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US stock futures (ES=F, NQ=F, YM=F) get a nudge higher in Wednesday's pre-market session following comments from Treasury Secretary Scott Bessent that the Trump administration will be meeting with Chinese officials over the weekend to engage in trade negotiations.
Yardeni Research President Ed Yardeni comes on The Morning Brief to speak more on how equity markets (^DJI, ^IXIC, ^GSPC) could react to President Trump's tariff policies and trade negotiations, as well as where he sees inflation moving in the short term.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
Is it still as strong? Is the market still as wide for all of these companies if you also have a deglobalization effort that's taking place at the same time?
Well, again, I think we want to be careful about, uh, you know, extrapolating, uh, short short-term statements, short-term events for where this is all going. Uh, I I don't really see this leading to deglobalization. I think, uh, we're going to be just seeing a greater diversification of supply chains. I mean this this has been going on for a while anyway, since Trump 1.0. Even under Biden, there was a move away from China to Vietnam and Mexico and Canada. I think what uh Trump is uh protesting is that the Chinese used some of these countries as back doors for uh for dumping their products anyways in the United States. And the Europeans are getting dumped on uh with uh electric vehicle cars. It's creating a real mess for their auto industry. So I think you're just going to see a lot of pushback mostly against China and I think overall though, the global economy is going to continue to grow and be interdependent. That's just not going to change.
And and based on your notes, I know that you do see the US economy as resilient in the face of the tariff turmoil, but you do say a recession is still a possibility. On on our Fed day here, I'm curious, is stagflation or recession worse? Because with stagflation, at least the Fed could potentially, or with stagflation, the Fed has less room than they do in a recession.
I I I think in the short term, uh, you're going to see more inflation than stagnation uh in the economy and that I think keeps the Fed on hold for sure. Uh, in other words, I think the inflation rate, which is right now 2 to 3%, goes up to 3 to 4% pretty quickly here. That's been signaled by some of these regional business surveys of pricing. So I think inflation is going to heat up here. Uh, it's going to be kind of like a mini version of what happened during the COVID pandemic with supply chain disruptions. On the other hand, I think the unemployment rates are actually going to stay fairly close to 4%. That's not an environment for the Fed to to lower interest rates. So I think the message from the Fed is going to be uh more of the same, which is they're in no hurry at all to lower interest rates.
Ed, we got to go. So that means probably not 100 basis points of cuts this year, right?
No, not at all.
Ed, thanks so much for taking the time this morning.
Thank you.
