Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1. Markets Last Week
US Indices:
- Dow up 2.3%; SPX up 1.7%; RSP up 2.5%; NDX up 1.5%; SMH up 1.9%; RUT up 3.5%; MDY up 2.8%; XLU 63 bps;
Mega Caps:
- AAPL up 6.1%; AMZN up 5 bps; GOOGL up 56 bps; META down 2%; MSFT up 58 bps; NFLX down 2%; NVDA up 1%; MU down 2%;
Financials:
- BAC up 3.9%; C up 5.2%; GS up 4.7%; JPM up 2.9%; KRE up 6.4%; EUFN up 57 bps; SCHW up 1.7%; APO up 1.1%; BX up 2.6%; KKR up 3.2%;
Dollar was down 11 bps on UUP & down 15 bps on DXY:
- Gold up 1.9%; GDX up 4.3%; Silver up 2.6%; Copper up 77 bps; CLF up 18.7%; FCX up 4.4%; MOS up 5.6%; Oil up 2.7%; Brent up 1.8%; OIH up 5.3%;
International Stocks:
- EEM up 1.4%; FXI down 1.4%; KWEB down 2.8%; EWZ up 4.2%; EWY up 2.8%; EWG up 38 bps; INDA down 13 bps; INDY up 2%; EPI up 13 bps; SMIN up 1.2%;
Fixed Income:
- 30-year Treasury yield up 2.6 bps on the week; 20-yr yield up 3 bps; 10-yr up 7.1 bps; 7-yr up 9.7 bps; 5-yr up 11.7 bps; 3-yr up 13.3 bps; 2-yr up 14.7 bps; 1-yr up 27 bps;
- TLT down 59 bps; EDV down 1.3%; ZROZ down 89 bps; HYG up 7 bps; JNK up 4 bps; EMB up 47 bps; leveraged DPG down 8 bps; leveraged UTG up 47 bps;
Financials were the stars for the 2nd straight week. Stephanie Link told CNBC’s Becky Quick on Monday morning that
- “financials was her favorite sector at this moment. She said valuations were attractive; stress tests came out on previous Friday much better than expected; deregulation – relaxing the SLR, Basel 3 end game. She added the new news that SEC is working with the exchanges to lower costs on companies wanting to come to the market. You are going to see a lot more companies in to the market; see better M&A“.
David Zervos of Jeffries also said on Monday that “Financials have a lot of room to run“. Besides deal flow, he also highlighted the de-regulation story with SLR, what the Fed’s doing & added that the Administration is keen on wrestling some of the regulatory purview back into the Administration’s area. He said “they really want to see activity & they are going to get it...”
And David Zervos made an emphatic statement saying “I think equities are going to have a double-digit second half“. He added:
- “I think we are in a very exciting place – this administration has some pretty big wins in the last 5-10 days; the market is adjusting to that; the market likes what it sees on trade deals; the market likes what it sees in the tax cut & jobs Act; the market likes what it sees on de-regulation; the market is telling you that the cross-hairs are next getting set on the Federal Reserve and the next tail-wind for markets is probably coming from expectations of rate-cuts into 2026...”
When CNBC’s Frank Holland asked Zervos about Fed’s concerns about potential stagflation, Zervos answered with the best line of this week:
- “… a lot of folks at the Fed around the FOMC table have gotten themselves very twisted up on the tariffs story; they are reading textbooks; they are not reading markets; and the markets are telling you that people do not see significant changes in inflation expectations based on tariffs; you look at the TIPS market, you look at some of the data & its all telling you that this has a very temporary if any impact at all… “
And Zervos reiterated the basic story that has driven the market up since April:
- “… its really wonderful news that the market is pricing in some of the stagflation; I think positioning is absolutely terrible, particularly after April & May; a lot of people are going to be stopped back into a much more goldilocks outcome … ; I like that people in the market have gotten themselves twisted up because that just means they have to climb the wall of worry & back into trades that we have been recommending at Jeffries”
2. Payrolls Report, Economy & Fed
Once again, the expectations about jobs added were wrong. The Treasury market was more bearish than necessary and saw a small sell-off with a stronger than expected jobs added number. The surprise to us was bearish commentary from wall street honcho Rebecca Patterson on CNBC on Thursday afternoon. She said:
- “if you go under the hood of the Jobs report, it is not as good as the headline; we only saw 74,000 private sector jobs added; that’s the slowest job growth so far this year. Less than half the industries reported job growth; …. if you look at the cyclical part of the economy, the labor market is continuing to slow; … we are going to have a significantly slower economy in the second half of this year“
Despite her own perceptions about the economy, Ms. Patterson dismissed the chances of a rate cut saying she doesn’t see any evidence that a rate cut is required. Even a September rate cut is a question mark, she added. CNBC’s Morgan Always Sunshine Brennan was happy about Ms. Patterson’s “conviction” but sensible Jon Fortt asked a relevant question about “those who have been struggling to find employment … which got worse in this Jobs report”
BlackRock’s Rick Rieder drew a more pointed distinction between the Service-oriented sector & the Housing sector, the largest asset owned by the average American. He said the service sector is not sensitive to interest rates because most companies in that sector don’t borrow for Capex; they do it with their free cash flow and that Housing is the one sector that is “incredibly sensitive to interest rates“. And he added:
- “We have a housing problem in the US economy – not enough inventory. I have said this before – Fed brings interest rates down, you actually reduce inflation; today home builders are subsidizing mortgages; you can’t sell houses until you subsidize that mortgage rate; so they don’t build enough houses; inventory stays too low; My view being we have to get that mortgage rate down & incentivize people to build houses; if you cut rates, you are NOT going to increase inflation, actually you are going to reduce it; “
- “Listen I think you have a bit of a room to move rates down. I am in the 2-rate cuts camp. I think they can do it & I don’t think it will be debilitating” .
Rieder is gently alluding to the political reality unfolding in America. Nothing is more important to the majority of America than housing. And housing today is unaffordable, especially for the young & youngish Americans. No one at CNBC is discussing the reality that the white college-educated youth in NYC voted for Zofran Mamdani not because of his crazy socialist views but because of his focus on Unaffordability.
We think Friday’s strong on the surface Jobs Report was bad luck for Jay Powell. Had the number been much weaker, then Powell could have had the opportunity to lower rates now and escape the noose in which he finds himself. What if Rebecca usually sunshine Patterson is right and the economy slows down significantly in the second half of the year? Powell could then find himself & his FOMC marooned in the middle of an ocean without an oar.
Even after Friday’s big up move in the belly of the Treasury curve, only the 30-yr & 20-yr rates are ABOVE the overnight Fed Funds Rate. Even the 10-year is a bit below the 4.375% mid point of the Fed Funds range. This is madness & yet the Fed keeps babbling about their fears of inflation arising from the so-called tariffs!
If the economy slows down “significantly” or even modestly & the Jobs picture darkens, whom can & will President Trump blame? The Fed can mistakenly take some solace in the support they have from CNBC-hosted Wall Street Economists. They should notice the big statement this week from Treasury Secretary Bessent – “I listen to the financial markets, not Wall Street Economists“.
In contrast, what does the Fed-lobby keep talking about? Listen to the unbridled arrogance from former Fed guy Richard Fisher in his lecture to CNBC’s Santoli:
Fisher extolled the virtues of the old battle against President Lynden Johnson for browbeating his Fed chair William McChesney Martin. Jr. and against the next Fed Chair Arthur Burns for not resisting next two Presidents.
Sadly, no one has taught Mr. Fisher about the dangers of continuing to fight the last big war decades ago. He doesn’t see today is very different than 1960s & 1970s. The Powell-Fisher faction keeps talking about Paul Volcker & telling people that the “Fed is stymied here” & that they would like to “get more clarity, more understanding“. They ignore the reality that, virtually in every profession, you have to make decisions without enough clarity, without enough understanding.
Mr. Fisher forgets that absolute clarity & perceived absolute understanding among decision makers is extremely dangerous. Recall the absolute clarity & the absolute understanding the French Army strategists had about what the Germans would do in 1939. So they built the huge & enormously expensive Maginot barrier. The German Blitzkrieg conquered France in a week by doing something completely different – using fast moving tanks to bypass the Maginot line.
Going back to Fisher & his hero-worship of Paul Volcker, notice that no one in the Fed-lobby, not even Richard Fisher, ever talks about Marriner Eccles, the man who virtually wrote the Central Banking Act of 1935 & who served as the First Fed Chair from 1935 to 1948 in probably the most uncertain time since the US Civil War. Did Chairman Eccles ever cry & moan about not having enough clarity or understanding during the Great Depression & the Second World War?
Guess Richard Fisher doesn’t talk about Fed Chairman Eccles because that great man curtailed his own ego and worked with the then Treasury Secretary & President FDR to steer the US economy to a safe landing! For our little money, we would absolutely take Fed Chairman Eccles over the over-hyped Volcker today.
Why can’t Chair Powell & his un-clear, un-understanding gang lower the Federal Funds rate to 4% at the July meeting as an insurance against steeper than expected slowing of the US economy? If that proves wrong, the Powell Fed can bring the rate back to where it is now saying the insurance was not needed. At least that might give some comfort to house-poor Americans that the Fed is trying to help them.
That is no different than slowing down a little or speeding up a little while driving when traffic conditions demand it? So sorry, quite possibly Chair Powell & his FOMC members don’t drive themselves because they are always driven by uniformed chauffeurs. So they wouldn’t know or get our simple analogy.
Forgive us but we were appalled by the arrogant tone & content of Richard Fisher’s diatribe above. But ask yourselves – if you were housing-poor & afflicted with affordability problems, whom would you rather choose – the arrogant Jay Powell -Richard Fisher-Marie Antoinette faction or the Zofran Mamdani crazy socialist but focused on housing-affordability faction?
If left to us, we would get rid of the entire Fed-gang & put our trust in the Treasury market – the largest & most liquid Bond market in the world.
PS: Perhaps Mr. Fisher is not entirely bad after all. Notice that he is willing to let Mr. Scott Bessent replace Mr. Jay Powell.
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