Skip to main content

tv   Making Money With Charles Payne  FOX Business  April 28, 2021 2:00pm-3:00pm EDT

2:00 pm
his approach to get everyone involved in the economy is not really all hands on deck. industry still digesting a avalanche of corporate earnings. big ones after the bell. apple, facebook, a lot to decipher. let's go to washington, d.c., and edward lawrence. >> the federal reserve decided to keep the rate unchanged. they're saying in this they added a sentence, amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. they removed words moderation in relation to the strength of economy and added that. the statement was also followed by this inflation has risen largely reflecting transitory factors. the fed also upgraded the language to say the health crisis weighs on the economy and poses risks. they removed the word considerable risks from that
2:01 pm
sentence there, but still says the path of economy will depend on the course of the virus. the federal reserve continue to buy bonds. buy 80 million a month in treasurys, 40 billion a month in mortgage-backed securities. that is unchanged. the statement is unanimous. we'll have to see what the federal reserve chairman remarks about inflation. we'll see if there is indication in possible shift of tapering. as it is stay the course for the federal reserve. back to you. charles: edward, thank you very much my friend. i want to bring in our panel, kathryn rooney vera, phil orlando and gibbs wealth management president erin gibbs. let me get an assessment from everyone what we heard about the fed, market initial reaction, we're under some pressure here. i guess the question is, are we mature enough as a stock market to handle the inevitable unwinding process? kathryn, let me start with you.
2:02 pm
>> what has taken us to these levels is the federal reserve buying $120 billion in assets per month and the fed's spending and deficit finance spending, like we've never seen in the history of our country. if either of those two things fails us, charles, we are in for a rough, rough ride. so my answer to that is yes. i suspect that the fed is not going to be tapering anytime soon. i doubt that even mentions it at the presser this afternoon. a lot of, i would say consensus is that he is going to give some hint towards tapering by the end of this year. my bet we're not even going to think about it until 2022. that depends, charles, where we are with the economy if in fact this v-shaped recovery that has been so favorably affected by base effects from a catastrophic 2020 continues or in fact we see some sort of a rollover. charles: phil, of course,
2:03 pm
chairman powell is famous for saying he is not thinking about thinking about thinking about changing course but we did have some language changes just now, right? the health crisis, we had a little bit after tweak there. a little bit of a tweak on the strength of the economy. inflation is still transitory but, are these the sort of baby steps you were expecting? >> we were expecting absolutely nothing on the policy side today which is what we got. i think in terms of the fed's thought process, they have to really focus on this inflation question that the market is growing increasingly concerned about. this coming friday we're going to get the march reading on core pce and that is expected to go from 1.4% year on year in february to 1.8% year on year in march. that is a pretty big jump in one month. then over the course of the balance of the summer we'll be lopping off the low or the negative inflation reads from
2:04 pm
march, april, may, june, a year ago and we could see the core pce by end of the summer at 2 1/2% or higher. i think that potentially sets the stage for the fed to go into the jackson hole meeting in late august. then you have got a come-to-jesus moment. is the fed going to acknowledge maybe this inflation with labor costs and spike in commodity prices, et cetera is more sustainable. charles: right. >> or is it going to be sticking to the script that this is transitory, it is going to roll over and die? charles: you know, erin, it is hard to think they will change the script. they were acknowledging there is inflation out there. they're working over time to brace us for numbers phil articulated. they say it will be transitory. which means we have to sit by and wait. i think what wall street is worried about today, do we get any hints they will start to maybe unwind, for instance, the $120 billion? you know, obviously the other
2:05 pm
question is, when will wall street accept the fact that yes, the fed will eventually have to hike rates anyway? >> i agree, charles. the question isn't whether they're going to change it. but whether they will talk about it. we had taper tantrums even admitting they're discussing it sends the market into turmoil. i think it will be about the press conference, whether he says, he did the last press conference, nope, we're not even discussing it or whether he says yes, we're actually discussing it and that is what could send markets into a little more of a panic. i think even talking about it is worrying. charles: call it a tizzy, right? a short panic maybe. let's shift guys, guys and gals to earnings. there is a few angles out there. first it is obviously an amazing earnings season. revenue growth up 10.4%. coming into the year this is, we were looking for like 6%. so far better than anticipated. obviously earnings have been
2:06 pm
phenomenal. the consensus for earnings was like 16%. we're almost at 34%. i like what i'm seeing, erin, i will go back to you on the revenue side. we always talk about the bottom line but there was a long time when this market was getting by without top-line growth. now we're even getting that. what are your thoughts? >> yeah i think the revenue growth is good. i think the big concern is though, it gets a little complicated because we can't really look at 2020 numbers. we need to go back to look at growth from 2019. and so we're starting to see some break evens or getting some larger numbers to 2019 in the first quarter, looks like we'll be about the same level, slightly high higher profits. seeing growth over 2019, not just 20 is important for investors where we feel more secure about the economy growing. charles: right. i want you all to help us out, audience, everyone does this,
2:07 pm
even pros, you pull your hair out, it is a nuanced question, everyone wants to understand. why do some stocks go straight to the moon when report earnings, some go straight down, completely crater? seems like they have the same results. case in point google versus microsoft. phil, explain this for the audience. >> the an lifts are getting into the weed as particular earnings report. growth, revenue, profit margins what are the expectations? how is company a doing versus company b in the same sector? so when the analyst it saking sg that deep dive, he or she understands the numbers, those subtle nuances result in the stock going up or down. charles: it happens to quick, it is knee-jerk. i'm sitting here. i'm going through -- this is my sheet from last night on earnings. okay? it looks like hieroglyphics about 1000 years from now they will think i'm an egyptian.
2:08 pm
the point they go straight up or straight down and it drives people crazy. speaking of driving people crazy, let's talk about the broad market. it feels like it has been stalling. we've been almost a same trading pattern about a month. maybe it need as pullback. maybe it needs to digest some gains. maybe we need to shake out weaker hands before we make a substantial move higher. kathryn, is that your thought process here and if so how does a investor ride out such a scenario? do you hold, do you sell, or try to buy the dip? >> price earnings multiple is critical here, charles. as you said the numerator is so astronomical, it is validating when you get the denominator being earnings looks like it is corroborating the prices. in this case we're seeing effectively that. second quarter will be equally if not more stellarly spectacular than the first
2:09 pm
quarter that the did hetry mental effects from last year. the market is looking how sustainable this, this reopening trade? we should expect banks, all things recreational, concert halls, consumer discretionary continue to perform very well in, this year. my question is next year. we have to remember, charles, that the fed owns about a third of all treasurys. so if and when, erin touched on this, if and when the fed starts to even hint that they might pull back, as the world's biggest most important investor in purchasing and monetizing, an extraordinarily exponential growth in u.s. deficit spending, then we are going to see a correction that would cause the fed to retrace its steps. charles: so erin, on the notion that we're due, so many smart people tell me we're due, let's accept the notion maybe we're due for a 10% pull back, do you ride it out?
2:10 pm
do you sell in front of that, you have dry powder maybe buy the dip? how do you go about it? >> i would say for 95% of all investors you hold it. unless there is something about the stock or the index that fundamentally changed, the reason you got in it completely changed. there is no reason to sell on a dip, to buy back on a low. it is tough. even as an institutional investor very few people do this well. rather than losing money on the bid spreads and causing yourself capital gains, you know, making that profit even smaller you're way better off just holding it if you still believe in the stock. charles: right. >> so i -- lock it, hold it. charles: you brought up capital gains and i want to go there. let me go back to you kathryn, then you, phil. kathryn you work with wealthy individual investors all over the world you, so how will the
2:11 pm
higher capital gains, we'll hear the pitch from president biden, the rich must pay their fair share, it will go down to even couples making a million dollars, means individuals making 500,000, the participate gets lower and lower. how will affect investors you deal with, what will it mean for the overall economy and the stock market? >> cap gains going to 42% has massive repercussions. i think charles, could be a one-two punch in risk appetite for markets next year. perhaps i take a more cautious approach. i would rather selling at current all-time highs and put options and purchase of put options are so inor thenantly expensive, tell us something. combination of higher corporate tax rates, higher marginal income tax rates on highest earners, plus capital gains, given what has taken us this far is money flooding into the equity market. the last thing we need is the
2:12 pm
fed that juiced markets to stop doing so and government start to cast at this gate flows going into equity markets. they will not continue. charles: phil, how would it impact the way you're investing? >> i think you run the risk of a significant selloff in technology stocks which have done extraordinarily well here. we saw this last september, october. stock market was down 10%. technology stocks were down 20% when it looked-like blue wave with significant increase in capital-gains taxes. question of fairness, very interesting red herring, according to ir data, top 10% of america, already pays 71% of the taxes in this country. the bottom half of america only pays 3% of the taxes. so if we're really focused on fairness we ought to talk about tax cuts for the very high, not tax increases. charles: phil, that was, that was remarkable answer.
2:13 pm
i did not expect that from you, you know from the esg crowd. so we're going to put a banner down, breaking news. even the esg crowd says we can go too far with these tax hikes. we leave it there. erin, phil, kathryn, fantastic stuff, on really important day. we appreciate leaning on your expertise. we'll talk to you all very soon. tonight, folks we get the presentation. president biden will pitch the $1.8 trillion. additional spending to the 2.2 trillion under the label of infrastructure. don't forget, 1.9 trillion already gone through ostensible for covid-19 19 aid. the tally is mind-boggling. been known fundamentally, this is what they wanted to do on this side of the party, democratic party to change america fundamentally. it has been a proposition out there for a long time.
2:14 pm
it's a transition from an economy, that where you pull yourself up by the bootstraps. legal backdrop where every citizen can prosper to one really focused on the redistribution of wealth, making lower income more tolerable, really honestly doing nothing to move folks up the economic ladder. the measure of success in my opinion with these sort of programs is arbitrary. they use the poverty line that can be any number you want it to be. the bottom line getting more people above that stated goal of poverty line. i don't think we should be striving for and certainly is not what we should be celebrating because the fact will still remain those are folks at the bottom, here is the is a sad part. they have fewer options to pull themselves up by before-mentioned bootstraps. president biden's plan will be presented under the guise of economics. really it is about politics, would-be social justice and sadly punishing success.
2:15 pm
for more i want to bring in "wall street journal" assistant editorial page editor james freeman. your thoughts what we're going to hear tonight, what the real life impact will be on those changes, from those changeses. >> you were hitting it right on the head how this is an attack on the opportunity society. it is presented as a worthy cause, supporting lots of needed programs, heavier taxes, likely a lot more debt imposed on our children to fund an education system, keeps telling us how much it cares about them from a distance in too many cases. higher taxes on the wealthy. the president has been talking a lot about that. capital gains rates at the top. some states going over 50% which is going to deter investment but i think for a lot of people, even if aren't super wealthy, another big piece of this they may not fully understand is the
2:16 pm
irs is going to be a much bigger, moring a agressive, better funded bully during the biden administration. charles: yeah. 80 billion for the irs. 29 billion for restaurants, yeah, okay. just moments ago president biden had it on the record, off the record meeting with a bunch of journalists. one of the things i got from it, he used the term we the people, used it in a way to suggest he is doing these sort of events, speaking directly to the american public because the gop is in such disarray that they don't, no longer represent their constituents. that is complete baloney. so unfair and disingenuous, what he is saying he will not negotiate with these folks that were sent and elected to d.c. for that very purpose. what are your thoughts on that? >> well i think it's, number of reasons why maybe his radical agenda isn't getting as much
2:17 pm
attention as it should. i understand why he wants to shift the focus to republicans and why he may have a moment here where people kind of see this moderate, perhaps soft image and they don't understand how dramatic the changes are that he is seeking to impose on american life. you were talking about how we're really changing the structure, the nature of what it means to be a citizen and to strive and create and grow in america. one of the reasons this is probably along with all the taxes he keeps talking about, probably a big debt problem too, is that this package, as you mentioned is 1.8 trillion over 10 years. in the years beyond that it gets much, much bigger. what we're doing, creating a lot of entitlements here or proposed or enacted as emergency programs last year in terms of pre-k,
2:18 pm
community college, all kinds of education benefits that are going to explode in costs over the years. so as crazy it may sound 1.8 trillion is small, it may in relation to what the ultimate tab is. all of these new programs, created, grow substantially over time. charles: you know, james, you're 100% right. you go back to 1935, look at all of the programs that have been rolled out in 1935, in the '50s, in the '60s, in the '70s, up to obamacare, everyone was promised to level the playing field. everyone was promised to make society fair. i guess they didn't live up to the promises or we wouldn't have what is happening tonight. the only thing happening you pointed it out they become more and more expensive. james freeman. appreciate it. far too long, my friend. talk to you real soon. >> great to see you. charles: absolutely. by the way, folks, apple,
2:19 pm
facebook reporting after the bell. apple has its work cut out for it. the tech giant we think it will blow away earnings but will the stock go up. it has been in a rut lately. with the economy ramping up, looks like fed chair powell will hold rates steady but i have three key things to look for what he speakses at 2:30.
2:20 pm
2:21 pm
front desk. yes, hello... i'm so... please hold. ♪♪
2:22 pm
i got you. ♪ all by yourself. ♪ go with us and get millions of flexible booking options. expedia. it matters who you travel with. before voltaren arthritis pain gel, my husband would have been on the sidelines. but not anymore! an alternative to pills voltaren is the first full prescription strength non-steroidal anti-inflammatory gel to target pain directly at the source for powerful arthritis pain relief. voltaren. the joy of movement.
2:23 pm
charles: just a few moments we'll hear from fed chair jerome powell, a number of hurdles and things to navigate, as he realizes how well the economy is doing but has to find a way to justify historic levels of accommodation. he wants to keep those in place until maybe 2024. i wonder what kind of nicknames powell should have considering conundrum of his own design. greenspan was the maestro.
2:24 pm
volcker was buddy to his nickname. everybody remembers the helicopter money, bernanke. then economist yellen. known as the reluctant hiker. i don't know if you guys can hear that. downstairs doing some work. i hope it is done. sorry about that. walk through the challenges facing the fed, what we should expect to hear. two of the best with us, quill intelligence ceo, former dallas fed advisor danielle dimartino booth, along with the chief economist of -- joseph lavorgna. powell, start with signaling asset purchases will start unwinding. joe, does he do that today? a lot of folks on wall street want to see that. >> they do, charles. thanks for having me on. this fed is in a box. in the old world you would allow rates to rise to accommodate rapid increase in aggregate demand, economy, v-shaped boom
2:25 pm
in the white house continues. instead the fed is kind of stuck and tapering is likely to be a lot further out into the future than the markets and investors are hoping for. they're just in a weird spot because they should be doing it now. by waiting, you're just going to make financial assets more expensive, more bubblicious if you will. that will basically preclude them from really raising rates, let alone taper. charles: danielle, you have been really warning folks about this for a long time. now it feels like more and more folks wall street jumped on board. powell is in a box, so is wall street. if he is not going to remove the pickup bowl, what do you do as an investor -- punchbowl. is there any possibility that he will drop any hints saying i have to start doing something at some point. >> i seriously doubt it, mainly because the market is on tenterhooks expecting this to happen. i think powell is extremely
2:26 pm
reticent. remember this is a political day. powell always wanted to paint the fed as hyper apolitical. the president is obviously going on tv tonight. they tried to keep the statement as neutral as possible but i hope there are some probing questions from the press corps, trim pill c rated junction debt, before d meaning default, trading lowest level since the financial crisis or dot-com bust. investors are not getting compensated taking risk in this environment. if you look at 2015 transcripts, jay powell was very aware of the risks in these type of low levels of return. he spoke to them. i'm hoping especially let's hear it from fox business, that the question gets asked, are you not concerned you're fomenting financial instability with this policy. charles: i have a got a feeling if he is asked he will deny it
2:27 pm
like he denied some other things, maybe to your point he knows in his heart and on record saying the opposite. let's talk about something else i think will be really confusing new definition of full employment, yellen reversed long trend, we went all the way to zero back in december of 2016. the u-3 the unemployment rate we all use was 4.7% but there was a big spread in the demographics. 4.2% for white americans, 5.8 percent pour hispanics ad 8% for black americans. he wants to see that before hiking all rates. how wise it. neil: can they pull it off? >> charles, you're exactly right. janet yellen said she was fed chair if i recall correctly a tight labor market was the job
2:28 pm
training environment we could possibly have. the fed will let the economy run hot. will let inflation attempt to get it over 2%. again monetary policy is a very blunt instrument. i'm not sure how effective the fed will be accomplishing this. my concern as danielle alluded to you get very expensive asset prices. to the extent asset prices are primary driver of monetary policy stimulus, the minute you try to remove the stimulus, financial markets have a hiccup, hurt prospective growth prospects. i don't see the fed getting out of this box. to the extent they're looking more granular unemployment rate, you have lower rates than even longer will be the case. charles: so, danielle, the fed, powell will talk about covid. not sure if he focuses on america or the world. the america doing well, the world not doing so well. ultimately when will the fed
2:29 pm
hike rates? are they still on for 2024? is that impossible? >> i think 2024 is a bit far out there. i think they have an eye on tapering operation in 2022 and then looking for that first rate hike out to 2023. charles: right. >> to joe's point, given excesses we've already seen, charles, they really are playing with fire at this point. it wasn't until the very tail end of a long episode that we actually saw the inclusive unemployment rate get to levels where chair powell is saying he wants them to get. charles: right. >> that led us up to the mother of all credit bubbles. charles: let me, we've got less than a minute to go. i want to have a little fun here with both of you, if you could, what would be a food good nickname for jerome powell and don't say jay? start with you. >> i will take the fifth, charles. charles: [laughter]. all right, danielle? >> look, i'm already pretty public on twitter it is not
2:30 pm
about one man, it is about j&j. jerome and janet. my hashtag. very much on the record, those two can do more damage than you can shake a stick at. >> by the way, joe, a lot of people taking credit for v-shaped recovery. i will tip my hat to you and trump administration. you did remarkable job. let's go to chairman powell at the federal reserve. >> achieving monetary policy goals congress has given us, maximum employment and price stability. today my colleagues on the fomc and i kept interest rates near zero and maintained our-sizeable asset purchases. these measures, along with our strong guidance on interest rates and on our balance sheet, will insure that monetary policy will continue to deliver pourerful support to the economy until the recovery is complete. widespread vaccinations, along
2:31 pm
with unprecedented fiscal policy actions are also providing strong support to to the recovery. since the beginning of the year indicators of economic axe tivity and employment have strengthened. household spending on goods has risen robustly. the housing sector has more than fully recovered from the downturn while business investment and manufacturing production have also increased. spending on services has also picked up including at restaurants and bars. more generally sectors of the economy most adversely affect the by the pandemic remain weak but show improvement. while the recovery has progressed more quickly than generally accepted it remains uneven and far from complete. the path of the economy continues to depend significantly on the course of the virus and the measures you know taken to control its spread. since march, progress on vaccinations has limited the number of new cases, hospitalizations and deaths
2:32 pm
while the level of new cases remains concerning, especially as it reflects the spread of more infectious strains of the virus, continued vaccinations should allow for a return to more normal economic conditions later this year. in the meantime, continued observance of public health and safety guidance will help us reach that goal as soon as possible. as with overall economic activity, conditions in the labor market have continued to improve. employment rose 916,000 in march, as the leisure and hospitality sector posted a notable gain for the second consecutive month. nonetheless, employment in this sector is still more than 3 million below its level at the onset of the pandemic. for the economy as a whole payroll employment is 8.4 million, below its pre-pandemic level. the unemployment rate remained elevated at 6% in march and this figure understates the short
2:33 pm
fall in employment particularly as participation in the labor market remains notably below pre-pandemic levels. the economic downturn has not fallen equally on all minutes and those least able to shoulder the burden have been the hardest hit. in particular the high level of jobless necessary has been especially severe for lower wage workers in the service sector and for african-americans and hispanics. the economic dislocation has upended many lives and created great uncertainty about the future. reads on inflation have increased and are likely to rise somewhat further before moderating. in the near term 12 month measures of pce inflation are expected to move above 2% as the very low reads from early in the pandemic fall out of the calculation and past increases in oil prices pass through to consumer energy prices. beyond these effects we are also likely to see upward pressure on prices from the rebound in spending as the economy continues to reopen,
2:34 pm
particularly if supply bottleneckses limit how quickly production can respond in the near term. however these one-time increases in prices are likely to have only transitory effects on inflation. the fed's response to this crisis has been guided by our mandate to promote maximum employment and stable prices for the american people along with our responsibilities to promote the financial stability of the financial system. as we say in our statement on longer-run goals and monetary policy strategy we view maximum employment as a broad-based and inclusive goal. our ability to achieve maximum emmoment in the years ahead depends importantly having longer term inflation expectations well-anchored at 2%. as the committee reiterated in today's policy statement, with inflation running persistently below 2% we will aim to achieve inflation moderately above two% for some time, that inflation averages 2% over time and longer term inflation expectations
2:35 pm
remain well-anchored at 2%. we expect to maintain an accommodative stance of monetary policy until employment and inflation out comes are achieved. with regard to interest rates we expect to will be appropriate to maintain the zero to one quarter% target range for the federal funds rate until labor markets reach levels consistent with the committees as's sent half maximum employment, inflation has risen to 2% and on track to moderately exceed 2% for some time. i would note a transitory rise of 2% inflation this year would not meet the standard. in addition we will continue to increase our holdings of treasury securities by at least $80 billion per month and agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward our maximum employment and price stability goals. the increase in our balance
2:36 pm
sheet since march 2020 has materially eased financial conditions and is providing substance support to the economy. the economy is a long way to our goals and it is likely to take some time for substantial further progress to be achieved. our guidance for interest rates and asset purchases ties the path of the federal funds rate and the size of the balance sheet to our employment and inflation goals. this out come-based guidance will insure the stance of monetary policy remains highly accommodative as the recovery progresses. to conclude we understand that our actions affect, communities, families and businesses across the country. everything we do is in service to our public mission. we at the fed will do everything we can to support the economy for as long as it takes to complete the recovery. thank you. i look forward to your questions >> thank you, mr. chair. first we go to paul keirnen. >> hi, chairman powell, thanks for doing this.
2:37 pm
i guess since i'm first i will go ahead reask howard's question from the last press conference. is it time to start talking about talking about tapering yet? have you and your colleagues have any conversations to this effect? thanks. >> thank you. no it is not time yet. we said we would let the public know when it is time to have that conversation and we would say, do that well in advance of any actual decision to taper our asset purchases. we will do so. meantime we'll be monitoring progress towards our goals. we first articulated this substantial further progress test at our december meeting. economic activity, hiring recently picked up after slowing over the winter. it will take some time before we see substantial further progress >> thank you. >> thank you. john at reuters. >> okay, hi, thank you so much. my question is about what is
2:38 pm
going on with the virus and what if we don't reach a level of herd immunity per se? so in your scenario think about the out look and the economy, do you have a model where you might start to normalize policy even if there is a baseline of infections going on? can you talk about how you're weighing those things? >> so, we have to leave questions about herd immunity what that looks like to the health experts but i would certainly say that what matters the most to the economic recovery continues to be controlling the virus. the economy can't fully recover until people are confident that it is safe to resume activities involving crowds of people. there may be people who are around the edges of the labor force who won't come back in unless they feel comfortable going back to their old jobs for example. there may be parts of the economy we won't be able to really fully re-engage in the
2:39 pm
pandemic is decisively behind us. we articulated particular guidance for tapering our asset purchases and for lifting off and raising interest rates. so for asset purchases. we said we would continue at the current pace of asset purchases until we see substantial further progress toward our goals. so, and that is, that is what it is, substantial further progress. for interest rates, as i said a moment ago, we want to see labor market conditions consistent with maximum employment. we want to see inflation at 2%. we want to see it on track to exceed 2%. those are our tests. we don't have an independent test to do with the virus. i will say as i started with the path of the virus is going to have an effect on our ability to achieve both of those tests. >> great, thank you.
2:40 pm
tina. >> thank you, chair powell. thank you for taking our questions. i wonder if you could talk a little bit about the test for interest rates you just elaborated. you obviously made it very clear you want to see advance in the real economy, real data, not just sort of expectations data before making that move but i guess i wonder what happens if inflation expectations were to move up before you see some sort of return to full employment? you know it seems like a lot of the stability in inflation has been tied to the fact that those have been so low and stable. i guess i wonder how your reaction, how your reaction to that is to that? >> right. so it seems unlikely frankly that we would see inflation moving up in a persistent way that would actually move inflation expectations up while there was still significant slack in the labor market. i won't say it is impossible. but it seems unlikely.
2:41 pm
it is much more likely we would have, having achieved maximum employment conditions we would also be seeing 2% inflation and be on track to see inflation moving above 2%. they tend to move together. so, that is not to say inflation won't, might not move up but for inflation to move up in a persistent way that really starts to move inflation expectations up, that would have to, that would take some time and you would think that, it would be quite likely that we would be in very strong labor markets for that to be happening. if that actually were to happen though, there is a paragraph in a statement on longer-run goals, monetary policy strategy that says the two goals are somewhat in conflict we weigh various factors including time it would take to get back and forth t doesn't really tell you what to do. tells you we weigh the two factors, how far away we are from them, reach that pretty
2:42 pm
unlikely state. >> thank you. steve liesman. >> thank you. mr. chairman, i want to follow up on janelle's question, i wonder if you help us understand better your thinking about how covid infection rates and the virus calibrate with monetary policy. as you recall we had a major resurgence in the virus last fall. would you need to be assured there wasn't a resurgence for lack of a better term, thinking about, thinking about tapering? what kind of comfort level would you need? is there something declared from the cdc or the world health organization, for example, downgrading the virus from a pandemic before you have the comfort level to reverse course on policy? thank you. >> we really have just articulated the goals that i mentioned couple times substantial further progress of our goals before we taper. that is very likely, for us to
2:43 pm
achieve that is likely to be the case before we make significant progress on controlling the virus through vaccination and other -- those two things should more or less coexist. we have not articulate ad separate test for the state of the virus we would like to achieve because we're not, you know, we're not experts in the area. we're really focused on the economic outcomes. my guess is that we, it is very likely, seems to me for us to achieve the economic out comes we would need to taper or raise interest rates we would also have to have made very substantial progress getting the virus under control, not necessarily fully under control. there is a possibility of course that we will have ongoing outbreaks over the summer, various regional outbreaks, potentially next winter as well but we'll be looking for substantial progress towards our goal, substantial further progress towards our goal as we think about tapering asset purchases.
2:44 pm
>> thank you. >> thank you. victoria. >> hi, chair powell. i wanted to ask you, you've talked a lot during this crisis about the need to have a lot of help from fiscal policy and monetary policy to make sure there is not long-term scarring in the economy. i was just wondering given all the policies put in place, do you expect there to still be some long-term scarring and if so you know what are you most worried about? where are you most worried about that showing up? >> so i would say that we were very worried about scarring both in the labor market from people being out of the labor market for an extended period of time. the evidence is clear it becomes more difficult for a long time to get back in, get back to the life you had. same thing with small businesses which are the work of generations where we wipe out many of those unnecessarily. that was a big concern. i would say that so far you
2:45 pm
know, here we are in late april of 2021 we haven't experienced that, that level of scarring either in the labor market or among smaller businesses. so we're not living the downside case we were very concerned about a year ago. notwithstanding we're a long way from full employment. payroll jobs 8.4 million below where they were in february of 2020. we have a long ways to go. and also, it is going to be a different economy. so we've been hearing a lot from companies that they are, they have been looking at deploying better technology and perhaps fewer people including some of the service industries that had been employing a lot of people. you know, it may well be, seems quite likely that a number of the people who had those service sector jobs will struggle to find the same job and may need time to find work and get back to the working life they had. these are people who were working in february of 2020. they clearly want to work, so those people are going to need help and so, while i would say
2:46 pm
we haven't seen really highly elevated levels of unemployment for, up in the teens that we thought we might have for an extended period of time we still have a lot of people still out of work. we want to get them back to work as quickly as possible. that is really one of the things we're trying to achieve with our policy. >> thank you. rachel siegel. >> thank you, michelle, and thank you chair powell for taking our questions. the housing market in many american cities is seeing booming prices, bidding wars and all cash offers well above asking price. this is happening at the same time that housing is becoming much more expensive for lower income americans and people who are still struggling from the pandemic. do you have concerns that there are localized housing bubbles, there is the potential for that, and what is the fed doing to monitor or address this? thank you. >> we do monitor the housing market very carefully of course. and i would say that before the
2:47 pm
pandemic it is a very different housing market than it was before the global financial crisis. one of the main differences was, that households were in very good shape financially compared to where they were. in addition, most people who got mortgages were people with pretty high credit scores. there wasn't the subprime, you know, low-doc, no doc lending practices were not there. we don't have that kind of thing where we have a housing bubble where people are over levered owning a lot of houses. there is no question housing prices are going up so we're watching that carefully. it is partly because there is clearly strong demand and there is just not a lot of supply right now. so builders are you know, struggling to keep up with the demand clearly. inventories are tremendously low. we're all hearing those stories. if you're an entry level housing buyer, this is, this is a problem because it just will be
2:48 pm
that much harder for people to get the first house. that is a problem. i mean we, it is part of a strong economy with people having money to spend and wanting to invest in housing. so in that sense it is good. it is clearly the strongest housing market that we've seen since the global financial crisis. my hope would be over time housing builders can react to this demand and come up with more supply and workers will come back to work in that industry. you know, it is not only good to have prices going up this much. we're watching it very carefully. i don't see the kind of financial stability concerns though that really do reside around the housing sector. so many of the financial crackups in all countries, all western countries have happened in the last 30 years have been around housing. we don't see that here, we don't see bad loans, unsustainable price, that kind of thing. >> thank you. chris, associated press.
2:49 pm
reporter: thank you for taking my question. i wanted to ask about the labor market. you see things such as in the "beige book," you saw in the "beige book" anecdotes about businesses not being able to find workers. [inaudible]. labor market fear of getting sick. child care concerns and so forth. do you see these also just a temporary bottlenecks that won't have much effect on the long-term health of the labor market? how are you thinking about these kinds of issues? >> you were breaking up a little there but i think i did get your question. i think there are a number of, a number of things going on there. the tension between high level of unemployment and yet many, many companies saying they can't find, elevated number of companies can't find workers. what is going on there? it should be a number of different things.
2:50 pm
workers don't have the specific skills that the employers are looking for. there may be geographical differences. it may also be that for example, one big factor would be schools are not open yet. there are still people at home, taking care of their children, would like to be back in the workforce but can't be yet. virus fears are weighing on people. some people don't want to go back to work. there are also significant number of people who say they have retired. a large number of people say they're retired. now it is hard to say whether they will come back in as the labor market strengthens, and as covid you know, becomes in the rear view mirror in the history books, if you will. so, but it clearly, there is something going on out there as many companies are reporting labor shortages. we don't see wages moving up yet. and presumably we would see that in a real, in a really tight labor market. we may well start to see that.
2:51 pm
i do think, so what will happen, what we saw during the last expansion, maybe a different expansion, we don't know, but what we saw was that labor supply generally showed up. in other words if you were worried about running out of workers it seemed like we never did. labor force participation held up. people came into the labor force. they stayed in the labor force longer than expected. so my guess would be that, you will see people coming back into the labor force an these jobs will be, the labor market will reach equalibrium. maybe pay will go up. and i do think, i do think also unemployment insurance benefits will run out in september. to the extent that is a factor, which is not clear, it will no longer be a factor fairly soon. my guess we'll come back to this economy where we have, equalibrium between labor supply and labor demand. it may take some months though.
2:52 pm
charles: federal reserve chairman jerome powell answering a litany of questions. a couple things really standing out here. the question of scarring, how much of the pandemic is taken its toll, has scarred this nation. on when the fed will move changing their rate policy. a very diplomatic answer why people won't go back to work. he did allude to the fact that maybe it has something to do with unemployment benefits but he seemed a little befuddled. i will bring back danielle dimartino booth, and get your assessment. danielle, on this, the market started to gain a little littlef traction because jerome powell was adamant, he was adamant providing substantial support for a long time. it would be outcome based. yes, he is not they having about thinking about changing anything right now. the market likes what they heard. what did you hear? >> you know, charles i heard the same thing but i also heard him
2:53 pm
speaking clearly out of both sides of his mouth. pull up the federal reserve board web page the fed is mandated to make policy in the public interest. one of the first things out of his mouth in his prepared statement the housing market has more than recovered. in a separate question he was asked about prohibitively high home prices and he did say you know, this is a bad situation for entry level homebuyers. no kidding. if you're buying in at these all-time highs it could certainly create a financial crisis for a household in the future. and, but my biggest takeaway, charles, what you spoke to. the very last thing we heard him talk about, the political will. the federal reserve and the white house have been hand in hand since the very first cares act emergency unemployment benefits were launched. he has to be hearing back, powell is not a phd in economics. he speaks to industry leaders all the time. he has to be hearing from the
2:54 pm
restaurant industry, the hotel industry, that there are not simply enough workers to fill positions because they're being paid too much to stay on the sidelines. so that was to me a shot across the bow by saying you know what? the fed is not going to be in lockstep with the biden administration if they choose to try and extend once again these emergency unemployment benefits on september the 6th, clearly hurting small businesses. charles: right. also seemed you know, when he was asked about the scarring issue he talked about small businesses and indeed many businesses have come back online but hundreds of thousands are completely gone for good, and you always look at folks unemployed 27 weeks or longer. that is considered long-term unemployment. chairman powell admitted when you're unemployed that long it is hard to get back in the labor force. you don't have the skills, maybe you don't have the will. 4.2 million of those folks from
2:55 pm
one million at the start of the pandemic. apparently that will not influence fed policy. should isn't. >> you know i think it will influence fed policy. i think that is going to cause to push the fed lower for longer. i think they want to pull in these sideline workers. i think they are advocating for jobs reskilling programs, not that they actually worked in the real world. when bureaucrats involved things tend to not work but he definitely does sense that the scarring will be a long-term drag. if he is not thinking about thinking about tapering the fact that so much slack still remains in the job force. again to your point, a lot of these people won't be capable or won't be eligible to return to the workforce unless they pick up a new skill of some kind. charles: yeah. in fact that was one of his rationales. he said right out the gate there is so much slack, eight million people, fewer people employed now than then. that will allow the fed to
2:56 pm
remain aggressive with a combination. danielle, as always, we thank you very much. we appreciate your expertise. the market trending better. now we brace for the next big event today in a long day of events. number one, number five market cap companies reporting in america reporting financial results after the bell. we're talking about stocks that have been juggernauts but for the last three weeks, apple it, has been a major underperformer. clear buying, holding these stocks long term has been really the smartest thing you can do. we do know investors are shaken out from time to time. it is important to understand recent reactions over the last year how these stocks react to the earnings reports. more importantly what should we expect? how should we deal with it? bring in one of the best, kaltbaum capital management. gary kaltbaum. gary before we get to earnings numbers. you're looking at jobs. what are you thinking so far with what chairman powell had to say in the fomc decision.
2:57 pm
>> not one dollar of tapering even though i'm getting calls from realtors, unsolicited to markets stunningly skyrocketing, bubbles all over the place, and he says, oh, we're cool about inflation. so every commodity i follow has i skyrocketed including copper at multiyear highs, lumber at all time. i could go on and on. i'm speechless, my friend, and you know where i think this ends up ultimately. but right now we're still in this little sweet spot of the market. charles: yeah. he acknowledged all those things you just said, but he also said they were, quote, likely transitory. let's talk about these big earnings, gary. [laughter] let's start with apple. after the bell they report. it's been a juggernaut. somewhat interestingly weak though in the last three months. are you a buyer? are you selling, holding? what should we expect and what are you doing? >> i want to see what the
2:58 pm
reaction is. i think apple, the biggest issue it has, it's got a $2.2 trillion market cap, it's trading at 35 times earnings when a decade or so it was averaging 15,ing 16, 17. but i expect very good number out of them. i expect good numbers both on the earnings and sales. it's just a matter of is it a little too expensive here, and is the market cap just, it's just tougher to move a stock when you have $2.2 trillion market cap. for me, it'll be about the reaction. if they get a good reaction, it gets on my screen. but, a actually, it hasn't done a thing for six or seven months now. same thing for amazon, so i'm looking at these very closely right now. charles: what about facebook? >> more positive on facebook because they only are an $800 billion -- have an $800 billion market cap. [laughter] amazing i have to say that. look, i think the numbers are going to be pretty darn good. again, i don't own it right now,
2:59 pm
too close to earnings, and again, these big cap stocks have been hardly doing anything and that's fine because they had big runs. if they blow out the earnings number and glam it up -- gap it occupy out of range, you'll be seeing me all over it tomorrow. two great dominating companies and god bless them for creating all the wealth that they have done throughout the years. charles: and, by the way, i don't think either one of them could have done that with the kind of tax rates we're going to implement. less than a minute to go, i know you've been worried the ninth inning you've said we're in. what's the approach now? do we we try to run as much as we can still before bailing completely out of this thing? >> absolutely keep riding it for a good 6-8 months. i've been using the word melt-up, and i'm pretty careful with my words. i think there's more to go, i'm just worried about the end game here. i feel like there's going to be a crescendo to the upside and then we'll talk about it later. let's keep the happy thoughts
3:00 pm
today, my friend. charles: let's keep the happy thoughts. that's why we always bring you on, my man, because we make money. want to say thank you to gary. again, thank you to danielle. as i hand it over to my colleague, liz claman, we got a little bit of bump. chairman powell, he's not going to rock this market, liz. liz: -- charles: so we're waiting for liz to come on. little technical glitch there. again, chairman powell's not going to be the one who's going to rock the boat with this thing, for sure. we'll see. liz: charlie, thank you very much. this is the part that moves markets, what fed chair jerome powell is saying during the remainder of this news conference. he already said, very importantly, inflation is going to spike higher, but then it'll somehow magically disappear. so we're going to go back into the virtual room r

44 Views

info Stream Only

Uploaded by TV Archive on