00:00 Speaker A
US stock futures following this morning following the latest federal reserve meeting where Jerome Powell tried to ease investor concerns on growth and inflation.
00:12 Jerome Powell
Let me say that it is um going to be very difficult to have a precise assessment of how much of inflation is coming from tariffs and from from other and that’s already the case. Markets are pricing in in in break evens some higher inflation over the next year must be related to tariffs. All forecasters have tariff inflation affecting core PCE inflation, core CPI inflation this year without exception. I’m not aware of an exception. We’re well positioned to move in the direction we’ll need to move. I I mean I I don’t know anyone who has a lot of confidence in their forecast.
00:59 Speaker B
Joining us now for more is Yahoo Finance markets reporter Josh Shafer. Josh, let’s just dive into what we just heard from Fed chair Jay Powell there. Tariffs, tariffs, tariffs, right? And I think that’s why equity futures might be down right now. So yesterday we had the rally right post Fed, you had the Nasdaq up almost 1 and a half percent after that meeting, but I think largely as we spoke to strategists on air throughout yesterday afternoon and as strategist sort of piled in with their research notes overnight, the takes seem to be, okay, so the Fed isn’t an issue right now. We don’t think the Fed is basically afraid to cut based on what Jerome Powell said, but what actually started this sell off and what started this sell off was uncertainty, right? We talked about this a lot throughout the beginning part of this week, sort of that tariff uncertainty overhang not being removed. That was your catalyst to sort of unwind the extended valuations that we had. Okay, we got through the Fed meeting. Really, the centerpiece of that Fed meeting yesterday was tariff uncertainty, right? So if I’m an investor coming into this morning, do I really feel any better about the outlook and any less concerned? I don’t really think so, right? And then I know you guys are going to get into economic projections in a minute, but if they’re projecting stickier inflation, slower growth, perhaps a stagflationary environment, there are not a lot of strategists you can talk to that say that’s a good environment for corporate profits, right? And then they’re also projecting growth below 2% for the next two years. We’ve talked through that talking point before too, right? If GDP is below 2%, also not typically a good environment for stocks. So I think there’s sure, maybe they the Fed didn’t have this crazy hawkish lean that would would have made stocks sell off, but I don’t think the story was necessarily changed enough for it to be a pure catalyst to get us back into risk on mode either.
03:58 Speaker C
I thought the word of the day beyond being tariffs and uncertainty was also transitory. It was back in the room. We’ve got the T word back uh much to the chagrin of those of us who really felt that transitory was not what happened with inflation because by the way, it’s still around years later. Uh what does that signal about the Fed’s path forward and where the market might be going? Because I guess if tariffs are going to be a transitory one-time inflationary hit, then maybe stocks aren’t going to continue to sell off as much.
04:48 Josh Shafer
Yeah, right. So if if tariffs are to be considered transitory, right? We’ll stick we’ll stick with the T word here. We’ll keep using it. And I think if that’s the base case, which economists have argued the Fed could take that view, right? It’s a one-time price pressure, then the Fed could probably look through that. And when you look at sort of how they see inflation pacing out over the next couple years, they see this one-time push up, but inflation falling in 2026, inflation falling in 2027. So that sort of gives you the base case for that’s why they could cut because if it’s transitory, that would mean that it has nothing really to do necessarily with policy, right? And so they can still keep cutting because those price pressures are going to come, they’re going to pass through and then you get to the other side and that’s why you end up still having Fed cuts overall. I think the final point here guys that sort of is interesting to me is we’re still sitting at two rate cuts projected for the year, right? And we were still we entered the we entered yesterday projecting two rate cuts for the year. So I don’t think that much changed from an investor perspective of what people expect the Fed to do this year. I think it was a lot of, I don’t know, maybe we’ll learn a little bit more in six weeks when they meet again.
06:53 Speaker C
He literally said, well, I don’t know, why don’t you guys do the dot plot. We don’t know. We’re just guessing as much as everybody else. We should still do our own Yahoo Finance bracket for the dot plot. Josh, thank you so much. As always, appreciate it.