tv The Claman Countdown FOX Business July 31, 2019 3:00pm-4:01pm EDT
i will come back to business borrowing. leverage in the financial system is low and funding risk is low. overall, staff's view has been and my view has been that if you look overall, financial stabily lnerabilities are moderate. the place that gets all the attention right now, a lot of attention, is business borrowing and we look very carefully at that. what's happened within this borrowing is the loans have moved off the balance sheets of banks and into market-based vehicles which tend to be stably funded but nonetheless, it's clear that a highly leveraged business sector could act as an amplifier to a downturn. we are watching that very carefully but again, i think if you look overall at the u.s. financial system, what you see is a high level of resilience, much higher than it was before the crisis. that's something to take comfort from. i think all of that gives us the ability to use monetary policy for its purposes and rely on, supervisory and regulatory tools
to, you know, to keep the financial system resilient. >> so you're not doing something today to help today, then it's going to cause problems down the road? you're not worried about that kind of dynamic? >> there are very few things that i don't worry about at all. so of course, of course we monitor, we have every quarter, we have an extensive briefing on financial stability and we had that yesterday. so we look at this on an ongoing basis. we have a great team. we meet with central banks around the world. one of my colleagues is head of the financial stability board globally so we're very much monitoring these things all the time. and we worry about them all the time. we are always looking at that. we are looking for that thing that we may have missed a lot of the time. the things we haven't missed, i think they paint a mixed picture but not one that should prevent us from taking monetary policy actions that we think are appropriate to support the economy.
>> you've talked in this press conference about being data dependent going forward, and that this is not the start of a series of rate cuts, but the financial markets seem to think that this is the start of a series of rate cuts, and that they're predicting three, four cuts this year. is this your effort to try to damp down that -- >> let me be clear. what i said is it's not the beginning of a long series of rate cuts. i didn't say it's just one or anything like that. what i said is when you think about rate cutting cycles, they go on for a long time and the committee's not seeing that. not seeing us in that place. you would do that if you saw real economic weakness and you thought that the federal funds rate needed to be cut a lot. that's not what we're seeing. that's not what we're seeing. what we're seeing is it's appropriate to adjust policy to a somewhat more accommodative
stance over time, and that's how we're looking at it. what i said was it's not a long cutting cycle, in other words, referring to what we do when there's a recession or very severe downturn. that's really what i was ruling out. i think if you look back at other mid-cycle adjustments, you'll see, you know, i don't know that they will be in the end comparable or not but you will see examples of these. >> you mentioned the difficulty of assessing trade tensions in the economic outlook, and could you say how much a factor the u.s./china trade conflict was in the fed's decision to cut rates and the current stalemate and the threat of more tariffs continue, what would that mean for future interest rates and possible cuts? >> so you know, i wouldn't bring
it down to any one trade thing or any one factor. i think we look at a broad range of factors and trade uncertainty, trade policy uncertainty is one of them that certainly includes discussions with china, but i wouldn't -- i wouldn't be able to tell you how much of it is due to that, and without knowing, you know, i think with trade we have to react to the developments and we don't know what they'll be, and so it's hard to exactly say. certainly we've seen, though, that when there's a sharp confrontation between two large economies, you can see effects on business confidence pretty quickly and on financial markets pretty quickly. we saw that in june but then we saw them unwind after that to some extent. you've seen returning to a much lower temperature, i think. again, with trade policy, we're yu just going to be watching and trying to assess the implications for the u.s. outlook. >> [ inaudible ]. >> the mechanical effects of the
tariffs are quite small. they're not large as it relates to the u.s. economy. the real question is what are the effects on the economy through the confidence channel, business confidence channel. again, very very hard to tease that out. i've seen some research which, you know, which says that they are meaningful, meaningful effects on output. that's to say not trivial. i think that sounds right but it's quite hard to get -- there is no way to get an accurate measure. you have to look at a range of estimates. i think businesses will tell you that it's a factor, particularly businesses that have -- manufacturing businesses that have supply chains that cross international borders will all tell you that it's been a challenge. many of them have made adjustments and gotten to a place where it's okay, but it's been a challenge. >> thanks for the question,
chairman. as this press conference has gone under way, markets have declined, the dow is down as much as 400 points. what i'm hearing is a reluctance to provide more guidance around the future path of rates, and i'm wondering if that reflects a greater lack of consensus on the committee and you know, how much consensus do you want to see around these decisions, and how split are people about this? >> you know, you're right, there's a range of views on the committee and -- but the committee is unified, completely unified on our dedication to making the best policy decisions we can make, and that means people have a responsibility to do their best thinking and present that thinking. i wouldn't have it any other way. in terms of the way forward, we will be monitoring the factors that i mentioned and we lay that
out, you know, in the post-meeting statement and that's the road map we're going to be following going forward. we're going to be date a dependent. we're going to be, as we always are, doing what we need to do, what we believe we need to do to support the economic expansion. >> so it's been about 18 months since the fed issued its enforcement action against wells fargo. i was wondering if you could characterize the progress the bank has made toward the shortcomings it has in its risk management processes and also curious whether their lack of a permanent ceo has hampered progress in your eyes. >> the problems at wells fargo, that arose at wells fargo around risk management and consumer,
the way they dealt with the consumer, were actually pretty deep and i think the company realizes that, and they're not going to be -- they haven't been fixed quickly and frankly, we didn't expect them to be fixed quickly. so, you know, they will be under the growth cap, our enforcement action, until the board votes to lift it. and that's not something we're considering doing right now, and the committee -- the company is working away to address these issues but they are deep-seated issues and it just takes time to address them. i wouldn't comment on the ceo question. i don't really have anything for you on that. >> are you pleased with the responsiveness you are getting from them? do you feel like this is going the way you kind of want it to? >> i'm not going to characterize it. i mean, i have characterized it. we have an enforcement action in place. the company's working away at
addressing it. they take it seriously. i think they do see it as we do, as something that has to go deep, and you know, we'll lift the growth cap when we're satisfied. >> so when we have our next recession, the fed will have less room, it will happen, the fed will have less room to maneuver cutting interest rates since you're cutting now. how big of a problem will that be? >> you know, the premise is not -- i will question your premise for a second. if you remember, again, one of the purposes of our cut today is to support the expansion and we don't know when, and if that works very well and the economy gets going again, you know, you don't know where the funds in other cycles, i don't know whether this will happen or not
but in other cycles the fed wound up raising rates again after a mid-cycle adjustment. again, i'm not predicting that, but i don't think that we know that we won't -- that we will have less ammo because of these things. that's one thing. >> you won't be able to cut as much if rates are low, you will have less ammo in that sense. >> well, but you're assuming that we would never raise rates again, once we have cut these rates, they can never go back up again. just as a matter of principle, i don't think that's right. in other long, long cycles, long u.s. business cycles have sometimes involved this kind of event where the fed will stop hiking, in fact will cut, then will go back the hiking. again, i don't know whether that will happen here. it doesn't seem like something that's, you know, particularly likely, frankly, but we don't know that. the other thing is, i think by extending the cycle, you do have
a lot of benefits from that. i think, you know, we will use the tools that we have, a couple of rate hikes one way or the other isn't going to matter so much if there is a down turn, you're right, there will eventually be one, we will use all of our tools aggressively as we need to when that time comes. >> can you give us an update on the ongoing reassessment of the inflation framework and have the discussions so far this year had any bearing on today's decision? >> so the monetary policy review is really there to look at the way we make policy in the longer run, and it's not something that enters directly into our discussions today. so far, we've had a series of meetings called fed listens at almost all the reserve banks, soon it will be all the reserve
banks, and we meet there with the constituencies that we serve. they have been very, very successful. hearing from people, not just economists, but people who are not economists, how their lives interact with the fed's work. it's been great, i got to say. it's been even better than i hoped it would be. we're just now beginning the process of incorporating all of that feedback and we are going to be having a series of meetings beginning today and yesterday as we evaluate the questions that we're asking about our framework. it's very early to say where that's going but we're setting the table now and looking at what our framework is and looking at how it's performed, looking at how all the fra frameworks performed around the world during the global financial crisis. i expect we'll be at it awhile. i think it's been a good exercise. i think it's opened us up to sunlight and perspectives that we might not have gotten otherwise and i think it's a
good time. you have ten years after the crisis, you are really living in a new normal for the economy and monetary policy and it's a really good time to step back and ask whether there are some things we can do to improve our framework. >> courtney brown from axios. can you give us a sense of whether the committee feels constrained at all by the market's expectations for more cuts or other developments in financial markets? >> so i think this was well telegraphed. what we did today was very consistent with what we had said we were going to do. i mentioned the reasons for it. they have been well telegraphed and i think, you know, i think they will achieve their goals. we do know that monetary policy works through communications and then action thas that are consit with those communications.
we think the changes we have made this year really worked. of course we always retain the flexibility to adjust our communications and our actions in light of incoming data and the evolving risk picture. but i will leave it there. >> just to expand on that point about communication, we saw that markets have been particularly sensitive with regards to new york fed president john williams' remarks before the blackout period, so the fed had the language in the statement that says the committee is contemplating the future path of target range for the federal funds rate and monitors implications. i'm wondering, now there's kind of this inflection point about whether or not the downside risk, because you have had to cut rates, outweighs the fact that you still see a positive outlook of the u.s. economy at a baseline. so just wonder if you can kind of clarify all those things within the context of the challenge of communicating it. >> so again, i see the u.s. outlook as being a positive one, and we do, we have had these
global really risks to the outlook. there really is nothing in the u.s. economy that presents, you know, a prominent near-term threat to the u.s. economy. as i mentioned, there's no segment that's -- or sector that's really boiling over and overheating. nothing like that. it's within the economy, it's healthy. so i would say that. downside risks are really coming from abroad and of course we are concerned about low inflation. by the way, those risks from abroad are affecting the manufacturing sector here, and business investment, fixed investment. >> thank you very much. >> thank you. liz: all right. let us be blunt here, folks. it was during that q & a with the financial press that just ended that federal reserve chair jerome powell triggered quite a rout in several asset classes, specifically stocks and gold. all of it triggered not by the
widely expected quarter point rate hike -- cut, rather, that was announced at 2:00 p.m., but by something perhaps less quantifiabl quantifiable. did the federal reserve chair just say in so many words you will all only get one cookie and that's it, no more sugar? it's quite confusing, because he said different things twice. stocks, you can see intraday, began to drop dramatically shortly after powell began taking those questions from the press. it was what we think this particular comment was after a single statement indicating that today's quarter point rate cut may not only be a first but a last. here it is, in what is widely seen as sort of a hedge against future policy moves, because quite frankly, the u.s. economy is solid, powell said quote, we are thinking of it as a mid-cycle adjustment to policy. so did that mean it's just a slight adjustment and then we're done, but then at 3:02 p.m. eastern he appeared to double down saying it's not the beginning of a long series of
rate cuts and then he also said quote, we're not saying either that the fed will only cut rates once. so investors chose to hear the second part of that, that we're not only going to cut once and that particular line got the market climbing back out of the hole, as you can see, but certainly not back up to session highs. at its worst point, the dow jones industrials were down 478 points. we are down 307 right now. if we can, let's look at the u.s. dollar, spiking to a two-year high. now, usually rate cuts are dollar negative, but foreign exchange traders are betting perhaps that the fed might not cut much more, if at all. when other central bankers in other countries are cutting more, the dollar remains the best house on a bad block, so that's why we see a two-year high for the dollar against a basket of major currencies. as for the economy, chairman powell said quote, we have a fairly balanced economy, but the engine, the consumers, they're
healthy but not really growing. i don't know, that confused me because we had a very strong gdp number and we also had good consumer confidence. but i'm not the expert. let's bring in the experts. first to a man very closely followed by wall street, andy brenner. along with long-time fed watcher, former wells fargo chief economist, now president of dynamic economic strategy, john sylvia. andy, you made no secret of the fact you thought it was a stretch under the worst of circumstances we should even be cutting rates. do you believe we are one and done? what did you make of his tone and the statement? >> well, as you just pointed out, he said twice basically implying one and done and the markets didn't like that. we saw two years down, i don't know, 11, 12 basis points and the curve flatten dramatically and of course, you mentioned the dow was down as much as 400. then near the end he said well, i didn't mean to say that we're necessarily not going to lower
rates again, and now you've got a little bit better. basically, he did not do a very good job of selling what the fed was trying to get through. yes, they didn't really have to lower rates, but they had already walked themselves into such a panic with the markets that they had to do something. will they lower rates again, yeah, i think they'll lower one more time this year but that will probably be it. but we have to wait to see what the trade tariffs are. we don't see where the fed raises -- excuse me, lowering rates, has any real effect on trade tariffs because corporations can issue as much debt as they want right now, they can do anything they want. liz: i want to get to john. did you interpret him saying one and done, or was this sort of the start of a flurry of rate cuts beyond just one insurance cut? >> well, it certainly came across to me that it was not a start of a series of rate cuts. i think the market was kind of disappointed on that, in the
sense that there was a lot of talk about three rate cuts this year, another cut next year. the fed funds futures market has sort of priced in a series of cuts and that's not at all what mr. powell was talking about. that mid-cycle correction kind of adjustment really led to the expectation this is not going to be a long series of fed cuts and i think that's why the market is very disappointed. liz: why do we see on the screen that september, you have fed funds futures betting on a 70% to 74% chance of yet another rate cut? is that, andy, the one you feel will be the last one until the end of 2019 and perhaps just as importantly, there was something that could be interpreted as more stimulus and that is that the fed decided that it would halt its balance sheet runoff, its unwind, two months early? >> liz, let's put it in bullish and bearish. i'm absolutely, the end of quantitative tightening is
bullish. you know, the fact that he was waffling as to whether it's one cut or two is bearish. the fact that there were two dissenters who clearly don't want any kind of rate cut is certainly bearish. we are seeing it in the yield curve, seeing it in tens. we think ten-years will break through this 2.01 level they have been working around. we expect to see a 1.90 handle depending on the unemployment number on friday. but yes, i do right now, i still think there's another rate cut in this year and as to whether it's september or december, i haven't looked at the charts since i have been up here, but if you are saying it's 70%, it's certainly leaning toward september. tell you what, the ecb is going to lower six days before the fed meets next september. i think the fed is going to be kind of forced to probably lower rates again and that's why you are at 70% plus. liz: can we put up the dollar again? folks, i was just in europe in december, january, i want to
say, and one single euro cost about $1.14. now it only takes $1.10. okay. we've got the greenback at a two-year high. this to me is a significant move. if anybody thought that the fed was trying to engineer an aggressive tamping down of the dollar to help, you know, global businesses that are based here in the u.s., it ain't working. john, you watch the fed very very closely. those two dissenters, esther george from the kansas city fed and eric rosengrig of the boston fed, they are, i guess, they have dissented, esther george has dissented seven times, back in 2013. she's very fastidious. back then she was worried aggressive bond buying or stimulus might cause unwanted inflation. we are seeing no inflation. fed chair powell was very clear about that. where is the inflation when we have a fully employed world right now here in the united states and the consumer seems
pretty confident and is spending. >> we're not seeing the inflation but let me build upon andy's comment, which -- with respect to the ecb, and why the fed will probably move one more time. simply because the dollar being stronger presents two problems. one, stronger dollar's going to hurt our exports and be a negative for overall economic growth. second, a stronger dollar means that our import prices will be lower and that will make it more difficult for the fed to get to its 2% target. so from my point of view, and again, maybe reemphasizing what andy had to say, i think there is a case for the fed once again, if they're serious about the trade, if they're serious about the inflation target, they will be in another position to lower the federal funds rate again, again in part following on the ecb's lowering rates. so we are all lowering interest rates together. liz: i don't mean to make odd comparisons, but when somebody's in the hospital getting painkillers, guys, you have to
amp up more and more to see the same effects. i'm looking at something and it's called zero lower balance, and i just was studying this because it may come into ay. just to let our viewers know, i know our guys know what this means, in essence it means where interest rates are at or near zero, and therefore, it takes a lot more than just a quarter or even maybe a half a point cut for central bankers to really have an effect at stimulating the economy. andy, do you see that as a possible unintended consequence and how does that play out for the investor who is watching right now? >> well, what it does is as john just said, puts more pressure on the fed to lower rates. but we have something that they don't have, fiscal stimulus. whether it's out there in the press or not, just look at our budget deficit. our budget deficit, that is fiscal stimulus. whereas the eu can't get out of
their own tracks, especially when germany refuses with surpluses to spend any kind of money, we are spending money hand over fist. i think we are going to be okay. i don't think we are going to go into recession. but i think you're right that the fed will lower rates again and this dollar issue is a real issue. liz: look at what the nasdaq has basically scratched back, folks. at its low it had been down about 163 points. right now, we do have it down just about 50 points or so. let's call it 44 now. it's changing as we speak. as we are watching all of this, i want to thank andy and of course, john. folks, keep your eyes on this market. it is moving fast and having gone down pretty dramatically. look at this, the dow down 478 points, we are cutting those in more than half here, down about 201. let's get to the guys who are in the thick of the trading action on the trading floors. john corpina at the new york stock exchange, what are you
hearing, what are you seeing and what are you doing? >> you know, it was quite some reaction here that we got from this announcement. the fed comes out, we watch it all on the news, we are watching your channel, what's going on, then once powell spoke, immediately his words just started to snowball and you get these computer programs that start reading the headlines and next thing you know, the market tumbles down and it takes awhile for it to kind of wash itself out. did the market react appropriately? i think it did. i just don't think it should have reacted as much as it did. right now, looks like we are starting to claw back in. i think investors are waiting for the close, waiting to see what's going to happen. look, we cut everything in half. russell is still up. vix should have moved more than it did. it hasn't. right now, no one is really convinced this is a big turn in the market. we do have a few more days obviously left to go in the session. in this week. end of the month today, that might add a little more volume towards the end that might dampen some of this liquidity. liz: alan, we are looking at the vix because as john pointed out, we did see a spike but not the move that he would have
expected. we are up about 3%. the vix of course indicates a little bit of fear in the market. what are you sensing from the flows and from the calls you are getting at the cme in chicago? >> well, we still have the vix at a very low level. remember it was last week that we were at the lowest level in that fear factor since april. i want to point out that it's really important that the markets had it completely right today. there was all the talk, the half point versus quarter point. obviously everyone knew there would be a cut. if we look out, you talked about september as a 70% chance of another cut. that's what the markets are telling us. more important to me is december. december's got a 50% chance of another cut. so it's priced into the pipeline. that's what the market things. the markets have been right. we live in this bizarro world where we are cutting rates because of the certainty of cutting rates because of the uncertainty in the trade policy. so it's kind of a self-fulfilling prophesy that the president wants rates cut, and we have this uncertainty so the fed feels we have to cut rates. so it's going to continue but i
still look at this, even the tiny pullback as opportunity. we are seeing the markets move a lot higher. this stresses the one thing, the chase for yield, people will still be going into equities. it's not going to pay in treasuries, especially at these rates. liz: back above 27,000 for the dow, just by one point, though. 27,001. financials are a mixed picture. luke, if you look at things like i would say insurer, all red. the chinese stocks that trade here, all red. it has been a very rough 48 minutes since he started speaking here. i'm beginning to wonder what you see there, and here are the insurance stocks now. they have reversed, they are back up at the moment. what do you think is the investment play here? >> well, great question, but it doesn't matter how unfair the world is or whether i think there's 4% inflation, it's negative or whatever.
the question you asked earlier, look at the vix, how low it is. if you are going to be in risk assets, if you are going to be in equities, you should own some volatility. you should own it hedged because you don't know what's going to happen but the market at all-time high, volatility all-time low, you should own some of that. i tell you another thing. the fed is painted into a corner and as i have said to you in this show for about a year and a half, there's not going to be any deal with china. president trump just picked up the narrative that maybe the chinese are waiting to see how the elections are going to go. he said that about two days ago. i think they are going to wait it out. there's not going to be a deal with the chinese. then the fed is going to have to act. it's going to have to follow the eu. and your simile about a patient with painkillers is exactly what's going on. liz: thank you. as a doctor's daughter, i always refer to what medications work, then stop working. john, can we throw up, guys, some of the metal stocks?
everything from bhp to gold, g-o-l-d? i'm wondering as we saw before this rate cut and then the q & a, gold was down four bucks. then it went down 14 bucks. john, clearly we do have a situation where the market's interpreting that this is stock negative and metals negative which is weird, because gold usually is a flight to quality. can you kind of play psychiatrist for traders and investors now? >> nyou know that correlation which usually is there, is not there at this point which shows me that investors are so disconnected to the market as to what's really going to happen. as your previous guest just said, talking about a trade deal, trade deal, we have a big meeting next week and we will get no information out of that. we are fooling ourselves if anything is going to happen. investors really don't know how to play this at this point. unfortunately, this was a date on our calendar. next week is a date on our calendar. neither one of them are really going to lead us to how we should play this next month or two months down the road.
at this point, i think we have to say that overall our economy is strong, sentiment is strong, and equities is the right place to be at this point, where you will see the best value. liz: or the dollar. cantor fitzgerald says you've got to go into the dollar. that was the right play, certainly if you went in yesterday. john, alan, luke, thank you so much. looking at a dow jones industrials down 241 but remember, we had been down 478 points. those markets did hit session lows, not only after the 25 basis point rate cut announcement by the fed, but it was more during that q & a with the financial press, and the fed of course also halting its balance sheet unwind two months early. it was supposed to end at the end of september. jay powell and company say let's quit it now, because that is in its own way a stimulative move. look at the dow move here, when we started to tank. this was just after the q & a
began. the major averages, you can cycle through, they all look the same, we do have some of the major averages still up a couple of points since last month's fed announcement that rates would remain unchanged. but he did make that sort of harbinger of today's cut. to edward lawrence, who was in the room during that q & a. he's just come before our cameras outside the federal reserve with late-breaking details about today's meeting. edward? reporter: very interesting. you are hearing that federal reserve chairman jerome powell say that spending is very good, consumer spending is driving this economy. business investment, though, they're saying, is a little slower here. you almost heard the fed chairman there basically saying he's taking credit for continuing the expansion going as long as it has. he says, you see as the fed has moved to be more accommodative, he says that you see low unemployment, wages rising. he says you see consumer spending very strong. as they're moving in their business cycle here. so i asked the fed chairman if
waiting basically seven months to ask for this rate cut, if he believed that that was causing a little bit of the slowdown on the business investment side. listen to his answer. >> what you hear is that demand is weak for the products, you see manufacturing being weak all over the world, investment, business investment is weak, and i wouldn't lay all of that at the door of trade talks. i think there's a global business cycle happening with manufacturing and investment, and that's been, you know, definitely a bigger factor than certainly we expected. reporter: so the fed chairman there making the point that the weakness in the economy on that business investment side is coming from outside the united states, not inside the united states, those influences, the global economic slowdown weighing on the economy, also trade uncertainty. he made the point that tariffs themselves are not really affecting the economy. it's the perception of those business leaders within the
united states about the tariffs that is affecting the economy. the bottom line is that powell says there's no reason this expansion, economic expansion, can keep going. he believes it will keep going. he believes that as the fed is moving to that more accommodative policy, that it can keep going. you know, one point there, the federal reserve chairman did go back and clarify that he's not just talking about one and done in terms of rate cuts. the federal reserve chairman saying this isn't going to be a long series of rate cuts but it's not necessarily one and done. liz? liz: edward, we are keeping one eye on you and one eye on donald trump's twitter feed. he still has not tweeted about this federal reserve rate cut of a quarter point. he has made it no secret that he really wanted 50 basis points, a bigger cut. let me stick up for jay powell here for a second. we have pretty decent data here. i know he's focused very much on let's do this rate cut now because he sees some weakening globally. he also is concerned about that
trade situation that we have right now. but we have low borrowing costs. exactly what issue does he think even lower borrowing costs will fix? reporter: it's very interesting, because if you listen to his language, and that matters when you talk about the federal reserve, he's saying to keep the expansion going, they will use their tools to keep the expansion going. not to head off a downturn or not to stave off a recession, but to keep the expansion going. that could indicate they are going to use these tools before the data starts to turn south which is kind of what they're doing today here, making sure that expansion can continue. that's what their goal is. you know, he believes the lower capital will keep that perception down so companies then might start investing a little bit more. he said companies have sort of worked out the trade issue, moving supply chains in some cases, or incorporating or absorbing that cost through technological advances. that's why we're not seeing a huge increase in prices related
to the tariffs that are coming on. the chairman believing this expansion can continue. liz: good to see you, edward. thank you. nice job out there in the big meeting. whether you like the feds move or not, there is always a trade. there is always an investment. let's get reaction as to how the fed's decision is impacting you and your portfolio, your money. you know, when you take a bunch of asset classes, not just stocks, into account, a very strange thing's happening this year. for example, you look at year to date picture of the dow. we are very close to highs here. now let's flip it over to a year to date chart including today of the s&p. same picture here. we are very close, if not at the highs. let's look at oil. oil is up 24.5% since january 1st. another great move. off its highs but still, a nice move. then when you go to gold, which is very much a traditional hedge against problems in stock markets, gold is not only up 12.25% in 2019, but currently it
is trading near 52-week highs. let's just take an outlier here. bitcoin, even bitcoin seeing quite a bounce of about 22% over the past year. so how is it that every single asset class, nearly every single asset class, is showing muscle year to date? to the man whose knowledge spreads from the federal reserve to stocks, tom lee joining us live. first your reaction to the fed's decision. >> i think it was a good move. 25 basis points was sort of where the market was expecting it. the selloff today i think is disappointing some folks but i think people need to look past this knee-jerk one-day reaction. it was a good move and very appropriate move. liz: if president trump were sitting here, because you know he's not going to be happy, he wanted a bigger cut, what would you say to him? >> if i was the fed, i would say that 25 is a road map to larger cuts, but it's appropriate to not make a large move at this
moment. liz: what do you make of i guess you could call it this paranormal market activity? usually if stocks are high, gold is down. it's just interesting to see that. the bond market's bee haifg hav very natural way. this morning, the yield was 2.06%. then it started to fall as prices for bonds went up. that of course is a flight to quality. we went as low as 2.01%. what do you make conundrum we are seeing? >> you know, one view in the market right now is this is a regime change, that low rates and mmt are going to start to cause an inflation in real assets which is why gold could be reacting to this. another reason to think about gold rising is, you know, i think part of it is next year is an inflationary year. there is a cyclical upturn.
part of it is geopolitical tensions. hong kong especially has been sort of one of these hotbs of controversy, among other regions. remember, the hong kong dollar was used in the proxy for dollars, and now it's less, you know, people are less comfortable holding it. liz: that seems to be the biggest outsized reaction. the dollar hitting a two-year high during the q & a. >> yes. liz: during the head of the federal reserve's discussion with the press. i just find that interesting because usually when you cut rates, that's worrisome about the economy and the dollar usually goes down. we are seeing the complete opposite. >> i think this is probably going to weigh into how the white house sees this. i think other central banks have been cutting more aggressively so i think there's a feeling there's a currency war outside the u.s. and if the u.s. is going to react to that a larger cut would have been sort of equal to weaker dollar. liz: what do you see as an unintended consequence, i just asked andy brenner and john silvia this, of this rate cut?
nothing? >> i think if there's an unintended consequence, it would be because it's too much of a good thing. liz: not enough of a good thing. >> no, too much of a good thing. meaning if we only had transitory weakness like the fed was mentioning, and we have cyclical upturn next year, we are really talking about, you know, after markets everywhere rallying and that could be a bubble. that could be an unintended uence. for now i'm happy with the 25. liz: s&p is down 19. at its lowest point, we were down 55. to me, the nasdaq is a stunner. it has been down 160 points. now right now, we do have it down just 55, which on a normal day would be a pretty ugly day. talk about the bitcoin picture. even bitcoin has been moving higher throughout 2019. you are a crypto believer. >> yes. liz: do rate cuts figure into anything regarding bitcoin? >> yeah. liz: how? >> bitcoin is becoming increasingly a macro hedge for
investors against the sort of things that could go wrong. rate cuts are adding liquidity. liquidity is pushing money into all these risk, you know, risk assets and also hedges which is helping bitcoin. liz: we are at $10,008 per bitcoin. what's your year end target? >> we don't have a target for bitcoin. but the prior high was $20,000. i think there's a good possibility bitcoin reattains that high this year. liz: we have a lot of investors listening right now who either choose active investing where you have a broker, a money manager, or passive investing, they are in index funds. does a dovish fed move people more into passive investing because you've got to figure they're just going to be on cruise control and stocks will go higher, why pay someone to pick individual names when the s&p just looks like it's clear skies ahead? >> great question. today's a good example where an active manager really has an edge because they can be buying this pullback so on sort of -- liz: they better have been. they had about four minutes while the dow was down 400 points.
>> that's right. you know, that's what a passive fund doesn't do. a passive fund is just buying the market every day at the close. so an active manager in a market where there's volatility and maybe even range-bound moves can shine. i'm proactive manager. liz: president trump tweeted, i want to go back to the dollar because i think i could be wrong but the spike in the dollar is significant, he has tweeted that the u.s. dollar is stronger than ever, and it is the most dominant currency in the world. i tend to agree with that. but he might not like that strength because it tends to make our wares that we manufacture here more expensive overseas. do we expect that this is going to incur his wrath, because we see an even higher move in the dollar? >> i believe the imf actually conclude the dollar is relatively overvalued. i think there is unfair strength in the dollar at the moment. i think weaker dollar is actually good policy. liz: he hates crypto. he's said that. he doesn't like bitcoin. jerome powell didn't like it either. here is what jerome powell said
about bitcoin and then you can react. >> okay. liz: let's listen. >> libra raises a lot of serious concerns. those would include around privacy, money laundering, consumer protection, financial stability and those are going to need to be thoroughly and publicly assessed. liz: libra of course being facebook's new plan to get into a crypto world. >> now, libra is quite different in its architecture from bitcoin. i think that some of his comments are fair about libra but they don't actually apply to bitcoin. liz: all right. what jumped out at you most when it comes to what powell said? i'm interested in what you interpreted, because there were a couple of things he said that were conflicting. number one, he said don't interpret this pretty much as a long string or a flurry of more cuts. yet then he said i wasn't saying that we would only have one and done. >> yes. liz: what did you hear? >> i think one, he is careful about being misinterpreted so i
think he's trying -- liz: that causes confusion, though. >> yes, it does. i think it's important that, you know, he is ending quantitative tapering early. i think this is still on balance quite a market-friendly fed move. that's why i think ultimately equities are going to be higher from here. liz: is that your favorite investment or something else? >> yes. i would be long equities for the majority of your viewers. liz: good to see you. thank you very much. dow jones industrials down just under a percent. 236 points. we've got the closing bell ringing in about 15 minutes. now, what happens next, we will take you back down to the floor of the new york stock exchange. we've got all kinds of experts who have had elbows deep into buying certain assets. we will find out what they are buying right now. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that.
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slight taste of what they didn't want, which was no clear indication that there's no way he will be on this path for more rate cuts. so that sets up for a battle with president trump, but what else does that settle and what does that really kind of point out? let's get to charlie gasparino at the moment with exclusive details in the newsroom. what's happening behind the scenes at the white house? >> i don't know about exclusive details but i have spoken with some investors and white house sources. let's break this down. first on the investor side. you do get the impression that the market is losing confidence in powell. you know, i'm not saying i agree with president trump's approach to this jawboning him into cutting rates, especially now. the economy is still strong, you know. the problem with the economy, if you are worried about the future, is not interest rate driven, it's trade. the fact is we are in the middle of a wide-ranging trade war which is impacting gdp. if you look at the last gdp
print, it was down to 2%. that's not because of rates. that's because of trade problems. but look at what jerome powell did. this is kind of interesting. back in december, when it was clear things were kind of -- the trade stuff was starting to kick in negatively, you know, global markets had some issues, he was not just raising rates on the short end. he was unloading the balance sheet on the long end. that double whammy really sort of locked down the markets. there was a real problem in the markets at that point. clearly when you talk to economists, and i speak to a lot of them, that was not needed. we need to unwind the long end because the fed has got a huge balance sheet, but probably we did not need at that point to start raising rates again. okay? so then he raises rates anyway. now he comes in and he basically says no more unwinding the long end and by the way, you know, we're going to cut rates on the short end despite what's going on in the economy.
because the economy did kind of -- markets settled. we just hit highs. i tell you, those sort of weird machinations, lot of investors think it's weird, is something people are now losing confidence in this guy. you know, i don't know if you can have a fed chief that people lose confidence in in the long run. that puts him, if trump wants to blow him out, trump launches a major campaign to get rid of him, again, it's hard to get rid of a fed chief, you have to show cause, but that puts him in a more precarious position. as far as the white house goes, listen, they wanted a bigger rate cut. there's no doubt about that. they are signaling that by looking to put in judy shelton, who has already said she wants, you know, she thinks we should cut rates more. whether that adds to the tension, i guess it will. we'll have to wait for trump's tweets. but you know, i don't know if mr. powell over the last sort of
six to eight months has done himself any favors, just in the way he's comported himself. liz: look on the screen. here's why -- can we put that back up, please? here is possibly why powell is trying to straddle a very tough line. >> right. liz: donald trump has been rightly championing strong gdp. here he says q2 gdp up 2.1%, not bad considering we have heavy weight of the federal reserve anchor wrapped around our neck, almost no inflation, usa is set to zoom. those aren't exactly the circumstances under which you cut rates. >> now, well, it depends. we are in the middle of a trade problem. it's not quite a trade war. it's like a cold war in trade, you know. we're not exactly at each other's throats but there's cross-currents of tariffs going on. it's not just china. it's globally. that is having an impact on our gdp. you can see that in sort of business investment and in other areas. i'm just saying that, you know, it had its impact in december
when he started really racheting up rates both on the long and short end, and now we recovered a bit and he's starting to cut rates again. you know t real problem with this economy, liz, the bottom line is this, it's not rate driven. it's all about trade. if you are worried about gdp and the markets, corporate earnings, they have come down to trade. it's not, you know, a quarter point on the fed funds rate. i think some of that, you know, you're seeing that reflected in the markets, that people are losing confidence in jerome powell right now. liz: charlie -- >> why is someone screaming wrap in my ear? liz: because there are about 50 other people, like planes at o'hare, we want to hear from as well. >> i actually talked to other people. liz: okay, charlie, thank you very much. the only major index, folks, to turn positive earlier in the hour was the russell 2000 but now, if we can look at an intraday, it has dipped back into the red. can we get an intraday picture of the russell? for one brief moment, it was
able to pop its head back up above water. but let's get to one of the most resilient names of all when it comes to every indice. that would be apple, holding on to pretty much the gains it had seen -- well, no, actually it had been up more than 5% earlier but then it's still up about 2.66%. it is topping the dow, despite iphone sales continuing to slump. what exactly is pushing apple closer to reclaiming the $1 trillion market cap and can it help the rest of the markets at this moment, jackie? you're on the nyse floor. jackie: you can see apple is trading off of its session highs and you know, the fed did take the wind out of the sales of this market a little bit, but apple is still seeing a nice boost. that's because it reported a stellar quarter. it was a beat on the top and the bottom line, fourth quarter guidance was raised, people were excited about that. and you know, it missed slightly on iphone sales but that was expected. there's high saturation in that
market. that's where the growth is going to be, apple news, apple games, the credit card which will come out in august. that's according to tim cook. the other thing was, remember what happened when apple preannounced and said it was worried about china in early january? it not only upset its own stock but the rest of the market. apple didn't say it's having any kind of problems in china, even with the backdrop of these trade negotiations continuing on and now talks not resuming until september. so investors are taking that as a positive view. you can see how strong this number was, when a lot of stocks churned on the fed news here this afternoon, apple really held on to a substantial portion of its gains. liz: i think you're right. not all of them, but some of them under very difficult circumstances because folks, it has been a roller coaster this hour. jackie, thank you very much. let's bring in our all-star panel. we have six minutes to go before the closing bell rings.
we've got market mavens not just with billions but in the aggregate, trillions of assets under management. state street global advisers chief investment strategist michael eroni, erin gibbs and author of the brand new book "the missionary of wall street" steve ott. beginning first with steve, what are the moves you're making right now in the wake of powell's statement? >> we are still overweight equities here. we are holding on. we are saying 3100 is our year-end target. we have been saying that all year. i think this was very bullish. the bulls needed powell really to do nothing. the economy is soft landing. we're okay. the bears think we are heading to recession. they want a series of cuts. the independents who i think will still come into this market, they just wanted to be assured he's not going to keep hiking. that's what really threw us into a tizzy last december. this is a promise in blood he's not going to -- once he cuts he
capit can't turn around. liz: it's less about more cuts and more about not hiking for awhile. >> we are in pause mode for awhile. that's very bullish. liz: erin, he's going into equities specifically. what are you looking at to buy in the wake of what we still don't know is either one or done or a flurry of future rate cuts? >> well, it means we are going to be in a growth environment. i'm saying move down the market cap, look at small and midcap. that's where you are really going to get your growth and the valuation premiums are at 15-year lows. this is just one of the tightest we have seen between small and mid versus your large. we are definitely in this type of fed accommodating environment. you want to get the liz: what about you michael? were you purchasing anything? >> positioning portfolios for an economic collapse in the face of what is incredible fiscal monetary policy or easy monetary policy has not been a winning
investment formula. we like risk assets. we like stocks. we think you need to be invested in high quality growth, cyclical sectors of the market. the last time fed paused in 1995. emerging markets, technology, financials all performed well. i think that provides you a road map for this time around as well. liz: look at nasdaq. steve you gave a broad, i'm into equities. what do you specifically like? >> so, you know people quote off the lows. chip stocks we like a lot. they have not achieved september highs from 18. they kind of moved with early cyclicals. the financials are starting to move. they're early cyclicals. i want to buy the early cyclicals starting to move. i think now have the green light to go forward.
deep cyclicals need china. industrial cyclicals you need to hold back. we need a china deal. i don't see that coming anytime soon. liz: erin, i have a question, i don't know any of us will know, if we did have a signed, sealed, delivered deal with china, would that cut it today? >> no, i don't think so. i think is really about, we keep talking about much more global economy, the slow down is about what is happening outside of the u.s., not inside of the u.s. because china has been hurt with the trade wars. so i think without these trade tariffs, that they wouldn't have had that data, that catalyst to cut rates today. liz: in fact the quote that jumped out during the q&a, the statement where he said, we see weakening global growth, and then he said specifically, michael, he said specifically the european union and china. so would you avoid those areas right now? >> we remain underweight to
equities outside of the night. we think that economic growth continues to struggle, be sluggish there. you continue to see some geopolitical risks, whether it be on political turmoil within europe, for example, we're not sure how brexit is going to play out. certainly the contented challenges with fiscal spending, for france, italy, others continue to be a challenge. even though the ecb is likely to get easier in terms of monetary policy, there isn't enough there to signal to us, that will be a catalyst to increase the economy or profits in europe right now. >> a year ago liz, he didn't know where europe was. now he is mentioning it. did he mention europe and china? that is one reason people were worried last fall. he was ignoring the global scene. liz: do you agree with charlie gasparino, steve that people are losing confidence in jay powell? >> a transition always has that
issue. [closing bell rings] he will get there. he promised he is not hiking. i think that's good. liz: what a busy hour. we've been up, we've been down. we're going back down. dow jones industrials down 323. it is what he said after the cut announcement that freaked markets. >>s it- it was the worst day for stocks. after fed's jerome powell said the central bank's decision to cut interest rates was quote, not the beginning of a lengthy cutting cycle, leaving future rate cuts in question. i'm kristina partsinevelos in for melissa francis. connell: i'm connell mcshane. this is "after the bell." should be a fun hour as we put all this together. not fun for the markets.
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