“Anytime you have a negative payroll growth number… that is, like I said, a big flashing red sign.” – 02:02
Sonu Varghese, Vice President Global Macro Strategist at Carson Group, joins Remy Blaire to provide expert insights into the current economic landscape. They delve into the likelihood of the Fed cutting interest rates, with the CME FedWatch indicating an 84% chance of a 25 basis point cut. Sonu emphasizes that the recent jobs report, which shows negative payroll growth and an increasing unemployment rate—the highest since October 2021—signals a pressing need for the Fed to take action.
The conversation shifts to the impact of rising import tariffs on American businesses and consumers. Sonu explains how these tariffs are affecting cyclical sectors of the economy, leading to job losses in manufacturing, wholesale trade, and construction. He highlights the relationship between income growth and consumer spending, noting that weak payroll growth and modest wage increases are contributing to economic challenges.
As they look ahead to upcoming inflation figures, including CPI and PPI, Remy and Sonu discuss the Fed’s dilemma of managing inflation, which is currently above target, while responding to a softening labor market. Sonu points out that while tariffs may contribute to inflation, the Fed faces broader challenges with services inflation also on the rise.
In the latter part of the segment, Remy and Sonu explore investment opportunities in the current market environment. Sonu advises on the importance of diversification, especially given the heavy exposure to technology within the S&P 500. He suggests looking into sectors like industrials and financials, which are performing well, and notes the recent rally in mid and small-cap stocks, as well as homebuilders benefiting from expectations of rate cuts.