Summers Backs Powell's Silence on Staying On at Fed Past May
'I don't see any reason at all for why he should prejudge that question,' Summers said on Bloomberg Television's Wall Street Week with David Westin. 'It'll depend upon aspects of his life, I imagine, and it will depend on who the next Fed chair is and what the sense is of how the Fed is going to operate going forward.'
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Yahoo
an hour ago
- Yahoo
5 ETFs to Benefit if Fed Cuts Rate in September
Markets are seeing growing odds of a September rate cut. The CME's FedWatch tool suggests an 87.4% probability of a 25-bps rate cut in September. The latest round of weak data and declining consumer activity reinforced expectations for monetary policy economy added just 73,000 jobs in July, well below the 104,000 expected. Job gains for the prior two months were revised sharply lower by a combined 258,000, and the unemployment rate ticked up to 4.2%. Manufacturing activity contracted, factory hiring fell to its lowest level since 2020 and consumer confidence weakened. The sluggish performance in the services sector, coupled with a decline in new orders, further fueled concerns about a potential economic slowdown or even a recession. The combination of weak data has raised the odds of interest rate cuts in September (read: Healthcare: Winning Sector ETF Amid Soft U.S. July Jobs Report).Further, President Trump's nomination of Stephen Miran to the Federal Reserve Board has reinforced dovish market expectations. Analysts believe his appointment could tilt the board toward rate cuts. Notably, JPMorgan has shifted its forecast, now expecting the first cut in September, much ahead of December. It now projects four cuts in total through early 2026. Low Rates: A Boon Lower interest rates generally lead to reduced borrowing costs, which help businesses expand their operations easily, resulting in increased profitability. This, in turn, stimulates economic growth and provides a boost to the stock market. In particular, high dividend-yield sectors, such as utilities and real estate, will be the biggest beneficiaries of the rate cuts, given their sensitivity to interest rates. This is especially true as these offer higher returns due to their outsized yields. In real estate, lower rates can boost housing market activities by making mortgages more affordable. Securities in capital-intensive sectors like telecom will also benefit from lower rates. Businesses will face lower loan rates over time. Lower rates will have a positive impact on consumer discretionary and financial services. Reduced borrowing costs will lead to increased consumer spending for consumer discretionary sectors. In the financial sector, while lower rates can compress net interest margins for banks, they can also encourage lending and lead to increased consumer and business loan are set to outperform in a lower-rate environment as these companies have higher levels of debt. Fed rate cuts tend to boost foreign capital inflows into emerging markets like India. As the outlook for India's economy remains strong, rate cuts will boost foreign capital inflow, which can lead the market to new highs. Gold will also continue to shine as lower interest rates will increase the metal's attractiveness (read: Gold Set to Shine Again: ETFs to Tap the Momentum).Given this, we have highlighted ETFs from sectors that are set to explode following a rate cut. ETFs to Gain Vanguard Real Estate ETF (VNQ) Vanguard Real Estate ETF targets the real estate segment of the broader U.S. market. It follows the MSCI US Investable Market Real Estate 25/50 Index and holds 155 stocks in its basket, with none accounting for more than 6.1% share. VNQ has key holdings in retail REITs, health care REITs, telecom tower REITs and industrial REITs with double-digit exposure each. Vanguard Real Estate ETF is the most popular and liquid ETF, with an AUM of $33.5 billion and an average daily volume of 3.7 million shares a day. It charges 13 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk Select Sector SPDR (XLU) With an AUM of $21.2 billion, Utilities Select Sector SPDR seeks to provide exposure to companies from the electric utility, water utility, multi-utility, independent power and renewable electricity producers, and gas utility industries. It follows the Utilities Select Sector Index, holding 31 stocks in its basket. Utilities Select Sector SPDR charges 8 bps of annual fees and trades in an average daily volume of 13 million shares. It has a Zacks ETF Rank #2 (Buy) (read: Utilities Witness Longest Win Streak Since 2009: ETFs to Play). Consumer Discretionary Select Sector SPDR Fund (XLY) Consumer Discretionary Select Sector SPDR Fund offers exposure to the broad consumer discretionary space and tracks the Consumer Discretionary Select Sector Index. It holds 51 securities in its basket, with key holdings in hotels, restaurants and leisure, broadline retail, specialty retail, and automobiles, with a double-digit allocation each. Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in this space, with an AUM of $22.3 billion and an average daily volume of around 5 million shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk Russell 2000 ETF (IWM)iShares Russell 2000 ETF is the largest and most popular ETF in the small-cap space, with an AUM of $60.4 billion and an average daily volume of 36 million shares. iShares Russell 2000 ETF holds well-diversified 1,979 stocks in its basket and has key holdings in financials, industrials, healthcare, and information technology. iShares Russell 2000 ETF charges 19 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk Gold Trust ETF (GLD)SPDR Gold Trust ETF tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is an ultra-popular gold ETF with an AUM of $104 billion and a heavy volume of about 10 million shares a day. SPDR Gold Trust ETF charges 40 bps in fees per year from investors and has a Zacks ETF Rank #3. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPDR Gold Shares (GLD): ETF Research Reports Vanguard Real Estate ETF (VNQ): ETF Research Reports iShares Russell 2000 ETF (IWM): ETF Research Reports Utilities Select Sector SPDR ETF (XLU): ETF Research Reports Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports This article originally published on Zacks Investment Research ( Zacks Investment Research
Los Angeles Times
an hour ago
- Los Angeles Times
Trump set to make final call on China tariff truce extension
US President Donald Trump is set to make the final call on maintaining a tariff truce with China before it expires in two weeks, an extension that would mark a continued stabilization in ties between the world's two biggest economies. The two sides agreed to extend their tariff truce, Chinese trade negotiator Li Chenggang told reporters in Stockholm without providing further details. Treasury Secretary Scott Bessent, who led the US delegation with Trade Representative Jamieson Greer, later said 'our Chinese counterparts have jumped the gun a little.' Asked on CNBC whether he'd recommend an extension of the pause, Bessent said he'd give Trump the facts, 'then he'll decide.' There's still 'a couple of technical details to work out,' Bessent told reporters Tuesday after two days of meetings with officials from Beijing led by Vice Premier He Lifeng. The Stockholm negotiations marked the third round of US-China trade talks in less than three months. They wrapped up ahead of an Aug. 12 deadline to resolve differences during a 90-day suspension of sky-high tariffs that had threatened to cut off bilateral trade. Adding an extra 90 days is one option, Bessent said. 'While there is disappointment that nothing material was agreed, the mood seems to be constructive and optimistic about future potential deals,' Kelvin Lam, senior China economist at Pantheon Macroeconomics in London, said in an initial assessment. Asian shares were mixed in early trade on Wednesday. The S&P 500 snapped a six-day rally. A 90-day extension would clear the path for Trump to visit China to meet with President Xi Jinping in late October, around the time of an international meeting in South Korea that the US leader is likely to attend. Speaking to reporters on Air Force One, Trump said he may meet with Xi before the end of the year. Trump also said he heard from Bessent that the talks with China went well. Trump-Xi Summit? Both sides have been taking steps to turn down the temperature and reduce flashpoints recently, with Chinese exports of rare earth magnets starting to recover in June and the US saying it would approve shipments of a semiconductor used for artificial intelligence which it had blocked. This week, the US also declined to allow Taiwanese President Lai Ching-te to transit through the US, removing a potential thorn in ties with the mainland, which claims Taiwan as its own territory. 'All of these moves are setting the stage for what I predict will be a summit between Trump and Xi before Thanksgiving,' Harvard professor Graham Allison said on X. Allison last month met with China's foreign minister and the party secretary of Shanghai, who is a member of the Politburo. The Stockholm round came on the heels of the Trump administration reaching preliminary tariff deals with Japan and the European Union. Bessent said his Chinese counterparts were in 'more of a mood for a wide-ranging discussion.' The US treasury chief told CNBC that the Chinese side came to talks with a delegation of 75 people, versus the 15-strong team fielded by Washington. 'We start out in a very large room, probably 12 or 15 on each side of the table,' he said. The 'real work gets' done when delegates 'break down into smaller groups of two-on-two,' he added. Unlike at the previous talks in London, the US team this time around didn't include Commerce Secretary Howard Lutnick, who oversees Washington's export control regime. With the outlook for tariffs looking less dire than in April, the International Monetary Fund this week raised its forecasts for global growth this year. The truce has also helped China's economy, with the IMF boosting its 2025 outlook for the country to 4.8%, noting the lower levies and stronger-than-expected activity in the first half. At issue in the ongoing dialogue is how the two countries seek to maintain a stable trading relationship while applying barriers like tariffs and export controls to limit each other's progress in critical sectors ranging from battery technology and defense to semiconductors. Greer said the US wants assurances that critical materials like magnets keep flowing so the two sides can focus on other priorities. 'We don't ever want to talk about magnets again,' he said. Greer said the resumption of China's rare earths exports is Beijing's biggest concession so far. Asked if the US made any commitments to China on its pending 232 investigations, Greer said China asked for status updates on them, but stressed that the eventual duties would be applied globally and not have any exemptions for particular countries. Reducing the 20% tariffs that Trump imposed over US claims that Chinese companies supply chemicals used to make the illegal drug fentanyl is also a high priority for Beijing, Eurasia Group analysts wrote in a note last week. In the background of the latest trade talks between Washington and Beijing is the race by several economies to sign tariff deals with Trump before Aug. 1, when he's threatening to impose so-called reciprocal import taxes on the US's major trading partners. Leonard , Tam and Duxbury write for Bloomberg.
CNBC
an hour ago
- CNBC
The big opportunity in these tax-free bonds may be short lived — 'the ship is leaving the port,' says strategist
The opportunity to scoop up municipal bonds at attractive prices isn't going to last forever, according to strategist Tom Kozlik. The head of public policy and municipal strategy at Hilltop Securities has been warning investors that a " window of opportunity " may close fast once the idea that the Federal Reserve is destined to cut interest rates gains in popularity. Now, he's seeing signs that may have started. "The ship is leaving the port, and investors should stay alert to avoid missing this opportunity," Kozlik wrote in a note last week. Yields on municipal securities declined recently, reinforcing this view, the strategist noted. July's disappointing jobs report , showing signs of a potential slowdown , further strengthened the argument. Bond yields move inversely to prices. Plus, recent economic data, Traders now see a about an 86% chance of a September rate cut by the Federal Reserve, according to the CME FedWatch tool , which uses 30-Day fed funds futures prices to determine the odds. "A combination of either the market and/or the Fed could cause yields to drop, further closing that window of opportunity," Kozlik said in an interview with CNBC. The average municipal bond yielded 3.9% late last week, down from 4% the week before, helped by a rally in the Treasury market, said Cooper Howard, fixed-income strategist at Schwab Center for Financial Research. For instance, the Schwab Municipal Bond ETF recently had a 30-day SEC yield of 3.78% and a 0.03% expense ratio. SCMB YTD mountain Schwab Municipal Bond ETF year to date Those yields are before taxes are taken into consideration. Interest earned from muni bonds is free from federal tax and, if the bond holder lives in the state where the bond is issued, exempt from state and any local tax too. For investors in the top tax bracket, the tax-equivalent yield is around 6.5%, Howard said. In addition, municipal bond yields are even more attractive on a relative basis when compared to Treasury yields, especially at the longer end of the yield curve, he noted. The municipal-to-Treasury ratio for 10-year bonds is about 75%, meaning munis yield about 75% of what similar Treasury bonds yield. While Treasurys are free of state taxes, they are not exempt from federal taxes. "The longer portion of the yield curve, if you're an investor who can stomach a little bit of interest-rate risk, we think that that can make sense," Howard said. Yet that relative value can soon come down as well, Kozlik said. Over the last couple weeks, cross-over —or nontraditional — buyers have been investing in municipal bonds, he said. "Those non-traditional and non-regular buyers have been pretty active, and when those non-traditional buyers jump in, that's one of the things that oftentimes brings down that relative value," he explained. The municipal-to-Treasury ratio hasn't fallen quickly because there has been heavy primary issuance, he said. "So on the one hand, that means that the opportunity for municipal-to-Treasury ratios being very attractive could continue for a couple of days — but I'm saying days, I'm not saying weeks," Kozlik said. "So this is something that when individual investors see this, they can't wait." Where to find opportunity Kozlik largely recommends high-grade, well-rated state and local general obligation bonds and revenue-authority bonds. "Municipal credit is still very, very strong," he said. "It's stronger than it was before the Covid crisis." In addition, there can be some value found in beat-up higher-education bonds , he said. While some in the sector are suffering, bonds from a large state system or large organization that isn't having an enrollment problem look good, he said. Howard doesn't focus on general obligation bonds versus revenue bonds, or any specific sector over another. "It's important to look at what is backing that bond, and where are they driving their revenues from," he said. Creating a ladder of varying duration can also make sense, he said. He suggests an average duration of six years. "It really takes the guesswork out of trying to time interest rates," he said.
