Sternlicht Says Housing Is a 'Stuck Pig' Amid Current Rates
"Every day that (Fed Chair) Powell keeps rates this high he creates further shortages in the housing market," Starwood Capital Group Chair and CEO Barry Sternlicht says at The Milken Institute Global Conference in Beverly Hills, California.
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Yahoo
34 minutes ago
- Yahoo
Could the Fed be 'the real issue' for the economy amid tariffs?
President Trump has characterized trade negotiations with Chinese officials as being "not easy" as the two countries renew negotiations following a phone call between Trump and China's President Xi Jinping last week. Infrastructure Capital Advisors CEO and CIO Jay Hatfield comes on to talk about the impacts of tariffs on markets (^DJI, ^IXIC, ^GSPC) as the Federal Reserve contributes additional economic pressures. To watch more expert insights and analysis on the latest market action, check out more Catalysts here. Well, tech stocks leading the market rally once again, as the possibility of easing trade tensions lifts investor sentiment. President Trump saying China is quote, "not easy," as talks are set to resume today. Would a rift in the fragile US-China relationship derail the rally? Joining me now, we've got J. Hatfield, Infrastructure Capital Advisors CEO and chief investment officer. J, it's always great to speak with you. Talk to me about how you are viewing or potentially pricing a risk of these trade talks getting derailed. Thanks, Mandy. It's great to be on. Well, we have a completely non-consensus call that the, uh, all the trade talks, obviously China's the most important, but as a whole, are not that critical to the US economy. It's about 10% of the US economy. Um, the effective rates gonna be somewhere, probably between 10 and 15. That's less than a half percent of GDP. And meanwhile, energy prices, they were down 20, they're down about 15. That's a much more important driver of inflation. So, we're bullish. Inflation is going to come down, even tomorrow. We're forecasting below consensus. And so, we think that, although it's been the key driver this quarter, uh, earnings are going to be more important next quarter. So we're projecting a summer power rally. So, talk to me about the biggest risk to your outlook then. Is it that tariffs have a bigger impact than anticipated? Is it corporations holding off on hiring CapEx, and that leading to a slowdown? Like, where would you see the risks to that outlook? Well, everybody's focused on tariffs and how that's slowing the economy, but nobody's focused on the fact that the Fed has ultra-tight monetary policy. They're actually shrinking the money supply, which is very dangerous. They did that before the great financial crisis. Um, normally it grows at 5, it's shrinking at 1. So the real issue, so I agree with the president, which I don't always agree with him, but that the real issue is the Fed. They're slowing the housing market. It hasn't crashed because there's a shortage of housing. So I'd see the key risk is the Fed remains on hold because they're incapable of forecasting inflation, focused way too much on the expectations theory of inflation, which has been discredited, and failed to realize that tariffs even are a one-time cost. Should be analyzed as sales tax and ignored for inflation purposes. So, the three top risks to the market are the Fed, the Fed, and the Fed. So, it's it's a great overview, J, because you see the power rally coming, but the Fed could potentially derail it in your view. How should investors be positioned then to benefit from that, while also staying diversified to prevent against any, uh, potential downside risk? Well, our scenario is, so we're bullish about bonds and stocks. Our scenario assumes that the labor market continues to slow, and even though this Fed has zero ability to forecast inflation, they are obsessed with the labor market. They're almost all Keynesians, so they're all believe the labor market drives everything. We strongly disagree with that, but that's what they believe. So, we think this deceleration will continue. Inflation will continue to be, really low if you correct for shelter and that they will cut. So, we you know, we don't give like probabilities of this and that, and probability that an asteroid will destroy South America. We have a base case, we're going to stick to the base case. So we think that, uh, the number of cuts will be two to three, rates will come down, and we will get to the 6,600, which is 22 times next year's earnings. So what's the best way to benefit from that then, J? Well, we, um, are, uh, are recommending stocks that tend to be higher on the risk spectrum. So, financials, so like Goldman Sachs, Morgan Stanley, we think the private equity firms like KKR are a great way to play it. Uh, REITs, so uh, and industrials. So be on the risk side, don't be in McDonald's and Philip Morris, and Coke, because you're worried about a recession. We don't think there's going to be a recession, think rates are coming down. So we'd be aggressive on the picks and and go into companies that benefit from a booming stock market, or at least a increase in stock market, likely investment banks. J, always great to get your thoughts. Thanks so much. Thanks, Mandy.
CNBC
an hour ago
- CNBC
Too soon to make call on tariff impacts, says fmr. Kansas City Fed President Esther George
Esther George, Former Kansas City Fed President, joins 'Closing Bell Overtime' to talk the idea of a 'shadow' Fed chair, the impact of tariffs, the state of the U.S. consumer, and more.
Yahoo
an hour ago
- Yahoo
Subdued consumer inflation in May surprises, but likely not enough for Fed
-- With the implementation of President Trump's aggressive tariff policy, economists were pleasantly surprised by today's milder-than-expected CPI reading. However, overall, they don't see it being enough to move the U.S. Federal Reserve on rates. Today's CPI report showed that U.S. consumer prices rose 2.4% in May from a year earlier, slightly below expectations of 2.5%, while monthly inflation slowed to 0.1%, under the 0.2% forecast, as falling gasoline prices offset shelter cost gains; core CPI matched April's 2.8% annual pace but came in softer than expected at 0.1% month-over-month versus 0.2% expected. Despite the subdued inflation reading, several economists warned that core PCE likely accelerated in May. Nomura economist Aichi Amemiya noted some components of CPI that have larger weights in core PCE inflation rose notably. Additionally, PCE service components derived from PPI likely increased significantly in May. 'Although core CPI inflation surprised to the downside, prices for newspapers & magazines and prescription drug prices (both of which have a larger weight in the core PCE price index than in core CPI) rose strongly in May,' Amemiya stated. 'We expect PCE core goods inflation likely remained relatively high in May, in large part due to those two components. In addition, food service inflation, which is not included in core CPI but is in the core PCE price index, came in stronger than we had expected, partially offsetting the negative impact from other components.' Macquarie's head economist, David Doyle, warned that core inflation will remain elevated following the implementation of tariffs. 'Despite the subdued figures, through year-end, we expect YoY core inflation to remain elevated and potentially rise as price pressures flow from recent tariff implementation,' Doyle commented. 'Overall, today's report was a bit of a surprise,' CIBC's Ali Jaffery said. 'Our expectation is that it won't last and core goods prices will have to start to rise. The economy will slow and that will make opportunistic pricing less pronounced than we have seen during the prior tariff episode or the pandemic, and also contain service inflation." On the Fed, most economists agreed that nothing changes from today's consumer inflation reading. 'At the margin, the relatively soft inflation prints over the past three months make it easier for the Fed to cut rates,' Brian Rose, Senior US Economist, UBS Global Wealth Management, said. 'However, ahead of next week's FOMC meeting, our view remains that the Fed will need to see weaker labor market data in order to resume rate cuts. Our base case calls for 100bps of cuts starting in September, but this could be delayed if payroll growth remains solid at the same time that tariffs are pushing up inflation.' 'Despite the muted impact from tariffs, it's too early for the Fed to write off inflation risks,' Amemiya stated. 'We expect today's lower-than-expected core CPI inflation print will have little impact on the June FOMC meeting.' "The softer pace of May inflation is good news for the Fed but it doesn't change the calculus," Jaffery commented. "They still need to wait and see how the economy and the job market respond, where tariffs settle and what fiscal policy looks like.' Related articles Subdued consumer inflation in May surprises, but likely not enough for Fed Canada's net foreign asset position drops $103.2 billion in Q1 US Treasury sells $39B 10-year notes at lower-than-expected yield Sign in to access your portfolio
