January 2, 2026 • 38 mins
Chuck Zodda and Mike Armstrong discuss how stocks overcame a long list of worries to gain in 2025, thanks to AI. What are market expectations for 2026? How did analysts do with their 2025 predictions? Fed minutes suggest caution about further rate cuts early this year. The condo market hasn't been this bad in over a decade.
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Episode Transcript
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Speaker 1 (00:00):
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(00:20):
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(00:42):
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(01:06):
and Mike Armstrong.
Speaker 2 (01:10):
Chuck, Mike, and Tucker with you here kicking off twenty
twenty six. I hope you all had a fantastic New
Year's Eve a good New Year's Day as well, and
nobody actually make it to midnight? I did, did you? Yeah?
Speaker 1 (01:27):
Yeah?
Speaker 2 (01:27):
I made it to midnight London time about ten thirty. Yeah, okay,
fair enough, seven p. I'm like you call it today, I
know I made it to midnight. Like generally, at this
point in my life, I get to somewhere around twelve
thirty twelve forty five in the comfort of my own
home without having to deal with other humans because quite honestly, look,
I'm not really a New Year's person. I'm just I'm
(01:48):
not the same. I don't believe in New Year's resolutions,
to be completely honest, I don't think New Year's should
be on January first.
Speaker 3 (01:58):
It's pretty pretty odd for the guy who's wearing a
two pey on January second. Okay, fine, I don't believe
in New Year's resolutions, Okay, Joe.
Speaker 2 (02:06):
It's fine. No, Like, I don't like I didn't make
any I'm not. I find that it's better to try
to build repeatable processes during the year than be like, well,
this is the year I'm gonna change, because look, we've
all seen the Sopranos where Tony almost dies spoiler alert,
and you know, comes back and it's like, oh, I'm
gonna be different, and that's you know, a whole part
(02:28):
of a season and everything, and then it turns out, Gee,
it's kind of hard to change as a human and
so trying to have this like epiphany that wow, it's
twenty twenty six, I'm gonna be a different person. No,
I'm not gonna be a different person. I'm gonna keep
being me and hopefully be a better version of me
that I can get to through, you know, some things
that I might actually want to do to improve my life,
instead of like, hey, this is gonna be the year
(02:50):
that I exercise. Well, no, the gym's just gonna be
crowded with everyone today and it's gonna dissuade.
Speaker 3 (02:55):
You from going back, and you're gonna eat Dorito's in
the car instead, right outside of the parking.
Speaker 2 (03:00):
Lot, which is why they have those vending machines there.
So let's talk a little bit about twenty twenty five
and big thing twenty twenty five, if we're being one
hundred percent honest, didn't go the way most people were expecting. Yeah,
an a year, but yeah, if you talk to people
(03:22):
this time last year January tewod the stuff that people
were talking about was, Hey, we're gonna see you know,
a bunch of deregulations. We're gonna see a bunch of
tax cuts. It's gonna spur a bunch of spending. And
that's what's gonna, you know, drive the economy. In fact,
what we ended up getting work. Yeah, I was still
in the conversation it was, but like, yeah, there wasn't
(03:42):
like a ton of conversation about it. Like the thought
was like, hey, the Trump Administration's gonna reinvigorate the economy
with X, Y and Z. And while it is true
that we got the tax cut piece, okay, it was
largely in kind of a different format than I think
a lot of people were expecting initially. The other piece is,
I don't think a lot of people and actually I
(04:05):
know that a lot of people didn't have tariffs on
their bingo card because the market was pretty surprised by
all these announcements of them. In the first third of the.
Speaker 3 (04:12):
Year, twenty percent market pullback to display that pretty clearly correct.
Speaker 2 (04:18):
So I think that you know, it was something where ultimately,
looking back, you now sit there and say, hey, the
S and P made you know, a little bit north
of you know, sixteen percent, and the Federal Reserve cut
interest rates a few times, and okay, like sure, like
that's stuff that you know is pretty close to what
was projected. But this is why I think that the
(04:39):
path matters is because if all you do is say, hey,
SMP earnings are going to grow ten percent this year,
stick it on your dartboard, and Okay, the S and
P is going to get to seventy four hundred, well
that doesn't really tell you anything about the path you
had to take to get there. And the path is
what matters for short term traders and for long term investors.
(04:59):
The act School number from one year to the next
doesn't matter because you're just saying no, I'm looking at
it long term. Agreed.
Speaker 3 (05:05):
I will also say, yes, plenty of investors kind of
missed what was going to be the theme this year. Yeah,
have we ever done a show in the beginning of
the year where we're looking back at the previous year
when markets are up in the previous year, right, I
want to know caveat that. You know, this only really
(05:26):
applies to when markets are up. But has there ever
been a year where we're talking about it like, oh, yeah,
everything was perfect and it just stayed perfect all year.
It's always Hey, there's these list of issues that investors
are going to need to overcome, and it's going to
markets are going to climb that wall of worry and
you know, move into a different, different place and you know,
(05:48):
go back and look at you know the records, Right
we had the bank failures in is that two years ago?
Speaker 2 (05:54):
Three years ago now twenty four or three three years ago?
Speaker 3 (05:57):
Yeah, Yeah, there's always a wall of worry that you know,
markets need to climb over in order to see this
positive turn. And in the years where things fall apart,
it's usually the case that, wow.
Speaker 2 (06:09):
Almost nobody saw that one coming. I'm less speaking to
the wall of worrying more like, hey, were the things
that we saw things that we expected to see or
not Like R twenty twenty one was very much this
is exactly what you expected to see. Hey, we pumped
a bunch of money into the economy, and now we're
(06:30):
going to see what happens as you know, society tries
to reopen. It was basically what everyone expected. Markets went nuts,
prices started rising, and like that was, you know, kind
of what you saw in twenty twenty one. The last
several years have had, you know, kind of a more
complicated relationship in that. Twenty twenty two I don't think
(06:51):
there were very many people, you know, heading into it
who were like, Yeah, we're gonna see like this Russian
invasion of Ukraine and you know, the Fed's gonna hike
interest rates five points and you know, blah blah. Like no,
there weren't a lot of people there twenty three. If
you'd ask people at the beginning of twenty three, Hey,
what are going to be the big themes, I don't
think anyone would have said there's gonna be a bunch
(07:13):
of bank failures in the first part of the year.
Not a bunch, but like a handful of, you know,
still sizable ones.
Speaker 3 (07:18):
They definitely thought that the inflation scenario is going to
be worse than it turned out to be. The miraculous
disinflation of twenty twenty three.
Speaker 2 (07:25):
Was kind of a defining factor, and no one had
ai becoming what it is today as quickly as it
is right as something that would affect markets, then, So yeah,
I think that when you look at this, I think
it's important to set the stage now for what are
expectations for twenty six because like this is ultimately what
(07:45):
matters and what influence is how markets move, because what
everyone's talking about will be the main things in terms
of markets.
Speaker 3 (07:52):
At least, I think that primary one continues to be
artificial intelligence, probably followed by expected changes from the Federal Reserve.
If you ask investors like what are they focused on?
I tend to think those are them. I mean, unemployment
plays into that, inflation plays into that. But those are
kind of the major things. We're not expecting some major
(08:14):
tax bill. We're not expecting some major political reform. Yes
it's an election year, but there's no big expected changes
there to SoC security, to other factors, and so that's
I think kind of the expectation. And quite frankly, I'd
be very surprised if we're sitting here this time next
year and saying, oh, yeah, it took place kind of
exactly the way we thought it would, right.
Speaker 2 (08:34):
The other items that I'd say, you know, are expected
right now, it's expected that the tax changes from last
year are going to provide a spending boost this year
in the form of larger than normal tax refunds and
things along those lines, business capex deductions, things like that,
driving additional economic activity. I think that's part of it.
(08:57):
I think that when we look at housing, I think
the expectations are that housing doesn't really shift its course
from the last couple of years in any meaningful way,
in that it's not a driver of a ton of
new economic activity. But it doesn't fall apart like in
(09:18):
the run up to two thousand and seven two thousand
and eight either. I think it just kind of muddles
along as the expectation more or less. And on the
employment side, this is the area where I do think
you get some divergences in terms of views. There's one
camp out there that says, because of that additional spending
that's going to be driven by tax changes, okay, that's
(09:41):
going to drive better employment. There's another group that says, hey,
the economic data is not really showing any meaningful shift,
and generally the best predictor of where employment's going to
be is where it's been. And so kind of a
continued muddling through of employment is what you might expect.
And then there are people in the camp of, hey,
(10:03):
we're on the precipice of something horrible happening in the
labor market, and this is going to be the year
that it finally falls apart. And I think that that's
one place where we look at labor where there is
a pretty big divergence of views as to how things
can play out this year. And wait, sorry no, And
(10:25):
I was just gonna say, and I think that that
is something that unfortunately tends to have a big impact
on the economy because consumer spending is typically driven by
employment income, and so given the wide range of possibilities
for labor, I think there's, you know, a case that
this is one of the more unpredictable.
Speaker 3 (10:46):
Years that you could see for the economy. Last market
directly related piece here. When I listen to interviews with
major market analysts or I leadership from companies like Schwab
or Fidelity or others that get interviewed regularly about the markets,
what I keep hearing about is for the theme of
(11:08):
twenty twenty six, very few of them saying, oh, yeah,
AI is going to have another AI related company is
going to have another fifty percent a year, and that's
going to drive it. I keep hearing the broadening out
of the stock market returns. Not sure I buy it,
but that is definitely a theme I hear pretty consistently,
at least through the optimists about where market returns are
going to come from in twenty twenty six. Is Hey,
(11:29):
returns are going to broaden out from what has been
a hyper concentrated market for the next three years. And yeah,
not sure I buy it, but that is definitely something
that I've been hearing a lot of.
Speaker 2 (11:39):
Let's discuss that we need to take a quick break,
but let's discuss that in a little bit more detail.
Will we see a broadening out of this market next year?
Speaker 1 (11:50):
This year, I guess breaking business and financial news first
throughout the day, only here on the Financial Exchange Radio Network.
Text US six one, seven, three six two thirteen eighty
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Speaker 4 (12:17):
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Speaker 2 (12:59):
All right. So Mike didn't raise the question, but he,
you know, noted that a lot of analysts that are
paid an awful lot of money to look at stocks
are saying, hey, we're expecting to see a broadening out
of equity market return. Equity market return.
Speaker 3 (13:21):
We define that by the way, because I mean it
seems intuitive. But you know, the S and P five
hundred for the last three years now returned what was it,
eighty eight percent? I believe for the last three years cumulatively,
sure over half of that has come from the mag seven.
So it's been a it's been a narrow. If you
(13:41):
own the SP five hundred, doesn't really make a difference.
On paper. You participated in that eighty eight percent, but
over half of it came from the magnificent seven. When
we talk about a broadening out, you're talking about other
participants other than the you know, top seven companies in
the index, participating more in that overall country tribution to
net return.
Speaker 2 (14:01):
So what I want to do is, I'm gonna look
and this is from Facts that's Earnings Insight, published on
the fifth of December, and I'm just gonna look at
Q three of twenty five earnings because it's the closest
we have to like what earning's done for the last year.
So year over year growth rate in earnings by sector,
got it. Infotech up twenty eight point nine percent year
(14:24):
over year, Financials up twenty three point five, Utilities of
twenty three, materials of twenty, Industrials up fifteen to seven,
consumer discretionary of eight to one, real estate up six,
healthcare up five to three, consumer staples up zero nine,
energy down zero four. Consumers I'm sorry communication service is
down seven eight. So ultimately I'm a big believer. When
(14:45):
it's all said and done, and what Larry Cudlow has
always preached about stocks, which is earnings are the mother's
milk of stock prices. Sure, the reason why stocks in
the US historically have gone up is because earnings have
historically gone up. Generally, you look at the history of it,
earnings growth in the US has been around seven to
eight percent annual growth over the long term. Stock returns
have been a little in excess of that, but that's
(15:07):
because multiples have expanded over the last one hundred years.
It's just how it's gone. There are potentially valid reasons
for that. There are reasons that you can believe it's
not valid, but this is how we get to where
we are. Yep. So I think that when you look
at this and say, why would I expect markets to
(15:27):
broaden this year? Fact Set's latest earnings Insight update from
the nineteenth of December says infotech earnings projected to grow
another twenty eight point six percent next year. Okay, so
that's the again, back to back like thirty percent earnings
growth yep. Again mostly driven by in video materials up
(15:51):
twenty two percent, industrials up fifteen to four, communications services
up eleven eight, consumer discretionarya at eleven two, Financials up nine,
utilities nine. Now, these are the expectations expectations for next year.
Healthcare up eight nine, consumer stable seven to three, energy
seven to two, real estate five to two. So the
reason that this is being said by analysts is because
(16:16):
there is a broadening of earnings growth that's being forecasted
forecast Why might that come?
Speaker 3 (16:23):
Again, when asked why it would happen that way, I
point to two things, lower interest rates and stimulus from
the One Big Beautiful Bill Act.
Speaker 2 (16:32):
So this is also now when we get to go
and do the fun thing, which is, hey, let's see
what they projected last year, because like, isn't that kind
of interesting? Like what are you? You know, what did
you project for earnings growth last year?
Speaker 1 (16:50):
Now?
Speaker 2 (16:50):
I have no idea what I'm going to find here.
In fact, I'm looking for last year's numbers right now
and I'm struggling, but I know I'm going to get there.
So ultimately it's a question of, hey, how accurate are
these analysts in being able to project where earnings growth
is going to be for the upcoming year? You know?
(17:13):
Is that something that they have skill in doing? And
here we go. I got it. I told you i'd
find it. So, Mike, do you know what was projected
for the S and P five hundred technology sectors earnings
growth this year? Twenty twenty three? Pretty close, right, and
so we P analysts projected twenty three. They came in
(17:37):
at what did I say? It was twenty eight? Something
like that. I really need to pull that hang on.
Let me pull this other one back up so that
we can do the math on the air, because it's
what we're gonna do. So we analysts projected twenty three,
they got twenty eight. Okay, that's that's pretty close. It's
not perfect, but it's pretty close. Let's now take a
(17:57):
look at the sector that did second best this year.
Financials came in with twenty three and a half percent. Again,
this is Q three, so I know it's not full year,
but just hear me out. Twenty three percent. Financials projected
at eight point six percent year over year. Big miss
to the downside on financials. Okay, that's cool. Next up
on the list, utilities came in with twenty three percent
(18:19):
earnings growth year over year. For Q three, Utilities were
projected to at nine percent earnings growth for the full year. Okay,
A little bit light. Next on the list, Materials came
in at eighteen point nine, was projected I'm sorry. Came
in at twenty point one, projected eighteen nine. Almost spot on,
(18:40):
nailed it on that side. Industrials came in at fifteen seven.
Was projected at nineteen. So industrials came in a little
bit light, nothing huge, but a little bit light. Consumer
discretionary came in at eight one. Was projected at twelve
five light. Real estate came in at six. Was projected
(19:03):
at four to seven. Touch high, so I mean, hang on,
We're almost there. Healthcare came in at five p three.
Was projected at twenty point seven. Big miss to the
downside on healthcare, We've got consumer staples point nine projected
was up five to six. Big miss to the downside.
(19:25):
Energy was flat projected six 't one. Communications services down
seven to eight, projected up fifteen and a half. More
on this quick break, Wall Street watches next.
Speaker 1 (19:39):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time Now for Wall Street.
Watch a complete look at what's moving market so far
today right here on the Financial Exchange Radio network. Well.
Speaker 4 (20:00):
Markets were starting off twenty twenty six on a positive
note in rally mode, where the Nasdaq was up over
one percent. However, since the open gains have been erased
and are in mixed territory. How about that right now
the Dow is off by only sixteen points. SMP five
hundred is up over two tenths one percent or fifteen
(20:20):
points higher, Nasdaq up four tenths of a percent or
ninety five points higher. Russell two thousand is up two
tenths of a percent, and your treasure yield is up
two basis points at four point one seven five percent.
Crude oiled down about one and a third percent, rating
of fifty six dollars and sixty six cents a barrel.
Tesla down by one percent after the ev maker reported
(20:42):
just over four hundred and eighteen thousand vehicle deliveries in
the fourth quarter, down sixteen percent from a year ago.
Wall Street analysts were expecting about four hundred and twenty
six thousand deliveries. Sticking with auto, where Chinese car maker
BYD saw its sales growth slow sick magnificantly last year,
but is still set to top Tesla as the world's
(21:03):
biggest ev maker BYD stock climbed over three percent higher
in Hong Kong. Separately, Chinese ev makers Lee Auto and
Neo also saw gains after reporting solid vehicle deliveries last month. Meanwhile,
several furniture stocks garnering attention after President Trump delayed a
thirty percent teriff hike. An upholstered furniture, kitchen cabinets and vanities,
(21:26):
way Fair and william Snowmer up over three percent, while
RIH shares are up five percent. Elsewhere, the US granted
Taiwan Semiconductor its annual license to import its equipment to China,
sending these stock up nearly four percent, and Warby Parker
is up about one percent after Loop Capital named the
eyeglass maker one of its top stock picks for twenty
(21:49):
twenty six, citing the firms expanding Ebita margins. I'm Tucker
Silva and that is Wall Street Watch. And remember you
can watch the show live every.
Speaker 2 (21:57):
Day on our YouTube page.
Speaker 4 (21:58):
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Speaker 2 (22:15):
Do you know there is no Warby Parker. What do
you mean there's no man named it was not founded
by Warby Parker. Okay, kind of bothers me a little bit. Yeah,
where where did that name come from? It actually comes
from two characters in uh. I think it's a Carawac
novel hm. But it's like an amalgamation of their names.
Speaker 3 (22:39):
I mean, honestly, I will take that name over all
of the other company names that we've been seeing over
the course of the last two years meta from Meta
to HBO Max plus minus.
Speaker 2 (22:53):
Right, at least doesn't have a plus in it, And
then you know all of gees, Does Warby Parker have
a Warby Parker plus like ge Ver Nova R. Yeah,
I'll take this one over over those silly names that
it doesn't look like there's a Warby Parker plus, so,
which is surprising. I feel like, I actually feel like
(23:14):
eyeglasses are something where you could run a very successful
subscription model. Sure, you know, say those fashion enthusiasts, right,
like you get a new pair every year for like
you know, the same price or something like that. Like
I feel like you could do that, But I digress.
Do we want to do any further conversation on broadening
of earnings?
Speaker 3 (23:35):
So I think the point that you were making earlier,
which if you missed, was that analysts, when they are
looking at their projections, they're oftentimes not that close to
what comes in and oftentimes one in the aggregate, they're
usually companies usually beat expectations, but when you look at
(23:56):
you know, sector bisector, that is not quite the case.
Speaker 2 (24:00):
And if you expect I mean again, there's a few.
Speaker 3 (24:04):
Reasons I could genuinely see for a broadening out to occur,
but right now the main thing that I'm hearing it
thrown out there for is to justify a continued market
rally without putting all the weight on AI shoulders, which
people are becoming suspicious.
Speaker 2 (24:23):
Well, I think the case again it's it's one of
the ones we discussed, which is, Hey, households in the
aggregate are probably going to have somewhere in the ballpark
of an extra fifty two one hundred billion dollars to
spend as a result of the tax bill. In additional
you know, deductions and things like that that they get. Now,
(24:47):
in terms of where that shows up is a lot
of that going to be going to you know, the
family of four that makes sixty thousand dollars a year. No, like,
there's there's not as much going there. That money will
get spent. And will the person making you know, two
million dollars a year that gets an extra you know,
that gets an additional Section one ninety nine deduction on
(25:08):
their LLC that they run. Will they end up spending
that money?
Speaker 1 (25:12):
Maybe?
Speaker 2 (25:13):
And if they do, like that could still be what
powers the economy through has been less through this case
shaped you know phenomenon that we've talked about. But that's
the case for the broadening is consumers are going to
have more money to spend and they'll spend it, and
businesses are going to invest more because of the bonus
appreciation they get. And that's how you're going to see
a broadening.
Speaker 3 (25:32):
One other item that you know, we will be discussing
later in the show would be tariff related, which again
I don't think tariffs are going to be the most
talked about it and this year, but the trend over
the course of the last six months has been a
weakening of tariffs on imports from outside the United States. Yeah,
and so you know, if you have this and when
(25:52):
you point to, hey, who's been really hurt by the tariffs,
it's been small businesses. It's been small companies, some of
which are probably traded, most of which probably are not. So, hey,
if you're going to see some broadening out, could some
benefit come from the cancelation or reduction of tariffs over
the course of the next year. Yeah, maybe maybe that's
a factor as well.
Speaker 2 (26:09):
So I think that's enough on that side of things.
Do we want to talk a little bit about the Fed,
who we might mention a few times this year? Yeah?
Speaker 3 (26:18):
I think we should so for you know, everyone's mind.
The May time frame is the turnover when j. Powell
will be ending his term and the new pick from
President Trump will be heading in there and leading the
Federal Reserve. Remember that the Federal Reserve as a committee
of twelve voting members who make interest rate policy. Both
(26:40):
of the major contenders for that chairperson role have been
very public about their desire for lower interest rates. It's
you know, why they were selected for the role is
because they tend to align with President Trump's own views
on interest rates. And I think I don't know what
the expectation is there. Chuck I'm not sure.
Speaker 2 (27:02):
How.
Speaker 3 (27:02):
I don't personally think that interest rate setting policy dramatically
changes from the new pick versus what Ja Powell has
already been doing. But clearly you are going to have
a new FED chair that is at least publicly calling
for much lower interest rates and pressuring other FED members.
Speaker 2 (27:17):
To do so. Here here's the piece that's going to matter.
It's what happens versus what is priced in Yep, when
we look at the board right now for twenty twenty six,
by the by the last FED meeting, which is going
to be December ninth, good uh, colenar Yep, it's it's
it's on mine as well. It's a it's a great
(27:38):
day right right now. When you look at where we stand,
FED funds rate is at three and a half to
three point seventy five percent. Two cuts are projected this year.
So really the question that is worth asking is when
you get a new FED chair, who is most likely
(28:00):
going to not most likely he was almost certainly to
have campaigned on lowering interest rates. Do are they able
to convince the rest of the Open Market Committee to
lower rates more than is what is projected right now? Right?
That's what matters to markets. If you get two cuts
this year, but it's priced in, doesn't matter, there's nothing better, Like,
(28:22):
it doesn't do anything. It's kind of like, Okay, if
AI earnings had come in, if tech earnings had come
in at twenty three percent growth this year, Okay, that's
what analysts we're projecting. They've come in closer to thirty percent,
which has given you additional upside expectations matters. So if
you get a situation where the FED is able to say, yeah,
(28:46):
you know, new chair Kevin X or Kevin Y, you
know is in here, and is you know, able to
get the board to say, yeah, we want to cut
interest rates to you know, two and a quarter percent. Okay,
that's a fundamental difference. But it also with the caveat
Hey was the reason they were able to convince them
to cut rates that much because the economy weakened more
than people expected, and so those cuts were viewed as,
(29:08):
you know, more warranted than prior. That plays into this
as well. So I think that where I tend to
land is there is an awful lot of institutional inertia
at places like the FED. Institutional inertia.
Speaker 1 (29:31):
I like that.
Speaker 2 (29:32):
Yeah, okay, you know. And I viewed this through the
same lens as Hey. When Scott Bessen became Treasury Secretary
last year, he spent the whole year being like Janet
Yell and I don't like what you're doing. Janet Yell,
and I don't like what you're doing. And he came
in this year and basically he has done the exact
same thing that Janet Yellen was doing. As far as
the mix of short term versus long term treasuries, some
(29:56):
of that's inertia and some of that is you take
the situation you're like, oh, if I push the wrong button,
I'm gonna get blamed for you know, problems. Yeah, I
better keep doing you know, what's been working. And I
think there's a certain amount of that at the FED
two because ultimately, like, let's say that I become FED
chair and like, which would be horrible, congrats, you're welcome.
(30:22):
Let's say that I become FED chair. And let's say
that I became FED chair in twenty twenty two and
actually hiked interest rates five percent at the start of
the year. It's a big risk. Like it's fine for
me to say, Hey, here's what I would do when
I'm not sitting in the chair. Would I actually have
the hutzpah to go out and be like, you know what,
(30:43):
screw it, fire all the torpedoes, like we're gonna do it.
I don't know if I would if I'm actually in
the chair.
Speaker 1 (30:49):
Yeah.
Speaker 3 (30:50):
And it's a long running institution with a lot of
history of the very big mistakes that were made over
the course of the ear, and everyone that is going
to take the role is are.
Speaker 2 (31:00):
Aware of the mistakes that were made over the year.
The reason we all remember Arthur Burns is because of
the inflation that happened on his watch, not because he
was a brilliant economist beforehand. It's the same as Bill Buckner.
We don't remember that Bill Buckner was actually a very
good defensive first baseman. We remember Mookie Wilson's ball going
under his legs and going oh no, and like That's
(31:23):
the thing about being fed chair is ultimately the ones
that are remembered are usually the ones that screw up.
It's like offensive linemen or kickers or anything else like that.
You want to be a fed chair who is not remembered,
but it's still paid very highly on the speaking circuit.
After you're done yeah, Ben Bernanke. No one really thinks
(31:44):
about Ben Bernanke a whole lot anymore. You know, it's
just like, okay, he was there. Let's take a quick
break when we return. Let's see we talked tariffs a
little bit already. We're not gonna do that. We're not
gonna do that. Condo market, Yeah, talk condos after this.
Speaker 1 (32:01):
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Speaker 2 (32:07):
All morning.
Speaker 1 (32:08):
Long Face is the Financial Exchange radio network business and
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Financial Exchange Radio Network.
Speaker 2 (32:34):
Wall Street Journal's got a piece. It's titled the condo
market hasn't been this bad and over a decade, and
conda price has had their largest annual decline since twenty twelve,
long one point nine percent for a year earlier in
September and October. Big reasons why fees, fees, that's the reason.
So here's the thing. If you look at where most
(32:57):
condos are just from like a pure number perspective, not
what place is the highest percentage of you know, dwellings
that are condos but it tends to be dominated by
the Southeast. Okay.
Speaker 3 (33:08):
So I was gonna say that, like, are we seeing
a condo problem or are we seeing a Florida problem.
Speaker 2 (33:12):
It's it's a Florida problem, okay. And but it's twofold
because part of it's Florida in that you know, look,
you've you know been over developed and people, you know,
built based on you know, expectations that the migrations from
twenty twenty and twenty one would continue and they haven't.
But the other piece is because of changes that have
(33:33):
happened to the laws down there, you have these monster
assessments that are being levied on a lot of these
high rise condos. It's it's not a factor if you're in,
you know, a condo that's just single family dwellings. But
the other piece that is a factor on all of
these is the master insurance policies for these condo communities
(33:53):
are either A going through the roof or B saying no,
we're not going to cover hurricanes anymore beyond like ex cost,
but you still have to pay up for it just
because you need to have a master policy of some
kind on the overall community.
Speaker 3 (34:09):
Yeah, I guess The interesting piece to me would be
if we studied this in a city by city basis,
are we seeing condo prices hold up worse compared to
single family in Portland, Maine, and New York City and Boston?
Or is this a real conversation of Yeah, the Florida
housing market is in very rough shape, and a big
(34:31):
portion of that happens to be condos.
Speaker 2 (34:33):
I think it's that. I tend to think so as well.
Speaker 4 (34:36):
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Speaker 2 (35:51):
The Craft Group reaching deals with Boston and Effett to
be able to move forward with plans for a soccer
specific state for the New England Revolution. This would be
some money heading to those cities in order to pay
for improvements related to traffic and pedestrian access. But I
can tell you is someone I lived like for a
(36:12):
while right next to where this is going to be
in Somemerville built. Yeah, I was in the eastern part
of Somerville. And what I can tell you is you
cannot get twenty five thousand people to that stadium without
causing all kinds of problems. Right now, the mass transit
that goes through there is on the other side of
(36:35):
the Mystic River with no direct pedestrian bridge access right now,
so you basically either have to like walk like a
mile and a half loop then in order to get there,
or take like cabs or buses or something. Either way,
like it gets very messy, very quickly. But ultimately this
is solvable if you actually just spend money to build
(36:55):
the pedestrian infrastructure that you need. But I think when
soccer season so not anymore.
Speaker 1 (37:06):
So.
Speaker 2 (37:06):
MLS announced I think a couple months ago, that they
are moving to unify the MLS schedule with the international
schedule in order to basically line up windows of transfers
and stuff like that that you make it so that
it works with other leagues in the world. So I
think it's either beginning next season or the one after.
(37:27):
Like most European countries, it's going to be a September
through like May June. Event water taxis are out. Now,
you're not going to have games in foxbur in Boston
in January. My guess is they go on some lengthy
road trips during the month in order to avoid playing
in eight degree weather. Because this thing doesn't have a
(37:49):
roof from what I saw, no, but ultimately I think
this is a fantastic development, but there's going to need
to be some work done in order to be able
to actually get people to this location. So I think
it'll be a real net positive for soccer in the
New England area in like a decade when it's done,
But there's some work to be done still on this.
(38:10):
Let's take a quick break. Coming up in just a
little bit. We got hour two stick around
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(01:06):
and Mike Armstrong.
Speaker 2 (01:10):
Chuck, Mike, and Tucker with you here kicking off twenty
twenty six. I hope you all had a fantastic New
Year's Eve a good New Year's Day as well, and
nobody actually make it to midnight? I did, did you? Yeah?
Speaker 1 (01:27):
Yeah?
Speaker 2 (01:27):
I made it to midnight London time about ten thirty. Yeah, okay,
fair enough, seven p. I'm like you call it today, I
know I made it to midnight. Like generally, at this
point in my life, I get to somewhere around twelve
thirty twelve forty five in the comfort of my own
home without having to deal with other humans because quite honestly, look,
I'm not really a New Year's person. I'm just I'm
(01:48):
not the same. I don't believe in New Year's resolutions,
to be completely honest, I don't think New Year's should
be on January first.
Speaker 3 (01:58):
It's pretty pretty odd for the guy who's wearing a
two pey on January second. Okay, fine, I don't believe
in New Year's resolutions, Okay, Joe.
Speaker 2 (02:06):
It's fine. No, Like, I don't like I didn't make
any I'm not. I find that it's better to try
to build repeatable processes during the year than be like, well,
this is the year I'm gonna change, because look, we've
all seen the Sopranos where Tony almost dies spoiler alert,
and you know, comes back and it's like, oh, I'm
gonna be different, and that's you know, a whole part
(02:28):
of a season and everything, and then it turns out, Gee,
it's kind of hard to change as a human and
so trying to have this like epiphany that wow, it's
twenty twenty six, I'm gonna be a different person. No,
I'm not gonna be a different person. I'm gonna keep
being me and hopefully be a better version of me
that I can get to through, you know, some things
that I might actually want to do to improve my life,
instead of like, hey, this is gonna be the year
(02:50):
that I exercise. Well, no, the gym's just gonna be
crowded with everyone today and it's gonna dissuade.
Speaker 3 (02:55):
You from going back, and you're gonna eat Dorito's in
the car instead, right outside of the parking.
Speaker 2 (03:00):
Lot, which is why they have those vending machines there.
So let's talk a little bit about twenty twenty five
and big thing twenty twenty five, if we're being one
hundred percent honest, didn't go the way most people were expecting. Yeah,
an a year, but yeah, if you talk to people
(03:22):
this time last year January tewod the stuff that people
were talking about was, Hey, we're gonna see you know,
a bunch of deregulations. We're gonna see a bunch of
tax cuts. It's gonna spur a bunch of spending. And
that's what's gonna, you know, drive the economy. In fact,
what we ended up getting work. Yeah, I was still
in the conversation it was, but like, yeah, there wasn't
(03:42):
like a ton of conversation about it. Like the thought
was like, hey, the Trump Administration's gonna reinvigorate the economy
with X, Y and Z. And while it is true
that we got the tax cut piece, okay, it was
largely in kind of a different format than I think
a lot of people were expecting initially. The other piece is,
I don't think a lot of people and actually I
(04:05):
know that a lot of people didn't have tariffs on
their bingo card because the market was pretty surprised by
all these announcements of them. In the first third of the.
Speaker 3 (04:12):
Year, twenty percent market pullback to display that pretty clearly correct.
Speaker 2 (04:18):
So I think that you know, it was something where ultimately,
looking back, you now sit there and say, hey, the
S and P made you know, a little bit north
of you know, sixteen percent, and the Federal Reserve cut
interest rates a few times, and okay, like sure, like
that's stuff that you know is pretty close to what
was projected. But this is why I think that the
(04:39):
path matters is because if all you do is say, hey,
SMP earnings are going to grow ten percent this year,
stick it on your dartboard, and Okay, the S and
P is going to get to seventy four hundred, well
that doesn't really tell you anything about the path you
had to take to get there. And the path is
what matters for short term traders and for long term investors.
(04:59):
The act School number from one year to the next
doesn't matter because you're just saying no, I'm looking at
it long term. Agreed.
Speaker 3 (05:05):
I will also say, yes, plenty of investors kind of
missed what was going to be the theme this year. Yeah,
have we ever done a show in the beginning of
the year where we're looking back at the previous year
when markets are up in the previous year, right, I
want to know caveat that. You know, this only really
(05:26):
applies to when markets are up. But has there ever
been a year where we're talking about it like, oh, yeah,
everything was perfect and it just stayed perfect all year.
It's always Hey, there's these list of issues that investors
are going to need to overcome, and it's going to
markets are going to climb that wall of worry and
you know, move into a different, different place and you know,
(05:48):
go back and look at you know the records, Right
we had the bank failures in is that two years ago?
Speaker 2 (05:54):
Three years ago now twenty four or three three years ago?
Speaker 3 (05:57):
Yeah, Yeah, there's always a wall of worry that you know,
markets need to climb over in order to see this
positive turn. And in the years where things fall apart,
it's usually the case that, wow.
Speaker 2 (06:09):
Almost nobody saw that one coming. I'm less speaking to
the wall of worrying more like, hey, were the things
that we saw things that we expected to see or
not Like R twenty twenty one was very much this
is exactly what you expected to see. Hey, we pumped
a bunch of money into the economy, and now we're
(06:30):
going to see what happens as you know, society tries
to reopen. It was basically what everyone expected. Markets went nuts,
prices started rising, and like that was, you know, kind
of what you saw in twenty twenty one. The last
several years have had, you know, kind of a more
complicated relationship in that. Twenty twenty two I don't think
(06:51):
there were very many people, you know, heading into it
who were like, Yeah, we're gonna see like this Russian
invasion of Ukraine and you know, the Fed's gonna hike
interest rates five points and you know, blah blah. Like no,
there weren't a lot of people there twenty three. If
you'd ask people at the beginning of twenty three, Hey,
what are going to be the big themes, I don't
think anyone would have said there's gonna be a bunch
(07:13):
of bank failures in the first part of the year.
Not a bunch, but like a handful of, you know,
still sizable ones.
Speaker 3 (07:18):
They definitely thought that the inflation scenario is going to
be worse than it turned out to be. The miraculous
disinflation of twenty twenty three.
Speaker 2 (07:25):
Was kind of a defining factor, and no one had
ai becoming what it is today as quickly as it
is right as something that would affect markets, then, So yeah,
I think that when you look at this, I think
it's important to set the stage now for what are
expectations for twenty six because like this is ultimately what
(07:45):
matters and what influence is how markets move, because what
everyone's talking about will be the main things in terms
of markets.
Speaker 3 (07:52):
At least, I think that primary one continues to be
artificial intelligence, probably followed by expected changes from the Federal Reserve.
If you ask investors like what are they focused on?
I tend to think those are them. I mean, unemployment
plays into that, inflation plays into that. But those are
kind of the major things. We're not expecting some major
(08:14):
tax bill. We're not expecting some major political reform. Yes
it's an election year, but there's no big expected changes
there to SoC security, to other factors, and so that's
I think kind of the expectation. And quite frankly, I'd
be very surprised if we're sitting here this time next
year and saying, oh, yeah, it took place kind of
exactly the way we thought it would, right.
Speaker 2 (08:34):
The other items that I'd say, you know, are expected
right now, it's expected that the tax changes from last
year are going to provide a spending boost this year
in the form of larger than normal tax refunds and
things along those lines, business capex deductions, things like that,
driving additional economic activity. I think that's part of it.
(08:57):
I think that when we look at housing, I think
the expectations are that housing doesn't really shift its course
from the last couple of years in any meaningful way,
in that it's not a driver of a ton of
new economic activity. But it doesn't fall apart like in
(09:18):
the run up to two thousand and seven two thousand
and eight either. I think it just kind of muddles
along as the expectation more or less. And on the
employment side, this is the area where I do think
you get some divergences in terms of views. There's one
camp out there that says, because of that additional spending
that's going to be driven by tax changes, okay, that's
(09:41):
going to drive better employment. There's another group that says, hey,
the economic data is not really showing any meaningful shift,
and generally the best predictor of where employment's going to
be is where it's been. And so kind of a
continued muddling through of employment is what you might expect.
And then there are people in the camp of, hey,
(10:03):
we're on the precipice of something horrible happening in the
labor market, and this is going to be the year
that it finally falls apart. And I think that that's
one place where we look at labor where there is
a pretty big divergence of views as to how things
can play out this year. And wait, sorry no, And
(10:25):
I was just gonna say, and I think that that
is something that unfortunately tends to have a big impact
on the economy because consumer spending is typically driven by
employment income, and so given the wide range of possibilities
for labor, I think there's, you know, a case that
this is one of the more unpredictable.
Speaker 3 (10:46):
Years that you could see for the economy. Last market
directly related piece here. When I listen to interviews with
major market analysts or I leadership from companies like Schwab
or Fidelity or others that get interviewed regularly about the markets,
what I keep hearing about is for the theme of
(11:08):
twenty twenty six, very few of them saying, oh, yeah,
AI is going to have another AI related company is
going to have another fifty percent a year, and that's
going to drive it. I keep hearing the broadening out
of the stock market returns. Not sure I buy it,
but that is definitely a theme I hear pretty consistently,
at least through the optimists about where market returns are
going to come from in twenty twenty six. Is Hey,
(11:29):
returns are going to broaden out from what has been
a hyper concentrated market for the next three years. And yeah,
not sure I buy it, but that is definitely something
that I've been hearing a lot of.
Speaker 2 (11:39):
Let's discuss that we need to take a quick break,
but let's discuss that in a little bit more detail.
Will we see a broadening out of this market next year?
Speaker 1 (11:50):
This year, I guess breaking business and financial news first
throughout the day, only here on the Financial Exchange Radio Network.
Text US six one, seven, three six two thirteen eighty
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Speaker 4 (12:17):
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Speaker 2 (12:59):
All right. So Mike didn't raise the question, but he,
you know, noted that a lot of analysts that are
paid an awful lot of money to look at stocks
are saying, hey, we're expecting to see a broadening out
of equity market return. Equity market return.
Speaker 3 (13:21):
We define that by the way, because I mean it
seems intuitive. But you know, the S and P five
hundred for the last three years now returned what was it,
eighty eight percent? I believe for the last three years cumulatively,
sure over half of that has come from the mag seven.
So it's been a it's been a narrow. If you
(13:41):
own the SP five hundred, doesn't really make a difference.
On paper. You participated in that eighty eight percent, but
over half of it came from the magnificent seven. When
we talk about a broadening out, you're talking about other
participants other than the you know, top seven companies in
the index, participating more in that overall country tribution to
net return.
Speaker 2 (14:01):
So what I want to do is, I'm gonna look
and this is from Facts that's Earnings Insight, published on
the fifth of December, and I'm just gonna look at
Q three of twenty five earnings because it's the closest
we have to like what earning's done for the last year.
So year over year growth rate in earnings by sector,
got it. Infotech up twenty eight point nine percent year
(14:24):
over year, Financials up twenty three point five, Utilities of
twenty three, materials of twenty, Industrials up fifteen to seven,
consumer discretionary of eight to one, real estate up six,
healthcare up five to three, consumer staples up zero nine,
energy down zero four. Consumers I'm sorry communication service is
down seven eight. So ultimately I'm a big believer. When
(14:45):
it's all said and done, and what Larry Cudlow has
always preached about stocks, which is earnings are the mother's
milk of stock prices. Sure, the reason why stocks in
the US historically have gone up is because earnings have
historically gone up. Generally, you look at the history of it,
earnings growth in the US has been around seven to
eight percent annual growth over the long term. Stock returns
have been a little in excess of that, but that's
(15:07):
because multiples have expanded over the last one hundred years.
It's just how it's gone. There are potentially valid reasons
for that. There are reasons that you can believe it's
not valid, but this is how we get to where
we are. Yep. So I think that when you look
at this and say, why would I expect markets to
(15:27):
broaden this year? Fact Set's latest earnings Insight update from
the nineteenth of December says infotech earnings projected to grow
another twenty eight point six percent next year. Okay, so
that's the again, back to back like thirty percent earnings
growth yep. Again mostly driven by in video materials up
(15:51):
twenty two percent, industrials up fifteen to four, communications services
up eleven eight, consumer discretionarya at eleven two, Financials up nine,
utilities nine. Now, these are the expectations expectations for next year.
Healthcare up eight nine, consumer stable seven to three, energy
seven to two, real estate five to two. So the
reason that this is being said by analysts is because
(16:16):
there is a broadening of earnings growth that's being forecasted
forecast Why might that come?
Speaker 3 (16:23):
Again, when asked why it would happen that way, I
point to two things, lower interest rates and stimulus from
the One Big Beautiful Bill Act.
Speaker 2 (16:32):
So this is also now when we get to go
and do the fun thing, which is, hey, let's see
what they projected last year, because like, isn't that kind
of interesting? Like what are you? You know, what did
you project for earnings growth last year?
Speaker 1 (16:50):
Now?
Speaker 2 (16:50):
I have no idea what I'm going to find here.
In fact, I'm looking for last year's numbers right now
and I'm struggling, but I know I'm going to get there.
So ultimately it's a question of, hey, how accurate are
these analysts in being able to project where earnings growth
is going to be for the upcoming year? You know?
(17:13):
Is that something that they have skill in doing? And
here we go. I got it. I told you i'd
find it. So, Mike, do you know what was projected
for the S and P five hundred technology sectors earnings
growth this year? Twenty twenty three? Pretty close, right, and
so we P analysts projected twenty three. They came in
(17:37):
at what did I say? It was twenty eight? Something
like that. I really need to pull that hang on.
Let me pull this other one back up so that
we can do the math on the air, because it's
what we're gonna do. So we analysts projected twenty three,
they got twenty eight. Okay, that's that's pretty close. It's
not perfect, but it's pretty close. Let's now take a
(17:57):
look at the sector that did second best this year.
Financials came in with twenty three and a half percent. Again,
this is Q three, so I know it's not full year,
but just hear me out. Twenty three percent. Financials projected
at eight point six percent year over year. Big miss
to the downside on financials. Okay, that's cool. Next up
on the list, utilities came in with twenty three percent
(18:19):
earnings growth year over year. For Q three, Utilities were
projected to at nine percent earnings growth for the full year. Okay,
A little bit light. Next on the list, Materials came
in at eighteen point nine, was projected I'm sorry. Came
in at twenty point one, projected eighteen nine. Almost spot on,
(18:40):
nailed it on that side. Industrials came in at fifteen seven.
Was projected at nineteen. So industrials came in a little
bit light, nothing huge, but a little bit light. Consumer
discretionary came in at eight one. Was projected at twelve
five light. Real estate came in at six. Was projected
(19:03):
at four to seven. Touch high, so I mean, hang on,
We're almost there. Healthcare came in at five p three.
Was projected at twenty point seven. Big miss to the
downside on healthcare, We've got consumer staples point nine projected
was up five to six. Big miss to the downside.
(19:25):
Energy was flat projected six 't one. Communications services down
seven to eight, projected up fifteen and a half. More
on this quick break, Wall Street watches next.
Speaker 1 (19:39):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time Now for Wall Street.
Watch a complete look at what's moving market so far
today right here on the Financial Exchange Radio network. Well.
Speaker 4 (20:00):
Markets were starting off twenty twenty six on a positive
note in rally mode, where the Nasdaq was up over
one percent. However, since the open gains have been erased
and are in mixed territory. How about that right now
the Dow is off by only sixteen points. SMP five
hundred is up over two tenths one percent or fifteen
(20:20):
points higher, Nasdaq up four tenths of a percent or
ninety five points higher. Russell two thousand is up two
tenths of a percent, and your treasure yield is up
two basis points at four point one seven five percent.
Crude oiled down about one and a third percent, rating
of fifty six dollars and sixty six cents a barrel.
Tesla down by one percent after the ev maker reported
(20:42):
just over four hundred and eighteen thousand vehicle deliveries in
the fourth quarter, down sixteen percent from a year ago.
Wall Street analysts were expecting about four hundred and twenty
six thousand deliveries. Sticking with auto, where Chinese car maker
BYD saw its sales growth slow sick magnificantly last year,
but is still set to top Tesla as the world's
(21:03):
biggest ev maker BYD stock climbed over three percent higher
in Hong Kong. Separately, Chinese ev makers Lee Auto and
Neo also saw gains after reporting solid vehicle deliveries last month. Meanwhile,
several furniture stocks garnering attention after President Trump delayed a
thirty percent teriff hike. An upholstered furniture, kitchen cabinets and vanities,
(21:26):
way Fair and william Snowmer up over three percent, while
RIH shares are up five percent. Elsewhere, the US granted
Taiwan Semiconductor its annual license to import its equipment to China,
sending these stock up nearly four percent, and Warby Parker
is up about one percent after Loop Capital named the
eyeglass maker one of its top stock picks for twenty
(21:49):
twenty six, citing the firms expanding Ebita margins. I'm Tucker
Silva and that is Wall Street Watch. And remember you
can watch the show live every.
Speaker 2 (21:57):
Day on our YouTube page.
Speaker 4 (21:58):
While of breaking business news and all of our content
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Speaker 2 (22:15):
Do you know there is no Warby Parker. What do
you mean there's no man named it was not founded
by Warby Parker. Okay, kind of bothers me a little bit. Yeah,
where where did that name come from? It actually comes
from two characters in uh. I think it's a Carawac
novel hm. But it's like an amalgamation of their names.
Speaker 3 (22:39):
I mean, honestly, I will take that name over all
of the other company names that we've been seeing over
the course of the last two years meta from Meta
to HBO Max plus minus.
Speaker 2 (22:53):
Right, at least doesn't have a plus in it, And
then you know all of gees, Does Warby Parker have
a Warby Parker plus like ge Ver Nova R. Yeah,
I'll take this one over over those silly names that
it doesn't look like there's a Warby Parker plus, so,
which is surprising. I feel like, I actually feel like
(23:14):
eyeglasses are something where you could run a very successful
subscription model. Sure, you know, say those fashion enthusiasts, right,
like you get a new pair every year for like
you know, the same price or something like that. Like
I feel like you could do that, But I digress.
Do we want to do any further conversation on broadening
of earnings?
Speaker 3 (23:35):
So I think the point that you were making earlier,
which if you missed, was that analysts, when they are
looking at their projections, they're oftentimes not that close to
what comes in and oftentimes one in the aggregate, they're
usually companies usually beat expectations, but when you look at
(23:56):
you know, sector bisector, that is not quite the case.
Speaker 2 (24:00):
And if you expect I mean again, there's a few.
Speaker 3 (24:04):
Reasons I could genuinely see for a broadening out to occur,
but right now the main thing that I'm hearing it
thrown out there for is to justify a continued market
rally without putting all the weight on AI shoulders, which
people are becoming suspicious.
Speaker 2 (24:23):
Well, I think the case again it's it's one of
the ones we discussed, which is, Hey, households in the
aggregate are probably going to have somewhere in the ballpark
of an extra fifty two one hundred billion dollars to
spend as a result of the tax bill. In additional
you know, deductions and things like that that they get. Now,
(24:47):
in terms of where that shows up is a lot
of that going to be going to you know, the
family of four that makes sixty thousand dollars a year. No, like,
there's there's not as much going there. That money will
get spent. And will the person making you know, two
million dollars a year that gets an extra you know,
that gets an additional Section one ninety nine deduction on
(25:08):
their LLC that they run. Will they end up spending
that money?
Speaker 1 (25:12):
Maybe?
Speaker 2 (25:13):
And if they do, like that could still be what
powers the economy through has been less through this case
shaped you know phenomenon that we've talked about. But that's
the case for the broadening is consumers are going to
have more money to spend and they'll spend it, and
businesses are going to invest more because of the bonus
appreciation they get. And that's how you're going to see
a broadening.
Speaker 3 (25:32):
One other item that you know, we will be discussing
later in the show would be tariff related, which again
I don't think tariffs are going to be the most
talked about it and this year, but the trend over
the course of the last six months has been a
weakening of tariffs on imports from outside the United States. Yeah,
and so you know, if you have this and when
(25:52):
you point to, hey, who's been really hurt by the tariffs,
it's been small businesses. It's been small companies, some of
which are probably traded, most of which probably are not. So, hey,
if you're going to see some broadening out, could some
benefit come from the cancelation or reduction of tariffs over
the course of the next year. Yeah, maybe maybe that's
a factor as well.
Speaker 2 (26:09):
So I think that's enough on that side of things.
Do we want to talk a little bit about the Fed,
who we might mention a few times this year? Yeah?
Speaker 3 (26:18):
I think we should so for you know, everyone's mind.
The May time frame is the turnover when j. Powell
will be ending his term and the new pick from
President Trump will be heading in there and leading the
Federal Reserve. Remember that the Federal Reserve as a committee
of twelve voting members who make interest rate policy. Both
(26:40):
of the major contenders for that chairperson role have been
very public about their desire for lower interest rates. It's
you know, why they were selected for the role is
because they tend to align with President Trump's own views
on interest rates. And I think I don't know what
the expectation is there. Chuck I'm not sure.
Speaker 2 (27:02):
How.
Speaker 3 (27:02):
I don't personally think that interest rate setting policy dramatically
changes from the new pick versus what Ja Powell has
already been doing. But clearly you are going to have
a new FED chair that is at least publicly calling
for much lower interest rates and pressuring other FED members.
Speaker 2 (27:17):
To do so. Here here's the piece that's going to matter.
It's what happens versus what is priced in Yep, when
we look at the board right now for twenty twenty six,
by the by the last FED meeting, which is going
to be December ninth, good uh, colenar Yep, it's it's
it's on mine as well. It's a it's a great
(27:38):
day right right now. When you look at where we stand,
FED funds rate is at three and a half to
three point seventy five percent. Two cuts are projected this year.
So really the question that is worth asking is when
you get a new FED chair, who is most likely
(28:00):
going to not most likely he was almost certainly to
have campaigned on lowering interest rates. Do are they able
to convince the rest of the Open Market Committee to
lower rates more than is what is projected right now? Right?
That's what matters to markets. If you get two cuts
this year, but it's priced in, doesn't matter, there's nothing better, Like,
(28:22):
it doesn't do anything. It's kind of like, Okay, if
AI earnings had come in, if tech earnings had come
in at twenty three percent growth this year, Okay, that's
what analysts we're projecting. They've come in closer to thirty percent,
which has given you additional upside expectations matters. So if
you get a situation where the FED is able to say, yeah,
(28:46):
you know, new chair Kevin X or Kevin Y, you
know is in here, and is you know, able to
get the board to say, yeah, we want to cut
interest rates to you know, two and a quarter percent. Okay,
that's a fundamental difference. But it also with the caveat
Hey was the reason they were able to convince them
to cut rates that much because the economy weakened more
than people expected, and so those cuts were viewed as,
(29:08):
you know, more warranted than prior. That plays into this
as well. So I think that where I tend to
land is there is an awful lot of institutional inertia
at places like the FED. Institutional inertia.
Speaker 1 (29:31):
I like that.
Speaker 2 (29:32):
Yeah, okay, you know. And I viewed this through the
same lens as Hey. When Scott Bessen became Treasury Secretary
last year, he spent the whole year being like Janet
Yell and I don't like what you're doing. Janet Yell,
and I don't like what you're doing. And he came
in this year and basically he has done the exact
same thing that Janet Yellen was doing. As far as
the mix of short term versus long term treasuries, some
(29:56):
of that's inertia and some of that is you take
the situation you're like, oh, if I push the wrong button,
I'm gonna get blamed for you know, problems. Yeah, I
better keep doing you know, what's been working. And I
think there's a certain amount of that at the FED
two because ultimately, like, let's say that I become FED
chair and like, which would be horrible, congrats, you're welcome.
(30:22):
Let's say that I become FED chair. And let's say
that I became FED chair in twenty twenty two and
actually hiked interest rates five percent at the start of
the year. It's a big risk. Like it's fine for
me to say, Hey, here's what I would do when
I'm not sitting in the chair. Would I actually have
the hutzpah to go out and be like, you know what,
(30:43):
screw it, fire all the torpedoes, like we're gonna do it.
I don't know if I would if I'm actually in
the chair.
Speaker 1 (30:49):
Yeah.
Speaker 3 (30:50):
And it's a long running institution with a lot of
history of the very big mistakes that were made over
the course of the ear, and everyone that is going
to take the role is are.
Speaker 2 (31:00):
Aware of the mistakes that were made over the year.
The reason we all remember Arthur Burns is because of
the inflation that happened on his watch, not because he
was a brilliant economist beforehand. It's the same as Bill Buckner.
We don't remember that Bill Buckner was actually a very
good defensive first baseman. We remember Mookie Wilson's ball going
under his legs and going oh no, and like That's
(31:23):
the thing about being fed chair is ultimately the ones
that are remembered are usually the ones that screw up.
It's like offensive linemen or kickers or anything else like that.
You want to be a fed chair who is not remembered,
but it's still paid very highly on the speaking circuit.
After you're done yeah, Ben Bernanke. No one really thinks
(31:44):
about Ben Bernanke a whole lot anymore. You know, it's
just like, okay, he was there. Let's take a quick
break when we return. Let's see we talked tariffs a
little bit already. We're not gonna do that. We're not
gonna do that. Condo market, Yeah, talk condos after this.
Speaker 1 (32:01):
The Financial Exchange streams live on YouTube. Subscribe to our
page and stay up to date on breaking business news.
Speaker 2 (32:07):
All morning.
Speaker 1 (32:08):
Long Face is the Financial Exchange radio network business and
financial news affecting the markets and your wallet. We've got
it all straight from Wall Street right here on the
Financial Exchange Radio Network.
Speaker 2 (32:34):
Wall Street Journal's got a piece. It's titled the condo
market hasn't been this bad and over a decade, and
conda price has had their largest annual decline since twenty twelve,
long one point nine percent for a year earlier in
September and October. Big reasons why fees, fees, that's the reason.
So here's the thing. If you look at where most
(32:57):
condos are just from like a pure number perspective, not
what place is the highest percentage of you know, dwellings
that are condos but it tends to be dominated by
the Southeast. Okay.
Speaker 3 (33:08):
So I was gonna say that, like, are we seeing
a condo problem or are we seeing a Florida problem.
Speaker 2 (33:12):
It's it's a Florida problem, okay. And but it's twofold
because part of it's Florida in that you know, look,
you've you know been over developed and people, you know,
built based on you know, expectations that the migrations from
twenty twenty and twenty one would continue and they haven't.
But the other piece is because of changes that have
(33:33):
happened to the laws down there, you have these monster
assessments that are being levied on a lot of these
high rise condos. It's it's not a factor if you're in,
you know, a condo that's just single family dwellings. But
the other piece that is a factor on all of
these is the master insurance policies for these condo communities
(33:53):
are either A going through the roof or B saying no,
we're not going to cover hurricanes anymore beyond like ex cost,
but you still have to pay up for it just
because you need to have a master policy of some
kind on the overall community.
Speaker 3 (34:09):
Yeah, I guess The interesting piece to me would be
if we studied this in a city by city basis,
are we seeing condo prices hold up worse compared to
single family in Portland, Maine, and New York City and Boston?
Or is this a real conversation of Yeah, the Florida
housing market is in very rough shape, and a big
(34:31):
portion of that happens to be condos.
Speaker 2 (34:33):
I think it's that. I tend to think so as well.
Speaker 4 (34:36):
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Speaker 2 (35:51):
The Craft Group reaching deals with Boston and Effett to
be able to move forward with plans for a soccer
specific state for the New England Revolution. This would be
some money heading to those cities in order to pay
for improvements related to traffic and pedestrian access. But I
can tell you is someone I lived like for a
(36:12):
while right next to where this is going to be
in Somemerville built. Yeah, I was in the eastern part
of Somerville. And what I can tell you is you
cannot get twenty five thousand people to that stadium without
causing all kinds of problems. Right now, the mass transit
that goes through there is on the other side of
(36:35):
the Mystic River with no direct pedestrian bridge access right now,
so you basically either have to like walk like a
mile and a half loop then in order to get there,
or take like cabs or buses or something. Either way,
like it gets very messy, very quickly. But ultimately this
is solvable if you actually just spend money to build
(36:55):
the pedestrian infrastructure that you need. But I think when
soccer season so not anymore.
Speaker 1 (37:06):
So.
Speaker 2 (37:06):
MLS announced I think a couple months ago, that they
are moving to unify the MLS schedule with the international
schedule in order to basically line up windows of transfers
and stuff like that that you make it so that
it works with other leagues in the world. So I
think it's either beginning next season or the one after.
(37:27):
Like most European countries, it's going to be a September
through like May June. Event water taxis are out. Now,
you're not going to have games in foxbur in Boston
in January. My guess is they go on some lengthy
road trips during the month in order to avoid playing
in eight degree weather. Because this thing doesn't have a
(37:49):
roof from what I saw, no, but ultimately I think
this is a fantastic development, but there's going to need
to be some work done in order to be able
to actually get people to this location. So I think
it'll be a real net positive for soccer in the
New England area in like a decade when it's done,
But there's some work to be done still on this.
(38:10):
Let's take a quick break. Coming up in just a
little bit. We got hour two stick around
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