Fed's forecast ‘Fog' adds more clouds to stock market outlook
Federal Reserve Chairman Jerome Powell probably spoke for a lot of people on Wall Street when he explained to reporters how challenging it was to put together the central bank's new growth and inflation projections.
'Right now it's just a forecast in a very foggy time," Powell said after he and his colleagues trimmed their near-term gross economic growth estimates while nudging their inflation predictions higher. They also made no changes to their guidelines for at least two rate cuts between now and the end of the year.
The so-called dot plot, which shows the rate path projections of 19 Fed officials, forecasts two quarter-point reductions this year. But it also was one estimate away from showing just one.
Projections for 2026 were just as ephemeral: The median dot plot for next year shows one rate cut, but if one official had thought differently it could have been as high as three cuts.
'Remember, though … with uncertainty as elevated as it is no one holds these rate paths with a lot of conviction," Powell cautioned. 'Every outside forecaster and the Fed is saying that we expect a meaningful amount of inflation to arrive in the coming months and we have to take that into account. "
If the man at the helm of the central bank guiding the world's largest economy is lacking the certainty needed to plot out the next six months, it's safe to say markets are in for a heck of a ride over the back half of the year.
The S&P 500's solid spring rally already has stalled, with the benchmark now just 0.3% higher over the past month, and the average Wall Street forecast calls for only a modest advance by the end of the year.
The Cboe's benchmark VIX volatility gauge, meanwhile, sits just a few ticks away from its highest levels since late May. Options traders are currently expecting daily swings for the S&P 500 of around 1.3%, or 78 points, over the next month.
Senate lawmakers continue to tinker with a Republican tax-and-spending bill that will add an estimated $3.4 trillion to the federal deficit over the next decade.
Sweeping tariffs put in place by President Donald Trump, which were then paused, then adjusted yet again, are still to pass through into the real economy. Higher oil prices from the escalating conflict between Israel and Iran, as well as America's role in it, are also set to stoke headline inflation pressures.
'Many global and domestic growth influences that stem from these issues will clearly matter," said Rick Rieder, chief investment officer of global fixed income at BlackRock. 'But other things are merely noise, so discerning the difference becomes crucial."
That is a challenge for Powell, as well, who mentioned the word 'uncertainty" at least 14 different times during his press conference on Wednesday. He also added about 30 references to the 'tariffs" that are likely to drive inflation higher over the second half of the year.
One thing he seemed more certain of, however, was the state of the job market. Powell said unemployment remains historically low, wage gains are moderating but outpacing inflation and 'indicators suggest that conditions are broadly in balance and consistent with maximum employment."
But Powell also was bullish on the job market in June of last year, when dot plot projections called for just one rate cut over the next six months. Labor weakness ultimately propelled the Fed to deliver a full percentage point of cuts, including a 50-basis-point reduction within three months.
'We think the committee again is unduly sanguine about the outlook for the unemployment rate," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
That could play a huge role in the Fed's autumn forecasts, particularly if inflation begins to reheat just as the economy mellows into the doldrums and geopolitical risks intensify.
'Markets will need to be patient as we await incoming data that will reveal the extent to which tariffs will drive higher inflation and slower growth," said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
Write to Martin Baccardax at martin.baccardax@barrons.com
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
an hour ago
- Mint
Gold price outlook: MCX gold rate falls to ₹99,000 per 10 grams amid Israel-Iran war. What should be trading strategy?
Gold prices on Multi Commodity Exchange (MCX) ended flat on Friday, tracking a muted trend in the international bullion prices, after US President Donald Trump delayed a decision on entering the Israel-Iran war. MCX gold rate ended marginally lower by ₹ 13, or 0.01%, at ₹ 99,096 per 10 grams on Friday. During the session, gold prices hit an intraday high of ₹ 99,198, and touched a low of ₹ 98,431 level. For the week, MCX gold price declined over 1%. MCX silver prices gained ₹ 51, or 0.05%, to close at ₹ 1,06,275 per kg. Silver rates hit an intraday high of ₹ 1,06,695, and a low of ₹ 1,05,053. In the global markets, spot gold prices fell 0.2% to $3,365.51 an ounce, while the index was down 1.8% for the week. US gold futures shed 0.7% to $3,385.50. Spot silver prices fell 1.1% to $35.98 per ounce, and were down 0.9% for the week. 'Gold prices dropped as investors balanced expectations of US Federal Reserve rate cuts against escalating geopolitical tensions in the Middle East. A firm US dollar and elevated bond yields continue to pressure gold,' said Jigar Trivedi, Senior Research Analyst at Reliance Securities. President Trump is expected to decide within the next two weeks whether the United States will intervene in the ongoing Israel-Iran air conflict, the White House stated on Thursday. Gold, traditionally regarded as a safe-haven asset, often gains during periods of heightened geopolitical and economic uncertainty. Meanwhile, US Fed policymakers project a total of 50 basis points rate cuts for 2025. However, they have slightly moderated the trajectory of easing, now expecting just one 25-basis-point cut in both 2026 and 2027. A high interest rate environment tends to weigh on gold prices, as the metal does not offer any yield. 'While Fed Governor Christopher Waller opened the door to potential rate cuts as early as July, Fed Chair Jerome Powell maintained a cautious, data-driven stance. This divergence has created uncertainty, limiting gold's upside even amid geopolitical stress,' Trivedi said. Next week, focus will remain on the Israel-Iran conflict, particularly any signs of US military involvement. Moreover, Fed Chair Powell's testimony before Congress will also be on investors' radar along with a slew of macroeconomic data that will influence the gold prices. 'While geopolitical tensions support gold in the short term, markets may remain reactive and headline-driven. Investors will look for any shift toward a more dovish or hawkish tone, especially in light of recent mixed comments from Fed officials,' said Jigar Trivedi. Additionally, any sustained strength in the greenback could keep bullion prices under pressure, despite safe-haven flows, he added. 'MCX Gold August futures find immediate support near ₹ 97,000 per 10 grams. With macro headwinds in play, we maintain a sell-on-rise strategy, especially around technical resistance zones,' said Trivedi. Gold prices remain caught between opposing forces: geopolitical risks providing support, and robust US data along with Fed policy uncertainty capping gains. Trivedi advises traders to stay cautious ahead of key economic events, with the potential for breakout or consolidation depending on how these narratives unfold. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
News18
an hour ago
- News18
Who Is Sajid Tarar, Pakistani-American Businessman Who Brokered Trump–Asim Munir White House Lunch?
Last Updated: A vocal supporter of Donald Trump since 2016, Tarar founded The American Muslims for Trump, and is known for advocating conservative values within the Muslim-American community A rare private lunch between US President Donald Trump and Pakistan's Chief of Army Staff, General Asim Munir, in the prestigious White House Cabinet Room dominated global headlines this week. According to Firstpost, this was only the second time in over two decades that a Pakistani military chief was hosted at such a level in Washington—the first being General Pervez Musharraf after the 9/11 attacks. As Trump discussed regional politics, the Isarel-Iran conflict and defence technology with Munir, there was buzz over who had been able to broker the high-level luncheon. Reports now suggest that it was Sajid Tarar, a Pakistani-American businessman, who orchestrated Munir's invitation during the latter's five-day US visit to strengthen bilateral ties. WHO IS SAJID TARAR? The businessman is a lawyer, activist, and Republican political figure based in Baltimore. Born in Mandi Bahauddin, Punjab, Pakistan, Tarar immigrated to the US in the 1980s–90s, studied law at the University of Baltimore, and became a US citizen. He runs multiple business interests and serves as President of Maximus Investment Group, dealing in finance and real estate. He's also the CEO of the Center for Social Change, a Baltimore-based non-profit focused on community programmes and social services. A vocal supporter of Donald Trump since 2016, he founded The American Muslims for Trump, and has spoken at Republican National Conventions and is known for advocating conservative values within the Muslim American community. He served as an advisor to Trump on Muslim‑American engagement and frequently appeared in conservative media defending the administration's policies. According to Times of India and Firstpost, Tarar's influence in Republican circles extends beyond political rhetoric. His son reportedly worked at the US State Department during Trump's first term, further signaling his integration into Washington's conservative establishment. He also advocates for improved India–Pakistan relations and has, in the past, praised PM Narendra Modi and encouraged regional peace initiatives. While the meeting made headlines for its setting, it also stirred controversy in Pakistan. As Moneycontrol and Economic Times point out, there was no official representation from Pakistan's civilian government. This raises concerns about the military conducting parallel diplomacy—a long-standing criticism in Pakistan's power structure. The fact that a private individual like Tarar could facilitate such a high-level engagement without the Foreign Office being involved has unsettled parts of Islamabad's civilian leadership. WHAT HAPPENED IN THE MEETING? According to top diplomatic sources in Washington, Trump laid out a series of sweeping demands and bold offers aimed at reshaping the regional power balance during the lunch meeting. Trump has reportedly asked Pakistan for unconditional military and strategic support, including access to air bases, ground logistics, and potentially sea routes—making Pakistan a critical player in any upcoming military theatre. In return, Trump has promised Pakistan unprecedented access to American defence technology—including 5th-generation stealth jets and advanced missile systems—along with significant financial aid. Trump reportedly urged Munir to 'distance Pakistan from Eastern blocs," including BRICS, and instead re-join the US-led security framework. The Trump–Munir meeting comes amid shifting global alliances, ongoing unrest in West Asia, and a changing power dynamic in South Asia. As reported by Moneycontrol, this private diplomacy could signal a future alignment where military figures bypass diplomats. With his increasing involvement in geopolitical dialogues, Sajid Tarar may be shaping a new model of diaspora-driven diplomacy—one that sidesteps traditional gatekeepers in both Washington and Islamabad. First Published:
Time of India
2 hours ago
- Time of India
Elon Musk faces pushback as Texas lawmakers urge delay of Tesla robotaxi launch
Elon Musk 's ambitious plans to launch Tesla 's robotaxi service in Austin this month have hit political resistance. A group of Democratic lawmakers from the Austin area has formally requested the company to delay the rollout until September, when new autonomous vehicle regulations are set to take effect in Texas. The lawmakers argue that waiting for the legislation to kick in would better serve public safety and help build trust in Tesla's self-driving technology . While Musk hinted at a tentative launch this Sunday, the lack of details has raised concerns about oversight and preparedness. Lawmakers cite safety and public trust concerns In a letter sent to Tesla on Wednesday, the group of Austin-based Democratic lawmakers urged the company to hold off until the new autonomous vehicle law comes into effect. They warned that an early launch could undermine public trust and compromise safety, especially without clear protocols in place. They asked Tesla to provide a detailed explanation of how it intends to comply with the upcoming legislation if it proceeds with the rollout as planned. What the new Texas law entails Currently, Texas allows autonomous vehicles to operate statewide, provided they meet basic registration and insurance requirements. The new law passed by the legislature which is expected to take effect in September, will require companies like Tesla to seek formal authorisation before launching driverless services . The law also grants state authorities the power to revoke permits if the vehicles are deemed a public danger, and mandates companies to provide emergency guidance for police and first responders. Tesla's quiet approach about the launch Tesla and Musk have so far offered limited details about the Austin robotaxi launch. Musk said it would begin with 10 to 20 Model Y vehicles operating in 'the safest' parts of the city, but has not revealed who the initial riders would be, how the service would be priced, or how remote monitoring would be handled. This opacity has added to the lawmakers' concerns and fuelled debate over whether the rollout is premature. High stakes for Tesla's future Musk has placed the future of Tesla heavily on its autonomous driving technologies, shifting focus from traditional EV sales to robotaxis and humanoid robots. Investors and analysts view the upcoming robotaxi rollout in Austin as a crucial step. The pushback from lawmakers, however, highlights the regulatory hurdles that could slow Tesla's momentum in a space already fraught with scrutiny. Will Tesla comply or proceed? It remains uncertain how Tesla will respond. While the lawmakers' letter carries political weight in Austin, Texas is a Republican-led state, and the new law has yet to be signed by the governor. Whether Tesla proceeds with the launch or chooses to delay voluntarily could shape both its public image and regulatory relationships moving forward.
