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Yahoo
2 days ago
- Business
- 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.
Yahoo
2 days ago
- Business
- 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. 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
Yahoo
16-04-2025
- Business
- Yahoo
Nvidia, caught in the US-China trade war, takes a $5.5 billion hit
Nvidia is caught in the middle of an escalating trade war between the world's two largest economies. Nvidia on Tuesday said it will take a $5.5 billion financial hit after Washington placed fresh restrictions on the export of its H20 artificial intelligence chips to China, in the latest escalation of a growing battle for AI dominance. Nvidia (NVDA) slumped more than 10% Wednesday after tumbling during premarket trading. The export restrictions on Nvidia come as President Donald Trump's tariffs are roiling global markets and raising concerns about the prospects for global economic growth. The World Trade Organization on Wednesday said its expectations for global trade this year have 'deteriorated sharply' owing to the battery of new tariffs on goods and uncertainty around future trade policy. The H20 chip, released just last year, was purposefully made to accommodate stringent US export controls to China and allowed Nvidia to continue selling to the country. The model has less computing power than the more powerful H100 AI chip, which has already been banned for sale to China. 'Nvidia specifically designed the H20 to comply with US exports restrictions…now the rules change and they lost $5 billion,' said Jay Hatfield, chief executive at Infrastructure Capital Advisors. 'So this inconsistent trade policy is costing companies a lot of money.' The H20 is believed to have contributed to DeepSeek's successful development of its ChatGPT-like reasoning AI model, R1, which was said to be trained at a fraction of the cost of American equivalents. The development stunned the tech industry and sparked an AI revolution in China. Nvidia said in a Tuesday regulatory filing that it was informed by the US government last week the H20 chips would now require a special license to be exported to China, which accounted for 13% of sales last year. The chipmaker said it will report approximately $5.5 billion worth of charges in its first quarter's earnings on May 28, associated with H20 products for 'inventory, purchase commitments, and related reserves.' Analysts led by Dan Ives, global head of technology research at financial services firm Wedbush Securities, said the financial impact is small relatively, but the restrictions mark a 'strategic blow' for Nvidia's efforts to continue engaging its Chinese customers. 'This disclosure is a clear sign that Nvidia now has massive restrictions and hurdles in selling to China as the Trump Administration knows there is one chip and company fueling the AI Revolution and it's Nvidia,' they said in a Tuesday research note. The industry-leading AI chip designer has been caught in the crossfire in recent years as the US seeks to block China's use of American technology to advance its military and AI systems. The US Commerce Department confirmed on Tuesday it was issuing new export licensing requirements on China-related exports of Nvidia's H20 and another American AI chipmaker AMD's MI308 chips, as well as their equivalents, according to Reuters. 'The Commerce Department is committed to acting on the President's directive to safeguard our national and economic security,' a Commerce Department spokesperson was quoted as saying. Nvidia was told the license requirement would be in place indefinitely, the company said in the filing. It is unclear how the US government would grant the licenses. The company declined to comment beyond its filing. While the Trump administration's imposition of curbs on the H20 chips was widely expected, the restriction was more abrupt than anticipated, analysts at Morgan Stanley said in a Wednesday note. Since DeepSeek's R1 model shook global markets earlier this year, American lawmakers on both sides of the aisle jointly called for tighter export controls on AI chips. In the months since, China has seen an AI boom, with DeepSeek's reveal galvanizing investment and pressure on Chinese companies to advance its AI sector. Investor confidence in the country's tech sector has surged, driving rallies in China and Hong Kong stocks. DeepSeek, along with many of China's established tech giants, have been major consumers of Nvidia's H20 graphic processing units. While Chinese tech heavy weight Huawei and AI chipmaker Cambroon have developed alternatives to H20s, those China-made chips generally lag in performance, particularly in software maturity, according to Brady Wang, associate director of Counterpoint Research, a market analysis firm. The performance gap between Chinese chips and Nvidia's is expected to widen, Wang said, because of 'Nvidia's superior ecosystem and manufacturing advantages,' even as DeepSeek's rise demonstrates that high-performing AI models can be trained with lower-spec hardware. The prospects for the global economy have taken a knock because of Trump's trade war, according to a new report by the WTO. The WTO projects global economies will grow more slowly than they would without tariffs — especially in North America, a region dominated by the United States, which will see a greater slowdown than other areas. The WTO said it expects global gross domestic product to expand by 2.2% this year. That growth would be 0.6 percentage points lower than the rate it would expect in a scenario with no additional tariffs. In North America, the impact will be more severe still, with GDP growth expected to be 1.6 percentage points below what it would be otherwise. With the escalation of an aggressive trade war between the US and China, Ives said further restrictions may be coming. 'While the Nvidia news is concerning, it's not a shock as we are in the middle of a trade war between the US and China and expect more punches thrown by both sides,' he said. In 2022, President Joe Biden began curbing the sale of advanced semiconductors from chipmakers like Nvidia to China over concerns that they could power its military. The controls have subsequently expanded to include restrictions on sales of chipmaking equipment, high-bandwidth memory chips and products manufactured outside the US using American technology in order to limit China's technological progress. Before Biden stepped down, his administration also broadened the geographic scope of those restrictions, unveiling a global export framework that subjects countries to different restrictions in a bid to prevent advanced AI technology from getting into the hands of adversaries like China through third countries. The new rules are expected to take effect next month. The series of restrictions have come under repeated criticism from US tech giants, particularly Nvidia, which says they will undercut US competitiveness. Ned Finkle, Nvidia's vice president of government affairs, wrote in a company blog post that the adoption of AI around the world fuels growth and opportunity for industries at home and abroad. But the restrictions put that global progress 'in jeopardy' and threatened to 'derail innovation and economic growth worldwide,' he said. Sign in to access your portfolio
Yahoo
08-04-2025
- Business
- Yahoo
Stocks closed mixed in most volatile session since the pandemic as Wall Street is ‘starting to find a bottom'
President Donald Trump's announcement of sweeping 'reciprocal tariffs' caught investors completely off-guard last week, but news of negotiations and an erroneous report about a 90-day pause might have given traders some hope. Meanwhile, hedge funds may have supported share prices as they covered their short positions. Markets are gyrating like it's 2020 all over again as investors continue to reckon with President Donald Trump's sweeping 'reciprocal tariffs,' resulting in Wall Street's most volatile session since the onset of the COVID-19 pandemic. Stocks initially fell further Monday before some Big Tech names led a measured recovery. The S&P 500 plunged into bear market territory to start the day, dropping 20% from the index's mid-February high, before erasing most of those losses to close down 0.23% for the session. The tech-heavy Nasdaq Composite followed a similar pattern, finishing with a 0.1% gain, while the Dow Jones fell about 350 points after ending last week with back-to-back losses of 1,500 points or more for the first time in its history. Markets simply weren't prepared for the protectionist measures Trump unveiled in the White House Rose Garden on Wednesday, said Jay Hatfield, the CEO of Infrastructure Capital Advisors. A blanket 10% tariff went into effect on Saturday, but most imports are set to be taxed much higher if those goods come from countries that have trade deficits with the U.S. 'What we call the 'chart of death' was completely unexpected,' said Hatfield, who manages ETFs and a series of hedge funds. However, Hatfield noted stocks didn't do a straight nosedive Monday as administration officials claimed more than 50 countries have called the White House to negotiate, even if reports of a 90-day tariff pause proved to be erroneous. When the S&P moved below 5,000, just over a month after surging above the 6,100 mark, it triggered a natural support level for the index, he said. 'We're starting to find a bottom,' Hatfield said. 'But that doesn't mean the bottom is not 4,800 or 4,600.' Ironically, share prices might have also gotten a boost because uncertainty remains high. The CBOE Volatility Index, or VIX, briefly moved above 50 several times throughout the session. Popularly known as Wall Street's 'fear gauge,' the index is derived from the prices of S&P 500 options and is experiencing its highest sustained spike since the pandemic. Hatfield said this heightened volatility signals hedge funds have, fittingly, ensured they are well hedged by buying puts, or options contracts that give investors the right to sell an underlying asset—in this case, the S&P 500 futures contracts—at a predetermined price. Exercising those options is profitable when the value of the index drops below the option's 'strike price.' When volatility is high, however, traders have incentive to unwind these positions to ensure they make money before stocks possibly rebound. 'It's actually one good thing about hedge funds,' Hatfield said. 'They are the ones doing the buying that causes the market to stabilize.' For example, Hatfield's small hedge fund loaded up on S&P 500 puts Friday morning before liquidating them on Monday, which he could do because his long exposure to the index was limited. 'If you never cover your shorts,' he said, 'you never make money.' Tariff uncertainty created several winners and losers Monday. Popular chip stocks rallied, with shares of bull market darlings Nvidia and Broadcom jumping 3.5% and 5.4%, respectively. Amazon and Meta also helped lead the way for America's tech giants, with both stocks climbing more than 2%. But Dollar Tree outpaced all those companies as one of the day's biggest winners. About half of the discount chain's products will be subject to tariffs, analysts from Citi said, but the stock rose 8% as they suggested the company could raise prices without much pushback from consumers. For other major names, however, Monday offered little respite. Apple shares have shed nearly a fifth of their value since Wednesday, with the stock declining 3.7% for the session. The iPhone maker relies heavily on China, which has been hit by a 54% tariff that Trump said will see another 50% duty tacked on if Beijing does not withdraw its own retaliatory measures. It's a similar story for Nike, which produces most of its apparel in India and other countries in Southeast Asia, which were also hit with heavy tariffs. Shares of Stellantis, Ford, and other automakers also continued to decline as the industry wrestled with a 25% tariff on all foreign cars and parts. Investors did not necessarily flock to all types of safe haven assets, however. Treasuries sold off as the 10-year yield moved up over 20 basis points to 4.20%, and the price of gold also fell. This story was originally featured on Sign in to access your portfolio
Yahoo
03-04-2025
- Business
- Yahoo
Asian stock markets plummet in aftermath of Trump tariffs announcement
Stock markets across Asia fell on Thursday after US president Donald Trump announced sweeping new tariffs on imports, raising concerns about a potential global trade war and the economic fallout that could follow. Tokyo's Nikkei 225 dropped as much as 4 per cent in early trade before partially recovering to close 2.9 per cent lower at 34,675.97 on Thursday. South Korea's Kospi slipped 1.5 per cent, while Hong Kong's Hang Seng fell 1.4 per cent. The Shanghai Composite dipped slightly by less than 0.1 per cent, and Australia's ASX 200 was down 1.3 per cent. India's GIFT Nifty futures also indicated a weak start, suggesting the Nifty 50 may open lower after the US slapped a 26 per cent duty on Indian goods – one of the steepest among Washington's close trading partners. The sell-off came after Mr Trump imposed a 10 per cent baseline tariff on all imports into the United States and sharply higher duties on several key countries. China faces a combined tariff burden of 64 per cent when new and existing measures are counted, while Japan has been hit with a 24 per cent duty. South Korea was levied 25 per cent, and the European Union 20 per cent. Taiwan and several Southeast Asian countries, including Vietnam and Bangladesh, are also facing steep new import penalties. 'This was the worst-case scenario that the market was expecting,' Jay Hatfield, CEO of Infrastructure Capital Advisors, told Reuters. 'It's enough to potentially send the US into a recession, and that's why the futures are so weak.'
