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Well, as we do every month, we are
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joined by Jeremy Seagull, ameritus
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professor of finance at the Wharton
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School and also senior economist at
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Wisdom Tree. Jeremy, good to talk to you
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again, sir. It's very good to talk to
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you too, Dan.
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>> Well, obviously the big story of the
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week is the Federal Reserve and the rate
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cut that was made. Uh, but maybe even
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more so, the comments by Chair Pal
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afterwards
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that he said that, you know, a December
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rate cut is not a guarantee.
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um give us your thoughts on that.
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>> Yeah, I mean and and also the you know
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the the trade negotiations, you know,
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just uh uh concluded between she and and
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Trump are are are certainly worthy. So
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you you you got me on a very good day. A
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lot of news is is coming out. Uh let's
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talk about the Fed. Yeah. I mean uh
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there's no question that Pal's comments
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about uh uh you know we're not sure at
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all about the December meeting and then
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uh emphasize far from it. He said, I
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mean like uh you know uh
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one has to remember that chair Powell
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more than any other chair that I can
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recall and pro you know um is very
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sensitive about preparing markets for
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whatever the Fed is doing and
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particularly if he believes the markets
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are heading in one direction uh that uh
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is not a sure thing or or not what he
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intends he's going to correct that. Um
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now this was very early uh the the the
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odds looked like you know that that you
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know was 70 80 90% that that he would
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cut and I guess because of the
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discussion uh he thinks it's more
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towards 50 now and he wanted to correct
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it right away and that's what he did. He
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pushed those odds uh closer to 50/50.
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Um, and you know, the truth of it is
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they don't know what they're going to do
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until they see what's going to happen
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the next six weeks. And these are very
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very important six weeks because uh, you
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know, uh, uh, the December 10th meeting
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does end two weeks before Christmas. But
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we will have a lot of data about how
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people are spending. Are they reacting
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to the tariffs? Are there is there going
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to be some sticker shock um, among some
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of them and say, "Oh my god, you know, I
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bought this last year for $10. Now it's
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$12 and I can't buy as much and uh you
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know uh we're going to have to see
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whether that's going to occur. In
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addition, we're we're beginning to see
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some layoffs. Um are they AI related or
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not? Some from the big tech companies.
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Uh is that going to shake confidence? So
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um in a way what he's saying is we just
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don't know. Um the the good thing is if
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if if it does affect confidence negative
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and consumer spending is poor during the
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next uh 6 weeks uh until that December
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10th meeting then uh there's no question
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they'll lower it. In fact, if it's very
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poor they they'll probably go could go
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down 50 basis points. Now I don't expect
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that to happen. It's always possible. So
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in a way I think stockholders know that
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they have the Fed at their back if
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things slip. But he's saying if things
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don't slip and things say stay as strong
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as they are looking now
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um we may well pause uh the December
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meeting and then collect you know more
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data until uh next year.
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>> Let me ask you about the markets in
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general because it seems like the last
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several months we have seen quite a run
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up in terms of what we've seen on the
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Dow and the NASDAQ and the S&P.
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uh seeing the dynamics that we have
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right now, are you leaning towards the
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potential of that run continuing or is
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there a dynamic out there where you say,
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"Okay, maybe we do have not a full-on
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correction, but at least we we pull back
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a little bit."
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>> Well, I think you know, you know, uh
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Pal's speech is a a little is going to
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be a little bit of a of a slowdown. I
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mean, the lid on uh overenthusiasm.
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Um uh and and maybe maybe that's good
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not to get too bubbly. We do we do we do
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have some speculative trading uh not
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excessive. I mean I the earnings are
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coming out. Blockbusters very very good
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on the whole firm's guidance is is very
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very good on the whole and and and that
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con combined with the expectation of the
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Fed continuing to lower rates I think
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was producing a strong bull market. Now
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with the expectation of further rate
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cuts muted, I think you know uh that
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that uh puts a dent but not a a fatal
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blow to the bull market. I I think I I
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think we can still see gains over the
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next uh two months. Um and I wouldn't be
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surprised if we take out 7,000 on the
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S&P. Um uh but I I think those gains
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because the bond rate I think is now
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going to move up to the 4 and a/4 to 4
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1/2 level do a little bit more challenge
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to uh the returns on the stock market.
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>> Let me circle back with you about your
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comments uh that you teased a moment ago
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about the labor markets and some of the
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softness that's there right now. And I
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guess we don't fully know whether or not
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AI is the driver of this. I think a lot
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of people suspect that it's part of the
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driver. And I think what's also
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interesting to note is that and I talked
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ran into a friend of mine in the grocery
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store who just lost his job. He's
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finding it harder and maybe this is the
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company's not yet well willing to pull
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the trigger on as much hiring to
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backfill some of those spots right now.
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And and that the labor market is going
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to be a little bit challenging for a
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while. And if it if it's I mean we see
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uh you know although you know there is
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the federal shutdown right now um uh we
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we can those uh jobless claims we can
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put together from the state uh numbers
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and um so far and that's an early
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warning signal pal mentioned it
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frequently um uh I we would see that uh
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type of slowdown in in addition by the
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way I I don't know if you saw the news
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that ADP uh which is the payroll
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processor coming out with weekly data. I
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think it's Tuesday morning.
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>> Uh this is something new and and
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welcome. Uh obviously uh uh especially
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in the shutdown period. We're we're
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getting the Chicago Fed also has an
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indicator of unemployment. So you know
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we're not it it's we're not flying blind
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by any means. Uh and I don't think the
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comment you know some people said, "Oh,
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it's he's going to slow down because of
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the fog and we don't really know." No, I
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don't think that's it. I don't I think
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we've got enough data uh to to make the
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judgments there. It's just and the data
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that we do have shows continued strength
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and basically what he's saying is if
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that strength continues through the
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Christmas holiday buying season which we
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know you know is hugely important. I
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mean retail sales in the next uh you
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know uh 6 8 weeks are you know uh you
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know what what onethird of the year uh
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on on gift items. So um that's going to
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be very important. We're going to wait
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and see how well are are consumers
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spooked or they're not spooked. Um and
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uh I think that they're going to say
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we're going to just have to see how that
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data comes and we'll make a judgment uh
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from there. If they're not spooked,
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consumer spending remains strong. I
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think you will have a pause. If we do
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see a slowdown, you will definitely have
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a drop.
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>> Let me finish up uh with trade and you
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mentioned it a bit ago uh that it seems
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like US and China are coming together.
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Uh I think it's been mentioned by you
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and by others how important getting a
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deal done with China is when you think
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about the overall potential growth of
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the economy. And you think about that
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those two countries being the most too
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influential out there uh in terms of uh
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of trade and and business.
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>> Yeah. I mean I I I mean it's don't
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forget this is not a deal, you know. I
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mean it's an outline. Uh deal the deal
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will be done later. Uh a lot of them are
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one-year extensions. Although Trump said
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I should, you know, I have no problem
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with extending it. like if everything
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goes okay. I mean, I'm not going to, you
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know, it's uh uh he he he wanted it to
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be, but I think both of them, you know,
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want to see how how how things go. But,
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you know, that's extremely welcome. And
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I mean basically the market had figured
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out that you know tr you know Trump
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likes to come in with a big stick and uh
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you know scare everyone 100% doesn't go
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through u and uh so market had basically
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figured that out but it was a lot of
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cordial uh interaction
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uh and uh you know that uh you know
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Trump is uh going to go to see she again
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and or or and she's going to visit him
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And uh this is this a very important
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ongoing uh ongoing. So that's that that
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is definitely a positive. He was in
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South Korea. He was in Tokyo where made
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more deals. Uh he wants to wrap up the
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deals. Um and it's it's it's resulting
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in a far lower effective tariff than you
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know all of us feared from April and uh
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that's one reason why you know the
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inflation bump has been really minor so
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far. Jeremy, always get to great to get
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your thoughts and your insights. We will
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catch up with you again next month. All
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the best.
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>> Okay. Thank you very much, hun. Bye.
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>> You got it. Jeremy Seagull, ameritus
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professor of finance here at the Wharton
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School and senior economist at Wisdom
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Tree.
