Program: Cavuto Coast to Coast
Station: Fox News Channel
DAVID ASMAN: But first, inflation and inflation, is it permanent or transitory? That is the question the Fed is debating as we speak right now. We’ll hear about their decisions coming up. But markets are on edge, waiting to hear whether the central bank will pull back on its money printing sprint. Our all star panel is here, Kingsview Asset Management CIO Scott Martin, Fox Business correspondent Susan Li, and Through the Cycle, president and founder John Lonski. A great panel. Thank you all for being here. So, Susan, what are the markets expecting? They seem not to not to be too certain about what’s going to come up.
SUSAN LI: Yeah, well, what does transitory mean? Because before you’ve heard the Federal Reserve say maybe two to three months and now is it for the rest of this year? We know that inflation has run hot now for the past three months. You have a five percent increase in prices, consumer prices, the fastest, two thousand eight. So I guess the discussion is when do they take away the punch? Bowl is a twenty, twenty two. And then do you get the first interest rate increase in twenty, twenty three? I think the markets are passing and looking for some sort of wording from Jay Powell later on today.
ASMAN: Scott, which way. You bet.
SCOTT MARTIN: Expecting not much, David, actually, I think the real news is going to come out in the Jackson Hole meeting in a few weeks here, but I’ll tell you what else is going on here, David, is you talk about this transitory notion of inflation. Susan’s right. The setup is exactly correct. It was a couple of months and now it’s several months. And as long as they keep using that word along the line, I guess it’s still transitory. And I’ll tell you, interest rate projections are hard to handicap right now because we’ve got softening economic growth coming down the pike here in Q4 and Q1 of next year, which probably puts off the rate hike at least another six months into two thousand twenty two.
ASMAN: Well, John, earnings, of course, are looking in the rearview mirror, but we have these spectacular earnings yesterday, almost 60 billion dollars between three companies, Microsoft, Apple and Google or Alphabet, as it’s now called. So you had these spectacular earnings from the high tech companies. You still have a lot of demand out there. There’s this pent up demand. People with a lot of cash, they want to spend it. But you have a labor shortage. You have you have inflation. You have certain pushbacks on supply, supply chain, mess ups and and strangulations going on. So. So what’s your bet on what the economy is going to be doing in the months to come?
JOHN LONSKI: I think the economy’s going to slow down. We have had a number of downward revisions for predictions of economic growth during the second half of this year. You know, we had, for instance, GDP now by the Atlanta Fed earlier. They thought that the second quarter and we’re going to get a report tomorrow on second quarter GDP, the second quarter GDP growing by something faster than 10 percent. Since then, that forecast has been lowered to seven point four percent. Basically, David, what is happening is that price inflation, higher prices are beginning to take their toll of household expenditures. The best example, housing. New home sales in June were a disaster, down nearly seven percent monthly, down 19 percent from a year ago, despite still very low interest rates. I think the Fed is quickly finding that it’s going to be between a rock and a hard place. If it hikes rates to try to cool inflation, it will hurt the economy. If it does nothing faster, price inflation will lead to pullbacks by consumer spending.
ASMAN: But, Susan, they’re going to have to rewrite their mandates, if that’s true, because they have two major mandates. One is for price stability. As we talked about, there isn’t much price stability right now. Inflation is going up. There are even signs that it could be double digit next year if if that’s conceivable that we could go back to the late 70s. And the second mandate is on unemployment. Well, we have nine point three million unfilled jobs. Yes. They might not be paying as much as the government is for unemployment benefits. But the point is we don’t have an unemployment problem right now. So is the government just getting in the way
LI: And finding the workers to fill those jobs? And they also say that there’s a Fed put out there being that there’s a third mandate, which is to protect the stock markets, because a lot of people on Wall Street says that if we see the stock market fall 10 percent, you bet the Fed will step in at some point, as we saw in the depths of March last year, which they should have done. But, yeah, there are concerns that right now maybe the economy is running too hot. There are a lot of jobs out there, not the right people to fill it. And maybe it is time to take away the punchbowl. Now, if you take away stimulus, it doesn’t mean you can’t be reinstated once you see some sort of slowdown or some sort of hiccups in the economy.
ASMAN: But but but right now and again, Scott, it has to be the last word. I’m sorry, John. We’ll get back to you. We’ll start with you the next round. But but the fact is, is that we have the government just getting in the way of this amazing emergence from from all of the lockdown’s, which was creating all this spectacular growth. I’m wondering if the government is causing more problems than they’re solving right now
MARTIN: For sure, David. And creating new problems every day. It’s the classic case of government knows best. Government knows how to do best with your money, not you, yourself, the business owner or the spender. And that’s really where I think we’re at this crossroads here, because the Fed has done what they needed to do. The government has gotten in the way and created more inflationary pressure. And they seem to keep doing that with some of these crazy spending packages that have yet to be passed through Congress.
ASMAN: A panel this good should not be missed in their second round, which is coming up later in the hour. Good to see you guys.
Money Control interviews Paul Nolte, SVP & Sr. Portfolio Manager
Paul Nolte discusses strained supply lines, the timeline for rebuilding them, and what that might mean for inflation.
Kingsview CIO Scott Martin discusses how the stimulus is baked into the market, and why Chairman Powell Chairman Powell will need to stay on the path he’s on for the time being.
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: You know, this is a big what if, but what if this whole thing fails? What if it goes kaput? What if they don’t get their differences reconciled and that one point nine trillion-dollar stimulus plan, the sort of the battle holy grail for this new administration, what if it just doesn’t happen? What would be the fallout? Scott Martin, Kingsview Asset Management. Susan Li, our superstar here at Fox Business. You know, I got to wonder, Susan, since the markets have factored in that it’s going to happen. It’s unlikely that it doesn’t, but it could. I mean, there were already a number of Republicans who’ve got at least a couple of Democrats with them worried about the price tag, worried about jamming in some of these other features. So then what?
SUSAN LI: Yeah, what a tangled web we weave, right. Thought you’d like that – that was for you Neil. So, yes, I think the markets are anticipating some sort of stimulus, whether it’s one point nine trillion or just a few billion. I think they pretty much said that you have to follow the money, and the money is telling you that there’s going to be money printing coming from either the White House and the government administration or from the Federal Reserve. As you’ve heard two days now with Jerome Powell, the Federal Reserve chair in front of Congress. So I think people are anticipating something. And don’t forget, you still have another trillion-dollar package infrastructure that will be also discussed and pushed for apparently already by the White House. So I think Wall Street needs something.
CAVUTO: If they don’t get it, Scott, of course, Mitt Romney has a column today ducking and bemoaning about all the issues that others are ignoring, that a lot of this is backloaded. A lot of this spending seven hundred, eight hundred billion dollars worth is meant for twenty twenty-two. So this idea that we urgently need it like now, now, now isn’t out there. So, again, I’ll ask you what I asked Susan. If this doesn’t come to be because the trip-ups on these issues, how will the market respond?
SCOTT MARTIN: It’ll feel a lot more than just a simple insect bite, Neil, where you can put some cortisone on it and take care of it in a few days, because if you want any evidence of that, I’ll tell you. Look, yesterday, yesterday, the Nasdaq is down about three and a half percent in the morning. Fed Chairman Powell comes out and starts talking about, don’t worry about inflation. We’re here for the markets. Unemployment is still terrible, et cetera, et cetera. Meaning we’ll be there for you, Mr. or Mrs. Market, as well as his partner in crime, Super Dove, Janet Yellen, treasury secretary, who’s been out talking about more stimulus, more trillions, wherever we can find it, print it, sell it and send it out. So the reality is, Neil, this is kind of baked in the markets to a degree, I believe. But the more it’s talked about in, the more becomes a reality, more the market loves it. The scary thing I will tell you, though, is even if Chairman Powell wants to get out of this situation and say, hey, if data changes, maybe we’ll change our role or slow our roll, the markets freak out. So he’s got to stay in the path he is on for now at least.
CAVUTO: Do you think, Susan, that that’s another superhero analogy? If you think about it, he’s in that role, Chairman Powell, of being like the superhero is going to guard and protect the markets. And his stance over the last two days is where I’ve got your back, does he?
LI: Yeah, that’s exactly what you’ve heard. You’ve heard all the right things being that we’re going to stay low, lower for longer and continue buying more than one hundred billion dollars of bonds each and every month. And what I took away yesterday was at six percent GDP forecast that he made for twenty twenty-one, saying that the recovery in the back half of this year is going to be stronger than the first half. And that will be, by the way, pushed through by the Federal Reserve or the White House and the government printing more money. There will be trillions of dollars there that will liquidate the market. And as we say that, you have to follow the money and watch growth managers. And what the money is telling you is that it’s still going into stock markets that’s liquify. So I use the wrong verb there. But you know what I mean? Meaning that you have to follow where the money is going and it’s going into stock markets right now and risk assets.
CAVUTO: So real quickly, Scott, do you see that changing? I mean, give me sort of your lay of the land for at least the next few weeks here.
MARTIN: No. And we’re cautious as far as bonds go, Neil. So Susan’s right. Money goes into stocks as a result. It goes into Bitcoin, it goes into gold, which are things that appreciate when there’s so much Fed printing. And I love the numbers. Susan threw out six percent GDP growth. We’ve got an improving, improving economic picture, yet Fed funds rate at zero and the Fed’s buying one hundred billion a month. Hey, why not start the party and keep it going?
LI: And by the way, six percent, just my follow up on that, Neil, six percent is almost three times the average for the GDP growth that we’ve seen over the past ten years. So that’s a lot. That’s a big bet. That’s your V shape recovery right there.
CAVUTO: But do you think we’re coming from awful levels, right? So, yes, it is good. I’m not minimizing that. But again, you know, it’s coming from depressed levels, but we’ll see. Guys, thank you both very, very much.
Reuters interviews Paul Nolte, SVP & Sr. Portfolio Manager
Paul Nolte weighs in on Fed Chair Jerome Powell, and says he’s hitting expectations, keeping interest rates low and monetary policy relatively loose.