Watch CNBC's full interview with Trivariate Research CEO Adam Parker and NB Private's Shannon Saccocia
Trivariate Research CEO Adam Parker and NB Private's Shannon Saccocia, joins 'Power Lunch' to discuss markets, impact of tariffs, the Fed and recession fears.
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Yahoo
an hour ago
- Yahoo
Why the Fed and ECB are no longer on the same page
The Federal Reserve on Wednesday is widely expected to hold interest rates steady for the fourth meeting in a row, while the European Central Bank just lowered its rates for the eighth time in a year. The divide has caught the attention of President Trump, who has seized on the gap as he pushes the Fed to lower rates by a full percentage point. He did so again last week as he called central bank chairman Jerome Powell a "numbskull" who has refused to ease policy despite Europe dropping its rates "10 times." "We've done none," Trump added. "Nobody understands.' The two central banks in the US and Europe have diverged as their respective economies move in different directions, impacted not just by tariffs from the Trump administration but other domestic factors. Earlier this month the ECB cut its benchmark interest rate to 2% from 2.25%, the lowest level since early 2023, leaving borrowing costs now more than 2 percentage points lower in Europe than the US. It also signaled it is nearing the end of its rate-cutting cycle. The Fed last cut rates in December 2024, reaching a target range of 4.25%-4.5%, and has yet to cut rates during Trump's second term in office. Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments 'The president is going to keep getting more and more upset about it,' said Wilmington Trust chief economist Luke Tilley. Perhaps the major difference is how the two central banks are viewing inflation. Policymakers in the US hiked their inflation forecasts in the spring as they worried about the ultimate impact of Trump's tariffs on prices — even though the higher expected prices haven't arrived yet. The Fed will offer new forecasts this coming week. In Europe, by contrast, the ECB has been cutting its inflation forecasts and now expects inflation to fall to its target of 2% this year before falling further to 1.6% next year. 'The European Union is cutting because inflation is low and there's a threat to growth," Tilley said. "I say the Fed either should be or will be cutting because inflation is low and there's a threat to growth, but they're holding on a little bit here.' Jeffrey Roach, chief economist for LPL Financial, said the Fed is more likely to remain in 'wait-and-see' mode than the ECB because US consumers are on stronger footing than their European counterparts, giving the Fed the luxury of time before US policymakers have to act. "Relatively stronger consumer demand means US inflation is running a bit hotter than the Euro area," said Roach. "As growth prospects look weaker in the Euro area, the ECB is becoming more dovish as they respond to economic pressures in Europe." ECB president Christine Lagarde has warned that trade tensions could lead to greater volatility and risk aversion in financial markets, which could weigh on demand in Europe and would also act to lower inflation. Most exports to the US face a 10% tariff, and levies could rise to 50% if the European Union and the US don't reach a deal by the White House's July 9 deadline. A fragmentation of global supply chains could also raise inflation by pushing up import prices and adding to capacity constraints in the domestic economy, Lagarde added. Unlike the US, Europe's central bank does not have a dual mandate. The ECB only targets inflation, while the Fed has to maintain both stable prices and maximum employment. Fed Chair Jerome Powell and many of his colleagues this year have repeatedly urged caution and patience on rates, saying they expect Trump's tariffs to push inflation higher and drag down growth, putting the Fed in a challenging spot. But a divide is emerging within the Fed about whether to hold rates steady for some time or get more comfortable about cuts later this year as officials try to determine whether any inflation coming from Trump's tariffs will prove to be longer-lasting. Some policymakers are arguing for "looking through" the impact of the duties as temporary, a stance that would leave the door open for cuts. Many on the rate-setting committee, however, believe there is a risk that inflation from tariffs could become more persistent. 'If we had a good Fed chairman, you would lower rates,' Trump told reporters earlier this week. 'And you know what? If inflation happened in a year from now or two years, let them raise rates.' The president stressed that the US has a lot of debt coming due and lower rates would mean lower interest expense for the US. 'If this guy would lower rates, we get a lower interest rate. It's unbelievable,' said Trump. 'And he's worried about inflation.' The World Bank warned this week that heightened trade tensions and policy uncertainty are expected to drive global growth down to 2.3 percent this year, nearly half a percentage point lower than the rate that had been expected at the start of the year and the slowest pace since 2008 outside of outright global recessions. The international body said turmoil has resulted in growth forecasts being cut in nearly 70% of all economies — across all regions and income groups. However, a global recession is not expected. Dustin Reid, chief strategist for fixed income at Mackenzie Investments, which has $150 billion in assets under management, said he thinks "the ECB may need to go a bit lower" with its rates. "Tariffs are going to be quite challenging for the European Union,' said Reid. On the Fed side, Reid thinks September is in play for a Fed rate cut. 'I do think the labor market data in the US is cracking a bit,' said Reid, adding that he 'would not be surprised" if Powell this coming week keeps "a little bit of an open door [to] at least keep July in play.' Click here for in-depth analysis of the latest stock market news and events moving stock prices
Business Insider
7 hours ago
- Business Insider
Trump's tariffs and tax bill look like a 'Greek tragedy' that could tank the economy and stocks, former IMF official warns
Like a protagonist in a Greek tragedy, President Donald Trump is exhibiting a concerning level of hubris in his handling of the US economy, former IMF official Desmond Lachman worries. Despite warnings from credible sources — like Fed Chair Jerome Powell, JPMorgan CEO Jamie Dimon, and BlackRock CEO Larry Fink — about what tariffs would mean for inflation and growth, and what his tax cut bill would mean for bond yields and the US dollar, Trump is doubling down on these policies, Lachman said in a June 10 post for the American Enterprise Institute, where he is a senior fellow. Unless Trump changes course, Lachman said, he could end up reigniting inflation, pushing up long-term bond yields, further tanking the US dollar, and sending the US economy into recession. "To Trump, these warnings are like water off a duck's back. Instead of dialing back his tariff policy, Trump has recently raised the import tariff on all aluminum and steel imports to a staggering 50%," Lachman wrote. He continued: "At the same time, instead of coming up with belt-tightening revenue and spending measures to address the country's gaping budget deficit of 6.25% of GDP, Trump is making every effort to secure the passage of his budget-busting One Big Beautiful Bill." So far, inflation has been tame and the labor market has held up as businesses have started to digest tariffs. But Lachman said the US economy is not out of the woods yet. Since businesses stockpiled inventory to prepare for Trump's tariffs, their effects won't start to show up until the second half of the year, he told Business Insider on Friday. "The fact that you're not seeing it in the May, June, July data, it doesn't mean anything," Lachman said. Here's the US trade deficit showing a surge in foreign goods buying from US businesses in late 2024 and early 2025. But tariffs aren't the only inflationary factor potentially at play. Lachman said that if you add the implications of Trump's tax bill on the value of the US dollar as the the national debt and budget deficit grow, consumers could end up paying even higher prices. With the dollar's value down 10%, for example, it means foreign goods are more expensive in addition to the 10% tariffs, or more, already being paid. In an inflationary environment — and with no indication that the US government is looking to reduce its debt and budget deficit — foreign investors have started to flee, and could continue to do so. That could send long-term Treasury rates soaring, Lachman said, slowing the US economy as the cost of lending follows suit. All of this puts US stocks in danger with valuations elevated, Lachman said. For example, here's the Shiller cyclically-adjusted price-to-earnings ratio for the S&P 500, which measures current stock prices against a rolling average of earnings over the last 10 years. "Start with the fact that the stock market has got very high valuations, and then overlay that with the likelihood that you could have either a bond or a dollar crisis, and it would seem to me that stocks don't do very well," he said. The myth probably most associated with hubris and its sometimes disastrous consequences is the tale of Icarus. Looking to escape from a labyrinth, his father builds him wings made of wax. Icarus succeeds in getting off the ground, but in the end ignores his father's warnings and flies too close to the sun, melting his wings. Trump having imposed steep universal tariffs without sparking inflation or a recession has so far defied conventional wisdom and warnings from top economists. But with Trump's tax bill on the way, will his wings, along with the US economy and stock market, soon start to melt?
Yahoo
15 hours ago
- Yahoo
Altria Picked by UBS as Safe Haven Dividend Stock
Altria Group, Inc. (NYSE:MO) is one of the best stocks for a retirement stock portfolio. The stock was highlighted by UBS equity strategists as one of the companies that offer 'safe haven' qualities, marked by strong operational performance, low stock price volatility, and a substantial dividend. A close-up of an assembly line with a blend of tobacco products. The company offers a dividend yield close to 7% and has a beta of just 0.5, meaning its stock remains relatively stable during market turbulence while delivering a return that's about 60% higher than the yield on a 10-year Treasury bond. Trivariate Research also included Altria Group, Inc. (NYSE:MO) in one of its defensive stock baskets. The firm, led by Adam Parker, pointed out that Altria tends to perform well during market downturns, while also showing strong price momentum and trading at a valuation lower than its historical average. Over the past few years, Altria Group, Inc. (NYSE:MO) stock has gained considerable ground, partly due to growing interest in the smokeless tobacco market. The company produces On! nicotine pouches, and its shares rose 30% last year and another 15% this year, through June 12 (not including dividends), reaching their highest level in six years. While that rally may raise some concerns, the nearly 7% dividend offers investors a sense of stability and income. Altria Group, Inc. (NYSE:MO) has raised its dividends 59 times in the past 55 years, which makes it a reliable option for income investors. Altria Group, Inc. (NYSE:MO) maintains a broad portfolio spanning both the tobacco and cannabis sectors. By leveraging its fully owned subsidiaries and strategic investments, the company aims to offer leading product options for adult consumers while also focusing on delivering strong returns to shareholders through dividend payouts and long-term growth. While we acknowledge the potential of MO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and Disclosure. None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
