Closing Bell - Closing Bell: Fed Pauses on Decision Day 9/20/23

Episode Date: September 20, 2023

Fed Chair Jay Powell held his news conference after the decision to keep rates unchanged. DoubleLine’s Jeffrey Gundlach gives his exclusive reaction. Plus, Sofi’s Liz Young and market expert Mike Santoli weigh in on the market reaction to that decision and Gundlach’s big call on rates. And, we break down the key metrics to watch when FedEx reports after the bell. 

And let me welcome you to Closing Bell. I'm Scott Wapner, live today in San Francisco. That was the Fed chair, of course, following what many described as a hawkish pause by the central bank. No increase in rates, but the outlook, which the markets were waiting for, shows holding them higher and more restrictive and keeping them longer there than perhaps anticipated. And with that, fewer cuts than the market has priced in for next year as well, perhaps because they also raised their economic outlook for next year, which Chair Powell talked about. He said, quote, the economy remains robust, GDP growth higher than expected, labor market, he says, still tight, but coming more into balance. He also said this was interesting, at least five times, perhaps even more than that,

that they will, quote, proceed carefully, but would raise rates again if necessary. He said based on the outlook, it was, quote, more likely than not that they'll raise at one of the two remaining meetings. Also wouldn't call a soft landing a baseline scenario, but that it was still possible. He did call it the primary objective. Joining me now to discuss all of this and what happens in the markets now is a CNBC exclusive interview. It's Double Lines' Jeffrey Gundlach with us as always, as he always is on Fed Day. Jeffrey, welcome. It's good to talk to you today.

Nice to be back again, Scott. Yep. What's your big takeaway? Long press conference today. Yeah, yeah, it sure was. What is your takeaway from it? You nailed it with your intro. That's what I was going to say.

The word of the day is carefully. He has said it two or three times in his prepared statement, and he said it many, many times in the Q&A. I think there was something in there for everybody. I think this is really one of the best Fed decisions that we've had in a while. I think that carefully concept is wrapped around the idea that we've raised rates, 525 basis points. He pointed that out in his statement. We continue to do QT. With Stephanie Link, I think prior to the Fed decision, I think correctly pointed out, doesn't get enough play that QT continues to happen. So they did upgrade the forecasts for next year. Unemployment not as bad.

Economy a little bit stronger. i i think he's right about all this i think that it's it's the right thing to not raise rates i think it's the right thing to wait uh we have a lot of indicators that are looking at softness a lot of people are making a big deal about the consumer uh resiliency i i think a lot of that's due to high prices and you see that in credit card gains. There was a big drawdown a couple months ago, but it's back up. So we see a lot of debt in the economy. And another problem with the economy is there's been so much increase in interest rates for

the Federal Reserve and the Treasury Department. In other words, the interest on the debt is really going up a lot. And it's going to go up every month that rates stay at this five and a quarter to five and a half level and obviously go up faster if they do another hike or two, which they're certainly contemplating or have the door open to. We've already had hundreds of billions of dollars of increased interest expense. And it's going to go up a lot more with these interest rate levels.

And it's creating a lot of bond supply. And the bond supply has been one of the reasons interest rates have been going up, in addition with the quantitative tightening. The good news, I guess, on interest rates is at least taxes are going to get paid here in California on October 15th. One of the reasons the deficit is so big is there's been deferral of tax payments. That's

going to go away. In fact, it's going to get a lot worse because here in California we're going to have to pay two years worth of taxes unless they change the rules for the 2023 tax payment and push that forward from April 15th. We'll have October 15th, 2023 and April 15th of 2024. That's two years worth of taxes paid in six months. And I know that some people, you know, are prudent and plan for that. I know I have. But a lot of people, they adjust their lifestyles. And that has to do also with a headwind on the student loan payback. Because we know a lot of people, when they weren't paying their student loans, they spent the same amount of money or they borrowed money, they paid the same amount of interest by ramping up their credit cards. And that's certainly been the case. So we have a lot

of cross-currents right now in the economy. I kind of see it in a transition. And the data is extremely non-reliable right now because all of these distortions from the government money and now the payback of, and now the drawdown in those excess savings, now the payback of loans. And now we have these strikes showing up. So we have cross currents regarding the inflation situation that makes it very prudent for the Fed to have a wait and see attitude. These strikes are obviously inflationary. The oil price going up 30 percent since June is obviously inflationary. Right. So all these things, all these things are happening. But at the same time,

the shelter component of the CPI is definitely coming down. The owner's equivalent rent lags badly. If you look at the Zillow and apartment list rent roll indices, they lead the owner's equivalent rent or the shelter component by about a year. And they're basically flat year over year. So a lot of cross currents going on. And it's absolutely appropriate to wait and see for the data. So they did the right thing. You know, Chair Powell said based on the outlook that it was, quote, more likely than not, as I've already said, that they'll raise at one of the two remaining meetings. You made the case repeatedly recently, including just last week, a few hundred miles down the coast from here with me, that you thought the Fed's done. Do you still maintain that

view that they are finished raising interest rates? I think the probability of rate hikes is higher than what I thought before this oil spike happened. The oil spike is really going to be problematic. We already know that the base effects, the roll-off of the CPI, is going to lead to very likely inflation going back up, kind of staying where it is now in a sticky way, maybe even going to a four handle on the headline CPI before it comes down with that shelter component effect. And so I think the chance of a rate hike is higher because these oil prices are going to be a real problem. My gasoline station over the past few months, the price has gone. I get Supreme

Gas 91 octane. It's gone from 550 to $7 a gallon already in just the past few weeks. And that's not going to go down with West Texas Intermediate above 90. So those things lead to a little bit of a headwind against the idea that the Fed can cut rates or stay on hold. And I think that it's appropriate that the Fed sort of downgraded the so-called rate cuts because of these cross-currents of inflation. So I do think there's a better probability that we'll get a rate hike than I thought, say, two months ago. Steve Leisman, of course, was in the room, asked a question to the chair, as he always does. He's stepped out now and is going to join our conversation. You know, Steve, I want to hone in on an issue that you raised earlier

and a point that you underscored in your question with the chair, asking why a more restrictive real rate next year than this, to which he was explicit where he said because of the stronger economy. And I just want your perspective, because what I feel is now interesting to talk about is it seems to me that the chair's biggest problem now is not where inflation is. It's where the economy is. And he is afraid that because the economy is, as he said, much stronger than they thought it would be, that inflation is going to come back. He doesn't trust necessarily that it's going to remain on

the trajectory that it's been. Yeah, I mean, Scott, let me just point out from the Vulcan mine melding department that that is the exact quote that I brought to you here was his answer to that question. So I'm going to let Chair Powell say what he said and answer the question. And if you don't mind, I'll comment on the back end of that. Rather than pointing to a sense of inflation having become more persistent, I wouldn't think that's not. We've seen inflation be more persistent over the course of the past year, but I wouldn't say that's something that's appeared in the recent data. It's more about stronger economic activity. Now, just to understand what he was answering, the question is, he even surprised me.

I was on Scott's show earlier today saying, I think higher for longer is going to be what we're going to hear today. But it surprised me that from a real rate perspective, take the Fed's inflation forecast, take their funds rate forecast for next year. The Fed becomes relatively more restrictive next year. I thought maybe it would pivot a little bit higher. But in fact, what happened is they kept the inflation rate the same, but they added a half a point or took away a half a point of rate cuts that they had previously penciled in. And Scott is right. I think I think the stronger economic growth is part of it. I think there's also a persistence to the service side of inflation that may be a part of it. But look, here's the thing.

Even though the forecast, Scott, is one that is relatively more hawkish, the overall forecast is more bullish when it comes to GDP, when it comes to unemployment. And I think I take Powell at his word that he's going to be careful in getting there. Just because you have a plan, even sometimes, Scott, if that plan is a little reckless, doesn't mean they're going to execute it. So the idea that they're going more slowly should give you a little comfort, even if the direction of travel is one that is ultimately more hawkish. I was going to ask you that, too.

The idea of those words, proceed carefully, as I noted at the outset. I counted at least five. It's probably a couple more. Jeffrey himself raised it very noted at the outset, I counted at least five. It's probably a couple more. Jeffrey himself raised it very much at the top. Do you want to just opine on that? Why he felt it so necessary to underscore those words? Well, I think the reason is because, look, he did an awful lot of work. 500 basis points is a very historically aggressive rate I cycle. He's gotten through it to a point where there's not obviously going to be a recession at this point. He has a chance to stick a soft landing and he now has the luxury to take a little bit more time. I think the idea of

a pause this month made a lot of sense. It may be they pause again. In fact, Scott, if you look at the probabilities, I'm sorry, I haven't looked at it since I came out of since the 2 o'clock announcement, but it was higher for December. So they pushed it ahead. They said, you know what? I don't think November is likely to be paused. And it's not even at the 50 percent. So Jeff could be exactly right. They are done with somewhat higher probabilities that they're not.

But the odds on call right now is that they are done. And the focus now is this how high for how long. Today we learned longer, but I think Powell is also saying, you know what, if I don't have to be, maybe I will take some back. Yeah, good stuff. Steve, I appreciate it very much. That's Steve Leisman, our senior economics reporter down in Washington on the backside of the FedChairs news conference. Back to Jeffrey Gundlach, who's clearly still with us, too. Jeffrey, your reaction to that? What Steve Leisman had to say about, you know, the economy being sort of, you know, this too strong economy in some respects

being an issue for the Fed chair? He really bought himself some time in a very clever way, Jay Powell did, I think. You know, he basically said, we're mindful of economic strength that, you know, like GDP now has been, it's pretty high at the Atlanta Fed. It's got downgraded recently, but it's still, I think, in the fours, maybe the high fours. So it's a hat tip to that. And they do the clever thing of buying themselves time. They make a forecast for, you forecast for the future, six months from now, 18 months from now, and they leave rates unchanged because they're cognizant, rightly so, of the potential for all of the accumulation of this tightening. Between the 525 on the Fed funds

rate and the quantitative tightening to date, I'm going to go back to the old shadow Fed statistics where there was a study done where they said if we didn't do this quantitative easing, quantitative tightening, if all we did to manipulate monetary conditions and looseness and tightening was the Fed funds rate, where would the Fed funds rate have to be to equate to the Fed funds rate tightening of 525 plus the QT. So if we didn't do the QT, this study shows that they've raised rates, they would have had to raise the Fed funds rate by 730 basis points is what they've effectively raised the Fed funds rate. That's a lot of tightening. And the Fed needs to realize, and of course Jay Powell said so explicitly, that the QT is continuing.

So those rate hikes really are not rate hikes, but it's tightening of monetary conditions. That's going to go up to 800 basis points. So it's very clever to say we're respecting the potential for less of an increasing unemployment rate, but at the same time we are going to buy ourselves time. Really good, really good stuff. I think it was an excellent way to handle this meeting. I agree with Steve completely that I think the narrative is going to develop that there's going to be no rate hike in November because they need more data. They need more data, maybe December. But the other thing I want to tell the listeners about, this is really an interesting thing. I always talk about the yield curve being inverted as a warning signal, if you

will, puts you on watch that a recession might be coming, but it doesn't happen imminently. It takes time. And so it's usually about 14 months to maybe 18 months after the twos, tens inverts that you start getting a recession. Well, that was last October, so we're coming on a year on that one. And one way to track this, the best way, one of my investors sent me a note the other day that I found very interesting. Just look at the 30-week moving average of the 2's, 10's spread. When the yield curve de-inverts by crossing back above its 30-week moving average, that's a really strong signal of a recession. And that's very close to happening. Also, the unemployment rate is now up by 40 basis points off of its low. It's probably going to

go higher, in my opinion. And so with that, you're going to get a crossover on the unemployment rate and also the unemployment rate is going to cross over its three-year moving average in the first quarter of next year by our by our assessment these are really strong recessionary indicators so it's styling starting to pile up I think that the problem we have government shutdown looming student loans being paid back taxes being paid I think that the problem that we have, government shutdown looming, student loans being paid back, taxes being paid. I think the economy could slow down fairly quickly once we get in the next, say, four to six months. But all that said, did bonds just become more attractive today? Because we think that, especially on the short end, you see that the two year is obviously up.

Stocks, by the way, are at the lows of the session at this very moment but if we think that you know rates on the short end are going to continue to rise for a bit before perhaps if your projection comes true and the economy weakens and then theoretically rates would would go down did bonds just get more attractive to you i i think treasury bonds are attractive i find them quite attractive at this moment. Not for the long term, though, Judge. It's really for the short term on economic gyrations, which I think are going to be weaker economy and probably weaker inflation than people are forecasting. But the problem is the long term for interest rates is getting increasingly unattractive because we have all of this interest expense that's piling up and the deficit's already at 8% of GDP.

And under a certain scenario that's not a very pretty one, you could go to 12% of GDP on the deficit. That's a ton of bonds. And so we have two really long-term secular indicators that turned twice in my career. The first time they turned was in the early 80s. And that's nominal GDP, a seven-year moving average of nominal GDP, peaked in the early 80s and fell for 40 years. So that has turned up, starting, it formed a bottom between 2016 and 2020. And that's an interesting indicator. Also, the core PCE, seven-year moving average, has exactly the same look. Peaked in 1980, bottomed around 2020.

That's also going up. And so that suggests to me that the next bond rally, which will come in a Pavlovian response to recessionary conditions, will not last. I think that the response to the next recession will be the same response that we've had in the last 20 years. And that's slashing interest rates and then probably quantitative easing. And this will be an inflationary policy. The deficit is going to get so bad in the next recession that we're going to have radical policy changes, just like the elections of the presidency keep getting wackier every four years.

The responses by the Treasury Department and the Federal Reserve need to be more extreme all the time because the debt acts as a tractor pull. And I'm afraid the next recession will get a bond rally that doesn't stick because the response is going to have to be inflationary. So we're in sort of an eye of the hurricane situation relative to the general trend, I think, in bond yields. For the time being, though, when you have to think about managing money actively, which, of course, we do every day, we have to respect the fact that we think we're looking at a bond rally. Even the 10-year Treasury yield is basically double-topped from where it was a year ago. It's made us a minor new high, but I think we're getting near the end of this rate rise on the 10-year. Well, speaking of slashing rates, we learned from the outlook that we're going to get two fewer cuts coming next year, at least based on the outlook, which isn't worth much more than the piece of paper because it's not a prediction. It's just obviously an outlook.

But you've been looking for cuts. It's a hat tip. Yeah, you've been looking for cuts next year. I mean, are you rethinking your outlook for rate cuts based on what the outlook today said? Not at all. I think it's quite likely there's going to be rate cuts in the first half of next year. And I think they're going to be bigger than the Fed thinks as their base case. So I think we have real rally potential long in long end of the bond market. So the way you

position, Judge, is really pretty simple. It's the same that I've been advocating now for a while. You want that profit potential at the long end of the Treasury market to help hedge your risk positions. But where you really want to be in bonds, it's not T-bill and chill, which is the new rhyming phrase that people use about investment strategy, because you can buy the six-month bill at $5.50. But I wouldn't do that. I would go more into a two- to three-year type of portfolio in credit, where you can get 7.5%, 8.5%, 9% yields. I mean, bank loans in the BB sector, they have yields that are up in the high single digits. And the Fed not cutting anytime soon means you're going to earn that yield for a while. So this is a market where you want a long-term position, kind of a core position in

treasuries for a fixed income portfolio. And then you want two and three-year, because that's the peak of the curve, the two and three-year in the securitized credit markets where you get these big yields. And so you can end up with a pretty sleep at night type of portfolio that throws off income that's probably triple, if not three and a half times that of the equity market. The equity market is really overvalued versus the bond market based upon risk premiums and stuff like that. Back a year and three quarters ago, bonds were stupidly overvalued. And as rich as stocks were when they began that bear market, they were cheap to bonds. That's changed by a factor of four. So you've gone from bonds were doubly rich to stocks. Now bonds are

doubly cheap to stocks. So it's been a 4x shift. And I think that that should be respected in portfolios. So I think 25% long-term treasuries, 25% not in cash, but in this short-term, not terribly low in credit, but not pristine credit stuff. And then you want 25% in stocks. At this point, I think there might be a case for building a position in commodities, which have moved above their 200 day moving average in a way that's becoming quite convincing. It's mostly energy. It's mostly energy. But it seems to me that there's momentum behind this move in the commodity sector. So it's you read my mind. I was going to ask you how you would break up 100 percent into which holdings to have. But let me end that if you if you think that it's it's worthy of of having, you know, 25 percent, let's just say in commodities, you assume you must then that what has been dollar strength is going to turn into dollar weakness as the economy itself weakens?

Yes, I think that for sure the dollar is going to weaken in the next rollover of the economy. It's going to weaken pretty mightily, I think. And that's one of the problems that the bond market is going to have, too. So I think that's going to happen. What's happened recently is we've had dollar strength recently, and that's been a little bit at odds with real interest rates, frankly. Well, not with real interest rates, but at odds with sort of financial conditions broadly, I think, with the deficit. But that's going to change. Jeffrey, I appreciate it, as always.

It's a good Fed day when we have you on the backside of Powell. I appreciate it so much. We will see you after the next meeting, I'm sure of that. Okay. Sounds good, Judge. Good luck, everybody. Yep. You be well.

That's Jeffrey Gundlach, of course, with DoubleLine, who joins us every Fed day, right when the Fed chair is done with his news conference. And you'll hear that again after the next meeting. Let's get to our results of our question of the day. We asked, how many times will the Fed cut rates next year? The majority of you said less than two. Maybe that changed a bit. Maybe you had to rethink that after the outlook today from the Fed.

Coming up next, SoFi's Liz Young. She joins me here on set at One Market. We'll get her first reaction to the decision. Plus, we are getting you set up for earnings in overtime, a rundown of what to watch when FedEx's numbers, they'll hit the tape in just a few moments from now. We're about 14 or so minutes away from overtime, all that and much more. We're going to take you inside the market zone next. We are now in the closing bell market zone. CNBC senior markets commentator Mike Santoli

and SoFi's Liz Young here to break down these crucial moments of the trading day. Plus, Frank Holland, he shares what to expect from FedEx, those earnings out in just a few moments in overtime. Liz, I turn to you first. Was this what you expected from Powell? I mean, I didn't expect them to raise rates. So, yes, I think a lot of these messages end up being very anticlimactic by the time we get to the actual meeting. The carrot got further away, right? But it's still a carrot in my view. And you're looking at the expectations and their summary of projections that say, okay, inflation, maybe a little bit cooler this year, growth, a little bit stronger, unemployment, a little bit lower. If after I really try to play that out, it doesn't track entirely, right? So we've got

a fed funds rate that we're expecting to be 5.6% by the end of the year, stay above 5% for all of 2024 without hurting the labor market, without hurting growth. Even after Chair Powell has said over and over again, we will need to see a period of below trend growth in order to fix this problem. If we have a period of below trend growth, we're probably going to have a below trend growth, we're probably going to have a rise in unemployment. We're probably going to have some weakening in demand and further weakening in margins, in company margins. So some of this just isn't entirely tracking. I think part of it is that they can't forecast that there's going to be a contraction. They can't

forecast that there's going to be a recession. So Gundlach would say, who we just obviously talked to, Jeffrey Gundlach would say that's exactly why he thinks that stocks are, in his words, wildly overvalued relative to bonds for the very scenario in which you say elevated rates and economy that's going to come in as a result. So I think the soft landing expectation is taking what's going on today and extrapolating it out into the future and acting as if nothing's going to change. We're just going to stay on this trajectory. As we know, and as Jeffrey rightfully pointed out, the lags and even yield curve inversions point to whatever indicator you want.

This is the period where it usually starts to be a problem. So declaring victory and saying a soft landing is just going to create a scenario where this all continues, I don't think is likely. It's going to have to inflict pain. And that has been reiterated by the Fed. It's going to have to inflict pain. We've seen a little bit of pain, but not quite enough yet to take care of the inflation problem. I am absolutely with Jeffrey on the idea that I think we'll see cuts before the market thinks we'll see cuts.

And I think we're going to see more cuts before then. Because I don't think that it's sustainable to expect rates to stay at this level, expect the yield curve to stay this inverted, and that everything else just sort of carries on its merry way. Well, I mean, Mike Santoli, even the Fed chair himself wasn't willing to call a soft landing his baseline scenario. He knows the lag effects that are still to come. He knows that by keeping real rates higher into next year that the economy is going to slow and the labor market is going to come even more, in his words, into greater balance. The question is, what are investors to do with all of that? Well, you know, their forecasting ability, as he conceded, is no really

no better than the market's collective ability to see ahead. I think what he did say is he's willing to allow himself and the Fed to get lucky if that's the way it goes and not necessarily try actively to short circuit the economy from here. You know, he was very diffident about the potential for another hike this year. Yes, that's what the committee projects. We leave it open because we're so close to the end of the year. That means one meeting out of two, we make it a hike. But beyond that, I think it's much more about he's going to make use of all the latitude afforded to him by the fact that the rates are up around where they need to be. The economy still continues to be somewhat stronger than they anticipated. And the

long end of the Treasury curve and perhaps energy prices are doing some of the job they otherwise might seem to do. So, yep, stocks have a little bit of a colicky response as the two-year note yield does go higher, which is we have the higher for longer medicine being applied. But I don't think this was a game changer today. And I don't think he wanted it to be a game changer looked at the collective projection is for unemployment to go above 4% next year they're not saying it's going to stay perfect it is for a step down in GDP growth and it but I think also the fact that they don't have inflation going to their target until two plus years from now gives them the ability to stay patient. So the market is perhaps you have to see what happens at the close and tomorrow for the real response. The great question, Mike, remains valuations. You heard Gundlach suggesting his words, stocks wildly overvalued relative to bonds. The debate has been relative to where rates are, where the economy seems to be heading, where earnings may in fact come in relative to expectations,

whether stocks even right now are just overvalued. It's a much longer conversation to decide how much the level of Treasury yields matters for equity valuations or not. It's obviously something that's in everybody's mind, that it is a little bit too tight right now. But I don't think that that's necessarily a little bit, you know, too tight right now. But I don't think that that's necessarily a clinching argument, especially outside the top seven stocks. Yeah. Liz, real quick to you. Dollar going to weaken, take a position in commodities, maybe 25 percent of your portfolio as he sort of broke it down. Twenty five, twenty five, twenty five bond stocks, you know, cash and commodities. I think in the near term, we're going to see dollar strength

as rates continue to rise. And I think that inflation, given where oil prices are and just given where expectations are, that inflation probably comes in either at or slightly above expectations again, either next month, the following month, or at least for a while here. So I think the dollar strengthens before it weakens. But if I play my own scenario out, the dollar does weaken as the economy starts to show signs of stress. And that's when you don't want to be overly exposed. Yeah, sounds like that's exactly what Jeffrey expected to happen to FedEx shares. We talked about them. Earnings are coming in overtime. Shares are far outperforming rival UPS and the market year to date. There's Frank Holland with more on that for us. Frank,

what are we expecting? Well, Scott, I think you're really hitting on one of the important things. FedEx is really outperforming rival UPS in the market. As investors, they are clearly supporting its broad cost cutting and transformation plan that began just about a year ago. So the key thing to watch on this will be the call and any commentary on new business and also any possible updates to guidance. So FedEx recently announced a general rate increase starting next year and surcharges for this holiday season. A lot of analysts are watching for any comments about winning business from UPS during the Teamster negotiations. UPS itself estimates it lost more than one million packages per day in volume during

those negotiations. Also, any gains in freight volume from the bankruptcy of Yellow. FedEx Freight is the largest LTL carrier in the nation. Yellow was in that same space. The influx of volume in both areas at higher prices is expected to give margins a boost. Evercore recently raised its EPS estimates for FedEx. There's a lot of speculation the company could also raise its EPS guidance. Back over to you. Thank you very much for that, Frank Holland. Mike Santoli, what are your expectations here? Yeah, I mean, this is a management that's not been shy about calling out macro challenges when they see them. You could say that they're kind of blaming global conditions sometimes in past quarters. So I would be interested to hear their characterization

of the macro, of pressures like, I know they pass along fuel costs, but what that's doing to demand. Now, earnings expectations for the current quarter have come down pretty significantly in the last several months. So in theory, I think the market kind of expects them to hurdle the latest print. But, you know, it is a much more in favor stock than it has been, I would say, in a couple of years. Yeah. So let's turn back to the market. So where I mentioned before, we were at session lows and that's where we are now. But, Liz Young, let's focus on those two words that took prominence today. Proceed carefully. And, you know, investors are going to have to make up their minds in the days ahead, how they view where the Fed's going to take rates and what their policy is going to go, how many hikes there are going to be, if any, when the cuts come, et cetera.

But proceed carefully. Something to hang on there if you want to see things more positively? Sure. I mean, this is one of those meetings where we get the dot plot, right? I think if you look over time at what the dot plot suggests, you find out that the dot plot is not good at predicting what they're going to do because it just has risen over time. And if we hung our hat on that earlier this year, we would have wildly undershot where rates ended up. Carefully, I think, is the right word to use.

And all it does, though, is make us just as data dependent as them. And we're watching the same data come in. They're watching the same data come in. As we move through fall, I do think another hike is more possible now because of what consumers are dealing with and because of the persistence of inflation. But again, I don't think that another 25 basis points really changes much. It just sends the message that they haven't given up the fight. And that's the important message. I mean, the question, Mike, is whether it changes, you know, the appetite, if you will, for growth stocks. I know it's not the number one factor, but it's an important one. And the NASDAQ's down 200 points.

It's down 1.5%. At the short end of the curve, the rates are up. It's a factor, and it's an important one. It's a factor in the short term. I will say that since the NASDAQ bottomed, it's up 40% since October, and we're up 200 basis points in terms of Fed funds since then. So it matters. But we'll see if that's more excuse than reason. Yeah. All right, guys, I appreciate it very much.

So stocks are going to go out at the lows of the day. There's the Dow. It's down about 80 or so points. Nasdaq, as I said, is the biggest loser. I'll see you back here in San Francisco tomorrow. Look forward to that.