#409 Danielle DiMartino Booth: Fed Is Hiking Into Recession, Consumers Tapped Out, & Credit Tightening

SPEAKER_1 (0:00)

College football is back, so Hilton called on me, the superstition concierge, to make your fan rituals a reality. Need a room to match your lucky number? We got you. Wanna make sure our team doesn't wash your lucky jersey? Oh, that smells lucky.

Hilton's unmatched hospitality can keep up with any superstition. Even a marching band wake up call at 555 and 55 seconds. Hit it! When you need a team that will do whatever it takes on game day, it matters where you stay. Hilton, for the stay.

Julia La Roche (0:31)

Hey, everyone. Welcome back to another in-studio episode of The Julia La Roche Show on Fed Day, where we are joined by Danielle DiMartino Booth, CEO and Chief Strategist at QI Research, author of the book Fed Up, and our go-to guest every single Fed Day. In this episode, we got Danielle's instant reaction following that 25 basis point hike by the Fed, and why she thinks that was a mistake. We also got her assessment of the economy and the biggest risk right now facing the markets. I really enjoyed this in-studio episode with Danielle, and I hope you all enjoy this one as much as I did.

Hey, everyone. Welcome back to another episode of The Julia La Roche Show on Fed Day, and we are joined by none other than Danielle DiMartino Booth, CEO of QI Research, and author of the book Fed Up. Friend of the show, great to see you as always, Danielle.

Danielle DiMartino Booth (1:28)

Happy Fed Day, Julia. Here we are.

Julia La Roche (1:29)

Happy Fed Day. Can I wish you a happy early birthday?

Danielle DiMartino Booth (1:32)

Yes, yes. Yes, you may.

Julia La Roche (1:34)

Happy early birthday as well. All right, Danielle, we got the hike, 25 basis points.

Danielle DiMartino Booth (1:40)

Boy, did we ever.

Julia La Roche (1:41)

Boy, did we ever. What was your reaction to today's announcement and the presser? What's the big picture takeaway for you?

Danielle DiMartino Booth (1:52)

To me, at least, it was the dose of accommodation. The dose.

Yeah. The idea that there's more to come is what Warsh communicated, and the market interpreted that as there's more to come. So whether or not he had a dot on the dot plot, we know he did not. He kind of revealed his dot, and markets did not like that.

Julia La Roche (2:22)

Yeah. Marcus definitely did not like that.

Danielle DiMartino Booth (2:25)

You've got three subsequent rate hikes priced in based on where the two-year treasury is trading right now, 4.73 percent.

Julia La Roche (2:34)

Including one right before the election possibly, in the month of October.

Danielle DiMartino Booth (2:39)

So before the press conference started, because it initially looked like a dovish rate hike, there was only one more rate hike priced in according to the dot plot of 16, not 17 individuals on the Federal Open Market Committee, and zero rate hikes penciled in for 2027 Markets initially interpreted that being as being dovish, and rightfully so until Warsh took to the podium for a record short 29-minute press conference.

Julia La Roche (3:12)

We know that he's been giving out shorter statements, shorter press conferences now. You probably saw the question. I don't remember who asked it, but if this was market-led, he said it was our decision.

Danielle DiMartino Booth (3:27)

He did. I don't know that the market believed him. I really, really don't.

I would say to be determined on that front. He relished, you could tell in using the word unanimous. He was so excited. He didn't have any dissents at this meeting. Yay. Wonderful.

But let's wait and see what happens on Friday. You've got Michelle Bowman, who is for sure one of the individuals calling for rate cuts next year, because there are four individuals on the committee calling for rate cuts in 2027 You've got Michelle Bowman coming out of the gate on Friday, and at the opposite end of the dovish hawk spectrum, you've got Jeffrey Schmidt of the Kansas City Fed. Let's see how cordial this family fight was at this Fed meeting. Let's see how unanimous the decision truly was when you get two opposite, one huge dove, one huge hawk coming out on Friday. To start with, promises to be a flurry of Fed speak, which in and of itself, Julia, can I point out that Kevin Warsh wanted to decrease the amount of communication on the part of Fed officials? And I think we've seen an increase.

Julia La Roche (4:42)

Yeah, there are definitely going to be the increase because if they feel like maybe the things have been so short or they're not getting it on fair time or there's an opportunity to have that much more Fed speak.