Wall Street’s Fed frenzy might not turn out how investors expect.
That’s at least according to Michael Schumacher, global head of rate strategy and managing director at Wells Fargo Securities, who said investors may find themselves disappointed by the Fed’s next move.
Many on the Street expect the U.S. central bank to slash its benchmark interest rate at the next Federal Open Market Committee meeting in late July in response to weakening economic data domestically and around the globe. The CME’s FedWatch tool currently shows traders pricing in a 100% chance of a July cut.
But what the stock market is pricing in with regards to Fed policy might be too aggressive, Schumacher told CNBC’s “Futures Now” on Thursday.
“We think they’ll come in and do two moves, so 50 basis points total [worth of cuts]. The market’s priced for something like 65 or 70 basis points,” Schumacher said. “So, in our view, at least at Wells Fargo, we think the Fed is, in some strange way, going to disappoint the market by not [cutting] as much as it already anticipates.”
Schumacher’s remarks came as Fed Chair Jerome Powell delivered what the strategist saw as “very dovish” comments in a two-day testimony to Congress. In it, Powell said macroeconomic “crosscurrents” including trade tensions and global growth worries were weighing on U.S. economic activity, and that the central bank would “act as appropriate” in response.
“He wants to cut,” Schumacher said, adding that the constructive U.S. consumer price data that were released early Thursday didn’t change the view of the chairman, who had likely seen the data before his testimony.
And, if the Fed decides to go through with a cut, U.S. 10-year Treasury yields could also see some counterintuitive moves, said the strategist, whose year-end target for the 10-year yield is 2.30%. On Friday, it rose to 2.13%.
“We think, in sort of a perverse way, that yields actually go up,” he said Thursday. “Typically, you might say, ‘Well, hey, if the Fed is about to cut, shouldn’t you get a big rally in bonds?’ The answer is yes, but we’ve already had it. There’s been a tremendous rally since November. We think it’s about done.”
But not everyone was on board with the idea of an imminent rate cut.
“Nobody still has convinced me that [Powell]’s going to act, and I don’t think he’s going to,” Anthony Grisanti, founder and president of GRZ Energy, said in the same “Futures Now” segment. “I don’t think he’s going to cut rates at the end of the month.”
Grisanti, who has traded futures for decades, said that between the still-healthy U.S. economic data, the prospects for a U.S.-China trade deal and the pressure Powell has received from President Donald Trump, a cut still seems unlikely.
“If we do get a trade deal, … he’s going to have to totally reverse course and then he loses all credibility whatsoever. And I also think that if he cuts rates, he actually looks like he’s under Trump’s thumb,” the trader said. “So, I think he’s going to look at this situation very carefully. There’s a couple more data points that have to come out.”
Bollywood’s Deepika Padukone’s battle with mental illness, depression
Bollywood star Deepika Padukone has spoken out about her battle with depression, calling for greater public discussion to help tackle the mental health crisis.
Padukone, who is one of India’s highest-paid actresses, said her experience during a seeming “professional high” revealed the illness’ indiscriminatory nature and inspired her to campaign for other sufferers.
“Mental illness crept up on me when I least expected it,” Padukone said last week.
“The perception and the general understanding was that I was at a professional high,” she said last Tuesday at the World Economic Forum in Davos, Switzerland. “But what I was also experiencing was this hollow, empty, pittish feeling … I would just cry out of nowhere.”
Padukone was diagnosed with depression in 2014.
The 34-year-old celebrity, who has over 30 movies to her name, said she considered herself lucky that her mother had spotted her symptoms and urged her to seek medical help.
However, she noted that stigma and lack of awareness surrounding mental illness can make it difficult for sufferers to reach out. In India alone, an estimated 7.5% of the population suffers from some kind of mental illness, according to the World Health Organization, yet provisions remain scarce.
That inspired Padukone to set up the Live, Love, Laugh Foundation in 2015 to support other sufferers. The charity aims to spread awareness of mental health issues, having launched India’s first national campaign, as well as working to help people reach diagnoses.
Learning to understand what she was experiencing was the first step to recovery, Padukone said. She encouraged potential sufferers and the people around them to look out for telltale signs of depression, such as prolonged feelings of sadness, sleeping and eating irregularities, as well as suicidal thoughts.
“The toughest part in the journey for me was not understanding what I was feeling,” said Padukone. “Just having the diagnoses in itself felt like a massive relief.”
Padukone was speaking at the WEF meeting — a gathering of global business leaders and policymakers — where she was honored with the 2020 Crystal Award for her contributions to mental health awareness.
In 2018, she was named as one of Time magazine’s 100 most influential people of the year.
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More US service members diagnosed with brain injury after Iran missile attack
A picture taken on January 13, 2020 during a press tour organised by the US-led coalition fighting the remnants of the Islamic State group, shows a view of the damage at Ain al-Asad military airbase housing US and other foreign troops in the western Iraqi province of Anbar.
Ayman Henna | AFP | Getty Images
A total of 50 U.S. service members suffered traumatic brain injury from this month’s Iranian missile attack on Iraqi bases hosting American troops, the Pentagon said Tuesday.
Of those TBI cases, which can include concussions, 31 were treated in Iraq and have returned to duty, Pentagon spokesman Lt. Col. Thomas Campbell said in a statement.
Last week, the Pentagon said there were 34 service members diagnosed with concussions and traumatic brain injuries.
Of the 16 new diagnosed cases, 15 service members have returned to duty in Iraq, Campbell said.
Iran launched ballistic missiles at two bases in Iraq housing American troops on Jan. 8 local time. The strike was in retaliation for the U.S. killing of Iran’s Gen. Qassem Soleimani, who was commander of its elite Quds Force, in a drone attack outside Baghdad’s airport less than a week before.
No one was killed in Iran’s strikes, and a day after targeting U.S. forces, President Donald Trump said that no one was hurt or killed.
Chief Pentagon spokesman Jonathan Hoffman has said that a lot of TBI symptoms are late developing and manifest themselves over a period of time.
The Centers for Disease Control and Prevention says on its website that some symptoms of concussions and other traumatic brain injury can appear right away, but other symptoms may not be noticed for days or months after the injury.
One of those new cases involved a service member transported to Germany for further evaluation and treatment, bringing the total taken there to 18. That person had been taken to Germany “for other health reasons and has since been diagnosed with a TBI,” Campbell said.
Last week, another Pentagon spokesman said that eight U.S. service members who were sent to Germany were then taken to the United States.
Campbell’s statement Tuesday said that there was no information as to whether anyone else has returned to the U.S.
A service member that had been taken to Kuwait for treatment has since returned to duty, Campbell said.
Hours after Iran launched missiles against U.S. forces, Iran’s armed forces shot down a Ukrainian passenger plane that departed from Tehran’s airport, in an incident that Iranian officials blamed on “human error” and which Iran’s president has called an “unforgivable mistake.”
All 176 people aboard Ukraine International Airlines Flight PS752 were killed, including many Iranians and Canadians.
Global dissatisfaction with democracy at a record high, research says
Pro-democracy protesters at a Thanksgiving Day rally on November 28, 2019 in Hong Kong.
Chris McGrath | Getty Images News | Getty Images
The world is unhappier with democracy than ever, new research has claimed.
In a report published Wednesday, researchers from Cambridge University analyzed the political sentiment of more than 4 million people, using data from survey projects that covered 154 countries between 1995 and 2020.
The proportion of people who said they were dissatisfied with democracy over the last year hit 57.5%, according to the report, with researchers saying 2019 marked “the highest level of democratic discontent” on record.
Authors noted that over the last 25 years, the number of individuals dissatisfied with democratic politics around the world rose from a third to more than half.
Shifts in satisfaction levels were often a response to “objective circumstances and events” such as economic shocks and corruption scandals, the report said.
Following the financial crisis in 2008, for example, global dissatisfaction with the functioning of democracy jumped by around 6.5%.
Many large democracies, including the U.S., Australia, U.K. and Brazil, were now at their highest-ever level of dissatisfaction with democracy.
According to the report, the U.S. in particular had seen a “dramatic and unexpected” decline in satisfaction with democracy.
When the surveys began in 1995, more than 75% of U.S. citizens were satisfied with American democracy. The first big knock came with the financial crisis, the report showed, and satisfaction has continued to deteriorate year-on-year ever since.
Fewer than 50% of Americans are now content with democracy in their country, marking the first time on record that a majority of U.S. citizens were dissatisfied with their system of government.
“Such levels of democratic dissatisfaction would not be unusual elsewhere,” the report said. “But for the United States, it marks an ‘end of exceptionalism’ — a profound shift in America’s view of itself, and therefore, of its place in the world.”
However, researchers noted that they had found an “island of contentment” in Europe, where satisfaction with democracy had reached all-time highs. Denmark, Switzerland and Norway were among the countries that fell into that category.
Southeast Asia was also described as a regional “bright spot.”
Latin American precedent
Speaking to CNBC in a phone call on Monday, Roberto Foa, lead author of the report, said there were a number of different factors behind the declining approval of democracy.
“In developed democracies, it’s partly about political polarization — this has been gradual in the U.S. but has spiked in the last couple of years in the U.K.,” he said. “Malaise with democracy in the West is often down to longer term economic stagnation and loss of geopolitical influence.”
He noted there was a reasonable amount of research suggesting a rise in unhappiness with democracy tended to provoke changes in political behavior. For example, people would become more likely to vote for populist parties or politicians promising to “shake up the system.”
“We expect a great deal more of this,” Foa told CNBC. “The region that proves this is Latin America — the levels of dissatisfaction have always been very high and we’re seeing (a rise in populist support) there.”
He added that the rest of history could “look more like the south of the Americas than the north” if global satisfaction levels continued to decline.
Cambridge University’s study follows a report published by the Economist Intelligence Unit last week, which found that the U.S. had a “flawed democracy” and the strength of global democracy was at its lowest since 2006.
Meanwhile, research from Edelman last week found that 70% of people around the world believed democracy was “losing its effectiveness as a form of government.”
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