New York morning trade.
Wall Street is higher and extending previous session gains, and the State of the Union address was the longest in US history.
The speech follows the Supreme Court ruling against the administration's tariffs and comes ahead of upcoming midterm elections.
Trump saying terrorists fueled a historic economic surge.
The president also took a victory lap on the State of the Union stage, calling the US Supreme Court ruling against his tariff policy very unfortunate.
So when it comes to affordability for Americans, what is on the horizon in terms of the cost of living?
Well joining me to weigh in this morning is bank great senior economic analyst Mark Hamrick.
Good morning, Mark.
Thank you so much for joining me.
So we're here the morning after the State of the Union address, and I do want to start out by terrorists, so I understand that this morning we heard from Jason Greer and he was saying that the US tariff rate for some countries will rise to 15% or higher from the newly imposed 10%.
But what do you make of this legal ping pong and what does this actually mean for American businesses and consumers.
Good to be with you, Remy.
You've been digging out from snow.
I'm digging out from the State of the Union.
I hope you're doing well there.
Let's sort of think about this from a higher level perspective.
And first of all, just the messaging from the administration has been tremendously confusing.
You had the 10% Section 122 plans referenced in the president's initial comments on Friday, then the True Social post talking about 15%.
And then seeming to split the difference and I mean unfortunately this one step forward, one step sideways, one step back routine has become all too familiar and so having had literally months to consider what the possible response to a negative high court decision would be in the eyes of the administration.
The messaging has been all over the place and one can't really put together reasoning why that should be the case.
So for businesses, for consumers, it's more disruption, it's more volatility, it's more uncertainty.
There is one thing that is certain, it's those latter three things that I just mentioned, not to mention that tariffs are going to be a primary tool used by this administration.
But it's not going to be able to use the shotgun approach with the IEPA authority that was used to impose more than let's say 2/3 of the initial tariffs because this authority that's being used now can only go for 150 days without intervention by Congress, and tariffs are not popular on the part of the American people.
And heading into midterm elections, I doubt that there are many members of Congress who want to raise their hand.
And have the continuation of taxes on imports when that is really a negative consideration for most consumers and businesses.
Yes, and yesterday Trump mentioned the roaring US economy, but there are a lot of moving parts here.
And when we look at the latest economic data, we know that core PC is stuck at the 3% range.
So what does this actually mean in terms of the rate outlook and how will Americans be feeling this going forward?
Well, for one, the latest data does not confirm that the economy has been roaring, as you know.
We had that smaller than expected rise in annualized GDP of 1.4% for Q4, and yes, a coiled spring.
It does seem to be in play here where we have a rebound in the current quarter, but for all of 2025, GDP annualized was a gain of 2.2%, and that's essentially the outlook for the next couple of years.
If you look at, for example, the Federal Reserve summary of economic projections, that's just barely above trend and in fact it may be the new trend, meaning the long term average having been seen at 1.8 or 2%, maybe 2.2% is now the new reality, and we have yet to really see.
The benefits of all the investment in AI, which by the way, is the primary driver of business capital investment, that's part of the solution or equation how you get to the rather lackluster employment data we see where we averaged 15,000 jobs added a month last year, 1/8 of the average of the previous year, and as you know, the sector participation and jobs creation. is really poor, very inconsistent with health care and social assistance leading the way.
So we'll leave it to voters to decide whether this is a golden age, but the economic data does not support the proclamation of a roaring economy.
There definitely are sectors of the economy that are doing better than others, but many are not doing particularly well at all.
And speaking of which, Mark, I do want to ask you about housing and shelter now.
Traders in US futures as well as options.
Markets are increasing bets that the central bank, the Fed will keep cutting interest rates into next year rather than start raising them.
And given the fact that mortgage rates hit a 3-year low near 5%, the housing market is still in a freeze.
So what does this mean moving forward in terms of housing?
So the bank rate average for the 30 year fixed rate mortgage hitting 6.09%.
We'll get an update on that in the next 24 hours.
I'll have more to say about that later, but as you said, that's the lowest in over three years, and the National Association of Realtors is.
Pondering the possibility that these lower mortgage rates could bring in hundreds of thousands of prospective buyers this year among the millions who are newly qualified because of these falling mortgage rates, and those who shop around can find definitely something with a 5 handle if they're well qualified, and paying their bills on time, so on and so forth.
Then the ironic effect of all that, Remi, could be that we have more competition.
For the constrained supply of housing that we have later this year and that could give another upward lift to prices which have been showing more of a tendency to cool.
We know there are some select markets with home prices actually falling.
That tends to be those that were the boom pandemic markets and sort of reverting to the mean, whereas you might say value priced markets for lack of a better way of putting it, are seeing.
Uh, more, uh, pricing, uh, power.
And Mark, we have about 60 seconds here, so I do want to get your take on what the Federal Reserve transition will look like.
What are your expectations?
Well, for one, it's going to be interesting.
Jerome Powell has 2 more meetings as chairman.
The big question in my mind is, does he stay on, which he can do for a couple of years as a board member, just to basically say, I'm here, right, and that brings a lot of influence to the table, even though he wouldn't be chair. longer and of course the other part is when do we have confirmation hearings for the president's nominee Kevin Warsh who will bring his own mindset and experience to the chair's job.
But right now this is a very data dependent Fed.
They need to have a higher degree of confidence that inflation is truly cooling, and the data certainly in the PCE most recently with the year over year increase of 3% did not support that thesis.
We'll see what happens this year.
Mark, we will have to leave it there for today, but thank you so much for joining us this morning and as always, thank you so much for sharing all of your insights.
Great to see you, Remy.
Thank you.
