Closing Bell - Closing Bell: 6/18/25

Episode Date: June 18, 2025

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Scott Wobner, live from Post9, right here at the New York Stock Exchange, as usual. That was the Fed chair, of course, following a meeting in which the Federal Reserve made no changes to interest rates, but the outlook was always going to be the most important part of what happened today, as you know.

The Fed did increase its inflation outlook. It did cut its growth forecast. A more stagflationary outlook, you could say, steps down for the economy and some steps up for inflation. He did say still that the economy continues to expand at a solid pace even with all of the uncertainty caused by tariffs. Very importantly seven members now calling for no rate cuts this year that's up from four at the last projection in March.

Chair Powell saying the Fed is quote well positioned to wait and see what happens both on the tariff and employment front. Markets very interesting story. Green right after the statement, perhaps because the markets like well okay I'd rather have a strong economy than rate cuts. But at about let's say 252, 253 you did have some very interesting moves in the market. You had stocks sell off, you had bonds move up, perhaps because of this line. We expect a meaningful amount of inflation, the Fed chair said, to arrive in coming months

and need to take that into account. We take all of that into account as we welcome in Jeffrey Gundlach. He's the CEO, CIO, and founder founder of double line capital good to see you it's always great to have you on these Fed days Jeffrey what was your biggest takeaway from what you heard from the chair it seemed like kind of a repeat of the last press conference except I think his messaging was a little crisper this time around last time it was sort of like, we don't know anything, which doesn't sound very good. And this time it was sort of wait and see. And we're getting to a point, I've talked about this at the

meetings all year, where we started the year in January with the Fed saying, we're in a great place, because everything was kind of going their way. And now with the adjustments to the SEP in March and now today, they're incrementally moving in the wrong direction. Inflation has come down, but as you just referenced, Jay Powell knows, just like everybody I think knows, that there's upside risk to inflation numbers. And meanwhile, the unemployment rate, while it's pretty well contained, there's some very worthwhile, not high frequency, but long term indicators that are worrisome on an unemployment rate going higher.

On the inflation side, you basically know that the base effects, meaning the numbers that are rolling off from a year ago are very low numbers. On the CPI, there's a 0 and a 0.1 rolling off the next two months. So those will probably be replaced with numbers that are higher than that. And so the Fed knows the inflation rate is going to be probably worse at the next meeting, and perhaps also at year end. So they upgraded their inflation forecast.

The three things, you got the base effect I just said, you also have oil, which is up, obviously, it could be a short-term fight based on tensions, but it's up over $10, it's up 20%. And every $10, the crude oil goes up, if it's sustained, adds about 0.4 to the headline CPI. So we've got the base effect, probably going to add a couple of tenths to CPI. We've got crude oil, if it sticks, maybe adding four tenths between now and year end. And then you've got the tariffs, of course, which are very unknown.

And one thing that's clear from Paul's answers to the questions is he thinks tariffs are inflationary. There's all kinds of arguments that it might slow down, destroy demand, slow down the economy and all that. But it's basically he believes it's inflationary, someone has to pay it. And that might mean that margins could be incrementally lowered. And of course, we've seen earnings estimates go down moderately for this year. So the mandate keeps getting, the dual mandate keeps running into increasing tensions.

And at one point, that's why I think he said wait and see. At some point, one of these dual mandates is going to win out over the other one. And I think, and they're going to have to pick one. I think they will pick the fighting the rise in unemployment more than fighting the rise in inflation. It seems like we're getting prepared for higher inflation numbers that are very likely to happen. He talks about maybe there's a one-time effect from tariffs that dissipates in 2026, but maybe it won't.

And so we'll have to see what happens with that. But in the bond market, what we've seen is a steepening yield curve. We've seen long rates going up substantially more than short-term interest rates, which is the bond market's way, in my view, of taking sides and saying, it looks to me like they're going to say, we're going to cut rates, even though inflation is probably higher than 3% between now and year end. So if the unemployment rate goes up, they're probably going to be more likely to cut rates, even if the inflation rate is at 3.5%.

The two indicators that I'm really focusing on for the employment rate is the yield curve, of course, has steeped and de-inverted. The indicator that I think is the most valuable is the one-year moving average of the 2s, 10s yield curve, because when it goes positive on a 12-month moving average basis, for the past 35 years, that's been right at the front end of a recession. And it is above now its 12-month moving average. So we're going to monitor that very carefully in the months ahead. The other thing is the U3 unemployment rate, which is at 4.2% now, versus its 36-month or three-year moving average.

And when that crosses above its three-year moving average, going back all the way to 1990, so 35 years, you've seen that right when it crosses above, you're at the front end of a recession. And that has already happened, but it's not yet, it's not accelerating. In the past, when it comes to what's 36 a month moving average, it accelerates. That has not happened yet. And so what we're watching very carefully is the continuing claims, which have been rising for the last two years, and they foreshadowed the moderate increase we've had so far in the U3 unemployment rate, but continuing claims keep rising.

So we're going to be watching that on a real time basis, because if that continues to move higher, it strongly suggests to me the unemployment rate will be moving higher. Also, one thing I want to point out is poor Jimmy Powell has been dealing with five years of incredibly unusual data, the money printing and then the surge in the supply chain problems and then the reversal of all of that. And now we have these tariffs and now we have all these tensions in the Middle East affecting the most important commodity for inflation, which is oil. So I understand his wait and see approach,

but at the end of the day, I'm just trying to divine the meaning of the bond market. I think we believe that they're going to be more likely to cut interest rates even against a rising CPI or PCE as we move forward through the end of this year into 2026. And so I believe that this yield curve steepening is a trend that has been in place for a while now.

And I think it's going to continue with the Fed likely to keep pressure lower on short term interest rates. I do think it's interesting that there is no talk whatsoever of a hike. I thought there were some questions in the Q&A that were relevant to that point. But it's clear that everyone on the Fed thinks that the next move in rates is lower. And that further corroborates my idea that ultimately, when the mandate comes into tension, they're going to look for the to improve employment rather than to fight inflation, as long as it's moderately above 3 percent only.

So that's kind of my takeaway for the meeting. Not a lot of new information, but it is a very, very long moving parts going on with economic data and tariffs and war. I mean, what else can you throw into that equation other than some sort of natural disaster? It's clear that the chair thinks that the president's tariffs have a decent chance of wrecking both sides of their mandate by pushing inflation up and causing you know the labor market to deteriorate at some point. It's just impossible to know at this point which has the potential of happening first, as you say,

but you obviously have a view on how they would react, one versus the other. It's interesting, when you were with me last time, you did say that the long end was going to continue to rise. On May 7th, the 30 year was 478. We're at 489 now. I think it was pretty interesting when, you know, the Fed chair has talked about inflation as a result of the tariffs being transitory, but that one line really stuck with me and I it moved the market undoubtedly when he said we expect a meaningful amount of inflation to arrive in coming months and need to take that into account. I think

he's saying as a result of all of that we're justified in not knowing what the next move will be because we just don't know what the impact of all this is going to be still. Well I think that's absolutely right. I mean as I said inflation is very likely to go up they know that they don't want to be embarrassed and to be blindsided by what could be a 1% increase in the inflation rate, depending upon what the tariff effect is. Just the oil effect is significant. And like I said, the base effects are also going to be problematic with numbers coming out, probably higher than the ones rolling off. So there's a lot of uncertainty, and the wait and see is right, but it's interesting,

you mentioned 30 years up about 11 basis points since the last Fed meeting, but the whole curve is up basically by 11 basis points. There's been very little movement. I think the wait and see attitude that the Fed is articulating is very similar to what's going on in the bond market. is very similar to what's going on in the bond market. There's been very little volatility in rates. The bond market is also signaling a wait and see attitude. We saw a big drop in risk assets in April, and we saw a great big widening on the spreads of lower credit versus Treasuries, like the high yield index went from 250 basis points over treasuries to 450 basis points over treasuries. That has been almost entirely reversed. Same is true for emerging market debt, which wind out by 200 basis points versus treasuries. If you exclude Venezuela, which

messes up the emerging market spread data because it wasn't in the index and it came into the index and it's very high yielding and so it created distortion on the spread. So if you want to analyze apples to apples, you just look at emerging markets ex Venezuela and they're really all the way back to where they started. So everything has had tremendous volatility, but we're all the way back. And the market is starting to look at stresses in parts of the credit market. One thing that's really kind of weird is that the bank loan market, the CCC bank loan market,

which is the most vulnerable area of the credit market in my view, the spreads on CCC bank loans have actually come in this year, which makes no sense to me, because CCC lenders are paying 425 basis points higher now than they were a few years ago, and the Fed is not cutting rates. And so the pressure on CCC bank loans is starting to mount because they've fully reset up 425 basis points. Some of these companies are paying 10% or 11%, and yet the spreads are in, and yet the defaults are mounting in the CCC sector of the bank loan market.

It's very strange to me that the lower tiers of the bank loan market have improved in terms of their prices versus Treasuries, whereas regular way high yield, the fixed rate stuff, which doesn't have hardly any pressure on it relative to these bank loans, whereas regular way high yield, the fixed rate stuff, which doesn't have hardly any pressure on it relative to these back lows, the triple C high yield market has widened out. So it seems like it should be the opposite to me. But at this point in time, we continue to favor liquidity. We continue to favor avoiding lower tiers of credit,

systematically looking to upgrade. I think now is yet another opportunity to do another tranche of upgrading fractions of the portfolio, because we're right back to where we were pre-April 2nd in terms of markets broadly. Stock markets almost fully recovered. It's actually now about as overvalued as it was at the peak, because we've had earnings being downgraded. And yet, the stock market has largely improved. It's not a little bit from its peaks, but really, the valuation. It's funny, when markets go down, and you go down 10%, 15%, 20%, people in hindsight look back and say, yeah, it was kind of overvalued.

I probably should have stepped aside, but we're right back to those levels now. And not surprisingly, everyone has forgotten about what they thought they learned on the last drawdown. So what makes it good? Go ahead. I was going to say we're 2% from a new high on the S&P.

Let me just break away for a moment, Jeffrey. I'll come right back to you because Steve Leesman's left the room and I do wanna bring him in. A couple things are clear here to me, Steve. Number one, it seems the Fed Chair believes that the tariffs have put both sides of the mandate into question

and they're gonna have to wait and see on how to deal with all of that. And that Powell himself doesn't seem to be a huge fan of these SEPs either. And he revisited the refrain from the last meeting, throwing back at the reporter who asked him the question, what would you write? We'll do the best we can.

Because they just don't know, and he pretty much told you to take it with a grain of salt without using those exact words. Yeah, and by the way, the grain of salt is actually a number in the In the SCP where they talk about the uncertainty and those uncertainty levels around their own forecast They acknowledge to be very high right now. I guess what Jeffrey was talking Scott I remembered a day I was on a boat and I had a east-west swell, a west-to-east wind, and a north-to-south rip. The waters are very turbulent right now.

And it's interesting. Well, first, let's hear what the Fed chair said about the outlook and what might be coming this summer. One of our jobs is to make sure that a one-time increase in inflation doesn't turn into an inflation problem. And, again, that will depend on the size of the effects, how long it takes for them to come in and ultimately on keeping inflation expectations anchored.

So Scott, in something that we were talking about, he did say he expected a meaningful increase in inflation. And that's something I think that's very important for what the market is expecting. And it hadn't seen it, it maybe thought it was out of the woods, but that's not the expectation of the Fed or any of the forecasts that I've been talking about for several weeks now.

What is really interesting, Scott, if you take a look at the changes to the forecast, something is going to not happen there. Here we go. We look, we reduced GDP by three tenths. We raised PCE by three tenths and core PC and we're gonna cut the funds rate essentially by 50 basis points I don't think you're gonna cut the funds rate by 50 basis points if you get a 3.1 percent Core pce And if that GDP number happens, well, I don't know what happens in that case

But I just don't think you're going to get that 50 basis points of cuts if indeed you're going to have that increase in inflation That's why I asked him about scenarios, but he wasn't necessarily willing to give me the details on it Yeah, they it doesn't want to deal in hypotheticals. I think he's made that that case over and over again Steve Thank you very much, Steve Leesman I need to get to aim and Javers now because the pool was in the White House in the oval And there are some headlines coming out of there. Eamonn, what do we know? Scott, this was a president who was very ambivalent-seeming about the prospect of using military force

in Iran. He was holding a photo op, really, with the Juventus soccer team, which is in D.C. today for a game. And while he was there, he talked to reporters, and he expressed his deep ambivalence about the idea of the U.S. joining the Israelis in the war against Iran, saying that he doesn't want to fight, but sometimes you have to fight, saying that he's been adamant all along that the Iranians cannot be allowed to have a nuclear weapon, saying it's his belief that they were just about a week or so away from getting to a nuclear weapon at the time

the Israelis began their attack and also saying that he's got a meeting coming up in the situation room which he called the war room in about an hour from now Scott so that gives us a little bit more insight into the decision-making process over the White House but this is just from tone of voice, body language, the word choice. You'd have to say this president is deeply ambivalent, Scott, about the prospect of U.S. military action. He said he still hasn't made a final decision. Yeah. Thanks for the update. It's Eamon Javer's for us in Washington. We're back with Jeffrey Gunlock now. And I guess you could say, you know, even these developments, Jeffrey, in the Middle

East are a reason why there's so much uncertainty on how this is all going to play out, what oil prices do from here as you suggested. It's a great unknown. I want to discuss with you what Steve sort of ended on. The idea about the outlook itself. Why the Fed even does it. David Rosenberg yesterday said something on social media and I want to quote from it and I want to have you react to it. He said, I have some advice for the Fed, ditch the dots. In fact, do what many CEOs have been doing in general and pull out of the guidance in the context of the supremely high level of economic uncertainty.

Any numbers this group publishes will be completely meaningless. He is not the only one who has suggested that theme. What are your thoughts on that? I don't have much of a argument with where he's coming from, but I don't see how the dots hurt anything. I mean, yes, there are a lot of uncertainty in them. There's volatility in it.

Nobody can see two years into the future. Jay Paul said that himself. But I like the dots because it gives you a sense of the nuance of how the Fed's thinking and how their interpretation of the data is changing. I don't put a lot of faith in the numbers. I don't think anybody does. But I like the fact they provide context for us to think about. We don't hear a lot of straight talk from the Fed.

They try to do a pretty good job at these news conferences. That's good to see those subtle changes. One thing that Steve said is, who knows about these numbers on the SEP? But I do think it's quite possible that the unemployment rate ends up being higher than what the Fed thinks because of things I talked about earlier. And so I do think that that's going to be the focus as we move forward. We already know with some certainty that inflation is going up. Jay Paul said so himself and fairly strongly. So the real question is what's going to happen with the unemployment rate.

They say it's going up to 4.5. That's a 3.10% increase. If it goes up to 4.7 instead of 4.5, I think the Fed's in cutting mode, almost certainly, regardless of whether the PCE is at 3.1 or 3.3. I think that's what they're gonna favor, but I like having the dots. Oh, it's good to hear your perspective on that. If you think the longer end

and yields are gonna continue to back up, I mean, are we talking 5% on 30 year, the 10 year? Where do you see it peeking out if it does move according to what you think? I have this theory that we are in this market where rates are rising because of the deficit, of course. You know, we're going to hit 37 trillion on the national debt. Maybe, I think it's this week, we're at 36 trillion, 996 billion or something like this,

and it's rising quickly. So that's one of the, but we also have long rates rising all over the place. Even Japan is way above where they used to be. Japan and Germany, interestingly, are now at the same level on their long-term bonds. Of course, that's UK rates have gone up like the United States, US rates are up. A lot of this, I think, has to do with all of these debts and deficits. And so that's a big variable in steepening out the yield curve. And compounding that, just to repeat myself, is that the Fed, I think, is biased to cut rates even though inflation is, by their own estimation, going higher.

Another thing I want to talk about is, in the past, I've talked about foreign stock markets being more attractive than the US stock market. Something very strange has happened this year. If you go back 15 years, there's been 13 corrections in the S&P 500 over the past 15 years. And in the first 12 of them, in every single case, when the S&P corrected down more than 10%, the dollar went up in every single case. And the dollar didn't go up a little. It went up by about 6% or 8%.

In the correction in April, March, April of this year, the dollar went down. And that's the first time that's happened in 15 years. And this is what I've been predicting is that the dollar will go down as you get into periods of fear and weakness in risk assets. That certainly played out in March and April. And yet, the dollar continues to weaken. It's interesting that S&P 500 has improved back almost to the high previously, and the dollar keeps falling, even though rates have been rising.

All of these things are very different from the past, which reinforces my core belief, and I've been stating this for a while, that when we get trouble, the dollar is not going to be a safe haven currency. The dollar will fall as we run into trouble. Now, one robin doesn't make a spring. So the fact this happened in the March-April period corroborates my theory, but it doesn't prove anything yet. I'm quite committed to this theory. Now, you ask what will happen, where can rates go on the long end? I feel that we'll get to a point where we start to have a real buyer strike on long-term 30-year treasuries, just like you have had on long-term JGBs. It might get to the point where there has to be something done about it, because we

have doubled the interest rate on the treasury debts over the past five years. It used to be in the high ones, like 1.8 entering 2020. We're headed towards 4% because all the bonds that are rolling off that had those 50 basis point and 25 basis point coupons, a lot of those are coming due, and they're being refinanced up 400 basis points. So the pressure on the interest expense is going to continue, and it may get to the point where there has to be something done about it. And so one of the things I'm thinking about, I've been avoiding long-term bonds broadly, and that's been the right move because that's been the worst place on the curve. But I think you might get to a point where it becomes uncomfortable, very uncomfortable for the government to be floating debt at what people are willing to buy them at, particularly

if we're in geopolitical turmoil, which hopefully we won't be. But we may see a pivot to a program of controlling long-term interest rates. And if that's the case, you might have one of the hardest decisions in the treasury bond market that we've had since the global financial crisis, where you had to pivot from very, very high quality long-term treasury bonds

into bombed out credit. And it takes a long time for these things to happen, but that you have to make a decision as to when to pull the trigger. There might come a time where they decide that they announce that they're doing quantitative easing. And they're going to focus on trying to get mortgage rates down and 30-year treasury rates down to fight the inter-supense problem.

And you may get an announcement. And if you do, then suddenly, you're going to have a monster rally in long-term treasury bonds. So there's going to have a monster rally in long-term treasury bonds. So there's going to have to be a pivot. I've been talking to you for quite a while about not liking long bonds and liking shorter term or the belly of the curve. And that's been a very good strategy. But at some point, there will be a moment where an announcement could come up and you

might see a 15-point increase in the prices of long-term treasury bonds in like two days or a week, like he saw in the corporate bond market back in 2020, when the Fed announced that or the Treasury Department announced that they were interested in perhaps buying corporate bonds to support the completely frozen credit market in the aftermath of the lockdown. So we have precedence on these things. That's really top of my mind regarding the long bond, avoid presently and look to potentially have to do a fairly large pivot. I know that everybody is not, I don't know anybody that's pounding the table to buy long

term treasury bonds, except maybe Dave Rosenberg, who has been very fond of long-term treasury bonds. I keep telling him I think he's early. But it seems like everybody is avoiding long-term treasury bonds, which exacerbates this problem, because once the trend is in place, as it is, people just think, wait and see, I don't want to commit myself too early. But everybody's been right. It's just like going up in credit entering 2025. That was a popular theme in the bond market. And a lot of people were, some of my big clients were saying,

you know, everybody's talking about these trends that you're talking about. And I've learned that when everybody's on the same side of the boat, you know, it's maybe it's time to switch sides. But that has to be the case. Sometimes the boat, you know, maybe it's time to switch sides. Right. But that hasn't been the case. Sometimes the consensus is right. And I feel like it is right now. Let me squeeze a couple things in before we run out of time. And you commented on the dollar,

and there are hypotheses abound, obviously, about why the dollar has been acting the way it has, which is certainly against historical norms. The flight to safety trade into the world's reserve currency hasn't worked out so well. Some have suggested it's because of the U.S. exceptionalism idea and that trade going out the window because of the way that the White House has maneuvered and managed the whole trade has maneuvered and managed the whole trade issue and some of the other global relationships that it has had for decades which are now changing. How would you assess that? And then I want to ask you one more thing before we go.

Well I don't think I don't think saber rattling or tariff rattling is really helpful. I don't think it encourages foreigners to buy dollar assets. Foreigners have been very willing, downright enthusiastic, almost euphoric about buying dollar assets over the past 18 years or so. Over $25 trillion have come into, been invested into US financial markets more than the US has invested in foreign markets. That's a massive increase. It went from $3 trillion to $28 trillion by one measure.

That may be reversing, and this is part of the underpinning for why I think that the trend of US outperformance is over. And I mean, like over for real, like Europe outperforming. If you're a dollar-based investor, I've been recommending Europe in European currency for dollar-based investors. The index has outperformed the US index by a decent amount, but if you had the currency side of it, if you own it in euros, and you get the currency translation, you are just printing money right now. And that trade, I believe, is just getting started. And it's gotten to the point where even the emerging markets are starting to perform on an index basis. And so I advise dollar-based investors,

don't do this with all your money. But certainly, 10%, 20%, I would take of my equity allocation, and I mean, on a $100 portfolio, I would take $10 or $20 of the $100 portfolio and put it into local currency emerging market funds, whether it's fixed income or equity. I like it on both sides, particularly on the equity side for now, because the volatility is so high on the bond side. The currency adds so much volatility that you're almost in a different asset class when you take currency risk in a bond fund. But when you do it in a stock fund, the stock volatility is so high that the incremental

volatility from the currency is not that big of a force accelerator. So that's kind of how I see it. I really favor non-US markets. I think people should invest in Germany. I think India, perhaps Mexico, I think are good areas to invest with what used to be S&P 500 money. Do you think gold is still going to 4,000?

Oh yeah, oh yeah. It's very high right now, but it's a clear beneficiary of everything that's been going on. It's the one asset class that's really doing well this year. I think the demand for gold is for real. A lot of it's from foreign central banks have reversed all of the selling.

They sold for years, and they sold at low prices, and now they've bought it all back. They're right back to where they were before they started selling it down. Of course, they're buying it back at 2,000 and 3,000, and they sold it at 3,400. But I think that that's going to continue to be a source of buying. I also think that real money, institutional money, not just survivalist lunatics and crazy short-term speculators who used to be the gold market. It's an asset class.

And it's thought to be a storehouse of value for real when we see all of this profligate spending and borrowing in developed countries. There's another reason why I like emerging markets. They don't have the same position that they do in Japan, the United States, and the UK. Do you have any concerns at all about some reporting that the president could possibly name Chair Powell's replacement well in advance of his term ending creating what some have coined a shadow Fed chair? Do you worry about that and wonder what the market

reaction would be? Well, I know what the market reaction would be. It would be a corollary, the same thing as what I talked about quantitative easing. If there was some ultra dove or sycophant that came in there that was just gonna do whatever Trump wanted to, and let's say that he announced the appointment before the end of Powell's term. So you've got this

what people call a shadow Fed chairman. If that shadow Fed chairman would make pronouncements, the minute that he's approved and gets into the chair, that he's going to cut interest rates 200 basis points. That talk like that could really accelerate some of these trends, because people would start to say, I mean, I think it would begin with a rally, unbelievably, in bonds. Even the long bond, I think, would rally on such a statement, although it shouldn't. If such a statement were made, the long bond should go to 6% very quickly, but probably because people have been informed of past patterns in markets that are informed by a secular bull market in long-term Treasuries, which is now a secular bear market in long-term US Treasuries, at

least for the time being. The relationships a lot of people react to in high frequency are not working, just like the one I talked about with the S&P 500 going into a correction and the dollar going down. We're in a different regime right now than we were from 1980 until 2020. That's at the core of my investment philosophy moving forward. And so far, it's been playing out pretty much according to the game plan. So it's going to be one of these environments where right now, there's almost nothing to do.

There's no volatility in the market. Even in the equity market seems to have stalled out, kind of found its way to 6,000, but it doesn't really go above 6,000, doesn't really correct much. But then all of a sudden, we're going to see a lot of volatility. Low volatility is always replaced with high volatility. And the variables that would lend themselves to high volatility seem to be pretty much in place under all these things that we've been talking about with inflation and tariffs and war.

But like I said, what else do you need to cause uncertainty and volatility? It should be coming as we move into the, I'd say probably Labor Day type of period towards the end. Jeffrey enjoyed it as always. Thank you so much for the time. We will see you following the next Federal Reserve meeting. It's Jeffrey Gunlock joining us once again. Take care. We're now in the closing bell market zone CNBC senior market

commentator Mike Santoli with us for these crucial final moments of the trading day. Coinbase and Circle are surging tonight. McKeel has the details there. Mike, you know, good to you first. What do you make of the market's reaction to what the chair said? I think it's probably the dream reaction for Jay Powell himself and for the Fed because they are resolutely noncommittal. They're kind of telling investors, probably for three months you're on your own. What would have to happen for late July, that meeting to be live with a cut is bad stuff, right?

Because you only get one more monthly jobs report, you got five more weekly unemployment claims. It's not gonna happen. Therefore, they're kind of wishing that they don't see an emergency in either direction and we're fine. It leaves investors in a position of rooting for the economy to perform well. You're not gonna root for weakness because it has to be really weak

for them to move right here. I do think it shows you a very high threshold within the dots for doing anything right now. And by the way, if you replace the Fed chair, that Fed chair doesn't have the votes to be cutting much anytime soon, unless you wanna blow up the whole committee structure. So let's not even talk about,

I don't even think investors have to think about that, because I also think the president prefers to have a foil here. Yeah, Taneya, coin and circle making big moves. What's going on? Yeah, that's right, Scott. Big pop in both Coinbase and Circle after the Senate passed its landmark stablecoin legislation,

the Genius Act. Stables have attracted a groundswell of interest in anticipation of regulatory clarity for their ability to make payments faster and cheaper. It's actually been really good for ETH ETFs, which have come roaring back from the dead this month. A lot of these stablecoins run on Ethereum.

And so with that, Coinbase is unleashing a stream of crypto innovation beyond trading, which is its core business. It introduced Coinbase Payments this afternoon. That's a product from merchants that lets them accept payments in USDC. You got a glimpse of that in Coinbase's partnership with Shopify announced last week. And so if we are in this new age of stablecoin payments, that could eat into revenue at the card network. So someone on Wall Street saying that fear may be premature, but nevertheless, Scott,

Visa and MasterCard taking a hit for now. And USDC issued, of course, by Circle, whose shares are rocketing up more than 500% since IPO earlier this month. Scott? All right, Tanae McKeel, thank you so much for that. Back to you, Mike. I mean, it feels like a dream scenario, since you use that, for the Fed would be you come in July,

you sort of give the same kind of repeat, not exactly sure, economy's still in a good place, inflation expectations are up, maybe up a little bit. You get yourself to Jackson Hole, and you set the table if you feel you absolutely have the clarity at that point and then you do the cut in September like many think is on the table anyway. Yeah, and the question is in August during Jackson Hole,

are you gonna have enough data then in terms of what the inflation impact is and whether it's gonna be sustained of tariffs? I do think there's a fair argument to be made that they should assert whether they think mostly you should look through that inflation or not. I know they want to just kind of sort of forego any real opinionating on that and leave themselves open. But yeah, I think that is the dream scenario is that you're able to do more of these normalization cuts, these kind of, quote, peacetime normalization moves,

as opposed to responding to a rapid weakening in the employment picture. I think a lot of people are really attentive to the softening of the internal labor conditions data, really anchoring to some of the softer inflation prints right now, looking at housing, and feeling like the downside risks have increased more than the Fed is acknowledging.

And if the Fed is going to essentially hide behind a 4.2% unemployment rate, and say it's going to 4.5 by the end of this year and gonna kind of stop there, then maybe there's gonna be some tension between how the data come in and that. For now, you know, the economy is not necessarily in a desperate spot. It's not slowing rapidly.

It just might be kind of unsatisfying in its trajectory at the moment. I still think the money line of this whole thing today was that line that I've already said a couple of times. We expect a meaningful amount of inflation to arrive in coming months and we need to take that into account. If you look at where the market was, both bond and equity, and you look at the moves subsequent to that line, I thought it was pretty dramatic. We'll see what happens as the bell rings. Yeah, so they're saying they're not going to look through the headline and placing numbers, and the market maybe got a little bit of a wobble on it.

Okay. Thanks for watching. Market's going out mixed into overtime for Morgan & John.