The US 10 year yield falling at the end of last week after Feter J.
Powell signaled a September rate cut is on the table, but this wasn't the only Treasury yield moving last week.
Now the UK's two-year government bond climbed to their highest level since June, and these yields rise when the price of the bonds declined, and we did see that.
After Britain's inflation rate climbed 3.8% year over year, making it unlikely the Bank of England will cut borrowing costs again.
Now British bond investors we amid sticky inflation, higher rates, and significant government debt.
Meanwhile, the US now has a 10% stake in Intel and the Trump administration saying they're exploring additional.
States and other US companies moving forward.
Well joining me this morning to weigh in is Patrick L.
Young, chairman and founder of Exchange Invest.
Patrick, good morning and happy Monday to you.
So first and foremost, at the end of last week on the heels of Jay Powell's speech, we saw reaction across all asset classes.
So what did you make of Powell's more dovish remarks?
I think it's very interesting.
Has he succumbed to political pressure?
Of course we'll never know, and he'll always deny it, but it certainly looks that way.
In some ways.
I think the most interesting message to come out of Jackson Hole was the whole thesis of the conference was about reworking the economy in a new age of different kinds of employment, and actually nobody's talked about that.
Everybody's talking about the interest rates.
So in other words, what we've happened is the market.
Trump world is obsessed with getting a rate cut, and that's what all the media is doing, which is responding to Trump's turn.
That has in turn led to obviously a big rethink about what's happening in the US economy in terms of if suddenly Powell can come in and cut interest rates, despite there still being some inflationary concerns around, what does that mean for the pricing of the US dollar and in fact the rest of the world's currencies?
Yeah, and Patrick, before we move away from this, could you actually expand on what you mean by this, especially given the fact that we saw those non-farm payrolls revisions following the July non-farm payrolls.
Yeah, well, look, I mean, one of the big concerns we have at all times in the USA is we've got tariffs coming in.
Now whether you agree with tariffs or not, this is irrelevant, but the point is tariffs add to prices.
Therefore, people pay higher prices.
Therefore we have inflation.
We already have a number of issues that were somewhat inflationary coming even out of the Biden administration, minimum wages from 2 years ago, etc.
The more that we look at the US economy, there is a concern that they have not slain the dragon of post-COVID inflation and therefore every single number should be looked at very, very closely at the moment.
And for Jay Powell, who was saying trenchantly just six weeks ago there was no sign of a rate cut coming to mind, then he goes to Wyoming, sniffs the summer airs in the countryside, and he says, you know what, I think I'll throw in a rate cut in September.
That's why markets are surprised because it looks rather schizophrenic.
Yeah, and Patrick, we have to keep in mind that here in the US on Friday morning, we will be getting PCE figures and of course next Monday is a holiday here in the US and it is Labor Day.
But I do want to shift our focus now on over to the Atlantic, the other side of the Atlantic that is.
So take us through what we're seeing in UK gill deals.
Look, what you've got at the moment across the sides of the Atlantic is two completely different perceptions of an economy.
We might be concerned about inflation in the USA, but the USA is a winner.
That's what we've got in Trump world.
We've got an economy that moves forward, an economy that's growing.
Remember those numbers the course of the last generation, US growth, 89% growth across the European Union, about 8%.
The UK is not doing that much better.
The problem is The UK at the moment is run by simply the most useless left-wing government we've seen in two generations.
We're back to the 1970s.
The unions are being given huge pay rises across the board.
The London Underground will be crippled next week because of tube strikes.
There are all sorts of things going on under the hood, and actually what's happening is every piece of news that's coming out is being viewed through a negative prism, and that's.
Because actually the finance minister is incompetent.
We know that she essentially was somewhat economical with the truth when it came to her CV.
The Prime Minister is at rock bottom levels of popularity.
He's actually less popular.
More people have a favorable view of Donald Trump in the UK than they have a favorable view of Keir Starmer, the Prime Minister, which is quite incredible given the fact that apparently nobody is supposed to be liking Donald Trump and the rest of the world.
Now what we've got therefore is the UK is in a lose-lose situation.
Everything about the UK economy is wrong.
Government spending is out of control.
The government is incapable of understanding and indeed following what the people really want.
They don't have effectively the consent of the majority of the people to govern anymore, despite having won a huge majority on July 4th last year.
That's why you've got, look at these numbers, guilt. are within inches of 27 year record high yields.
That's a catastrophe.
But the truth is, the government can't just keep borrowing money willy-nilly in the UK.
It doesn't have an extortionate privilege like the US dollar.
It is in an economic mess, and the UK needs huge cutbacks right now.
And instead, the discussion is all about endless tax rises, which is further bad for the economy.
Well, Patrick, let's shift our focus on back to the US.
Earlier today, the White House has said the government is likely to continue taking stakes in companies similar to the Intel deal, and the Trump administration took a 10% stake in Intel, and the president also praising the CEO after calling him out just a few weeks ago.
So what do you make of all of this?
Well, I mean there is a certain amount of concern that obviously the president could be bullying certain parties in the private sector as to what they do.
At the same time, is it really safe and sensible for the government to be taking stakes in companies?
I'm not really sure.
Look at what France did.
They had national champions.
It didn't help their economy whatsoever.
They're utterly stagnant.
So there's a huge concern out there that the Trump administration.
In believing that it's pro-commerce and can do deals may be overstepping the mark, and I think that will follow through in markets by effectively taking stakes in companies which may therefore be seen as being preferred over other companies.
Somehow or other it just doesn't sit easily with me.
I was much more with the Donald Trump of 4 weeks ago who was talking about privatizing Fannie Mae and Freddie Mac and lowering the number of utilities that the government owns.
And finally, Patrick, before I let you go, I do want to ask you about our neighbor to the north, Canada planning to remove reciprocal tariffs on most US consumer goods that are part of the USMCA.
So what does this mean for trade negotiations between the two countries?
Let's face it, Canada is under pressure at the moment.
The US has got advancing negotiations with China.
It's got trade deals with all the people in the world who have very, very significantly large economies.
Effectively, who's the person that's falling out of the G7 that they haven't got an agreement with?
The neighbors to the north.
We all know Canada certainly doesn't have the power, not that it's going to get to that, towards nipping south and burning down the White House as they did a couple of 100 years ago when they were still being ruled by the British.
So Are we going to go?
The answer is Carney, in his honeymoon period, already losing support at home, has to crumble.
He has to meet Trump more than halfway and do a deal, and that's why Trump can focus in on a laser-like fashion right now.
He's got most of the other trade deals he either wants or he's getting there, and therefore there's going to be, I hope, bonomy north of the border from Canada in the near future, and that's why you've seen them starting to cave on tariffs already.
Well, Patrick, we will have to leave it there.
I look forward to speaking to you in September after Labor Day.
Thank you so much for your insights and perspective.
