Power Lunch - Stocks soar after Powell's Jackson Hole Speech 8/22/25

Episode Date: August 22, 2025

Markets perceived Fed Chair Jerome Powell's Friday morning speech in Jackson Hole to mean rate cuts are coming soon. The race for both AI talent and cloud space continues to heat up.   And are stock valuations getting too rich? Listen to it all here on Power Lunch.   Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stocks are rocking and you are wrapping up your work week, making some money. A seemingly more doveish Jerome Powell, sending markets higher. Welcome to Power Lunch, everybody. I am Brian Sullivan. As you know by now, you can see on your screen, stock averages climbing higher. The Dow is up 2%, NASDAQ up 2%, S&P up 1.6. Fed Chair J. Powell seems to have made up his mind to cut interest rates next month. Or did he?

Investors hearing the message is Jackson Hole. Either way, we're going to dive. deeper into that in just one second. Also, coming up, the AI arms race, not slowing down. Companies now battling out for human beings, talent, open AI, losing their recruitment chief. Further ahead from that, we're going to talk cars, Jeep, betting big on its biggest car, the new Grand Waggonier, Philibos chatting with their CEO. We'll talk more about the Cherokee and that. We've got a lot to do this hour, folks, but we're going to begin with this. With policy and restrictive territory, the baseline outlook and the shifting balance of risks

may warrant adjusting our policy stance. And with those just 20 words, the Fed chair clearly or seem to signal it is likely to cut interest rates at its September 17th meeting. The markets absolutely love it. I mean, they're just hard emoji all over it. Stocks ripping higher. But with inflation possibly lurking because of tariffs, by the way, As the Federal Reserve itself said, is Powell going a little bit soft right now?

Let's have a big, bold, beautiful conversation about all this. On set, two of our favorite people, Kevin Gord, of Schwab, Francis Donald with RBC Capital Markets. Thank you for joining us. That's Brian. Nice to see you. So I'm reading Powell's speech here, Kevin. Higher tariffs have begun to push up prices in some categories of goods. We expect the effects of tariffs to accumulate over coming months. with high uncertainty bet timing and amounts.

I could read this and actually make the case for a rate hike. Yeah, I mean, I think he, to me, this speech was all about balance and wanting to assess what the risks are. And, you know, to me, the most important line was assessing the upside risk for inflation, but also the downside risk for the labor market. And that's really the pickle that the Fed has found themselves in for a good chunk of this year.

And that's still where they find themselves probably for the remainder of the year. Markets, okay, markets don't get things wrong. markets are what they are, right? So the markets are reacting, and that's what we've got. But I am, I'm not going to lie, I'm a little surprised by the abulience, the exuberance of this market reaction. Well, I will say, I mean, if you look at what has been leading, at least initially out of the gate, when I first checked, you know, right after Powell was speaking, it had been more of the riskier, speculative parts of the market that tend to benefit when you get, you know, rate cuts. So if it is the case that the market's making a pretty big bet on that, it would seem to be,

consistent with what leadership has been today. Plus, I think a lot of the move and the reaction has been consistent with the probability that the market had going into September. I mean, going into the speech, you were close to around 80 percent for a probability of a cut in September. That's moved up to 85, 86 percent to the time we're having this conversation. But Francis, it's not 100 percent. It's not.

And listen, I want to be as cheery as markets are today, no question. But we've seen enough evidence from PPI statistics and prices paid statistics that there is tariff inflation coming. I think of it like the tariff Titanic has already hit the inflation iceberg. It's just the band still playing and it hasn't sunk yet. But that moment is coming for the American economy. Core inflation is going to end the year above 3%. And not just because of tariffs, but because there's also inflation on the services side. So Chair Powell might want that door to be open towards a rate cut in September, but I don't think the inflation data is going to allow him to walk through it. You just made a really good case for a rate hike or, as I called it a couple

days ago, Jackson Hold, because I, you're making the case, Powell's making the case with tariffs and inflation for not cutting rates. And yet the market is, yay, rate cuts. Well, listen, we're used to that dual mandate moving in the same direction and making that easy, but this isn't easy for the Federal Reserve because they're concerned about labor market. But I might say they might not need to be as concerned about that as they're expressing in this speech via Jackson Hole. The unemployment rate is at 4.2% exactly where it was a year ago, Brian. So yes, there is a slowdown happening, but Chair Powell himself admitted that there are supply side factors that mean we don't need as much job growth as we did before. So when I listen to this speech, I'm wondering,

Chair Powell, what problem are you trying to solve right now? Are you trying to prevent one? And what are the risks right now to this market to the economy of moving too early, too quickly versus reacting maybe a little bit later? I am very, listen, the markets are going up. People are, our audience watching and listening, maybe stuck in traffic somewhere. making money today. We like that. Schwab's customers making a lot of money today. That said, next week, I think it's next week. Don't we get the Fed's preferred inflation gauge, ye old PCE? What happens, Francis, if that number comes in hot next week. Does all this exuberance go away? Well, all of it, no, but that door that we said is open. Well, maybe it starts squeaking

shut a little bit. We get a lot of inflation data before that next meeting, PCE, CPI, PPI. But what I find so strange about this is we're all waiting for inflation to show up in the consumer side. But any economist is going to tell you that if tariff inflation is coming, it's showing up in PPI, producer prices, prices paid first, and that's already happened. We're not waiting for that effect to come through. This is why Chair Powell today said we know tariff inflation is coming through, but this is a Federal Reserve that can choose to say we expect that to be, they're not going to say transitory, Brian.

Don't say that. They can say we're going to choose to look at it differently and they can use all measures of inflation, if they want to cut, they can say we're looking at CPI X 400 items that exist within it, and therefore that gives us some ability to do it. So this is a Federal Reserve where even if we believe the data is going in this direction, and the three of us here think the Fed should do one thing, we also have to listen to what their bias is, and their biases clearly, they want to cut. I hate using the word hate. Okay, there's only three things that I actually do hate, olives, beats, and being wrong. Okay. Can't do anything about the first

two, but the third one, I have to admit, I was wrong because I didn't think the Fed mattered that much anymore. AI's been driving the trade. You might have heard of these MAG7 stocks. Yeah. Kevin, Invidia. Does Nvidia care about inflation or the Fed? Well, the one thing I'll say, from a performance perspective, they're not driving the train. If you look at the top 10 performers in the S&P 500, year to date, the MAG 7 doesn't exist in that list. So from a contribution to the index standpoint, yes, they're driving things. But the fact that they don't exist in the top 10 underscores an emphasizes the fact that investors can find and have been able to find opportunities outside of, not that you have to look outside of that group, but there are other opportunities in the large-cap world,

even in the small-cap world, you know, not even looking at just the Russell 2000 at the index level, in pockets of small-caps, you've been able to do well. But I will say, you know, in terms of the discussion around whether this is good or bad for the market and what the Fed does, the Fed is sort of, you know, reacting to the macro conditions and has to look forward to what the macro conditions will be. So if they're cutting in the context of an economy that's holding up, that's, you know, probably logically going to lead to a market that does okay. If they're cutting in the context of a labor market that is falling apart and, you know, rapidly deteriorating, it's probably not a bullish outcome for the stock market. And I will say you look back in history the times when the Fed has restarted a cutting cycle after staying on hold for at least six months.

You have seven instances. Presumably, it becomes number eight if they cut in September. There's a huge range around what the average performance is for the S&P following that. because the worst case outcome was the recession in 1990. You had a short and shallow bare market, but you did have a recession. You did have a little bit of a labor cycle. So you can't really look at just what the Fed is doing and use that as your base case for how the market's going to perform.

You have to pay attention to what the macro conditions are. And to Francis's point, I think from an inflation standpoint, there are legitimate concerns. Austin Goulsby called the PPI services data dangerous yesterday. I think that that needs to be sort of looked at in terms of how sustainable that is because of service. being a larger chunk of the economy. And I hear your point, and I hope we get a broadening out.

We have recently, but we've also never had more concentration at the top. Ten stocks are 50% of the S&P 500. Invidia and Microsoft alone are 15% of the entire market. And I just wonder how much those companies care. I know you're not like the stock strategist. You're an economist, Francis, but do you factor in AI? Do you factor in this insane wave of AI-related growth into your economic models? Well, absolutely, because AI and data centers are responsible for a significant amount of

CAPEX development. They've also contributed, as you and Kevin have noted, to stock market gains that are disproportionately supporting upper-income households. So this theme is wildly important. But I have to say, Kevin, thank you for your comments, because effectively what you're saying is your bullish economists. that at the end of the day, what matters here is what is the economic outlook, less so what the Federal Reserve does. And in the context of today, that's how I'm thinking about the culmination of this information,

which is the Fed can cut or hike 25 basis points if they wanted to, and it's not going to change that this is an economy that's running sub-trend 2%. It's dealing with a range of structural issues that are lowering the amount of jobs needed, but also the amount that are hiring, and that you have this really big conflict between cyclicality and structural factors that are creating more challenges for the Fed than even their dual mandate. Fair enough. Okay, but guess what? I'm going to quote Francis Donald back to Francis Donald because we're talking about a trillion dollars of capital spending for AI. Oh, by the way, building out the electrical grid. What can the Federal Reserve do about that? Nothing. Although I guess there's a borrowing money, interest rate aspect to that. But if the capital spending, the AI wave, the third sort of generation of, you know, building out the internet, right,

from 1999 and then 20 years ago and then now, what does the Federal Reserve how do they matter in all that? I don't see where they fit into something that I'm told almost every day is actually driving the market higher. Well, you're getting to the core of why if I was a central banker, I'd be having a full-on existential crisis right now

because for the past several decades, when we thought about prices, we've thought about them as being demand-driven and interest rate sensitive. But this new inflation, this post-COVID inflation, is increasingly supply side. From the electrical grid

to more frequent and severe weather events to geopolitics, to tariffs, These are not interest rate sensitive developments. So the Fed's role is moving away from, can we target 2% inflation? By the way, it's been above 2% for 52 months, and the Fed's talking about cutting. Are they really committed to that 2% to the same extent? And we have to start thinking about the Fed just trying to control a subset of inflation prices, which is making sure that those supply-side prices don't bleed out further into the economy.

That's a role shift for this central bank. And we started to hear a little bit more from Powell about how they're dealing with that, even the topic of Jackson Hole labor market structural shifts are beginning to have those conversations. I think that the discussion around, and this is, it's hard to emphasize this enough, this being a supply shock-driven world. I mean, we're so used to, and what have a lot of investors, even post-tech bust have been used to in that almost 20- or two-decade period was a demand-driven economy. When you have a demand-driven economy and demand shocks are driving everything, central bank policy is pretty easy to control that. You raise rates, you choke off demand, you don't have as much of an inflation problem. Now, central banks are in a much more difficult scenario, especially on the labor side.

The stats around looking to last year's Jackson Hole to this one, unemployment rate unchanged to 4.2%, but average the three-month growth on net for non-farm payrolls. Last year, just above 100,000, this year, 35,000. That perfectly explains the supply dynamics that are totally different this time and why. And Powell mentioned this in the speech, too. I was actually just going to, we got to go, but I was going to be done. bring that up or basically said that with the job, he said there's, it's a, he called it a challenging situation, managing jobs and inflation very quickly. We're happy the markets are up. People are

making money. But is there any part of you that thinks the market has gone a little ahead of itself right now? I mean, I mean, if it's extrapolating this to mean that the Fed's about to re-engage in a full-blown cutting cycle, then yeah. And I only say that because we don't have August data for jobs or inflation. You could easily see a bounce back in pay. growth, maybe a move lower-nown-employment rate, not that we're necessarily forecasting that. But if it's a relatively solid report, if you don't get as severe revisions to the downside like you had in the prior report, and if you do get a bit of a hotter inflation print, especially on the producer's side, then I think it takes a lot more steam out of the rate-cut

argument. Great discussion. I wish we could do the whole hour on it. We can't. We'll see where tariffs and inflation go. And we've got to say, you know, the great country of Canada, pulling back on those reciprocal tariffs today, I think, I would say sending us an olive branch, but it's more of like a maple leaf, right? But it's good news, maybe for inflation. Well, maybe it's another signal

that the worst of the tariff pressures are over. And now we just have to see how do the tariffs that actually are in place start to filter through the system. But we'll take any good news on a Friday afternoon when markets are up. You're here. The markets are up.

It's Friday. It's a beautiful day. The Canadian wildfire smoke is finally blown away. Kevin and Francis, thank you very much. Thanks, Brian. Appreciate it. All right, we got some breaking news on Intel. Just moments ago, there was a headline that Amon hit at the, just the end of the show before us. The exchange, Amin, about Intel and the Trump administration in 10%. What exactly is happening here with Intel? Yeah, so what I can tell you, Brian, is I am now told that the Intel CEO, Lip Bhutan, will be here later this afternoon at the White House to have a discussion with President Trump.

Now, I want to play you what the president said in the Oval Office just now, and then also tell you what a White House official said to me just a short time ago, sort of dialing back a little bit what the president said. Here's what the president told reporters about how this 10% deal came together and what Lip-Butan told him about whether or not he'd agreed to the deal. Take a listen. And I said, I think you should pay us 10% of your company. And they said, yes, that's about $10 billion.

I don't get it. This comes to the United States of America. And I said, I think it would be good having the United States as your partner. He agreed. And they've agreed to do it. And I think it's a great deal for them. And I think it's a great deal. He walked in wanting to keep his job,

and he ended up giving us $10 billion for the United States. So we picked up $10 billion. So as you heard the president there say that he agreed to do it, that is Liputan agreed to give 10% of intel to the U.S. government. That said, a White House official described the conversations to me that are happening here at some point this afternoon as an ongoing conversation. A lot of details still have not been agreed to. A lot of the final decisions about how much, say, the U.S. government will have, how large that equity stake will actually be. all the rest of the terms and conditions, not necessarily final, according to a White House official I just spoke to in the West Wing.

So I think we got to wait now until we see the outcome of this meeting, which is not going to be on camera, or at least the plan for now is that it won't be on camera. And the plan for now is not that there's going to be any kind of signing of anything here today, but that is, I'm told, certainly always possible. So this might be a little bit more of a moving target than we might have thought coming out of the Oval Office after listening to the president. This is now being described to me as an ongoing conversation with a lot of moving parts. Okay.

So, um, color me a little bit confused because Trump there was, I love the hat, by the way. I mean, I'm kidding. I'm being a little bit sarcastic. Trump was right about everything that's the hat he's wearing. So Trump is also playing both sides as conversation. So if I heard it right and if I'm hearing you right, Amin, what I heard was Trump saying, sort of role playing to Lip Bhutan, you should give me 10% of your company. and Liputon, according to President Trump, saying yes or okay.

So basically, President Trump is saying he spoke with the Intel CEO, he said you should give me 10% of your company, and the Intel CEO agreed to do that. Is that basically where we are? That's what the president said on camera in the Oval Office, but behind the scenes, I'm being told that this conversation, we expect Liputan to be at the White House to talk to the president today, and that this conversation is going to be.

an ongoing conversation with a lot of moving parts and that nothing has agreed to until it's agreed to. We may not see a formal signing of anything, a turning over of shares to the U.S. government or anything like that today. But we may. So the impression that I'm being given now is that this is much more of a moving target than you might have thought listening to the president just a couple of minutes ago. And keeping the politics out of it as much as we can, there's a lot of people are going to say this is unprecedented. of the U.S. government, it's not. The U.S. government took a big stake in General Motors. In fact, they just recently, I think this year sold out of that. They took stakes in some of the banks through TARP and all these things that we want to forget about in 2008, 2009.

So I don't know, Amon, if this would compare to that. I mean, are we at the point where we're calling this a bailout of Intel? I think it certainly would compare to that in terms of what the is contemplating doing here. But the difference is the context, right? I mean, in those situations, the government was the buyer of last resort for companies that were going to collapse in the midst of an economic calamity. And in that situation, the U.S. government decided, you know, we just can't have these pillars of the American economy collapse. We're going to step in and backstop this with taxpayer money. And then at some point down the line, be able to sell out of that position here. I mean, Intel certainly has been suffering, but Intel is not, you know, on the verge of collapse in the midst of an economic calamity.

The economy is pretty good broadly. The decision that the U.S. government is making is now that this industry is so significant from a national security perspective that we can't afford to lose it. And that's why the U.S. government is stepping in. So if you listen to the Commerce Secretary, he's saying the national security concerns here are sort of the moral equivalent of the economic calamity concerns we had, you know, a decade ago. And I guess I'm stuck on the words. I know we're going a little bit long on this, Eman, so I apologize. Producers at the back, you know what I'm talking about. I've been there.

When Trump said, I think you should pay us 10% of your company. That's the direct quote. So do we have any idea? It sounds like he's urging Intel to give the government 10% of Intel. We're not paying that they're going to give. I know there's a chipsack. So theoretically you could argue. that we've already paid them, but he wants Intel to basically say, here's 10% of the company,

I think. Right. Yeah, sort of, you know, revising the deal on the Chips Act and saying, you know, basically that was an equity purchase by the U.S. government, not a grant by the U.S. government and sort of after the fact converting that grant to a purchase of equity in the company, and then negotiating that. So all of that still to be papered, still to be officially agreed to, I'm told. So we'll wait for any official announcements here from this White House. But yeah, I mean, it's a pretty dramatic moment. And then it raises the question of, you know, all these other companies that have gotten Chips Act grants. And then, of course, you know, what the president has in mind for the rest of the economy.

It's a fascinating story. And as you reported, we are waiting for the CEO of Intel to show up at the White House a bit later on today. A heck of a story around Intel. and the possibility of a bank-like stake in Intel based on the chips act. Amon Jabbers at the White House, thank you very much. You bet. All right, folks, you can tell very, very busy Friday, don't go anywhere because coming up more on these markets and your money moving higher, the NASDAQ is rocketing up 2% plus,

some of our rather surprising stocks that are moving on this news, and a rare triple header of big technology news from out west. The Dow is up 838 points. We are back right after this. All right, welcome back. Really got a triple header of technology headlines happening now. They involve a tanking stock. Elon Musk and Google and Facebook make it a pretty big deal.

Powerful combo. So let's go out west to McKenzie Sagalos and our San Francisco Bureau to kind of hit all of these. And McKenzie, let's start with AI. and another big move in the race to spend big bucks on the hottest talent in Silicon Valley. So you've got Musk, Altman, and Zuckerberg once again at the center of this AI talent war. So I've confirmed that today is the last day for OpenAI's recruitment chief. So she was only promoted to the C-suite this spring. And her job was to keep talent from walking out the door during one of the fiercest hiring battles in Silicon Valley,

while also leading the company's most aggressive hiring push yet. So her exit comes as Sam Altman is scrambling to hold on to key executives while also fighting Elon Musk in court. So a legal filing last night showing that Musk tried to recruit Mark Zuckerberg to help finance a bid to take over Open AI this year. Now Zuckerberg, he is trying to steer clear of that fight, even resisting subpoenas for internal documents. But meta, it is still deep in the talent wars. The company confirmed to CNBC just yesterday that it paused hiring for its new AI division, but then Bloomberg reporting last night that Meta poached another senior Apple AI exec as it undergoes its fourth restructuring in six months, trying to get all of those pricey new hires to work under the same roof.

So the bigger picture here, Brian, Open AI, losing leaders at a critical moment, Musk circling, meta rating Apple and Open AI. The enemy of the enemy is my friend. All right, next up, Google scoring a massive deal, signing a $10 billion agreement with meta. what exactly are they spending this money on? Okay, so it has been a big day for Alphabet. That stock actually hitting a new intraday all-time high on two big pieces of news. Now, that first one you just mentioned,

Google Cloud just signed a $10 billion deal with Meadow, one of its biggest ever. It signals a real shift in what's long been this two-horse race between Amazon and Microsoft in the Cloud Wars. Now, Google already hosts Anthropic. It added Open AI this spring, and it also counts Apple as a cloud cut.

customer, that momentum is really significant here. And then I want to also tell you about this second piece of news that really is helping to push up Alphabet shares this afternoon. You've got Bloomberg reporting that Apple is in early talks to use Google's Gemini to power a revamped Siri. They had been talking about using LLMs from OpenAI and Anthropic as well. And rounding out the trifecta here, McKenzie, despite the macro markets ripping higher, a Peter Tealback crypto company is getting pretty crushed right now. What is the name? and what is happening? Okay, the name is ETHZ,

and this Peter Teal-backed firm that up until this week was called 180 Life Sciences, that stock is getting crushed today, down more than 31% last time I checked. After a filing showed that Teal's fund and other major holders are offering shares for resale, now it had spiked earlier this month when ETHZ revealed a big ether stake

and Teal's ownership, but those gains are now gone. The company has been trying to reinvent itself as one of those crypto-treasurer. replays similar to what Michael Saylor is doing Bitcoin over at strategy. But I will say this, Brian, and a very important caveat in the crypto market, this drop is not hitting ether itself. The token rebounded to near record levels after Fed Chair Powell's speech earlier today, potentially hinting at that upcoming rate cut. I know you were debating that at the top of this hour.

We were. We were debating that. But hey, walking through the technology stuff, AI kind of running the show. McKenzie Seagalos really appreciate it. Boom, boom, boom. Thank you. All right, coming up next block, we're going to be joined by the man they called the Dean Evaluation. Where does he see Big Tech now? We've gotten into kind of stupid territory. We'll talk about it. Next. All right, welcome back to Power Lunch, everybody.

Big Technology stock popping today. The NASDAQ is up 2%, all on hope of a rate cut at next month's Fed meeting. All of the Mag 7 today are higher. Tesla leading the charge up about 5%. But as Kevin Gordon smartly noted at the top of the show, For the year, not all the MAG-7 have actually outperform the macro markets. Speaking of super cap technology stocks and video reporting next Wednesday, that is going to be a huge read on not only that stock, but maybe the AI spending story in general. But as well as these stocks have done, or maybe because of it, the question many have is evaluations gotten out of control.

Well, we don't know, but let's ask somebody who does. Aswat the Motor and his professor finance at the NYU School of Business, they call him, The dean of valuations for a reason, Oswaf, great to have you on. Perfect day for it. Have valuations gotten a little bit stupid, or are we okay? I think for the last 10 years, we've had this conversation over and over again. Markets reach a new high. We say, our market's crazy. And experts like me come on, and we say, markets are too rich. You've got to sell. And two years later, we repeat the whole process. Over the last three or four years, I've decided that markets maybe are more trustworthy on this

than experts. So that the market seem to figure things out. When you look through this year, there have been two faces to the market. Through April 8th, tech especially was beaten up. The Mag 7 collectively lost, I think $2 trillion in market cap just in that first three months. Between April 8th and today, you look at tech, it's come back, not just come back, but it's become one of the strongest sectors again, the S&P. So this is a longstanding story and the story has legs.

Is the market rich? Absolutely. Is it underestimating some of the risks that are probably around the corner? Maybe. But given that these risks have to show up in the numbers, which should be in the economy and in earnings, until that happens, I think markets are holding on and saying, hey, we don't know what's going to happen.

So we're going to price in the expectation that things are going to be okay. Do you think the market is overreacting to the Federal Reserve news today? I think so. I mean, I've written extensively about the Fed and then Fed rate cuts not really conveying much to the market other than something for us to all talk about. I mean, they don't even affect the one thing they're supposed to affect, which is interest rates, traded rates. They might affect the Fed funds rate.

But Treasury rates themselves have a life of their own. So it'll be interesting to see if there's a Fed rate cut, whether the T-Bond rate drops below 4%. My guess is it will not, because as long as inflation stays at 2.5, 2.6, 2.7%, the T bond rate is destined for 4% plus. So it'll be interesting to see what the bond market does if there's a Fed cut. My guess is it won't do much and stocks will have to retrace some of the upswing you saw. So what do you, okay, fair enough. And I, by the way, I wouldn't necessarily disagree as you might have heard the top of the show. So what do you attribute today to then? Hey, you know what? The game of expectations keeps getting reset for this market and sometimes

just delivering what was expected becomes an unexpected plus. I mean, it happened with tariffs, the same thing with rates. I think for a period there in the middle, there was worry that inflation would continue to go up and rates might continue to go up. I think part of it is expectations keep getting reset and markets be, and you beat those expectations, market viewed as a positive surprise. It's a very strange twist on the expectations game, but it's a is what I think is driving the market today. Yeah, and, you know, we talked earlier in the show about next week. We get the Fed's preferred measure of inflation PC.

What if that were to come in hot? I mean, I read Powell's speech three times, Aswath. I'm not, this is the market's going to do what the market's going to do. I'm not here to tell the market it's incorrect. It's not my job. It's obviously interpreting it one way. I don't read the speech the same way the market appears to be. Do you?

I don't either, but in a sense, in this case, I think the market views absence of bad news is good news, that the Fed did not come in and say anything explicitly about not cutting rates. So I think in many ways the market is reading in whatever it wants to read into this process. I think the feeling the market has is the pressure on the Fed to cut rates is so strong that even if it's not the right thing to do, the Fed will actually cut rates. that's not a great thing for a central bank to do, but I think we're in that position right now. Yeah, what would you, let me ask you this, because you have written about it extensively.

I know we generally get you on to talk about valuations, but I think the Fed is kind of driving a lot of the valuation argument here. What would you like to see the Federal Reserve do? Is there something that Jay Powell and the others can say or do that might make you a little more confident in the path they might take? I'll be quite honest. I think the Fed has been too visible. The Fed chairman, the Fed board members have been too visible, too verbal, too vocal for the last

decade. I think, you know, the old saying about children should probably apply to the Fed, the less we hear from them. Maybe you shouldn't say that about children anymore. But the less you hear from the Fed, the better. I remember, I mean, I'm old enough to remember when you hardly ever heard from the Fed, The Fed chair was, you know, most people didn't even know who the Fed's chair was. That's right. Exactly. Exactly.

Now, when did we elevate the Fed to this level of, you know, central guard driving markets? It's not healthy, but I think that's where we are right now. And at this stage, the Fed has dug a hole that it can't take itself out of, which is markets are expecting it to give guidance. It's almost like a company giving earnings guidance. The Fed is expected to come out here and tell you what they're going to do. And maybe we should as well start valuing the Federal Reserve. I can answer some of that question for you. Obviously, financial media, what we do, you know, sort of taking these things.

I get it. But here's where I think why we do it, why the Federal Reserve is taken on this role. I'll answer your question. When you have a balance sheet of $7 trillion that is almost two times the federal budget of the United States, like 15 unelected officials. run an economy that is one and a half times larger than the budget of the United States. Budget here is about $4.5 trillion. Fed's balance sheets about $7 trillion, give or take a few hundred billion here and there.

That's why they get the attention. I'll concede to you, 2008 made a big difference to the place the Fed as in the economy. That said, though, I think Fed chairman have let their egos go to their heads. They think they can set what the economy is doing. They actually think they can set the level of interest rates if they wanted to. and people have bought into it. And no wonder politicians are then expecting the Fed to lower rates. They're saying my mortgage rate is too high.

What are you going to do about it? Once you start laying the foundation for letting investors think that you can set interest rates across the market, you're headed for where we are right now. And I'm afraid there's no going back from it, or at least not in the short term. We'll leave it. It's called moral hazard. We saw it in 2008. The U.S. took a giant stake in.

General Motors. In 2009, they took stakes of the biggest banks. Now, here we are talking about a potential stake take in Intel. Once you open that door, politicians of either party are going to walk right through it. But we're going to leave it there. We're going to have to leave, we're going to close this door. Oswaf, great to have you on. Great discussion. Thank you. Thank you for having me on. All right, you're very welcome. All right, let's get a CNBC News update with Kate Roger. Hi, Brian. The Pentagon said today, National Guard troops patrols, Washington, D.C., have been ordered to start carrying firearms. It's the latest escalation in President Trump's federal intervention in the nation's capital,

which also includes the takeover of D.C.'s police department. The president said today he will expand his crime crackdown soon to Chicago and then New York City. President Trump's choice to become the next chair of the Republican National Committee was officially elected today during the party's summer meeting. Florida State Senator Joe Gruters, a longtime alley of the president, won the post without opposition. Outgoing chair Michael Watley is running for the Senate in North Carolina next year. And a union official representing Boeing striking defense workers and negotiations with the company

will resume on Monday. That will be exactly three weeks since the more than 3,200 union members went on strike, calling for a pay raise and more vacation and sickly. The strike is shut down the production of F-15 and F-A-18 fighter jets. Brian, back over to you. All right, K. Rogers, Thank you very much. All right, still ahead. The big changes coming to drug prices, the news you may not have heard, but should, and you will after this.

CryptoWatch is sponsored by crypto.com. Crypto.com is America's premier crypto platform. Welcome back and happy Friday. Pretty much everything is jumping today after that Powell speech in Jackson Hole. You've got markets soaring, including a handful of biotech and health-related stocks, names like biotechney, Charles River Labs, Revity, and Moderna, all getting nice bids. They're among leaders in the S&P health care sector, and there are some big developments in health care this week. Now, it is a little bit wonky, but it's also important. America and Europe releasing the legal documents of their trade deal, and within that, tariffs on pharmaceuticals

from the U.S. on European pharma products is capped at just 15%. That is well below. the 250% number that President Trump previously floated. So what does that development mean for a sector that, let's be honest, has underperformed all or most others? Jared Holst and Bazooho joining us once again, Jared. Good to have you back on. What does, in plain English, what does this 15% tariff cap mean for your companies that you follow?

Great to see you, Brian. Thanks a lot for having me. Yeah, I mean, it's a piece of the puzzle. I think we're trying to put this mosaic together to kind of determine, you know, what the economic policies are going to be with respect to this industry. And the 15% I think is important in the context of, you know, as you alluded to, some of the other negative headlines that we've seen out of pharma with this administration. So to me, it's one piece. Obviously, Europe, super important. A lot of drugs are manufactured there. If we keep it to 15%, and that winds up being one of the more notable variables here. I think the industry can handle it, can absorb it. This has been a troubled sector. By the way, as you've noted, you've written about, and you have been right.

But I do know that we are a nation that continues to get, if not more sick, where pretty much the same level of sickness that we have been, despite trillions thrown at the problem. Healthcare is not going away. Most of these companies not going away. where are the opportunities now, Jared? Well, I think with pharma, you really have to be cognizant of the macro orientation of the market.

And we're kind of like in a weird spot here because, you know, the tariffs on one hand are positive. You know, obviously with the Fed stuff today and, you know, it seems like there's another Fed headline every other week now. there does seem to be a little bit of an uplift in mid-cap names and names that are generally more helped or benefit from rate cuts. And so pharma to me is kind of like in the middle. I still like Eli Lilly on dips for an opportunity. I'm fairly sure this oral obesity drug is going to be better than how analysts have sort of perceived it. Of course, it's about a year away, so not super near-term. But I do think if we do see tech and these other high-flying industry verticals dip a little bit, that's where you want to be buying farm. So just quickly on that Lilly News,

so basically we're talking about taking a pill as a GLP-1. A lot of people, they don't like needles. And you think a pill version would help. I do. I'm not so sure where it fits in the treatment paradigm. I mean, there could be a situation in which you take the injectable for a while and then switch to the pill. I mean, I think when we looked at the data, when everyone looked at the data. It looked like the adverse events were concerning, but if you take low doses in order to maintain a lower weight, it could be a blockbuster still. Jared Holes, Mizzouho, talking a little bit of opportunity maybe down the line with that Lilly Medicine. Jared Holes been nailing it lately, and we appreciate it. Thank you. Thanks a lot. All right. Coming up, Jeep rebranding the Cherokee,

making some big changes. Will it jumpstart their sales? Philibault in the house, spoke with Jeep CEO, and he'll join us next. Stellantis, Stellar today, the home of Jeep, Dodge, Chrysler, and Ram rocking with the markets of 5%. But overall, it's been a rough year. The stock getting slammed down about 40%. So it's Jeep Division trying to turn things around with a new plan and a new look Cherokee. Philibaults, spoke Jeep CEO this morning, joins us now to discuss.

I'm looking at the Cherokee. Yep. It's a good looking car. What did they realize they needed to do with this? Well, first of all, they needed to get in this segment. The mid-sized SUV segment, they haven't been there for the last three years. This goes on sale by the end of this year. All of the vehicles sold will be hybrids, by the way.

They said the range will be more than 500 miles. This is last night in Brooklyn when they unveiled it. They had L.L. Cool J there. It was quite the little party that they put out there. Look, the bottom line is this. This reminds me a lot of when Alan Mullalley took over at Ford and he said, where's the Taurus? Why would you not have the Cherokee?

There are certain names within the auto industry that are no-brainers. And when they got rid of the Cherokee in 23, I mean, I've talked to dealers who were like, please, for God's sakes, bring it back. Mid-sized SUV is the biggest segment. That's what they're shooting for here. It's going to be priced. The first ones that come out this year are going to be in the mid-40s. The base price, those models come out next year.

They're going to be just over 37, or just under 37,000. Fair price. plug-in hybrid or engine-powered hybrid? Engine-powered hybrid. Gas-electric hybrid. Okay. Gas-elect, that's good news. That'll increase the fuel economy.

Absolutely. Did they realize that the shrinking, small, tiny little Cherokee compass thing they were doing, to your point, is not going to beat the RAV or the Honda CRV? No, they're getting their butts kicked by the RAV-4 and the CRV. And you throw in the, you know, whether you want Ford Bronco Sport, whatever you want to throw in there, That mid-sized SUV category, they are losing. This will help them get back into it. Now, will they sell as many as the RAV-4 right off the bat?

No, but they will be competitive here, and that's what they need to do. Okay, you said they're losing. I would argue they gave it away. They gave that market away. They got, Jeep got weird. There's the $110,000 grand wagon here. I can't imagine that's selling too well. And I own two Jeeps.

I love Jeep. I wave to people. I talked to a couple of Jeep dealers last night in Brow. Brooklyn, they are dying for a vehicle in this segment. I mean, this is the no-brainer. You need to be here. If it's a no-brainer, why did they have no brains about it? Because under the previous administration, they made a decision back in the early 20s

that they were focused more on developing electric vehicles, and they let the segment go. So this new, not Grand Cherokee, but by the way, the new Grand Cherokee, I have the old style. The new one, I see a lot of them. Is that coming? It feels like just anecdotally on the roads it's coming back. I would say that that is a successful vehicle for them. Now, it's a little bit bigger, and that market is a little smaller.

It's not quite as lucrative as that mid-sized SUV market. They are getting their act together in terms of a full portfolio, more hybrids, more extended range vehicles, which are selling well. They've discovered that. People want that. Okay. I need your help because you're a car guy. You super car guy. I'd like to think I'm a car guy.

I will say this. And I'm not picking on Jeep, okay? Because you got a $90,000 Toyota Sequoia out there. You've got the BMWX-7. Who is buying all these $100,000 SUVs? Watch on Monday. I will have numbers for you and you will say, my goodness, there are a lot of wealthy people. Now I'm interested.

Well, have me come back on Monday. I won't be here, but have me come back. Well, okay. Where will you be? In Chicago. Where you live. Yes. So you actually can be home for one.

Because you're rarely home. Well, that's true. I knock on the door. My wife says, who's that? And I've got a new car. So on Monday, you're going to have numbers for us about who's buying because you do the math. I don't know a lot of people lease. All you leasers out there, don't come at me.

If I do a six-year loan at current rates on $100,000 car, my payment's $1,500 a month. Let me give you one last tease. Also next week, I will have data on car payments, monthly car payments, more than one out of every four people who are leasing or buying a vehicle in this country are paying more than $1,000. That's one out of every four people in the U.S. I'm going to watch on Monday. That's not Monday. That's later in the week. But Monday, you're going to be stories out over time.

Just Phil LeBoe, just boom, boom, boom. That's what we're, every day, you're somewhere else. Yeah. Phila Bow, United loves you probably. Call my wife. Tell her I'm coming home. Phil. Hey, Mrs. Leboe, he's coming home. Thank you. All right. Still to come, we're going to highlight the hottest sectors in this sizzling market next.

Before we leave this hour, want to highlight some hot sectors in a red-hot stock market, many of these interest rate sensitive stocks, and they are rocking. Here you go. First, the obvious housing and housing-related, Hovnanian Beezer Homes, KB Home, and Winchester, Virginia-based American Woodmark all soaring today. To buy a home, you might need to borrow money. So some of the banks are also popping. Names, Western Alliance, Valley National, Bank United, and even old National Bank Corp, all up more than 5 or 6%. You know who else is helped a lot by lower rates and borrowing costs? Some of the wind, solar, and battery companies.

Solar edge up 12 percent, end phase, up 11 percent. Well, that's the wrong ticker. It's not next decade. Next tracker is the name. That stock's up. Don't know what next decade is. Don't care. First solar also up 5 percent.

And this is random but interesting. Despite threats of tariffs, lower rates giving a big pop to the economically sensitive stocks like truckers, SAA, SAA, SAA, Warner, Knight Swift, and Old Dominion doing it. And guess what? If you truck something, you may need to need a place to store that stuff. It's a warehouse, logistics stocks also getting bought. Big day. I'll see on Fast Money at 5 p.m. closing bell. Up now.