September 22, 2025 • 12 mins
In this episode of Paramount Wealth Perspectives, Chris Coyle and CIO Scott Tremlett unpack the Fed’s latest rate cut and what it means for markets, inflation, and the labor outlook. They explore the split inside the Fed, the uneven reality of U.S. consumer spending, and how global dynamics—from Europe’s political risks to Asia’s shifting trends—are shaping investment opportunities. Tune in for practical insights on balancing portfolios amid cautious optimism and persistent uncertainty.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Chris Coyle (00:00):
Intro song
Hello everyone.
Welcome to Paramount WealthPerspectives, your go-to podcast
for the latest updates on globalmarkets and current economic
events.
This is your host, Chris Coyle.
(00:21):
I'm the marketing director andan advisor here at Paramount
Associates Wealth Management.
And today I'm joined byParamount's, chief Investment
Officer, Scott Tremlett.
Scott, thanks for sitting downagain with me today.
Let's dive right in.
The Fed just made another 25basis point cut, but markets
didn't cheer as much as youmight expect.
(00:42):
What's your read Right Chris,the Fed lowered its benchmark
rate to four and to four point aquarter percent.
Powell called it a riskmanagement move stressing.
It wasn't the start of anaggressive easing cycle.
Yields actually ticked up a bitbecause investors saw it as more
cautionary.
At the same time, we had job asclaims fall sharply to 231,000.
(01:05):
The biggest drop in nearly fouryears.
That shows the labor market'sstill holding up.
And they released their updatedprojections too.
Correct?
Exactly.
The DOT plot, as they call itnow, points to potentially two
more rate cuts this year, butthe Fed is split.
Some members want to movefaster.
Others think inflation is stilltoo sticky.
(01:26):
Powell may clear the Fed faces achallenging situation.
Inflation above target labormarket showing cracks and
tariffs, adding price pressures.
It's a balancing act right nowbetween supporting jobs.
And not reigniting inflation.
I also saw dissent in themeeting.
Yes, governor Myron dissented,he actually wanted a half point
(01:49):
cut.
He argues rates are already toorestrictive, giving structural
shifts like lower immigration,tariff revenues, and
demographics, and he reallybelieves in a lower neutral rate
in his view keeping policy.
This tight risks, unnecessaryjob losses.
And what are Fed members sayingright now in real time?
(02:11):
Well, just today, Bostic fromAtlanta said there's little
reason, quote unquote, to cutfurther.
Right now he thinks inflationcould linger above 2% until
around 2028.
Meanwhile, mus of St.
Louis echoed that concern.
Warning, there's limited roomfor more cuts this year without
risking too much accommodationon the other side.
(02:34):
Myron repeated his case forfaster easing, saying high rates
are already weighing heavily onlower income workers.
So we've got a real divideinside the Fed.
Let's pivot to inflation for amoment.
Powell admitted it's still abovetarget.
Where do you see inflationtrending into next year?
Well, headline inflation shouldcontinue drifting lower, largely
(02:55):
because energy prices are softoils around$62 a barrel compared
with over$70 at the start ofthe.
The core services, particularlyhousing and healthcare, remain
sticky.
My expectation is core PCEsettles in the uh, two and a
half to 3% range next year,which is better, but still above
(03:16):
the Fed's goal.
That's why some members arereally nervous about cutting too
fast.
You mentioned the labor marketwith job gain slowing, is there
a risk of a sharperdeterioration?
That's the key risk to me.
Payroll growth has alreadyslowed from about 166,000 per
month in 2024 to 130,000recently.
(03:38):
If that weakens further.
Unemployment could climbquickly.
Right now, unemployment is atabout 4.2% up from 3.7% a year
ago, and the Fed wants to avoida spike, but they're constrained
by inflation.
So you can see the stop and goeasing cycle, cutting enough to
stabilize jobs, but not so muchthat inflation expectations do
(04:01):
drift higher.
How are financial conditionsfeeding back into the economy?
Are markets.
Easing too much relative to whatthe Fed wants.
Well, equity markets, Chris, areat all time record highs.
The s and p 500 is up more than14% this year, and the NASDAQ is
up nearly 18%.
Credit spreads are tight andhousing demand is stabilized.
(04:23):
Despite the 30 year mortgagerates, around 6.5%.
From the Fed's perspective, thatresilience gives them room to be
cautious.
If markets were cratering, theycut more aggressively.
Instead, they're balancing astill loose financial backdrop
against weaker labor data.
And what's happening on theconsumer side, because spending
(04:46):
is really the backbone of growthhere.
On the surface, consumptionstill looks strong.
Chris core retail sales rose0.7% in August.
Well above expectations and realspending is positive, but the
distribution tells a differentstory.
Low income households areshowing clear stress.
(05:06):
The personal savings rate forthe bottom quartile is falling
close to 2% versus eight to 9%for middle and high income
groups.
Credit card delinquency ratesare at their highest since 2011
with serious delinquencies, over10% for subprime borrowers.
Auto loan delinquencies arerising sharply as well but by
(05:27):
contrast, wealthier householdsare still in good shape.
Stock portfolios are up doubledigits.
Year to date.
Home equity values are nearrecord highs and their savings
rates remain positive.
That's why you still see recordspending on travel restaurants
and discretionary goods at thetop end, so the averages mass,
(05:48):
the reality.
Some households are thriving.
While others are hurting.
Exactly.
It's a K shaped, spending pathat the bottom.
Families are trading down tostore brands, cutting back on
essentials or delaying medicalcare at the top.
Households are buying luxurygoods and flying
internationally.
And I mean, that explains whysome are outperforming while
(06:10):
others warn of weakness.
Looking ahead, how sustainableis this?
It really comes down to threethings.
First, the fat.
How much further they cut andhow fast.
Second, the labor market,whether job growth slows
meaningfully and thirdinflation, whether sticky
services and shelter costs.
(06:31):
Finally, cool.
My base case, spending moderatesinto 2026.
Aggregate consumption slows, butdoesn't collapse unless jobs
roll over middle and higherincome.
Households will keep spendingand bottom quartile is tapped
out.
Now let's broaden the lens abit.
(06:51):
How does US consumer trendscompare with what we're seeing
overseas?
The contrasts are reallystriking in.
In Europe.
Consumer spending has been farweaker, high energy cost and
persistent inflation have leftreal disposable income.
Flat household confidence.
Surveys remain depressed, andretail sales volumes in places
(07:12):
like Germany and the UK arestagnant.
Unlike the US where top incomehouseholds are fueling
discretionary demand, Europeanconsumers are far more cautious
across the board.
In Asia, it's it's more complex.
In Japan, spending has beensteady, but constrained by slow
wage growth, even thoughinflation has been above target
(07:33):
for over three years.
In China, households areactually turning to equities as
savings alternatives.
Since property markets remainsoft and deposit rates are low,
that shift has boosted Chinesestock markets this year compared
with the US global consumerslook.
Less resilient.
Overall, the US stands outbecause wealthier households are
(07:55):
still driving aggregatespending.
While lower income Americans arestill under real strain.
In Europe, the pain is moreevenly distributed.
While in Asia, behavior isshifting toward investment
rather than consumption.
So the United States looksrelatively stronger, but beneath
the surface.
The distributional issues aresharper.
(08:17):
That's it.
Exactly.
The US consumer is still theengine of global demand, but
it's increasingly powered by thetop half of the income spectrum
that makes the economy lookresilient on the surface, but
vulnerable if those householdspull back internationally, the
story is more about broadcaution.
Which is why global growth is sodependent on whether the US
(08:39):
consumers keep spending one lastangle, the dollar it's been
weaker this year.
How does that tie in?
The dollar is down nearly 10%year to date, thanks to nearing
interest rate differentials.
That helps us multinationalswith overseas earnings, but a
weaker dollar can raise importprices, which hits low income
(09:00):
households hardest.
So again, even currency movesshow up differently across
income groups.
Given that backdrop, how shouldinvestors think about
opportunities internationally?
Chris, I'd, I'd really frame itthis way.
In Europe, weakness and broadconsumption means investors
should focus on exporters andglobally diversified companies
(09:21):
that can tap demand outside theregion.
Luxury goods and industrialsthat sell to the US and Asia
remain more resilient right nowin Asia.
China's shift towards equityinvesting is creating liquidity
in local markets and selectconsumer tech and financial
firms are definitely positionedto benefit and with the dollar
(09:44):
down nearly 10% this year.
non-US assets become morecompelling.
Currency tailwinds alone canenhance returns when allocating
abroad.
So the takeaway is that whilethe US consumer strength is
still the centerpiece,opportunities abroad shouldn't
be overlooked.
You wanna target regions andsectors that either benefit from
(10:05):
us demand or experiencingstructural shifts that support
asset prices, even if localconsumption may be weak.
That's a great way to put it.
Resilience in the United States,but selective opportunities
globally, especially wherecurrency and policy align.
Yes, you got it.
It's less about blanket exposureand more about finding those
(10:27):
pockets where the macro storytranslate into durable earnings
and cash flow.
And how do you feel about UnitedStates stocks currently?
Scott?
Again, Chris, A targetedapproach really does matter.
Equities are still up over 14%year to date, but leadership is
really narrow.
Companies serving wealthierconsumers have pricing power.
(10:48):
Mass market retailers tied tolower income demand, face
headwinds in credit.
Public high yield could comeunder pressure if delinquencies
rise, particularly in theconsumer focus sectors.
What's your message forinvestors trying to position
portfolios in this environment?
I know it sounds like a brokenrecord, but diversification is
(11:09):
critical with the dollar weakerand international equities
gaining momentum.
Global diversificationdefinitely makes sense in fixed
income.
Yields are attractive bothpublicly and privately.
However, the correlation betweenbonds and stocks has continued
its ride up over the last fewyears.
Causing diversification of fixedincome to be less meaningful in
(11:32):
stocks.
Focus on quality companies withstrong balance sheets and
pricing power, and importantly,recognize the bifurcated
consumer companies exposed tothe high end of the market look
much stronger than those tied tohouseholds under financial
stress and don't rely on USstocks.
Or international stocks to beyour only performance drivers.
(11:55):
There are many asset classesthat are providing compelling
risk reward characteristicsright now.
Well, thank you, Scott, fortaking the time to share your
thoughts.
Thank you to our audience fortuning in, and remember to
please submit your questions viaemail to
general@paramountassoc.com.
For now, stay informed.
(12:16):
Stay ahead.
And join us next time for morekey updates shaping the global
economy.
Intro song
Hello everyone.
Welcome to Paramount WealthPerspectives, your go-to podcast
for the latest updates on globalmarkets and current economic
events.
This is your host, Chris Coyle.
(00:21):
I'm the marketing director andan advisor here at Paramount
Associates Wealth Management.
And today I'm joined byParamount's, chief Investment
Officer, Scott Tremlett.
Scott, thanks for sitting downagain with me today.
Let's dive right in.
The Fed just made another 25basis point cut, but markets
didn't cheer as much as youmight expect.
(00:42):
What's your read Right Chris,the Fed lowered its benchmark
rate to four and to four point aquarter percent.
Powell called it a riskmanagement move stressing.
It wasn't the start of anaggressive easing cycle.
Yields actually ticked up a bitbecause investors saw it as more
cautionary.
At the same time, we had job asclaims fall sharply to 231,000.
(01:05):
The biggest drop in nearly fouryears.
That shows the labor market'sstill holding up.
And they released their updatedprojections too.
Correct?
Exactly.
The DOT plot, as they call itnow, points to potentially two
more rate cuts this year, butthe Fed is split.
Some members want to movefaster.
Others think inflation is stilltoo sticky.
(01:26):
Powell may clear the Fed faces achallenging situation.
Inflation above target labormarket showing cracks and
tariffs, adding price pressures.
It's a balancing act right nowbetween supporting jobs.
And not reigniting inflation.
I also saw dissent in themeeting.
Yes, governor Myron dissented,he actually wanted a half point
(01:49):
cut.
He argues rates are already toorestrictive, giving structural
shifts like lower immigration,tariff revenues, and
demographics, and he reallybelieves in a lower neutral rate
in his view keeping policy.
This tight risks, unnecessaryjob losses.
And what are Fed members sayingright now in real time?
(02:11):
Well, just today, Bostic fromAtlanta said there's little
reason, quote unquote, to cutfurther.
Right now he thinks inflationcould linger above 2% until
around 2028.
Meanwhile, mus of St.
Louis echoed that concern.
Warning, there's limited roomfor more cuts this year without
risking too much accommodationon the other side.
(02:34):
Myron repeated his case forfaster easing, saying high rates
are already weighing heavily onlower income workers.
So we've got a real divideinside the Fed.
Let's pivot to inflation for amoment.
Powell admitted it's still abovetarget.
Where do you see inflationtrending into next year?
Well, headline inflation shouldcontinue drifting lower, largely
(02:55):
because energy prices are softoils around$62 a barrel compared
with over$70 at the start ofthe.
The core services, particularlyhousing and healthcare, remain
sticky.
My expectation is core PCEsettles in the uh, two and a
half to 3% range next year,which is better, but still above
(03:16):
the Fed's goal.
That's why some members arereally nervous about cutting too
fast.
You mentioned the labor marketwith job gain slowing, is there
a risk of a sharperdeterioration?
That's the key risk to me.
Payroll growth has alreadyslowed from about 166,000 per
month in 2024 to 130,000recently.
(03:38):
If that weakens further.
Unemployment could climbquickly.
Right now, unemployment is atabout 4.2% up from 3.7% a year
ago, and the Fed wants to avoida spike, but they're constrained
by inflation.
So you can see the stop and goeasing cycle, cutting enough to
stabilize jobs, but not so muchthat inflation expectations do
(04:01):
drift higher.
How are financial conditionsfeeding back into the economy?
Are markets.
Easing too much relative to whatthe Fed wants.
Well, equity markets, Chris, areat all time record highs.
The s and p 500 is up more than14% this year, and the NASDAQ is
up nearly 18%.
Credit spreads are tight andhousing demand is stabilized.
(04:23):
Despite the 30 year mortgagerates, around 6.5%.
From the Fed's perspective, thatresilience gives them room to be
cautious.
If markets were cratering, theycut more aggressively.
Instead, they're balancing astill loose financial backdrop
against weaker labor data.
And what's happening on theconsumer side, because spending
(04:46):
is really the backbone of growthhere.
On the surface, consumptionstill looks strong.
Chris core retail sales rose0.7% in August.
Well above expectations and realspending is positive, but the
distribution tells a differentstory.
Low income households areshowing clear stress.
(05:06):
The personal savings rate forthe bottom quartile is falling
close to 2% versus eight to 9%for middle and high income
groups.
Credit card delinquency ratesare at their highest since 2011
with serious delinquencies, over10% for subprime borrowers.
Auto loan delinquencies arerising sharply as well but by
(05:27):
contrast, wealthier householdsare still in good shape.
Stock portfolios are up doubledigits.
Year to date.
Home equity values are nearrecord highs and their savings
rates remain positive.
That's why you still see recordspending on travel restaurants
and discretionary goods at thetop end, so the averages mass,
(05:48):
the reality.
Some households are thriving.
While others are hurting.
Exactly.
It's a K shaped, spending pathat the bottom.
Families are trading down tostore brands, cutting back on
essentials or delaying medicalcare at the top.
Households are buying luxurygoods and flying
internationally.
And I mean, that explains whysome are outperforming while
(06:10):
others warn of weakness.
Looking ahead, how sustainableis this?
It really comes down to threethings.
First, the fat.
How much further they cut andhow fast.
Second, the labor market,whether job growth slows
meaningfully and thirdinflation, whether sticky
services and shelter costs.
(06:31):
Finally, cool.
My base case, spending moderatesinto 2026.
Aggregate consumption slows, butdoesn't collapse unless jobs
roll over middle and higherincome.
Households will keep spendingand bottom quartile is tapped
out.
Now let's broaden the lens abit.
(06:51):
How does US consumer trendscompare with what we're seeing
overseas?
The contrasts are reallystriking in.
In Europe.
Consumer spending has been farweaker, high energy cost and
persistent inflation have leftreal disposable income.
Flat household confidence.
Surveys remain depressed, andretail sales volumes in places
(07:12):
like Germany and the UK arestagnant.
Unlike the US where top incomehouseholds are fueling
discretionary demand, Europeanconsumers are far more cautious
across the board.
In Asia, it's it's more complex.
In Japan, spending has beensteady, but constrained by slow
wage growth, even thoughinflation has been above target
(07:33):
for over three years.
In China, households areactually turning to equities as
savings alternatives.
Since property markets remainsoft and deposit rates are low,
that shift has boosted Chinesestock markets this year compared
with the US global consumerslook.
Less resilient.
Overall, the US stands outbecause wealthier households are
(07:55):
still driving aggregatespending.
While lower income Americans arestill under real strain.
In Europe, the pain is moreevenly distributed.
While in Asia, behavior isshifting toward investment
rather than consumption.
So the United States looksrelatively stronger, but beneath
the surface.
The distributional issues aresharper.
(08:17):
That's it.
Exactly.
The US consumer is still theengine of global demand, but
it's increasingly powered by thetop half of the income spectrum
that makes the economy lookresilient on the surface, but
vulnerable if those householdspull back internationally, the
story is more about broadcaution.
Which is why global growth is sodependent on whether the US
(08:39):
consumers keep spending one lastangle, the dollar it's been
weaker this year.
How does that tie in?
The dollar is down nearly 10%year to date, thanks to nearing
interest rate differentials.
That helps us multinationalswith overseas earnings, but a
weaker dollar can raise importprices, which hits low income
(09:00):
households hardest.
So again, even currency movesshow up differently across
income groups.
Given that backdrop, how shouldinvestors think about
opportunities internationally?
Chris, I'd, I'd really frame itthis way.
In Europe, weakness and broadconsumption means investors
should focus on exporters andglobally diversified companies
(09:21):
that can tap demand outside theregion.
Luxury goods and industrialsthat sell to the US and Asia
remain more resilient right nowin Asia.
China's shift towards equityinvesting is creating liquidity
in local markets and selectconsumer tech and financial
firms are definitely positionedto benefit and with the dollar
(09:44):
down nearly 10% this year.
non-US assets become morecompelling.
Currency tailwinds alone canenhance returns when allocating
abroad.
So the takeaway is that whilethe US consumer strength is
still the centerpiece,opportunities abroad shouldn't
be overlooked.
You wanna target regions andsectors that either benefit from
(10:05):
us demand or experiencingstructural shifts that support
asset prices, even if localconsumption may be weak.
That's a great way to put it.
Resilience in the United States,but selective opportunities
globally, especially wherecurrency and policy align.
Yes, you got it.
It's less about blanket exposureand more about finding those
(10:27):
pockets where the macro storytranslate into durable earnings
and cash flow.
And how do you feel about UnitedStates stocks currently?
Scott?
Again, Chris, A targetedapproach really does matter.
Equities are still up over 14%year to date, but leadership is
really narrow.
Companies serving wealthierconsumers have pricing power.
(10:48):
Mass market retailers tied tolower income demand, face
headwinds in credit.
Public high yield could comeunder pressure if delinquencies
rise, particularly in theconsumer focus sectors.
What's your message forinvestors trying to position
portfolios in this environment?
I know it sounds like a brokenrecord, but diversification is
(11:09):
critical with the dollar weakerand international equities
gaining momentum.
Global diversificationdefinitely makes sense in fixed
income.
Yields are attractive bothpublicly and privately.
However, the correlation betweenbonds and stocks has continued
its ride up over the last fewyears.
Causing diversification of fixedincome to be less meaningful in
(11:32):
stocks.
Focus on quality companies withstrong balance sheets and
pricing power, and importantly,recognize the bifurcated
consumer companies exposed tothe high end of the market look
much stronger than those tied tohouseholds under financial
stress and don't rely on USstocks.
Or international stocks to beyour only performance drivers.
(11:55):
There are many asset classesthat are providing compelling
risk reward characteristicsright now.
Well, thank you, Scott, fortaking the time to share your
thoughts.
Thank you to our audience fortuning in, and remember to
please submit your questions viaemail to
general@paramountassoc.com.
For now, stay informed.
(12:16):
Stay ahead.
And join us next time for morekey updates shaping the global
economy.
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