Former Bridgewater CIO Rebecca Patterson: Biggest earnings takeaway is that consumer is holding up
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Miami Herald
25 minutes ago
- Miami Herald
Trump's next job: Selling skeptical Americans on his economy
Six months into his comeback term, Donald Trump has taken full ownership of the U.S. economy. For better or worse, his party must now sell it to voters. The president has hailed the world's 'hottest' economy – and found others to blame for any wobbles. When Friday's jobs report showed a dramatic slowdown in hiring, he fired the head of the agency that published it. He's pinned some frustrations on his predecessor Joe Biden, and continues to berate the Federal Reserve for what he considers too-high interest rates. But for political purposes, his takeover has now been cemented - after passage of the 'One Big Beautiful Bill' tax-and-spending law, and the latest phase of his global tariff rollout. Commerce Secretary Howard Lutnick trumpeted the transition: 'The Trump Economy has officially arrived,' he posted on social media. The question is whether Americans like it. Next year Trump's economic record will be on the midterm ballot. Polls suggest voters are unhappy with the tariffs and tax plans — potentially giving Democrats an opening. The loss of GOP majorities in Congress could stall Trump's legislative agenda and expose him to impeachment efforts, as it did in his first term. The July employment figures, with job creation running at the weakest pace since the pandemic, were the latest indicator of a slowing economy. GDP shrank in the first quarter then rebounded in the second, as trade shifts skewed the numbers — but the overall pace in the first half of 2025 has been around half of last year's, with consumers hitting the brakes amid trade war uncertainty. Still, unemployment remains low and so far there's been little sign of the tariff-led surge in prices that many pundits warn of. 'The economy has held up remarkably well. Inflation has stayed relatively tame. But I do think there are storm clouds on the horizon,' said Republican strategist Marc Short, who served in Trump's first administration. Many businesses have so far avoided passing on tariff costs to consumers, he said, but 'the frog has been boiling all along.' Trump announced another round of tariff hikes this week, after months of often chaotic threats and reversals. Almost all U.S. trading partners now face higher rates. The import taxes are bringing in billions in government revenue, but the longer-term economic impact remains unclear. Critics say U.S. consumers and businesses will foot the bill. A recent Fox News poll shows that 62% of voters disapprove of Trump's handling of tariffs – while 58% are against the tax and spending bill, and 55% are unhappy with his overall handling of the economy. Voters are especially sensitive to the cost of living right now after prices skyrocketed under the Biden administration. Fed Chair Jerome Powell has cited the risk that tariffs could rekindle inflation as one reason for holding interest rates steady — to Trump's fury. The president has campaigned aggressively for lower rates, hinting he may fire Powell before his term ends next May. On Friday he called on the Fed's board to 'assume control' if Powell doesn't deliver a cut. There were some signs in June's price data that tariffs are starting to nudge prices higher for products like furniture and appliances. Still, the White House has a decent story to tell, according to Republican strategist Alex Conant. 'I would certainly take this economy over two or three years ago,' he said. 'There are two things that crush a president, inflation or unemployment. Right now both are low.' Democrats see opportunities to go after Trump on his tax-and-spending legislation as well as his tariffs. The measure includes new breaks for tips and overtime pay — but also steep cuts to health programs that will hurt many low-income Americans. 'Our summer's all about Cancel The Cuts,' former House Speaker Nancy Pelosi said on social media. 'I'll be looking at how House and Senate Republicans fare back home as they try to sell the recent budget bill,' said Democratic strategist Jim Manley. 'If you look at the polling, Democrats have to focus on his handling of the economy, because Americans are not happy.' With tariffs largely in place, the White House in August plans to start promoting its tax law. State and local officials were at the White House this week getting briefed on the legislation, one official said. Another White House insider said Trump was expected to hit the road as part of the effort. Key parts of the bill like the tips exemption are 'huge immediate political winners,' Conant said. 'They should not only run on them, they should attack Democrats for opposing them.' The law also extends tax cuts from Trump's first term, which had been due to expire. That's potentially the GOP's strongest argument to voters — 'if they'd not done it, can you imagine what your tax bill would've been like next April' — according to veteran Republican pollster Frank Luntz. 'They should be saying it, they're doing it to some degree,' he told Bloomberg TV on Friday. 'But it's not being heard.' The White House maintains that the economy is booming. 'All the naysayers and the doomsayers have been proven wrong,' Communications Director Stephen Cheung said. And Trump is pulling other levers to improve GOP chances in the midterms. He's raised $236 million for his political operation in the first six months of 2025 — an unprecedented sum for a second-term president. The latest filings to the Federal Election Commission suggest most of that cash will be available for GOP House and Senate candidates. Trump is also urging Texas lawmakers to redraw the state's congressional map in an effort to win House districts that are more favorable to Republicans — a move Democrats have decried as a power grab. Midterm elections historically favor the party out of power — potentially giving a boost to Democrats, who were soundly beaten in 2024. But the opposition party is also struggling in the polls, and hasn't coalesced around an effective appeal to voters. Former Chicago Mayor Rahm Emanuel, who has said he is considering a 2028 Democratic presidential bid, said the party has a clear economic message available for the midterms — which includes focusing on tariffs as an effective tax hike. 'This is all about accepting that Donald Trump owns this economy,' Emanuel said. Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Yahoo
2 hours ago
- Yahoo
Don't blame Jerome Powell — or the Fed — if you can't afford to buy a house right now
Has Trump got the wrong guy? President Donald Trump has cast Federal Reserve Chair Jerome Powell's reluctance to lower interest rates as the biggest obstacle to aspiring home buyers. 'I told him that wouldn't fly': My 90-year-old mother's adviser pushed her to change her beneficiaries. What is going on? Bonds and the dollar are sounding the alarm about the U.S. economy. Stock investors might want to heed the warning. Older adults on 'edge of poverty' lose jobs and funding as new Medicaid and SNAP work requirements loom Shop Top Mortgage Rates A quicker path to financial freedom Your Path to Homeownership Personalized rates in minutes 'People aren't able to buy a house because this guy is a numbskull,' Trump said of Powell ahead of Wednesday's Fed policy meeting, where the central bank left its benchmark interest rate unchanged despite pressure from Trump to cut borrowing costs. Trump has said repeatedly that high interest rates are blocking Americans from buying houses. But Powell is not the main reason so few people can afford to buy a home right now, experts told MarketWatch. With so little supply, home prices have shot up to all-time highs. The market is too expensive for both renters trying to buy their first homes and repeat buyers who want to upgrade or downsize. And many of those existing homeowners can't afford to let go of their low mortgage rates, fueling the so-called lock-in effect. Yes, elevated mortgage rates are part of the reason buying a home is unaffordable for so many. Most people in the U.S. take out a mortgage when they buy a house. In 2024, 91% of first-time buyers financed their home with a mortgage, according to the National Association of Realtors. For those people, higher mortgage rates have been a barrier. The 30-year fixed-rate mortgage averaged 6.72% as of July 31, according to Freddie Mac. The 30-year rate has been in this range for a while, hovering above 6% for most of the last three years. That's a big jump from years past. A home buyer purchasing a $400,000 home with a 15% down payment and a 30-year mortgage rate of 3% — a common rate during the pandemic — would pay about $2,000 per month. With a 7% mortgage rate, that monthly payment would be nearly $2,800. Trump has repeatedly singled out Powell, saying in a July 18 Truth Social post that Powell and the Fed 'are choking out the housing market with their high rate, making it difficult for people, especially the young, to buy a house.' A week later, the president said that housing in the U.S. was 'lagging because Jerome 'Too Late' Powell refuses to lower Interest Rates.' But mortgage rates don't directly follow the direction of the Fed's benchmark short-term interest rate. Instead, they tend to move in tandem with the yield on the 10-year Treasury note BX:TMUBMUSD10Y, which typically rises when investors see inflation ahead. When the 10-year yield rises, so does the 30-year mortgage rate. However, the timing of Powell's decision to raise interest rates from pandemic-era lows did contribute to housing-affordability challenges by making mortgage rates more volatile, said Michael Fratantoni, the chief economist of the Mortgage Bankers Association, an industry trade group. 'The Federal Reserve was late to increase rates in 2022,' Fratantoni told MarketWatch. 'If they had moved more quickly, they likely would not have needed to raise rates to the same extent. So there is some culpability for the extent of rate volatility we experienced.' See also: Asked at this week's Fed policy meeting about 7% mortgage rates and housing affordability, Powell said he doesn't believe the Fed plays the central role in those issues. 'We don't set mortgage rates at the Fed,' Powell said in response to a question during the Wednesday press conference. 'It's not that we don't have any effect. We do have an effect. But we're not the main effect.' The current housing-affordability crisis is more about the 'long-term housing shortage that we have,' Powell added. 'We haven't built enough housing. This is not something the Fed can help with. And that'll be the case even after things normalize.' 'So I think the best thing that we can do for housing is to have 2% inflation and maximum employment. And that's what we can contribute to housing,' Powell said. Some don't agree with that analysis. Federal Housing Finance Agency Director Bill Pulte, a Trump ally who has also repeatedly attacked Powell for not cutting interest rates, wrote on X in response to Powell's comment that 'The Fed has EVERYTHING to do with Housing.' The Fed has more impact on the housing market than its officials would like to think, said David Dworkin, president and chief executive of the National Housing Conference, a left-leaning nonprofit advocacy group. The Fed's interest-rate policy directly affects home builders' borrowing costs, which in turn affects how many new homes are built. The Fed's holdings of mortgage-backed securities also have an impact on mortgage rates. In theory, if the Fed buys up more mortgage-backed securities, that in turn could push mortgage rates down. But the Fed has not been doing this. It has been trying to trim its balance sheet by letting those securities mature and roll off. The reality is that lower mortgage rates wouldn't be enough to solve affordability issues, experts told MarketWatch. While lower rates might make it more affordable to buy a home with a mortgage, the housing market's affordability crisis is also fueled by high home prices. Those rising prices are driven by a mismatch between supply and demand. Even as home sales are running at the slowest pace in 30 years, home prices continue to reach record highs. The median price of an existing home sold this June was $435,300. Putting aside pandemic boom towns and the Sun Belt, where builders have been able to boost construction of new homes, most markets are still undersupplied. The pace of home building is still far below where it was two decades ago, prior to the Great Recession, and has not recovered fully. That's in spite of demand skyrocketing over the years across most markets. Even current homeowners, who have benefited from significant home-price appreciation, face a tough market. Many bought their homes when both mortgage rates and home prices were significantly lower. To sell now would mean confronting a market that has become much more expensive — and that doesn't incentivize them to move. Hence, 'rate cuts alone aren't enough,' Amy Nixon, a housing economist and a contributor at MacroEdge Research, noted in a post on X. 'We need lower prices and consistently higher wages,' she wrote. 'Some regions still need more inventory too.' For a typical house to become affordable to a buyer, the 30-year mortgage rate would need to drop to an 'unrealistic' 4.43%, according to a recent report by the real-estate platform Zillow ZG. The last time the 30-year rate was at that level was in March 2022. In response to a request for comment, a White House spokesperson said the Trump administration's efforts to address housing affordability aren't focused only on interest rates. 'The Trump administration's push to restore the American Dream of homeownership goes beyond interest rates,' spokesperson Kush Desai told MarketWatch. 'Rapid deregulation to expand new home construction, historic working-class tax relief through The One Big Beautiful Bill, and America First trade deals that level the playing field for American workers reflect the Administration's two-pronged approach of cutting costs while raising wages for everyday Americans.' The other option to make housing more affordable is for home prices to fall. But that's equally unrealistic, according to Zillow. 'If rates and other factors held steady, home values would need to drop 18% for the typical home to be affordable for a median-income family,' the company said. And falling home prices is not necessarily a positive trend. 'The bulk of people in the U.S. don't have massive equity-market portfolios,' James Knightley, chief international economist at ING, previously told MarketWatch. 'The bulk of people's wealth is overwhelmingly in their property and their pension fund as well.' Most middle-income families pay more attention to the value of their home than the value of their stock-market portfolio, Mark Zandi, chief economist at Moody's Analytics MCO, told MarketWatch. So when home prices fall or are poised to fall, Knightley said, 'I am a little bit nervous' that those declines could negatively hurt consumers' outlook regarding the economy and their interest in spending. And that could start to weigh down the U.S. economy. 'We need a multifaceted all-of-government approach to addressing a housing-affordability crisis, which has become mainstreamed across America,' Dworkin said. 'We need to build more housing, and we need to build housing that's affordable to first-time homebuyers. But we need to do it in a way that doesn't depreciate home prices.' Two bills recently introduced in Congress seek to address housing affordability. One would eliminate capital-gains taxes on home sales; another would try to boost new-home construction by cutting red tape. 'We didn't get into this because of one policy, and we're not going to get out of this because of one policy,' Dworkin added. Read more: Republicans and Democrats are joining forces to fix America's housing affordability crisis. Here's what's in their plan. So what could Powell do at this point to address the stagnant housing market? 'At this point, it would be best for housing markets if the Fed meets their mandates: conducting monetary policy in a manner that results in price stability and maximum employment,' the MBA's Fratantoni said. 'If the Fed gets monetary policy right over time, longer-term rates like mortgage rates will be lower and more stable on average,' he added. And 'that would benefit housing affordability.' Jim Bullard, the former president of the Federal Reserve Bank of St. Louis, told MarketWatch in an April interview that he was 'a little bit pessimistic about housing.' 'I think it has gotten quite a ways away from a steady state. And it's going to take a long time [to fix because] it's a slow-moving market. We just didn't build enough houses after the global financial crisis,' he said. 'It is going to take a long time to come back into equilibrium.' What personal-finance issues would you like to see covered in MarketWatch? We would like to hear from readers about their financial decisions and money-related questions. You can fill out or write to us at . A reporter may be in touch to learn more. MarketWatch will not attribute your answers to you by name without your permission. 'I have never been asked for money before': My friend wants to borrow $1,600 to pay her rent. Do I say yes? I'm trustee of $65,000 going to my nephew. What are the rules for what I can do with the money? This trader is sounding the alarm over stocks. Why he's pressing the sell button now. 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
Forbes
2 hours ago
- Forbes
Amazon Stock Falls 8%. Why, Jassy To-Dos, Why To Skip $AMZN Shares
Amazon stock fell 8.3% following a mixed second quarter report, according to CNBC. Why? Although Amazon's retail business performed well, investors expressed disappointment with the growth pace of Amazon Web Services – which grew more slowly than Microsoft Azure and Google Cloud. In a conference call, analysts expressed frustration with CEO Andy Jassy's explanations for AWS's relatively slow growth. Amazon's fundamental problem is its failure to adapt to the competitive imperatives of the generative AI age, as I described in my book Brain Rush. This age has been propelled by two companies – OpenAI which supplied the fast-growing ChatGPT and Nvidia, the designer of AI chips for speeding the training and operation of AI chatbots. Amazon seems to be applying the strategy it used to create the cloud services industry to one where it seems struggling to catch up. More specifically, unlike Microsoft and Google – which have access to proprietary integrated AI chatbots (ChatGPT and Gemini, respectively) – AWS's strategy of handing off to developers the task of choosing and integrating individual computing services requires more technical expertise – thereby slowing adoption. To grow faster, Jassey ought to consider three possible strategies: Since Jassy helped build AWS and has yet to demonstrate a compelling vision for competing with faster growing rivals, I am skeptical of whether Amazon will be able to leapfrog these rivals. 'Our conviction that AI will change every customer experience is starting to play out," Jassy said in an earnings release. 'Our AI progress across the board continues to improve our customer experiences, speed of innovation, operational efficiency, and business growth, and I'm excited for what lies ahead,' he added. I have requested comment from Amazon and will update this post if I receive a response. Amazon's Mixed Second Quarter Results Amazon's second quarter results combined above expectations sales and earnings with a mixed forecast for the future combined with a shaky explanation for why AWS is growing more slowly in the age of AI. Here are the key numbers: Second quarter 2025 sales: $167.7 billion – up 13% and $5.5 billion above the FactSet consensus, according to Investor's Business Daily. Amazon and its hyperscaler rivals – such as Google and Meta – are increasing their capital expenditures. For example, Amazon is boosting capital expenditures 42% to $118 billion in 2025 – while Google estimates 2025 capex of $85 billion while Meta forecast $69 billion in 2025 capex, according to CNBC. While formal return on investment information is not available for these hefty capital expenditures, investors are using growth rates as a proxy for ROI. Since AWS is growing at roughly half the rate of Microsoft Azure and Google Cloud, investors see a problem with AWS's strategy. Jassy's responses to analyst questions about AWS' relatively slow growth. He said the faster-growing second ranked rival was '65%' the size of AWS, highlighted Microsoft's security woes – notably the hacking of SharePoint, and suggested it was 'early days' in AI, according to the Q2 earnings conference call transcript. These comments did not offer a compelling explanation of why Amazon – with 30% market share to Microsoft's Azure's 20%, according to Synergy Group -- is growing about half the rate of challengers. Why AWS Is Growing More Slowly Than Rival Cloud Services Since Jassy sidestepped the question, AWS is growing more slowly than rivals for two reasons: What Amazon Must Do To Surpass Cloud Services Rivals Here are three strategies Amazon must pursue to grow faster than its cloud services rivals: These recommendations may be difficult to implement and may not result in new services that deliver more value to customers than those from faster-growing rivals. For example, Amazon believes in inventing and improving its own solutions – as it did with AWS and Alexa. Therefore the recommended partnerships may be at odds with the company's culture. Moreover, as former CEO of AWS Jassy may have strategic blind spots. These could include viewing AI as primarily an infrastructure challenge that Amazon can solve with superior engineering and a tendency to see the more rapid growth of rivals as superficial – rather than a sign customers value AI cloud services from Microsoft and Google more highly. What Analysts Are Saying About Amazon's Stock Is Amazon stock – which has lost 2.4% of its value so far in 2025 – trading at a bargain price? Some analysts sound skeptical: The mixed views suggest some upside in Amazon stock. Of the 52 analysts who cover Amazon, the stock has 9.2% upside based on an average price target of $255.72, according to Zacks. Unless AWS' revenue growth accelerates, that modest gain could prove difficult to achieve.
