Closing Bell - Closing Bell: 9/17/25

Episode Date: September 17, 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. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

You're listening to Closing Bell in progress. Forecasts have been coming up, as you can see. So labor market is, unemployment is low, but, you know, downside risks, but it's still a low unemployment rate. So that's how we see it. Hi, Stephanie Ruhle, MSNBC. Treasury Secretary Scott Besson has said that the Federal Reserve suffers from mission creep and institutional bloat.

He's now calling for an independent review. Would you support an independent review, or are you open to any sort of reform in any areas of the Fed? I, of course, I'm not going to comment on anything the Secretary says or really any other officer says. So in terms of reform at the Fed, you know, we just went through a lengthy

and I think very successful process of updating our monetary policy framework i would say there's a lot of work going on behind the scenes around um the assets we have in the federal reserve bank system federal reserve system and at the board are they the right size we're actually going through a 10% head head at 10% head count reduction through the whole fed including the board and all the reserve banks the employment Employment at the Fed at the end of that will be basically at the same level it was more than 10 years ago. So we will have had zero job growth for more than a decade when we're finished with that. And I think we'll probably do more than that.

So I think we're certainly open to constructive criticism and ways to do our jobs better. Not an independent review? We're certainly open to, you know, to always trying to do better. Mr. Chairman, Neil Irwin with Axios, there's been some debate lately on whether AI is already starting to affect the labor market in terms of lower labor demand, higher productivity by contrast. Do you buy that? And if that is true, does that have implications for the monetary policy setting? So there's great uncertainty around that. I think my view, which is also a bit of a guess, but widely shared, I think, is that you are seeing some effects, but it's not the main not the main thing driving it and so particular focus on young people coming out of college and yeah there may be something there it may be that that companies or other institutions that have

been hiring younger people right out of college are able to use AI bet more than they had in the past that may be part of the story it's also part of the story though that you know job creation more broadly has slowed down the economy has slowed down and so it's probably a number of things but Yeah, it's, it's probably a factor, hard to say how big it is. Thanks, Mr. Chairman. What evidence do you see of tariffs showing up in inflation? Well, if you, you can take goods, just sort of the broad goods category. And last year, goods inflation was negative.

If you go back 25 years, that was the typical thing, was that goods inflation was goods prices generally went down, even adjusting for quality. So that was not the case during the pandemic, of course. Goods inflation went very high, but we had essentially returned to zero or slightly negative inflation. Now, I think goods inflation over the course of the past year is 1.2%, which doesn't sound like a lot, but it's a big change. So we think, I mean, analysts have different views, but we think it's contributing, you know,

point three or point four, something like that to the current core PC. C.E. inflation reading, which is 2.9%. So it's contributing. What seems to be happening is that, you know, the tariffs are not, mostly not being paid by exporters, mostly being paid by really the companies that sit between the exporter and the consumer. So if you, if you buy something and you sell it through retail or you use it to make a product, you're probably taking a lot of those costs on and not able to pass it fully along to the consumer yet. That appears to be what we're seeing. All of those companies and entities in the middle, they'll tell you that they have every intention

of passing that through in time, but they're not doing that now. To the consumer, the pass-through has been pretty small. It's been slower and later, slower and smaller than we thought. But the evidence is it's very clear that there's some pass-through. I also wanted to ask if you could share with us the conditions under which you might consider leaving the Fed in May. I have nothing new on that for you today. Hi, Katerina Sarajevo with Bloomberg News. I just wanted to follow up on one of your answers just a couple minutes ago.

you know, we've often heard you talk about how you and your colleagues, you know, do not think about politics. This does not enter the room. But one of your new colleagues does come from this world, right, where everything is seen through this framework of politics and of what party is being helped and that person is still employed by the White House. how can markets and the public interpret, you know, some of his speeches, for example, and then some of, you know, the forecast that we see today. I mean, the median for this year was moved because of the introduction of his forecast. I'm talking about the number of rate cuts seen this year. What do you, you know, what do you say to markets and the public that are trying to interpret, you know,

what you guys are saying? So there's 12, 12 voter, 19 participants of whom 12 vote, as you know, on a rotating basis. So no one voter, you know, can really, the only way for any voter to really move things around is to be incredibly persuasive. And the only way to do that in the context in which we work is to make really strong arguments based on the data and one's understanding of the economy. That's really all that matters. And that's how it's going to work. And I think that is the way the institution, that's in the DNA of the institution, that's not going to change. And then I wanted to ask about a Gallup poll that showed that Americans now have more confidence in the president than the Federal Reserve when it comes to doing what's right for the economy.

Why do you think that is? And what's your response? What's your message to the public? Our response is we're going to do everything we can to use our tools to achieve. achieve the goals that Congress has given us, and we're not going to get distracted by anything. So I think that's what we're going to do. We're just going to keep doing our jobs. Claire.

Claire Jones, Financial Times. Given the range of views expressed prior to the meeting, I think there was a lot less dissent today than a lot of people expected. It would be good to know just what you think the drivers were of coming to their voice. very strong consensus in the meeting and also on the flip side to just explain why the dot plots are really so scattered between, you know, someone even expecting rates to end up higher by the end of the year to five cuts. I mean, what were the kind of range of views you heard about on one side why there was so much support for a cut today and on the flip side, why there's so much

divergence about what comes next? So I think there's quite a wide assessment that, you know, a wide assessment meant that the situation has changed with respect to the labor market, whereas we could still say and did say in July, at the time of the July meeting, that the labor market was in solid condition, and we could point to 150,000 jobs per month and many other things. I think that the new data that we've had, and it's not just payrolls, it's other things as well, suggests that there really is meaningful downside risk. I said there was downfired risk then. But I think that that downside risk is now a reality, and there's clearly more downside risk. So I think that was, I think that's broadly accepted.

And so that meant different things for different people. Some, you know, some wrote down, almost everyone wrote down, supported this cut, and some supported more cuts and some didn't, as you will see from the dot plot. So that's just the way it is. I mean, people have, it's, it's, you have people who take this work very seriously, think about it all, time do their work discuss it with our colleagues you know we endlessly discuss this in between ourselves and then we have a meeting where we put it all out on the table and this is what you get and you're right there is a there's a range of views in the dots and and I think that's like I said very

unsurprising given the quite unusual historically unusual nature of the challenges that we face but let's let's remember though the unemployment rates 4.3%. The economy's growing at 1.5%. So it's not a bad economy or anything like that. We've seen much more challenging economic times. But from a policy standpoint, the standpoint of what we're trying to accomplish, it's challenging to know what to do. There are, as I mentioned earlier, there are no risk-free paths now. It's not incredibly obvious what to do. So we have to keep our eye on inflation. At the same time, we cannot ignore and must keep our eye on maximum employment, which is that those are our two equal goals. And you will see that

there are just a range of views on what to do. Nonetheless, we came together today at the meeting and acted with a high degree of unity. Archie. Thank you, Audrey Hall, the economist. You mentioned earlier that job creation was running below your guess at its break-even rate? I'd be curious to hear a bit more about that and where you think the break-even rate is. You know, so there are many different ways

to calculate it and none of them is perfect, but you know, it's clearly come way down. You could say it's somewhere between zero and 50,000 and you'd be right or wrong. There's just many different ways to do it. So wherever it was, 150,000, 200,000, a few months, ago it's come down quite significantly and that's because very a very lower amount of people are joining the labor force the labor force really not growing

much at this point and that's that's a lot of where the the supply of labor was coming from over the last three two or three years so we're not getting that now we're also we've got much lower demand you know it's interesting that supply and demand have really come down together so far except now we do have of inflation, sorry, unemployment ticking up outside, just one tick outside of the range where it's been for a year. 4.3% is still a low level. But, you know, I think this level of this speedy decline in both supply and demand has certainly gotten everyone's attention. I may. You mentioned the downside risk to employment a fair amount, but it's striking that

measures of kind of activity and output for the third quarter, those that we have seem pretty strong. The Atlanta Fed's GDP now is very strong. You mentioned strong PC numbers as well. How do you square those things? Is there a chance actually could be upside risk to the labor market if those activity measures are right? Well, that would be great. We'd love that to happen. So I don't know that you see a big tension there, but it's gratifying to see that economic activity is holding in. And it's, you know, so it's a good bit from consumption. It looks like consumption was stronger than expected what we got earlier this this week i guess but and also we're getting you know a fairly narrow sector is is producing a lot of economic activity which is the the a i build out and you know

business investment so i you know we watch all of it and i would say we you know we did move up the median for growth for this year actually moved up in the cp between the june and september So, and really the inflation and labor market didn't change much. It's really the risks that we're seeing to the labor market that were the focus of today's decision. Nicole. Hi, Nicole, good kind with Barron. Thank you for taking my question. Given the cumulative impact of high interest rates on the housing sector, I'm wondering how concerned you are that current rate levels are exacerbating housing affordability issues

and potentially hindering household formation and wealth accumulation for a segment of the population? You know, housing is an introsensitive activity. So it's at the very center of monetary policy. When the pandemic hit and we cut rates to zero, the housing companies were incredibly grateful, and it was really, they said that was the only thing that kept them going was that we cut so aggressively and provided credit.

and things like that and they were able to finance because because we did that the other side of that is when inflation gets high and we raise rates and it it you're right it does burden the housing industry and so rates have come down a bit and as that happens we don't set the we don't set mortgage rates but our policy rate changes do tend to affect mortgage rates and that has been happening and that'll that'll of course raise demand lower borrowing rates for for builders will help, you know, get builders will supply. And so some of that should happen. I think most analysts think that we have to be pretty big changes for it to matter a lot for the, big changes in rates for the, to matter a lot for the housing sector. And, you know, the other thing is by, you know,

by achieving maximum employment and price stability, that's a strong economy. That's a good economy for housing. And then the last thing I'll say is, you know, there's a deeper problem here. there's not a cyclical problem that the Fed can address, and that just is a pretty much nationwide housing shortage. Or a lot of places in the country just don't have enough housing for people. And, you know, all of the areas around metropolitan areas like Washington, for example, are very built up, and so you're having to build farther and farther out. And that's where it is.

And just a quick follow-up, during the last SEP or the press conference following the last SEP, you seem to indicate that policymakers lacked conviction about their projections, and I'm wondering if you still feel that way. You know, forecasting is very difficult even in placid times. And as I've mentioned before, forecasters are a humble lot with much to be humble about. So I think right now is a particularly challenging time, even more uncertain than usual. And so I don't know any forecaster anywhere, really. ask any of the forecasters whether they have great confidence in their forecast right now.

I think they'll honestly say no. Thank you, Chair Powell. Jennifer Schoenberger with Yahoo Finance. If you're cutting rates, why continue to reduce the size of your balance sheet, then pause the unwinding? Well, I think we're, you know, we're cutting the size of our balance sheet quite marginally now. As you know, with the balance sheet, we're still in an abundant reserves condition, and we've said that we would stop somewhat above a somewhat above an ample reserves level. That's what we are.

And we're, you know, we're getting closer to that. We're monitoring it very carefully. We don't think that that has at all significant macroeconomic effects. These are pretty small numbers moving around inside a giant economy. You know, the number, the level of runoff is not. not very large. So I wouldn't attribute macroeconomic consequences to that at this point. And at his recent confirmation hearing, Stephen Myron brought up that the Fed actually has three mandates from Congress, not just jobs and stable crisis, but also moderate long-term

interest rates. So what does Congress mean by moderate long-term interest rates? How should we understand that when we see the 10-year treasury moving? And how do you think about this part of the mandate when policy choices like rate cuts or balance sheet reductions affect the long end of the yield curve? So we always think of it as the dual mandate, maximum employment and price stability for a long time because we think moderate long-term interest rates are something that will result from stable inflation, low and stable inflation and maximum employment. So we don't haven't, we haven't thought about that for a very long time as a third mandate

that requires independent action. So that's where that is. And there's no thought of, as far as I'm concerned, there's no thought of considering that, you know, considering that we somehow incorporate that in as something in a different way. Thanks, Chair Powell. Matt Egan from CNN.

We recently learned that average FICO credit scores are down this year by two. two points the most since 2009 during the Great Recession, and delinquencies are high for car loans, personal loans, credit cards. How concerned, if at all, are you about the health of consumer finances, and do you expect today's cut will help? So, you know, we're aware of that. I think default rates have been kind of ticking up, and we do watch that. They're not at a level, I don't believe they're at a level or overall. They're, you know, terribly concerning, but it is something that we watch. You know, lower rates should support economic activity. I don't know that

one rate cut will have, you know, a visible effect on that. But over time, you know, a strong economy with a strong labor market is what we're aiming for and stable and stable prices. So that should help. Just a follow up. This rate cut is coming at a time when the stock market is at or near all-time highs and some valuation metrics are elevated historically. Is there a risk of cutting rates could overheat financial markets potentially fueling a bubble you know we we're tightly focused on our goals right and our goals are maximum employment and price stability and so we take the actions that that we take with it with an eye on the on those goals separately and that's what we why we did what we did today

separately we monitor financial stability very very carefully and you know I would say it's a it's a mixed picture but households are in good shape. Banks are in good shape. Overall, households are still in good shape in the aggregate. And I know that people to lower end of the income spectrum are under pressure, obviously. But from a financial stability perspective, we monitor that picture. We don't have a view that there's a right or wrong level of asset prices for any particular financial asset. But we monitor the whole picture, really looking for structural vulnerabilities. And I would say those are not elevated right now.

Jean, we'll go to you for the last question. Hi, Chair Powell, Gene Young with M&I, Market News. I wanted to ask about inflation expectations. You've said the Fed can't take the stability of inflation expectations for granted. You mentioned at the short run they've gone up a little bit. I wonder if you can talk a bit about that. And then also at the long run, I'm wondering, do you see evidence that the debate over Fed independence and the growing deficit

is putting pressure on inflation expectations. So as you said, shorter-term inflation expectations have tended to respond to near-term inflation. So if inflation goes up, inflation expectations will predict that it takes just a little while to get back down. Fortunately, throughout this period, longer-term inflation expectations, both break-even in the markets and almost all of the longer-term surveys, Michigan being a bit of an outlier lately, have been just rock solid in terms of, you know, running at levels that are consistent with 2% inflation over time. So we don't take that for granted. We actually assume that our actions have a real effect on that and that, you know, we need to, you know, continually show and also mention discuss our commitment to 2% inflation.

And so you'll hear us doing that. But, you know, as I mentioned, it's a difficult situation because we have, we have risks that are both affecting the labor market and inflation. Those are two goals, and so we have to balance those two. When they're both at risk, we have to balance them, and that's really what we're trying to do. I don't, in turn, your latter part of your question was about independence. You know, I don't see market participants. I don't see that that's something they're factoring in right now in terms of setting, interest rates.

Thanks very much. All right, that was the Fed Chair, explaining why the Fed just cut interest rates by 25 basis points. Its first cut in a year, Chair Powell, saying the balance of risks have shifted towards more weakening in the labor market. Much talk about potential dissents today. We got one. from newly appointed Fed Governor Stephen Myron. He wanted a 50 basis point cut.

We're going to discuss that and more in just a bit. Let's take a look at stocks, too, as we enter the final stretch today. They are largely mixed. The Dow's been higher for most of the day, NASDAQ lower. It is the Russell that is outperforming today about 1% or so from an all-time high. Also important to look at rates, the curve steepening, a little volatile there as well. The long end has been to focus. The 10-year went briefly below 4%.

but you see now has risen above that, and we'll get into that as well. It's good to welcome you to closing bell today. I'm at Double Line in Los Angeles with Jeffrey Gunlock, the firm's founder, CEO, and CIO. It's good to have you, and thanks for having us. Welcome to Double Line, and I calculated that we've been doing this. You'll be surprised. It's our 37th time that we've done this in relation to the Fed, which is, it feels like a lot less than that, but that's the way time goes, especially when you get older.

And we've had a lot to talk about, obviously, in that stretch. Yeah, it's been all over the place. Yeah, give me your reaction to what you got today, to what the Fed share himself called a risk management cut, as he suggests the risks have grown. Yeah, I think the phrase of this press conference is challenging situation and no risk-free path forward. I think what really surprised the markets a little bit

and what led to some of the reversal on what was lower interest rates and the stock market was that when he said there was no support or very little support for a 50 basis point cut. Because I know the chatter going into this meeting was a lot about maybe they'll go 50, but it sounds like that wasn't even in consideration. And he also said, which he says pretty much every press conference, there's no predetermined path for interest rates. I thought Steve Leesman asked an interesting question about the word recalibration disappeared.

Frankly, he didn't say recalibration, but I think there was recalibration. And, you know, I always talk about the spread between the Fed funds rate and the two-year treasury. And it was getting pretty out of whack. It wasn't like it was a year ago when it was the most out of whack in my career. But it was out of whack, and so the 25 is there. Very divided opinions about what should happen for the rest of the year. To say the least, I mean, I'm wondering what you make of that. I mean, there is huge disagreement.

So one member wanted five more 25 basis point cuts. we can only assume that that's Mr. Myron. Six project no more, and nine see two more. So there's a massive disagreement. All over the place. What do you make of that? Well, I think it ties in with Jay Powell's comments about the labor market. He seemed genuinely surprised or confused, maybe is a better word,

about the 1.7 million job revision downward. And the most recent one, 900, I think it was 918,000, which are really big revisions. And he seems a little bit confused also about how the labor market has shrinking supply and demand. And I'm a little bit concerned that the consequences of this path downward from about 120, 150 job creations a month down to maybe zero to 50, I think he gave the range. I think there's a risk there of overeasing. I hope that they start focusing. saying, and I think they will, if I read carefully until what Jay Powell said, they need to look at the unemployment rate more than the jobs creation.

Always used to be the jobs creation, but now with this negative immigration and with the downward shift in demand for jobs, supply for jobs, I think we really need to focus on the unemployment rate, which he rightly says is not terribly elevated at 4.3. You know, there's that old SOM rule about the unemployment rate versus its moving average, It's not triggering. It's not over 0.5 above its total moving average. As Ms. Somm said this morning on CNBC, not quite triggered.

So she's matching exactly what you believe, too. There are two important indicators that are not high frequency. They have long lead times. And one of them is the unemployment rate versus its 36-month moving average. And it's above its 36-month moving average. And that's very usually leads by a lot, but it's been above its size. 36-month movement for a long time. And yet, no recession yet. Also, the yield curve, twos to tens. When it crosses above its 12-month moving average, you're really on watch for a

recession. But when the 12-month-moving average itself goes above zero, which it has on the twos-tens, that's very, has a good record of predicting that you're getting near the front edge of recession. And, you know, Jay Powell seems, it's interesting that they've, the SEP, they increased marginally the expectations for growth, yet he sounds much more cautious about things with the confusion about the unemployment rate and the birth death model he brought up, which a lot of economists that have been wary about the economy, have been talking about flaws in the birth death model, and he kind of acknowledged that today. And that's the primary reason in his mind for the, you know, the downgrade in the

past reports of the jobs created. If you are worried to some degree about the Fed over-easing, do you agree with the 25-point move today? Do you think that was the right move? And do you think 50 would have been a mistake? Yeah, I think 25 is the right move. Again, it's getting more in sync with the two-year treasury. But I do think that it's interesting that the yield curve, it started out by steepening, and now it's flattening.

And I think that's in response to the rhetoric about 50 was not even being considered. The long bond, as I've been talking about, really for the past over a year in these conversations, the long bond doesn't really want the Fed to be easing a lot. The Long Bond likes the fact that when the Fed has inflation more under control. And the long bond obviously doesn't like the budget deficit increasing.

We're almost all the way through fiscal 2024. which ends at the end of the next month. And the budget deficit of percent of GDP is higher than last year, which was higher than the year before, which was higher than the year before that, which it's all very surprising because we had so much stimulus back then. So what's really out of control is spending. Government spending is out of control. And I think the 3B bill that's coming into effect, I think that that has too much

spending in it, and I don't like the tax cuts either. Hang on just one second. Steve Leesman's made his way out of the room, and we'll come back. with Jeffrey, of course, in just a minute. So, Steve, as you read the statement and you heard the Fed Chair, and then, of course, you asked your question, is the biggest story today the massive disagreement, as we've termed it over the outlook for the remainder of 25, is that the biggest takeaway, among others? Well, Scott, let me correct you. The correct economic term for disagreement on the Federal Reserve is dispersion of views, just so you know.

Thank you. And that's a joke, of course. I'm guessing Jeff got understood that one. Anyway, where we are is you had seven folks who didn't want just either one more cut or no more cuts, and you have nine who want two more cuts. And the way Powell explained it was like, hey, with all the stuff that's going on right now, you would think we would have a dispersion of views or a debate.

In fact, that's exactly what I ask about. But before we get to that quote, which I want to run here, I said, is this a recalibration, or is this meeting by meeting? And he said, it's meeting by meeting. We're going to have to see the data. And then he talked about this exact question that you asked about, Scott.

Ordinarily, when the labor market is weak, inflation is low. And when the labor market is really strong, that's when you, I'll be careful by inflation. So we have a situation where we have two-sided risk. And that means there's no risk-free path. And so it's quite a difficult situation for policymakers. And it's not at all surprising to me that you have a range of views.

Now, I think we went into this, Scott, with really one question, which is, we knew a cut was going to happen, how much confidence can we have in the future cuts? I'm looking at the futures market, Scott, and I'm seeing that they're pretty much dialed in those other two rate cuts out there. I don't know if it's more or less than they should, but certainly Powell did not use that word recalibration, which is what he used in September 2024. forecast additional cuts. We're looking now at January 2026. So that's pretty dialed in that 360, which is right by the way, right on where the median Fed funds or Fed official is right now.

So I do think there's some doubt that should be in investors mind, Scott, only because if inflation goes a little hotter and jobs are a little stronger, maybe you get just one more cut. I also have felt, Steve, over the last, you know, few meetings at least, that, that the chair himself has had an air of confidence about him and where the Fed currently is and how it views the outlook and where they feel like they are. I feel like today you just have reintroduced a level of uncertainty around things that we really haven't felt in a while

to the degree that the Fed Chair himself said, it's not entirely clear what to do. At the end of the sentence where he started, there's no risk-free paths now that you mentioned. Yeah, I mean, I kind of disagree a little bit, Scott. I think Powell is pretty comfortable with the uncertainty around it. It's like, hey, I was dealt, you know, a two, a three, a four, and an eight, or something like that. There's no actual obvious hand here to think about in the sense that you have, and I've said this a bunch of times,

unprecedented challenges on both sides of the mandate. Let me give you an example, Scott, and this is something that we're going to need to talk about in the future. If the break-even rate of employment is, let's say it's 50,000 now, and your 95% confidence level around that number is plus or minus 100,000, that means you could be minus 50K and have an okay job market if that's where, if those numbers are the right numbers. So I think he's like, hey, this is what I got. I got unprecedented challenges on both sides. I have a committee. They're expressing themselves. And he's going through the process.

I don't think he's any more uncertain with the situation than he's been. He's just in a very uncertain situation. Seems pretty comfortable for me in that situation. All right. Good stuff, Steve. I appreciate you. Thank you. That's Steve Leesman, just out of the room.

Of course, asking a question himself to the Fed Chair. We're back here in Los Angeles with Jeffrey Gunlach. Do you agree with that assessment from Steve? Largely, I do. Yeah. I mean, I think there is a remarkable divergence of views at the Fed. I mean, one guy, the new guy, wants five cuts between now and year end. I think that that's a little bit disturbing for the inflation outlook when we think about

that it's quite possible, if not likely, that Trump is going to replace Jay Powell with somebody else. And based upon this action today of this five, cut out way out in the left field, you wonder if you're not going to be running a more inflationary policy. And so it's not surprising to me that the tenure couldn't stay below 4 percent and that the long bond gave it up as well, because that's not a long way away, May. It's not a long way away. And if we end up getting somebody that's going to run a very low interest rate policy, this is going to be extremely challenging for bond investors. Also, relative to the bond market, something I'd like to point out. For a long time now, we've been having the bond market supported

by decent treasury yields, and then on top of that spreads for credit products. But the treasury yields have been falling in recent weeks fairly a lot. And now we're getting to the point where the treasury yield plus the spread on some of these products like investment-grade corporate bonds is no longer getting to the yield bogies that, say, insurance companies want to invest their money for their fixed rate annuities, which has become popular. And this may end up putting, if the Treasury market rallies, and I'm not really convinced that it's going to rally further, but if it does, I don't think credit's going to keep up because a lot of these buyers that have been supportive of credit, which has been extremely

stable other than the tariff tantrum earlier in the year, they've been solving for their yield bogey, and it's going to be harder to get if Treasury yields fall further unless spreads widen out. So I think there could be some pressure on credit spreads as we move forward. I've asked others that this question, and you sort of allude to it. I'm wondering, is this in your estimation the last best chance to take advantage of some things in credit as a result of what you fear could be a super dove, so to speak, in the big chair? I think credit is fairly expensive. I don't think there's a, it's clear. It's, it's It's just a statistical fact that two years ago, credit was incredibly cheap.

We had very high interest rates, you had widespread on credit, and that was the opportunity. I think now the biggest opportunity to be looking for is a continuation of the trend of the lower dollar, which I think it may have dropped sharply on the cut, but then it rebounded. Then it rebounded. But if you look at, as well as assets the United States have done this year, I mean, Bonds, low-risk bond portfolios that are intermediate, like benchmarked against the Bloomberg Agra Index, it's easy to be up over 7% year-to-date and a low-risk sense. And then you go to, you know, the stock market's done really well, foreign stock markets for

dollar-based investors, which was a very strong recommendation of mine for the year 2025, have just done phenomenally well. I mean, they're up in the 20s for dollar-based investors with the currency translation. being so powerful. I just think that the dollar is going to be continuing to decline with foreign investments in the United States has now reversed after 18 years of huge inflows from foreign investors over 20 trillion dollars. That's reversed in the most recent data. And I think that's going to continue. And they'll put downward pressure on the dollar. Also, hedging costs for foreign investors are down. And so they'll be selling pressures perhaps on the dollar going forward.

I continue to believe that non-U.S. investing for dollar-based investor is a strong recommendation. And that goes right along with gold, which has just been ridiculous over the last two years, up over 100 percent, up 45 percent in your date. And now even the gold miners are getting involved, which suggests to me that retail investors are starting to join the momentum trade on the gold market. I remember I suggested that gold would go to $4,000. just going to ask you by year end, I think we got up to about 3,700. I think almost certainly gold will close above 4,000 before the end of this year. So there are a number of things in that. I want to go back to the idea of higher inflation as a result of what's taken place in terms of the makeup of the Fed and how it may continue to evolve in the months ahead. Because there is a view

that what the president's done to the chair Powell or what the things that he said and you know Mr. Myron's presence now on as a Fed governor will in fact lead to higher inflation um it sounds like you agree with that I think there's risk of higher inflation and Jay Powell he didn't dwell on this in his remarks but he certainly referenced the idea that inflation is rising and it's under upward pressure and so I think that the inflationary outlook is very uncertain. Jay Powell is correct in stating that we don't really know what's the tariff effect, when it's going to kick in, what it's going to be. It's obviously not going to be non-zero. And in spite of the fact that the energy complex has done nothing, I mean, crude oil has been

in this 60 to 65 range for a long time, commodity prices are going sideways, and yet gold is going crazy. I think that is a reference to the weaker dollar. which has to have something to do with higher inflation. Our inflation model, like many others and like the price fixing in the market, really looking for a three handle on the CPI to end this year, maybe even as high as 3.3 on the CPI. The PCE, they always use that one. It's lower and better contained.

But I think the risk of higher inflation should not be discounted or dismissed, certainly. Does that mean that you would continue to avoid the 30 year, for example, which you've maintained with me on multiple occasions, was not a place to be? Yeah, well, it's certainly been the right place, the right idea. I mean, since the Fed started easing a year ago, the long bond is down now about 8% on a total return basis, and I think that there's a lot of risk there. There's going to be, I think one of those, the penultimate question in the press conference was something about the dual mandate. Now they're talking about a third mandate, which is moderately moderate interest rates, and I think they mean long-term interest

rates, I think it's interesting that that's joining the conversation, because I believe that it's possible that there will be a yield curve control that becomes implemented if interest rates go too high on long-term treasuries. To answer your question specifically, we are only thinking of increasing our exposure down the curve and decreasing further our exposure out the curve. And some of our funds where we have futures capabilities, we actually have been short the 30-year treasury bond and getting the duration instead on intermediate and shorter-term bonds

by being long two-year treasury contracts. And that's worked very well. I mean, the 230 spread has gone out from inverted out to as high is about 130 basis points. It's settled in now at about 115. But I believe that that's going to continue until such time as interest rates are deemed to be too high for economic purposes.

And I think most importantly, is housing affordability. Housing affordability is very poor. Even with interest rates having come down, there's work at the Atlanta Fed that looks at what percentage of the median household income has to go to paying for your home, your mortgage, the insurance, the PMI, and all that. And it's gone up by about 20 percentage points, what it takes. So the median

household income, now the mortgage and the homeownership cost is 48% of median household income. And in urban areas, it's really outrageous. I saw a statistic today that in the Los Angeles metropolitan area, which is Los Angeles, Anaheim, and Long Beach, amazingly, the average, the median home payment is 90% of median household income. And the way things are going, it might even go to over 100, which sounds like crazy, but it just shows that there's so many people that can't afford a home. I think it's possible that they try to manipulate interest rates to get mortgage rates down.

And that would be, in anticipation of that, one has to be constantly mindful that that type of manipulation, could cause a reversal in this yield curve steepening situation. I think the yield curve will naturally keep steepening until it gets manipulated. And given that the new Fed member is outrageously calling for five cuts at the next two meetings, it shows the extent to which, let's just, let's generously call it creative thinking, is being entertained by the administration and the evolving construct of the Federal Reserve. Do you have a favorite in mind of the names that have been out there publicly on who you would be comfortable with as the next Fed share?

I haven't really thought about it, quite frankly. I think the list is really three people. I think they've sort of tipped the hand on that. I don't think I'm not really fond of the ones that are going to be the most malleable. But I do think the job interview, given the what the, the opportunity. of the Trump administration, I think the job interview is going to be, will you do what I tell you to do? And if the answer is no, I think you're not going to be Fed share. And so this is what I'm worried about with the inflationary policy.

As we get towards the next Fed chair, I do think it's going to be almost a negative real interest rate type of situation. We have interest rates that are below the inflation rate. I mean, if you know, I guess if you strongly feel like that, that's likely to happen. What's the fattest pitch right now in bonds? Local currency, emerging market debt, in local currency, which has started to perform very well. But I think that that's the number one play on the weaker dollar, which remains one of my strongest convictions. And the dollars basically rebounded off its lows today, but it was at the low of the year. I think it was lower than any time since 2022.

And so it is interesting that with the dynamics of it going on, typically you'd expect a stronger dollar, but instead we have a weaker dollar. When the S&P sold off earlier this year, almost always the dollar rallies when the S&P sold off, not this time. The dollar actually went down by about 8% when the S&P sold off. Well, because you've had the president himself talk about wanting a weaker dollar.

Yeah, I mean, when you run negative interest rates, if you're going to do that, negative real interest rates, you're running an inflationary policy, and that's going to lead to, I think, a weaker dollar. What does that mean for stocks? Well, stocks are, have priced in, as has the bond market, a lot of rate cuts. And one thing I've been struck by is how every time there's talk of more interest rate cuts or an interest rate rate. cut is coming, the stock market rallies day after day after day, just on the same hope, like the 50 basis point hope was, I think, exaggerated by investors that they thought maybe we get a 50, and maybe that's what we got the last several percentage points up in the stock market. But I don't really like U.S. stocks as a U.S. based, as a dollar-based investor.

I've felt that way all year, and I continue to feel that way. You're really better off in non-dollar markets, and they are all up similar amounts. There's some dispersion, but there's similar amounts on an index basis, but when you translate the currency, you end up with tremendous results out of some of these stock markets.

I mean, I think, and also bond markets, like the Mexican bond market for dollar-based investors is up like 35% year today. But you've been a big proponent of India, and you've said it with me for at least a couple of years, I feel like now. That's a little bit on pause because that's not, that's one currency that's not appreciating. It doesn't appreciate versus the dollar.

So this Indian stock market has not benefited from currency translation like the European stock markets have. Well, I was also going to ask you about these sort of renewed tensions or not even renewed, just new between, you know, our administration. That's a setback for the Indian stock market, for sure. But the Indian stock market is a very, it's a long-term play. It's one that's zero trading, just long and don't worry about it, because the economic reforms are required to absorb all of the population that is entering the labor force, hundreds of millions. They need to restructure things the way China had to do it to absorb their huge influx of workers in the labor force that's now gone the other way.

So China makes, for me, makes no sense for U.S. investors. There's too much tensions with China. I don't know what would happen if the market went up a lot. You might not be able to get your money out. If it goes down, you're going to own it. I just don't like the risk-reward mix there at all. India has just such favorable fundamentals and a strong history of good economic leadership, actually over time, and I think it's going to return to that situation.

I've often asked you as well, like, what does the perfect portfolio for the moment feel like? Have you been thinking more about that lately? And how would you answer that for our viewers who are thinking the same thing? Yeah, I really haven't changed very much. I'm still think gold serves a purpose in portfolios. It's at a high level on a short-term basis, but the momentum is remarkable. You know, I love it when a market goes up a lot, and then instead of correcting, goes sideways for a while. And that's what gold did.

It got up to about 3,300, and then it consolidated there, and now it's on uplay. I still think a 25% type of weighting in portfolios of gold is not excessive. I think that... Really? One quarter of one's portfolio in gold. Yeah. I think it's not excessive, because I think that that is an insurance policy, and it's it's in a winning mode because of the weaker dollar, and I believe that's going to continue.

So a lot of my perfect portfolio concepts revolve around weaker dollar. So foreign stocks, European stocks, make sense. I think some Asian stocks, X China would make sense, and you do it in local currencies. So I have a big anti-dollar theme that's going through things. And like I said, for bond portfolios, I think local currency emerging markets, I think having 10% there makes some sense. I would have probably 40% in stocks, mostly, if not entirely, non-U.S., as I've suggested. Even with the AI theme and the trend of where that is, the tremendous advancements that are taking place, you wouldn't have any exposure or such minimal exposure to U.S. stocks like this?

You know, when new technologies come, the sky's the sky's the limit, but it gets priced in very quickly. And I use the analogy of electricity. In 1900, people started to realize the electricity was going to change the world, and they were right. And so there was a mania in electricity stocks that actually peaked out in 1911 before there was really widespread electrification. It was all priced in. And in fact, since 1911, if you look at U.S. stocks, not electricity, everything other than electricity-oriented stocks, and then you just look at electricity stocks, the non-electricity has outperformed since 1911. So it gets priced in very, very early. And the AI buildout is enormous, but it seems a lot like kind of the fiber optic stuff back in the late 1990s, where it's very real, it's happening.

going to be world changing, but the markets are incredibly efficient at pricing things in and often overdo it. So I am not a momentum person at all, unless there's a fundamental reason. And momentum driving things to very high valuations, that's just, I don't, if there's one thing that makes me not sleep at night is owning stuff like that, and that's just me. For some people, they'll make a fortune on it, but I think the fortunes have large, been made. What do you think of these crypto treasury strategies that have become pretty popular, I would say, in the last handful of months and some very high profile people, well known to our viewers, and certainly in the investing world, the Tom Lees of the world, Dan Ives, and others

who are taking advantage of that. What do you think about that? Every few years, there's something that comes up that's kind of a gimmick. And, you know, I remember portable alpha, member 3130 strategies. I think that a lot of these things are sort of gimmicky. And so I wouldn't be involved in that at all. And because of, are you concerned about the volatility in Bitcoin and Ethereum? And if there's a major correction of some sort, those are the kinds of assets that would be hurt the most? Probably. Probably that's right.

But I don't spend a lot of time thinking about that. I'm not a big crypto person at all. And I notice that Bitcoin has underperformed gold this year. And that's pretty remarkable, given how everything's up so much. So I don't really think that Bitcoin is a very good investment. I know that people have made a fortune in it, but it's lost its momentum. And I just don't think that it's going to serve the purposes that are hoped for.

My last question, will we get a cut? do you think at the next meeting, right before we talk to you next? Yeah, I think we'll get a cut at the next meeting. They seem to be, he doesn't say it in plain English, but they seem to be in cutting mode. And the two-year treasury is still 60 basis points below the new Fed funds rate. And that to me suggests that the odds are much better for a cut than for a hold at the next meeting. All right. Well, we'll talk to you right after. We'll see exactly what happens. It's the 38th time.

Yeah, I look forward to it. We'll have just as much to talk about, I'm sure, given where things are and where maybe we think they're going. Jeffrey, thanks so much for having us out here. Thanks. Good luck everybody out there. It's Jeffrey Gunlock here at Double Line live in Los Angeles. We'll take you into the closing bell market zone now. CNBC senior markets commentator Mike Santoli is with us. And Verdis Investments, Joe Taranovo, we'd like to get their views. Joe, I'll just go to you first. You know, stock investor, what do you do now that you heard from the Fed and you've had a chance to listen to Jeffrey Gunlock's views as well? well. I think the big decision for an investor right now, Scott, is do you want to turn in the direction of the narrative where the rally broadens out? Do you want to trade down into small caps? Do you want to look at things like regional banks? Clearly, the indication is today based on the price action that, in fact, you could make somewhat of that turn. I'm still staying up in the equity size class with mid-cap and large-cap, but the ownership that I have of financials is proving to be a good

one today in the wake of the Federal Reserve rate cut. We had a little bit of a sell-off before the three o'clock hour here on the East Coast down to 65-51. Traders stepped in. They bought that dip, and they bought that dip really in the equally weighted S&P, not so much in the Mag 7. Mike, that's going to dominate the conversation, I suppose, on programs going forward. Do you now that you think that more cuts are coming, do you lean into the broadening trade versus the Mag 7, for example. Yeah, I mean, it's funny, Scott, because there was an effort to front-run that exact trade. I talked about it on halftime today where it was sort of Russell was ripping,

NASDAQ 100 was for sale. I mean, in a way, that's a mechanism for the market to rebalance itself a little bit here because the only super overbought part of the market is mega-cap tech, so maybe you can get away with just sort of rotating your way around it. I don't think too much has completely altered in terms of the outlook here, maybe less than people were hoping for in the sense that Powell was still kind of, you know, not dismissing inflation as a concern. It was relatively still kind of a balanced, contingent outlook. We are still going to have to pay attention to the data. Big picture, rates are going down,

not up. The economy is still hanging in there. So those are the two premises that got the stock market to where it is right now. And unless and until the bond market really starts to register concern about longer-term inflation or if the economy is going to really start to run hot next year, then I think stocks can live with this and kind of feed off of the same themes. And even if it is about, you know, a little bit of bumpy action in the near term as we still contend with a little bit of a seasonal undertow. Mike, what do you make of Jeffrey here talking about gold continuing its run? It's at high levels.

He obviously admits that as he talks bullishly about it. but even suggesting that a quarter of your portfolio should be in that, in that asset. Obviously, you know, then you're massively overweight gold if you have a quarter of your portfolio in it, because if you just look at the aggregate value of all financial assets, so many things are going in the direction of gold. And I think one of the things that it has going for right now is it's sort of defying some of the things you would expect it to do. In other words, yes, the dollar is down. Yes, people are diversifying.

Central banks are buying it. But it's not as if real yields are negative. It's not as if inflation is raging. It's not as if really macro stress is that high. So all those things that would otherwise be explanations for why gold is strong are not necessarily flagging it, and yet it's still in demand. So I think it's much more about don't fight the trend than it, to me, is about having a very coherent view of why it's doing what it's doing and playing that into the future.

So, you know, I'm in a don't fight it mode. Yeah. What about a weaker dollar plays, Joe, if you believe that that's the direction for the foreseeable future, that the dollar is just going to continue to move lower, is it a multinational lean-in that's going to be beneficial for their earnings? How do you see that? Yeah, in fact, it is. It allows you to kind of think about diversifying geographically. And also, you have a stronger disinflationary trends for sure in Europe.

it's one of the reasons why Germany is outperforming year-to-date and the emerging markets are outperforming year-to-date. So you have that opportunity to look outside. I think the dollar continues to move lower, and it gives multinationals the ability to do what the chairman spoke about and I found so interesting. And that's absorbed the cost of the tariff. And Scott, if you think about the totality of 2025 and the rally we've had, it's really been the ability of corporations and the strong earnings to allow this market to levitate. As long as those earnings are strong, they can continue to absorb the tariff. Joe, what would you make of what we've, you know, we've been calling really since the moment it happened,

this massive disagreement about the outlook for rate cuts for the remainder of the year? And you as an investor having to decide which side of that debate, if you will, you're on and to what degree you're on it. You may want a cut in the next meeting, but that's it. You may want two. I don't know. You tell me and how that might influence your stock ideas. I think it's a little bit troubling, especially as you turn the calendar into 2026 on halftime today. I suggested that we would get a 25 basis point cut and three dissents.

Well, you didn't get three dissents, but there's a lot of dissension inside the Federal Reserve right now. So we go back to staring at the labor numbers more than any. else. The unemployment rate's going to be particularly important. But the path is, I think, a little bit more unclear today to investors than it was 24, 48 hours ago. Mike, also, you know, the one dissent we got is, I could see some saying, well, that's way better than getting three, because the one who dissented and has the outlook that we believe he has is the most of the outlier view relative to some of the others. So as the bell rings here, we'll follow all that. Appreciate the coverage. We'll see stocks go out mixed here. The Dow is higher.

As you see, S&P NASDAQ are both negative in the Russell 2000 coming off its best levels of the day as well. That does it for us. I'll see you back. Now into overtime with John Ford.