Crowdell: The outlook for utilities has never looked better
Anthony Crowdell, Senior Analyst at Mizuho Americas, says utilities are thriving with rising CapEx, data center demand, and possible Fed rate cuts, while still offering defensive value and strong earnings.
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Miami Herald
3 hours ago
- Miami Herald
Fannie Mae chief Pulte sends savage one-word message to Fed's Powell
There's mounting tension in Washington, D.C. over the Federal Reserve's interest rate policy. After cutting interest rates by 1% late last year, Fed Chairman Jerome Powell has taken a decidedly different tack in 2025, holding interest rates steady, and frustrating many, including President Donald Trump, who wants rate cuts now. President Trump has called Powell a "numbskull" for not reducing the Fed Funds Rate, and "Mr. Too-Late" because of the risk that the Fed's hesitancy will put it behind the curve, possibly causing stagflation or worse, a recession. Don't miss the move: Subscribe to TheStreet's free daily newsletter The Fed's dilly-dallying on rate cuts means homebuyers will have to wait for lower mortgage rates, a fact that hasn't been lost on housing market experts, including Fannie Mae Chairman Bill Pulte, who is also director of the Federal Housing Finance Agency (FHFA). Pulte knows a thing or two about the housing market, given he's the grandson of the founder of the mega homebuilder PulteGroup and formerly served on PulteGroup's board of directors. This week, Pulte targeted the Fed's monetary policy, delivering a harsh rebuke and curt message to Chairman Powell that has raised eyebrows. Image source: Bartkowski/Getty Images The Federal Reserve has an important mission to encourage low inflation and unemployment by raising or lowering the Fed Funds Rate. The FFR is the rate that banks charge each other when lending excess reserve balances overnight. Unfortunately, its dual mandate is easier said than done. Often, low inflation and unemployment are contrary goals. Higher rates lower inflation but increase job losses, while lower rates decrease unemployment but increase inflation. Related: Fed interest rate cut decision resets forecasts for the rest of this year We've witnessed that dynamic in real time over the past five years. At risk of surging unemployment due to the Covid pandemic, the Fed doubled down on its zero-interest rate policy of low rates. The move worked, helping the U.S. avoid a recession or worse. However, low rates (and stimulus payments) caused inflation to spike in 2021. At the time, Fed Chair Powell initially and infamously referred to inflation as 'transitory;' however, he was forced to switch gears and embark on the most aggressive rate hikes since the 1980s after inflation skyrocketed to 8% in June 2022. The higher rates have sent inflation below 3%; however, they've done so at a cost, given emerging cracks in the jobs market. The U.S. unemployment rate has moved up to 4.2% from 3.4% in 2023, and over 696,000 layoffs have been announced this year through May, up 80% year over year, according to Challenger, Gray, & Christmas. There's also increased evidence that the economy is weakening. ISM's latest manufacturing and services PMIs, which measure economic activity, were below 50, suggesting contraction in May. A concerning job market and potential economic slowing aren't great recipes for consumer and business spending, yet the Fed has kept its finger off the rate cut trigger, citing inflation uncertainty amid recently enacted tariffs. Related: Major housing expert predicts huge change to mortgage rates in 2026 Since February, President Trump has placed 25% tariffs on Canada, Mexico, and autos, a 10% baseline tariff on all imports, and stiff tariffs on China, a significant trade partner that supplies just about everything from clothing to car parts. While China's tariffs have retreated from a sky-high 145% in April that effectively shut down trade, they remain at 30%. Worries that tariffs may cause inflation to reassert itself in the coming months have Fed Chair Powell a bit boxed in, given that rate cuts to shore up the economy may add to possible inflationary fires this year. Fed Chair Powell argues that a wait-and-see approach makes sense, given that unemployment is historically low and the economy, while showing some worrisome signs, is still expected to grow by 3% this quarter. Related: Forget tariffs, Fed interest rate cuts may hinge on another problem "The effects on inflation could be short-lived - reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent," said Powell after holding rates steady on June 18. "Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer-term inflation expectations well anchored." The worry over tariffs isn't shared by Fannie Mae Chairman Pulte. After Powell held interest rates at their current 4.25% to 4.50% range, he blasted Powell, calling for immediate interest rate cuts to lower mortgage rates and support the housing market. "Jerome Powell is a main reason for the Housing Supply Crisis in this Country," wrote Pulte on X. "By improperly keeping interest rates high, Jerome Powell is trapping homeowners in low-rate mortgages and choking off existing home sales - directly fueling the housing supply crisis. He must lower rates." Pulte is, at a minimum, correct anecdotally that the housing market is in a crisis, especially with first-time homebuyers who struggle to come up with enough money for a down payment, given supply shortages have propped up home prices, and can't afford monthly mortgage payments. More Economic Analysis: Federal Reserve prepares strong message on long-term interest ratesMassive city workers union approves strikeAnalyst makes bold call on stocks, bonds, and gold Mortgage rates typically run 2% to 3% higher than the 10-year Treasury note yield, and the Fed Funds Rate highly influences the 10-year yield. As a result, 30-year mortgage rates have risen to roughly 6.8% from 2.7% in early 2021 before Powell raised rates to fight inflation. In April, the median price for a new home exceeded $407,000, up from $310,000 five years ago. Meanwhile, according to Bankrate, the average mortgage payment doubled to $2,207 in 2024. With housing affordability so challenging and the Fed firmly in the "no cut" camp, Pulte sent a powerful message to Powell. "Americans are sick and tired of Jerome Powell. Let's move on!" wrote Pulte. "Funny thing is Jay Powell is talking right now about the housing market - he has no clue what he can do for the housing market. And he's not listening to the people who help lead the housing market." His blunt advice to Powell? "RESIGN," said Pulte. Related: Veteran fund manager who predicted April rally updates S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
CNBC
4 hours ago
- CNBC
The Israel-Iran conflict and the other big thing that drove the stock market this week
It's been a tense and dynamic week for the world at large. The market action on Wall Street over the past four sessions was been anything but that. For the week, the S & P 500 lost 0.15%, the tech-heavy Nasdaq ticked up 0.21%, and the Dow Jones Industrial Average was basically flat, up a mere 0.02%. Beneath the surface, though, there was plenty of news for investors to digest. Here's a closer look at the biggest market themes during the holiday-shortened trading week. 1. Geopolitics: The major news story was — and still is — the intensifying war between Israel and Iran. The big question on everyone's mind is whether the U.S. will get involved. As of Friday, reports indicate that while President Donald Trump is actively reviewing options to attack Iran, nothing has been authorized. The White House has said Trump he will make a decision in the "next two weeks". As a result of the Israel-Iran conflict, investors spent the week keeping an extra close eye on the movement in safe-haven assets like gold and the dollar, as well as risk assets such as oil. Gold prices pulled back this week after their initial spike last Friday, which is when Israel's first attack on Iranian nuclear infrastructure jolted markets. The U.S. dollar index , meanwhile, strengthened this week but still remains near multiyear lows. Oil rose again for the week, with international benchmark Brent crude climbing nearly 4%. For those looking to gauge what the market thinks will happen with Iran, look to oil. The commodity is currently acting as something of proxy on the odds of the conflict intensifying and America directly entering the fray. 2. Fed updates: The other big theme of the week centered on the health of the U.S. economy in the lead up to Wednesday afternoon, when we got the Federal Reserve's latest interest rate decision and revised economic projections. Ultimately, the Fed kept its benchmark lending rate unchanged on Wednesday following its two-day policy meeting. The decision followed lackluster updates on the state of the consumer and the housing market , along with lower-than-expected inflation readings the week prior. As we outlined earlier this week , the Fed is in a tough spot when it comes to abiding by its dual mandate of ensuring price stability and low unemployment. The state of play requires nuance. On the one hand, there is evidence in support of rate cuts, namely some cracks in the consumer — even if the consumer has remained largely and impressively resilient — and the Fed's own updated outlook for lower real GDP growth and higher unemployment this year. On the other hand, the Fed is now expecting higher inflation this year than it did in March, which would support the need for higher interest rates. Given these dueling dynamics and the uncertainty around tariff impacts, the central bank's decision to keep interest rates steady makes sense. While the Fed certainly doesn't want to wait too long and make the same mistake we saw coming out of the Covid-19 pandemic, we must acknowledge that the causes of a potential rebound in inflation are different this time around. Tariffs will likely push up prices, but that may be a one-time increase, as opposed to the sustained inflation we saw exiting the pandemic, which was driven by massive supply chain disruptions and shifts in consumer behavior. As a result, we believe the apparent bias to be more worried about the job market and overall economic growth — and therefore cut rates later this year — makes sense, too. Indeed, the Fed's updated projections still pencil in two rate cuts in 2025, the same as in March despite the aforementioned revisions to its inflation and growth outlook. Fed Governor Christopher Waller made the case Friday that the cuts should start as early as July, arguing that the inflation risk posed by tariffs is not significant and ensuring resiliency in the labor market should be a higher priority. Waller's argument is basically that it's better to move now than wait for a jump in unemployment. Our biggest focus at the Club is staying nimble, given the highly volatile nature of geopolitics at the moment. No doubt, rate decisions are important to think about, but they're only one small part of the investing puzzle to navigate each day. For this reason, we continue to focus more on individual company fundamentals and industry trends rather than higher-level dynamics, important as they are to shaping our worldview. Cybersecurity stocks are one example that we highlighted this week. Another example would be the news we got from Club names Meta Platforms and Amazon this week on their artificial intelligence efforts. We think the implications that AI will have on the cost structures, revenue opportunities and efficiency gains should weigh far more heavily in the minds' of long-term investors than whether the Fed will cut in July or September. (Jim Cramer's Charitable Trust is long META, AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
CNBC
7 hours ago
- CNBC
Where Goldman sees the best opportunities for income in the second half of the year
Amid the uncertainty around tariffs and the path of Federal Reserve monetary policy, investors can find attractive opportunities for income, according to Goldman Sachs Asset Management. The central bank opted to hold interest rates steady when it concluded its two-day meeting on Wednesday. The Fed still anticipates two reductions this year , but expects higher inflation and lower economic growth ahead. At the same time, the market is awaiting a resolution on tariffs. President Donald Trump 's deadlines for reaching trade deals is fast approaching, with the pause on reciprocal levies due to expire in July. "The next couple of months of data are going to be the proving ground for understanding how the tariff shock really is going to feed through the system," Simon Dangoor, head of fixed income macro strategies, said in Goldman's midyear outlook event this week. "There's still a lot we don't know about where tariff policy is going to end up. The uncertainty effect really builds with time," he added. "The next couple of months, where the data plays out, is going to be key for understanding how the Fed plays its hand." Dangoor said he expects the central bank to remain on hold at next month's meeting, but believes a path could open up for it to resume rate cuts later this year if the labor market weakens. Goldman's income play In this environment, Dangoor is focused on income as credit spreads are tight. "Credit spreads have gone back to being frustratingly expensive, but we think that that's underpinned by really quite good fundamentals in the corporate sector," he said. "We continue to see very disciplined behavior from corporates that leaves us wanting to build our portfolios for carry." Securitized products in particular have attractive income relative to risk, he said. Within securitized, he likes collateralized loan obligations — especially the AAA-rated assets, the highest quality part of the market. The Janus Henderson AAA CLO ETF (JAAA) currently has a 30-day Securities and Exchange Commission yield of 5.35%. Flows into CLOs remain strong, Dangoor noted. "Issuance of the underlying bank loans is reasonably soft, " he said. "That combination of a reasonably light supply of the underlying asset and the strong demand is something that we think will keep CLOs behaving very well and offering quite attractive carry to risk." "We like new issue CLO, where you get a such a long reinvestment period and an opportunity to create a portfolio of new vintage loans that's been underwritten to the current environment." he added. In addition, Dangoor sees select opportunities in commercial mortgage-backed securities because there is some value and space for credits to compress. In particular, he likes single-asset, single-borrower CMBS on a high-quality underlying office collateral. "If you're prepared to do the underwriting work, [they] can give you some comfort about recovery to really all scenarios and particularly where those single-asset single-borrower deals have been refinanced to the new prevailing interest-rate environment," Dangoor said. "We think that they are pretty robust structures and offer quite attractive value."
