Bessent Says BOJ Is Falling Behind the Curve, Expects Rate Hike
'They're behind the curve,' Bessent told Bloomberg TV on Wednesday, noting that he discussed Japan's inflation problem with BOJ Governor Kazuo Ueda. 'So they're going to be hiking and they need to get their inflation problem under control,' he added.
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Forbes
23 minutes ago
- Forbes
Fed Expected To Cut Interest Rates, Though Inflation May Be Picking Up
WASHINGTON, DC - SEPTEMBER 18: Federal Reserve Chairman Jerome Powell speaks during a news conference following the September meeting of the Federal Open Market Committee at the William McChesney Martin Jr. Federal Reserve Board Building on September 18, 2024 in Washington, DC. The Federal Reserve announced today that they will cut the central bank's benchmark interest rate by 50 basis points to a new range of 4.75%-5%. (Photo by) Getty Images Fixed income markets fully expect that the Federal Open Market Committee will cut interest rates on September 17. However, economic data suggests that the FOMC may have to manage a monetary policy trade-off over the coming months. That's because the jobs market appears to have been weakening between May and July. That would typically call for lower rates. However, inflation may be picking up slightly on recent data. If that trend continues it might imply higher rates are needed. Of course, the FOMC only has a single policy tool, interest rates, so if unemployment rises and inflation picks up, then the FOMC's decision making may be made more complicated. The July Employment Situation Report saw 73,000 nonfarm payrolls added for July, which was itself a relatively slow pace of growth compared to prior months. However, figures for May and June were also revised down significantly to under 20,000 nonfarm payrolls added in both cases. In contrast, over 100,000 jobs had been added monthly over most of the prior 2 years. That said, the unemployment rate has been relatively stable since summer 2024, but if the recent slow pace of job creation continues, it may signal downside risk for the economy. The jobs report for August will be released on September 5, offering further data before the FOMC next meets. Recent data has shown some acceleration of inflation, too. July Producer Price Indexes showed a relatively pronounced rise in prices. In addition, there were some signs of rising prices in the July Consumer Price Index. For now, overall inflation remains relatively mild. For example, annual inflation is close to 3% to July depending on the metric used. However, the FOMC's annual target is 2% and inflation could accelerate further as the impact of tariffs, which in many cases have only been recently implemented, are felt. That said, some policymakers have said they are willing to look through any tariff-related inflation, believing it will be one-off in nature. If so, that makes it an easier decision to lower rates if there are concerns about a softening job market. At the last FOMC meeting in July both Christopher Waller and Michelle Bowman dissented, preferring to lower rates. That and the likely appointment of Stephen Miran to the FOMC before the September meeting, suggest added pressure for a rate cut. That's because President Trump is known to favor lower rates, and he likely proposed Miran with the belief that he would vote to lower rates. It seems likely that the FOMC will cut interest rates in September. There are still more economic reports to come before that meeting, but fixed income markets strongly predict a rate cut. That said, there are signs that inflation could be accelerating, that may not prevent a September cut, especially if signs of a soft labor market continue, but could present challenges for policy makers later in 2025 if they have to choose between restraining inflation and supporting the jobs market.
Yahoo
42 minutes ago
- Yahoo
This Artificial Intelligence (AI) Stock Is Dirt Cheap Compared to Its Growth
Key Points Chip stocks have been some of the biggest beneficiaries throughout the artificial intelligence (AI) revolution. While companies like Nvidia and AMD fetch the most attention, they rely heavily on the foundry services of TSMC. Despite notable valuation expansion, Taiwan Semiconductor remains dirt cheap based on one overlooked metric. 10 stocks we like better than Taiwan Semiconductor Manufacturing › One stock that has consistently outperformed the S&P 500 and Nasdaq Composite throughout the artificial intelligence (AI) revolution is the foundry and fabrication specialist Taiwan Semiconductor Manufacturing (NYSE: TSM). While its share price has posted monster gains of 174% over the last three years, there's still a good argument to be made that TSMC (as it's known for short) remains attractively valued. Let's dig into the catalysts fueling such epic growth at TSMC and then assess some lesser-understood valuation techniques that may help investors see why the stock still looks attractive at its current price point. TSMC's growth is off the charts... Before diving into TSMC's financial profile, it's worth reviewing how the company fits into the broader AI picture. Companies such as Nvidia, Advanced Micro Devices, and Broadcom have enjoyed record growth over the last few years thanks to booming demand for their GPU clusters and data center networking equipment. At the same time, hyperscalers such as Microsoft, Amazon, and Alphabet have experienced surging growth across their integrated AI ecosystems -- including applications in cloud computing infrastructure, cybersecurity, workplace productivity software, and more. While rising capital expenditures represent strong tailwinds for GPU and custom ASIC businesses, the trend is arguably even more favorable for foundry services such as TSMC. Why is that? Simply put, it actually manufactures many of the chipsets and systems equipment sold by the companies referenced above. Budget increases for chips and infrastructure represent a hidden -- and often overlooked -- tailwind for TSMC, regardless of whose chips are in demand. TSMC's mission-critical fabrication solutions provide the company with significant pricing power. These dynamics can be seen from the financial profile above, underscored by the company's steepening revenue growth trend in parallel with improving gross profit margins. ... and it appears it can sustain this growth One of the interesting aspects of TSMC's investor materials is that the company publishes revenue growth reports on a monthly basis rather than solely in a quarterly report. In the table below, I've summarized the company's monthly revenue growth throughout 2025: Category January February March April May June July Revenue growth YoY 35.9% 43.1% 46.5% 48.1% 39.6% 26.9% 25.8% Data source: TSMC Investor Relations. During the second quarter, TSMC generated $30 billion in sales thanks to continued demand for highly coveted 5nm and 3nm chip nodes. Revenue growth seems to have stalled a bit in June and July, but I do not see this as a long-term trend. Keep in mind that new GPU architectures such as Nvidia's Blackwell and AMD's MI350 and MI400 series are still in early stages of rollout and development. As infrastructure spending continues to accelerate across the AI landscape, TSMC is in position to benefit from such robust secular themes. Why I think TSMC stock is dirt cheap Common valuation methodologies often include ratios such as price-to-sales (P/S) or price-to-earnings (P/E). These metrics can be helpful when benchmarking a company against a set of peers, but they can be misleading when these ratios begin to expand meaningfully. For example, if you take a look at the chart below, you'll notice that TSMC's P/S and P/E multiples have risen throughout the AI revolution. Such a degree of valuation expansion might lead investors to believe that the stock is overbought and has become pricey. While such logic has merit, it does not always apply. A more nuanced way to value the chipmaker is by using its price/earnings-to-growth ratio (PEG), a metric popularized by legendary fund manager Peter Lynch. Essentially, it accounts for the P/E ratio as well as the earnings growth over a period of time. A good rule of thumb is that a PEG ratio below 1.0 signals that the stock is undervalued. Per the chart above, the stock has a PEG ratio based on next year's earnings of 0.6. I think the PEG ratio compression illustrated above can be attributed to a few factors. Wall Street's bullish view calls for the anticipation of accelerating earnings from TSMC supported by ongoing AI infrastructure spend. However, increased earnings revisions are likely outpacing appreciation in Taiwan Semi stock -- basically normalizing the company's PEG ratio without a sell-off as the primary driver. In addition, I think the market might be underpricing TSMC due to broader macro uncertainty surrounding geopolitical tensions with China or general cyclicality of the chip market. The combination of PEG ratio compression and a robust financial outlook could make the stock a textbook candidate for investors seeking growth at a reasonable price. To me, the stock is dirt cheap at its current price point relative to its growth. Investors with a long-term time horizon may want to take advantage of this rare opportunity to own a chip stock positioned to ride and dominate the AI infrastructure wave. While many semiconductor and AI stocks continue to trade at a premium, TSMC appears to be an undervalued opportunity anchored amid a sea of frothy valuations. Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now? Before you buy stock in Taiwan Semiconductor Manufacturing, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Taiwan Semiconductor Manufacturing 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 $663,630!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,115,695!* Now, it's worth noting Stock Advisor's total average return is 1,071% — a market-crushing outperformance compared to 185% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 13, 2025 Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. This Artificial Intelligence (AI) Stock Is Dirt Cheap Compared to Its Growth was originally published by The Motley Fool
Yahoo
44 minutes ago
- Yahoo
Australian and Philippine forces launch largest military exercises near disputed South China Sea
MANILA, Philippines (AP) — Australia on Friday launched its largest military exercises with Philippine forces, involving more than 3,600 military personnel in live-fire drills, battle maneuvers and a beach assault at a Philippine town facing the disputed South China Sea, where the allies have raised alarm over Beijing's assertive actions. The exercises are called Alon, meaning wave in the Philippine language, and will showcase Australia's firepower. The drills will involve a guided-missile navy destroyer, F/A-18 supersonic fighter jets, a C-130 troop and cargo aircraft, Javelin anti-tank weapons and special forces sniper weapons. Military officials said defense forces from the United States, Canada, Japan, South Korea, New Zealand and Indonesia will join as observers. 'This exercise reflects Australia's commitment to working with partners to ensure we maintain a region where state sovereignty is protected, international law is followed and nations can make decisions free from coercion,' Vice Admiral Justin Jones of the Royal Australian Navy said in a statement. The combat exercises are 'an opportunity for us to practice how we collaborate and respond to shared security challenges and project force over great distances in the Indo-Pacific,' Jones said. The exercises will run until Aug. 29. Australia is the second country after the U.S. with a visiting forces agreement with the Philippines, allowing the deployment of large numbers of troops for combat exercises in each other's territory. The Philippines has signed a similar pact with Japan, which will take effect next month. It is in talks with several other Asian and Western countries including France and Canada for similar defense accords. China has deplored multinational war drills and alliances in or near the disputed South China Sea, saying the U.S. and its allies are 'ganging up' against it and militarizing the region. China claims most of the South China Sea, a busy global trade route, where it has had a spike of territorial faceoffs with the Philippines in recent years. Vietnam, Malaysia, Brunei and Taiwan also lay claims to the resource-rich waters. On Monday, a Chinese navy ship collided with a Chinese coast guard ship while trying to drive away a smaller Philippine coast guard vessel in the Scarborough Shoal in the South China Sea. The Australian Embassy in Manila expressed concern over 'the dangerous and unprofessional conduct of Chinese vessels near Scarborough Shoal involving the Philippine Coast Guard' and said the incident 'highlights the need for de-escalation, restraint and respect for international law.' In response, the U.S. deployed two warships off the Scarborough on Wednesday in what it called a freedom of navigation operation to protest China's expansive claims, restrictions and its demand for entry notifications in the disputed waters. In February, a Chinese J-16 fighter jet released flares that passed within 30 meters (100 feet) of an Australian P-8 Poseidon military surveillance plane in daylight and in international air space, Australian defense officials said at the time. Solve the daily Crossword
