In Conversation With Spartan Capital SEC's Peter Cardillo

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00:00First, to talk about how global markets are faring, we're joined by Peter Carillo, who

00:04is the Chief Market Economist at Spartan Capital Securities.

00:08Good morning, Peter.

00:09Good morning to you.

00:10Yes.

00:11I'll start off with asking you what your initial gauge on the Fed minutes are.

00:16Do you think that the course is set for a rate cut in September?

00:20Yeah, I think so.

00:21I think we're going to have a rate cut in September, obviously.

00:25The Fed minutes pointed to that.

00:28Many of the Fed members agreed to a rate cut.

00:33But I think the big question is how aggressive the Fed is going to be.

00:39And as you know, there were a little over 800,000 jobs revised, which means they vanished.

00:47So the job market is a lot weaker than what the market has been dealt with.

01:02And as a result of that, I think that the Fed is likely to be more aggressive.

01:08So there's a very good possibility that we get a 50 basis point cut in September.

01:15If it's only a quarter of a point, then I think we're headed for a 50 basis point cut

01:22in December.

01:24Because if you look at some of the other macro indicators that have come out recently, they've

01:30been rather mixed.

01:31Now, that doesn't suggest that, and what I'm referring to was the latest leading indicators

01:40that actually came down, and the Lager index also came down.

01:46This is the first time it's come down in a while.

01:49So while it doesn't necessarily point to recession anytime soon, I think this is a big question

01:57mark for the Fed.

01:59And of course, what the market now is focusing on, has the Fed waited too long to reduce

02:09interest rates?

02:10And we'll know when we get the September unemployment data.

02:17If we should see another weak number where non-farms come in, let's say, under 100,000,

02:27that would be a good indication that the job market is moving towards less of a robust

02:42market.

02:42And that would, in my opinion, induce the Feds to be more aggressive.

02:47Okay.

02:48You know, I want to focus on the job market and employment a little bit more.

02:51Now, the estimate was lowered by 818,000.

02:55What kind of suggestion does that give in terms of how do you feel the markets would

02:59take it as well?

03:00And when you talk about the upcoming data, what are your expectations of it?

03:05Yeah.

03:06Well, in the upcoming data, I'm looking for non-farms to move up by about 131,000, which

03:14would be just in line with what we saw last month.

03:19If it should come in under 100,000, I think that would be, you know, the markets would

03:27rethink recession.

03:30And so that's a key.

03:34And then, of course, we have another big index coming out next Friday, a week from this Friday,

03:40and that's the PCE price inflation index.

03:45And here again, I think we'll see inflation move in the right direction.

03:50So that would give more ammunition to the Fed to be more aggressive.

03:57Got it.

03:57And Peter, in terms of expectations, in terms of how certain commentary in Jeremy Powell's

04:02speech at the Jackson Hole Symposium tomorrow, are there any certain kind of commentaries

04:07you're looking out for?

04:09Well, I think, you know, he'll hint to the fact that we're headed for rate cuts.

04:16Obviously, he's not going to sway from that.

04:20But will he be repetitious in terms of inflation?

04:26Yeah, I think so.

04:28We saw that in the Fed's minutes today.

04:31They basically said, you know, we need more time to be convinced that inflation is moving

04:38in the right direction.

04:40And other phrases that basically have been repeated over the past several or eight months.

04:51But again, you know, that's, let's say, Fed rhetoric.

04:56But the bottom line is the actual numbers going forward.

05:04And I think that they will show that the economy is weakening at a faster pace than market

05:16perception.

05:17And so I think he'll be cautious in what he says.

05:21I believe he will confirm what the Fed minutes confirmed today, that a rate cut is coming.

05:33Will he hint to the Fed being more aggressive?

05:39He'll probably do so in terms of saying, well, we have to be data dependent.

05:45And that would just simply mean that if the August-September numbers come in lower than

05:53expectations, then he will be more, the Fed will be more aggressive.

05:59The question is, do they do it in September or do they do it in December?

06:04Right.

06:04Thank you, Peter, so much for joining us and giving us more insight to how the data is

06:08looking.

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