January 9, 2026 • 38 mins
Mike Armstrong and Paul Lane discuss US payrolls rising 50,000 in December, less than expected. Unemployment falls to 4.4%. The productivity boom has arrived. AI may not be the reason. The stock market rally isn't just about tech anymore. What happens if the Supreme Court rules against Trump on tariffs? Trump is getting a new Fed. He may not be happy with what it does.
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Speaker 1 (00:00):
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(01:03):
This is the Financial Exchange with Mike Armstrong and Paul.
Speaker 2 (01:07):
Lane, Happy Friday out there from the Financial Exchange. Hope
everybody's doing well. It is a job's Friday. We got
the report ninety six minutes ago and that's where we
will be kicking off our day here. So Paul, as always,
we have some good, some bad, a little bit ugly
(01:28):
in any of these jobs reports, but generally speaking, this
is one of the cleanest ones we've gotten since the
government shut down, and generally speaking, I think people are
taking it away as a bounce back report after a
few bad ones leading up to the holidays. So let's
dive right in here. As always, this is a jobs
(01:49):
report for the prior month. It measured data back in
the month of December, prior to the holidays. It is
comprised of two separate surveys that the government does. One
as a survey of households, one is a survey of businesses.
They indicate completely different things. They're not intended to be
read as a combined report, although they obviously you know,
(02:11):
very frequently do get reported as such. Where do you
want to kick things off? In terms of the most
relevant data here for the jobs I think.
Speaker 3 (02:18):
The area that everyone was most focused on was the
unemployment rate. So let's sit the stage with this. The
the unemployment rate for the month of November's jobs report
was four point six percent. That has been revised down
to four and a half percent. And then the report
that we just got an hour and a half ago
not revised that number, but the number came in slightly
lower at four point four percent. So we went from
(02:40):
four point six printed to revise to four point five
to four point four percent today. So that was encouraging
to see. Largely anticipated that we were going to get
that point one percent decrease there on the unemployment number
of the unemployment rate, but that really was the primary
focus going today on the jobs added. That's another component
of the job support that we focus on so much.
(03:02):
We saw about fifty thousand jobs added in the month
of December, that was below expectations of seventy three thousand,
and then one slightly not so positive piece was going
back to October where there were job losses. There was
a further significant revision there where the initial print was
one hundred five thousand jobs that were lost for the
(03:24):
month of October. That was arise down further to one
hundred and seventy three.
Speaker 4 (03:28):
Thousand, So yeah, I mean good, bad, ugly.
Speaker 2 (03:31):
Here, Let's start with that unemployment rate piece, because when
the November data came out and we saw four point
six percent print, what I immediately voiced here on the
Financial Exchange was, at that level, you are getting close
again to a Psalm rule recession indicator. That is, when
the three month rolling average on the unemployment rate passes
half a percent higher than the three month rolling average
(03:54):
of the low over the last twelve months, we were
getting there. This indicates that we are not getting there.
This indicates that a data was actually revised back downward
and the December number came in better. A four point
four percent unemployment rate, while significantly weaker than pretty much
anywhere we've been over the last three years, is a historically.
Speaker 4 (04:13):
Very low unemployment rate.
Speaker 2 (04:16):
I just want to drive that home for a moment
from the Fed's perspective of unemployment, from anyone who has
lived through and worked through the last thirty years in
the labor market, a four point four percent unemployment rate
is quite low. I recognize if you're a twenty two
year old, that doesn't feel that way. For a twenty
(04:37):
two year old, the average unemployment rate is closer to
nine percent. But for you know, an overall economy to
be experiencing a four point four percent unemployment rate, it's low,
borderline inflationary. So I think that's the context here. Is
really solid number from that perspective, does not indicate further
labor market weakness that the FED would need to respond to.
(05:00):
Right the job creation number, that's where I get to
a very mixed bag, like, yeah, I like to see
the December bounce back, but wow, was October bad?
Speaker 3 (05:09):
Really bad? Yeah, And part of that where it's worthy
to note that the deferred resignation program of the government
that they had put together that is influencing the number
that we're seeing there.
Speaker 2 (05:21):
So perhaps it can explain that because it's been a year. Right, so,
spring of last year the federal government offered buyout packages
and did layoffs of a bunch of government workers that
effectively went so that they had paychecks until September. October
was the first time that they were counted in this
(05:43):
report as not working, and so that was a big
number in October. I think again, to your point, that's
pretty explainable one time event, not something that is going
to likely repeat itself. I think the overall message though
on the pay job creation that I would take away
is in the first six months of twenty twenty five,
(06:06):
we were averaging about eighty two thousand jobs per month
getting created. I don't see exactly where we are for
the last six months of the year, but it is
well below that, right, It is well below that and
has showed a continued weakening in the pace of hiring
on behalf of private companies and public organizations like the
(06:27):
federal government.
Speaker 3 (06:28):
To me to further kind of your statistics there, the
stark difference between twenty twenty four and twenty twenty five
was pretty significant when I looked at it in terms
of the average number of jobs added through twenty twenty five.
So this encompasses the first six months you talked about
and the second half. It was about forty nine thousand
jobs that were added over the course of twenty twenty five.
That number in twenty twenty four about one hundred and
(06:49):
sixty eight thousand.
Speaker 2 (06:50):
So we're running half right, and twenty twenty four was
about half of what twenty twenty three was, And so
you can draw a pretty clear trend line there, and
if it were to follow that trend line, we would
see net job loss in twenty twenty six if you
just kind of drew a line there and continued it. Obviously,
that is top of mind for the Federal Reserve. Now
(07:14):
the interesting piece on this is, in spite of those
pretty weak hiring numbers, which again did bounce back in December,
we have investors taking a look at interest rate policy
and saying, well, this sure thing is up for that
January twenty is.
Speaker 3 (07:30):
Immediately where I went to after the report came out,
within fifteen minutes.
Speaker 4 (07:34):
Yeah, so here's a state of play yesterday.
Speaker 2 (07:37):
When you take a look at the Chicago Mercantitle Exchange
CNB group, you can take a look at FED fun futures.
There they were pricing in an eleven point one percent
chance of a rate cut at that January meeting.
Speaker 4 (07:48):
Immediately cut in half. Now a five.
Speaker 2 (07:50):
Percent chance of a rate cut at that January meeting.
I tend to agree. I think it was unlikely in
the first place, now extraordinarily unlikely the Fed cuts rates
at that meeting. Why the unemployment rate is what they
think is the best indicator for this labor market right now,
They have said it over and over again. A they
(08:11):
don't trust the job creation numbers. B They don't feel
like they have a really great grasp on the state
of labor supply in the country right now. They have
open questions about how good their surveys are. Given the
pace of immigration change net migration change into the United States.
They are not really certain how many sixty five plus
(08:31):
year olds still want to work in this labor market.
And so they are really looking at that job creation number,
which by the way, is about to get their annual
revisions and probably look even weaker than it was before.
And they're just saying, look, we don't think that the
job creation number is the best one for us to
get a sense of how tight the labor market is.
We need to be looking at other things like that
(08:54):
unemployment rate, like the Jolts report too.
Speaker 4 (08:56):
That's another good indicator.
Speaker 2 (08:57):
And I think this report really confirms for them that, hey,
further rate cuts right now probably not needed on an
emergency basis.
Speaker 3 (09:08):
Yeah, you wouldn't need to see that unemployment rate, which
would have been a shock tick upwards to have the
semi futures and for the Fed fund cut at the
end of the month dramatically change, And that wasn't the case.
And that was my interpretation, Mike, looking over this report,
this is further evidence that it probably makes sense at
the end of January to stay the course and allow
(09:29):
for more data to trickle in before making any other
decisions on the rate front.
Speaker 4 (09:33):
Grade this thing for me, what are you giving it?
Speaker 3 (09:35):
I would say B minus.
Speaker 2 (09:37):
I was at a B B plus. Maybe they drop
into the unemployment rate. I think gave me a slightly
better grade on that. But this job's report is one
that at least kneecaps the argument of a rising unemployment
rate and a PSALM rule recession again, and I think
you're seeing some of that positivity maybe in early trading here. Again,
(10:00):
it did not set off alarm bells with investors that hey,
we're heading towards a recession, at least so far. So
the jobs report for December again headline news here, four
point four percent unemployment rate, job creation pace of fifty
what was it, fifty four thousand, fifty for the month
of fifty thousand for the month of December. That job
(10:21):
creation was lower than anticipated, but got some help from that.
Speaker 4 (10:24):
Lower unemployment rate.
Speaker 2 (10:26):
And I think that's really the piece that investors are
taking away today.
Speaker 4 (10:30):
Let's tay a quick break.
Speaker 2 (10:31):
When we come back, I want to stay on the
idea of the labor market, specifically moving over to the
positive productivity boom that we have seen over the last
few years. Is AI causing it? Can we continue to
expect it? That's next. On the Financial Exchange.
Speaker 1 (10:46):
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Speaker 2 (11:37):
Two somewhat breaking news stories.
Speaker 4 (11:40):
One Supreme Court. It was theorized they might.
Speaker 2 (11:44):
Be announcing their ruling on the tariff President Trump's tariffs today.
It's been clarified that they will not be doing that.
Tariff ruling today. Presumably they've already ruled, they're just not
announcing the ruling so far. So we'll keep you tune there.
But I mean, looks like it could be any day now.
Speaker 4 (12:02):
Sure.
Speaker 2 (12:03):
Second big breaking news story for all our New English
is this just a new England company. I don't know
where they are located.
Speaker 3 (12:09):
Their headquarters is Manchester, Connecticut.
Speaker 2 (12:12):
Bob's Discount Furniture looking for an IPO in twenty twenty six.
So we were talking yesterday about how could be a
heating up IPO market this year and you.
Speaker 3 (12:21):
Know, SpaceX anthropic Bob Bob just.
Speaker 4 (12:25):
Toss them right into the same group.
Speaker 2 (12:26):
Yeah, So I want to talk about productivity. So first off,
we have to kind of define it. It's pretty obvious,
but productivity is measured by, you know, how much dollar
output there is per hour worked. And this is kind
of the holy grail when it comes to an economy
because it's how an economy develops. I know, there are
(12:49):
plenty other good measures of you know, well being in
an economy, but if you're trying to figure out, hey,
can an economy truly grow? This is the holy grail
because it is improving quality of life if you get
productivity booms. You can also get growth out of a
growing population, obviously that will do it. But the productivity
(13:12):
piece is a huge one. And so we have seen
a productivity boom for the last several years, and as measured,
we've been coming in at.
Speaker 3 (13:22):
Two point three percent two.
Speaker 2 (13:25):
Point three percent over the course of the last few years.
That compares to a one point one percent productivity piece
of increase during the twenty tens decade, right, And so
you know, obviously everybody's throwing up their hands and saying, Okay,
what's causing this? We can measure it, we can measure
the output of it, but anything in terms of figuring
(13:46):
out what's causing it is a guess at this stage.
Speaker 4 (13:49):
Obviously, the first one.
Speaker 2 (13:50):
That anybody wants to blame it on is a yeah, right,
why wouldn't you want to blame it on AI? We're
spending trillions of dollars on developing this technology. Hopefully we're
getting something out of it, and we may be. You know,
I think there could be something to that. Here are
the counter arguments to it being an AI story. One,
(14:12):
The surge in productivity start in the spring of twenty
twenty three. Raise your hand if you're listening and we're
using chat GPT in March of twenty twenty three, because.
Speaker 3 (14:23):
It was released in November of twenty twenty two, So
that means you were in the first adopter.
Speaker 4 (14:29):
Yeah. And furthermore, keep your hand raised if you can
measure how.
Speaker 3 (14:33):
Much money you're driving to keep it on the wheel.
Speaker 4 (14:35):
Well, yeah, if you're driving, keep it on the wheel.
Good point, Paul.
Speaker 2 (14:38):
But keep your hand raised. If you can measure how
much more productive you were from chat GPT in your
paid job.
Speaker 4 (14:47):
Oh, that's that's one in a million. That's very few people. Yeah,
So I don't know that.
Speaker 2 (14:54):
Maybe we can blame the continued productivity boom on AI,
but the early ones I don't think so.
Speaker 3 (15:00):
I'm not even willing to go there with it at all.
I just think it's too early in the adoption period
for it.
Speaker 4 (15:06):
To be even in twenty twenty six or twenty five.
Speaker 3 (15:10):
Yeah, I don't think I can. I really don't think
I can get there yet to explain such a broad
I mean, we're talking about size of an economy as
massive as the US to have such broad adoption that
we increase productivity by a pretty significant clip. I'm just
not willing to say that it if it's part of
(15:31):
the pie at all, it's a really small piece of
it if anything. And I'm just not sure we can
get there yet, because yes, there's more, there's the use
has picked up a lot, but that productivity measurement, I
just find it a little harder to believe. I think
that the factors that you could lean on a little
bit more heavily as to why we're seeing that productivity
(15:53):
output increase is the capital tightening cycle that we went
through where we were in an economy with very very
low interest rates, and there was a tremendous amount of
labor hoarding that came out after that period. So the
pandemic hits interest rates come down significantly, You then have
the economy reopen and a ton of demand to hire workers.
(16:13):
Back during that low interest rate environment, you had people
spending and barring at a very high clipped businesses running
at unprofitable levels. But when that tightening capital tightening's changed
where interest rates went up to five percent, there was
a lot more efficiency and looking in scrutinization by companies
on their balance sheets and on their businesses to perhaps
(16:34):
not take on as much hiring. It to be a
little bit more efficient and look at productivity a bit
more part of it. I'm not saying that's all that.
Speaker 2 (16:41):
Yeah, so that has been one three that's been tossed
around to hey. In twenty twenty one, two, twenty twenty three,
it was tough to find workers. So if there's a
way you can make your workers more efficient, it paid
to do so because you didn't need to hire another
person and pay them a signing bonus and a really
wage in order to get them on board.
Speaker 4 (17:02):
This is how boring my mind is.
Speaker 2 (17:05):
But like, the garbage truck was driving around my neighborhood
today and I was looking at it and thinking through
myself like, huh, it's a very different garbage truck than
the Sopranos garbage truck that had two guys in the
front seat plus a couple guys in the back haul
and the trash into it. No, it was one guy
with a mechanical arm that grabs the trash cans and
tosses it in there. What used to be between two
(17:26):
and four workers is now one for at least this
one garbage company. So I can buy that there's probably
bigger investment in robotics and modernization in the workforce in
the early stages of COVID for all sorts of reasons,
social distancing, you know, requirements that states were putting into
place to say, hey, you can't have all your workers
(17:46):
congregating in this one area. So perhaps that forced towards
efficiency during COVID, part of which might be robotics, part
of which might just be you know, innovative ways of
getting people more productive. Maybe we're seeing some of that now. Again,
these are all theories, right, I don't have any better
one than anybody else is proposing. Other economists are calling
(18:07):
something a ten year dividend, kind of like this idea.
So here's the idea. Companies over the last few years,
because of that tightness in the labor market, really worried
about losing their workers. We talked about labor hoarding. Now
we're talking about individuals who are job hoarding, who are
hugging their jobs and not wanting to leave. The theory
here would be, hey, if the tenure at your company
(18:30):
is now much longer because there's not this labor turnover
story that you're seeing back in twenty twenty, for example,
and now you have these workers that have been in
their jobs and not leaving for three, four or five years.
Speaker 4 (18:42):
Do they just get better at the jobs?
Speaker 2 (18:44):
They're just naturally better at the jobs and more efficient
than they were in year.
Speaker 4 (18:49):
One when you hired them.
Speaker 3 (18:51):
I think most of us can agree that you do
get better at your job as your experience grows. It's
certainly a first year to a third year that's a
massive difference.
Speaker 4 (18:59):
D'arn well better.
Speaker 2 (19:01):
If you haven't gotten more efficient in your job after
five years, then you're not likely going to have a
job for very long. So look, I think any and
all of these can be contributing factors. And I just
broke another pen because that's what I do when I
get excited. But I how many pens have you witnessed
me break?
Speaker 4 (19:19):
And just little pieces of it just go flying off?
Speaker 3 (19:22):
You come into our studio and the amount of pens
that are broken.
Speaker 2 (19:25):
It's pretty fascinating. We've got to take quick break. Wall
Street Watch coming up next.
Speaker 1 (19:41):
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TFFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network.
Speaker 4 (19:52):
Time now for.
Speaker 1 (19:53):
Wall Street Watch, a complete look at what's moving markets
so far today, right here on the Financial Exchange Radio Network.
Speaker 5 (20:02):
The December jobs report is here and markets are modestly
in positive territory after the Labor Department reported fifty thousand
jobs were added last month, softw than forecasts of seventy
three thousand. The unemployment rate fell to four point four percent,
better than the four point five percent estimate. Right now,
(20:24):
the Dow is up nearly four tenths of one percent,
or one hundred and eighty eight points higher. SMP five
hundred is up just over half a percent or thirty
seven points higher. NASDAC up over two thirds of a
percent or one hundred and fifty nine points higher. Russell
two thousand is up by about a third of a
percent ten. Your Treasure reeled down one basis point at
four point one sixty nine percent. Crude oil up nearly
(20:47):
two and a half percent higher, trading at fifty nine
dollars and seventeen cents a barrel. Intel stock is up
over eight percent now after President Trump said the government
is taking a new ten percent stake in the chip
maker after discussions about the company's future. Meanwhile, nuclear power
companies including Vistra and Ochloo, both rallying fourteen percent after
(21:10):
Meta announced agreements with the companies in addition to terror
Power as part of Meta's efforts to secure necessary resources
for its AI ambitions. MetaStock, by the way, is up
by about a half a percent. Elsewhere, General Motors revealed
they would record a seven point one billion dollar loss
for the final quarter of twenty twenty five, primarily from
(21:32):
its investments in electric vehicles. Last month, competitor Ford said
it expected to take nineteen point five billion dollars in charges,
mostly tied to its EV business. JAM shares it down
over three percent, and Johnson and Johnson agreed to lower
drug prices for US patients in an agreement with the
(21:52):
Trump administration, similar to other pharmaceutical companies like GSX, Merk
and Novardes, Jane J. Stock is flat at the moment.
I'm Tucker Solvan.
Speaker 4 (22:02):
That is Wall Street Watch. I love love pieces like this.
Speaker 2 (22:07):
Wall Street Journal reports that the stock market rally isn't
just about tech anymore. Funny enough, we were talking about
themes for twenty twenty six on one of the last
shows of the year, Chuck and I were, and I
brought this up as one of the themes that I
think many experts are talking about is, Hey, we're going
to see the stock market rally broaden out into other areas,
(22:28):
and I kept hearing it, and I really continue to
see very little evidence of it. I think it's possible,
but I would just say, let's all treat all this
with a heavy dose of skepticism.
Speaker 3 (22:43):
Because this is ridiculous, This is so absurd, this is
I feel like doing the show now for several years.
I don't know what the tally is that they've run
this playbook. You kind of get through a cycle where
the Santa CAUs rally pieces come out, and then you
go to the beginning of the year. We've had six
trading days so far, and they're quoting performance of different
(23:04):
sectors saying that, you know, industrials and energy have outperformed tech.
It's been six days. Can we at least run this
story when it's been six months. Six days is not
a reasonable sample size to say that now it's not
techt turn anymore.
Speaker 4 (23:22):
By the way, it's been like five and one quarter
of the day.
Speaker 3 (23:25):
Okay, thank you for the adjustment. Look back at the
last seven years of the S and P five hundred
sector performance and you will see that the technology sector
has been either number one or number two in terms
of performance for the five of the last seven years.
And oh, by the way, when it was number two
(23:45):
for two of those seven years, the telecommunication sector, which
is far from your traditional AT and T and Verizon stuff.
It's basically Facebook and Google and Netflix, those were the
number one. So this idea that it's not about tech
anymore because of five and a quarter days of trading
(24:05):
tries me absolutely insane that they write this piece like
I'm just not willing to have I'm not willing to
have I guess I just had the conversation about it,
but I'm not willing to buy it until we get
it at least six months, and then I'm willing to
give it an ounce of credibility.
Speaker 4 (24:21):
Yeah, this story is preposterous.
Speaker 2 (24:23):
Yeah, just gonna throw it out there, and not to
pooh pooh any utility investors out there or people who
are really excited about the energy sector maybe, but to
write a piece that says, again the headline, the stock
market rally isn't just about tech anymore after five days
(24:44):
and an hour and eight minutes of trading.
Speaker 3 (24:47):
Really, you're really into the precise measurements that you had
ninety six minutes on the Jobs report when you.
Speaker 4 (24:52):
Let off with it today, Yeah, you said six days
of trading.
Speaker 3 (24:55):
It's dead wrong.
Speaker 4 (24:57):
You're just wrong.
Speaker 2 (24:58):
So I thought it was important to correct you on it.
It's it's a preposterous story to write. I hope we
do get a broadening out that that would make me
feel a little bit better about the rally that we've
been on for the last three years. But to be
very clear, the rally that we have been on over
the last three years has been all about tech, and
specifically all about AI. Right, And when you buy you know,
(25:21):
an index that tries to replicate the you know, the
the market weighted stocks of the US stock market, you
are making a bet on AI, plain and simple, like
you go take a look at any of this stuff.
And that's where I think stories like this are not
only foolhardy, but they're a little bit dangerous to is
because when you go buy, for instance, you know, the
(25:45):
sm you can't buy the S and P five hundred index,
but you can buy you know, funds that replicate it,
you are putting you know, close to half of that
money into big giant tech companies that are making massive
bets on artificial intelligence. And so to paint it as
anything else I think is disingenuous. Right, hopefully it broadens out,
hopefully it changes. But stop writing stories five days into
(26:09):
trading that are going to tell me how the markets
are going to perform for the rest of the year.
Speaker 4 (26:13):
Because last year it wasn't this story, it was a
different story.
Speaker 2 (26:16):
It was, Oh, well, the stock market went down for
the first three days of the year, and when that happens,
lookout because this is what happens, you know, for the
rest of the year. When this happens, and guess what
stocks went up, like seventeen percent for the year.
Speaker 4 (26:27):
Yep.
Speaker 2 (26:28):
So don't tell me, Yeah, don't don't tell me this.
This is this is preposterous. As we mentioned earlier, the
Supreme Court, when will they be ruling on tariffs?
Speaker 4 (26:39):
I don't know, but not today.
Speaker 2 (26:40):
But I was asked, you know, I was speaking with
a Portland affiliated and an interview this morning and.
Speaker 4 (26:47):
Folks over at WGA and thanks for listening.
Speaker 2 (26:50):
The question was raised like, Okay, what the heck does
this mean if it does happen, like what happens if
the Supreme Court comes out tomorrow and says, yeah, the
tariffs that President Trump put into place, in April are illegal,
and we are striking them down.
Speaker 4 (27:07):
What are the next order? Questions about all of that?
Speaker 3 (27:10):
Great, what did you say? But I didn't get asked it.
Speaker 2 (27:15):
So my answer was, first and foremost, I don't know
which way the Supreme Court is going to rule. I
think obviously they have provided a fair bit of deference
to the executive branch over the last few years, so
I don't think there's any foregone conclusions.
Speaker 4 (27:27):
About which direction they rule.
Speaker 2 (27:28):
You can look at recent rulings one way or the
other to say that we're going to rule one way
versus the other. They ruled against Joe Biden on the
idea of student loan.
Speaker 4 (27:39):
Cancelation.
Speaker 2 (27:40):
That was a fairly big expansion of executive power, as
is this, So you know which way will they rule?
Speaker 4 (27:46):
I don't know. I have no sense to dogs the question. Well, no,
but then the next order.
Speaker 2 (27:51):
The next question after that is, Okay, what happens to
all the tariffs that were already collected? That's the first
order question in my mind, is Okay, you're resetting the
clock on all these companies. What about the tariffs that
have been collected for the last nine months?
Speaker 4 (28:05):
That was a tens of billions dollars billions of dollars.
Speaker 2 (28:12):
So are we going to suddenly refund that and just
inject stimulus into the economy of a few hundred billion dollars?
Maybe I don't have an answer here. How are you
going to do it? It's been insinuated that would be
tossed to the lower courts to figure out.
Speaker 4 (28:27):
So probably nothing immediate.
Speaker 2 (28:31):
Second question immediately after that, Okay, what is the White
if they are ruled overruled?
Speaker 4 (28:36):
If they're not overruled, then we're right backwards as usually.
But if they are.
Speaker 2 (28:40):
Overruled, Uh, then what does the White House do? Is
this going to continue to be something they pound the
table on because there are plenty of other methods for
the White House to pass new tariffs on all sorts
of different products, probably not in the same way country
by country as they did. But are they going to
(29:01):
stick with this as the issue that they want to
basically campaign on as they head into twenty twenty six
or do they basically say, Hey, Supreme Court ruled against
there's nothing we can do about it.
Speaker 4 (29:11):
We're going to move on to the next important thing.
When it comes to affordability.
Speaker 3 (29:14):
I don't know it would be hard to It'd be
hard to imagine that they do that. You had mentioned
that they do seem to have some other arrows in
their quiver in terms of attacking this terror issue, because
I'm not as certain as to what the recourse my
I have viewed on this has always been right. If
they turn it over, then I'll dive in and try
and figure out what the next step is.
Speaker 4 (29:34):
I mean, as the market always does.
Speaker 2 (29:36):
They're looking forward on this, and I don't think you know,
there's no stock market investor that has a There might be,
but there's no stock market investor that knows which way
the court's going to.
Speaker 4 (29:44):
Rule on this.
Speaker 2 (29:45):
They're weighing and betting on the possibility of this being
overruled and largely seeing that as a net positive for
publicly traded companies.
Speaker 3 (29:54):
Sure.
Speaker 2 (29:54):
Sure, and so if their terrors stay in place, it
does beg the question or raise the question, I don't
know which. Are there some companies that are overvalued right now?
Speaker 4 (30:05):
So?
Speaker 2 (30:06):
Yeah, could you see some drop off in stock prices
if the tariffs are upheld? I think that's an open
question as well. Let's take a quick break when we
come back a little bit. Fed talk is next on
the Financial.
Speaker 1 (30:18):
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Speaker 2 (31:10):
So we talked a little bit about the FED following
the jobs report this morning. Again for the highlights, four
point four percent unemployment rate, fifty thousand jobs created, and
just that this federal reserve that's in place today unlikely
to act in terms of interest rate changes based on
a job's report like that, and that's being priced into
markets now that han't been said this fed chair and
(31:37):
fed this chair. This Federal Reserve board is having some
you know, senior year kind of senioritis at the moment
because they are on their way out.
Speaker 4 (31:50):
At least J.
Speaker 2 (31:51):
Powell is on his way out. His last Federal Reserve
meeting that he oversees will be in April. And so
the question is then being raised, Okay, you have no
matter who is appointed to the Federal Reserve, because we
don't have an answer for the chair person, you are
very likely to have somebody who sees much more eye
to eye with the president, or at least claims that
(32:11):
they see more eye to eye with the president when
it comes to interest rates setting policy. Therefore, I would
expect lower rates because of that. But will we get
it that that is, I feel like this is being
overstated in terms of the likelihood that rates continue to
come down in a dramatic fashion.
Speaker 3 (32:32):
Because people not being aware of the consensus approach that
they need to take.
Speaker 2 (32:35):
Well, not even the consensus approach. It's a vote right,
twelve person vote. Even if you're not a good consensus builder,
even if you are the best consensus builder out there,
it's not some conversation that then you know.
Speaker 4 (32:48):
They well seems to me like agree with me.
Speaker 3 (32:52):
The jurors and locked in and right to come out
with a verdict one way or another.
Speaker 2 (32:55):
So it I don't think is as much a foregone
conclusion that rates are going to be dramatically lower by
the end of this year. When we do take a look,
you know, fast forwarding all the way to the December meeting,
and this does assume a new appointment at the head
of the Federal Reserve. The most likely outcome, which again
(33:17):
this isn't this isn't terribly useful for actually determining what's
going to happen, But the most likely outcome that people
are betting on right now is that rates are half
a percent lower than where they are today.
Speaker 4 (33:30):
It's not a lot of cutting.
Speaker 2 (33:32):
The appointees that President Trump has been talking about Stephen Myron,
who's on the board now, who's a Trump appointee, they've
been talking about one and a half percent rate cuts.
So you know, markets are clearly not buying it, I
think is the message here, and it also helps explain
some of the actions that the President announced either this
(33:52):
morning or overnight when it comes to bond buying and
boat rates that we'll be covering later in the show.
Speaker 5 (33:59):
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Speaker 2 (35:09):
Paul, you ever heard of the company, gily not until
this morning, so most as Happy movie with Ben Affleck
and Jennifer Lopez.
Speaker 3 (35:20):
Chili that was back in the two thousands.
Speaker 4 (35:22):
Yeah, spelled slightly differently.
Speaker 2 (35:24):
So this is a Chinese car maker, and I agree
with you, most people have never heard of him, but
they are wide owner of a whole bunch of brands,
including it's Volvo right that they own in the United States.
Speaker 3 (35:39):
Definitely heard of them and drove that car around for
many years.
Speaker 2 (35:42):
So the announcement from Gilla, the rumors from Gilea is
that they intend to expand into the United States or
at least make an assessment to do so within the
next twenty four to thirty six months. Now, there's a
reason that you don't see any Chinese branded cars sold
in the United States today because we tear if the
living hell out of them. So there is no ban
(36:05):
on Chinese may Chinese owned cars being sold in the
United States.
Speaker 4 (36:08):
Because again, if.
Speaker 2 (36:10):
You drive a Volvo today, you own a Chinese owned car.
It's a you know, it's a division of gile but
it is wholly owned by or majorly owned by Gilely,
and they direct the company what to do. They just
happen to get manufactured here in the US. Why I
think this is interesting and relevant. One is the timing, right, Like,
(36:30):
you know, we are trying to improve relations with China,
make sure we can still source rare earths. Might this
be an alive branch that the Trump administration is considering, Hey,
come invest in domestic manufacturing here and we'll actually let
you sell your cars here.
Speaker 3 (36:44):
You think he would allow? There's no chance, right a
Chinese EV.
Speaker 4 (36:49):
What's the difference?
Speaker 2 (36:51):
They own Volvo, They direct them exactly what to do?
Speaker 3 (36:57):
Do you we don't know necessary. I mean that still
has like a Swedish sort.
Speaker 2 (37:01):
Of it's all on subsidiary, like you know what.
Speaker 3 (37:06):
I don't know if he'd go I don't know if
he'd go for it.
Speaker 4 (37:09):
In either case.
Speaker 2 (37:10):
Why I think this is fascinating Jim Farley after visiting China,
I think in twenty twenty four his quotes he's the
CEO of Ford, the experience was the most humbling thing
I have ever seen. Chinese evs are far superior in technology,
cost and build quality. They pose an existential threat to
Western automakers and dominate the global EV landscape. Yeah, that's
(37:34):
what American car makers are up against, because like it
or not, I think a combination of hybrid and more
electrification is probably the future for even the US auto market,
or a larger portion of it. And you just I mean,
like I think gas powered cars are going to be
around for thirty years. I just think that evs are
(37:54):
going to slowly make up a larger portion of the total.
Speaker 3 (37:57):
I mean, if these Chinese ones come through a twenty
grand didn't proliferate throughout the United Sates.
Speaker 2 (38:01):
Wouldn't because you'd have US workers manufacturing them. But this
is an interesting one, I think, something to keep an
eye on, and I'm not as convinced.
Speaker 4 (38:11):
That they will continue to be banned as Paul seems
to be. Quick Break A lot more to cover in
the second hour. The Financial Exchange
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(00:20):
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(01:03):
This is the Financial Exchange with Mike Armstrong and Paul.
Speaker 2 (01:07):
Lane, Happy Friday out there from the Financial Exchange. Hope
everybody's doing well. It is a job's Friday. We got
the report ninety six minutes ago and that's where we
will be kicking off our day here. So Paul, as always,
we have some good, some bad, a little bit ugly
(01:28):
in any of these jobs reports, but generally speaking, this
is one of the cleanest ones we've gotten since the
government shut down, and generally speaking, I think people are
taking it away as a bounce back report after a
few bad ones leading up to the holidays. So let's
dive right in here. As always, this is a jobs
(01:49):
report for the prior month. It measured data back in
the month of December, prior to the holidays. It is
comprised of two separate surveys that the government does. One
as a survey of households, one is a survey of businesses.
They indicate completely different things. They're not intended to be
read as a combined report, although they obviously you know,
(02:11):
very frequently do get reported as such. Where do you
want to kick things off? In terms of the most
relevant data here for the jobs I think.
Speaker 3 (02:18):
The area that everyone was most focused on was the
unemployment rate. So let's sit the stage with this. The
the unemployment rate for the month of November's jobs report
was four point six percent. That has been revised down
to four and a half percent. And then the report
that we just got an hour and a half ago
not revised that number, but the number came in slightly
lower at four point four percent. So we went from
(02:40):
four point six printed to revise to four point five
to four point four percent today. So that was encouraging
to see. Largely anticipated that we were going to get
that point one percent decrease there on the unemployment number
of the unemployment rate, but that really was the primary
focus going today on the jobs added. That's another component
of the job support that we focus on so much.
(03:02):
We saw about fifty thousand jobs added in the month
of December, that was below expectations of seventy three thousand,
and then one slightly not so positive piece was going
back to October where there were job losses. There was
a further significant revision there where the initial print was
one hundred five thousand jobs that were lost for the
(03:24):
month of October. That was arise down further to one
hundred and seventy three.
Speaker 4 (03:28):
Thousand, So yeah, I mean good, bad, ugly.
Speaker 2 (03:31):
Here, Let's start with that unemployment rate piece, because when
the November data came out and we saw four point
six percent print, what I immediately voiced here on the
Financial Exchange was, at that level, you are getting close
again to a Psalm rule recession indicator. That is, when
the three month rolling average on the unemployment rate passes
half a percent higher than the three month rolling average
(03:54):
of the low over the last twelve months, we were
getting there. This indicates that we are not getting there.
This indicates that a data was actually revised back downward
and the December number came in better. A four point
four percent unemployment rate, while significantly weaker than pretty much
anywhere we've been over the last three years, is a historically.
Speaker 4 (04:13):
Very low unemployment rate.
Speaker 2 (04:16):
I just want to drive that home for a moment
from the Fed's perspective of unemployment, from anyone who has
lived through and worked through the last thirty years in
the labor market, a four point four percent unemployment rate
is quite low. I recognize if you're a twenty two
year old, that doesn't feel that way. For a twenty
(04:37):
two year old, the average unemployment rate is closer to
nine percent. But for you know, an overall economy to
be experiencing a four point four percent unemployment rate, it's low,
borderline inflationary. So I think that's the context here. Is
really solid number from that perspective, does not indicate further
labor market weakness that the FED would need to respond to.
(05:00):
Right the job creation number, that's where I get to
a very mixed bag, like, yeah, I like to see
the December bounce back, but wow, was October bad?
Speaker 3 (05:09):
Really bad? Yeah, And part of that where it's worthy
to note that the deferred resignation program of the government
that they had put together that is influencing the number
that we're seeing there.
Speaker 2 (05:21):
So perhaps it can explain that because it's been a year. Right, so,
spring of last year the federal government offered buyout packages
and did layoffs of a bunch of government workers that
effectively went so that they had paychecks until September. October
was the first time that they were counted in this
(05:43):
report as not working, and so that was a big
number in October. I think again, to your point, that's
pretty explainable one time event, not something that is going
to likely repeat itself. I think the overall message though
on the pay job creation that I would take away
is in the first six months of twenty twenty five,
(06:06):
we were averaging about eighty two thousand jobs per month
getting created. I don't see exactly where we are for
the last six months of the year, but it is
well below that, right, It is well below that and
has showed a continued weakening in the pace of hiring
on behalf of private companies and public organizations like the
(06:27):
federal government.
Speaker 3 (06:28):
To me to further kind of your statistics there, the
stark difference between twenty twenty four and twenty twenty five
was pretty significant when I looked at it in terms
of the average number of jobs added through twenty twenty five.
So this encompasses the first six months you talked about
and the second half. It was about forty nine thousand
jobs that were added over the course of twenty twenty five.
That number in twenty twenty four about one hundred and
(06:49):
sixty eight thousand.
Speaker 2 (06:50):
So we're running half right, and twenty twenty four was
about half of what twenty twenty three was, And so
you can draw a pretty clear trend line there, and
if it were to follow that trend line, we would
see net job loss in twenty twenty six if you
just kind of drew a line there and continued it. Obviously,
that is top of mind for the Federal Reserve. Now
(07:14):
the interesting piece on this is, in spite of those
pretty weak hiring numbers, which again did bounce back in December,
we have investors taking a look at interest rate policy
and saying, well, this sure thing is up for that
January twenty is.
Speaker 3 (07:30):
Immediately where I went to after the report came out,
within fifteen minutes.
Speaker 4 (07:34):
Yeah, so here's a state of play yesterday.
Speaker 2 (07:37):
When you take a look at the Chicago Mercantitle Exchange
CNB group, you can take a look at FED fun futures.
There they were pricing in an eleven point one percent
chance of a rate cut at that January meeting.
Speaker 4 (07:48):
Immediately cut in half. Now a five.
Speaker 2 (07:50):
Percent chance of a rate cut at that January meeting.
I tend to agree. I think it was unlikely in
the first place, now extraordinarily unlikely the Fed cuts rates
at that meeting. Why the unemployment rate is what they
think is the best indicator for this labor market right now,
They have said it over and over again. A they
(08:11):
don't trust the job creation numbers. B They don't feel
like they have a really great grasp on the state
of labor supply in the country right now. They have
open questions about how good their surveys are. Given the
pace of immigration change net migration change into the United States.
They are not really certain how many sixty five plus
(08:31):
year olds still want to work in this labor market.
And so they are really looking at that job creation number,
which by the way, is about to get their annual
revisions and probably look even weaker than it was before.
And they're just saying, look, we don't think that the
job creation number is the best one for us to
get a sense of how tight the labor market is.
We need to be looking at other things like that
(08:54):
unemployment rate, like the Jolts report too.
Speaker 4 (08:56):
That's another good indicator.
Speaker 2 (08:57):
And I think this report really confirms for them that, hey,
further rate cuts right now probably not needed on an
emergency basis.
Speaker 3 (09:08):
Yeah, you wouldn't need to see that unemployment rate, which
would have been a shock tick upwards to have the
semi futures and for the Fed fund cut at the
end of the month dramatically change, And that wasn't the case.
And that was my interpretation, Mike, looking over this report,
this is further evidence that it probably makes sense at
the end of January to stay the course and allow
(09:29):
for more data to trickle in before making any other
decisions on the rate front.
Speaker 4 (09:33):
Grade this thing for me, what are you giving it?
Speaker 3 (09:35):
I would say B minus.
Speaker 2 (09:37):
I was at a B B plus. Maybe they drop
into the unemployment rate. I think gave me a slightly
better grade on that. But this job's report is one
that at least kneecaps the argument of a rising unemployment
rate and a PSALM rule recession again, and I think
you're seeing some of that positivity maybe in early trading here. Again,
(10:00):
it did not set off alarm bells with investors that hey,
we're heading towards a recession, at least so far. So
the jobs report for December again headline news here, four
point four percent unemployment rate, job creation pace of fifty
what was it, fifty four thousand, fifty for the month
of fifty thousand for the month of December. That job
(10:21):
creation was lower than anticipated, but got some help from that.
Speaker 4 (10:24):
Lower unemployment rate.
Speaker 2 (10:26):
And I think that's really the piece that investors are
taking away today.
Speaker 4 (10:30):
Let's tay a quick break.
Speaker 2 (10:31):
When we come back, I want to stay on the
idea of the labor market, specifically moving over to the
positive productivity boom that we have seen over the last
few years. Is AI causing it? Can we continue to
expect it? That's next. On the Financial Exchange.
Speaker 1 (10:46):
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Speaker 5 (11:13):
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Speaker 3 (11:19):
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Speaker 2 (11:37):
Two somewhat breaking news stories.
Speaker 4 (11:40):
One Supreme Court. It was theorized they might.
Speaker 2 (11:44):
Be announcing their ruling on the tariff President Trump's tariffs today.
It's been clarified that they will not be doing that.
Tariff ruling today. Presumably they've already ruled, they're just not
announcing the ruling so far. So we'll keep you tune there.
But I mean, looks like it could be any day now.
Speaker 4 (12:02):
Sure.
Speaker 2 (12:03):
Second big breaking news story for all our New English
is this just a new England company. I don't know
where they are located.
Speaker 3 (12:09):
Their headquarters is Manchester, Connecticut.
Speaker 2 (12:12):
Bob's Discount Furniture looking for an IPO in twenty twenty six.
So we were talking yesterday about how could be a
heating up IPO market this year and you.
Speaker 3 (12:21):
Know, SpaceX anthropic Bob Bob just.
Speaker 4 (12:25):
Toss them right into the same group.
Speaker 2 (12:26):
Yeah, So I want to talk about productivity. So first off,
we have to kind of define it. It's pretty obvious,
but productivity is measured by, you know, how much dollar
output there is per hour worked. And this is kind
of the holy grail when it comes to an economy
because it's how an economy develops. I know, there are
(12:49):
plenty other good measures of you know, well being in
an economy, but if you're trying to figure out, hey,
can an economy truly grow? This is the holy grail
because it is improving quality of life if you get
productivity booms. You can also get growth out of a
growing population, obviously that will do it. But the productivity
(13:12):
piece is a huge one. And so we have seen
a productivity boom for the last several years, and as measured,
we've been coming in at.
Speaker 3 (13:22):
Two point three percent two.
Speaker 2 (13:25):
Point three percent over the course of the last few years.
That compares to a one point one percent productivity piece
of increase during the twenty tens decade, right, And so
you know, obviously everybody's throwing up their hands and saying, Okay,
what's causing this? We can measure it, we can measure
the output of it, but anything in terms of figuring
(13:46):
out what's causing it is a guess at this stage.
Speaker 4 (13:49):
Obviously, the first one.
Speaker 2 (13:50):
That anybody wants to blame it on is a yeah, right,
why wouldn't you want to blame it on AI? We're
spending trillions of dollars on developing this technology. Hopefully we're
getting something out of it, and we may be. You know,
I think there could be something to that. Here are
the counter arguments to it being an AI story. One,
(14:12):
The surge in productivity start in the spring of twenty
twenty three. Raise your hand if you're listening and we're
using chat GPT in March of twenty twenty three, because.
Speaker 3 (14:23):
It was released in November of twenty twenty two, So
that means you were in the first adopter.
Speaker 4 (14:29):
Yeah. And furthermore, keep your hand raised if you can
measure how.
Speaker 3 (14:33):
Much money you're driving to keep it on the wheel.
Speaker 4 (14:35):
Well, yeah, if you're driving, keep it on the wheel.
Good point, Paul.
Speaker 2 (14:38):
But keep your hand raised. If you can measure how
much more productive you were from chat GPT in your
paid job.
Speaker 4 (14:47):
Oh, that's that's one in a million. That's very few people. Yeah,
So I don't know that.
Speaker 2 (14:54):
Maybe we can blame the continued productivity boom on AI,
but the early ones I don't think so.
Speaker 3 (15:00):
I'm not even willing to go there with it at all.
I just think it's too early in the adoption period
for it.
Speaker 4 (15:06):
To be even in twenty twenty six or twenty five.
Speaker 3 (15:10):
Yeah, I don't think I can. I really don't think
I can get there yet to explain such a broad
I mean, we're talking about size of an economy as
massive as the US to have such broad adoption that
we increase productivity by a pretty significant clip. I'm just
not willing to say that it if it's part of
(15:31):
the pie at all, it's a really small piece of
it if anything. And I'm just not sure we can
get there yet, because yes, there's more, there's the use
has picked up a lot, but that productivity measurement, I
just find it a little harder to believe. I think
that the factors that you could lean on a little
bit more heavily as to why we're seeing that productivity
(15:53):
output increase is the capital tightening cycle that we went
through where we were in an economy with very very
low interest rates, and there was a tremendous amount of
labor hoarding that came out after that period. So the
pandemic hits interest rates come down significantly, You then have
the economy reopen and a ton of demand to hire workers.
(16:13):
Back during that low interest rate environment, you had people
spending and barring at a very high clipped businesses running
at unprofitable levels. But when that tightening capital tightening's changed
where interest rates went up to five percent, there was
a lot more efficiency and looking in scrutinization by companies
on their balance sheets and on their businesses to perhaps
(16:34):
not take on as much hiring. It to be a
little bit more efficient and look at productivity a bit
more part of it. I'm not saying that's all that.
Speaker 2 (16:41):
Yeah, so that has been one three that's been tossed
around to hey. In twenty twenty one, two, twenty twenty three,
it was tough to find workers. So if there's a
way you can make your workers more efficient, it paid
to do so because you didn't need to hire another
person and pay them a signing bonus and a really
wage in order to get them on board.
Speaker 4 (17:02):
This is how boring my mind is.
Speaker 2 (17:05):
But like, the garbage truck was driving around my neighborhood
today and I was looking at it and thinking through
myself like, huh, it's a very different garbage truck than
the Sopranos garbage truck that had two guys in the
front seat plus a couple guys in the back haul
and the trash into it. No, it was one guy
with a mechanical arm that grabs the trash cans and
tosses it in there. What used to be between two
(17:26):
and four workers is now one for at least this
one garbage company. So I can buy that there's probably
bigger investment in robotics and modernization in the workforce in
the early stages of COVID for all sorts of reasons,
social distancing, you know, requirements that states were putting into
place to say, hey, you can't have all your workers
(17:46):
congregating in this one area. So perhaps that forced towards
efficiency during COVID, part of which might be robotics, part
of which might just be you know, innovative ways of
getting people more productive. Maybe we're seeing some of that now. Again,
these are all theories, right, I don't have any better
one than anybody else is proposing. Other economists are calling
(18:07):
something a ten year dividend, kind of like this idea.
So here's the idea. Companies over the last few years,
because of that tightness in the labor market, really worried
about losing their workers. We talked about labor hoarding. Now
we're talking about individuals who are job hoarding, who are
hugging their jobs and not wanting to leave. The theory
here would be, hey, if the tenure at your company
(18:30):
is now much longer because there's not this labor turnover
story that you're seeing back in twenty twenty, for example,
and now you have these workers that have been in
their jobs and not leaving for three, four or five years.
Speaker 4 (18:42):
Do they just get better at the jobs?
Speaker 2 (18:44):
They're just naturally better at the jobs and more efficient
than they were in year.
Speaker 4 (18:49):
One when you hired them.
Speaker 3 (18:51):
I think most of us can agree that you do
get better at your job as your experience grows. It's
certainly a first year to a third year that's a
massive difference.
Speaker 4 (18:59):
D'arn well better.
Speaker 2 (19:01):
If you haven't gotten more efficient in your job after
five years, then you're not likely going to have a
job for very long. So look, I think any and
all of these can be contributing factors. And I just
broke another pen because that's what I do when I
get excited. But I how many pens have you witnessed
me break?
Speaker 4 (19:19):
And just little pieces of it just go flying off?
Speaker 3 (19:22):
You come into our studio and the amount of pens
that are broken.
Speaker 2 (19:25):
It's pretty fascinating. We've got to take quick break. Wall
Street Watch coming up next.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network.
Speaker 4 (19:52):
Time now for.
Speaker 1 (19:53):
Wall Street Watch, a complete look at what's moving markets
so far today, right here on the Financial Exchange Radio Network.
Speaker 5 (20:02):
The December jobs report is here and markets are modestly
in positive territory after the Labor Department reported fifty thousand
jobs were added last month, softw than forecasts of seventy
three thousand. The unemployment rate fell to four point four percent,
better than the four point five percent estimate. Right now,
(20:24):
the Dow is up nearly four tenths of one percent,
or one hundred and eighty eight points higher. SMP five
hundred is up just over half a percent or thirty
seven points higher. NASDAC up over two thirds of a
percent or one hundred and fifty nine points higher. Russell
two thousand is up by about a third of a
percent ten. Your Treasure reeled down one basis point at
four point one sixty nine percent. Crude oil up nearly
(20:47):
two and a half percent higher, trading at fifty nine
dollars and seventeen cents a barrel. Intel stock is up
over eight percent now after President Trump said the government
is taking a new ten percent stake in the chip
maker after discussions about the company's future. Meanwhile, nuclear power
companies including Vistra and Ochloo, both rallying fourteen percent after
(21:10):
Meta announced agreements with the companies in addition to terror
Power as part of Meta's efforts to secure necessary resources
for its AI ambitions. MetaStock, by the way, is up
by about a half a percent. Elsewhere, General Motors revealed
they would record a seven point one billion dollar loss
for the final quarter of twenty twenty five, primarily from
(21:32):
its investments in electric vehicles. Last month, competitor Ford said
it expected to take nineteen point five billion dollars in charges,
mostly tied to its EV business. JAM shares it down
over three percent, and Johnson and Johnson agreed to lower
drug prices for US patients in an agreement with the
(21:52):
Trump administration, similar to other pharmaceutical companies like GSX, Merk
and Novardes, Jane J. Stock is flat at the moment.
I'm Tucker Solvan.
Speaker 4 (22:02):
That is Wall Street Watch. I love love pieces like this.
Speaker 2 (22:07):
Wall Street Journal reports that the stock market rally isn't
just about tech anymore. Funny enough, we were talking about
themes for twenty twenty six on one of the last
shows of the year, Chuck and I were, and I
brought this up as one of the themes that I
think many experts are talking about is, Hey, we're going
to see the stock market rally broaden out into other areas,
(22:28):
and I kept hearing it, and I really continue to
see very little evidence of it. I think it's possible,
but I would just say, let's all treat all this
with a heavy dose of skepticism.
Speaker 3 (22:43):
Because this is ridiculous, This is so absurd, this is
I feel like doing the show now for several years.
I don't know what the tally is that they've run
this playbook. You kind of get through a cycle where
the Santa CAUs rally pieces come out, and then you
go to the beginning of the year. We've had six
trading days so far, and they're quoting performance of different
(23:04):
sectors saying that, you know, industrials and energy have outperformed tech.
It's been six days. Can we at least run this
story when it's been six months. Six days is not
a reasonable sample size to say that now it's not
techt turn anymore.
Speaker 4 (23:22):
By the way, it's been like five and one quarter
of the day.
Speaker 3 (23:25):
Okay, thank you for the adjustment. Look back at the
last seven years of the S and P five hundred
sector performance and you will see that the technology sector
has been either number one or number two in terms
of performance for the five of the last seven years.
And oh, by the way, when it was number two
(23:45):
for two of those seven years, the telecommunication sector, which
is far from your traditional AT and T and Verizon stuff.
It's basically Facebook and Google and Netflix, those were the
number one. So this idea that it's not about tech
anymore because of five and a quarter days of trading
(24:05):
tries me absolutely insane that they write this piece like
I'm just not willing to have I'm not willing to
have I guess I just had the conversation about it,
but I'm not willing to buy it until we get
it at least six months, and then I'm willing to
give it an ounce of credibility.
Speaker 4 (24:21):
Yeah, this story is preposterous.
Speaker 2 (24:23):
Yeah, just gonna throw it out there, and not to
pooh pooh any utility investors out there or people who
are really excited about the energy sector maybe, but to
write a piece that says, again the headline, the stock
market rally isn't just about tech anymore after five days
(24:44):
and an hour and eight minutes of trading.
Speaker 3 (24:47):
Really, you're really into the precise measurements that you had
ninety six minutes on the Jobs report when you.
Speaker 4 (24:52):
Let off with it today, Yeah, you said six days
of trading.
Speaker 3 (24:55):
It's dead wrong.
Speaker 4 (24:57):
You're just wrong.
Speaker 2 (24:58):
So I thought it was important to correct you on it.
It's it's a preposterous story to write. I hope we
do get a broadening out that that would make me
feel a little bit better about the rally that we've
been on for the last three years. But to be
very clear, the rally that we have been on over
the last three years has been all about tech, and
specifically all about AI. Right, And when you buy you know,
(25:21):
an index that tries to replicate the you know, the
the market weighted stocks of the US stock market, you
are making a bet on AI, plain and simple, like
you go take a look at any of this stuff.
And that's where I think stories like this are not
only foolhardy, but they're a little bit dangerous to is
because when you go buy, for instance, you know, the
(25:45):
sm you can't buy the S and P five hundred index,
but you can buy you know, funds that replicate it,
you are putting you know, close to half of that
money into big giant tech companies that are making massive
bets on artificial intelligence. And so to paint it as
anything else I think is disingenuous. Right, hopefully it broadens out,
hopefully it changes. But stop writing stories five days into
(26:09):
trading that are going to tell me how the markets
are going to perform for the rest of the year.
Speaker 4 (26:13):
Because last year it wasn't this story, it was a
different story.
Speaker 2 (26:16):
It was, Oh, well, the stock market went down for
the first three days of the year, and when that happens,
lookout because this is what happens, you know, for the
rest of the year. When this happens, and guess what
stocks went up, like seventeen percent for the year.
Speaker 4 (26:27):
Yep.
Speaker 2 (26:28):
So don't tell me, Yeah, don't don't tell me this.
This is this is preposterous. As we mentioned earlier, the
Supreme Court, when will they be ruling on tariffs?
Speaker 4 (26:39):
I don't know, but not today.
Speaker 2 (26:40):
But I was asked, you know, I was speaking with
a Portland affiliated and an interview this morning and.
Speaker 4 (26:47):
Folks over at WGA and thanks for listening.
Speaker 2 (26:50):
The question was raised like, Okay, what the heck does
this mean if it does happen, like what happens if
the Supreme Court comes out tomorrow and says, yeah, the
tariffs that President Trump put into place, in April are illegal,
and we are striking them down.
Speaker 4 (27:07):
What are the next order? Questions about all of that?
Speaker 3 (27:10):
Great, what did you say? But I didn't get asked it.
Speaker 2 (27:15):
So my answer was, first and foremost, I don't know
which way the Supreme Court is going to rule. I
think obviously they have provided a fair bit of deference
to the executive branch over the last few years, so
I don't think there's any foregone conclusions.
Speaker 4 (27:27):
About which direction they rule.
Speaker 2 (27:28):
You can look at recent rulings one way or the
other to say that we're going to rule one way
versus the other. They ruled against Joe Biden on the
idea of student loan.
Speaker 4 (27:39):
Cancelation.
Speaker 2 (27:40):
That was a fairly big expansion of executive power, as
is this, So you know which way will they rule?
Speaker 4 (27:46):
I don't know. I have no sense to dogs the question. Well, no,
but then the next order.
Speaker 2 (27:51):
The next question after that is, Okay, what happens to
all the tariffs that were already collected? That's the first
order question in my mind, is Okay, you're resetting the
clock on all these companies. What about the tariffs that
have been collected for the last nine months?
Speaker 4 (28:05):
That was a tens of billions dollars billions of dollars.
Speaker 2 (28:12):
So are we going to suddenly refund that and just
inject stimulus into the economy of a few hundred billion dollars?
Maybe I don't have an answer here. How are you
going to do it? It's been insinuated that would be
tossed to the lower courts to figure out.
Speaker 4 (28:27):
So probably nothing immediate.
Speaker 2 (28:31):
Second question immediately after that, Okay, what is the White
if they are ruled overruled?
Speaker 4 (28:36):
If they're not overruled, then we're right backwards as usually.
But if they are.
Speaker 2 (28:40):
Overruled, Uh, then what does the White House do? Is
this going to continue to be something they pound the
table on because there are plenty of other methods for
the White House to pass new tariffs on all sorts
of different products, probably not in the same way country
by country as they did. But are they going to
(29:01):
stick with this as the issue that they want to
basically campaign on as they head into twenty twenty six
or do they basically say, Hey, Supreme Court ruled against
there's nothing we can do about it.
Speaker 4 (29:11):
We're going to move on to the next important thing.
When it comes to affordability.
Speaker 3 (29:14):
I don't know it would be hard to It'd be
hard to imagine that they do that. You had mentioned
that they do seem to have some other arrows in
their quiver in terms of attacking this terror issue, because
I'm not as certain as to what the recourse my
I have viewed on this has always been right. If
they turn it over, then I'll dive in and try
and figure out what the next step is.
Speaker 4 (29:34):
I mean, as the market always does.
Speaker 2 (29:36):
They're looking forward on this, and I don't think you know,
there's no stock market investor that has a There might be,
but there's no stock market investor that knows which way
the court's going to.
Speaker 4 (29:44):
Rule on this.
Speaker 2 (29:45):
They're weighing and betting on the possibility of this being
overruled and largely seeing that as a net positive for
publicly traded companies.
Speaker 3 (29:54):
Sure.
Speaker 2 (29:54):
Sure, and so if their terrors stay in place, it
does beg the question or raise the question, I don't
know which. Are there some companies that are overvalued right now?
Speaker 4 (30:05):
So?
Speaker 2 (30:06):
Yeah, could you see some drop off in stock prices
if the tariffs are upheld? I think that's an open
question as well. Let's take a quick break when we
come back a little bit. Fed talk is next on
the Financial.
Speaker 1 (30:18):
Exchange breaking business news as it happens only here on
the Financial Exchange Radio Network. The Financial Exchange streams live
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Financial Exchange Radio Network.
Speaker 5 (30:38):
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Speaker 2 (31:10):
So we talked a little bit about the FED following
the jobs report this morning. Again for the highlights, four
point four percent unemployment rate, fifty thousand jobs created, and
just that this federal reserve that's in place today unlikely
to act in terms of interest rate changes based on
a job's report like that, and that's being priced into
markets now that han't been said this fed chair and
(31:37):
fed this chair. This Federal Reserve board is having some
you know, senior year kind of senioritis at the moment
because they are on their way out.
Speaker 4 (31:50):
At least J.
Speaker 2 (31:51):
Powell is on his way out. His last Federal Reserve
meeting that he oversees will be in April. And so
the question is then being raised, Okay, you have no
matter who is appointed to the Federal Reserve, because we
don't have an answer for the chair person, you are
very likely to have somebody who sees much more eye
to eye with the president, or at least claims that
(32:11):
they see more eye to eye with the president when
it comes to interest rates setting policy. Therefore, I would
expect lower rates because of that. But will we get
it that that is, I feel like this is being
overstated in terms of the likelihood that rates continue to
come down in a dramatic fashion.
Speaker 3 (32:32):
Because people not being aware of the consensus approach that
they need to take.
Speaker 2 (32:35):
Well, not even the consensus approach. It's a vote right,
twelve person vote. Even if you're not a good consensus builder,
even if you are the best consensus builder out there,
it's not some conversation that then you know.
Speaker 4 (32:48):
They well seems to me like agree with me.
Speaker 3 (32:52):
The jurors and locked in and right to come out
with a verdict one way or another.
Speaker 2 (32:55):
So it I don't think is as much a foregone
conclusion that rates are going to be dramatically lower by
the end of this year. When we do take a look,
you know, fast forwarding all the way to the December meeting,
and this does assume a new appointment at the head
of the Federal Reserve. The most likely outcome, which again
(33:17):
this isn't this isn't terribly useful for actually determining what's
going to happen, But the most likely outcome that people
are betting on right now is that rates are half
a percent lower than where they are today.
Speaker 4 (33:30):
It's not a lot of cutting.
Speaker 2 (33:32):
The appointees that President Trump has been talking about Stephen Myron,
who's on the board now, who's a Trump appointee, they've
been talking about one and a half percent rate cuts.
So you know, markets are clearly not buying it, I
think is the message here, and it also helps explain
some of the actions that the President announced either this
(33:52):
morning or overnight when it comes to bond buying and
boat rates that we'll be covering later in the show.
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Speaker 2 (35:09):
Paul, you ever heard of the company, gily not until
this morning, so most as Happy movie with Ben Affleck
and Jennifer Lopez.
Speaker 3 (35:20):
Chili that was back in the two thousands.
Speaker 4 (35:22):
Yeah, spelled slightly differently.
Speaker 2 (35:24):
So this is a Chinese car maker, and I agree
with you, most people have never heard of him, but
they are wide owner of a whole bunch of brands,
including it's Volvo right that they own in the United States.
Speaker 3 (35:39):
Definitely heard of them and drove that car around for
many years.
Speaker 2 (35:42):
So the announcement from Gilla, the rumors from Gilea is
that they intend to expand into the United States or
at least make an assessment to do so within the
next twenty four to thirty six months. Now, there's a
reason that you don't see any Chinese branded cars sold
in the United States today because we tear if the
living hell out of them. So there is no ban
(36:05):
on Chinese may Chinese owned cars being sold in the
United States.
Speaker 4 (36:08):
Because again, if.
Speaker 2 (36:10):
You drive a Volvo today, you own a Chinese owned car.
It's a you know, it's a division of gile but
it is wholly owned by or majorly owned by Gilely,
and they direct the company what to do. They just
happen to get manufactured here in the US. Why I
think this is interesting and relevant. One is the timing, right, Like,
(36:30):
you know, we are trying to improve relations with China,
make sure we can still source rare earths. Might this
be an alive branch that the Trump administration is considering, Hey,
come invest in domestic manufacturing here and we'll actually let
you sell your cars here.
Speaker 3 (36:44):
You think he would allow? There's no chance, right a
Chinese EV.
Speaker 4 (36:49):
What's the difference?
Speaker 2 (36:51):
They own Volvo, They direct them exactly what to do?
Speaker 3 (36:57):
Do you we don't know necessary. I mean that still
has like a Swedish sort.
Speaker 2 (37:01):
Of it's all on subsidiary, like you know what.
Speaker 3 (37:06):
I don't know if he'd go I don't know if
he'd go for it.
Speaker 4 (37:09):
In either case.
Speaker 2 (37:10):
Why I think this is fascinating Jim Farley after visiting China,
I think in twenty twenty four his quotes he's the
CEO of Ford, the experience was the most humbling thing
I have ever seen. Chinese evs are far superior in technology,
cost and build quality. They pose an existential threat to
Western automakers and dominate the global EV landscape. Yeah, that's
(37:34):
what American car makers are up against, because like it
or not, I think a combination of hybrid and more
electrification is probably the future for even the US auto market,
or a larger portion of it. And you just I mean,
like I think gas powered cars are going to be
around for thirty years. I just think that evs are
(37:54):
going to slowly make up a larger portion of the total.
Speaker 3 (37:57):
I mean, if these Chinese ones come through a twenty
grand didn't proliferate throughout the United Sates.
Speaker 2 (38:01):
Wouldn't because you'd have US workers manufacturing them. But this
is an interesting one, I think, something to keep an
eye on, and I'm not as convinced.
Speaker 4 (38:11):
That they will continue to be banned as Paul seems
to be. Quick Break A lot more to cover in
the second hour. The Financial Exchange
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