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Miami Herald
10 hours ago
- Business
- Miami Herald
Billionaire fund manager sends strong message on Fed Chair Powell's future
The Federal Reserve is in a bind, which has put its Chairman, Jerome Powell, on the defensive. Powell cut rates last year to shore up the jobs market, but he's since paused additional rate cuts because of uncertainty over the impact of tariffs. Many, including President Trump, think this is a big mistake, arguing that hesitation on lowering the Fed Funds Rate, a benchmark used to set rates on everything from cars to mortgages, risks stagflation or recession. The risk that higher rates contribute to a slowing economy is real. Still, the impact of tariffs on inflation has yet to be fully felt, and cutting rates could send inflation skyrocketing, pressuring consumers and businesses further. Related: Legendary fund manager sends blunt 6-word message on bitcoin Powell's decision to remain on the sidelines despite the President's comments regarding Powell's future has caught the attention of major market participants, including billionaire fund manager Ken Fisher. Fisher is the founder of Fisher Investments, which has $295 billion in assets under management. He's been navigating the markets since the 1970s, and he's seen his share of economic and market booms and busts. This week, Fisher weighed in on the prospect of Powell's removal, offering a candid take on what's likely to happen to him. Image source:The Federal Reserve has a tough job. Its dual mandate is to set interest rates at levels that ensure low unemployment and inflation, two often contrasting goals. When the Fed cuts interest rates, it fuels economic activity, creating jobs but increasing inflation. When it raises rates, it crimps GDP, lowering inflation but causing unemployment. Related: Looming inflation data may rock interest rate cut forecasts We've seen this relationship play out since Covid. In 2022, the Fed switched gears away from zero-interest rate policy, or ZIRP, embarking on the most hawkish pace of rate hikes since the 1980s to fight runaway inflation caused by stimulus payments. Those rate hikes slowed inflation, driving it below 3% from above 8% in 2022, but they also caused job losses to increase. The unemployment rate has climbed to 4.2% from a low of 3.4% in 2023. The weakening in the jobs market and confidence that inflation would continue to fall prompted the Fed to change policy again late last year, cutting rates in September, November, and December. Many market watchers and economists expected those cuts to continue in 2025; however, that hasn't happened as inflation has proven stickier than hoped. In April, the Consumer Price Index, or CPI, was 2.3%, about in line with its 2.4% reading last September. The risk of inflation reasserting itself worsened in February, when President Trump announced 25% tariffs on Mexico and Canada and 20% tariffs on China. It worsened even more in April when the President announced harsher-than-expected reciprocal tariffs, including a 10% baseline tariff on all imports. While the White House has paused implementing most tariffs announced in early April, many tariffs remain in effect, including those on Canada and Mexico and a 25% tariff on autos. Meanwhile, the China tariffs, while lower than their peak, have increased to 34%, and the baseline tariff remains active. The uncertain inflation picture is keeping Fed Chair Powell from reducing rates, even as job losses continue and signals of a weak economy mount. The ISM Manufacturing PMI, a measure of manufacturing activity, was 48.5 in May, below the 50 level associated with growth. The Conference Board's consumer expectations index was 72.8 in April, below the 80 threshold that typically signals a forthcoming recession. In 2021, Fed Chair Powell infamously said inflation would prove transitory, only to reverse course in 2022 when inflation had firmly taken hold. Now, Powell risks the opposite. If Powell falls behind the curve, it could take more significant rate cuts to restore GDP growth, resulting in more economic damage than necessary. President Trump clearly believes that's the biggest economic risk, given he's ratcheted up his rhetoric toward Powell earlier this year, referring to him as "Mr. Too-Late" and saying after last week's job reports that Powell should immediately cut the Fed Funds Rate by 1%. More Economic Analysis: Hedge-fund manager sees U.S. becoming GreeceA critical industry is slamming the economyReports may show whether the economy is toughing out the tariffs Ken Fisher says the president's desire for lower rates may reflect his understanding that tariffs could be a drag on GDP later this year. "He [Trump] has said, repeated negative comments about Fed Chair Jerome Powell, including the notion that his term couldn't be over soon enough, making many people envision the President trying to fire him," said Fisher on X. "The more the President criticizes Powell, the more certain it is that Powell does not do what the President wants. He wants the Fed to lower interest rates at least partly to offset the drag on the economy that the tariffs the President wants will impose." Powell is adamant about the Fed's independence. The Fed was designed to avoid the risk of bending to political will, recognizing that politicians' and lobbyists' desires aren't necessarily always aligned with what is best for the economy long term. "The fundamental feature of the Fed almost above and beyond all others is to want and need to appear to be truly independent from political pressure... Their image of integrity is central to getting people to believe that what they're doing is not jerry rigged by politics," said Fisher. Fisher predicts that Powell won't be successfully removed before his term expires in May 2026. "Jerome Powell has said that he will not go softly into that good night, and... many people wonder if the President will just do it... Mind you that may well happen, a good long time after America takes over Canada and Greenland," joked Fisher. While Fisher thinks it's possible that Trump has a change of heart and renominates Powell, it is most likely that Trump will look to nominate a "Toadie" before next May, who he believes will bend to Trump's will regarding interest rate cuts. Fisher says Trump wants to "nominate someone he thinks will be a toadie." However, there's no guarantee that the person nominated won't change their mind once they're confirmed, and "decide for the purpose of the Fed's integrity and his own integrity, he can't do that." Overall, Fisher's take on Fed Chair Powell's future is pretty blunt. "The President is not going to be able to fire Jerome Powell," concluded Fisher. "Jerome Powell is going to finish out his term." Related: Veteran fund manager revamps stock market forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Miami Herald
30-05-2025
- Business
- Miami Herald
Housing market chief Pulte sends blunt message on Fed interest rate cuts
In the midst of one of the slowest spring real-estate markets in decades, the director of the Federal Housing Finance Agency strongly urged Federal Reserve Chair Jerome Powell to resume cutting the central bank's interest rates. Trump-appointee FHFA Director William J. Pulte made his blunt request on X just a few days before the minutes of the May Federal Open Meeting Committee, chaired by Powell, showed multiple reasons why the central bank chose not to reduce rates. Don't miss the move: Subscribe to TheStreet's free daily newsletter Pulte and other Trump administration officials have been demanding that the independent Federal Reserve Bank's leaders cut interest rates as early as its June or July meetings to allow, among other outcomes, mortgage rates to drop for was sworn in as the director of the U.S. Federal Housing Agency, FHFA, following his nomination by President Donald J. Trump and bipartisan confirmation by the U.S. Senate. In this role, Pulte oversees Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Related: Fed official sends strong message about interest-rate cuts He knows a thing or two about the housing market. Pulte is the grandson of the founder of PulteGroup, one of the largest U.S. homebuilders. He has had a longstanding career in homebuilding, housing products, and community development, including sitting on PulteGroup's board from 2016 to 2020. In 2011, Pulte founded Pulte Capital Partners LLC, an investment firm that focuses on building and housing products. He's also widely followed on the social media site, "X", where he garnered over 3.2 million followers partly due to his focus on philanthropy. As inflation stays relatively steady and housing inventory dries up, Pulte turned to Elon Musk's social media platform X to plead for a long-awaited change in the federal funds interest rate. More Economic Analysis: Hedge-fund manager sees U.S. becoming GreeceA critical industry is slamming the economyReports may show whether the economy is toughing out the tariffs The Federal Reserve impacts consumer interest rates by influencing the federal funds rate, which in turn affects the money supply. When the federal funds rate is lowered, it can stimulate economic growth and lower interest rates for consumers. Mortgage rates are impacted by changes in the 10-year Treasury note, which is influenced by changes in the Fed Funds Rate. Most U.S. mortgages, particularly the 30-year fixed rate, are influenced more directly by the movement of the 10-year Treasury yield. The current Fed Funds Rate is between 4.25 and 4.50%. The average interest rate on a 30-year home mortgage is approximately 6.86%. The 10-year Treasury yield as of May 29 is 4.32%, an increase from early 2023. Some analysts believe the 10-year Treasury yield could reach 5.5% by the end of the year if inflationary pressures and global trade policies are not addressed. "Jay Powell needs to lower interest rates - enough is enough," he wrote. "President Trump has crushed Biden's inflation, and there is no reason not to lower rates. The housing market would be in much better shape if Chairman Powell does this," Pulte said in the X post on May 27. Pulte says the rate cut is overdue and prolongs the multiple economic damages the Biden administration left behind. Pulte did not mention Trump's seesawing tariffs. Redfin recently announced that there were 500,000 more buyers for homes in the United States than inventory of houses for sale. Related: Fed minutes send strong message on interest-rate cuts The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
14-05-2025
- Business
- Yahoo
Goldman Sachs announces major change to S&P 500 forecast
The S&P 500 is the benchmark index most investors use to measure performance, and for good reason. It comprises 500 of the largest companies in America, crisscrossing industries. The index represents the U.S. economy's strength or weakness. It's a leading indicator because market participants make buy-and-sell decisions, anticipating what may happen next. Earlier this year, those participants grew very anxious. Weakening jobs data and sticky inflation already had investors jittery about stagflation. President Trump's harsher-than-expected tariffs put an outright recession on the have changed recently, though. Trump's Liberation Day tariff announcement sent stocks reeling to new lows, prompting him to reverse course on April 9, when he paused implementing many of his tariffs for 90 days to negotiate trade deals. The S&P 500, which had become oversold, has marched in a straight line higher since then, bullied up by hopes that negotiations would rein in the worst of the tariffs, including the sky-high 145% tariff on Chinese goods. The S&P 500 has gained over 13% since its April lows, and following Trump's reduction of China tariffs to about 30% on May 12, Goldman Sachs has reset its S&P 500 forecast. The Federal Reserve finds itself backed into a corner this year. After engaging in the most restrictively hawkish monetary policy since Chair Paul Volcker battled inflation in the 1980s, current Chairman Jerome Powell was forced to about-face and cut rates three times in 2024 to shore up a weakening jobs market. The dovish shift by the Fed late last year shaved 1% off the Fed Funds Rate, but the Fed had to abort more cuts when inflation ticked higher and amid Trump's imposing inflationary Trump instituted 25% tariffs on Mexico and Canada in February. On April 2, he unleashed a torrent of reciprocal tariffs, kicking off a trade war with China that lifted Chinese tariffs to 145%. He also instituted 25% tariffs on autos, sending shockwaves throughout the industry, which relies heavily on imported cars, trucks, and auto parts. The threat of higher prices because of new import taxes has left the Fed in a big bind. Its dual mandate is low inflation and unemployment, two often competing goals. Cutting rates this year risks adding more fuel to inflation's fire, but it would help jobs. Raising rates would pressure a jobs market already in trouble if inflation skyrockets because of tariffs. Last month, the unemployment rate was 4.2%, up from 3.4% in 2023. According to the monthly Job Openings and Labor Turnover Survey (JOLTS), there were also over 900,000 fewer unfilled jobs last month. Companies have announced 602,493 layoffs this year, up 87% year over year, partly due to Department of Government Efficiency job cuts. That's not great. And the economy reflects it. In Q1, Gross Domestic Product (GDP) contracted 0.3%. With that backdrop, it's little wonder that investors got antsy. The S&P 500 fell 19% from its all-time high in February to its low on April 8, just missing bear market territory. The stock market's swoon since February was arguably a self-inflicted wound, given that most losses came after Trump's tariff announcements. The Trump administration, however, has always seemed to pay attention to the markets, and this time appears no different. More Experts Treasury Secretary delivers optimistic message on trade war progress Shark Tank's O'Leary sends strong message on economy Buffett's Berkshire has crucial advice for first-time homebuyers The stock market's retreat, plus sell-offs in the U.S. Dollar and Treasury bonds, likely contributed to Trump's quick pivot on tariff policy on April 9. Most reciprocal tariffs were paused except China's, shifting markets from worrying over the next tariff drop to becoming flat-footed amid what may prove to be a steady slate of positive trade deal news. That shift hasn't been lost on Goldman Sachs, one of the most prominent Wall Street research firms. Like most, Goldman Sachs ratcheted its S&P 500 outlook lower on recession risk amid the tariffs-driven sell-off. Now, it's ratcheting its forecast higher again. On May 12, Trump announced that weekend negotiations between the U.S. and China were fruitful enough to roll back tariffs to 30%, comprising a 20% fentanyl tariff instituted in February and a 10% baseline tariff that brings China in line with the rest of the world. The news took an economic Armageddon potentially off the table, allowing Goldman Sachs to ramp up its S&P 500 outlook due to higher revenue and profit potential. "While we had expected a de-escalation, the rate is lower than the +54pp tariff hike we had penciled into our baseline," wrote Goldman Sachs analysts in a note to clients. "We raise our S&P 500 return and earnings forecasts to incorporate lower tariff rates, better economic growth, and less recession risk than we previously expected." Goldman Sachs expects S&P 500 companies to deliver earnings per share of $262 in 2025, up 7% year over year, and $280 in 2026, also up 7%. "These estimates reflect better-than-expected 1Q 2025 results and a stronger U.S. economic growth outlook in coming quarters," wrote Goldman Sachs. "Our previous EPS growth estimates were +3% and +6%, respectively." Additionally, Goldman Sachs increased its forward price-to-earnings outlook for the S&P 500 to 20.4 from 19.5. "Our updated fair value estimate reflects reduced uncertainty, faster earnings growth, lower inflation, and renewed confidence in the fundamentals for the largest stocks in the index," wrote Goldman Sachs. Overall, Goldman Sachs has reset its S&P 500 price targets to 5,900 for the next three months and 6,500 in 12 months, up from 5,700 and 6,200, respectively. Its six-month target is 6,100, up about 4% from here, and above its prior 5,900 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
Miami Herald
13-05-2025
- Business
- Miami Herald
Goldman Sachs announces major change to S&P 500 forecast
The S&P 500 is the benchmark index most investors use to measure performance, and for good reason. It comprises 500 of the largest companies in America, crisscrossing industries. The index represents the U.S. economy's strength or weakness. It's a leading indicator because market participants make buy-and-sell decisions, anticipating what may happen next. Earlier this year, those participants grew very anxious. Weakening jobs data and sticky inflation already had investors jittery about stagflation. President Trump's harsher-than-expected tariffs put an outright recession on the table. Related: Fund manager has extremely blunt words on China tariff news Things have changed recently, though. Trump's Liberation Day tariff announcement sent stocks reeling to new lows, prompting him to reverse course on April 9, when he paused implementing many of his tariffs for 90 days to negotiate trade deals. The S&P 500, which had become oversold, has marched in a straight line higher since then, bullied up by hopes that negotiations would rein in the worst of the tariffs, including the sky-high 145% tariff on Chinese goods. The S&P 500 has gained over 13% since its April lows, and following Trump's reduction of China tariffs to about 30% on May 12, Goldman Sachs has reset its S&P 500 forecast. The Federal Reserve finds itself backed into a corner this year. After engaging in the most restrictively hawkish monetary policy since Chair Paul Volcker battled inflation in the 1980s, current Chairman Jerome Powell was forced to about-face and cut rates three times in 2024 to shore up a weakening jobs market. The dovish shift by the Fed late last year shaved 1% off the Fed Funds Rate, but the Fed had to abort more cuts when inflation ticked higher and amid Trump's imposing inflationary tariffs. Related: Bombshell China tariff announcement sends stocks soaring President Trump instituted 25% tariffs on Mexico and Canada in February. On April 2, he unleashed a torrent of reciprocal tariffs, kicking off a trade war with China that lifted Chinese tariffs to 145%. He also instituted 25% tariffs on autos, sending shockwaves throughout the industry, which relies heavily on imported cars, trucks, and auto parts. The threat of higher prices because of new import taxes has left the Fed in a big bind. Its dual mandate is low inflation and unemployment, two often competing goals. Cutting rates this year risks adding more fuel to inflation's fire, but it would help jobs. Raising rates would pressure a jobs market already in trouble if inflation skyrockets because of tariffs. Last month, the unemployment rate was 4.2%, up from 3.4% in 2023. According to the monthly Job Openings and Labor Turnover Survey (JOLTS), there were also over 900,000 fewer unfilled jobs last month. Companies have announced 602,493 layoffs this year, up 87% year over year, partly due to Department of Government Efficiency job cuts. That's not great. And the economy reflects it. In Q1, Gross Domestic Product (GDP) contracted 0.3%. With that backdrop, it's little wonder that investors got antsy. The S&P 500 fell 19% from its all-time high in February to its low on April 8, just missing bear market territory. The stock market's swoon since February was arguably a self-inflicted wound, given that most losses came after Trump's tariff announcements. The Trump administration, however, has always seemed to pay attention to the markets, and this time appears no different. More Experts Treasury Secretary delivers optimistic message on trade war progressShark Tank's O'Leary sends strong message on economyBuffett's Berkshire has crucial advice for first-time homebuyers The stock market's retreat, plus sell-offs in the U.S. Dollar and Treasury bonds, likely contributed to Trump's quick pivot on tariff policy on April 9. Most reciprocal tariffs were paused except China's, shifting markets from worrying over the next tariff drop to becoming flat-footed amid what may prove to be a steady slate of positive trade deal news. That shift hasn't been lost on Goldman Sachs, one of the most prominent Wall Street research firms. Like most, Goldman Sachs ratcheted its S&P 500 outlook lower on recession risk amid the tariffs-driven sell-off. Now, it's ratcheting its forecast higher again. On May 12, Trump announced that weekend negotiations between the U.S. and China were fruitful enough to roll back tariffs to 30%, comprising a 20% fentanyl tariff instituted in February and a 10% baseline tariff that brings China in line with the rest of the world. The news took an economic Armageddon potentially off the table, allowing Goldman Sachs to ramp up its S&P 500 outlook due to higher revenue and profit potential. "While we had expected a de-escalation, the rate is lower than the +54pp tariff hike we had penciled into our baseline," wrote Goldman Sachs analysts in a note to clients. "We raise our S&P 500 return and earnings forecasts to incorporate lower tariff rates, better economic growth, and less recession risk than we previously expected." Goldman Sachs expects S&P 500 companies to deliver earnings per share of $262 in 2025, up 7% year over year, and $280 in 2026, also up 7%. "These estimates reflect better-than-expected 1Q 2025 results and a stronger U.S. economic growth outlook in coming quarters," wrote Goldman Sachs. "Our previous EPS growth estimates were +3% and +6%, respectively." Additionally, Goldman Sachs increased its forward price-to-earnings outlook for the S&P 500 to 20.4 from 19.5. "Our updated fair value estimate reflects reduced uncertainty, faster earnings growth, lower inflation, and renewed confidence in the fundamentals for the largest stocks in the index," wrote Goldman Sachs. Overall, Goldman Sachs has reset its S&P 500 price targets to 5,900 for the next three months and 6,500 in 12 months, up from 5,700 and 6,200, respectively. Its six-month target is 6,100, up about 4% from here, and above its prior 5,900 outlook. Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
09-05-2025
- Business
- Yahoo
Veteran fund manager who predicted the S&P 500 rally updates forecast after Fed, China news
Updated 4:00 pm EST This article has been updated to include statements regarding the May 7 Federal Open Market Committee's decision to hold the Fed Funds Rate steady at a range of 4.25% to 4.50%. The S&P 500 and Nasdaq indexes have rallied sharply since April 9, when President Trump announced a pause in his newly proposed reciprocal tariffs pending trade deals. The double-digit gains were welcome news to investors, who had been hit hard since February due to fears of a weakening U.S. economy, sticky inflation, job losses, and tariff threats. From its peak in mid-February to its low on April 8, the S&P 500 retreated 19%, nearly entering bear market territory before rebounding. 💵💰Don't miss the move: Subscribe to TheStreet's free daily newsletter 💰💵 The buy-the-dip crowd has certainly been well rewarded, and optimism for trade deals that may significantly lower proposed tariffs remains. However, plenty of macro risks remain, and a sidelined Federal Reserve isn't keen to ride to the rescue if things worsen. The bull versus bear tug-of-war has surprised many, but veteran hedge fund manager Doug Kass isn't among them. Kass, who has managed money professionally for nearly 50 years, including a stint as director of research for Leon Cooperman's Omega Advisors, correctly predicted in December that stocks would retreat, and he wisely bought stocks on the early-April collapse before the oversold rally happened. Given Kass's accurate predictions, investors should consider what he's doing with his money now, especially after news that China and the U.S. plan to start trade negotiations soon. The Fed is entrusted with changing the Fed Funds Rate to maintain low unemployment and interest rates, a massive task this year given the weakening jobs market and inflation risks due to the Fed raises rates, it slows inflation by hitting the brakes on economic activity. Unfortunately, that increases unemployment. When it cuts rates, it boosts employment, but fuels inflation. The difficulty setting Fed monetary policy this year isn't lost on Fed Chairman Jerome Powell. 'We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension," said Powell in April. You ain't kidding. Unemployment has increased to 4.2% from 3.4% in 2023, and CPI inflation clocked in at 2.4% in March, above the Fed's 2% inflation target, and unchanged from last September. As a result, the Fed finds itself walking a tightrope, forced to the sidelines amid growing uncertainty. It risks adding more gasoline to the inflationary fire if it cuts rates. If it raises rates, it can nip inflation in the bud, but risks more layoffs and an already looming this reason, Fed Chairman Jerome Powell announced on May 7 that he was keeping the Fed Funds Rate unchanged for the third consecutive month. The Fed also signaled that stagflation is a growing possibility, writing in its statement, "the risks of higher unemployment and higher inflation have risen." "Bottom line, that stagflationary risk highlighted by the FOMC is a handcuff-type acknowledgement that freezes them for now," said economist Peter Bookvar in a note to clients. That acknowledgment suggests little help for companies already retrenching amid tariffs that will likely dent demand and profits and households, which are cutting back spending because of inflation risks. That's bad news for GDP growth and the stock market, prompting investors to rethink their outlooks for sales and profit growth and their willingness to pay up to buy arguably already high-valuation stocks. Kass's long Wall Street career means he navigated the inflation scare in the 1970s, the S&L crisis in the late '80s and early '90s, the Internet boom and bust, the Great Recession, the Covid pandemic, and 2022's bear market. His experience during good and bad markets helped him correctly forecast the S&P 500's sell-off and rally this year. Fund manager buys and sells Fund manager who forecast stock drop and pop talks what's next Fund manager sends blunt message on S&P 500 bear market risk Fund manager resets stock market forecast after oversold rally Unfortunately, after correctly buying the April dip, Kass thinks the stock market is running out of steam and will likely head lower. "The markets are increasingly unpredictable and volatile (VIX remains elevated)," wrote Kass on TheStreet Pro. "It's a good time to have below-average invested positions, given value at risk (VAR) and the potential for more 'tape bombs.' It is also a great backdrop for opportunistic traders — but not so great for the buy-and-hold crowd." The Fed's comments at its May meeting didn't do anything to relieve that uncertainty. "The Fed is in no rush to cut interest rates," wrote Kass. "Prepare for a battle royale between the administration (Trump) and the Fed (Powell)." Furthermore, while the potential for trade deals has increased, and negotiations with China are slated to start this weekend, it may not be the catalyst for stocks many hope. Sure, a deal with China would be good news, given that the current 145% tariffs on Chinese imports have effectively shut down trade between the U.S. and China. However, it isn't clear how trade deals will shake out. If the U.S. and China take hardline approaches, it could create significant market volatility. As a result, Kass says he agrees with iconic hedge fund manager Paul Tudor Jones, who recently said that stocks will retreat even if tariffs on China reset significantly lower. After Bessent announced the negotiations, Kass said he "went to work further on the short side." Kass is betting that stocks will roll over now that they've reached resistance, given that some indicators are starting to flash short-term overbought. How low could the S&P 500 go on a retreat? It could undercut its April low. "I see the market moving irregularly lower all summer, with a bona fide threat of new lows (estimated S&P range 4800-5800)," said in to access your portfolio
