the dividend is completely safe, but if the yield curve continues to steepen, the dividend should become more sustainable. If MBS-to-Treasury yield spreads narrow from historically wide levels as banks or other institutions reenter the MBS market, AGNC could see a meaningful recovery in both its book value and share price. That's the best-case scenario. However, even if that doesn't play out, AGNC still has room to deliver solid total returns. The company pays a monthly dividend of $0.12 per share, which equates to a yield of about 16% based on recent prices for the stock. That dividend income alone puts it in a strong position to outperform in a market that seems to have stalled. With even a modest portfolio value recovery, AGNC could deliver annual 20% to 25% total returns during the next few years. Overall, I'd consider AGNC a high-risk, high-reward income play. However, the stock has already taken the brunt of the blow from higher interest rates and wide MBS-to-Treasury yield spreads, and the current environment may finally be turning in its favor. The wild card is whether historically wide MBS-to-Treasury spreads begin to narrow, because if they do, the upside could be significant. For investors who understand and are comfortable with the risks, AGNC offers a very high yield with strong potential upside. It's not a set-it-and-forget-it stock, but at current prices, it could be a smart investment for income-focused investors during the next few years. Before you buy stock in AGNC Investment Corp., consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and AGNC Investment Corp. wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $674,395!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $858,011!* Now, it's worth noting Stock Advisor's total average return is 997% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. AGNC Investment: Its High Yield Looks Tempting -- Why the Stock May Be Ready to Rebound was originally published by The Motley Fool
