The Federal Reserve is 'out of play,' strategist says

00:00 Speaker A

Let’s talk about the Fed real quick. We got the Beige book today. Here’s what they had to say. Uh conflict in the Middle East uh cited as a major source of uncertainty that complicated decision-making around hiring, pricing, capital investment. Many firms adopting a wait-and-see posture. Where is the Fed in your narrative? Like are are you in the listen, they’re done for the year. I’ve had smart strategists this week tell me they’re on their hands the rest of the year. They’re not moving.

00:27 Speaker B

I think that’s that’s um, that’s a supportable statement. So I mean, look, I I think I think the Fed is generally out of play. Um there there’s no state of the world in which they’re going to raise rates in in this environment. So like people people a little bit worried about like inflation pressures and going they’re going to raise rates like no chance. Like they’re they’re a dual mandate central bank. They look at core, not not headline inflation, not like the Europeans. There’s no chance that they’re raising rates.

00:52 Speaker A

Also, would you would you say the labor market, yes, it’s cool but no signs of crashing.

00:58 Speaker B

No, it’s it’s just stagnant. So like like the way I’ve been talking about the labor market has been like everybody’s been saying it’s no hiring, no firing. That is a that that’s that’s a that’s not a robust labor market. You know, that’s not it’s not a dynamic labor market. That’s not that’s that’s a labor market that that I think you can characterize as fragile. Um but it’s holding in and it’s and it’s been this way for a year and a half. Um so, you know, so long as the labor market kind of holds in like it’s doing, uh and and by the way, companies that are making a lot of money and having expanding margins don’t fire people.

01:25 Speaker A

Mhm.

01:26 Speaker B

They don’t they just don’t. So so long as all those things kind of hold in, the Fed doesn’t have much much of a worry on the on the on the employment side, but it’s definitely part of their radar.

01:34 Speaker A

Let me ask you, how do you think the US economy responds though, Scott, if indeed 2026 the Fed is just sitting on their hands?

01:40 Speaker B

Just fine. Uh look, I mean as far as the economy goes, like what what the what the Fed does for for the rest of this year really matters almost zero. Um, you know, what what the Fed did a year or a year and a half ago is actually starting to hit the economy right now because it takes about a year, year and a half for Fed cuts to actually come in the economy. That obviously impact the markets much quicker than that. But as far as the economic impact for for the Fed cuts, that like we’re getting those right now. Um and that that’s kind of baked in the cake right now. So like so if they cut once or twice or zero times the rest of this year, okay. Like it’s like it’s it’s really not going to move the needle for for a whole lot. So I think the Fed’s generally out of play.