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Barry Ritholtz we have on the podcast today. Welcome to Seeking Alpha. Any market observer, any market participant, any investor knows the name Barry Ritholtz, perhaps knows what you do. You have a litany of laurels too. Well, you don't rest on them, but you have a litany of laurels to your name.
co-founder, chairman, CIO of Ritholtz Wealth Management. You're a trailblazing podcaster, master's in business, most popular podcast on Bloomberg Radio. You are the blog father. You predate even my 16 years at Seeking Alpha, which we used to excerpt your writings on Seeking Alpha from the big picture. That's right. A very, very accomplished and astute man. So I really appreciate you taking the time
This hot rhetoric between Powell and President Trump and the job owning there. How would you say it plays into the U.S. dollar conversation and broadly speaking, policy and economically speaking? Inflation peaked June 2022. It plummeted from 9% to 2.5%. I made the argument at the time that, hey, the 2000 to 20, right up into the pandemic was an era driven by monetary policy.
The CARES Act, the first one under President Trump, was the biggest fiscal stimulus since World War Two as a percentage of GDP. Ten percent of GDP. CARES Act two under President Trump added to that. CARES Act three under President Biden added to that. And then Biden passed four or five.
10-year programs, the infrastructure bill, the semiconductor bill, the Inflation Reduction Act. There was a fourth one involving veterans, but they're all 10-year spends. So we are in the era of fiscal stimulus for another five, six years to say nothing of what we're going to end up seeing from
from the renewal of the 2017 Tax Cuts and Job Acts in whatever form it is. So we are in an era of fiscal stimulus, which raises two points to answer your question. The first is the 2% inflation target. It's random. It's a made up number. It literally comes from the 1980s in New Zealand. It has nothing to do with anything. That's according to a former vice chair of the Federal Reserve, Roger Ferguson, who describes why this is pointless.
I don't believe they would be admitting defeat if they said we're going to have a 3% target and here we are.
But I would tell you if I was advising Jerome Powell, I would tell him to quote Wadsworth and say to President Trump, I can't hear what you're saying because what you're doing is speaking so loudly. So if you're going to make prices go up through tariffs, how on earth can we cut rates unless you send prices up so much that you're going to send the unemployment rate up and then we'll be happy to cut rates. But really, do
Do we have to cause a recession with tariffs in order for us to cut rates? Everything was going along swimmingly. The rates had come down from 9% to 2%. That was by 2023. Inflation was a global phenomena. It wasn't just a US phenomena. And the US has performed better under Jerome Powell's leadership at the central bank than most other countries, P.S.,
If I was advising President Trump, I would say, hey, you appointed him. He did a good job. Take the win and work behind doors to tell him what you're doing and get rates lower. But all of this feels like, first of all, the Fed has to be independent, just like the Supreme Court has to be independent. And this back and forth is completely, completely unproductive, number one. And then number two is,
And I say this with a heavy sigh because everybody interprets this as partisan, but it's not. Let me give you two minutes of not just the tariffs, but how they were implemented that's so problematic. So we just had a Fed meeting recently. Before the Fed changes interest rates, whether it's a hike or a cut,
Hey, everybody, we're raising rates in six months. Hey, everybody, in three months, we're raising rate. Hey, everybody, look at the dot plot. In two months, we're raising rates. A month before the meeting, all the Fed governors and presidents fan out. They speak at the Petroleum Club of Houston and the Economic Club of New York, and they speak at Harvard and they speak at Berkeley. And everybody knows. And then the meeting happens.
And they raise rates or cut rates or whatever they do. And then Jerome Powell holds a press conference and politely answers questions. And then a few weeks later, the transcript comes out.
Nobody's surprised at the change in interest rates because the Fed knows the market does not love being surprised. But when you basically are talking about 5% and 10% tariffs and April 2nd comes and you go, hey, 100% tariffs.
Everybody party. The market says, hold my beer. We're 20% too high, maybe 30% too high. This is going to be problematic. Allow us to adjust our prices to reflect this new information and the ham-fisted way it was just dropped on everybody. So you can make an argument that there are two problems here. Problem one is tariffs are inflationary.
People have a finite amount of money to spend. And if you're going to make the cost of goods and services go up, they will be able to buy less of them. Again, economics 101, not partisan. This is just fact. If you disagree with me, commenters and emailers, feel free to realize I don't say this very often, but you're completely wrong. Save your emails.
On the other hand, there's no disagreement. You can't surprise the markets. If you surprise the markets, well, then you get three of the worst consecutive days in a row on the way to a 15% drawdown in a market that has been the third best performing market over any 15-year period in history.
You can't blame that on anybody, anything else. It's not even the tariffs. It was just kaboom. Hey, guess what? Markets don't like that. What's your best guess for what happens at the June meeting and beyond? So it really depends on how much progress we see made on these various tariffs and how the president respects the investor class and the bond market.
I mean, James Carville was right. I want to be reincarnated and come back as the bond market. It's the most powerful thing in the world. If we take him seriously and not literally, and if these tariffs are a negotiating tactic, and if we start seeing some more wins, and we're seeing lots of signs of that, if we get more deals, look for Canada, look for Mexico, look for Japan.
Like some of the stuff is just so distracting and silly. No, he's not going to be Pope or serve a third term. Canada is not going to be the 51st state and we're not invading Greenland or Panama.
but upset the stock market because you completely upend their economic expectations of an ongoing healthy economy, healthy market, ongoing expansion. And hey, there's going to be hell to pay. What's the quote? Hell hath no fury like a market annoyed. It's a whole Shakespeare aside. You cannot shock the stock market that way and then be surprised when the market says,
Oh, you're in charge? Let me show you who's really in charge. We're going to be here long after you're dead and buried. To all of us, not just anyone, you know, 78-year-old president, to all of us, the stock market remains undefeated. These episodes will be up with transcriptions at SeekingAlpha.com slash WSB. And join the highest level discussion of any stock or ETF with our community of serious investors like you. Find us at SeekingAlpha.com slash subscriptions.