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The fund generally invests at least 90% of its assets in the bonds of the underlying index and at least 95% of its assets in U.S. government bonds. It may invest up to 10% of its assets in U.S. government bonds not included in the underlying index, but which BFA believes will help the fund track the underlying index. It also may invest up to 5% of its assets in repurchase agreements collateralized by U.S. government obligations and in cash and cash equivalents.

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Recent spikes in consumer inflation expectations are threatening to narrow the Federal Reserve's room to maneuver to further reduce interest rates this year, casting new uncertainty over whether cuts <a href="https://www.benzinga.com/news/econ-s">will materialize this year.</a>
In a note shared this week, Goldman Sachs analyst Elsie Peng discussed recent data showing a notable rise in survey-based inflation forecasts and why the Federal Reserve might have to tread carefully despite softening economic conditions.
See Also: <a href="https://www.benzinga.com/government/regulations/25/03/44492183/cfos-increasingly-alarmed-over-tariffs-as-business-confidence-wavers-15-say-they-are-concerned-about-duties-in-q1">CFOs Increasingly Alarmed Over Tariffs As Business Confidence Wavers: 15% Say They Are &#8216;Concerned&#8217; About Duties In Q1</a>
<h3 class="wp-block-heading">What&#8217;s Driving Inflation Expectations Higher?</h3>
The University of Michigan&#8217;s closely watched Survey of Consumers revealed a jump in year-ahead inflation expectations to 4.9% in March, up from 4.3% in February. That's the highest reading since November 2022. 
Longer-term expectations, tracking perceived inflation over five to ten years, climbed to 3.9% — a level not seen since 1993.
These figures are particularly concerning because they suggest consumers are not just reacting to short-term price pressures but may be bracing for a more structurally persistent inflation regime. Elevated inflation expectations can become self-fulfilling, as households and businesses adjust behavior in anticipation of future price increases.
It's not just the Michigan survey flashing red. The Conference Board's Consumer Confidence Index, released Tuesday, showed inflation expectations rising from 5.8% to 6.2% in March.
Yet Federal Reserve Chair Jerome Powell, speaking after the March Federal Open Market Committee (FOMC) meeting, downplayed the Michigan <a href="https://www.benzinga.com/economics/macro-economic-events/25/03/44331170/us-consumer-confidence-plunges-as-inflation-fears-hit-highest-level-since-1993">results, calling them an "outlier." </a>
Still, there&#8217;s more nuance under the hood.
<h3 class="wp-block-heading">Are Political Biases, Tariffs Distorting The Data?</h3>
Peng said that recent survey results are being distorted by sampling changes and political polarization.
Last year, the University of Michigan switched from a phone-based to an online format, resulting in a greater share of extreme responses.
This shift, combined with how survey medians are calculated, has skewed results toward more extreme inflation views, especially amid news of new tariffs.
"Inflation expectations have become extremely partisan," she said, adding that expectations tend to rise when a respondent's opposing party is in power.
Adjusting for these factors, Goldman Sachs estimates that the 1-year inflation expectation for March should be closer to 3.6% rather than 4.9%, and the 5-10-year expectation should be 3.3% instead of 3.9%.
Even so, Peng said that "these adjusted expectations are still meaningfully higher than late last year," reinforcing the idea that consumers are genuinely rattled by tariff news and persistent inflation in essential categories like food and energy.
Investors who turned to traditional inflation hedges like Treasury inflation-protected securities, tracked by the iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), or gold, tracked by the SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>), would have seen year-to-date gains of 3% and 14% respectively, in contrast to a 3% decline in the broader S&amp;P 500 index.
<h3 class="wp-block-heading">What This Means For The Fed's Rate Path</h3>
Goldman's analysis adds another layer to the growing debate over how much room the Fed really has to ease policy this year. 
According to Fed funds futures, markets expect at least three rate cuts in 2024. However, persistently high inflation expectations—even if somewhat overstated—make it harder for the central bank to justify easing unless economic data deteriorate sharply.
"High inflation and high survey-based inflation expectations raise the bar for possible rate cuts this year," Peng said.
Yet, she also added that if economic growth slows enough, Fed officials would still likely proceed with cuts — particularly if market-based inflation expectations remain well-anchored.
In such a scenario, officials could take the same stance they held during the first trade war in 2019: temporary inflation bumps related to tariffs don't pose long-term risks if broader demand weakens.
Based on the latest dot plot, the Federal Reserve projected two additional rate cuts for 2025.
Betting markets on the CFTC-regulated platform Kalshi now reflect expectations for two rate cuts, a shift down from earlier projections of three cuts earlier this month.
<iframe loading="lazy" src="https://kalshi.com/external-widgets/events/KXRATECUTCOUNT-25DEC31?color_scheme=light&#038;widget_size=large&#038;utm_campaign=benzinga_widget" width="552px" height="400px" style="border:0"></iframe>
Read now: 
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<li><a href="https://www.benzinga.com/government/regulations/25/03/44475192/consumer-confidence-falls-to-lowest-since-2022-as-inflation-tariff-worries-grow">Consumer Confidence Falls To Lowest Since 2022 As Inflation, Tariff Worries Grow</a></li>
</ul>
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Elevated Consumer Inflation Expectations 'Raise The Bar For Possible Rate Cuts This Year': Goldman Sachs

As markets navigate a challenging landscape, George Smith, Portfolio Strategist for LPL Financial, is advocating a recalibrated <a href="https://www.benzinga.com/topic/economy">asset allocation strategy </a>for the next three to five years. 
His outlook reflects a "higher-for-longer" interest rate environment, subdued economic growth, and inflation that may remain stubbornly above the Federal Reserve's target.
<h2 class="wp-block-heading">Dialing Down Risk: A Cautious Equity Stance</h2>
&#8220;The risk-reward trade-off for both stocks and bonds is being challenged by a slowing-growth environment, elevated inflation, and a &#8216;higher-for-longer&#8217; interest rate outlook,&#8221; Smith said. He added that stretched equity valuations and falling equity risk premiums have prompted his team to reduce exposure to domestic growth stocks, particularly large- and mid-cap names.
Instead, Smith favors value equities and emerging markets. &#8220;Foreign equities, especially emerging markets, remain attractive over the longer term,&#8221; he notes, emphasizing the risk-reward advantage of rotating from developed markets into EM. 
For investors, ETFs like the Vanguard Value ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VTV#NYSE">VTV</a>) and the iShares MSCI Emerging Markets ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EEM#NYSE">EEM</a>) could align with this strategy.
Read Also: <a href="https://www.benzinga.com/trading-ideas/25/02/43827291/exclusive-will-trumps-tariffs-hurt-or-help-stock-market-59-say-this" target="_blank" rel="noreferrer noopener">EXCLUSIVE: Will Trump&#8217;s Tariffs Hurt Or Help Stock Market? 59% Say This…</a>
<h2 class="wp-block-heading">Fixed Income: Playing It Smart</h2>
In fixed income, Smith advises trimming nominal Treasuries, stating, &#8220;Longer-duration fixed income may not deliver significant protection in ordinary financial market corrections.&#8221; 
Instead, core bonds remain essential for diversification and income, while short-duration Treasury Inflation-Protected Securities (TIPS) gain favor. 
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>) offers a way to implement this.
<h2 class="wp-block-heading">Alternatives, Real Assets: Diversifying The Playbook</h2>
To hedge volatility and enhance diversification, Smith highlights the importance of alternatives. &#8220;We believe alternative investments can be used to hedge potential volatility and market concentration risks via a diversified basket of long/short equity, managed futures, and global macro strategies,&#8221; he says. 
Multi-strategy and global macro funds, such as the iMGP DBi Managed Futures Strategy ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DBMF#NYSE">DBMF</a>), can serve this purpose.
For inflation protection, Smith suggests real assets. &#8220;We aim to hedge potential inflation risks by initiating an off-benchmark diversified basket of commodities and global listed infrastructure,&#8221; he explains. 
ETFs like the Invesco DB Commodity Index Tracking Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DBC#NYSE">DBC</a>) and Global X U.S. Infrastructure Development ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PAVE#NYSE">PAVE</a>) fit the bill.
With risks mounting and traditional stock-bond dynamics shifting, Smith&#8217;s insights provide a timely roadmap for resilient portfolios.
Read Also: 
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<li><a href="https://www.benzinga.com/trading-ideas/long-ideas/25/02/43776863/top-3-risk-off-stocks-which-could-rescue-your-portfolio-this-quarter-3">Top 3 Risk Off Stocks Which Could Rescue Your Portfolio This Quarter</a></li>
</ul>
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DBMF

PAVE

2025 Asset Allocation In 'Higher-For-Longer' Era: Why Value Stocks, Emerging Markets, Inflation-Protected Bonds Stand Out

Investors are recalibrating their expectations for Federal Reserve rate cuts after an unexpected <a href="https://www.benzinga.com/topic/inflation">surge in consumer inflation</a>.
Fed futures now reflect just 36 basis points of cumulative rate cuts by year-end. This implies only a 50% probability of two reductions, according to CME FedWatch tool.
Markets increasingly see just one rate cut as the most likely scenario, versus the two-cut path indicated in December.
Betting odds tracked by the CFTC-regulated Kalshi currently assign a 25% probability to two rate cuts. The chances of one cut or no cut at all stand at 22% and 17%, respectively.
<iframe loading="lazy" src="https://kalshi.com/external-widgets/events/KXRATECUTCOUNT-25DEC31?color_scheme=light&#038;widget_size=large&#038;utm_campaign=benzingawidget" width="552px" height="400px" style="border:0"></iframe>
<h3 class="wp-block-heading">Inflation Concerns Resurface</h3>
The University of Michigan&#8217;s latest consumer sentiment survey triggered fresh alarm, showing a sharp jump in inflation expectations that surprised analysts. 
The one-year inflation expectation surged to 4.3%, rising one full percentage point from last month and reaching its highest level since November 2023.
&#8220;Many consumers seem concerned that high inflation will return within the next year,&#8221; the University of Michigan stated in its report.
President Donald Trump pledged to raise tariffs on major U.S. trading partners, on top of a 25% tariff on aluminum and steel imports.
The U.S. five-year breakeven inflation rate—a key gauge of market-based expected inflation—rose to 2.59% on Monday. That&#8217;s up from 1.89% in September 2024, according to TradingView data.
This suggests investors anticipate inflation to average well above the Fed's 2% target over the next five years.
&#8220;Given the considerable policy uncertainty caused by the return of global trade protectionism and the return of mercantilism among the G-7 nations, it is not certain that inflation expectations will remain well anchored,&#8221; said Joseph Brusuelas, economist at RSM US LLP. 
&#8220;The sudden jump in inflation expectations isn't a coincidence. Trump&#8217;s tariff threats toward Canada, Mexico, China, and the EU are fueling inflation concerns. Despite stocks holding near record highs, gold is rallying, and TIPS have outperformed Treasuries for the past month—clear signs that investors are positioning for inflation,&#8221; said analyst Michael Gayed, CFA.
Nonfarm payrolls rose by 143,000 in January, slightly below consensus due to weather disruptions, but revisions from previous months added 100,000 jobs. The unemployment rate unexpectedly dropped to 4.1%, while wage growth accelerated.
&#8220;The labor market appears to have stabilized around full employment, reinforcing our view that the Fed's rate-cutting cycle is over,&#8221; said Bank of America economist Aditya Bhave.
Goldman Sachs economists echoed this sentiment. Markets still underprice the inflationary impact of tariffs, indicating that investors may not be fully accounting for persistent price pressures in their rate forecasts.
&#8220;Friday's jobs report reinforced the argument that economy is in a place that can allow the Fed to be patient until it has better confidence in underlying disinflation and better clarity into (trade and fiscal) policy outcomes,&#8221; wrote Goldman Sachs economists.
Inflation hedges have delivered strong gains over the past month. The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>) is up nearly 3%; the SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) has surged 9%.
Now Read: 
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Image: Shutterstock

Bonds

Commodities

Traders Rethink Interest-Rate Path As Inflation Concerns Resume: 'Fed's Rate-Cutting Cycle Is Over,' Economist Says

A key market-based gauge of long-term U.S. inflation expectations has surged to its highest level since October 2023, signaling mounting investor concerns over more persistent price <a href="https://www.benzinga.com/news/econ-s">pressures for the economy.</a>
The shift in market sentiment, fueled by trade policy uncertainty under the Donald Trump administration, is already influencing Federal Reserve rate expectations and bond market positioning.
<h3 class="wp-block-heading">Inflation Fears Resurface In Bond Markets</h3>
The U.S. 10-year breakeven inflation rate—a measure derived from the spread between nominal Treasury yields and Treasury Inflation-Protected Securities—climbed to 2.45% as of Monday's close, according to TradingView data. 
This implies that investors now predict annual inflation to average 2.45% over the next decade.
For bondholders, this threshold is critical. 
If annual inflation exceeds an average of 2.45% for the next 10 years, TIP bonds—which are broadly tracked by the iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>)—offer a superior hedge, as they provide a 2.06% real yield plus inflation compensation. 
By contrast, nominal 10-year Treasuries, represented by the U.S. 10-Year Treasury Note ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UTEN#NYSE">UTEN</a>), yield 4.51% but provide no inflation protection.
<h4 class="wp-block-heading">Chart: 10-Year Breakeven Rate Hits 2.45%, Highest Since October 2023</h4>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="503" src="https://editorial-assets.benzinga.com/wp-content/uploads/2025/02/04151930/image-30-1024x503.png" alt="" class="wp-image-765619" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2025/02/04151930/image-30-1024x503.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/02/04151930/image-30-300x147.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/02/04151930/image-30-768x377.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/02/04151930/image-30-1536x754.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/02/04151930/image-30.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h3 class="wp-block-heading">Tariff Uncertainty </h3>
The inflation debate has intensified amid speculation over potential tariff increases.
According to Bill Adams, chief economist at Comerica Bank, rising tariffs on imported goods would contribute to higher consumer prices as importers pass costs onto customers, while domestic manufacturers could capitalize on reduced competition by raising prices further.
&#8220;While the exact timing and size of higher&nbsp;tariffs&nbsp;is anyone's guess, Comerica's forecast assumes that&nbsp;tariffs&nbsp;do increase on American purchases of foreign goods this year,&#8221; Adams said Tuesday. 
&#8220;The bear flattening of the yield curve seen on Monday indicates the bond market views&nbsp;tariffs&nbsp;as a short-term&nbsp;inflation&nbsp;risk and a potential problem for growth further out,&#8221; said Kristian Kerr, head of macro strategy for LPL Financial. 
On Monday, China responded to Trump's 10% import tariff, by implementing countermeasures, including export restrictions on key minerals to the U.S. and new tariffs on American energy products.
China raised tariffs by 10%-15% on select U.S. imports such as coal, liquefied natural gas, crude oil, agricultural machinery, and vehicles.
Goldman Sachs estimates that a broad 10% tariff hike could add roughly 1 percentage point to core personal consumption expenditures—the Federal Reserve's preferred inflation gauge. 
"The boost to U.S. consumer prices would likely be enough to further slow Federal Reserve policy rate cuts," Brian Coulton, chief economist at Fitch Ratings, wrote in a note.
<h3 class="wp-block-heading">Betting Markets See Higher Inflation In 2025</h3>
Speculators on the CFTC-regulated betting platform Kalshi have significantly raised their wagers on inflation exceeding expectations in 2025. 
Market-implied odds indicate a 58% chance that the annual Consumer Price Index will hit at least 4% in one or more months this year—the highest probability recorded since Kalshi launched the market in November 2024.
<iframe loading="lazy" src="https://kalshi.com/external-widgets/events/KXLCPIMAXYOY-25?color_scheme=light&#038;widget_size=large&#038;utm_campaign=benzingawidget" width="100%" height="400px" style="border:0"></iframe>
For January 2025 alone, it&#8217;s more likely than not that the CPI inflation exceeds 2.9%. 
While inflation remains below the extreme levels seen in 2022, market sentiment suggests that the battle against rising prices is far from over. 
<iframe loading="lazy" src="https://kalshi.com/external-widgets/events/KXCPIYOY-25JAN?color_scheme=light&#038;widget_size=large&#038;utm_campaign=benzingawidget" width="100%" height="400px" style="border:0"></iframe>
With the breakeven rate climbing, tariff risks looming, and betting markets pricing in higher prices, investors may be bracing for a longer period of economic uncertainty than previously anticipated.
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Image: Shutterstock

UTEN

Market Inflation Bets Soar As 10-Year Breakeven Rate Hits 16-Month Peak: It Will 'Slow Federal Reserve Policy Rate Cuts'

As markets brace for the Federal Reserve's final policy meeting of the year, scheduled at 2:00 p.m. Wednesday, Goldman Sachs highlighted 20 exchange-traded funds (ETFs) that have historically shown outsized <a href="https://www.benzinga.com/topic/federal-reserve">moves around Fed decision days</a>.
While a 25-basis-point rate cut to a target range of 4.25%-4.50% is widely anticipated, the market's focus is on the Fed's forward guidance, particularly the Summary of Economic Projections (SEP) and the updated &#8220;dot plot.&#8221;
Following December's expected cut, Goldman Sachs projects a more measured pace of easing next year, forecasting rate cuts in March, June, and September, with the terminal rate seen at 3.50%-3.75%.
Read Also: <a href="https://www.benzinga.com/economics/macro-economic-events/24/12/42554114/all-eyes-on-december-fed-meeting-as-traders-await-interest-rate-projections">All Eyes On December Fed Meeting As Traders Await Interest Rate Projections</a>
<h3 class="wp-block-heading">Market Dynamics Around Fed Days</h3>
U.S. equity markets have displayed strong short-term gains during Fed meeting weeks in 2024. 
Investors employing a simple strategy of buying the S&amp;P 500 index at market close before a Federal Open Market Committee (FOMC) announcement and selling at close the following day have captured median returns of 1.1% across the past seven meetings.
Yet those extending the trade horizon to 15 sessions post-Fed meeting have enjoyed significantly larger average gains of 3.29%, more than double the short-term returns. Notably, every Fed meeting this year has resulted in positive 15-day returns.
"We observe that U.S. banking ETFs, such as SPDR S&amp;P Bank ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KBE#NYSE">KBE</a>) and SPDR S&amp;P Regional Banking ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRE#NYSE">KRE</a>), have seen unusually large moves on FOMC days since 2022" Goldman analysts wrote in a recent note.
For bond-focused investors, the report highlights consistent post-meeting gains in high-yield and investment-grade ETFs like iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HYG#NYSE">HYG</a>) and iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LQD#NYSE">LQD</a>).
Meanwhile, energy-focused ETFs, such as the United States Oil Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>), have seen negative reactions. 
<h3 class="wp-block-heading">ETFs Showing Heightened Fed-Day Moves</h3>
Here's Goldman Sachs' list of 20 ETFs with the largest absolute moves – which include both positive and negative swing – on FOMC days:
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>ETF Name</th>
<th>Focus</th>
<th>Average Absolute Move on FOMC since 2022</th>
<th>Average Absolute Move (Last 3 FOMC events)</th>
</tr>
</thead>
<tbody>
<tr>
<td>SPDR S&amp;P Regional Banking ETF </td>
<td>Regional Banking</td>
<td>2.5%</td>
<td>1.5%</td>
</tr>
<tr>
<td>VanEck Semiconductor ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NASDAQ">SMH</a>)</td>
<td>Semiconductor</td>
<td>2.4%</td>
<td>3.7%</td>
</tr>
<tr>
<td>iShares Semiconductor ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SOXX#NASDAQ">SOXX</a>)</td>
<td>Semiconductor</td>
<td>2.4%</td>
<td>3.3%</td>
</tr>
<tr>
<td>SPDR S&amp;P Bank ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KBE#NYSE">KBE</a>)</td>
<td>US Large Banks</td>
<td>2.2%</td>
<td>1.3%</td>
</tr>
<tr>
<td>SPDR S&amp;P Biotech ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XBI#NYSE">XBI</a>)</td>
<td>Biotech</td>
<td>2.0%</td>
<td>0.3%</td>
</tr>
<tr>
<td>United States Oil Fund </td>
<td>Oil</td>
<td>1.9%</td>
<td>2.0%</td>
</tr>
<tr>
<td>Technology Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>)</td>
<td>Technology</td>
<td>1.9%</td>
<td>2.3%</td>
</tr>
<tr>
<td>iShares Silver Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SLV#NYSE">SLV</a>)</td>
<td>Silver</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
<tr>
<td>Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>)</td>
<td>Nasdaq 100</td>
<td>1.7%</td>
<td>1.7%</td>
</tr>
<tr>
<td>Consumer Discretionary Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLY#NYSE">XLY</a>)</td>
<td>Discretionary</td>
<td>1.6%</td>
<td>1.0%</td>
</tr>
<tr>
<td>iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>)</td>
<td>Russell 2000</td>
<td>1.5%</td>
<td>0.3%</td>
</tr>
<tr>
<td>SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>)</td>
<td>S&amp;P 500</td>
<td>1.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td>Vanguard S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOO#NYSE">VOO</a>)</td>
<td>S&amp;P 500</td>
<td>1.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td>Financial Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLF#NYSE">XLF</a>)</td>
<td>Financial</td>
<td>1.1%</td>
<td>0.7%</td>
</tr>
<tr>
<td>SPDR Gold Shares (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>)</td>
<td>Gold</td>
<td>0.9%</td>
<td>1.4%</td>
</tr>
<tr>
<td>iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/EMB#NASDAQ">EMB</a>)</td>
<td>EM Bond</td>
<td>0.8%</td>
<td>0.6%</td>
</tr>
<tr>
<td>iShares iBoxx $ High Yield Corporate Bond ETF </td>
<td>HY Corp Bond</td>
<td>0.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td>iShares iBoxx $ Investment Grade Corporate Bond ETF </td>
<td>IG Corp Bond</td>
<td>0.6%</td>
<td>0.7%</td>
</tr>
<tr>
<td>iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>)</td>
<td>7-10 Year Treasury</td>
<td>0.6%</td>
<td>0.7%</td>
</tr>
<tr>
<td>iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>)</td>
<td>TIPS Bond</td>
<td>0.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td>Average</td>
<td></td>
<td>1.5%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
</figure>
Check Out: 
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<li><a href="https://www.benzinga.com/economics/macro-economic-events/24/12/42539116/fed-meetings-made-stock-traders-richer-in-2024-could-wednesday-bring-last-big-rally">Fed Meetings Made Stock Traders Richer In 2024: Could Wednesday Bring Last Big Rally?</a></li>
</ul>
Image: Shutterstock

20 ETFs Primed For Unusually Big Swings On Fed Meeting Days

Transportation Secretary Pete Buttigieg&#8216;s claim about <a href="https://www.benzinga.com/government/24/09/41006494/the-fed-and-inflation-recalibration">inflation</a> came under scrutiny from Gordon Johnson of GLJ Research, who argued in an X post on Wednesday that pricing pressures have actually been trending upward.
What Happened: Commenting on a news story that contended claims by Republican Vice President candidate Sen. J.D. Vance (R-Ohio) that the Inflation Reduction Action of 2022 stoking pricing pressure, Buttigieg, who serves in the [Joe] Biden administration, said, &#8220;Sure is interesting how we passed the Inflation Reduction Act, and then inflation went down.&#8221;
The Inflation Reduction Act was passed by Congress and signed into law by Biden on Aug. 16, 2022. Apart from provisions for supporting clean energy and reducing emissions, the bill also includes measures to bring down healthcare costs and increase revenue to the government through tax reform. The latter is expected to help the government gather the necessary resources to fund the remaining provisions of the bill.
Johnson At Odds: Johnson stepped in to make a counterclaim. Sharing a chart showing inflation&#8217;s trajectory, the analyst challenged Buttigieg to prove his point with the chart. Inflation has not gone down, only the pace of price increases has slowed, he said.
&#8220;They are still rising and you don&#8217;t seem to care&#8230;at all,&#8221; Johnson said. The chart showed that the annual consumer price inflation is 11.4% points above the 2% inflation trend seen since March 2020.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">1/2 Hey <a href="https://twitter.com/PeteButtigieg?ref_src=twsrc%5Etfw">@PeteButtigieg</a>&#8230; can you show me on this chart where inflation went down? You can&#39;t b/c inflation has NOT WENT DOWN. The pace of prices rising has slowed, yes, but THEY ARE STILL RISING AND YOU DON&#39;T SEEM TO CARE&#8230; AT ALL. In reality, inflation is running at +11.4%&#8230; <a href="https://t.co/g48fbiHxmL">https://t.co/g48fbiHxmL</a> <a href="https://t.co/NPh2ExmEYz">pic.twitter.com/NPh2ExmEYz</a>
&mdash; Gordon Johnson (@GordonJohnson19) <a href="https://twitter.com/GordonJohnson19/status/1839031424659161317?ref_src=twsrc%5Etfw">September 25, 2024</a></blockquote>
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<figcaption class="wp-element-caption">Economist Peter Schiff, who also holds a similar view, reacted to Buttigieg&#8217;s post. The economist said inflation would have gone down more without the Inflation Reduction Act. &#8220;But inflation is about to go back up, and the inflation &#8220;reduction&#8221; Act is one reason that the next leg up in inflation will be even bigger than the last,&#8221; he warned.</figcaption></figure>
Delving into the root cause, the economist said the problem was excessive government spending and regulations. &#8220;That undermines productivity and results in larger budget deficits, which depletes savings and results in the Fed creating more money to buy Treasuries,&#8221; he said. The economist called upon massive spending cuts by the government if inflation were to go down. 
See Also: <a href="https://www.benzinga.com/money/best-inflation-stocks">Best Inflation Stocks</a>
Why It&#8217;s Important: The slowdown in inflation from the 9%+ level in the summer of 2022 to 2.5% in August has allowed the Federal Reserve to reduce the Fed fund rate, which was hovering at a 22-year higher ahead of the 50 basis-point cut announced last week. Inflation deniers argue that the owners-equivalent rent component, which is one of the main reasons for the sticky inflation, is based on lagging data and is not reflective of the current situation.
Schiff, meanwhile, sees renewed inflation pressure as the U.S. dollar weakens amid the rate cuts, potentially pushing up inflationary pressure.
More clarity on inflation will likely emerge when the Bureau of Labor Statistics releases the <a href="https://www.benzinga.com/news/large-cap/24/09/41029162/feds-favorite-inflation-data-friday-could-sway-november-interest-rate-cut-odds">personal income and spending report for August on Friday.</a> The report comprises the personal consumption expenditure index, which is the Fed&#8217;s favorite inflation gauge.
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Wednesday's session down 0.38% at $110.41, according to&nbsp;<a href="https://benzinga.grsm.io/lxquj26b2sag" target="_blank" rel="noreferrer noopener">Benzinga Pro data</a>.
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</ul>
Image Via Shutterstock

News

Analyst Counters Pete Buttigieg's Assertion That Inflation Went Down After Biden's IRA 2022: 'They Are Still Rising And You Don't Seem To Care..At All'

The Federal Reserve&#8217;s rate-setting committee -the <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/09/40883023/how-second-tier-economic-data-tuesday-could-sway-the-feds-rate-decision-it-will-be-">Federal Open Market Committee, kickstarts a two-day meeting on Tuesday</a> and the futures market currently bakes in a 67% probability of a 50-basis-point rate cut. Ahead of the all-important meeting, Nobel laureate Paul Krugman said on Monday the fed funds rates are &#8220;too high.&#8221;
Data Turns Benign: The Fed targets inflation of around 2% over the longer run, with its favorite inflation gauge being the annual rate of the price index for personal consumption expenditure. The latest available data show that the annual rate of headline and core consumer price inflation was 2.5% and 3.2%, respectively, in August.
Using the personal consumption expenditure as an inflation measure shows the annual headline and core rate at 2.5% and 2.6%, respectively, in July.
Krugman said inflation is basically in line with the target if the lagging shelter measures are accounted for. Pointing to the job openings data, he said, &#8220;The labor market is cooler than it was before the pandemic.&#8221; Job openings fell to 8.83 million in July, the lowest since 2021, according to a Bureau of Labor Statistics report.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">Meanwhile, the labor market is cooler than it was before the pandemic 2/ <a href="https://t.co/nkxhKFjpYd">pic.twitter.com/nkxhKFjpYd</a>
&mdash; Paul Krugman (@paulkrugman) <a href="https://twitter.com/paulkrugman/status/1835652859934675165?ref_src=twsrc%5Etfw">September 16, 2024</a></blockquote>
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</figure>
See Also: <a href="https://www.benzinga.com/money/best-inflation-stocks">Best Inflation Stocks</a>
Rates Elevated: Juxtaposing that with the Fed funds rate, Krugman noted that even a 50-point cut would leave the Fed funds rate 300 basis points above pre-pandemic.
<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="730" height="545" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/17015844/image-1-33.png" alt="" class="wp-image-550990" style="width:920px;height:auto" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/17015844/image-1-33.png 730w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/17015844/image-1-33-300x224.png 300w" sizes="(max-width: 730px) 100vw, 730px" /></figure>
&#8220;How can this be justified?&#8221; he asked. While self-answering the question, the economist said the economy doesn&#8217;t seem to be in a recession yet. The Fed is apparently waiting to adjust the taps until it turns ice-cold, he said, adding that &#8220;maybe it&#8217;s PTSD from the unexpected inflation of 2021-22, but it&#8217;s still a big mistake.&#8221;
&#8220;Also bear in mind that the risks are asymmetric: we&#8217;re probably back in the world where excessively loose monetary policy will only gradually affect inflation, while a labor market downturn could happen very fast,&#8221; Krugman said.
Realistically, there is hope for a 50 basis-point cut, the economist said. He, however, said the argument for incrementalism is very weak.
Meanwhile, economists on the other end of the spectrum such as Peter Schiff think <a href="https://www.benzinga.com/news/24/09/40890618/peter-schiff-says-unlikely-that-fed-rate-cuts-will-lower-borrowing-costs-predicts-rising-mortgage-ra">a rate cut now would be a huge mistake, </a>as it would potentially weaken the dollar and fan inflationary pressure, with the vicious cycle continuing.
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Monday's session up 0.34% at $110.82, according to&nbsp;<a href="https://benzinga.grsm.io/lxquj26b2sag" target="_blank" rel="noreferrer noopener">Benzinga Pro data</a>.
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</ul>
Photo by TANYA LARA on Shutterstock

Ahead Of FOMC Meeting Paul Krugman Says Fed Rates Will Be Elevated Even With 50 Bps Cut: 'Argument For Incrementalism Is Very Weak'

The <a href="https://www.benzinga.com/news/24/08/40650939/kamala-harris-wants-to-tax-the-ultra-wealthy-with-unrealized-gains-tax-leaving-silicon-valley-unsett">Democrats&#8217; call for taxing the rich</a> hasn&#8217;t gone well with economist and gold bull Peter Schiff, who suggested the party should approach the problem the other way around.
What Happened: Democrats clamor for the rich to pay their fair share of taxes but they are already paying 40% of the federal income tax, said Schiff in a post on Sunday. &#8220;That means the rich already pay far more than their fair share,&#8221; he said.
If the rich were to pay their fair share of taxes, the Democrats should cut their taxes, he added.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true"><a href="https://twitter.com/hashtag/Democrats?src=hash&amp;ref_src=twsrc%5Etfw">#Democrats</a> keep insisting that the rich must pay their fair share of taxes. But the top 1% currently pays 40% of the federal income tax. That means the rich already pay far more than their fair share. If Democrats want the rich to pay their fair share, they must cut their taxes.
&mdash; Peter Schiff (@PeterSchiff) <a href="https://twitter.com/PeterSchiff/status/1835360342106353686?ref_src=twsrc%5Etfw">September 15, 2024</a></blockquote>
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</figure>
Schiff also said 40% of Americans pay no federal income tax at all. &#8220;Are Democrats going to insist that the poor start paying their fair share?&#8221; he asked. 
To a question from one of his followers regarding some corporations such as Amazon paying taxes at a far lower rate, the economist said their shareholders pay taxes and many of Amazon&#8217;s shareholders aren&#8217;t rich, he said.
See Also: <a href="https://www.benzinga.com/money/best-growth-stocks">Best Growth Stocks Right Now</a>
Why It&#8217;s Important: Vice President Kamala Harris, who replaced President Joe Biden on the Democratic ticket, has come under criticism for her proposal to impose unrealized capital gains tax, which is dubbed Harris&#8217; billionaire minimum tax. The new proposal calls upon Americans with net wealth above $100 million to pay a minimum effective tax rate of 25% on an expanded measure of income that includes their unrealized capital gains, <a href="https://taxfoundation.org/blog/harris-unrealized-capital-gains-tax/">according </a>to the Tax Foundation.
Commenting on the proposal, the nonpartisan, tax policy non-profit said the proposal would &#8220;take the tax code in the wrong direction by imposing a complicated tax on a narrow segment of high-earning taxpayers in a way that's never been tried.&#8221;
&#8220;This proposal would add new compliance burdens for taxpayers and administrative challenges for the IRS while weakening the US economy by raising the tax burden on saving and entrepreneurship,&#8221; it added.
Sen. Bernie Sanders (I-Vt) said in a recent interview that about 60% of Americans are living paycheck to paycheck and the gap between the rich and poor is growing wider. He also opined that Harris should go higher than the 28% she has proposed. &#8220;When you have got three people on top earning more wealth than the bottom half of American society, where billionaires pay an effective tax rate lower than truck drivers or nurses, yeah, you can substantially raise taxes on the billionaire class and the people on top,&#8221; he said.
Republican candidate Donald Trump&#8217;s tax proposals are considered to be far more business-friendly, as he has pledged to reduce the tax rates and make up for the shortfall through income generated out of additional tariffs. However, economists caution regarding the <a href="https://www.benzinga.com/news/24/07/39630382/paul-krugman-says-trump-tariffs-will-hurt-80-of-americans-benefit-only-the-top-1-burden-would-fall-o">tariffs stoking import price inflation </a>and in turn economy-wide inflationary pressure.
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Friday's session up 0.34% at $110.44, according to&nbsp;<a href="https://benzinga.grsm.io/lxquj26b2sag" target="_blank" rel="noreferrer noopener">Benzinga Pro data</a>.
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</ul>
Image via Shutterstock

Government

Regulations

Politics

Peter Schiff At Odds With Bernie Sanders Over Taxing Rich, Calls Upon Democrats To Cut Taxes: 'They're Already Paying 40% Of The Federal Income Tax'

No Signs Of Recession: The <a href="https://www.benzinga.com/opinion/24/08/40229775/investors-cheer-a-likely-rate-cut-history-says-be-careful-what-you-wish-for">Federal Reserve may not cut interest rates</a> until the November meeting, according to Brad Case, chief economist at Middleburg Communities, a real-estate investment and construction firm.
In an interview with Yahoo Finance, Case <a href="https://www.youtube.com/watch?v=RxDo6d34Eb8">said</a>, &#8220;There&#8217;s no particular reason to cut rates right. When data really show a softening economy, yes then there will be a chance to cut rates but we don&#8217;t have that kind of data yet.&#8221;
Consumer spending has remained strong, and wages and income have continued to increase, providing consumers with the money to spend, he said. &#8220;Until we start to see faltering in income growth or in consumption growth, there&#8217;s really no reason to think that the economy needs lower rates,&#8221; he added.
Data that are used for making forecasts about macroeconomic conditions are based on surveys and there is likely to be month-to-month bumps in the data, said Case. The July employment report was weaker than expected but there have been several times in the past an employment report that is weaker than expected followed by other employment reports that were are not so weak, he added.
&#8220;Before we start to take data like that as a sign of actual weakness throughout the economy, we need to see some sustained weakness in those indicators and we need to see it across a bunch of indicators,&#8221; Case said.
A recession, Case said, doesn&#8217;t mean that one part of the economy is weak. A recession means sustained strong weakness throughout the economy, both geographically across the country and throughout many or most sectors of the economy, he said, adding that &#8220;we we just don&#8217;t see that.&#8221;
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On CME FedWatch Tool: Case also shed light on the CME FedWatch Tool, which is based on futures trading. The tool now projects a 51.5% probability of a 25-basis-point cut at the September meeting, which would take the rate from the current 22-year high of 5.25%-5.50%. The futures market is pricing in a 48.5% probability of a 50-basis-point cut. 
Case said the tool is based on investment activities by people, who have important reasons for hoping for a cut in interest rates. &#8220;It&#8217;s not an infallible tool,&#8221; he said.
It is only prudent to look at a broad range of indicators and look for multi-month trends, the economist said. &#8220;My recession probability forecasting model has increased in probability but only to 41%. &#8220;The probability of recession over the next year has increased but it hasn&#8217;t become very strong,&#8221; he said.
Rate Outlook: Between now and November, there will be enough data that suggests that the Fed should not continue to keep rates high and because of that the Fed will start to reduce rates in November, Case said.
The betting market is predicting a 95% chance of a Fed rate cut in September, according to data available on Polymarket. The probability is an even higher 97% for a cut in November and 98% for December.
The next meeting of the Fed&#8217;s monetary policy-setting committee &#8211; the Federal Open Market Committee, is scheduled for September 17-18. Before the meeting, the central bank may have on hand two consumer price inflation reports and a job market data to assess. 
The July <a href="https://www.benzinga.com/topic/cpi">consumer price inflation report</a> is due on Wednesday, with economists, on average, forecasting the annual rate of the core consumer price inflation to tick down from 3.3% to 3.2%.
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Friday&#8217;s session up 0.26% at $108.20, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data</a>.
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<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40261111/mortgage-rates-fall-to-lowest-level-in-over-a-year-ease-pressure-on-homebuyers-good">Mortgage Rates Fall To Lowest Level In Over A Year, Ease Pressure On Homebuyers: &#8216;Good News For Home Price Appreciation&#8217;</a></li>
</ul>

Media

Economist Pours Cold Water On September Rate Cut: 'We Need To See Some Sustained Weakness'

Paul Krugman, an authority in economics and Noble Prize winner, commented on Friday&#8217;s<a href="https://www.benzinga.com/economics/macro-economic-events/24/06/39547288/feds-preferred-inflation-gauge-falls-to-lowest-level-since-november-2021-relieves"> inflation data that showed a further easing in pricing pressure, </a>prompting an increase in the odds of rate cuts.
Inflation War Won? &#8220;Inflation looks beaten,&#8221; said Krugman in a post on X, formerly Twitter. The Bureau of Economic Analysis&#8217; personal income and spending report released on Friday showed that the annual rate of the personal consumption expenditure index (PCEI) came in 2.6%, marking the lowest level since March 2021. The metric is considered the Fed&#8217;s favorite inflation gauge.
Sharing a chart of the annual rates of PCEI and the core PCEI, Krugman said, &#8220;The blip a few months ago looks like start-of-year price resets, and what's left is lagged housing costs.&#8221;
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">In other news, inflation looks beaten. The blip a few months ago looks like start-of-year price resets, and what's left is lagged housing costs <a href="https://t.co/OsBPCPC2vo">pic.twitter.com/OsBPCPC2vo</a>
&mdash; Paul Krugman (@paulkrugman) <a href="https://twitter.com/paulkrugman/status/1806724684584550764?ref_src=twsrc%5Etfw">June 28, 2024</a></blockquote>
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</figure>
See Also: <a href="https://www.benzinga.com/money/best-inflation-stocks">Best Inflation Stocks</a>
Why It&#8217;s Important: Consumer price inflation rose to a high of 9%+ in the summer of 2022 and has been trending broadly downward. The CPI, which was at 3.1% at the start of this year, jumped slightly to 3.5% in March and fell to 3.4% in April. Krugman attributed the spike seen earlier this year to &#8220;start-of-year price resets.&#8221;
One significant factor keeping the CPI inflation above the Federal Reserve&#8217;s 2% threshold is shelter costs. Home prices are not included in inflation calculations because they are considered an investment by the Bureau of Labor Statistics. However, the CPI does include rents and &#8220;owners&#8217; equivalent rents,&#8221; which estimate the amount a homeowner might charge if they rented out their own home.
Shelter costs accounts for 30-40% of the CPI.
The BLS collects data for calculating the CPI every month, but the rent included is the amount negotiated at the start of the lease, which may have been set well before that particular month. Therefore, economists often regard this number as a lagging indicator.
The inflation number is particularly important, as the Federal Reserve has maintained the Fed funds rate at a 22-year high. A reduction in interest rates could kickstart growth and have a cyclical effect on the economy.
For the stock market, which is rallying due to a sharp spike in shares of select stocks tied to artificial intelligence technology, a rate cut could mean additional gains. Lowering rates is seen as a positive for interest-rate-sensitive companies, potentially leading to a rise in stock prices and a broadening of the rally.
That said, inflation truthers such as Peter Schiff have warned that <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/38840668/gold-bull-peter-schiff-says-inflation-headed-far-higher-as-powell-refuses-to-acknow">inflationary pressure will reignite in the near- to medium-term.</a>
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Friday&#8217;s session down 0.31% at $106.78, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/top-stories/24/06/39552559/inflation-data-shows-fed-policy-is-working-daly-says">Inflation Data Shows Fed Policy Is &#8216;Working&#8217;, Daly Says</a>
Photo: Shutterstock

Prominent Economist Paul Krugman Says 'Inflation Beaten,' Underlines This As Reason For Sticky Pricing Pressure

Former Treasury Secretary Larry Summers on Friday said he hasn&#8217;t seen a <a href="https://www.benzinga.com/government/24/06/39319275/no-income-tax-yes-to-high-import-tariffs-trump-floats-idea-to-ceos-gop-lawmakers">more inflationary economy policy than that of presumptive presidential candidate Donald Trump in his lifetime</a>, calling it an &#8220;irresponsible set of proposals.&#8221;
Biggest Supply Shock: Trump&#8217;s tariff proposals are the biggest supply shock that will likely push up prices of not just imported goods but all of goods that compete with those imported, Summers <a href="https://www.youtube.com/watch?v=NXdT6Zoq9YE">said</a> in an interview with Bloomberg.
&nbsp;&#8220;Anybody who&#8217;s worried about gouging should think that more competition, including from abroad, is a very, very important step,&#8221; he said. 
Summers noted that Trump&#8217;s plans for greater labor restrictions will likely cause wage inflation, and scaling back renewable energy subsidies will increase energy costs. This, the economist said, will significantly increase inflation and inflation expectations, putting more pressure on the Fed to prove its credibility.
&#8220;This could easily be a prescription for a 10% mortgage rate,&#8221; he said, adding that &#8220;this is really dangerous stuff.&#8221;
See Also:&nbsp;<a href="https://www.benzinga.com/money/best-inflation-stocks" target="_blank" rel="noreferrer noopener">Best Inflation Stocks</a>
Misspeak? Regarding reports that Trump discussed replacing income taxes with tariffs in a meeting with Republican lawmakers, Summers said people sometimes misspeak and aren&#8217;t serious about what they say. 
&#8220;That&#8217;s probably a feature of candidate Trump,&#8221; he said.
Replacing the income tax with revenue from tariffs would be the worst macroeconomic policy proposal in U.S. history, the former Treasury secretary said.
&#8220;It, of course, burdens the middle class and the poor who purchase goods, the goods that exist on international markets. So, it&#8217;s regressive,&#8221; he added.
The economist noted that the 1930 Smoot-Hawley tariffs, which were only 0.6% of GDP, caused enormous damage and worsened the Great Depression. If currently, half of income tax revenues were replaced with tariffs, it would work out to six times Smoot-Hawley levels, he said.
&#8220;That&#8217;s got the potential to do enormous damage to the competitiveness of every U.S. exporter, to do huge damage to all kinds of workers who use imported goods in what their businesses produce to create a downward spiral,&#8221; Summers said.
He added that significantly higher prices for imported goods mean consumers will have less to spend on other items.
Summers also pointed out that higher tariffs will lead to economic warfare as other countries respond in kind. 
&#8220;This is a prescription for the mother of all stagflations,&#8221; he said.
The economist, however, believes that tariffs replacing income taxes could happen if Trump were elected, urging the market not to dismiss this possibility.
&#8220;But this is something that I think should be viewed very ominously,&#8221; he added.
Nobel laureate and economist Paul Krugman said last week that <a href="https://www.benzinga.com/news/24/06/39326844/trumps-tax-agenda-could-lead-to-133-tariffs-and-inflation-spike-says-paul-krugman-just-ignorant">Trump tariffs may have to be as high as 133% if they were to make up for the loss of revenue from income taxes.</a>
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Friday&#8217;s session up 0.12% at $106.19, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/markets/equities/24/06/39340719/inflation-cools-in-may-fed-hints-at-slower-pace-of-rate-cuts-stocks-hit-new-record-highs-this-we">Inflation Cools In May, Fed Hints At Slower Pace Of Rate Cuts, Stocks Hit New Record Highs: This Week In The Market</a>
Photo: Shutterstock

Larry Summers Warns Donald Trump's Fiscal Policy Could Inflict More Damage Than One That Precipitated Great Depression: 'Prescription For The Mother Of All Stagflations'

After CNBC reported that presumptive Republican presidential candidate Donald Trump is considering replacing income taxes in the U.S. with additional import tariffs to offset the revenue shortfall, Nobel laureate and economist Paul Krugman shared his views on the matter through a series of posts on X, formerly known as Twitter, on Thursday.
Impractical Approach: If Trump&#8217;s proposal were to be implemented, the average tariff required to supplant the income tax would be 133%, said Krugman. The economist also shared the math behind the estimate. Imports make up about 14% of the U.S. GDP, while the federal income tax revenue, not including payroll taxes, makes up 8%, he said. In order to replace the income tax, tariff rates should be 8/14 or around 57%, he added.
Since tariffs tend to raise import prices to consumers, higher tariffs would reduce imports, the economist said, adding this would mean &#8220;you need a higher tariff rate.&#8221; This would have a cyclical effect of reducing imports further, necessitating a still higher tariff for generating the income to do away with income taxes, he said.
Determining how high tariffs need to go in the end depends on the elasticity of demand for higher import prices, Krugman said. Assuming an elasticity of 1, the required tariff would be 133%, he explained. &#8220;With a higher elasticity, it would go higher, maybe to infinity,&#8221; he warned.
The economist also contrasted the situation prevailing now and back then in the 19th century, when the federal government largely paid its way with tariffs. &#8220;Because back then the government was much, much smaller,&#8221; he said.
&#8220;Believing that we can go back to those days is just ignorant.&#8221;
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">This was a bit cryptic, so a quick explanation 1/ <a href="https://t.co/l38na9IFMN">https://t.co/l38na9IFMN</a>
&mdash; Paul Krugman (@paulkrugman) <a href="https://twitter.com/paulkrugman/status/1801370551656792392?ref_src=twsrc%5Etfw">June 13, 2024</a></blockquote>
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See Also: <a href="https://www.benzinga.com/money/best-inflation-stocks">Best Inflation Stocks</a>
Why It&#8217;s Important: Trump reportedly told lawmakers from his party at a meeting at the Capitol Hill Club in Washington D.C. that tariffs could be used to &#8220;leverage negotiating power over bad actors.&#8221;
Commenting on the idea floated by the former president, New York University Law Professor David Kamin<a href="https://x.com/davidckamin/status/1801267503802335478"> said, </a>&#8220;Broadly substituting tariffs for income tax is a sure way to hit hard low and middle-income Americans and reward top.&#8221;
Earlier this month, former Treasury Secretary Larry Summers said, in an interview with the Atlantic, Trump&#8217;s economic policies, including &#8220;compromising the independence of the Federal Reserve Board, enlarging the federal budget deficit by extending his 2017 tax cuts, raising tariffs&#8221; etc., are inflationary. He also flagged the real possibility of mortgage rates <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/06/39131503/ex-treasury-secretary-larry-summers-warns-trumps-re-election-may-push-mortgage-rate">shooting above 10% under Trump.</a>
One of the pushbacks that President Joe Biden is facing in his potential rematch with Trump is voter perception regarding his ability to shepherd the economy, especially inflation. If Trump gravitates to policies and measures that are inflationary, it could hurt his re-election chances, which are already weighed down by his multiple legal travails.
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, rose 0.39% to $106.77 on Thursday, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/markets/equities/24/06/39322329/nasdaq-100-s-p-500-close-at-record-highs-as-tech-stocks-reclaim-dominance-thursdays-gainers-lose">Nasdaq 100, S&amp;P 500 Close At Record Highs As Tech Stocks Reclaim Dominance: Thursday&#8217;s Gainers &amp; Losers</a>
Photo by Tanya Lara on Shutterstock

General

Trump's Tax Agenda Could Lead To 133% Tariffs And Inflation Spike, Says Paul Krugman: 'Just Ignorant'

President Joe Biden is expected to sign an executive order on Tuesday to temporarily close the U.S.-Mexico border to migrants when it exceeds a certain threshold, suspending <a href="https://www.benzinga.com/topic/immigration">long-standing asylum protections</a>.
What Happened: According <a href="https://www.nytimes.com/2024/06/03/us/politics/biden-immigration-asylum-order.html?smid=fb-nytimes&amp;smtyp=cur">to</a> the New York Times, a Biden-signed executive order on this issue marks a significant policy shift.
News sources reported two different ranges of thresholds: The New York Times stated via sources it could be an average of 5,000 border crossings in a week, or 8,500 in a single day.
AP <a href="https://apnews.com/article/biden-immigration-executive-order-asylum-border-7cd0b0f28e298036ad1fc6b0c78961e1">cites</a> that the executive order &#8220;would shut down asylum requests&nbsp;to the U.S.-Mexico border once the number of daily encounters hits 2,500 between ports of entry, with the border reopening once that number declines to 1,500, according to several people familiar with the discussions.&#8221; 
<a href="https://www.benzinga.com/news/24/02/37061857/trump-will-be-held-accountable-every-day-between-now-and-november-for-sabotaging-border-deal-says-bi">Earlier this year</a>, former President Donald Trump <a href="https://www.benzinga.com/news/24/02/37049493/trump-takes-credit-for-collapse-of-bipartisan-border-deal-i-think-we-killed-it-its-dead">took credit</a> for Republican Senators voting against bipartisan border legislation, arguing that its passage would be a political win for Biden.
Since then, thousands of migrants continued to cross the border daily. 
Biden&#8217;s latest effort marks the most restrictive border policy by any modern Democrat. It&#8217;s also reminiscent of a 2018 attempt by Trump, which faced harsh criticism and legal challenges.
Biden faces immense pressure to address illegal migration, <a href="https://www.benzinga.com/general/politics/24/02/36970427/crisis-of-illegal-immigration-new-survey-shows-record-number-of-voters-cry-major-issue-but-who-g">a key voter concern</a>. Polls indicate increasing support for stricter border measures among Democrats. 
The order allows border officials to deny asylum claims and swiftly turn away migrants if crossings exceed a set threshold. 
See Also: <a href="https://www.benzinga.com/news/24/04/38488525/elon-musk-advocates-for-easier-and-simplified-legal-immigration-process-amid-migrant-influx">Elon Musk Advocates For &#8216;Easier And Simplified&#8217; Legal Immigration Process Amid Migrant Influx</a>
Why It Matters: Sunday reportedly saw over 3,500 migrant apprehensions at the border. 
Immigration is among the major issues concerning voters in the <a href="https://www.benzinga.com/topic/2024-presidential-election">upcoming 2024 presidential election</a>.
Republicans and Democrats both face criticism for not taking action. But when the GOP hindered <a href="https://www.benzinga.com/government/24/02/36940752/migrant-legislation-to-reach-senate-vote-this-week-whats-at-stake-with-the-new-border-deal">additional border enforcement</a> this year for Trump&#8217;s sake, it marked a significant policy shift between the parties. 
For example, in 2019 Biden ran on a platform that criticized then-President Trump&#8217;s asylum policies. Biden asserted that asylum seekers should present their cases within the U.S. 
This new order demonstrates a significant departure from that stance.
ETFs To Watch: according to&nbsp;<a href="https://benzinga.grsm.io/lxquj26b2sag" target="_blank" rel="noreferrer noopener">Benzinga Pro data</a>, there are several exchange-traded funds (ETFs) to follow as this news unfolds. They include:
<ul>
<li>iShares U.S. Home Construction ETF (BATS:<a class="ticker" href="https://www.benzinga.com/stock/ITB#BATS">ITB</a>)</li>
<li>iShares U.S. Health Care Providers ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IHF#NYSE">IHF</a>)</li>
<li>iShares Global Infrastructure ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IGF#NASDAQ">IGF</a>)</li>
<li>and iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>)</li>
</ul>
Now Read: <a href="https://www.benzinga.com/general/politics/24/03/37499660/jon-stewart-mocks-donald-trump-for-new-immigration-crisis-phrasing-hannibal-lecter-comparisons">Jon Stewart Mocks Donald Trump For New Immigration Crisis Phrasing, Hannibal Lecter Comparisons</a>
Disclaimer:&nbsp;This content was partially produced with the help of&nbsp;<a href="https://www.benzinga.com/author/benzinga-neuro" target="_blank" rel="noreferrer noopener">Benzinga Neuro</a>. Benzinga editors reviewed and published the article.
Photo: Shutterstock

Latin America

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iShares Dow Jones US Homenstruction Index Fund

Biden To Sign Executive Order To Limit Asylum Seekers Crossing US-Mexico Border: Report

Former Treasury Secretary <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38196450/larry-summers-says-june-rate-cut-could-be-dangerous-and-egregious-error-after-hotte">Larry Summers, who is on the &#8220;inflation truthers&#8221; camp,</a> said on Sunday there is a real risk of inflation spiking if Donald Trump wins a second term.
Trump Bad For The Economy? Trump&#8217;s re-election could mean the U.S. could see another bout of inflationary pressure, Summers <a href="https://www.theatlantic.com/politics/archive/2024/06/trump-plan-supercharge-inflation/678566/?utm_source=twitter&amp;utm_medium=social&amp;utm_campaign=social">told</a> The Atlantic. &#8220;There has never been a presidential platform so self-evidently inflationary as the one put forward by President Trump,&#8221; he said. &#8220;I have little doubt that with the Trump program, we will see a substantial acceleration in inflation unless somehow we get a major recession first,&#8221; he said.
Incidentally, Summers was among the economists, who warned the [Joe] Biden administration of the risk of rising inflation when it approved a massive COVID-19 relief package in 2021. The former Treasury official now told The Atlantic that he wasn&#8217;t sure of the success of the policies of Biden and the Federal Reserve to bring inflation down to the central bank&#8217;s 2% target.
Summers, however, was more downbeat about a Trump term. Trump&#8217;s blueprint would make inflation worse, he reportedly said.
Among the components of Trump&#8217;s economic agenda that will likely have an upward thrust on inflation are &#8220;compromising the independence of the Federal Reserve Board, enlarging the federal budget deficit by extending his 2017 tax cuts, raising tariffs, rescinding Biden policies designed to promote competition and reduce &#8216;junk fees&#8217; and squeezing the labor supply by restricting new immigration and deporting undocumented migrants already here,&#8221; Summers said.
Summers followed up with a post on X, formerly Twitter, in which he said it&#8217;s difficult to predict the timing and the precise dynamics. &#8220;But it is hard to imagine a policy package more likely to create stagflation than measures that directly raise prices (through tariffs), undermine competition, enlarge deficits, and excessively expand the money supply,&#8221; he added.
He further flagged the possibility of mortgage rates going past 10% under Trump. &#8220;There is a real risk during a Trump presidency that we would again see mortgage rates above 10 percent as inflation expectations rose and long-term interest rates increased,&#8221; he said.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">There is a real risk during a Trump presidency that we would again see mortgage rates above 10 percent as inflation expectations rose and long-term interest rates increased.
&mdash; Lawrence H. Summers (@LHSummers) <a href="https://twitter.com/LHSummers/status/1797391697258713323?ref_src=twsrc%5Etfw">June 2, 2024</a></blockquote>
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See Also: <a href="https://www.benzinga.com/money/best-inflation-stocks">Best Inflation Stocks</a>
Why It&#8217;s Important: The 30-year fixed-rate mortgage rate rose to 7.05% in the week ended May 24 and all the other loan types also saw rate increases, according to weekly data released by the Mortgage Bankers Association. The 30-year mortgage rate is now at its highest level since early 2002.
<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1024" height="350" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/03033642/fredgraph-1-1024x350.png" alt="" class="wp-image-367225" style="width:920px;height:auto" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/03033642/fredgraph-1-1024x350.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/03033642/fredgraph-1-300x102.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/03033642/fredgraph-1-768x262.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/03033642/fredgraph-1.png 1318w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Source: St. Louis Fed
The higher mortgage rate reflects the elevated Fed funds rate, which currently hovers at a 22-year high of 5.25%-5.50%. Consumer inflation, though having eased from the cycle peak of 9.1% in June 2022, remains stubbornly elevated. The April inflation report showed <a href="https://www.benzinga.com/markets/equities/24/05/38842603/us-inflation-falls-as-expected-in-april-bolsters-fed-rate-cut-bets">annual headline and core inflation of 3.4% and 3.6%, respectively.</a>
Summers&#8217; view of Trump&#8217;s policy likely being inflationary comes at a time when the American public is highly critical of Bidenomics — the term used to refer to the economic policy of the current regime. Most nationwide surveys show registered voters and the American public reposing increased confidence in Trump&#8217;s ability to handle the economy than Biden&#8217;s.
An FT-Michigan Ross poll held between late March and early April showed that 40% trusted in Trump&#8217;s ability to handle the economy compared to 34% who felt the same about Biden. About 20% said they trusted neither. Despite economic data painting a fairly robust economic picture, voters are a disgruntled lot, as they see a worsening of the overall economy and their personal financial situation.
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, rose % to $ at $ in premarket trading Monday, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/39023220/undocumented-immigration-good-for-economy-black-swan-author-nassim-taleb-warns-any-">Undocumented Immigration Good For The Economy? Black Swan Author Nassim Taleb Warns Any Sudden Curb Would Lead To &#8216;Explosive Inflation&#8217;</a>
Photo via Shutterstock

Ex-Treasury Secretary Larry Summers Warns Trump's Re-Election May Push Mortgage Rates Beyond 10%: 'Never Been A Presidential Platform So Self-Evidently Inflationary'

President Joe Biden&#8217;s <a href="https://www.benzinga.com/government/24/05/38978431/most-americans-think-economy-is-in-recession-under-biden-despite-hard-data-telling-different-story-w">poll prospects have been stymied by public perception of elevated inflation</a> and a sluggish economy despite the numbers telling an altogether different story. Nobel laureate and economist Paul Krugman on Monday weighed in on this conundrum.
What Happened: Krugman shared on X a chart showing consumer prices under Biden and former Republican President Ronald Reagan. The chart showed Biden starting his presidential tenure with a lower inflation than Reagan and boasting a lower inflation rate until the end of the first year.
In the subsequent months, inflation under the Biden regime was slightly higher than Reagan&#8217;s at similar points in their respective presidencies. And after 36 months, the consumer prices were beginning to converge.
Krugman commented on the chart, &#8220;For those saying that Americans are righteously angry because the level of prices is up even though the rate of inflation has fallen, a history lesson.&#8221;
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">For those saying that Americans are righteously angry because the level of prices is up even though the rate of inflation has fallen, a history lesson <a href="https://t.co/2n5zQS84aD">pic.twitter.com/2n5zQS84aD</a>
&mdash; Paul Krugman (@paulkrugman) <a href="https://twitter.com/paulkrugman/status/1795134482539819222?ref_src=twsrc%5Etfw">May 27, 2024</a></blockquote>
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<figcaption class="wp-element-caption"> See Also: <a href="https://www.benzinga.com/money/best-inflation-stocks">Best Inflation Stocks</a> Why It&#8217;s Important: The economic policy of Reagan, popularly called Reaganomics, has been deemed a success by most economists. Economists Jeffrey Eisenach and James Miller III <a href="https://www.hoover.org/research/reaganomics">called</a> Reagan&#8217;s reign a watershed presidency in a paper published on the website of the American public policy think tank Hoover Institution in 2004.</figcaption></figure>
&#8220;He launched the longest peacetime expansion in the American economy. Inflation, interest, and unemployment rates all fell. Other relevant indexes rose: employment, the labor force participation rate, and productivity,&#8221; they said in the paper. His go-to tool for achieving prosperity was to cut taxes, reduce social spending, increase military spending, and implement market deregulation.
Reagan served two terms as president, spanning from Jan. 20, 198, to Jan. 20, 1989. Inflation under the former president <a href="https://www.reaganfoundation.org/ronald-reagan/the-presidency/economic-policy/">fell</a> from 13.5% in 1980 to 4.1% by 1988, with the decline attributed mainly to fiscal restraint and reducing government spending, combined with tax reforms and deregulation.
The most recent numbers showed <a href="https://www.benzinga.com/markets/equities/24/05/38842603/us-inflation-falls-as-expected-in-april-bolsters-fed-rate-cut-bets">year-over-year rates of headline and core inflation at 3.4% and 3.6%, respectively, in April.</a> Thawing inflation below the Federal Reserve&#8217;s 2% upper ceiling is important as it would provide the central bank with the confidence to take down the Fed funds rate, which is currently at a 22-year high of 5.25%-5.50%.
The&nbsp;iShares TIPS Bond ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>),&nbsp;an ETF tracking the investment results of an index&nbsp;composed of inflation-protected U.S. Treasury bonds, ended Friday&#8217;s session up 0.12% at $106.44, according to&nbsp;<a href="https://benzinga.grsm.io/lxquj26b2sag" target="_blank" rel="noreferrer noopener">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/markets/cryptocurrency/24/05/38991084/inflation-stresses-retail-traders-as-fed-cuts-look-unlikely-crypto-doubts-increase-survey">Inflation Stresses Retail Traders As Fed Cuts Look Unlikely, Crypto Doubts Increase: Survey</a>
Photo via Shutterstock

Paul Krugman Schools Americans 'Righteously Angry' About Soaring Costs: Biden's Price Levels Mirror Reagan's Inflation Triumph

Inflation has persisted as a significant issue, now emerging as a key factor in the upcoming election.
Curbing <a href="https://www.benzinga.com/general/politics/24/02/36970427/crisis-of-illegal-immigration-new-survey-shows-record-number-of-voters-cry-major-issue-but-who-g">the influx of migrants</a> into the country may have an unintended negative consequence, Black Swan author Nassim Taleb said on Saturday.
What Happened: The U.S. is &#8220;so structurally dependent on cheap labor from &#8216;illegal&#8217; immigration that any sudden restriction would, in a nonlinear way, lead to explosive inflation,&#8221; Taleb said in a post on X, formerly Twitter. 
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">The United States is so structurally dependent on cheap labor from &quot;illegal&quot; immigration that any sudden restriction would, in a nonlinear way, lead to explosive inflation.
&mdash; Nassim Nicholas Taleb (@nntaleb) <a href="https://twitter.com/nntaleb/status/1794339489550397717?ref_src=twsrc%5Etfw">May 25, 2024</a></blockquote>
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The former trader and risk analyst&#8217;s view aligns with that of Nobel laureate Paul Krugman, who, in a post in February, said that <a href="https://www.benzinga.com/government/24/02/36923711/paul-krugman-details-why-immigration-has-become-campaign-issue-its-becoming-harder-for-republicans-t">immigrants were the reason behind bringing down inflation.</a> &#8220;Inflation has come down so easily in part because of strong labor force growth," the economist said, adding that all of that growth is attributable to foreign-born workers.
Krugman also asserted that immigrants do not supplant the domestic labor force but are &#8220;complementary.&#8221; &#8220;Foreign-born workers expand the supply. And lots of evidence that they are complementary to native-born workers, so that they let us run the economy hotter without inflation and hence &#x2A;raise&#x2A; native-born employment,&#8221; he said.
See Also:<a href="https://www.benzinga.com/money/best-inflation-stocks"> Best Inflation Stocks</a>
Why It&#8217;s Important: Undocumented immigration has become a key election issue, weighing down on President Joe Biden&#8217;s re-election bid, according to a slew of nationwide opinion polls. Several well-known figures, including Tesla CEO Elon Musk, have decried the fiscal strain the influx of migrants has placed on states.
But the economy become a bigger issue than immigration, with Americans visibly unhappy over their personal finances being dented by rising price levels.
Inflation surged to over 9% in June 2022 following extensive stimulatory measures enacted after the COVID-19 pandemic. With the Fed acting aggressively with a string of rate hikes, inflationary pressure has cooled off but not to the extent that has pleased the central bank.
As Taleb pointed out, higher labor costs can result in cost-pull inflation. Undocumented immigration, therefore, remains a double-edged sword.
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Friday&#8217;s session up 0.12% at $106.44, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/38840668/gold-bull-peter-schiff-says-inflation-headed-far-higher-as-powell-refuses-to-acknow">Gold Bull Peter Schiff Says Inflation Headed &#8216;Far Higher&#8217; As Powell &#8216;Refuses To Acknowledge&#8217; Policy Mistake During COVID-19</a>
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Undocumented Immigration Good For Economy? Black Swan Author Nassim Taleb Warns Any Sudden Curb Would Lead To 'Explosive Inflation'

While most opinion polls link <a href="https://www.benzinga.com/general/politics/24/05/38973806/bidens-approval-rating-hits-22-month-low-heres-how-many-americans-support-presidents-job-perform">President Joe Biden&#8217;s poor job approval rating to the economy&#8217;s performance,</a> a new survey has shown that it has to do mostly with voter perception rather than reality.
Pessimism In The Air: A majority of Americans believe that the U.S. economy is in a recession, blaming the president for the predicament, the<a href="https://www.theguardian.com/us-news/article/2024/may/22/poll-economy-recession-biden"> results </a>of a Guardian-commissioned Harris Poll showed Wednesday. Fifty-five percent of the respondents said the economy was contracting and 56% said the economy was in a recession.
Incidentally, after emerging from a COVID-19-induced recession in the third quarter of 2020, the U.S. economy has shown positive growth for much of Biden&#8217;s tenure, except for the first and second quarters of 2022.
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="411" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22223934/image-95-1024x411.png" alt="" class="wp-image-351398" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22223934/image-95-1024x411.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22223934/image-95-300x120.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22223934/image-95-768x308.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22223934/image-95-1536x616.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22223934/image-95.png 1600w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
The two consecutive quarters of negative growth, technically called a recession, were not considered as one because other economic indicators such as those measuring the labor market remained resilient, economists<a href="https://www.dallasfed.org/research/economics/2022/0802/"> said.</a>
The Harris poll showed that 49% of Americans said the unemployment rate is at a 50-year high, while the jobless rate has been languishing at a near 50-year low of sub-4% for quite some time now.
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="779" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22224848/civilian-unemployment-ra-1-1024x779.png" alt="" class="wp-image-351406" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22224848/civilian-unemployment-ra-1-1024x779.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22224848/civilian-unemployment-ra-1-300x228.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22224848/civilian-unemployment-ra-1-768x584.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/05/22224848/civilian-unemployment-ra-1.png 1400w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Source: Bureau of Labor Statistics
A little less than half (49%) said the stock market fell in 2023, the poll found. But the S&amp;P 500 Index, a broader market gauge, gained 24.23% for the year.
A whopping 72% said inflation was rising even as the measure has notably pulled back from the 9%+ level in June 2022.
The pollster said there was persistent pessimism among voters, with less than six months to go for the 2024 presidential election.
It doesn&#8217;t come as a surprise that most Republicans held a negative view of the economy under Biden, while only less than 40% of the Democrats felt the same about the economy. There was bipartisanship regarding wariness over economic news coverage. More than 60% of both parties said they didn&#8217;t know who to trust in learning about the economy.
See Also: <a href="https://www.benzinga.com/general/politics/24/05/38976120/trump-vs-biden-one-candidate-gains-in-2024-election-poll-of-swing-state-voters-who-is-hurt-the-m">Trump Vs. Biden: One Candidate Gains In 2024 Election Poll Of Swing State Voters; Who Is Hurt The Most By Kennedy Jr.?</a>
Biden Cops The Blame: Most respondents (58%) said the economy worsened due to Biden&#8217;s management of the presidential administration, the Guardian report analyzing the poll numbers said.
They may have a point there as the government and the central bank&#8217;s stimulus measures after COVID-19 stoked inflationary pressure, prompting the Federal Reserve to raise the benchmark interest rate from near zero to a 22-year high of 5.25%-5.50%.
Stung by a higher interest rate environment, companies had to right-size operations to preserve profitability, necessitating massive layoffs. This pushed Americans to the corner, as their financial situation worsened.
Despite inflation cooling off, the Fed seems to be in no hurry to reverse rate hikes and appears to be fixated on a &#8220;higher for longer&#8221; stance.
Why It&#8217;s Important: &#8220;There's a stubborn gap between the reality represented in that data – what economists use to gauge the economy's health – and the emotional reality that underlies how Americans feel about the economy,&#8221; the report said.
The current situation has been referred to &#8220;vibecession&#8221; — a term coined by economic writer Kyla Scanlon to describe &#8220;widespread pessimism about the economy that defies statistics that show the economy is actually doing OK,&#8221; it added.
While the economy poses a major challenge for Biden&#8217;s re-election bid, the president can draw comfort from the fact that Republican voters were slightly more optimistic about the lasting impacts of Bidenomics than they were in the September Harris poll. 
About four in 10 Republicans said they believed<a href="https://www.benzinga.com/topic/bidenomics"> Bidenomics will have a positive lasting impact,</a> an 11 percentage-point increase from September. The proportion of Democrats who said likewise was 81%.
The poll also found three-quarters of all respondents said they supported at least one of the key pillars of Bidenomics, namely investments in infrastructure, hi-tech electronics manufacturing, clean-energy facilities, and more union jobs.
"What Americans are saying in this data is: ‘Economists may say things are getting better, but we're not feeling it where I live,'&#8221; said John Gerzema, CEO of the Harris Poll. &#8220;Unwinding four years of uncertainty takes time. Leaders have to understand this and bring the public along.&#8221;
The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), an exchange-traded fund tracking the performance of the S&amp;P 500 Index, fell 0.29% to $529.83 on Wednesday, according to <a href="https://benzinga.grsm.io/register174">Benzinga Pro data.</a> The ETF has gained about 47% since Biden&#8217;s inauguration on Jan. 20, 2021.
Read Next:<a href="https://www.benzinga.com/money/how-to-invest-in-startups"> How To Invest In Startups</a>
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Most Americans Think Economy Is In Recession Under Biden Despite Hard Data Telling Different Story: 'We're Not Feeling It Where I Live'

Federal Reserve Chair&nbsp;Jerome Powell&nbsp;on Tuesday&nbsp;<a target="_blank" href="https://www.benzinga.com/markets/equities/24/05/38821976/fed-chair-powell-signals-patience-in-rate-policy-labels-producer-inflation-data-as-mixed" rel="noreferrer noopener">warned of rates remaining higher for longer</a>&nbsp;but qualified the April producer price inflation report as mixed. More importantly, he reassured the next rate move will unlikely be upward. Economist&nbsp;Peter Schiff,&nbsp;an inflation hawk,&nbsp;took a swipe&nbsp;at Powell&#8217;s stance.
What Happened:&nbsp;Powell refused to acknowledge that the Fed&#8217;s easy monetary policy during the COVID-19 pandemic was a mistake, said Schiff in a post on X, formerly Twitter. &#8220;It resulted in the current inflation problem,&#8221; he said.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true"><a href="https://twitter.com/hashtag/Powell?src=hash&amp;ref_src=twsrc%5Etfw">#Powell</a> refuses to acknowledge that the Fed&#39;s excessively easy monetary policy during Covid was a mistake and that it resulted in the current <a href="https://twitter.com/hashtag/inflation?src=hash&amp;ref_src=twsrc%5Etfw">#inflation</a> problem. Since the <a href="https://twitter.com/hashtag/Fed?src=hash&amp;ref_src=twsrc%5Etfw">#Fed</a> doesn&#39;t understand its own mistakes it&#39;s sure to repeat them. Therefore Inflation is headed far higher.
&mdash; Peter Schiff (@PeterSchiff) <a href="https://twitter.com/PeterSchiff/status/1790398098839101657?ref_src=twsrc%5Etfw">May 14, 2024</a></blockquote>
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A section of economists have blamed the central bank squarely for not acting quickly enough when stimulatory policies following the pandemic stoked inflationary pressure.&nbsp;
The Fed fund rate was brought down&nbsp;to near zero to nurse an economy ailing with the effects of the pandemic.
Consumer price inflation peaked at 9.1% in June 2022&nbsp;from its cycle low of 0.1% in May 2020.&nbsp;After a drop to 3% in June 2023, the downtrend has stalled.
See Also:<a target="_blank" href="https://www.benzinga.com/money/best-inflation-stocks" rel="noreferrer noopener">&nbsp;Best Inflation Stocks</a>
Northward Bound?&nbsp;Schiff said he expects the&nbsp;inflation&nbsp;to grind higher yet again. &#8220;Since the #Fed doesn&#8217;t understand its own&nbsp;mistakes&nbsp;it&#8217;s sure to repeat them. Therefore&nbsp;Inflation&nbsp;is headed far higher,&#8221; he said.
The April inflation report&nbsp;due&nbsp;shortly&nbsp;will offer some clues regarding the accuracy of Schiff&#8217;s statement. The annual rate of core consumer prices&nbsp;is expected&nbsp;to ease from 3.8% in March to 3.6% in April.
The&nbsp;iShares TIPS Bond ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>),&nbsp;an ETF tracking the investment results of an index&nbsp;composed of inflation-protected U.S. Treasury bonds, rose 0.19% at $106.49 in premarket trading, according to&nbsp;<a target="_blank" href="https://benzinga.grsm.io/lxquj26b2sag" rel="noreferrer noopener">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/news/earnings/24/05/38839147/wall-street-futures-pause-as-april-inflation-worries-eclipse-meme-stock-mania-2-0-why-this-analyst-">Wall Street Futures Pause As April Inflation Worries Eclipse Meme Stock Mania 2.0: Why This Analyst Bets May Will Be &#8216;Strong Month&#8217;</a>
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Gold Bull Peter Schiff Says Inflation Headed 'Far Higher' As Powell 'Refuses To Acknowledge' Policy Mistake During COVID-19

The <a href="https://www.benzinga.com/etfs/broad-u-s-equity-etfs/24/05/38815242/producer-inflation-hits-highest-level-in-a-year-heightens-pressure-on-consumer-prices">producer price inflation report released on Tuesday stirred worries</a> concerning a hot consumer price inflation print, which weighed down on the market in early trading. An economist, however, pointed to a data point that could allay concerns about pricing pressure.
What Happened: The results of the National Federation of Independent Business&#8217;s small business survey released Tuesday threw up some encouraging news for Wednesday&#8217;s CPI print, said David Rosenberg, founder and president at Rosenberg Research &amp; Associates, in a post on X.
Sharing two charts on current and future pricing power, the economist said the &#8220;downtrend in both is notable.&#8221; He also said the latest installment of the Fed&#8217;s Beige Book, a compilation of anecdotal evidence of economic conditions in the 12 Federal Reserve districts nailed this.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">Ahead of tomorrow's CPI report, some encouraging news from today's NFIB small biz survey on current pricing and future pricing power. The downtrend in both is notable. The Fed Beige Book nailed this. <a href="https://t.co/XwqwWvGskM">pic.twitter.com/XwqwWvGskM</a>
&mdash; David Rosenberg (@EconguyRosie) <a href="https://twitter.com/EconguyRosie/status/1790480697833992608?ref_src=twsrc%5Etfw">May 14, 2024</a></blockquote>
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See Also:<a href="https://www.benzinga.com/money/best-inflation-stocks"> Best Inflation Stocks</a>
Why It&#8217;s Important: With the Federal Reserve&#8217;s fixation on bringing inflation below its 2% upper ceiling, incoming data is keenly watched by the Street. Traders are particularly worried about inflation potentially resuming its upward climb and preventing the Fed from reversing its rate hikes.
The next Federal Open Market Committee meeting is scheduled for June 11-12. Between now and then, traders get to digest two CPI inflation reports, one coming just ahead of the Fed decision on June 12. A personal income and spending report, which comprises the Fed&#8217;s preferred inflation gauge, namely the annual rate of core price consumption expenditure data, is also due before the next meeting. 
This apart, traders may also look for cues on rate trajectory from the May non-farm payrolls report due in early June.
Fed Chair Jerome Powell on Tuesday stuck with his rhetoric that inflation has stayed elevated, likely keeping rates on hold for longer. But the market construed it as suggesting a rate cut could come as early as September.
The CPI report for April due Wednesday at 8:30 a.m. EDT is expected to show a 0.4% month-over-month increase in the headline number, compared with March&#8217;s 0.3% rise. On an annual basis, however, the consumer price index may have risen 3.4%, lower than the 3.5% gain in the previous month.
The monthly and annual rates of core consumer prices are expected at 0.3% and 3.6%, respectively, versus March&#8217;s 0.4% and 3.8%.
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Wednesday&#8217;s session up 0.19% at $106.29, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/markets/equities/24/05/38820970/expect-rate-cuts-not-a-recession-fund-managers-most-bullish-on-stocks-in-over-2-years">Expect Rate Cuts, Not Recession: Fund Managers Most Bullish On Stocks In Over 2 Years</a>
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Don't Panic Yet! Ahead Of Key April Inflation Data, Economist Points To Charts That Hint At 'Some Good News' — 'Fed Beige Book Nailed This'

Bidenomics has not cut much ice with the American voters, with new poll results published on Sunday showing that voters&#8217; approval of President<a href="https://www.benzinga.com/news/24/04/38153660/rich-dad-poor-dads-robert-kiyosaki-calls-bidenomics-a-joke-says-inflation-is-eating-american-familie"> Joe Biden&#8217;s economic policies</a> took a further dent.
Approval Rating Slips: Merely 39% of the respondents said they strongly/somewhat approved of Biden&#8217;s handling of the economy, down a percentage point from the April poll, <a href="https://globalstrategygroup.app.box.com/s/2c2r9kz47no3so44gljty6m3nlidm81v">data</a> from FT-Michigan Ross&#8217; nationwide poll conducted between May 2-6 showed. The poll surveyed 1,003 respondents and has a margin of error of +/-3.1%.
The proportion of respondents who said they strongly/somewhat disapproved of the president&#8217;s handling of the economy rose from 64% in April to 68% in May.
After seeing a nice four-point tick-up to 43% in April, the approval rating for Biden&#8217;s handling of his job as president edged down a point to a net of 42% in May. The net disapproval rating was at 56%, up from 53% in April. FT said the approval rating will make for a &#8220;depressing reading among the White House's incumbents.&#8221;
What&#8217;s Behind Disgruntlement: The bulk of the negativity revolved around something Biden often flaunts as his achievement. A majority of respondents rate their personal financial situation and the overall economic conditions negatively.
<ul>
<li>A net of 56% of the respondents said they were surviving (just meeting expenses/having trouble meeting expenses).</li>
<li>A net of 71% had a negative view about overall economic conditions in the country (not so good/poor).</li>
<li>A net of 51% said they were financially worse off since Biden has become president (somewhat worse off/much worse off).</li>
<li>Nearly half of the respondents (49%) said Biden&#8217;s economic policies have hurt the economy (hurt the economy somewhat/hurt the economy a lot).</li>
</ul>
See Also: <a href="https://www.benzinga.com/money/best-inflation-stocks">Best Inflation Stocks</a>
Key Voter Issues: Eighty percent of the respondents chose price increases when they were asked to pick the three biggest sources of financial stress personally from a given list. Personal income level was mentioned by 49%, rent by 32%, credit cards by 26%, medical expenses by 23%, investment losses by 13%, and mortgage costs and loss of employment by 11% each.
The Biden camp has another reason to worry as well. When asked what would be the most important criteria that would help them decide whether they would vote for Biden, 55% mentioned economic issues like jobs and cost of living, 35% immigration and border security and 32% each future of social security and Medicare as well as crime, public safety and gun violence.
Among specific economic issues, inflation was picked as the top issue (61%), the respondents would consider while zeroing in on their presidential choice. They also mentioned other price-related issues such as gas prices (34%), housing costs (27%) and healthcare costs (24%).
Threats to democracy and the future of abortion policy ranked down in the order of importance for voters, with these mentioned by 24% and 21% of the respondents, respectively.
<a href="https://www.benzinga.com/real-estate/24/05/38788597/botched-attempt-at-controlling-inflation-grant-cardone-blasts-fed-for-destroying-the-middle-class-an">Inflation has proved to be stickier than expected. </a>After rising to a cycle peak past 9% in the summer of 2022, inflation began to trend lower, giving rise to hopes that the Federal Reserve will soon start reversing its rate hikes. The declining trend has stalled this year, though. The annual rates of core consumer price inflation and the core price consumption expenditure &#8211; the Fed&#8217;s preferred inflation gauge have stubbornly stayed above the central bank&#8217;s 2% target.
The consumer price inflation report for April is due on Wednesday, with economists, on average, expecting a 3.6% annual rate for core consumer prices, down from 3.8% in March. The year-over-year rate of consumer prices is also expected to tick down one-tenth of a percentage point to 3.4%.
Trump Trusted: Former President Donald Trump continued to score over Biden in terms of trust in handling the economy. Forty-three percent said they trust Trump better to handle the economy compared to 35% who said the same about Biden.
A sizeable proportion (16%) said they trust neither.
The iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, last traded up 0.16% $106.21, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/government/24/05/38724294/biden-says-hes-already-turned-economy-around-blames-corporate-greed-for-persistently-high-inflation">Biden Says He&#8217;s Already Turned Economy Around, Blames &#8216;Corporate Greed&#8217; For Persistently High Inflation: &#8216;We&#8217;ve Got To Deal With It&#8217;</a>
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