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Miami Herald
2 days ago
- Business
- Miami Herald
Jobs report shifts Fed interest rate forecasts
Will they or won't they? With the relatively bland U.S. labor numbers for May bumping against randy trade deals and thirsty tariff tiffs, there's leverage for Federal Reserve Board Chair Jerome Powell to re-examine the expected three 25-basis point rate cuts later this year. The Department of Labor reported June 6 that hiring remained stable in May with employers adding 139,000 jobs, gains that were slightly higher than expected but down from April. The unemployment rate stayed the same at 4.2%, as expected by most economists. Leisure and hospitality plus healthcare sectors reported the highest numbers of jobs with the DOGE-ed federal workforce among the lowest. But the manufacturing and retail sectors also shed jobs, which coupled with the federal losses, display an irrefutable shock from the Trump administration's trade wars churning the global economy. Bloomberg/Getty Images President Trump, just days before the jobs report, blasted the central bank chairman as "unbelievable" and a "disaster" on Truth Social for Powell's delay in lowering interest rates, a move Trump maintains is choking economic growth. Trump's latest angry tirade against Powell was sparked after the payroll firm ADP reported private-sector firms added just 37,000 jobs in May, the lowest total in more than two years. An irked Trump demanded 'Too Late' "Powell must now LOWER THE RATE." Related: Bank of America predicts major housing market changes are coming soon Minutes from a meeting of the Federal Reserve Bank leaders, which was held in early May and released on May 29 show the central bank voted to undertake open market operations "as necessary" to maintain the federal funds rate in a target range of 4.2% to 4.50%. In a related action, the Board of Governors of the Federal Reserve System voted unanimously in early May to approve the establishment of the primary credit rate at the existing level of 4.5 percent – which means interest rates for lenders, consumers and the rest of Americans won't be budging in the near term. This added fuel to Trump's increasing vitriolic displays against Powell (a mere harbinger of what the president started throwing down against former First Buddy and Tesla (TSLA) CEO Elon Musk on June 5.) Market participants remain downbeat about interest rate cut chances despite President Trump's demands. The CME's highly-watched FedWatch tool showed a decline in odds of an interest rate cut this summer. Related: Fannie Mae predicts major mortgage rate changes are coming soon The chances the Fed Funds Rate will be in a 4% to 4.25% range in July fell to 16.5% on Friday, June 6, from 30.4% on Thursday, June 5. The odds were nearly 57% one month ago. The Street's Chris Versace reports the market will need to reconsider the three 25-basis point rate cuts it expects per the CME Fed Watch Tool. "With Atlanta Fed President Raphael Bostic signaling ahead of this data that he sees room for just one rate cut, the growing likelihood is more Fed heads will fall into that camp based on the aggregate data published this week." Verace says. " We also have to wonder if Bostic's comment helps lay the groundwork for the Fed's upcoming set of economic projections that it will publish alongside its next policy decision on June 18.'' Thus, the odds of the Fed indicating just one rate cut in the second half of 2025 will increase if next week's May CPI and PPI data support the "May inflation data we've seen thus far and there is no meaningful progress on trade deals,'' Verace says. Related: Veteran fund manager who predicted April rally updates S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Time of India
4 days ago
- Business
- Time of India
ETMarkets Smart Talk - RBI may cut rates by 50 bps in 2025 as growth needs support, says Dr. Joseph Thomas of Emkay Wealth
In this edition of ETMarkets Smart Talk, Dr. Joseph Thomas , Head of Research at Emkay Wealth Management, shares his insights on the evolving macroeconomic landscape and what it means for investors. He highlights the rising possibility of a 50 basis points rate cut by the RBI in 2025, as inflation remains under control and the need to support growth becomes more pressing. From his views on global volatility triggered by tariff tensions and US bond yields, to India's improving earnings landscape and growing IPO activity, Dr. Thomas outlines where opportunities lie for long-term investors and which sectors deserve close attention now. Edited Excerpts – Q) What is fuelling volatility on D-Street – tariff war fears still playing the spoilsport? A) We have witnessed unusually high levels of volatility in the last three to four months. The sell off by FIIs, as it gradually moderated, the Trump tariffs made the entry creating unprecedented uncertainties in global trade and the sustainability of the economic momentum that was picking up in Europe and elsewhere in the world. From a domestic perspective, the Indo-Pak conflict also contributed to some amount of volatility though it was short-lived. The actual impact on the secular uptrend of the markets is concerned, these events would have had very little enduring impact on the domestic economy and markets. The US seems to be in a conciliatory mode as of now with negotiations in progress with several countries. As far as India is concerned the bilateral trade agreement with the US is at an advanced stage of negotiations and could be finalized soon. However, the Russia-Ukraine conflict is still alive, and it is difficult to see how it is going to progress in the coming days. Therefore, we may see volatility continuing to envelop the markets but the intensity is likely to moderate substantially. Q) What does rise in US Bond Yields mean for Indian markets? Historically, a rise in bond yields could trigger a rotation out of equities into bonds. Additionally, rising US yields can lead to capital outflows from emerging markets as investors seek safer returns in US bonds. How are you reading into this? A) US bond yields do not mean anything much for Indian markets as things stand at this juncture. The US bond yields moved up in response to two factors – the downgrade by Moody's, and the pause on rate cuts by the Fed . The US rates are bound to come down over the next three to six months. Over the next one year or so, the Fed Funds Rate could come down by another 200 basis points with the rate of economic growth showing a deceleration, and a further slowdown in growth in the coming quarters, and with inflation too very close to the target rate. Considerations of growth will compel the Fed to cut rates further. With further fall in US interest rates, there is likely a flow of funds into emerging markets, and this requires rate action by the Fed. Asset rotation is a possibility only where rates have peaked or near-peak. The conditions in the US or India is still an evolving one with rates having come down the peaks and set to move still lower. With far higher government expenditure on the anvil, any frenzied buying in the US treasuries can be ruled out especially with a lower rating by another agency, and far more supplies expected at the primary in the coming months. Q) What do you make of the March quarter results from India Inc.? A) The Q4- FY25 results are more or less in line with expectations. Broadly, going by BSE-500 results, the PAT growth was, on a y-o-y basis, to the tune of 8.70%. The sectors which displayed improvements sequentially are Healthcare , Materials and industrials, and those who did not measure up included IT and Consumer Discretionary. Strong underlying cash flows, and significant step up in EBITDA over the last couple of years for BSE 500 companies marks a fundamental robustness. With valuations at reasonable levels, and likelihood of much lower cost of funds, and liquidity sustaining over a longer period of time, the indexes may pick up further momentum, with the only threat being the acceleration of the tariff related uncertainties. Q) FOMC minutes indicated that further rate cuts could be data dependent. But what about rate cuts back home? How do you see rates moving? A) As I mentioned earlier, there will be more rate cuts in the US as we progress further in this year. With the last CPI number at 2.30 %, inflation is close to the Fed's target rate. The need to prop up growth through lower rates would emerge sooner than later. Back home the RBI has so far effected two rate cuts which has taken the Repo rate to 6.00 %. The probability of rate cuts is very high as the cost of funds needs to be brought down to support economic growth. Inflation is under control, and the threats from food or fuel component is very limited or nil. Mainly, the crude prices are very low and the OPEX+ expansion of output and supply to the tune of 410,000 barrels per day would act as a dampener on prices. On a very conservative assessment the rate cuts from the RBI could be at least 50 basis points for the rest of the year. The market yields are already pricing-in this to a large extent. The fall in rates and the liquidity which is aplenty in the interbank market helps the transmission of rates deeper into the credit realm. The GOI 10 Year benchmark has already touched 6.20 %, and the fall from these levels would be more gradualistic, while the short-term rates may display relatively greater intensity of fall. The liquidity and interest rate scenario supports both higher equity and debt markets. Q) We are seeing some activity in the IPO markets. What do you make of the companies that are getting listed – any interesting names? What about SME space, which has gathered more interest so far in 2025 as compared to mainboard IPOs? Do you see froth building in this space or an opportunity for long-term investors? A) The IPO market for both mainboard and the SME space saw good number of new issues during last calendar year. In the year 2024, India reached the number one position internationally in IPO volumes, and in India twice as many IPOs as the US, and almost two-and-a-half times as many as Europe, were listed. More or less the same pace is seen early on in this year too. The number of SME issues was larger than the number of the mainboard issues. These issues come up when the outlook for the markets is positive, when the market liquidity is smooth, and also the perception on gains post the listing is quite substantial. At this juncture conditions are conducive to a revival of interest in IPOs in both the segments. The pre-IPO activity, mainly in the popular unlisted space is also gradually picking up steam. What has been supporting the IPOs is a very strong interest by retail investor in this space, apart from interest from overseas investors. Also, IPOs almost always create an impression of something that is cheaper than the market which is reflected in the oversubscription in majority of the issues. Q) Where do you find value in this market for long-term investors? A) The Mid and Small Caps segment (SMIDs)offers better value to the portfolio on a longer-term basis. This is because of two reasons. After the corrective downward movements seen in the last three to four months, the valuations are now at reasonable levels. The segment offers better growth and therefore, better price performance. Yat another factor to reckon with is that the market capitalization of the SMIDs has expanded over the last couple of years, and this makes it a favoured destination for overseas investors. This is something that should not be missed from a long-term perspective. Apart from these two themes which Emkay Wealth has been highlighting is the Infra and PSU equity. There has been significant correction in these two segments, and they offer immense amount of value for investors as their performance is linked to developmental efforts and government policies and not that much correlated to economic cycles. The other sectors which Emkay is positive on are consumer discretionary, healthcare, technology, and utilities. Q) What is your call on the defence space? Many stocks witnessed a double-digit jump after geopolitical tensions between India and Pakistan earlier this month. A) The defence space looks lucrative against the background of the military operations which actually highlighted the strategic shift in the modes, mechanism and techniques of warfare. The use of drones unmanned aerial vehicles, and the use of satellite technology to hit targets with precision has lent great credibility to a host of defence manufacturing entities and their capabilities which have now been established. However, it may be mentioned here that the listed entities may be far and few, but the number of entities who are in the unlisted space and who would be coming up in the near future would be much, much, higher than what we have in the listed space. It may be worthwhile looking at private equity funds focussed on early or mid-stage startups which are available in the marketplace. At a portfolio level, one should be careful about avoiding any kind of overexposure to the sector.
Miami Herald
26-03-2025
- Business
- Miami Herald
Fund manager who predicted stocks bounce has surprising 8-word reaction to rally
The S&P 500 gained an impressive 24% in 2024, marking back-to-back 20%-plus returns, but it's been more of a roller-coaster in 2025. The benchmark index retreated 10% from recent highs last month, putting it in correction territory and raising red flags among investors accustomed to gains. Stocks' sell-off surprised many investors, but Wall Street hedge fund manager Doug Kass wasn't caught flat-footed. Kass predicted a stock market reckoning in December and continued to beat the bearish drum on the S&P throughout February. That wasn't his only prescient prediction this year, though. As stocks were mired in a fast and steep sell-off in March, he switched gears, saying stocks were oversold and ready to head higher. Kass's correct forecast is rooted in his having experienced more than his share of good and bad markets firsthand during his 50-year career, including his time as research director for Leon Cooperman's Omega Advisors. He successfully navigated the inflation battle in the 1970s and early 1980s, the savings and loan crisis in the 1980s and early 1990s, the Internet boom and bust, the Great Recession, Covid-drop, and 2022's bear market. In short, Kass knows a lot about stock market cycles, which makes his latest take on the market worth considering. There's good reason for stocks to have struggled this year. Recession risks mounted last month following middling economic data showing sticky inflation to a weaker jobs market. Worrying over a tariff war following President Trump's decision to enact 25% tariffs on Canada and Mexico and 20% tariffs on China did little to assuage investors' concerns. Related: Jamie Dimon sends curt 6-word response to tariff war It's certainly welcome news that inflation has retreated to below 3% since peaking above 8% in the summer of 2022. The dip in inflation allowed the Federal Reserve to take its foot off the economic brake pedal last fall, resulting in a dovish monetary policy that included cuts to the Fed Funds Rate in September, November, and December. However, the relief on rates has proven short-lived. A recent increase in the Consumer Price Index inflation to 2.8% from 2.4% in September has since caused Fed Chairman Jerome Powell to pause additional rate cuts, disappointing businesses and borrowers. There have also been concerning job data. Layoffs have become more common, and the unemployment rate has inched up to 4.1% from 3.5% as recently as 2023. American employers cut 172,017 jobs in February, the most for the month since 2009. According to the Job Openings and Labor Turnover Survey released by the Bureau of Labor Statistics, there were 7.7 million open jobs in the U.S. in January, about 728,000 less than one year ago. Stubborn inflation and sluggish growth aren't great recipes for a healthy economy, and as a result, consumer confidence has suffered. The Conference Board's Consumer Confidence measure fell 7.2 points last month to 92.9, marking its lowest reading since January 2021. Given the backdrop, little wonder that stocks tumbled 10% last month. However, stocks don't go up or down in a straight line, and bargain hunters like Kass often materialize following rapid drops that push stocks to oversold levels. Related: Major national bank closing dozens of branches (locations revealed) Once some of the air was let out of the S&P 500's arguably sky-high valuation, Kass began trading more activity in his hedge fund on the long side. Near the lows, Kass cited technical market indicators, like the S&P Short Range Oscillator, entering oversold territory and relative strength index readings near bargain-basement lows among the reasons for his bullish shift. Kass took advantage of the dip, buying the technology-heavy Nasdaq 100 and S&P 500, as well as big tech stocks and major banks, writing on March 7, "I have moved to large Amazon (AMZN) at $193.02." Clearly, his bullishness paid off, making him a nice profit on those buys. More fund manager buys and sells: Veteran fund manager goes shopping, buys 5 stocks after big dropsBillionaire Ray Dalio sends hard-nosed message on economyVeteran fund manager who predicted S&P 500 drop revamps outlook However, he's become less excited about owning stocks now that they've rallied, prompting him to lock in his gains and start planning for another decline. "Based on my five scenarios (from very negative to very positive and attaching multiples to that distribution) I expect the S&P index to be down between five and ten percent for the full year," said Kass in a post on TheStreet Pro. "My thinking remains that the high might have been already made in late January." Kass thinks the downside risk this year is between 10% to 15% on the S&P 500, and he thinks that throughout the year there will be "plenty of long and short opportunities" for active investors. Nobody knows what's next for stocks, but Kass is preparing for another swing. "Gun to my head, we head down shortly," said Kass bluntly. 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
26-03-2025
- Business
- Yahoo
Fund manager who predicted stocks bounce has surprising 8-word reaction to rally
The S&P 500 gained an impressive 24% in 2024, marking back-to-back 20%-plus returns, but it's been more of a roller-coaster in 2025. The benchmark index retreated 10% from recent highs last month, putting it in correction territory and raising red flags among investors accustomed to gains. Stocks' sell-off surprised many investors, but Wall Street hedge fund manager Doug Kass wasn't caught flat-footed. Kass predicted a stock market reckoning in December and continued to beat the bearish drum on the S&P throughout February. That wasn't his only prescient prediction this year, though. As stocks were mired in a fast and steep sell-off in March, he switched gears, saying stocks were oversold and ready to head higher. Kass's correct forecast is rooted in his having experienced more than his share of good and bad markets firsthand during his 50-year career, including his time as research director for Leon Cooperman's Omega Advisors. He successfully navigated the inflation battle in the 1970s and early 1980s, the savings and loan crisis in the 1980s and early 1990s, the Internet boom and bust, the Great Recession, Covid-drop, and 2022's bear market. In short, Kass knows a lot about stock market cycles, which makes his latest take on the market worth considering. There's good reason for stocks to have struggled this year. Recession risks mounted last month following middling economic data showing sticky inflation to a weaker jobs market. Worrying over a tariff war following President Trump's decision to enact 25% tariffs on Canada and Mexico and 20% tariffs on China did little to assuage investors' certainly welcome news that inflation has retreated to below 3% since peaking above 8% in the summer of 2022. The dip in inflation allowed the Federal Reserve to take its foot off the economic brake pedal last fall, resulting in a dovish monetary policy that included cuts to the Fed Funds Rate in September, November, and December. However, the relief on rates has proven short-lived. A recent increase in the Consumer Price Index inflation to 2.8% from 2.4% in September has since caused Fed Chairman Jerome Powell to pause additional rate cuts, disappointing businesses and borrowers. There have also been concerning job data. Layoffs have become more common, and the unemployment rate has inched up to 4.1% from 3.5% as recently as 2023. American employers cut 172,017 jobs in February, the most for the month since 2009. According to the Job Openings and Labor Turnover Survey released by the Bureau of Labor Statistics, there were 7.7 million open jobs in the U.S. in January, about 728,000 less than one year ago. Stubborn inflation and sluggish growth aren't great recipes for a healthy economy, and as a result, consumer confidence has suffered. The Conference Board's Consumer Confidence measure fell 7.2 points last month to 92.9, marking its lowest reading since January 2021. Given the backdrop, little wonder that stocks tumbled 10% last month. However, stocks don't go up or down in a straight line, and bargain hunters like Kass often materialize following rapid drops that push stocks to oversold some of the air was let out of the S&P 500's arguably sky-high valuation, Kass began trading more activity in his hedge fund on the long side. Near the lows, Kass cited technical market indicators, like the S&P Short Range Oscillator, entering oversold territory and relative strength index readings near bargain-basement lows among the reasons for his bullish shift. Kass took advantage of the dip, buying the technology-heavy Nasdaq 100 and S&P 500, as well as big tech stocks and major banks, writing on March 7, "I have moved to large Amazon () at $193.02." Clearly, his bullishness paid off, making him a nice profit on those buys. More fund manager buys and sells: Veteran fund manager goes shopping, buys 5 stocks after big drops Billionaire Ray Dalio sends hard-nosed message on economy Veteran fund manager who predicted S&P 500 drop revamps outlook However, he's become less excited about owning stocks now that they've rallied, prompting him to lock in his gains and start planning for another decline. "Based on my five scenarios (from very negative to very positive and attaching multiples to that distribution) I expect the S&P index to be down between five and ten percent for the full year," said Kass in a post on TheStreet Pro. "My thinking remains that the high might have been already made in late January." Kass thinks the downside risk this year is between 10% to 15% on the S&P 500, and he thinks that throughout the year there will be "plenty of long and short opportunities" for active investors. Nobody knows what's next for stocks, but Kass is preparing for another swing. "Gun to my head, we head down shortly," said Kass bluntly. Sign in to access your portfolio
