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