One Analyst Insists: Wage Growth Is Too High for an Interest Rate Cut

With the jobs report due this morning, we spoke to inflation bear Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management. He believes it would be surprising if the Fed cuts interest rates in September.

"I think that the Fed Reserve officials have been head-faked on inflation this year," he said. "And so they want to see increasing evidence that we're going to remain on that path of inflation returning to 2% before they cut rates."

Right now, wage growth is still around 4%, and it would need to return to 3.5% or 3% for the Fed to see a path forward, Stucky said. He also mentioned the possibility of a recession in the wake of the Fed's interest rate hikes, since 10 of the last 13 Fed hiking cycles have resulted in the R-word.

"If that were to happen again, the Federal Reserve is very likely to cut aggressively," he said. But then we'd have bigger worries.

"The Federal Reserve is going to be patient until they're sure that disinflationary trend is back in place," Stucky said. "We just struggle to see how it's going to happen. Especially if the wage environment persists as it sits today."

Read this in your browser Jul 05, 2024 Howdy, Cheddheads! While we were out enjoying the Fourth of July, the Bureau of Labor Statistics was busy cooking up its June jobs report, due out at 8:30 a.m. today. Most economists expect jobs and hourly wage numbers to decline a tad. They also expect unemployment to hold steady. Such early signs of a softening in the labor market could prompt the Fed to consider lowering interest rates. But! The likely numbers should show a labor market that is cool-ING, and not cooled-DOWN. So, while some have argued that positive trends in inflation and signs of slowing economic activity mean the Fed should move faster... we're not holding our breath.   Meanwhile, we've got plenty of cheddlines to grab your attention before the weekend: Why inflation could still stick around until the fall  Tips to save money on travel this summer  The Fed has approved Eli Lilly's new Alzheimer's drug  Manhattan is now a buyer's market for real estate!? Bonus: a roundup of the best beaches in the West by a man calling himself Dr. Beach. Listen to him—his job is literally beach.   —Matt Davis, N2K Chedditor 1. One Analyst Insists: Wage Growth Is Too High for an Interest Rate Cut With the jobs report due this morning, we spoke to inflation bear Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management. He believes it would be surprising if the Fed cuts interest rates in September. "I think that the Fed Reserve officials have been head-faked on inflation this year," he said. "And so they want to see increasing evidence that we're going to remain on that path of inflation returning to 2% before they cut rates." Right now, wage growth is still around 4%, and it would need to return to 3.5% or 3% for the Fed to see a path forward, Stucky said. He also mentioned the possibility of a recession in the wake of the Fed's interest rate hikes, since 10 of the last 13 Fed hiking cycles have resulted in the R-word. "If that were to happen again, the Federal Reserve is very likely to cut aggressively," he said. But then we'd have bigger worries. "The Federal Reserve is going to be patient until they're sure that disinflationary trend is back in place," Stucky said. "We just struggle to see how it's going to happen. Especially if the wage environment persists as it sits today." Watch Now 2. Don't Go Broke From Holiday Travel More than 70 million Americans are expected to travel across the 4th of July weekend, with the TSA anticipating 32 million airline passengers alone. According to Bankrate, over a third of Americans are willing to go into debt to finance their summer travels. But that's wack! We spoke to money-saving expert Andrea Woroch about some of the ways to prevent your summer budget from getting out of control. The average family spends more than $3,500 for a weeklong trip. But if that's not in your budget, Woroch says, then consider a staycation. Great websites like Resort Pass allow you to purchase day passes to local resorts that with big pools, waterslides, and spas. You feel like you're getting away, but not paying for airfare or gas. You can also go camping in your backyard. The idea, she says, is to "feel like you're getting away without really spending a lot of money." More tips: Zoos and botanical gardens offer discounted admissions on specific days, and buying your theme park admissions a week in advance is cheaper than paying on the day at the ticket booth. Go to midweek movies. Consider a host of free (or nearly free) activities like hiking, planning a picnic, or going to the beach. Even retailers are offering free events like kids' gardening and crafting workshops. When it comes to buying your summer apparel, why not wait until the end of July when the summer sales start? Have a look at resale sites. And remember, Amazon Prime Day is in mid-July. That's less than two weeks away—you can wait! Read More 3. FDA Approves Eli Lilly's $32K-a-Year Alzheimer's Drug Great news for the 7 million Americans with Alzheimer's and their families. The FDA, in a big move, has approved Eli Lilly's drug Donanemab, sold under the brand name Kisunla, for treatment of adults with early stages of the disease. The approval comes after the FDA twice rejected the drug. Shares in Eli Lilly rose 3% on the news, to all-time highs. Some of the downsides: The drug slows the progression of the disease, rather than curing, halting, or reversing it, and comes at a hefty cost of $32,000 a year. Meanwhile, Alzheimer's remains among the top five killers for people over 65. Still, it feels like a step in the right direction. Watch Now So, what do you think of Cheddar? We want to hear from you! From shows to site to this very newsletter, we'd love some feedback. Take the Survey! 4. At Last: A Buyer's Market for Manhattan Real Estate?! New York City's real estate inventories are rising, and prices are falling, with Century 21 CEO Mike Miedler calling it a "buyer's market." "What we're following right now is a little bit of a tapering off of the price, and more inventory," he said. Let's do this! We've always wanted a brownstone in the West Village! Now you can buy one for only $349,000. A year. In property taxes. Wait. We still need $12 million for the building itself. What sort of "buyer" is enjoying this sort of "market," Mr. Miedler? After all, with mortgage rates around 6.7%, it'd be an eye-watering $77,743 a month for us to move right on in there (we just Googled it), assuming we had the $3 million downpayment. Which we do, by the way. Just sitting in our checking account and ready to go. #Millionaires. Miedler says those mortgage rates are the "number one challenge," with the real estate market the "most sensitive" to the Fed's interest rate rises. Last year, Century 21 sold 4.1 million homes nationwide, a "30-year-low because of mortgage rates." And they're still stubborn. In New York, 62% of buyers are "all cash," which is double what you see in the rest of the country. That means they're less affected by such dynamics. Here at Cheddar HQ, we're actually considering buying a row of brownstones, in fact, and converting them all into one converted Bond Villain lair with a giant piece of cheese on the top. Then we'll all move in next door to each other just like The Beatles did in Help. But if you're after a home in the $200,000 range, Miedler mentions Orlando, Florida, and midwestern cities such as Cleveland, Columbus, and Madison, Wisconsin. They're only a plane ride from Manhattan, after all. And it's not like the ballet and opera and food and celebrity spotting in New York were ever what you'd call world class, is it? Wait. Watch Now 5. The 'Beach Doctor' Unveils His Top 50 List Don't need the money-saving travel tips above? Let's go to Hawaii! Stephen P. Leatherman, Ph.D.—a.k.a. Dr. Beach—has unveiled his much-anticipated annual list of best beaches in the West for 2024. With decades of expertise and a unique 50-component rating system, Dr. Beach's selections are exhaustive. This year, three Hawaiian gems stood out in the top 10 rankings, including the serene expanse of Duke Kahanamoku Beach in Oahu. Renowned for its views of Diamond Head, it offers a quieter alternative to the bustling scenes of Waikiki. Also making the list are the splendid shores of Wailea Beach in Maui and the sunny, dry haven of Poipu Beach in Kauai. Both provide blends of luxury and natural beauty, Dr. Beach says. His reviews also contrast the beach conditions on the West and East coasts, noting the "softer, cooler sands" found in Western locations. Evidently, he's yet to grok the fact that an A-train trip to Rockaway is about harder, hotter sand. And listening to the Ramones. Because East Coast, baby! But yeah. Whatever. Hawaii sounds nice... Read More This email was sent to salenamartine360.news1@blogger.com unsubscribe     member center     contact us   Cheddar Cheddar • 1 State Street • 25th Floor • New York, NY 10004 • USA