“Investors maybe want to be prepared for some surprises.” – 02:29
Brian Jacobsen, Chief Economist at Annex Wealth Management, joins Remy Blaire to discuss the current economic landscape as we await a crucial speech from Federal Reserve Chair Jay Powell.
Together, they explore the delicate balance the Fed must maintain amid political pressures, inflation concerns, and an uncertain economic landscape. As Powell prepares to speak, Brian anticipates that he will acknowledge the labor market’s current state, which has shown signs of weakness despite previous assumptions of strength. He suggests that Powell will likely convey that while the labor market remains solid, it is not as robust as initially thought, and the full effects of inflation from tariffs have yet to be fully realized.
The conversation shifts to the expectations surrounding a potential 25 basis point rate cut, with current market predictions hovering around 70%. Brian advises investors to be prepared for surprises, suggesting that the Fed may opt for a more aggressive 50 basis point cut in September, followed by a pause to assess the economic situation.
The discussion then turns to the recent retail earnings reports, which shed light on how consumers are adapting to changing shopping habits and the impact of tariffs on pricing. Brian emphasizes that inflation from tariffs is a gradual process, warning that the creeping costs will eventually affect consumer prices. He notes that while retailers have managed to absorb some costs initially, the full effects are beginning to surface, potentially leading to a challenging third-quarter earnings season.