Elevated Crude Oil Hits Fed's Inflation Outlook, Tariffs Tackle Global Trade

**SPEAKER_1** (0:00)
I do want to welcome in our next guest, though, joining us this morning, Scott Martin, Partner at Kingsview Wealth Management. Scott, great to have you on the show. Happy Monday to you. I'm looking at a sea of red on the big board right now. I'm looking at oil moving higher. We've got reignited conflict in the Middle East. We've got some tariff uncertainty. And yet, we're still near record highs. We're about to close out a winning month of August. What's the market getting right right now? And what are some things that are making you scratch your head a little bit?

**Scott Martin** (0:27)
Well, I scratch my head off in these days, Marlee, and it's a good day if red's your favorite color, which it kind of is for me, as you can tell what I'm wearing. But I think the market look has had a pretty good month considering everything that's been going on. And considering the cross currents, Marlee, you talked about in the previous segment, which is a lot of different kind of upgrades and downgrades that are out there. Obviously, the pressure on oil, the pressure on gold to the negative side, and just the general malaise, I think that's starting to set in, at least from Warsaw's statements last week. And so I think the markets took a decent job today of handling a lot of those things, including obviously the Iran conflict being reheated. And therefore, I think it's likely we have a day like this coming today. It happens to be the day. But the next month, the next couple months as we approach November, sure with the elections too, it's going to be a big testing ground for the markets here.

**SPEAKER_1** (1:08)
You mentioned Warsaw's comments from Friday and this malaise. There seems to be so much focus on the Fed's path forward, yet we know he's not going to tell us the path forward. We are aware of this and yet we still keep looking for every little clue that we can get.
Have investors become too obsessed with this concept that we are going to find some nugget and get a clue of where we are going?

**Scott Martin** (1:34)
Yes, I think there's way too much emphasis here because Warsaw's done a pretty good job of speaking when he needs to speak. And I think still leading the market along in this presence of saying, hey, we're going to watch data. We're going to make sure that data conforms with what our belief is. Now, depending what their belief is, Marlee, is the question. I think the question that comes is, is this another kind of J-PAL type of progress here, where we're talking about looking at PCE at 2%, for good sakes, and looking at things like even CPI and PPI, so maybe a little bit, looking at consumer spending numbers, GDP, or is Warsaw going to let the markets dictate what's going on, as we've seen lately with rates starting to tick up, but then tick down as well. So I think the market is really trying to figure out who this next administration in the Fed is going to be, and how he's going to behave vis-a-vis what Trump maybe told us some months ago when he was picking Warsaw, but also vis-a-vis what the data tells us, and vis-a-vis, let's say, Marlee, what the economy can handle because can the economy right now with GDP growth and say 2 plus maybe 2.5 percent for the year, consumer spending decent, jobs numbers so-so, and then obviously tariffs and some of the other pressures that are out there geopolitically, can the economy deal with rate hikes here going into the November elections and further on?

**SPEAKER_1** (2:43)
Can they? That's the question for you, Scott. What's your base case for the Fed? I just refreshed the FedWatch tool while you were talking there. We're looking at a higher than 66% chance of a hike here coming up in a couple of weeks now, just thanks to a few small comments that people are diving into from Warsh on Friday. So what do you foresee the Fed's path moving forward through the end of the year being?

**Scott Martin** (3:05)
I was afraid you're going to ask me that. You're a good journalist by saying, can they? Because I don't think the economy can handle it. I really don't. I think this core inflation data that's supposed to be at 2% back from a post-COVID era is a t-shirt. I mean, it really is. I don't think it's reality. I really don't think the economy needs to be necessarily back at those levels. I don't think it can be, Marlee, based on what we've seen with both data response to, say, geopolitical concerns and certainly data response to tariffs. So we have a decently strong economy here, but I don't think the economy needs rate hikes here. I think the rate hikes are going to be taken care of in the open market, as we're seeing on some days with the tenure. Yes, the short end is dropping in interest rates. That's also because there's a lot of demand on the curve as far as the short-term interest rates. The long-term rates have gone up because inflation has ticked up some. The economy has started to maybe grow a little bit further as we go into the future here. So I think the Fed has to be really careful here to get back into a maybe more Jerome Powell regime, which Jerome Powell is still being part of the Fed. It's kind of funny considering it seems like it's maybe more Jerome Powell-esque where we're hiking a couple of times and then maybe cutting a couple of times, hiking, cutting, hiking, cutting. When Warsh is said, he wants to kind of stay out of things and let the market do its work.