By coinnews 
00:00 Speaker A
Futures mixed this morning. Coming off a day of losses following Fed chair, Jay Powell’s warning on the impacts of President Trump’s trade policy, saying it could be inflationary with potential of a so-called fed put seemingly dead in the water. Are markets prepared for higher inflation or even a possible recession? Joining us now, we’ve got Yahoo! Finance’s Josh Shafer. So what is the calculus that’s being run around this after the Fed’s commentary yesterday?
00:29 Josh Shafer
Yeah, Brad. So I’ve sort of been asking equity strategists this question all week, because essentially in the economics community, recession risks are rising, right? Whether someone has a recession call or they don’t, they’re certainly arguing that the risks to a recession are rising. So I’ve been asking strategists essentially, are we priced for that in the equity market at this point? And we did a little bit of a work with that, taking a look at a chart here that we made. Just looking at large drawdowns for the S&P 500. So what you’re looking at in green there would be the max drawdown seen from the index in years that the economy has been in recession. Notably, I would point out those green bars are significantly lower than the 18.9% drawdown that you’ve seen in the S&P 500 thus far, essentially arguing that just using a little bit of history, normally markets would fall further than we’ve seen at this point, if we are indeed headed for recession. And I think that’s largely guys what you’ve been hearing from strategists to I’ve speaking to City’s group headed. They recently lowered their S&P 500 target to 5800, which would be up about 7% from where we are now or 8%. But notably, in that call is not a recession, right? So it’s essentially what strategists and economists are both landing on at this point is they want this trade war to de-escalate. They want the tariffs to come lower. If that happens, then maybe there’s a path where there’s not a recession, maybe there’s a path where the S&P 500 can move higher. If we stay in this uncertain period for too long, a lot of people are arguing the economy likely tips in recession. And perhaps there’s more downside for the equity market at this.
02:21 Speaker A
And you were so smart to flag that the Powell commentary was going to be critical yesterday, Josh. And it was interesting hearing him not use the word transitory. And also, from from my understanding, sounded a little bit more negative on the outlook, even though this is the first time we’ve heard him speak since we got news of the 90 days for negotiations. That was an indication to me that maybe those negotiations that we’re hearing the president speak about this morning with Mexico, with Japan, are not going to be enough to potentially stop this train.
02:53 Josh Shafer
Yeah, well, I I think there’s a difference between sort of how perhaps the central bank looks at what this uncertainty does and perhaps what the administration looks, right? But in the economics community, a lot of folks would argue that the uncertainty you’re creating right now just spins and spirals. And once you have sort of that downside spiral, there’s not a lot of ways to really save that, right? And one of them would maybe be if the Fed came in and cut rates. And I think Powell made that rather clear yesterday that there’s not a clear path for them to be cutting rates soon. And that was just not what the market wanted to hear net net, right? And so when you think about sort of the two potential puts that are out there, the two policy arms that could come in and help the market right now, whether it be the administration or the Fed, both of them are sort of, as we know from this morning from Trump’s posts, right? They’re sort of saying they’re not coming, right? They both of them maybe want the other one to come, but that help is not coming to the market at this point.
04:01 Speaker A
And so with that in mind, how are you hearing strategists increasingly talk about what their own projections, not just for the end of the year, but perhaps more more immediately, this earning season is starting to look like as well?
04:18 Josh Shafer
Yeah, Brad. I mean, I think the big issue right now, you saw it yesterday with what came out for NVIDIA, right? It’s just this uncertainty coming from the administration, whether it be specifically tariffs or how they’re putting in different legislations to challenge companies and challenge their shipments out to China, right? Using NVIDIA as an example, uncertainty is just the word right now. And until that really changes, I don’t think a lot of people feel that confident about what’s going on in the market. I mean, I was talking to one strategist who said their S&P 500 EPS range right now is one of the largest they’ve ever had, right? Because they can you go from a range of maybe $220 in S&P 500 earnings per share to maybe 270, right? Because you’re talking about just a wide swath of tariffs. We don’t know where it actually lands. So at least in the near term, you don’t really know enough.
05:27 Speaker A
That’s how you get a united coming out with two different guidance. United came out with two very different guidance as Brad. One of them was okay, and one of them was really not that great, right? And so when you look at that, it’s just like, what do you actually do with that as an investor? I think people are struggling with that. And of course, the advice continues to be find a company that you feel confident will still be a large part of the American culture in 5 to 10 years, regardless of tariffs, right? That’s sort of the prevailing take, but in the immediate term,
06:09 Josh Shafer
I don’t know. Maybe we’ll get some clarity. I’m rooting for it.
06:14 Speaker A
In the immediate term, uh, looks like tech is up. So I guess immediate term, okay, for this exact second. Yeah, exactly, exactly. Josh, thank you so much. Really appreciate it.