CGTN Europe interviewed Matt Maley, Chief Market Strategist, Miller Tabak + Co., LLC
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00:00Well, to talk all things inflation, I'm joined by Matt Maley, who's chief market strategist at financial services company Miller Tabak & Co.
00:07Good to see you again, Matt. So when we're coming to this surprise drop in inflation, is it good news or is there more to it?
00:16Well, you know, it's certainly good news, especially with the thought that the trade war is not as bad as it was,
00:25because people really think that, you know, even if the inflation number wasn't too bad this month, it'll be much worse going forward.
00:32Well, maybe it won't be quite so bad. The problem, though, of course, is that we have a situation where the economy was slowing even before the before this tariff issue became a problem.
00:44And number one and number two, you know, everybody has been pricing in that the Fed would be much more aggressive this year in cutting interest rates.
00:51And, you know, even though, again, this number is a little bit lower, I think that most people realize that it's still well above that 2 percent target level.
00:59So they're not going to be getting aggressive anytime soon.
01:01So when you have an expensive stock market like we have today, we have to be worried about assuming that or extrapolating out the rally that we've seen over the last four or five weeks into the future.
01:13Well, you mentioned the fears of recession there, and we had GDP numbers out, too, didn't we, showing that had shrunk in the first quarter, for the first time since 2022.
01:22Where are those fears of recession today?
01:25Well, they've certainly been eased by the by the deals that have been made by the U.S. with both the U.K. and with China and more supposedly coming down the road.
01:36So that's eased.
01:37But again, my concern about what's going on in the stock market is that it's trading now.
01:42It's back to 22 times 2025 earnings and even almost 22 times the next 12 months.
01:49This is basically back to where we were in January.
01:51February. So we need to see the economy not just avoid a recession.
01:57We need to see the economy to bounce back in a major way if the earnings forecasts are going to pick up enough to justify today's level in the stock market.
02:05And I just question that that's really going to take place.
02:08So the Fed has quite a lot to think about here, doesn't it?
02:10What do you think we're going to see happening to interest rates?
02:12Well, you know, it's interesting because, you know, with this news, you know, people have been assuming that the interest rates would automatically come down with the Fed, you know, looking at looking to at least ease.
02:27But as we move through this year and they've been pushing it out further and further and further and, of course, after last week's announcement, they've gone out, you know, there's now people are looking for aren't looking for a rate cut until or another rate cut until September.
02:41OK, we have the 10 year yield in the U.S. here has only been higher for four months out of the last 17 years.
02:50So they're high. I mean, I don't they're not as high as they were in the 1970s during that stagflationary period, but they're still high.
02:57And that is something that creates headwinds for the for the economy.
03:00So I think I just worry that people are getting putting too much enthusiasm behind this deal and assuming that everything's going to just be fine from here on in.
03:09I want to talk to you about tariffs. I mean, of course, what news program doesn't feature tariffs lately?
03:14But we've had some uncertainty surrounding them, let's say.
03:17There has, of course, been a deal with China with a 90 day mutual tariff cut.
03:23What kind of effect might that have? Will it will it soften the expected economic blow?
03:29It certainly has. And, you know, but the question is, how much uncertainty has it removed?
03:36I mean, that was one of the biggest things we had, not so much for the stock market, but for the economy.
03:41Business managers, they certainly feel a lot more comfortable about the situation now,
03:45but they still don't have the full clarity they need to really to act.
03:50I mean, let's face it, these tariffs are still more than they had before President Trump took office, you know, fairly significantly more.
03:57And so even though they're much lower than the most extreme levels that they were using just a month or two ago, they're still up there.
04:06And again, if the stock market was trading in the U.S. was trading at 16 times earnings, I'd be less concerned about it.
04:13Or the trading at 22, 21 to 22 times earnings, it still creates some concerns in my mind.
04:19Matt, great to talk to you as always. Thank you for coming on the program.
04:22That's Matt Maley from Militae Back Inco.