Former Treasury Secretary Lawrence H. Summers discusses the potential Fed rate adjustments. Lisa Erickson dives into market pricing. Robert Steel talks about budget challenges. The conversation also touches on US foreign policy, global infrastructure investing, and the impact of the upcoming US election on foreign relations and market reactions.
Market reacts negatively to potential Fed rate hike, focusing on larger tech stocks' leadership.
Non-agency mortgages offer extra income opportunities in fixed income market amidst low interest rates.
Deep dives
Market Reaction to CPI Numbers
The markets had a tough reaction to hot CPI numbers, reflecting a concern about the potential impact on the path of Fed rate cuts. The market had been driven by expectations of rate cuts, and any deviation from that path can lead to a challenging market reaction. The concentration of market leadership remains in larger stocks, particularly in the technology sector. While there have been attempts by smaller and cyclical companies to gain momentum, the leadership remains concentrated. This lack of broad market participation contributes to a cautious outlook for equities.
Opportunities in Fixed Income
In the fixed income market, there are opportunities to generate extra income. Non-agency mortgages backed by strong fundamentals offer attractive yields, as the housing market continues to be supported by demand. These securities provide a yield premium due to their relatively complex nature. Investors can consider non-agency mortgages for potential income generation in a low-interest-rate environment.
Foreign Policy Differences between Biden and Trump
While foreign policy is not a major factor for voters in the upcoming election, the outcome will have significant implications for the world. Joe Biden prioritizes allies and sees them as a source of comparative advantage for the US, particularly in relation to Ukraine, where he has advocated for a more engaged approach. Donald Trump, on the other hand, views allies as free riders and is less concerned about Ukraine's fate. Additionally, Biden supports rejoining global agreements like the Paris climate accord, in contrast to Trump's decision to withdraw from them.
Challenges in Infrastructure Investing
Infrastructure investment presents significant opportunities and challenges worldwide. Major players in the private sector, including BlackRock and other companies, are seeking to invest in infrastructure projects. The private sector can provide organizational, execution, and planning expertise to complement government efforts in infrastructure development. However, the size of these projects often requires collaboration between the public and private sectors. Governments must create policies and regulations while businesses respond and work with governments to achieve common goals in infrastructure investment.
On this edition of Wall Street Week, Lawrence H. Summers, Former Treasury Secretary & Wall Street Week contributor tells us why he thinks there is a meaningful chance that the Fed's next move could be upwards. Lisa Erickson, US Bank Wealth Management Head of Public Markets Group dives into how the market is pricing in the Fed's next move. Robert Steel, Perella Weinberg Vice Chairman tells us about budget challenges facing New York and other cities around the country and Richard Haass, Centerview Partners Senior Counselor & Council on Foreign Relations President Emeritus tell us how foreign policy could affect the elections this year.