The Soft Landing is a Myth: Here's What's Really Going on in the Economy | Cullen Roche

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Mar 20, 2025

Cullen Roche, a renowned financial expert from Discipline Funds, shares his insights on the economy and markets. He challenges the idea of a soft economic landing, emphasizing the complexities involved. Cullen dives into the effects of tariffs as corporate taxes and their inflationary potential. He assesses the national debt's risks while addressing government spending implications. Furthermore, he critiques the bond market's sophistication and discusses how AI technologies are reshaping productivity within corporations.

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INSIGHT

Soft Landing Reframed

The Fed successfully slowed the economy to combat inflation from COVID, akin to stabilizing a plane's altitude.
However, a true "soft landing" requires returning to pre-COVID economic growth and stability, which is yet to be seen.

INSIGHT

Tariffs as Corporate Taxes

Tariffs function as corporate taxes paid by domestic companies, not the exporting country.
This can lead to producer price inflation, and whether it translates to consumer price inflation depends on companies' pricing power.

INSIGHT

US Economic Shift

The US economy has fundamentally shifted from manufacturing to tech and services, making it unlikely that tariffs will significantly revitalize manufacturing.
This shift predates outsourcing and is further driven by automation.

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Join us for an insightful conversation with Cullen Roche, a renowned financial expert from Discipline Funds, as he breaks down some of the most pressing economic and market topics impacting investors today. Hosted by Justin and Jack, this episode of Excess Returns dives into a "fact and fiction" style discussion, where Cullen unpacks complex issues like Federal Reserve policies, tariffs, and the national debt with clarity and nuance. With his knack for simplifying the mechanics of markets and the economy, Cullen offers a fresh perspective on what’s really happening—and what it means for your financial future. Check out more about Cullen’s work at disciplinefunds.com.

Main Topics Covered:

The Fed and Soft Landing: Cullen evaluates whether the Federal Reserve has successfully managed inflation and engineered a soft landing, reframing the analogy as stabilizing an economy in flight rather than landing it.
Tariffs and Inflation: A deep dive into Trump’s tariff policies, exploring their impact as a corporate tax, their potential to drive inflation, and whether they can bring manufacturing jobs back to the U.S.
National Debt Concerns: Cullen shares his take on the U.S. national debt, downplaying immediate risks while acknowledging the long-term inflationary dangers of unchecked government spending creep.
DOGE and Deficit Reduction: Thoughts on the Department of Government Efficiency (DOGE), its potential to cut waste, and the challenges of moving the needle given the dominance of entitlements and defense spending.
AI’s Economic Impact: How artificial intelligence might boost productivity, its limits in transforming retail demand, and whether it offsets tariff-related economic pressures.
Bond vs. Stock Market Smarts: Cullen debunks the myth that the bond market is inherently smarter than the stock market, emphasizing both are efficient in their own right.
Mortgage Rates and Housing: A look at whether we’ll see ultra-low mortgage rates (like 3%) again, driven by secular trends in technology and population growth.
Crypto Reserve Fund: Cullen critiques the idea of a U.S. crypto reserve, arguing it diverts resources from productive economic investments.
Leg Day Economics: A lighthearted yet serious take on why leg day matters—not just for fitness, but for longevity and stability.