Torsten Slok, Chief Economist at Apollo, shares his insights on tariff uncertainties and their implications for the U.S. economy, warning of a potential recession in 2025. Jeffrey Rosenberg from BlackRock discusses the shifting investment landscape and expectations around Fed interest rate decisions. Meanwhile, NYC Mayoral Candidate Zohran Mamdani addresses housing affordability and community safety in his candidacy, emphasizing a balanced political identity to tackle city challenges.
Tariff policies are expected to dampen consumer confidence and spending, especially in the luxury goods market amid rising prices.
Concerns of stagflation are growing as businesses report declining new orders and rising input costs, complicating the Fed's monetary policy decisions.
The economic divergence between the U.S. and Europe highlights differing recovery patterns, influencing global trade and investment strategies.
Deep dives
Impact of Earnings Expectations
Recent analyses indicate a significant decline in consensus earnings expectations for the S&P 500, particularly for the upcoming quarters. This downward revision suggests that businesses may be bracing for subpar performance amid current economic conditions. Such a shift in expectations reflects broader concerns about future growth, highlighting a cautious outlook from analysts and investors alike. As companies adjust their forecasts, this trend could influence stock performance and overall market sentiment.
Effects of Tariff Policy on Consumer Behavior
The introduction of new tariff policies is anticipated to negatively impact consumer confidence and spending habits. Early data suggests a slowdown in high-end consumer activities, including airline bookings and luxury spending, indicating that consumers are reacting to increased prices and uncertainty. Despite the significant inventory builds leading up to the tariffs, long-term effects may lead to reduced spending as consumers and businesses adjust to higher costs and potential shortages. As inventory levels shift and shelves begin to show empty spaces, the economic ripple effects may intensify.
Stagflation Risks and Economic Indicators
There are growing concerns that the economy is heading toward stagflation, characterized by stagnation in economic growth coupled with rising inflation. Recent survey data indicates collapsing new orders and capital expenditure plans among companies, while input prices continue to rise. Such a scenario complicates the Federal Reserve's monetary policy, as they must balance the dual mandate of controlling inflation while supporting employment. The implications of this economic shift necessitate close monitoring of both consumer and corporate behaviors in the coming months.
Federal Reserve's Dilemma
As the Federal Reserve prepares for its upcoming meeting, there is a critical need to evaluate the balance between managing inflation and fostering economic growth. Current data reflects a challenging environment where soft indicators are declining, even as hard data appears stable. This incongruity complicates policy decisions, as the Fed must gauge whether to respond aggressively or maintain the status quo. The potential for a recession is looming if uncertainty among corporations stifles economic activity, putting increased pressure on the Fed's decision-making process.
European Economic Dynamics
There's a significant contrast between the current economic trajectories of the U.S. and Europe, with the latter beginning to gain momentum following substantial fiscal stimulus measures. The German government's recent infrastructure spending promises to act as a tailwind for growth, contrasting with slowing U.S. economic activity. This divergence could have profound implications for global trade and currency dynamics, as both regions experience distinct economic environments. Understanding these economic shifts is crucial for navigating the complexities of international markets and investments.
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyMay 6th, 2025 Featuring: 1) Torsten Slok, Chief Economist at Apollo, joins for an extended discussion on tariffs, the outlook for the US economy, a potential recession in 2025, and this week's Fed meeting. Global stocks fell today due to concerns about the trade war's impact on companies and the world economy. Recent optimism fueled by US trade concessions is fading, and markets are bracing for an economic slowdown, with investors reducing exposure to the US and expecting fewer Federal Reserve interest-rate cuts. 2) Jeffrey Rosenberg, Portfolio Manager: Systematic Multi-Strategy Fund at BlackRock, offers his outlook for the US economy, signals from the bond market, and long/short strategies as investors weigh how to play stocks and bonds. Investors are coming around to the view that the Fed won’t cut interest rates as early or as deeply as earlier anticipated. While it’s expected to leave interest rates on hold this week, money markets have pushed back the timing of the first reduction to July and see three cuts by year-end, rather than the four they had expected a week ago. 3) Joe Mazzola, Head Trading and Derivatives Strategist at Charles Schwab, talks about client activity, where investors are playing risk in markets, and what concerns they're expressing amid growing economic uncertainty. While the spot VIX index has fallen to near where it was before stocks slumped on tariff fears in early April, the VIX futures curve is signaling concerns that the market turbulence may return. 4) Zohran Mamdani, NYC Mayoral Candidate and NYC assemblyman, discusses his candidacy for mayor, his proposed policies, and whether Democratic Socialists like him are a key piece of the future of the national Democratic platform. According to one Democrat - NY House Rep. Pat Ryan - Democrats must take more risks to counter the GOP power trifecta successfully or they could face an extended stint on the sidelines. 5) Lisa Mateo joins with the latest headlines in newspapers across the US, including reports on the fashion and fundraising from the Met Gala and a WSJ exclusive on the Trump administration holding schools responsible for students paying back their loans.
