Newscasts - Market Talk: How Trump wants to shape the Fed and corporate America

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19/09/2025 22:48

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Description: A panel of experts discusses U.S. President Donald Trump’s efforts to exert greater control over the Federal Reserve and his administration's intervention in private-sector companies. Lisa Bernhard has more.

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Video Transcript:

The Federal Reserve cut rates for the first time this year after months of pressure from the US President. How else has Donald Trump tried to exert his influence over the US economy? Let's ask Nancy Tengler of Laffer Tengler Investments, Eric Lynch of Suncoast Equity Management, and US Economics Editor at Reuters and my colleague, Dan Burns, and I'm Lisa Bernhard. It was a big week for the Federal Reserve. It kicked off with the rushed confirmation of the Trump Administration official Stephen Miran, to the Board of Governors and it was capped off by President Trump in a pretty unprecedented maneuver asking the Supreme Court if he could fire Fed Governor Lisa Cook. So, Nancy, let's start with you. How do you see the current state of Fed independence?

I think the Fed is independent. I mean, the job owning has been going on for decades. We had the situation with President Lyndon Johnson where he threw his Fed secretary up against a wall at his ranch. So, intimidation has been attempted. Reagan tried it with Volcker, that was a little tougher. And I think we're in good shape as it relates to that. I think the Fed has made a number of mistakes that have cost Americans dearly, but we don't have to go into that again. I think we talked about that last time, but I think the Fed's independence is intact.

Well, mainly just to touch on that because you think that they have cut too late, correct?

Yes. Well, I think Fed Chairman Powell, I just don't think he understands monetary policy, and I think he's been 100% wrong at every single turning point. And then he has also shown an inability to learn from his mistakes or admit them. I wrote a piece called it's time to replace the Fed with ChatGPT because at least ChatGPT learns from its mistakes and that's been something the Fed has not done. So, I'm looking forward to a new chairman, not from a political standpoint, but from a guiding monetary policy standpoint.

Eric, I think Nancy threw down the gauntlet there by saying the Fed doesn't understand monetary policy and she would rather have ChatGPT do the job. What do you think and also what do you think of the current state of the Fed's independence?

Yes. I think Nancy is right, the Fed has been a bit late. Certainly, they're very late on the other side of inflation. And so here we are today. You know, I think it's still a pretty independent body. It doesn't really concern me, this brouhaha of what's happened with Cook and the recent appointment from Iran. Why do I say that structurally, it was well designed. You've got 12 voters, even Waller and Bowman who Trump appointed only voted for 25 BIPs cut this week. So, I think everybody is pretty data dependent. I think they have an honest intention here. I really wouldn't worry too much about long term Fed independence.

Well, Dan, you've been covering the Fed under several administrations. What do you think in terms of the Fed's independence right now?

Well, I think the state of play is very different from what we've seen for a number of years. You know, Nancy and Eric are right. There have been instances in the past, fairly distant past, really, that you've seen, real efforts to influence the Fed, Nixon and Arthur Burns, and again, the Reagan appointees ganging up on Volcker and Greenspan those were, incidents in the past. But we've never seen somebody try to fire a Fed official. And this is really historic and really, does mark a change, right? We haven't seen the tantrum in the bond market that you might have thought would occur, but that might take some time, right? And for a Fed, if Trump is successful in dismissing Lisa Cook, and then he will get the chance to install a chair of his own choosing in the next eight months. You know, if you see that bias toward a kind of a structurally more dovish Fed, that could be something that you begin to see reflected in long term interest rates and inflation expectations rising. We haven't seen it yet, right? It's something that is a risk for sure. But it's know this question sits before the Supreme Court, and we could have a decision from them literally at any moment about whether to grant the Trump Administration's request to stay the two lower court decisions so far that have ruled against his effort to dismiss Cook. But and there was some language in a ruling an unrelated opinion earlier in May that was some people are suggesting or indicative that the Supreme Court may follow the two lower courts in their thinking about Fed independence. They said explicitly they see the Fed through a different lens. And also, we'll see if that's how they actually rule though, anybody's guess?

Okay. Well, let's talk about the Fed's dual mandate, which has shifted more towards the weakening labor market. Eric, let me come to you. Do you think that inflationary concerns regarding tariffs are really behind us?

I don't think so. I think there's one thing we've learned from all this in terms of corporate management in the United States, both in the pandemic and now in this year of the tariffs and uncertainty the fiscal and trade policy this year. We have a great set of corporate management in this country. It's amazing the profit growth that they have produced this year despite all this uncertainty, and I think that they've done a great job managing the tariff impact so far. It's going to be hard to do that on a sustainable fashion going forward. We started the year at a 3% effective tariff rate in the US. We maxed out during the April liberation day at 28, and we're still at 17. If you look at Trump 1.0 tariffs, 2018 and 2019, CPI did launch up about 50 to 75 BIPs for about six to nine months. So, I think you're going to start, Lisa, seeing some of that feed through. You're certainly seeing that somewhat referenced in Q2 earnings calls. I don't think it's going to be gigantic, again, because of substitutions, corporate management. Some of the tariffs are going to be eaten on the exporter side. I think it'll be manageable, but it will probably slow growth a bit.

Nancy, what do you think? Do you agree?

I do to a certain extent. I think Eric's 100% right on the tariff side of the equation. I think we're going to see growth tailwinds coming from the One Big Beautiful Bill Act, and that is not just for the consumer who's expected to get about $158 billion more in tax refunds for a total of 512, but also for corporations due to the expensing extensions. If you look at the cash tax savings that are going to go to corporations. It's pretty impressive, and I think they'll continue to use it to reinvest in growth. So, I think that may be a mitigating factor, but we have been investing for a slower growth environment by buying the reliable growers, think technology, et cetera, a lot of some of the cyclical names, but not all of them. That's been a good decision, but I do think we will begin to see acceleration of growth in the first quarter of next year.

Well, Dan, let me ask you this because Reuters had a piece just this week about automakers potentially having to raise their prices. So, do you think that we will start to see some companies translate some of these costs over to the consumer?

They already are. I mean, you're seeing that in core goods inflation and CPI and PCE, but it's not enormous, and I think that's one of the reasons why you've seen the change in posture at the Fed is they've come to an expectation and you look at the projections this week, they see PCE, which they used to guide their 2% inflation target ending this year at 3% and core a little bit above that. That's a full point above target, but they're comfortable with now, as they say, textbooks seeing through this as a one-time event. I don't think there's nobody is talking about a risk of returning to a 9% CPI like we had in June 2022 or a 7% PCE at that time. But it is going to remain above target for some time. The issue is that the Fed has held the target rate until this latest meeting unchanged since last December, and it had been well above where inflation was. So, through that period, it had been exerting, pressure against inflation. And you've seen things like the housing services inflation that had been one of the main sticking points for inflation and the difficulty they had taming it has begun to really ease. But you are seeing some goods prices come up. Powell addressed that, and he said, ''Listen, we've found a little bit of a spot where the companies that are in between the producers, importers, and the end consumers, largely eating most of that cost and there's been some bit of it is still being distributed across the supply chain and some is ending up with a consumer, but not certainly Dollar for Dollar.''

If I could just add to what Nancy said earlier, she's absolutely right. The One big Beautiful Bill Act, quite a mouthful, is probably going to result in one to $2,000 per household of household spending increase ability for them. That's probably going to offset almost neutrally, the impact of higher tariffs. So, what's really great about that bill is that it gives certainty to tax rates going forward, which is a big reason why the stocks have taken off since April. But also, like Nancy said, the depreciation, 100% bonus depreciation and R&D is really important because we're going through this CapEx AI super cycle right now.

Okay, let's pivot and talk about Trump's relationship with the private sector. We've seen the administration strike financial deals with Intel, with NVIDIA. This week we saw a different type of influence. We saw Jimmy Kimmel being pulled off the air obviously by Disney, large publicly traded company due to pressure from the FCC. Nancy, as an investor, how do you view these government moves?

I hate them. I do. The government has no positive track record in getting involved in the private sector. I don't know if I'm the oldest person here, but I remember Chrysler in 1979, Jimmy Carter administration, they bailed them out. Then we came back, we had to bail them out again in 2008, 2009, and then now there is no Chrysler for the most part. So, I think the government has a very poor track record and in particular, this one really bothered me because taxpayer money was used to fund the CHIPS Act, right? I really deficit spending was, but it effectively is taxpayer dollars. Then the Administration said, well, for that, we want 9.9% of the company diluting existing shareholders and then adding in warrants that would further dilute shareholders. And the President argued that he got this $10 billion value for nothing. And the stock has gone up due to the NVIDIA investment, which I have some questions about in terms of will it really make a difference? There's been no benefit to me, just like there was no benefit as a taxpayer with Chrysler. I think the government should govern and the private sector. That was my argument at the time. Let the private sector solve it. So, if NVIDIA wants to, and it's not clear whether or not there's a quick pro quo for NVIDIA, maybe some China access, who knows? But if NVIDIA wants to invest in Intel, that is the right solution. But just remember Xerox, who developed the mouse, and then it was monetized by Microsoft and Apple because Xerox fell asleep at the wheel. That's what happened at Intel. It should not be rewarded. It should be allowed to go the way of capitalism, in my view.

Interesting, Eric, what are your thoughts?

Yes. Well, I believe Nancy is generally correct. The invisible hand at work where corporations and individuals pursue their own self-interest does end up with the best common good. But the only thing with exception I would note is that there are times when you have market failures, public good, national security issues. So, in certain select situations, I think it's okay. I will reference the MP materials investment by the federal government this summer. Where they invested about $0.5 billion to promote the refining of rare earths in the United States. The supply which it used to be that mine had 70% of the global supply went all the way down to 14. Why is that important? Well, obviously there's a national security concerns that relate to our defense, advanced technologies have access to those. China has used those in leverage against the US in the trade negotiations. And so, why is it a market failure? Well, it's a market failure because you have a central communist state that's subsidizing the supplier in China, and so that has bankrupted that mine a couple of times. The US stepping in, I'm for $0.5 billion. That's okay. We to be the $100 billion that the federal government has subsidized Amtrak over the last 50 years. I'm okay with a $0.50 billion for a strategic asset.

Does anybody want to comment on the Jimmy Kimmel situation? I know it's slightly different when we're talking about Intel or NVIDIA, but again, I don't know if you own shares in Disney as shareholders. We also saw CBS Paramount settle a $16 million lawsuit when that Skydance deal was pending. Anyone of you want to comment on that? Nancy your --.

I'll take a pass on this one because I'm never up that late. I only saw Johnny Carson when I was in New York. So, I don't really know Jimmy Kimmel. I don't know the situation and I don't own Disney. So –

I haven't followed, Lisa. All I would say is I really do believe in the separation of church and state as it relates to social causes and issues and, I don't like it when corporate management takes our eye off the ball in terms of certain shareholder interest. To me, it's just bad business, whether a company is shifting to the right or attacking to the left, you're going to inherently anger half of your client base. So, I just don't like it. So, I like companies to kind of stick to their knitting.

Dan, from a macro policy standpoint, what are your thoughts? All right. Well, I don't really my area of coverage, but I would say we are seeing evidence of Trump flexing his muscles not just as the commander in chief, but in his view as the capital allocator in chief as well. and he'd shown an inclination toward this from very early in his first term, even before when he was preparing for the transition back, coming out of the 2016 election, and he was taking potshots at Boeing over Air Force one at that point and others, and you would see the reactions in share prices. And so that continues. It's certainly a change in Republican Orthodoxy. Remember, we used to be the notion of the government should not be involved in picking winners and losers. And now we seem to have jettisoned that in its entirety in its entirety. So, I think it's certainly a watch this space. I don't think that the Intel and the other deals you've referenced are going to be the last. And certainly, there's questions around how, for instance whatever the future ownership of TikTok is, how that's going to be allocated, by Trump? Does it something that is an open process or does it or are these stakes placed with people who are seen in his orbit?

Yes. And I would just add just the export tax that was added, -- AMD and NVIDIA is unconstitutional. And then you've got this commerce secretary saying, we're going to go after the defense companies next because they get all their revenues from the government. I think that's wrong headed and I hope we see some pushback on that because we don't want the integration of government into the private sector. Both sides of the aisle have failed at this, but Solyndra was a pick of the Obama administration, and they went bankrupt. So, I think let's let the market dictate this and profits and innovation, not some guys sitting in Washington in fancy offices. Gosh, they sound like a revolutionary.

Okay, well, great. My thanks to Nancy Tengler of Laffer Tengler Investments, Eric Lynch of Suncoast Equity Management, and my Reuters colleague, Dan Burns. I'm Lisa Bernard and this is Reuters.