Closing Bell - Closing Bell Overtime: Historic Fed Decision 06/15/22

Episode Date: June 15, 2022

DoubleLine’s Jeffrey Gundlach gives his exclusive, first take on the Fed’s decision to raise rates by 75 basis points. Plus, Sofi’s Liz Young with her take on what’s at stake for stocks moving forward. And, Mike Santoli’s “Last Word” on the Fed.

And welcome, everybody, to Overtime. I'm Scott Woffman. You just heard the bells. We're just getting started right here at the New York Stock Exchange. And we get right to our talk of the tape today, that Fed decision and the fallout for the already fragile markets and your money. Let's ask those critical questions today to our special guest, DoubleLine CEO and chief investment officer, Jeffrey Gundlach. He is back with us now in a CNBC exclusive. Jeffrey, welcome back. It's nice to have you again. Yes, Judge, this is turning into something of a habit, doing the 4 p.m. Eastern Fed Day show. So I'm happy to be here. It certainly is. It is, and I'd like to keep that going. Let me get first off your reaction to what happened today.

I know from your tweet last night you wanted 200 basis points, and we both know that wasn't going to happen. But what do you make of the 75 that you got? Well, it's pretty obvious that was going to happen. As you've been saying since Monday, Judge, I mean, that was obviously didn't just fall out of the sky. It was pretty obvious they were going to do 75 and they were warming the market up for it. But when you look at the reaction from the press conference, in spite of the fact that Jay Powell was very adamant that it's critical that we bring inflation down to 2%, it's essential we bring it down, we're going to bring it down. The market took the announcements in the press conferences somewhat dovish, really, I thought. I mean, the dollar falling, I thought that was interesting.

The two-year Treasury rallying, the yield curve steepening, that's not really a hawkish action by the dollar or the bond market. So Jay said a lot of things that were seemingly contradictory because he was trying to attack things from many different angles. from May where he kind of spent some of his credibility by promising no 75 and then doing a 75 and deciding on it apparently just days before. So what I took from Jay's comments really is he's become a very short-termist, data dependent, we're looking at everything all the time. But in a certain sense, Judge, they sort of did, in a weird side door way, kind of tell you that they're raising rates to 3%, kind of what I tweeted out last night. I mean, when you're talking about 3.4 by the end of the year, you're going to be at 3 pretty fast. And we're talking about 175 basis points of rate increase to get there. You're talking about three fifties and a twenty five

or else a seventy five in there, maybe one less fifty or something. So by September, it looks like we're going to be at around that range will be two fifty to seventy five. And I don't really know what the difference is between raising it to three now and raising it in two steps in September. The inflation rate is so high. And this idea that it's about to come down to anything close to the 2% level is completely out of the cards. If you look at the data right now, our model at Double Line is looking for an inflation rate to stay in the eight handle now for a couple more months, maybe even print a little higher based on the fact that commodity prices got even more elevated, particularly energy. And so by year end,

we might get inflation down to the high sixes. But when you're talking about a goal of 2% and repeatedly committing to that as an essential goal, I think you said, to even allow for a functioning economy, You need that kind of price stability. We're so far away. I just don't see how we're going to avoid that 3% number happening basically by the September meeting or something very, very close to it. So very much as expected because the Fed told you on Monday what they were going to do. Yeah, for certain.

And there's a lot in there, and I want to get to a bunch of things that you said. I want to begin on the credibility issue of what you just said. The Fed chair saying he doesn't see 75 basis point moves as, quote unquote, commonplace. He said 50 or 75 at the next meeting is appropriate. And I know that's what you were just alluding to in your comments. Powell himself talked about getting optionality out of that. And I do want your reaction as well to a conversation that I had right before we came on, Jeffrey, with David Tepper, who contrasted Powell today, as you just did, when Powell said last time that 75 was basically off the table. Tepper saying, quote, last time was ridiculous. At least this time, it's in the realm of the possible. He left himself optionality. Now, the question will

still remain as to whether it's right or wrong. But nonetheless, he at least gave himself back what he seemingly took away, as you alluded to in May. Your reaction to what Tepper says? Well, I agree with David. I think his comments make sense. I didn't see that interview. I was getting... No, it was just a phone. It was just a phone conversation that I had. I see. Well, one thing that's amazing about the credibility issue is the Fed is making these predictions for rates a year from now being about 3.8 or something like that in May of next year, and that being the high point.

And you've got all these inflation predictions for next year and the year after. Where the credibility is really lacking is why are you bothering with all of these predictions for one year and two years from now when you've had a complete U-turn on some of the things you said six weeks ago and a complete U-turn on things you said, you know, six months ago. So I just don't take those credible at all on those predictions. And as I said, the model double line, we're looking for maybe even a 7% inflation rate for the year 2022 as a whole. And one thing I'd like to talk about, I think it's really important. It's something that Larry Summers published last week, and I thought it was really interesting.

I think it got the market's attention, and I think it has something to do with the incredible repricing of the short end of the yield curve. In three short days, pricing in 75 more basis points in heights this year is what the yield curve did from late last week into yesterday. What Larry Summers did was really very, very clever. I've become something of a fan of Larry Summers because he was the one person who had the courage to say it's not transitory inflation that is, a year and a quarter ago. But he did something that was really clever. There's been a group of economists that have been railing against the economic statistics, particularly the CPI, for a long, long time. These people,

they call it shadow finance statistics and stuff. And they kind of unfortunately relegate themselves to a lunatic fringe sort of corner of macroeconomics because they act like there's a conspiracy going on. The government is lying about the inflation rate that's really much higher, and it's because the methodology has been changing, and substitutions, and hedonics, and nobody ever pays much attention to them, but they've been saying in shadow economists that the inflation rate is really understated by about four or five percentage points based upon what was reported, the methodology that was used back, say, in 1980. So in other words, they point to all of these changes and say they're lying to you, and people don't really take them very seriously. But what Larry Summers did was reach the same conclusion in a much more

simplistic and much more less controversial way. Instead of saying, let's compare today's inflation and use the 1980 methodology, so we're comparing the number today to the number in 1980. He did the opposite. He thought it was really smart. He said, let's calculate the 1980 inflation rate, which was around 13.5%. Let's calculate that using today's methodology. So he gets away from in real time calling people conspirators and lying to people because we're not talking about real time. We're just accepting today's number, 8.6%.

So what Larry Summers did is he said, let's just use the same methodology today and recalculate 1980. So you're not accusing anybody of anything. And so what he did is he said, let's just take shelter. He made it really simple. So it was very elegant. Let's just take shelter. Shelter is a third of the CPI. and they're saying shelter is up 5.4%. Now, everybody knows that shelter is not up 5.4%. Rents over the last 12 months are up double digits. There's real series that calculate this.

They're up double digits, and of course, single-family homes on a median basis are up 22%. So if you actually use home prices instead of this owner's equivalent rent, which is just a construct, Larry Summers said the inflation rate in 1980 wasn't really 13.5. Using today's methodology, it was something like nine. And I think that opened people's eyes because it's a way of accepting the methodology changes without criticizing anybody. And so basically 8.6 today sounds a lot like 9. And so the inflation rate today, using the same methodology, the inflation rate in 1980 at 9, using today's methodology, and we're at 8.6 today,

it's the same inflation rate. And yet we have interest rates that are below 2% on the Fed funds rate. We're so high on the inflation rate relative to 1980, about the same number, and the rates are so low. And that's why I think it's really foolhardy to believe that this inflation rate is going to meet these Pollyannic predictions and go down to 2% in the next year and a half. And I think the Fed is going to have to raise rates in line with what the bond market says. As I've said to you repeatedly and to your audience repeatedly, the Fed follows the two year. So one of the things that Jay Powell said that was really disingenuous is he said the forward guidance they've been giving has been helping to tighten

financial conditions. It's exactly the opposite. It's the tightening financial conditions as evidenced by higher short-term interest rates by 275 basis points on the two-year treasury. That's what's been leading the forward guidance. He's got cause and effect backwards. They're following the bond market as appropriate they do so. As many commentators have said today, and I think accurately,

it is nice to see that the Fed's predictions for year end are finally matching what's going on with the two-year treasury, but they have to execute on it. That's why I think it's, I just think that they should, I think they should paint or get off the ladder, basically, when it comes to meeting this goal of that 3% type of interest rate, and they should get there now. Does the fact that they, by pulling their, you know, by raising their forward guidance, by getting that more in equilibrium, if you want to use that word, with where the market has been, does that calm the bond market down going forward now, Jeffrey? Because some of the moves in rates over the last few days alone have been just absolutely shocking,

and I'm sure even jarring to someone like you who's seen a bond market or two. Yeah, I've seen a lot of bond markets. I was around in 94. I was around in the 80s. So I've seen a lot of stuff there. I think the bond market has obviously been calmed down, at least for now, because, you know, there's less uncertainty, as we talked about six weeks ago. At least there's less uncertainty about where we're going. But the Fed heading to 3.4%. My suspicion is that the two-year Treasury is going to start heading higher again because the inflation prints are not going to be pretty.

The next two that are coming out will probably be somewhat stable relative to today's level. But then we have base effects that have been somewhat helpful in making inflation plateau in the lower to mid eights. Some of those base effects, which means the number that's rolling off from a year ago, the numbers that are rolling off from late last summer, the next month is a high number that's rolling off. So inflation probably won't be, will probably be somewhat similar to where it is today on the headline CPI. But a couple of months later, there's lower numbers that are rolling off. And we have a potential to see a 9% inflation print on a year over year, one month print anyway, year over year, somewhere between now and year end.

And I just don't see how we can live with a two uh with stability and feeling good also bond market liquidity is is deteriorated uh with the fed doing quantitative tightening and just in general the bond market uh investors being on buyer strike or even in outflow mode across etfs and mutual funds and banks not buying they're making loans uh now instead of like buying mortgage-backed securities stuff like that they did a lot of last year so the problem we have is a liquidity problem and uh it's interesting i saw someone on cnbc yesterday saying that what the stock market needs is an increase in liquidity well of course what the stock market's getting is exactly 180 degrees the opposite of an increase in liquidity.

Liquidity is going down. It's going to go down further. So this summer is going to see, I think, further rate rises later, at least later in the summer on the short-term interest rates. Well, the question is, you know, and Powell was asked about how committed he is to getting inflation down, even if he's doing so at a point where the economy is weakening and potentially weakening substantially. He says the Fed is, quote, strongly committed to doing what it takes and they have the tools to do it. The question is, if it starts to look more and more like we're heading into a recession and inflation remains as hot as you just suggested it will, do you believe that he'll have the fortitude to go forward and do

what he says he will if that's the scenario? He's got to. I mean, he said things in such uncertain terms. I even wrote it down here. We have to restore price stability. We really do. Getting 2% inflation is critical and essential. That's pretty direct messaging. And so if inflation doesn't get down below, I would say six on year over year basis in the next few months, he's going to have to, like I said, he's got to paint or get off the ladder and get these right legs through if he wants the market to, I guess, restore his credibility, which I think everybody agrees is a little shaken these days. The other question is, is 4% going to be enough? Where they've raised their

expectations, is that going to be enough to do the job? And Steve Leisman, who, you know, last time asked the question of the conference. This time, I thought he asked the question of the conference and he got the money answer. It's certainly in the range of plausible numbers, said the Fed chair. We'll know when we get there. I would think it would, again, alluding to the 2022 forecast of 3-4, the 2023 forecast of 3.8. And the question is to whether that's going to be enough to get the job done. Yeah, it seems unlikely that it's going to be enough to get the job done.

If you're really committed to getting positive real interest rates and the neutral rate is very low these days. So what he's saying is to get to real interest rates, you've got to get to positive real interest rates. You've got to get the inflation rate seriously. It's got to be below the neutral rate. And he says the neutral rate is low. So I don't know how you're going to get there with inflation running at eight, eight and a half, maybe 9% in the near term. I don't see how you're going to get there with only a 3.4, 3.8 fed funds rate. So I think higher, if he's serious, I mean, that's the big question they can they can see what happens they can go to 3.5 or four or we went through predicting 3.8 and just wait and see what happens but the rest of his

messaging is full of flexibility being nimble being data dependent so it looks like they're trying to get to a place you know a destination destination in the next year or two. But what they're looking at is almost day to day. And so they're oversteering, I think, constantly. But I mean, these are these are somewhat unprecedented times, wouldn't you admit? So what's wrong with being a little more flexible than one might otherwise be, whether it's day to day or week to week? I mean, you, Mish, the Consumer Confidence Survey was unsettling. I think you used the word unnerving when describing that. And that helped paint the picture of why today

happened. Obviously, the CPI read was much hotter than people thought. They were caught by surprise yet again. Don't you want a Fed chair at this point who is flexible, who's willing to make a change of policy based on what the story dictates? I'm completely in favor of that. And here's how I propose doing it. Put the Fed funds rate to 3% right now and then be flexible. And if the data really starts to soften, bring it back down. That's also flexibility. The flexibility we're doing now is hoping that something good happens, but kind of fearing that that good thing isn't going to happen. So messaging that we're going to, you know, hope for the best, but plan for further increases. And that's called flexibility. I call it hope. Let's do this, Jeffrey. Let me squeeze in a quick

break, if I might. And we'll come back more of our conversation, our exclusive conversation today with Double Lines, Jeffrey Gundlach. We'll be right back. We are back in overtime and with our CNBC exclusive today with Double Lines, Jeffrey Gundlach. By the way, it was quite eye-catching was the exact words that the Fed chair used when describing you, Mish. I just wanted to make sure I was 100 percent accurate for everybody, obviously. You know, he did also address the current economic situation, Jeffrey, in which he said, quote, there's no sign of a broader slowdown. It does sort of speak to the fact of whether they can pull this off, which, look, he sounded he's still trying to project confidence that they can that they can pull this off. It goes to the issue of whether they've waited too long and now they're going to do too much.

Esther George today, she dissented. She wanted 50. But speak to that issue, if you could, because I know you have huge doubts. You don't think it can happen. You don't think they can pull off a soft landing. No. And I kind of I think it's eye catching, frankly, or you're catching that everyone keeps talking about how wildly strong this economy is. I mean, GDP was negative in the first quarter and GDP now from the Atlanta Fed for the second quarter is now at zero. And it's been trending in a southward direction for the last few months. So where's the strong economy? I mean, retail sales aren't exactly strong. Personal consumption expenditures, they look strong because there's inflation in there.

You know, housing has become extremely less affordable. The average monthly payment, the monthly payment on a median home, if you just take the median home price and the 30-year commitment rate, that payment is up by 45% year to date. So it's pretty obvious that these higher mortgage rates, which have doubled in just the past several months, are going to cut into things. You mentioned the consumer sentiment. That's terrible. And I think it has a lot to do with the price of gasoline, the price of cars, the price of housing. But still, the number is the number it's the lowest number ever on consumers to consumer sentiment and we all know that a lot of consumption was pulled forward durables exploded to the upside two years ago and stayed elevated until very recently and are still way above trend

that was in place for the years prior to lockdowns so you can't expect any growth at all. You should be expecting negative trajectory on the nominal value of durable spending. Non-durables is also above trend. So what we got left is services, which was correctly pointed out by Jay Powell, that the inflation rate is very, very problematic in services. And it's probably going to get worse in the months ahead because there's so much pent

up demand for travel and leisure and hospitality. But all three of these things are either at or above trend. If we go back to 2016, we took a huge hit during the pandemic, but we've more than recovered by a lot in durables and non-durables and are almost back to trending services so where's the growth supposed to come from it's not housing uh you know is is it is it going to come from global trade doesn't feel like it so i i just i've had a hard time finding where the economic growth is naturally going to come from and while you're raising interest rates and trying to and promising multiple times that you're watching inflation you You know it hurts people. You care a lot about your duties to take care of the American economy. And so you're going to be moving interest rates higher until the inflation rate comes down. So we really have, Jay Powell

admits it's one of those difficult times. Everybody knows that. And to say that we're going to avoid softness, I mean, we're already in a soft-ish landing. That's putting it kind of kindly. So if you think things are going to get worse and by raising interest rates to fight inflation, your intention is to make things worse. I just don't think the non-recession case has much more probability.

The other thing they obviously are going to try and avoid doing is breaking something, if you will, in quotes, in the bond market. They've got, you know, the role of the balance sheet, QT. They're staying at the current pace, the level of the runoff. That's what Powell said today. I did read an article a few hours ago that suggested central banks weren't going to be able to go at the pace that they plan to because credit spreads are going to widen, if not widening already. And that was going to force them to scale back. QT, do you agree with that? if there's very significant damage, either economically or to the stock market, or the one thing that no one likes to talk about that seems to happen a lot when you have very large volatility in risk assets is somebody blows up. And that usually starts to change the narrative.

We've had such a huge decline in parts of the stock market and stock markets, many stock markets in the world. I mean, emerging market equity year to date is down 15%. Most equities are down a number. NASDAQ's down 28. Bitcoin is down 53% year to date and 45% just since the last Fed meeting. We've already seen around the edges some blowups in parts of the crypto world. And that could be foreshadowing some problem. And I also noticed that some of the financial institutions in Europe, their stocks are pretty weak. So once you put all this into a system that was living on very low interest rates and therefore very likely very leveraged up, I think it's very possible that we see some sort of a blow-up that happens.

And that's the thing that is worrisome. I also think that the VIX, in spite of the S&P going to a bear market and there being a lot of bad numbers, I mean, if you look Thursday, Friday, Monday, Tuesday at the stock market, I'm surprised the VIX didn't go higher. So I do think that this sort of a dovish read almost, I think, off of the Fed's press conference. I mean, it sounds hawkish doing 75, but the dollar falling and the short end coming down doesn't exactly take it as hawkish,

takes it more as dovish. I think that move, we could see a replay of six weeks ago where, you know, we got a relief rally. We've had that a number of times now as the Fed has raised interest rates. And I think we might see a reassessment on just how likely that soft-ish landing can be engineered by the Fed. I don't think it's possible. Let me get your view of a few asset classes. I mean, you alluded to all of them here, but I want to drill down a little bit more, if I may. Crypto, okay?

21.5 is where it is, as Bitcoin is, as we have this conversation here. How low do you think it's going? Well, when it broke below 30, it looked on a chart basis that 20 was like oh but going to happen really quickly and it did but the the the trend in crypto is clearly not positive i mean topped out a long time ago i remember i was with you in july of last year and bitcoin was up at like uh 60 000 or something and uh you know know, then it dropped down to 30,000. Luther was going to break down. They managed to rally back.

But it keeps putting in, it looks like it's being liquidated. So I'm not bullish at 20,000 or 21,000 on Bitcoin. I wouldn't be surprised at all if it went to 10,000. Wow. You've, speaking of falling, you have suggested to me and our viewers in prior appearances that you did think the dollar was going to weaken. Now, I'm not sure if you think, I mean, it's been really red hot and the dollar has been so strong of late. Let me ask you first, has the dollar had more staying power being as strong as it has for longer than you expected? Because I know you

do think it's going to go weaker, but it's been really strong. Has that caused you by surprise? Not at all. If you listen to the replays of my webcasts, I have all year and for the past 12 months have been bullish on the dollar in the short term. I'm very bearish on the dollar long term. I was bullish on the dollar in the near term. And now I'm very bearish on the dollar long term. I was bullish on the dollar near term. And now I think the bull case for the dollar is getting worse because the ECB is going to have to start tightening interest rates. And other countries are going to start tightening interest rates. I think the Fed was kind of the pace car on hiking interest rates. And that was the reason I was bullish on the dollar, that the Fed was going to be relatively raising interest rates more than other central banks. I

don't think that's really likely the case anymore. You can really see the dollar strength has a lot to do with the dollar versus the yen, because the BOJ is absolutely willing, it appears, to sacrifice the yen at the altar of zero interest rates. And they're just not even really taking seriously what's going on with global inflation. And so the yen has just been mightily, mightily weak. The euro has been relatively weak, but not so much recently. I do think that the dollar is going to fall very sharply in the next recession. My viewpoint is that the dollar has been strong. I've expected it to be strong. We've not been we've been in the dollar. We've not been short the dollar this year. And I expect to be to

be short to going into recession, be strong because of the Fed's raising interest rates will lead to the recession. But then once the recession comes, I think the Fed will go to zero pretty fast. And so that would be the minute that the dollar rolls over. OK, do you still like commodities as much as you have? I like commodities for the longer term. The move is just so convincing. It's very overextended, but it doesn't correct. And so I think investors should have a structural position in commodities.

You've danced around emerging markets for a while, I know. Have you stayed on the dance floor? Have you done anything? Have you bought them yet? You said you were taking a look. I wish I had because they've started to perform a little bit better. But I'm really waiting for that dollar break to happen before I pull the trigger on emerging markets. They've stopped underperforming. They've stopped. They started outperforming. It's the U.S. that is now underperforming. The rest of the world's underperforming. Europe. I've liked

Europe. I've been in Europe for over a year. It's been an outperformer versus the S&P 500. I have not pulled the trigger on emerging markets. But what I do, I think I'll do it in a big way. I just don't think it's timely yet, although I am a little bit impressed by how it's been outperforming against the developments of the past few months, which has been obviously weakness for a lot of risk assets. Two more quickies for you. Stocks, U.S. stocks. What's your view on where they go from here? Are you neutral now? I'm kind of neutral on stocks right now. I mean, we got to the 35 on the VIX, which is a level at which I start to not really feel very negative. We're back a little bit lower today, understandably. But I think stocks are going to put in new lows, but I don't think that this is a good time to sell them right now.

I think what we've seen has been a pretty big decline. And so I think we've got a better place to sell them today. So I'm sort of neutral. I'm not aggressively advocating, but if you wrote it all the way down this far, I do not think today or certainly not yesterday is the moment to sell. And lastly, I'm going to go right into your wheelhouse. I want our viewers to hear from you. What's the most exciting or attractive part of credit to you right now? Well, there's a lot of opportunity, but you have to take a lot of risk. There's a lot of things that yield 12 percent. They're risky, but they're down the capital structure and structured products and the like.

Also, weirdly, in the last few, just in the last few days, maybe the last week, our models on where fair value is for the 10-year treasury have gotten really, again, we'll use Jay's phrase, eye-catching. One of the things we use, there's models that use on on the 10-year treasuries and some of them actually have been saying that the 10-year treasury was correctly priced as recently as a few weeks ago but weirdly a bunch of them have now said the 10-year treasury yield they're ready for this is too high that that these are good signposts that have worked over time like the the copper-gold ratio says the 10-year is too high in yield. The GDP blend with not all GDP with the German 10-year, which is a strange indicator, but it works very well,

says the 10-year is too high. It's kind of strange. I don't know if that's just a short-term blip, but it kind of suggests that there's a counter-trend rally coming at the long end of the Treasury market, which I've been advocating for as a hedge. But if you haven't done it and you're scared, you've been scared and right to be scared.

I mean, I'm looking at my data again. I mean, the 30-year treasury yield is up 35 basis points since the last Fed meeting, a little less since this was printed an hour ago. Tenures up 41 basis points. Year-to-date, tenures up 189 basis points. So, you know, I think a countertrend rally in the bond market, which may have started today, and the long end even started to participate in today's rally.

First, the two-year, 30-year spread was flat last night and was flat when Jay took the podium and then widened to 20 basis points as he was talking. And what the market liked is there's no guarantee of supersized interest rate hikes baked into the cake. And that's when the stock market rallied, the two-year rallied. It's a long bond sort of joint. And I wouldn't be surprised to see the long bond go back down to 3%. So you might have a short-term trading opportunity there. Interesting.

We will leave it there. Thank you so much for being here. I like these regular appearances on Fed Day. And I know our viewers like to hear from you as well in your real-time reaction to it. We'll see you soon. All right. Thanks, Judge.

Good luck out there. All right. Yep, you as well. That's Jeffrey Gundlach of DoubleLine joining us there in a CNBC exclusive. Let's get to our Twitter question of the day now. You as well. That's Jeffrey Gundlach of DoubleLine joining us there in a CNBC exclusive. Let's get to our Twitter question of the day now. It's simple. Will stocks be higher or lower than they are today by the next Fed decision on July 27th? When hopefully I'll be sitting here once again speaking to Jeffrey Gundlach.

You can head to at CNBC overtime. Cast your vote. We'll share your answers before we leave the show tonight in about 25 minutes. It's time for a CNBC News update now with Shepard Smith. Hi, Shep. Hi, Scott. From the news on CNBC, here's what's happening now. As NATO defense ministers start a two-day meeting on providing assistance to Ukraine, President Biden told the Ukrainian President Zelensky on a telephone call today

that the United States is sending another $1 billion worth of weapons and equipment. That includes artillery, ammunitions, and rocket systems to help Ukraine defend against Russian advances in its eastern Donbass region. COVID shots for young kids. The FDA today greenlighting the Pfizer vaccine for kids under five. If regulators sign off, kids could get shots in arms as early as next week. And the man accused of shooting up the top supermarket in Buffalo, New York, killing 10 people and injuring others, now charged with federal hate crimes. If convicted, he could face the death penalty. Tonight, the disturbing new data on self-driving cars. Over a 10-month period, nearly 400 crashes in the U.S. involving driver

assistance technologies. Phil LeBeau with a deeper dive on the numbers on the news right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. I appreciate that, Shep. Thank you, Shepard Smith. After the break, halftime committee member Josh Brown joins us with his instant take on what the Fed did today, what Jay Powell said over time's back right after this. We're back in overtime. The Fed hiking interest rates today by 75 basis points.

It is the largest increase in 28 years. Stocks rallying on the back of that historic hike. Joining us now with more reaction, Ritholtz Wealth Management CEO and a CNBC contributor, Josh Brown. JB, it's good to see you. What now? Where do stocks go from here, do you think? I wouldn't be surprised if we have a similar outcome as what we had during the last Fed meeting. If you recall how that went down, CNBC's Steve Leisman asked the fateful question,

were you considering 75 basis points after a 50 basis point rate hike? And the chairman demurred and the stock market took off to the upside. Today looks like a similar setup, not as big of a rally, but certainly being led by some of the trashiest, highest multiple, scariest former growth stocks imaginable. Those were the leaders today. Never a great sign. And tomorrow, there could be a really big rethink. And I can't imagine that the bear market we've been in now, which is the ninth longest in the last 80 years in the entirety of the post-World War II history of the stock market.

This is now the ninth longest bear market. It's hard for me to imagine it ends with a Fed rate hike of 75 basis points. So I don't think we've seen the lowest prices that we will see. And I don't think much really changed today, given how rapidly the bond market had already gotten here before the FOMC had its chance to put out a statement. So what changes the game then? Nothing. You probably need a recession. I don't think you can wring the amount of stimulus that's been put into this economy over the last couple of years out with just like a soft landing where everybody gets a happy ending. One of the questions I would have asked Jeff, and I guess I'll ask him some other time, but I would ask as a bond manager, is now the time to shift from being worried about duration and that being the biggest risk to credit?

And I generally think the answer is yes. We haven't had an environment where anybody had to worry about the solvency of really anything or anyone, whether we're talking about municipal governments, or we're talking about newly public companies, or we're talking about fallen angels. There's really been nothing to worry about, and spreads have reflected that. That seems to no longer be true, and this is not just going to be a U.S. phenomenon. In Europe, they called an emergency ECB meeting to look at what was going on with southern country bond yields. I don't know when the last time was that we had to worry about that issue, but now Italian bonds relative to German boons of the same duration, we're seeing spreads widen.

And that often is the precursor to a lot of headlines in the Financial Times, the Wall Street Journal. So if we have to pivot now, just let me finish the thought. If we have to pivot now to this new risk. So, so look, if he answered that in terms of looking for something, he's expecting something. I think, you know, something to blow up, someone to blow up. As a result, when I asked him about this idea that central banks are not going to be able to do QT to the degree that they want to or at the speed that they think they can because of credit spreads widening. And he fully said to that question that he expects something somewhere to break. We had about 1,500 companies come public over the last

two and a half years, and a lot of them were not built for a world where there's a cost of capital. And it's a positive cost of capital. They're not built for that. Our present housing market is not built for what's gone on in the mortgage market. In just the last week, things have gotten so extreme that purchase applications have crashed by 40%. Compass and Redfin, two of the largest brokerages or brokerage platforms, announced proportionally pretty big layoffs. There's a whole leg down in housing that could occur that would have significant ramifications for the economy. And that's notwithstanding the damage that we've already seen in equity market

capitalization. You've got over $9 trillion in losses for the U.S. stock market. I don't think that's been felt yet in the real economy. There's a lag from a negative wealth shock like that, but it's coming. So this is where we are. I like the idea that stocks will have these temporary reprieves. They shouldn't go down five days a week, of course. And some stocks might be done going down, period. But it's going to be a difficult environment. The Fed is not in a position, Judge, to supply us with a new bubble to get excited about. Think about how many bubbles we've had come our way to enjoy over the last few years. The FANG bubble, the growth stock bubble, the SPAC bubble, the crypto bubble, the venture capital unicorn bubble. It's been one amusement park ride after another.

The Fed just can't do it right now. They can't supply us with one. And that's why I think boring stocks are going to win. I think companies that are high-quality balance sheets, fortress balance sheets, if you will, companies that have pricing power, that have the ability to raise prices, I think dividend payers over non-dividend payers show me the cash flow. And I think return of capital is the new byword. And return on capital becomes significantly less important at this stage in the game. And if you can process those things mentally and look at your portfolio, you will rapidly come to the conclusion that you still have a lot of stuff that you bought

during a very different environment that no longer makes sense in the morning light. Yeah, it's a it's a great point that you make and a good way to finish. Josh, I appreciate it. We'll see you soon. Josh Brown joining us there. Up next, we're tracking some big stock action. There is some in overtime. Christina Parts and Novelos always on the lookout for that. What's on deck? Well, we've got layoffs, a hushed million dollar settlement and random surges. Sounds like a movie, but it's really your OT movers all have those stock names right after this short break. We are back in overtime. Let's get now to Christina Partsenevalos with a look at some of the big movers today. Christina.

Scott, another day, another company announcing a hiring freeze. This time it's Spotify. In an email to employees today, the company said it would slow hiring by 25 percent. Another signal that tech companies are cutting back on growing staff during the ongoing swoon in markets. And you can see the stock price did climb over 7% today. In the past hour, though, there is a new report out from the Wall Street Journal stating that the Board of World Wrestling Entertainment, WWE, is investigating a secret $3 million hush settlement paid to a departing employee. The report claims WWE's chief executive, Vince McMahon,

had an affair with a paralegal. The board's investigation has also discovered other non-disclosure agreements involving former WWE female employees. You can see the share price falling in the OT. Scott, back over to you. All right. Yep. Christina, thank you. Christina Partsanova is up next. Much more reaction to the Fed's historic decision today to raise rates by 75 basis points. What is next? What it might mean for your money? We'll do that ahead in overtime. In today's halftime overtime, DoubleLine's Jeffrey Gundlach telling me moments ago that the non-recession case for the U.S. economy doesn't have much credibility

and that he doesn't think a soft-ish landing is possible. Joining us now, Liz Young, SoFi's head of investment strategy. It's good to see you. I'd love to know what you would tell people you think happens now with the stock market that the Fed has spoken. Yeah, look, first, Scott, I think the Fed did a good job today. I think Jerome Powell did a good job today, and there's a couple reasons why. I think, number one, obviously getting their projections to a much more realistic level was really important. They were way off base before, so that was a really important positive. The second thing is we learned that it wasn't just lip service, that they were data dependent.

They changed their direction after that CPI report, and I think that was a big positive. So now we know that they are actually watching those things. And lastly, I think watching the consumer and noting that headline inflation is really what matters is a much more real world approach to going after this. And it prevents them from making a huge mistake because they have their head buried in the sand. That all said, I do agree with Jeffrey that there is still a little bit too optimistic on their projections that they can do all of this without inducing a recession. Now, I don't think that increased recession risk is going to stop them. But I also don't think that profit margins and consumer spending can last much beyond this year if inflation doesn't get under control.

So I still think that they have to hit it with a hammer. And I still think we see volatility through July. Do you think by getting closer to where the market has been on rate expectations, which they did today, it'll calm markets, so to speak, particularly the bond market, which has been just going crazy over the last, I mean, there were moments in the last few days that were certainly jarring, if not wholly unsettling. Sure. I mean, the smaller the gap between the actual events and what the market was expecting, the better for market volatility. But we've still only gotten just one more piece of data. There's a lot of uncertainty here. And I think the biggest one that's still looming out there is that second quarter GDP report. So that's why I'm still not

telling people to plow all their money in and declare victory here, because if we get a negative GDP print at the end of July, the market hasn't priced that in yet, right? A 22% decline in the S&P is not a recessionary decline. So if we get a negative GDP print, you're going to see the market go down another 10 to 15%. I don't want people to be exposed before if that happens. So, yes, it does help volatility to be more in line. But I still don't think we have enough information to know what they're going to have to do for the rest of the year. Yeah, July between GDP, more CPI reports, earnings. Oh, yeah. Earnings are going to come out, too. There's a lot ahead of us. Liz, your points are well taken. Thank you, Liz Young. Sofi joining us there. Up next is Santoli's last word. Overtime's right back. To the results of our Twitter question, we asked, will stocks be

higher or lower by the next Fed decision on July the 27th. Nearly 47 percent of you said higher, while 53 percent said lower. Mike Santoli is here for his last word. You got a lot to choose from today. Yeah, I know. Right. Credibility seems like it's the subject of the last three hours, the Fed's credibility. And honestly, the one way you know that the Fed was credible going into this was just, I believe, contrary to what Jeff Gundlach was saying, the financial conditions have tightened mostly based on what the Fed has said. You go back to November, late November of last year, before this pivot in rhetoric. Yeah, the two-year note yielded half a percent.

Immediately went up to 75 by the few weeks later. And it's marched on from here. When we got the leak on the Wall Street Journal that they were going to go 75 this week, immediately the two-year note went up 25 basis points. So clearly it's taking its cues from how many rate hikes are we expecting. The fact that maybe Powell seemed a little halting, maybe kind of not a clear, coherent message based on how much growth risks there are and what they have to do for inflation, that's almost how you know he's being genuine because it's such an inherently conflicted position to be in, right?

You have to acknowledge the weaknesses is likely. He also doesn't want to box himself in in any way like some suggest he did last time. I was going to ask you, you know, what did we really resolve today for stocks? And I would suggest the answer is nothing. Now, you tell me better than that if you have something. I would say we resolved nothing in terms of the really big picture main inputs to stocks. What you did in the short term resolve was once we got the Fed message and saw that it was roughly in tune with where the bond market had been sitting going into this decision, right, at least for the moment, it was, OK, fine. We don't have to deal with another eruption of bond market volatility.

We don't have to be as off balance. So, no, I don't think anything else was resolved. Look, lower prices ultimately and washout selling like we maybe got earlier this week is the precondition for some kind of stabilization. Can a calmer bond market equal a higher stock market? I think it's almost a precondition of it. Like you need it as a prerequisite. Now, yes, look, we got three 7 to 10 percent rallies this year on the way down from less oversold conditions than we have right now. So, you know, nothing says you can't have one of

these come out of nowhere. And I do think people are very, very defensive and de-risked, as they say. So glad to have your last word, as always. That's Mike Santoli. I will see you right back here, as will Mike. Fast monies now.