Fed's Powell at ECB Forum, EU-Big Tech regulations: Catalysts

Tuesday's market action is in full swing, with stocks reacting to May's job openings data from the US Bureau of Labor Statistics JOLTS (Job Openings and Labor Turnover Survey) report.

Catalysts Host Madison Mills covers the top market and economic stories this hour, which includes Yahoo Finance reporting on Federal Reserve Chair Jerome Powell's latest inflation comments from the European Central Bank (ECB) Forum on Central Banking in Portugal. The labor market is in focus ahead of the June jobs report scheduled to be released Friday morning, July 5.

Imperial College Business School professor of economics Tommaso Valletti comes onto the show to talk about the European Union's (EU) latest regulatory battles against Big Tech titans Apple (AAPL) and Meta Platforms (META) under its Digital Markets Act (DMA).

TD Bank Global Head of FX and EM Strategy Mark McCormick joins Catalysts in-studio to discuss the influence the Fed's interest rate journey and the 2024 US presidential election could have on the US dollar.

This post was written by Luke Carberry Mogan.

Video transcript

10 a.m. here in New York City.

I'm Madison Mills alongside Brad Smith this morning.

Let's dive into the catalyst that are moving markets today.

An update on the labor market, job openings and labor turnover data is crossing right now.

We'll discuss the latest numbers in just a moment and fed chair Jerome Powell speaking at the European Central Bank for in Portugal right now saying that we're back on track for this inflation.

We're going to what this could signal for the feds path moving forward.

Plus the Eu's battle against big tech that continues the regulator accusing meta of breaking European law with its pay or consent advertising model.

We will dive into the antitrust catalysts ahead.

But first we got the breaking job openings data here us made job openings coming in at 8.14 million.

The estimate here was 7.946 million.

Now we also have a revision prior month coming in at 8.05 million that was revised here.

So I'm taking a look at that data as we are getting it in the revision is 7.9 million.

A little bit of a revision down here.

Having said that the broader headline here is a job openings rising over 220,000 to 8.14 million in May from 7.91 million the prior month.

And that May.

Job opening rate is 4.9%.

That is job openings as a percent of total employment plus openings that's coming in at 4.9% versus four point percent the prior month.

Interesting.

The pace of hiring also had a slight uptick coming in at 3.6% versus 3.5%.

Also seen layoffs and discharges coming in at 1% in May.

That is on track with what we saw in April.

We also saw 1%.

So interesting to see Brad, you can take a look at the market action here, but it is potentially being seen as this broader question we've been talking about all morning of when the cracks that were seen in the labor market start to cause an issue.

This clearly state showing us that we're actually seeing a potential return to strengthen job market with more openings here than anticipated.

The larger trend line continues to remain intact at least over the past year and two year as we're taking a look at some of the charts within this jolts release here.

One of the things that I continue to look at is where some of these jobs are either being taken off the table or continuing to be put into the mix here.

Now, what's interesting is that the job openings rate, even as you were mentioning, that was a little changed at 4.9% in May.

Job openings actually decreased in accommodation and food services.

That was down by about 147,000 and then in private educational services, perhaps there was a little bit of seasonality in that.

But the number of job openings increased in a few areas, state and local government excluding education, durable goods, manufacturing, that was up 97,000.

Then federal government jobs also added about 37,000 in terms of the openings as well.

So all of these things considered, I mean, this is looking back at the month of May.

So uh super lag if you will on this particular figure, but going forward, there's going to be a little bit more focus on that ad P jobs for instance, that we get Wednesday.

Yes, it's interesting to we're seeing this definitely unwinding the rally that we had been seeing after Powell's comments in the bond market at least a little bit here and that jolts state again coming in a bit stronger, but mind those revisions here that we saw from the prior month, revising down just a touch.

So something to continue watch, moving forward and we're seeing the stocks continue to be mixed following that fresh labor market data.

Joining us now to discuss this, we got David do.

He is the Head of Economics, David, thank you so much for being here with us this morning.

Talk to me about your reaction to this jolts data.

Obviously, the headline number coming in a bit stronger.

But does that revision stick out to you or which of those two feels like the driver of the market action here?

Well, look, I I think uh typically you would see the market focus more on that headline number.

So I think the number for May, the actual number reported is probably driving the the market reaction.

Um Look, I I think overall though we need to be cognizant of, of where we're coming from, right.

There's been a few months now where where the jolts or job openings number has shown a sharp decline.

A tick back up is not altogether surprising given the context there.

So I wouldn't, I wouldn't necessarily be overly concerned that the labor market is heating back up as a result of these, these data.

In fact, it makes some sense to me that we're stabilizing potentially after a few months of a sharp downturn.

Yes, certainly.

And David, as we think about kind of going forward from here, we're going to be waiting for a few more pieces of employment situation data to come over the course of this week.

What do you need to see within that data to signal that the fed can continue to kind of rest on where it's seeing the employment of the labor economy move so that they can continue to kind of isolate and attack inflation.

Yeah.

So look, I think Chair Powell has been pretty clear that he is prepared to ease if the, if the labor market shows a an undesirable deceleration or an undesirable weakening.

Now, what that means uh remains to be seen.

Um But, but he's been clear that he's willing to do that.

I think that's a very important feature of the markets right now is that the fed policy put is there.

So if you do see the labor market, you know, stall out or start to show unemployment rising more than is desirable, the fed will be there and will be willing to, to ease, you know, earlier and potentially more aggressively um than they otherwise would.

I'll tell you what I'm watching though most closely.

Uh uh is the wage growth numbers, right?

So we had seen some deceleration in the wage growth numbers heading into the last employment report.

Um Then we got some very strong monthly numbers coming out of that.

If we start to see that subside again, it will further reinforce the disinflation narrative.

However, if those wage growth numbers remain strong that I think could be more concerning in terms of anticipating when the FED might cut.

Next, I do want to get your take on some additional data here, which is the GDP data, the US GDP in the second quarter, probably expanded by 1.7% down from 2.2% according to the most recent estimates from the Atlanta FED GDP.

Now indicator, obviously that's still growth.

But the uh one handle versus the two handle on that data, does that start to concern you at all?

I not look not overly so I I think that you know about where we are now, you know, is, is roughly in line with trend, maybe slightly below trend growth.

I think if we started to move, you know, into the low one handle, that would be more concerning for the fed because it might imply that again, you would see a an undesirable rise in, in the unemployment rate.

Um But 17, you know, in the 1.5 to 2.5% range, I I'm not too questioned about that.

Uh I, I do think that now there are some, you know, I know that number was above 4% the Atlanta fed estimate back in the middle of May.

Uh I think now I I it's close to bottoming out.

There are some I I would say fairly um low bars for that for the incoming data to clear.

Now, in order for that number to stabilize, for example, the consumption data that goes into the, the GDP, the Atlanta S estimate is implying, you know, a paltry gain of just 0.1% month on month and real spending growth for June and, and I suspect you'll come in, you know, potentially above that.

So I, I think, you know, it's, it's been encouraging to see the US slow towards trend because I think that's been a big part of what's allowed disinflation to set in, in the economy.

Um And, and our forecast from here is that we stabilize around trend growth.

Let's also talk about the housing market because mortgage rates have declined in recent weeks.

From your perspective, as mortgage rates do continue to fall back.

Could that sort of have a reverse effect and make the fed's job harder by fueling price gains in the broader housing market?

II, I do think that mortgage rates are important to watch uh in so far as there is a feedback effect on on fed policy.

Um I I'm not so sure it will operate through their any concern with regards to house prices.

Um but I do think there'll be a read through to housing activity levels.

So things like home sales, things like renovation activity, um housing under construction, those could show, you know, a AAA significant response in a positive way if you see mortgage rates decline much further and and I think that creates an upside risk, uh you know, going forward.

So it is something to watch in terms of mortgage rates.

Uh just because II I suspect given how low housing activity has fallen relative to what's a normalized level, there's ample scope for it to rebound if the rate drops prove sustainable.

All right, David, thank you so much for joining us.

We really appreciate it.

That was David Doyle.

He is the head of Economics at Macquarie.

Thank you so much.

We're now going to get to our vibe check on this Tuesday morning, another day, another lift on the S and P for price target calls this time coming from our BC setting their price target on the S and P 2 5700 and 5300 that comes from their head of global equity strategy la CAL seen.

Now she did have it as a nervous and jumpy ball when it comes to the call, saying that R BC does the risk of a near term growing but still getting that call from R BC here and again, another quote that I thought was interesting here saying we continue to view our price target is more of a compass, a rough guide than the GPS precision tool.

So certainly leaving a little bit of room to be wrong when it comes to that call.

But a big kind of capitulation when it comes to them.

And especially given the timing, we've seen so many others come out already and increase their calls from the lower 52 5300 area up to the 57 region.

So interesting to see themselves coming out but calling themselves tired bows here, Brad.

Yeah, which is interesting, especially as you have city talking about.

Uh, another S and P target increase.

Um, but city says stocks are headed for a summer squall here.

I mean, and all the, the weather people out there, they love to hear of a squall.

Right.

Because it's a, you know, you usually look at his, uh, blip blizzard if you will.

But during the, the summer, it's a larger question of what could propel what could really, um, and because of volatility that you would naturally think about during a blizzard, what type of volatility could we see that could eventually push us to some of these new targets?

And where does that mean we would end or finish out the year, at least in cities perspective or per view?

It looks like they're projecting this target of 5600 um that we could perhaps end or finish the year at or around here for the S and P 500.

Um But again, valuations right now are high.

We've already had many of the analysts that we've spoken with calling for what we could see in a retreat in valuations in the near term.

But a larger question of where there would be kind of continued strength.

The strength right now has really been in the crowding into a few trades, largely legend led by the A I trade right now.

Yeah, and to that end less so in terms of the I I trade, but they mentioned some potential risks to this call.

They say that the economy does appear to be entering a soft patch.

And also that the stock market could experience more volatility as we get closer to the presidential election.

But they do see that potential pullback being short term moving forward.

So R BC coming in with another price target raise here 5700 for year end on the S and P. Turning now to a big story in the labor market, that is the rising demand for health care jobs.

We've seen health care take up a massive portion of jobs added each month, adding positions faster than most other sectors.

Joining us now with the latest on this, we got Yahoo finance health reporter on and on and thanks for joining us on this.

I know you've been working on this reporting in terms of the labor market and health care workers.

What do we know about just the degree of the demand and how long this has lasted?

Yeah.

So we saw consistently the job gains in the health care sector since really since April that has been April 2023 is when it really started being consistently that you saw health care at the top within the top three of those job gains and that is in large part because of turnover.

So that sort of the behind the scenes, not so positive part of the story.

So while it is a blow out every month, the story behind the scenes is a little bit darker.

And that is because of out that has been exacerbated during the pandemic.

A shortage of physicians that has been known before the pandemic and then continues now in the post because of that burn out.

So it's just building one on top of the other.

Then you've also got the squeeze from payers.

That's insurers, Medicare, Medicaid, the like.

And then there's the shift in demand.

We saw, you know, the push to tell the health and a swing back.

There's all these other factors that have been building up into where doctors are going, where they're finding jobs.

So things like start ups and tele health have pulled them out of the traditional market for some time as well.

And so the health care space has been looking for solutions to that.

There have been discussions about, you know, funding more graduate school positions, medical school positions for those students and to make sure that there are more positions for residents as well that's funded by the federal government.

Meanwhile, there's also options like uh care team.

So those who don't necessarily become doctors but are part of the care team.

That's been another solution.

So there have been ways that the health care industry has been wrangling for years to solve this problem.

And so we while there is no solution just yet, we are going to continue to see this wave of ongoing hires and those job gains really blow out every month.

And that, of course, leading to those price and wage inflation there as well.

Thank you so much for joining us and for your reporting on this.

We really appreciate it coming up.

We are taking a look at some trending tickers on Yahoo finance.

We're going to give you the latest on Apple and Meta and some other big tech names.

After the break, big tech targeted once again over in the eu meta becoming the latest company under fire by regulators who say that the company's a subscription model is a pay for content scheme that requires users to choose between paying a fee or handing over more personal data to meta to use for targeted advertising.

Joining us to discuss not only me in the EU but also some other big tech names being targeted.

We've got Tomasetti, Professor of Economics and Bureau Business School.

He's also the former Chief competition economist of the European Commission tomorrow.

So thank you so much for being here with us.

So talk to me about your thinking on the EU strategy here when it comes to looking at several big tech names at once, particularly given that we've kind of seen this movie before.

This has already been an ongoing theme in the EU I, I'm just curious given your background with the eu what you make of their strategy on this.

So as you said, there is an old movie but a new chapter in an old movie, the European commission tried for many years to use antitrust laws to curb the market power of some dominant companies that were abusing their market power.

So, and as you said, I was working for the European Commission for, for a few years and then I joined my academic position.

Uh but that didn't work.

So the cases were taking too long, the Google shopping case took seven years.

So as a reflection of the discontent with that approach, they decided to regulate Xante, some companies they are designated as gatekeepers and there is a new law.

So this is what you're observing now is the instances of the cases brought under the new, the new law which is called the D MA the Digital Markets Act.

And this law was enacted in in in March after a long discussion as you might expect and we are seeing the first result.

So you see positives and negatives depending on whether you are pro enforcement or against enforcement.

So the good aspect at least is the speed of the intervention.

So this case started in early March and now at the end of July, the European Commission already came with provisional views.

So compared to Google shopping, say that took seven years, this is an advancement in my view.

The negative is that the European legislation was meant to be self executing.

So the language the legal jargon should have been so clear about what companies could and could not do.

So that they would just self execute it.

And people believe that for a while.

But now we are seeing that that was kind of a dream because the companies are actually saying we did execute the spirit and the letter of the law and the European Commission is saying no way what you are proposing now is not aligned with the law.

So to cut a long story short, we are going to see a long legal battle again, right?

So that is my exact next question.

Where do we go from here then?

So the idea that there would have been a regulatory dialogue, by the way, these are just provisional findings.

So the companies can respond, they can have this regulatory dialogue.

I suspect that the stakes are so high because if you want the philosophy of the European Commission is that they would like some companies, some big tech companies to change the business model.

So in terms of meta is about data collection, in terms of apple, they have an ecosystem which is completely closed and they want to, you know, have a revolution there.

But companies are making so much money that for them, it is better to fight on legal grounds instead of changing the business model.

Well, exactly.

And we've seen this regulatory pressure from the eu just result in fines in the past that these companies with some of the highest free cash flow rates we've ever seen in corporate history are perfectly capable of paying and then kind of moving on given that you have sat in the shoes of regulators previously.

How frustrating is that?

Well, the fine.

So for instance, I personally ran the economic analysis of three cases against Google.

It was shopping, it was Android and also adsense.

In the end, the European commission imposed over the three cases, more than 8 billion which is a lot of money for ordinary citizens.

But Google is making $300 billion every year from the advertising side.

So this is like the slap on the wrist so that those fines don't really help at all if you want a certain conduct to be changed.

And so you have to impose higher fines.

The D MA has the power to impose up to 10% of the global turnover.

So actually this would be fines that hurt more.

But then you have to go through courts to see whether this is going to happen or not.

To me, it's more important not that the fines are imposed, but the behavior of firms changes upfront because you don't want to find people after the drive too fast.

You want people to start slowing down if you want, if you believe that driving too fast is actually dangerous, I want to switch gears a little bit and ask you about in video according to sources, speaking with Reuters and video set to face French antitrust charges.

To what extent do you think it's likely that that could expand more broadly within both the eu and then globally.

So before I respond to that, and I don't have a lot of information because as, as I said, there are some rumors, we haven't seen the findings yet.

So first of all, it's not just Europe against the US companies because if I take Google, there is currently more than 100 different cases in 25 different jurisdictions worldwide.

Ok.

So the problem with big tech is not just a European problem, it's something which is much wider than that.

Another interesting case in this instance of the French intervention is that it's not just the Eu digicom, which is the regulator for competition at the European level, but also now national competition authorities which are having views.

So for instance, the first case against Facebook is not the one against meta, it's not the one of the now, but it was Germany who started it a few years back and France is looking into NVIDIA.

So we are looking into the cloud market, we are looking into a, you know, it's not even the next the next generation.

It's already happening now with A I, this market is already extremely concentrated.

So they are looking at where the bottlenecks are.

So it makes sense to have an investigation they did don't raise.

But as I said, this is this, I'm not informed enough to let you know what I think about the substance of the case because nothing has been said by the French Authority yet.

But you are definitely informed enough to give us a great perspective just on how the Eu and regulators are viewing these companies.

And that was a great conversation.

So we do really appreciate it.

Thank you so much.

That was Tommaso Valetti.

He is a Professor of Economics at Imperial College Business School and formerly with the European Commission.

Thank you so much.

Now Apple is set to launch its A I centric phone in September but losing market share in China, its third largest region for sales.

For more of an in depth.

Look at this, we go to Yahoo Finances, Dan, how for more Dan?

Great to see you.

Thanks so much for being on with us.

Talk to me about what we're seeing here.

Yeah, this is uh coming from David Vaught who's at U BS Global Research.

Basically saying that look the next iphone cycle.

Uh meaning the next iphone to come out, which is presumably the iphone 16.

Uh isn't expected to be kind of this huge sales super cycle where people go out and trade in their, their phones and mass for the next version.

Uh It's not going to be a repeat.

Uh according to V of what we saw with the five G phones, um that was when phones started to come out with five G uh capabilities.

People went from four G to five G um frankly, I mean, the difference hasn't really been all that great uh overall uh but still it was a newer technology.

So people went out and purchased new new iphones.

Um And so the the thinking would be ok. Well, here comes Apple Intelligence.

Uh this is a new reason for people to want to upgrade, but there are some problems here specifically uh with uh Apple's market share loss in China.

Now.

Uh basically what vault says is look at the time that five G was coming out for the iphone.

Huawei was getting kneecapped by the Trump administration around 2019 and a little after, obviously, with the Biden administration as well.

And so because of that Huawei wasn't able to offer the kind of phones that people wanted, people then moved over to iphone.

But now that Huawei is back, they're able to offer comparably impressive devices.

And so now they're going back to Huawei.

And so it's eating away at some of Apple's market share in the region and Apple Intelligence might not be the thing that gets people to go back.

And so because more people are on with Huawei, now, it means that they may not necessarily want to go over to Apple.

And so that could as Vaude say be a material governor to iphone unit growth in 2025.

Now there's a few other things to point out here with China and Apple, obviously, as you said, it's the third largest region by revenue behind the Americas and then Europe.

But it also has obviously regulatory issues that it's going to have to deal with how it rolls out.

Apple Intelligence in the country is going to be a big deal.

Part of the pitch of Apple Intelligence was that it's not going to be saving any data when people go to access different A I features, we'll have to see how that works in China.

Uh as well as different other features.

Open A is uh access um that people get when it comes to the new version of the iphone and the next versions of I Os and ipad, Os and, and Mac Os uh specifically.

So, you know, there's a, there's a number of things going on here.

But you know, as, as far as uh a supercycle for this next generation of iphones, at least according to, to vote, it could be uh problematic.

I think one other thing to, to point out though is that numbers of device sales are very hard to gauge just because Apple doesn't provide those exact numbers.

It's all based on how uh the, the general revenue number comes in for iphones.

That's what Apple now provides.

So you're kind of taking a stab at, is it the newest phone?

Is it the oldest phone?

Uh is it, you know, the high end version?

Is it the the midrange version?

So it's, it's all kind of difficult to, to properly uh gauge which devices are selling and which aren't Dan really quickly here.

I'm curious, what will you look at to indicate that we are at the bottom in terms of the pressure on iphone sales coming out of China.

Look, I think right now, uh there's some news out of Bloomberg saying that uh they had done their, their own, uh run their own numbers and seen that, that there was a boost in sales, 40% in May and 50% in April, I believe uh was what they saw year over year increases.

Uh That's a result of some of the big sales that Apple has been having in, in the region.

Uh you know, they've been cutting prices, there were holidays going on, they wanted to kind of get those out the door.

And so seemingly it's been paying off, I think, you know, for, for apple, uh China is, is clearly incredibly important, but there's, there's different consumer taste in China as well.

Foldable phones are a big part of the sales over there.

And that's why we see companies like Huawei offering foldable phones, Samsung has its own foldable phones.

Uh Google has its own foldable phone, Apple, not so much.

So, you know, there's, there's a number of different uh I think uh attributes that Apple could work on there to improve its place.

It's not gonna roll out a foldable phone until it's absolutely perfect.

There's still, you know, some things to work out with them.

Um especially as far as durability goes.

Uh but I think, you know, when it comes to the, the bottom that we're seeing, it all just comes down to whether or not we're going to start to see improved growth uh in the next quarter or two.

All right, Dan, thank you so much for joining us on all things.

Uh iphone sales coming out of China, we appreciate it Coming up next fed chair Jerome Powell speaking today at the annual forum on central banking, we're gonna have the details and what it signals for rate cuts ahead after this fed chair, Jerome Powell speaking this morning at the ECB Forum on central banking in Portugal, our own Jennifer Schonberger is following this for us and has more.

Hey, Jennifer, good morning, man.

That's right.

Federal Reserve chair JP said this morning that the latest readings on inflation show prices are getting back on a downward path, but that the central bank will need to see more evidence that inflation is falling before cutting interest rates.

Take a listen, I think the last reading and, and the one before it to uh and inflation and the one before it to a lesser lesser extent do suggest that we are getting back on a on a disinflationary path.

We want to be more confident that inflation is moving sustainably down to 2% before we start the process of uh of uh reducing uh how tight.

Uh Our our policy is of of loosening policy comments come days after the latest reading on the Federal Reserve's preferred inflation gauge the personal consumption expenditures index excluding those volatile food and energy prices, which showed prices rose 2.6% in May down from 2.8%.

In April marking the slowest annual gain in more than three years.

Inflation is slowing after showing signs of in the first quarter which had caused Fed officials to look at holding rates higher for longer.

Pell says the fed wants to understand whether the levels the fed is seeing on inflation right now are a true reading on what's actually happening with underlying inflation and reiterated that the fed can afford to be patient given a strong job market that's cooling gradually.

Powell declined to say whether the fed could cut rates as soon as September the month for which investors are pricing in the first rate cut here.

But mad certainly music to investors ears.

This is encouraging.

The Fed is seeing encouragement from these inflation readings that we've seen in the second quarter so far, you hopes for rate cuts later this year back to you.

All right, Jennifer, thank you so much for following all that for us.

We appreciate it for on Chairman Powell's comments.

We're gonna bring in Cameron Dawson, New Edge Wealth's Chief Investment Officer, Cameron.

It's always great to speak with you.

Thanks for being here with us.

I want to pull up a specific quote from Fed Chair Jay Powell because he recently said in these comments that in a year us inflation will be in the mid to low to that's obviously been the FEDS rallying cry throughout this rate hike cycle.

What do you think is giving him confidence on that?

Yeah.

Well, they've had this confidence at different points over the last, let's call it a year or so that inflation would be firmly on their target and then it seems to go in the other direction.

So it does seem to be that there could be risks to the upside if we think of things like potential immigration reform, tariffs as well as some of the things we're seeing within supply chains.

So it is interesting that they're striking this note of confidence.

Again, we think the thing that would get them to cut rates much more than just accelerating inflation would be more deterioration in the labor market.

And that's why we're watching Friday's job data so much is that if you look at unemployment, it's sitting at 4.0% that's effectively where the fed is projecting it to be for the full year.

If we see an further increase in that unemployment rate, we do think that that opens the door up for the rate cuts.

And really regardless of what the inflation path is at that time, I also want to talk to you about your latest uh note here.

About GDP.

Uh We are seeing our first cut to 24 GDP in a year here.

Uh We are also seeing the Atlanta Fed GDP.

Now, figures moving down to 1.7% from 2.2% to what extent is that the start of the type of crack that guests who have come on our show for the last couple of years have been saying we really need to be looking out for.

It is a sea change from the last year or so.

Meaning that if you go back over the last 18 months, we have had this rising environment for GDP forecasts seems like each and every month they get notch higher.

This is the first time in 12 months that 2024 GDP estimates have been cut and we've been expecting it simply because economic surprises have turned deeply negative.

You were that deterioration in the Atlanta fed GDP now which all suggests that maybe forecasts were a little bit too high.

Now, this is not necessarily saying that you're slipping into some kind of deep recession, but just to say that the environment for further increases to forecasts is likely behind us, we likely have to moderate forecasts lower.

And then that raises the question of what do growth and risk assets do in that environment because they really have enjoyed this environment of rising forecasts.

Well, speaking of surprises here, we are seeing some movement in the Treasury space particularly at the end of last week, we saw Treasury potentially the the kind of commentary was that they were repricing and starting to price in rather a potential Trump presidency.

To what extent do you see the bond market maybe starting to take some action on positioning ahead of the November election that the equities market might want to start paying attention to?

Yeah, I think we learned two things from the debate last week.

The first one being that neither party is making austerity a key priority for their policies, which just means that we have to get used to continued high budget deficits regardless of who wins.

But then if we look at the polling coming out of it, the odds of a Trump victory as well as a Republican sweep went up materially.

So the question would be for the bond market is do Trump's policies potentially contribute to inflation?

And that's where we get back to things like immigration as well as tariffs and ask the question of, could they contribute to higher inflation readings into 2025?

This would be a surprise for the fed.

It would be a surprise for the bond market because nowhere is anybody pricing in a re and inflation because of these kinds of policies.

Cameron, I wanna end by talking about your latest note that you sent over to us here looking at value versus growth stocks and uh not super surprising growth.

The huge winner of those two.

Talk to me about your thinking on how investors should be planning around the longevity of that.

How long are we going to continue to see growth here?

It's such a good question because we have seen growth be absolutely dominant after a really strong 2023 growth has outperformed value by 16% this year.

We think you can explain a lot of that out performance because of earnings revisions, earnings for the growth index are up 11% over the last year.

Whereas for value, they're down 4%.

And it's good to remember that in a rising eps revision environment, you tend to see more multiple expansion which has allowed growth stocks to now trade at an 80% premium to value, which is back to the highs, it got to back in 2021.

So we do say that trees don't grow the sky and there is going to come a point where you will see a leadership rotation.

But we think you need a catalyst and we think that catalyst is earnings, meaning that you have to see either growth earnings moderate or value earnings start to turn higher in order for a sustained leadership rotation to happen.

Well, we love talking about those catalysts on our show here, Cameron.

Thank you so much for joining us this morning.

We really appreciate it.

That was Cameron Dawson, New Edge Wealth's Chief Investment Officer coming up is the time to start positioning around the November election, particularly when it comes to currencies.

I'll speak with an effect strategist about that after the break, taking a look at the dollar here moving lower just to be on the back of those comments from Fed chair Jay Powell on the path for inflation as well as that may job openings data coming in a bit higher than expected.

Joining me now to discuss, we got Mark mccormick in studio.

He's TD Bank, Global head of FX and emerging market strategy.

Mark, thanks so much for coming in person.

We appreciate it.

So talk to me about what we are in the greenback movements this morning, obviously in reaction to Powell but also the jobs data.

What does that tell you about how the dollar is trading right now?

There's a couple of things, right?

So we had a pretty decent outcome from the French election.

So that was like a big risk that was overhanging market.

So that kind of went as planned.

So there wasn't the worst case scenario.

So there's some dollar weakness coming from that.

Also with Powell, I think market are looking for confirmation bias if they can cut rates at some point this year.

But I think one of the things that is very challenging is they're like, yes, inflation is going in the right direction.

The economy is a little bit slower, but the econom economy is coming down from a very hot level and all you're kind of going is from one altitude to the next.

And inflation from month to month is going to be very challenging and very volatile indicator.

So the way that we keep looking at it is there's no room for error.

So next week's inflation number, if it comes in hot, this whole narrative is gone.

If it comes in as expected, then we get another inflation print where it's like yes, they can still probably go in September.

But again, if it comes in hot, it's like everything is binary now.

So the market is really, it lacks confidence, it lacks motivation in terms of how to trade these themes.

Um And again, the big elephant in the room is what happens with the US election and the inflation outlook and fiscal policy like one rate cut and then maybe, you know, an inflationary move from a new president is it changes the fed's calculus for 2025.

Well, that is exactly what I want to talk to you about when it comes to the election.

Former President Trump talking about tariffs when it comes to his potential policies that could impact the dollar.

We spoke with Scott Besson.

He is on Trump's short list for potential Treasury Secretary.

People moving forward about tariffs and the dollar.

Let's take a listen.

Traditionally you get a 50% what whatever the level of the tariff is, you get a 50% appreciation of that amount in the currency.

So it's a 10% tariff, we get a 5% currency appreciation which takes care of some of the inflationary effects.

So he is basically arguing that Trump's tariffs would lead to upper pressure on the dollar, which would take care of some of the inflationary effects of tariffs.

Interesting argument there.

But from your perspective, I just want to hear what you're thinking about how a Trump presidency could really impact the dollar.

Yeah, there, there's also the other side of it which is growth.

So currencies reflect an understanding of one currency versus another currency.

So the the thing that's very challenging is yes, it's inflationary for us consumers.

It's something the FED will have to deal with.

It's also negative for the non us global economy.

So part of the you know the framework to think about the dollar is again, the other thing that's very important right now is inflation is running above the fed's target.

So we're not in a world where we were in 2016, where central banks were essentially trying to get inflation higher.

Th th this is like I I many people including myself believe we are in a structurally different world post 2020 with a lot of the things that are handing over from 2010.

All the to this point where demographics, geopolitics, population growth, structural changes in supply chains, all these things are working towards a higher inflation in area environment.

So it's like what they wanted to achieve was 2% inflation ceiling.

I think you could see that 2% is basically a floor at this point.

So when we think about it, like the tariffs in themselves, one will create inflation in an environment where the fed is already dealing with above target inflation.

They're hoping and forecasting inflation goes back to 2%.

But it's still at 2.6 the way they're, they're tracking it now.

And the other thing is it takes growth away from the rest of the world Europe, China.

And the thing that they do is they counter.

So it's also bad for us growth from that.

It's not gonna weigh on growth as much as it would weigh on European growth.

But you have to think of the inner like the intersection of growth plus inflation and how this has an impact on global corporations supply chains and all those things.

So it's much more complicated than just inflation will go up and the dollar goes up and it offsets it.

And it brings up this question too about monetary versus fiscal policy.

Uh When you think about the euro dollar, for example, what do you think is driving that more?

Is it politics or is it central bank policy?

It's a mix of both because we are, we've already seen the major central banks non fed cut.

So we know that the ECB has started, the Bank of England is ready to go.

The bank of Canada started S and B surprise markets would have cut the only central bank that's going in the opposite direction is the boj.

Uh the, the thing here is we just don't know if the fed has enough confidence or will get the right data to be able to cut this year.

Um And so I think a big piece of it is what's driving it is now, there's political uncertainty in Europe fragmentation debt levels.

France not being able to generate enough growth to offset what could be a dysfunctional government and their ability to kind of create an environment where foreigners feel acceptable to take that level of risk, buying oats or buying Euro or buying European stocks.

All these things are what's driving Euro dollar now.

So it's political environment, it's monetary policy, it's relative growth.

But keep in mind, the US offers the highest yield advantage to any other G 10 currency.

What does that mean for the Kerry trade?

The carry trade is interesting because it, it's, it's always been and people fo focus on it as an emerging market strategy.

Turkey, Mexico, Brazil, South Africa, Indonesia.

These countries offer in India, they offer higher yields, but you take a higher reward.

Well, to get th to get those yields, you need to take higher risk in an environment of goldilocks where there's no macro volatility.

It's the perfect trait and it's worked two years plus most of these currencies are doing well are energy or commodity exporters.

So they got growth, they got commodities, they got carry, they got the central banks.

Now you're seeing more volatility.

Uh Turkey, I'm sorry.

Uh South Africa, India, Mexico.

All had surprise elections created volatility.

Now the US election is to me, the thing that plus the inflation outlook is gonna generate a lot of volatility and you take those things together and the carry trade doesn't perform well.

But the thing is, is a dollar offers more yield than 62% of the world's major currencies.

So you get a currency that's got better growth that's insulated from global risk shocks.

One that you get higher yields.

And again, you get the carry in US dollar that you don't get in Euro or you don't get in in uh Switzerland or you don't get in Sterling.

So the dollar is now the carry trade in a higher ball environment.

Great insights as always, Mark.

Thank you so much for joining us in studio.

We really appreciate it.

This is Mark mccormick here with me in studio.

He is TD Banks, Global head of FX and emerging market strategy.

Coming up.

The US labor department is out with its latest job openings.

Numbers.

We're gonna unpack more of that data next.

You're watching Yahoo Finance, we're gonna talk about our key take away for the day here and that is the impact of the labor market on today's overall stock market here.

We see.

May job openings coming in a little higher than economists were expecting.

At 8.14 million.

Our very own.

Josh Shafer has been looking at those numbers and he joins us now for more.

So, Josh, we are talking a little bit about what this means in terms of the outlook for the labor market.

What is your key takeaway?

Yeah, Maddie, I mean, we've been talking over the past week and a half.

Now I've written a couple of stories on, uh, essentially that the labor market is a little bit more in focus now for economists and perhaps the fed than it was over the last couple of months.

We've definitely seen some cooling in the labor market.

You're starting to see initial jobless claims come up.

But then you get this may jolts report and job openings increase the hiring rate, uh, was flat.

The hires itself actually tick up a little bit.

You look at something like the open rate that's up a little bit, the actual job open rate moved up slightly and I think you sort of digest the full report and it's ok. Maybe there are some signs of swelling overall in the labor market, but it's not all gonna cool.

Right at once.

Right.

It's, uh, I don't, I don't know what bad comparison we can make a, make about putting something in the freezer and expecting it to freeze instantly or something, but it's, that's not quite how the data is gonna work if that were to be happening and perhaps, maybe it's not happening.

Right.

I think the overarching conversation economists have been having is we're kind of in a thin area right now.

It's a thin landing zone for the labor market.

And the risks are to the upside of the unemployment rate ticking up.

But those are where the risks lay there is in theory, a world where you can stay here for a little bit longer until you get a fed rate cut.

And perhaps maybe the labor market sort of survives it.

It's just people flagging the fear is that the unemployment rate keeps coming up.

But I think data like today let us know that maybe we're in an ok place for now.

Yeah.

Well, and it's interesting seeing equity is kind of still mixed throughout the morning here, but green on your screen when it comes to the S AND P just above the flat line and the tech heavy NASDAQ up 2/10 of a percent.

But it, it's interesting to see the market digest this data because there was a question going into this about whether or not we were going to see some softness that indicates that the has stayed too high for too long or good news in terms of, if you are looking for a job that indicates that perhaps there's too much growth and the fed might have to stay higher for longer.

Which of those two do you think is the takeaway here.

Yeah, I think it's probably that the economy isn't exactly too hot and the fed has to stay higher for longer.

Is it goldilocks?

I mean, if you're looking at one jolts report.

Sure.

Right.

But I think what, I was going to spin it forward to as well as we have that Friday Jobs report coming.

Right.

And the jolts report gives you some look into some inflationary pressures but sometimes what's been moving the market and people get really excited about is that year, over year wage growth that comes on Friday, right?

That numbers come in hot a couple of times, given the hot inflation readings.

That's been something that economists have been stuck on.

You.

Look at today's jolts report, you have a quits rate sitting at 2.2%.

Economists constantly highlighting that saying that is a good thing, long term for wage growth.

And so I think that will be interesting, Mattie to see when we get that report on Friday, which is a lot more robust.

Also for June, we're talking about a May jolts report.

It's a month lagging, right.

So we're gonna get that June Jobs report and I think there's just a lot more to break down when we get to that.

And it'll be interesting to see how the market digests it because yes, it it feels like we've been in this moment where hot economic data has not necessarily been received that well, by the market is that gonna be the case on Friday?

It probably also depends what happens with your unemployment rate.

Right.

If your unemployment rate comes back down, perhaps that's a good sign.

And there's just a lot more to look at with that data release.

And of course, we have the tenure still near 4.5%.

Last time I looked it was somewhere there.

Right.

It's a little bit over 4.4 now, after the big move.

Yeah.

So if we get a big move in yields on Friday, that's gonna be the market and that'll be telling Josh, thank you so much as always for joining us.

We really appreciate you coming in for our takeaways here on catalyst coming up.

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