Wall Street Breakfast
The stock market remains undefeated
May 11, 2025
Barry Ritholtz, co-founder and CIO of Ritholtz Wealth Management, dives into the hot rhetoric between Powell and Trump regarding inflation and monetary policy. He explains the complexities of the Federal Reserve's inflation target and how tariffs complicate economic stability. Ritholtz also discusses the influence of presidential decisions on market dynamics and investor sentiment, emphasizing the need for clearer communication from policymakers to reduce uncertainty and better navigate today's turbulent market.
08:35
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Quick takeaways
- Fiscal stimulus, particularly from the CARES Act, has significantly influenced GDP and inflation, prompting questions about the validity of a 2% inflation target.
- Tariff policies can create market volatility through unexpected changes, highlighting the need for gradual adjustments and clear communication to maintain investor confidence.
Deep dives
Impact of Fiscal Stimulus on Inflation and Policy
The discussion highlights the significant influence of fiscal stimulus on the U.S. economy over the past few years, particularly through various stimulus packages initiated under both the Trump and Biden administrations. The CARES Act and subsequent fiscal measures represent the largest fiscal stimulus since World War II, dramatically affecting GDP and inflation rates. As inflation peaked and subsequently decreased, it poses the question of the rationale behind maintaining a 2% inflation target, which some argue lacks solid foundation and relevance. This context of fiscal stimulus indicates that the current economic environment will continue to be shaped by these significant government expenditures for the foreseeable future.
