i think things are a little different now. we've just come through a high inflation period. and you can argue that both ways. you can you can say that companies have figured out that they do like to raise prices. but but we also hear a lot from companies these days that consumers have really had it with price increases. and so i don't know how that shakes out. nonetheless, you're coming through a situation where we're not quite back to 2% and that that's just different. in addition, you know, the trade, the kind of footprint of trade is has changed a lot as trade has now spread around. you know, it's not as concentrated in china as it was. there's a lot more manufacturing. they've moved to mexico and other places. so there are differences. and i just think the range of possibilities is very, very wide. we just don't know. and i don't want to start speculating as tempting as it is, because we really don't know. and we didn't know, by the way, in 2000 and i guess 18, we

didn't really know. and, you know, the again, the range of possibilities is very, very wide. we don't know what's going to be tariff. we don't know for how long or how much, what countries. we don't know about retaliation. we don't know how it's going to transmit through the economy to consumers. that's that really does remain to be seen. you know, there are lots of places where that where that where that price increase from the tariff can show up between the manufacturer and the consumer. just so many variables. so we're just going to have to wait and see. and you know, the best we can do is what we've done, which is study up on this. and you know, look at historical experience, read the literature and think about the factors that might matter. and then we'll just have to see have to see how it how it goes. >> courtney. >> thank you. courtney brown from. axios two unrelated questions. the first. is

whether. >> or not. there was any discussion. >> about the timeline. for ending qt at this meeting. and then the second question is just i wonder if the. >> i prompted. >> sell off in the stock. market this week signaled anything to you about the state of financial conditions. >> so on on let's let's talk about runoff. so the most recent data do suggest that reserves are still abundant. reserves remain roughly as high as they were when runoff began. and the federal funds rate has been very steady within the target range. we track a bunch of metrics, and they do tend to point to reserves being abundant. we do intend to reduce the size of our balance sheet to a level that's consistent with implementing monetary policy efficiently and effectively. in our ample reserves regime, we're closely monitoring a range of indicators to assess conditions, and that should provide signals whether reserves are approaching a level could be judged as, quote, somewhat above ample. i, i don't

have anything to say to you about particular dates. it's just that's the process. and what we see is, is that the rates do appear to be abundant. as always, we stand ready to take appropriate action to support the smooth transition of monetary policy, including to adjust the details of our approach for reducing the size of the balance sheet in light of economic and financial developments. on on i it's a big event in in the stock market and in particular parts of the stock market. i mean, what really matters for us is macro developments. and that means substantial changes in financial conditions that are persistent for a period of time. so i wouldn't put that label on on these events. although of course we're all watching it with interest. >> simon. >> simon rabinovitch with the economist. thank you. you mentioned in your remarks that activity in the housing sector seems to have. stabilized at the same time, since your first rate

cut in september, long term mortgage rates have gone. up by a full percentage point back above 7%. i'm wondering kind of looking forward, do you think are you confident that activity will remain stable given how elevated. mortgage rates are? how does it fit into. >> your broader. >> thinking about the economy? >> so as you know, as we've reduced our policy rate 100 basis points, longer rates have gone up, not because of expectations, not principally because of expectations about our policy or about inflation. it's more a term premium story. so and you know, it's long rates that matter for housing. so i don't think i think these higher rates are going to probably hold back housing activity to some extent. if they're persistent we'll have to see how long they persist. so you know, we are we control an overnight rate. generally it propagates through the whole family of asset prices, including interest rates. but in this particular case, it's all happened at a

time when, for reasons unrelated to our policy, longer rates have moved up. >> jennifer. >> thank you. chair powell. jennifer schonberger with yahoo finance, you said you want to see further progress on inflation, given that households appear to be unhappy with the elevated level of prices, do you believe the committee should wait until inflation has fallen back to target to cut rates again? >> no, i wouldn't say that. we we've never said we need to be all the way at target to reduce rates at any time. what we're doing is we're looking at the economy and asking whether our policy stance is the right one to achieve maximum employment and price stability. so i think if we would want to see further progress, but we think our we think our as i mentioned, we think that our policy stance is restrictive, meaningfully restrictive, not highly restrictive, but meaningfully restrictive. and so i would

think we need to see further progress. i wouldn't say all the way back down to 2% on a sustainable basis. so although we'd love to see that, of course. and we will. >> and separate question for you on tariffs. curious whether the threat of tariffs and not knowing whether they could stick or not creates uncertainty for business here in the united states and could cause them to pull back. ultimately weighing on growth. does the threat of tariffs cause you to ponder your growth forecast? >> you know, we i want to avoid commenting, even indirectly on the conduct of tariffs. you know, it's not our job and it's not our job to comment on the moves that people make. so i wouldn't want to criticize anything that's happening or really comment on it one way or another. praise it for that matter. it's just not our job. i do think that, you know, we found in 2018 there was a lot of work done on trade policy uncertainty, trade policy uncertainty, if it's large and persistent, can start to matter for businesses making investment

decisions and things like that. that's not something i'm observing today. it's very early days for this, but that did i think that did matter in in 20 1819. and it's you know, one of many things we'll be watching. >> matt keegan. >> thank you. >> chair powell matt egan from cnn. >> following up on courtney's question from earlier about the stock. >> market. >> how concerned are. >> you. >> if at all. >> about potential asset bubble brewing. >> in financial markets? how do relatively high market valuations factor into considerations about. >> potentially lowering interest rates further? >> is that something that's in the back. >> of. >> your mind. >> so we look. >> we look at from a financial stability perspective at asset prices generally, along with things like leverage in the household sector, leverage in the banking system, funding risk for banks and things like that. but it's just one of the four things asset prices are. and yeah, i'd say they're elevated

by by many metrics right now. a good part of that, of course, is this thing around tech and ai. but we look at that. but you know, we also we look at how resilient the households and businesses and the financial sector are to those things. so we look at that mainly from a financial stability perspective. and we think that there's a lot of resilience out there. banks have high capital and households are actually overall not all households, but in the aggregate households are in pretty good shape financially these days. so that's how we think about that. i you know, we also we look at overall financial conditions. and you've got you can't just take you can't just take equity prices. you've got to look at rates too. and you know, that represents a tightening in conditions with with higher rates. so overall financial conditions are probably still somewhat accommodative. but it's a mixed bag picture. >> hi chair powell i'm richard escobedo with cbs news. one

question for you. this month's statement notes that unemployment has stabilized at a low rate and that the labor market is solid. you walk through some of what's driving this, but i wonder what risks you see that might challenge your assessment. well. >> the things we watch we discussed earlier. one is, is that there's a low hiring rate. and so that if there were to be a spike in layoffs, if companies were to start to reduce headcount, you would see unemployment go up pretty quickly because the hiring rate is quite low. that's one thing we look at. i think it's also it's worth pointing out that for lower income households, they are they're under significant pressure. and in the aggregate the numbers are good. but we know that people at the lower end of the income spectrum are, are struggling with with costs. and really it's high inflation for the basics of life. it's not so much the inflation now. it's the price level because inflation has raised prices. inflation is now closer much closer to target. but people are

really feeling that. but you know overall this is a good labor market. you're at 4.1% unemployment. that's that's just a really good level. and you've been solidly there now for 6 or 7 months. and job creation is pretty close to a level that will hold the unemployment rate there. given given that, you know, there'll be much slower population growth. >> one more question. some of the uncertainty around immigration policy is in your assessment. is that making it harder for businesses and the fed to plan going forward? >> you know, we hear anecdotal reports, but i don't see there's nothing in the data yet on that. but you hear you hear that kind of thing about construction, for example. and, you know, businesses that are dependent on immigrant labor are saying that it's suddenly gotten harder to, to get people. but again, i don't you don't see that in the aggregate data yet. but yes, you

hear it anecdotally, nick. >> thank you. >> thank you. chair powell, nicholas jasinski from barron's. the uncertainty is certainly a theme today. and i'm wondering are there any periods from your career or as it. >> relates to. >> markets, the economy, what's going on here. >> in washington and. >> beyond or from lessons from history that may provide some guidance for a central banker operating in uncertain times like today. >> i guess i'd say this uncertainty is with us all the time. it's it is human nature, apparently, to underestimate the how fat the tails are. in a way. you know, the possibility we think of things in a normal distribution and in the economy. it's not a normal distribution. the tails are very fat, meaning things can happen way out of your expectations. it's never not that way. i wouldn't, you know, if you think about it, think about the first few months of the pandemic that was uncertainty. are we going to be

able to reopen the economy? if so, when? how much of it how long will it take? you know, that was uncertainty. what we have now is a good labor market. we have the economy growing at 2 to 2.5%. inflation has come down to now the you know, the headline inflation number was 2.6. and that's what the public experiences we look at. we look at core because it's a better indicator of future inflation. so yes the price level went up a lot for inflation. and people are feeling that. and they're not wrong. but i you know so the kind of uncertainty we have is just the usual level of uncertainty about the economy. but then policies which are, you know, not for us to criticize or praise really, those are those are policies which people have been elected to implement. they're implementing them with a view to making a better economy. and so i don't think i wouldn't call this out as, as a, as one of those times. i wouldn't compare it to the global financial crisis or anything like that, given that we have

actually a very good economy right now. >> kevin. >> evan riser with market news international chair powell is a march cut still on the table. and then additionally, are you looking to see better than expected data on inflation to cut, or are you looking for inflation data that roughly aligns with current forecasts? >> so as i mentioned, the economy is strong. the labor market is solid. downside risks to the labor market appear to have abated. and we think disinflation continues on a slow and sometimes bumpy path. that tells me and the other members of the committee, the broad sense of the committee actually, is that we don't need to be in a hurry to adjust our policy stance. your second question was. >> whether or not you need to see better than expected inflation data, or just inflation. data that roughly aligns with your current forecasts. >> you know, it's one of those things. we'll know it when we see it. but more more the

expectation is that we will make continued progress. and, you know, that's what we want. we'll know when we see it, when we it's going to have to be something that isn't just idiosyncratic. you're going to want to see, you know, continued progress with housing services inflation. you're going to want to see inflation behaving in a way that builds confidence that we are really making progress. that's what it's going to be. and i mean, is that better than our expectations that we expect to see that it's just a question of when. >> scott horsley, npr. in your five year review, you said the 2% inflation target. >> won't be on the table. >> can you. >> talk a little bit about why? is that because you think that's the right target, or is it because you don't want to move the goalposts mid-game or what's what's what's behind that? >> i think to i think that goal has served us well over a long period of time. it's also the sort of global standard. i think

that if a central bank wanted to look at changing that, you wouldn't do it at a time when you're not meeting it anyway. i would not look at changing it any way, but i certainly wouldn't look at at it at a time when you're not when you're not meeting it. i mean, there's just no interest at all in changing it. if i'm being at all unclear, we're not we're not going to change the inflation goal anytime soon. >> and five. >> years. >> ago, if i can paraphrase what you all. >> decided it was, you're going. >> to not raise interest rates preemptively to. >> to head. >> off inflation. >> until you see the whites of the eyes. >> of. >> inflation. >> because the. >> solid labor market was so. >> beneficial. >> have the last few years. >> changed your thinking about that? >> so what we really said was that we wouldn't we wouldn't look at at a strong labor market and raise rates unless we saw some evidence of inflation. so the thought was that we'd seen really low levels of inflation,

sorry, of unemployment with no sign of inflation. so why would you preemptively want to want to put people out of work in the absence of, of any kind of any evidence that suggested that that this was not a sustainable level? it was a way of, of acknowledging how much humility we have about about the starred variables, especially, you know, the natural rate of unemployment. so that was that was an insight. we'll discuss that again. that'll be one of the many things that we discuss. but i don't think that insight is wrong. we didn't you know, we said what we said was that, you know, in times when inflation persistently undershot 2%, we would likely allow inflation to run moderately above 2% for some time. that's what we said. that was turned out not to be relevant to what actually happened. there was nothing moderate about the overshoot. it was it was an exogenous event.it happened. and, you know, our

framework permitted us to act quite vigorously. and we did once we decided that that's what we should do. the framework had really nothing to do with the decision to we looked at the inflation as as transitory and right up to the point where the data turned against that. and when the data turned against that in late 21, we changed our our view and we raised rates a lot. and here we are at 4.1% unemployment and inflation way down. but the framework was was more was more irrelevant than anything else. that that part of it, that part of it was irrelevant. the rest of the framework worked just fine as as we used it, as it supported what we did to bring inflation down. >> mark, for the. >> last question. >> hello. >> chairman powell, mark hamrick. with bank rate, as you know, in the annual. >> report from. >> the. >> financial stability. >> oversight council, among the risks. >> outlined is cryptocurrency. could you. >> talk about those. >> risks now and regarding

individuals and households, perhaps distinct from the concern about the financial system? >> do you worry. >> that speculation in this unregulated asset class could hurt their financial well-being? >> or do you think it has a place in. >> a household's portfolio? >> you know, so our our role with bitcoin really is to look at with crypto really is to look at the banks. and you know, we think it's you know banks are perfectly able to serve crypto customers as long as they understand and can manage the risks. and it's safe safe and soundness. many of our a good number of our banks that we regulate and supervise do that. you know, the threshold has been a little a little higher for banks engaging in crypto activities. and that's because they're so new. and, you know, we don't want to make the mistake. if you if you're making a choice to conduct that activity inside a bank, which is inside the federal safety net with deposit insurance, then you want to be pretty sure that that

that it's a safe and sound activity. so, you know, we're we're not against innovation. and we certainly don't want to take actions that would cause banks to, you know, to terminate customers who are perfectly legal just because of excess risk aversion may be related to regulation and supervision. so with respect to households. >> and their. inclusion in that. >> asset class, i you know, that's that's kind of a it's not really our, our bailiwick. you want people to be knowledgeable about the financial engagements that they have. and that's why we have, you know, the securities law, the laws that we have. it's why if you read a mutual fund prospectus or an individual stock prospectus, you want households to have the chance to understand the risk that they're taking. and, you know, i do think it would be helpful if there were a greater regulatory apparatus around crypto. and i think that's that's something congress was working on quite a lot. we've

actually spent a lot of time, you know, with members of congress working together with them on on various things. and i think that would be a very constructive thing for, for congress to do. thank you. >> thanks. >> that was chair powell following the very first fed meeting of 2025, one in which there was no change in interest rates as expected. but there was plenty said in the news conference. we just watched chair powell saying, among other things, inflation remains, quote, somewhat elevated relative to the fed's 2% target. he said conditions in the labor market are solid. the economy is strong. overall, he did point to resilient consumer spending. still considering additional adjustments, he said, quote, we do not need to be in a hurry. you probably heard as well our steve liesman asking the very first question about president trump's recent address to leaders in davos, in which he said he would demand that interest rates drop. chair powell wouldn't address that at

all, said he has had no direct contact with the president. welcome to closing bell with that i'm scott wapner, live from post. nine here at the new york stock exchange. we're showing you the markets here because in this final stretch the major averages are lower. and did. >> move that way when. >> the statement was released, perhaps came a little bit off the worst levels of. >> the session. >> albeit slightly bond yields. they ticked up a little, especially the two year perhaps on the comment about inflation. remaining a bit elevated. the dollar worth noting, too, because it's also at least was near session highs. although it's come off of that boil just a little bit as well as we always do. let's welcome in doubleline capital. >> ceo, cio. and founder jeffrey gundlach. it is. >> a cnbc exclusive. welcome back. it's nice to see you in this new year. >> yeah. good to see you scott. nice to be here again. >> you said on social media. >> leading in that this was the most predictable quote. >> no change. >> in years meeting. what do you make though of what you heard?

the market seems to have taken this at least. a bit hawkish. is that your takeaway as well? >> yeah it's a little on the hawkish side i think. i mean the words of this. press conference are you actually nailed it in your intro scott. >> it's no hurry. >> we're not in any hurry to. >> to cut rates. and that's. >> appropriate i think we've had a range bound interest rate market for some time now. and the two year treasury is about 4.25% or 4.2%. and the fed funds rate is at four and 3/8. so they're very much in sync. so i heard a very wide open view of what the next move might be. no hurry to cut rates. doesn't seem to be there's any inclination to raise rates at this point in time. and he's obviously focused on. >> the. >> stability and the. >> unemployment rate. >> right now in terms of not feeling a need to cut rates. the inflation rate has been drifting higher by. >> a little bit.

>> i mean, the cpi is up in the high twos and it was down in the mid twos. and with the commodity complex being. above its 200 day moving average on the bloomberg commodity index and looks like it may have bottomed out. and the price of oil is in the low 70s. and trump wants to get the price of oil down. so he says drill, baby, drill. but the price of oil hasn't hasn't changed very much. >> it's still. >> somewhat elevated. so what's really fascinating is since the last fed, since. >> the first. >> fed rate cut. >> back in september, the two year treasury yield is up by 60 basis points. the ten year treasury. >> yield is up by. >> 85 basis points. >> the long. >> bond etf is down by on price only forgetting. >> about the. >> the coupon. it's down by about 11%. so we have had this very unusual. move that with the fed. >> beginning a cutting cycle. >> we have not seen a bond rally. in fact, the.

>> general high quality bond. >> market hasn't made much progress. so i think. no hurry. >> and we're. >> very, very data dependent. it seems like. a new high has been reached in data dependency. and i. >> worry a little. >> bit, as i have. periodically since the hiking cycle started and now the cutting cycle. >> i worry. that they were. running into a high degree of short termism, that. >> we're going to wait and see what the data does in just a few months ahead. >> is what i. >> think we're looking at. but i think market participants takeaway from this is the fed is on hold and they're just going to wait for data. and so what came out of this meeting. >> was completely expected. and not a. >> lot of insight. on where we're headed other than data dependency. >> i feel like. >> we might have gotten. >> some. >> insight, if nothing else. into the psyche of the fed chair when he said policy is, quote, well positioned. i mean, i think he made the case that they think they're in a really good place

and they can afford to not be in a hurry as, as he said, do you agree with that or do you call that into a little bit of question? >> i think when he says. >> we're. >> in a really good place in terms of policy and the economy, he's basically saying we're on hold. and yet contradicting that, he says we're. above the neutral rate. so the implication is. >> that we're on hold. until the. inflation rate goes down. and unfortunately. >> it's probably not going to go down very much in the. several months ahead. so i wouldn't be looking for rate cuts in. >> at the next meeting. >> certainly we didn't expect one in this meeting. >> and so we. >> have a relatively stable place. >> where we're. >> where we're standing. and it kind of. supports the fact that the market is in a. >> calm position. >> right now. and so is jay powell. apparently there are some things that. are troubling, though regarding markets. i notice how high the cape ratio is on the s&p 500. it's up in

the mid 30s. it's interesting. >> that. >> when ronald reagan. >> took office, the cape ratio. >> was down. >> at about ten. >> and so now it's about four times. >> higher or. >> eight times higher anyway. >> than it was when reagan took office. >> so it doesn't seem there's. >> any room. >> for valuations. >> to expand. >> and so. >> it's an. entirely earnings driven market. we're going to have. >> to see. >> how that develops. at the same time. >> the credit. markets are. very very. low incremental yield versus treasuries. >> this has. >> been a. >> theme that's been developing now for a year and a half. and there's not. >> a lot of. >> room for error. and in fact some things have happened. >> if you get. >> a. >> little bit down. >> in the weeds that. >> are somewhat disconcerting because. >> they're reminiscent. >> of what was going on in the mid zero. heading into the global. >> financial crisis. >> about 20. >> years ago, and that is that. >> we're. >> starting to see. retrenching of. >> credit risk. remember, as the credit ratings. >> that screwed everything. >> up in the subprime. >> market back in 2007 or so. well, now. >> we're starting to see in the. >> re securitization.

>> markets of, of bank loans. >> which. >> is called the clo market. what we're starting to. see is retrenching. of traditional letter ratings. >> so for example. >> there's triple triple b rated bonds. and all of a sudden they're they're. >> retrenching them. >> into senior triple. >> b's and junior triple b's. why are they doing that. they're doing that. >> because the. >> average interest rate that's paid. >> by tranching it into two pieces is lower. >> than the interest rate. >> if it was just a triple. >> b and this is a slippery. >> slope. >> it's only getting started now. i don't think that it's an imminent problem. one thing i've. >> learned in over 40. >> years of the investment. >> business is. >> you might be seeing signs. that are worth taking note. >> of. >> but by the time that they really develop into a consequence, it takes much longer than you think. >> so in the. >> subprime crisis, the retrenching stuff and the nutty activity. >> got started in oh five. >> and. into oh. >> six, but it wasn't. >> until oh. >> seven that it really. >> blew up. so i'm. >> not really looking for. >> this to be a.

>> problem. >> you know, in the first half. >> of 2025. >> but something that bears watching because once you start making triple-a rated securities out of triple b rated. >> securities. >> which. >> is what. >> actually happened in the subprime nuttiness, that's not happening right now, but it is a. >> slippery slope, something to watch out for. >> so we're getting more. >> and more concerned. >> about the levels. >> of valuation. on the. lower tiers of credit. >> i've talked about. >> this in the past fed meeting day appearances, but it's getting worse. it's getting more overvalued. >> and there's. these activities of retrenching are. very they're dangerous over a multi-quarter time frame. >> so i think investors. >> need to be. upgrading across the board. >> in terms of reducing risk and upgrading. >> across the. >> board based on valuation. and you know. >> the fed's on hold and they're not really in any hurry as jay powell said to cut. so you're not going to get any relief from. >> interest rates. >> and you're not going to. >> get any relief from valuation. >> because valuations on stocks. >> are very, very. high versus their own history.

>> and the valuations on. non treasury bonds versus treasury bonds are very very high based on their. >> own internal history. >> so this is a. >> time to be careful. >> did think it was interesting. >> that when. >> the chair was asked about financial conditions related to the stock market, he said that asset prices are elevated by many metrics right now. now he was and i think he made the point pretty clearly that he was zeroed in on parts of tech and the ai related stuff, but maybe not overall. so i understand. >> what you're saying. last time. >> you were on with. >> me, you said, quote, two cuts are on the maximum side. >> for 2025. >> given the. >> fact that you believe today was, you know, maybe putting in sharpie, if you will, that they're on hold for the foreseeable future. two cuts. does that still make sense to you for the balance of 2025? >> i would say exactly what i said in december, and that is maximum two cuts this year. and what i mean maximum. >> i'm not.

>> predicting two cuts. i just think that's the. >> most you can. >> possibly think about. and at the present moment, i. >> if you had made. me pick a number, i would say now one. cut would be. >> the base case and maximum two though still. >> isn't that pretty good? i mean, wouldn't that be a good thing if the fed doesn't have to cut as much as it might have thought initially, and that investors have come to grips with that? fact is, chair powell said, as i told you, what he what he said about, you know, where. >> the economy. >> is and the labor market, he thinks they're in pretty good balance right now. >> yeah, well. >> the unemployment rate went. up for a consecutive months, several, several months. it went up and now it. >> ticked down. and i think. >> in the most recent reading, and i think he's taking a lot of solace from that. >> that movement. >> he was worried about the labor market weakening. and so the fed's goals were in something of a tension. >> i mean, the. >> cpi or the year over year inflation. >> rate, which he. >> he referenced. today that. you use year. >> over. >> year, i thought that was

important. he mentioned. that it. >> takes. >> out some of the noise of seasonality, but it's a departure from where we were 18 months ago when. >> we. >> were talking about annualizing short. >> term inflation numbers. >> so he's looking more at year over. >> year inflation. >> i d think that. >> the unemployment rate being at 4.1. >> and having. >> relaxed a little bit. >> i think. >> that unless the unemployment rate. >> starts. >> going up, there's. >> not there's going to be a very. >> it's going to be a slow process to get to a hurdle to cut rates again. >> and as i. >> said just a few minutes ago, i. >> don't think you're going to see a cut at the next fed meeting. so when the fed. >> says we're in a good. >> place, he means. the policy. he. >> believes. >> or he chooses to. >> believe that it's going to lead. to the. unemployment rate staying at a comfortable. >> level, a. >> relatively low. >> level, and the inflation rate. he's hoping that it comes down. i don't really understand. he they mentioned owners equivalent rent or the shelter component. and yes, that should come down. i don't know how much

southern california. >> is going to factor into. >> that, because there's obviously. >> not going. >> to be a home. >> price. >> declines for new construction. >> or for. >> rentals and. >> so forth in southern california. but i think it is good. >> that the. >> fed is on hold. and it's because you. >> need the fed to. >> be on hold or. >> being easing to support the valuation levels that we have. >> steve liesman. >> has come out of the room. jeffrey, bear with me for a moment as i bring him into our conversation as well. well, you tried number one to get him to react to president trump, as i thought you might, but. >> let's move to the time, scott, when you have got to fall on your sword. i just did that for the entire press crew. >> do you what do. >> you make of the market's initial. >> reaction. >> steve. >> to what. >> was thought to be a smidge more hawkish by the chair, and the statement which i think you. >> acknowledged immediately thereafter. >> now the market is coming back a little bit as well. do we have it right?

>> i'm so glad you asked that, scott, because i have a pet peeve i want to get off my chest here, which is this. why does the fed do something in the statement that needs to be later clarified in the press conference? okay, what exactly happened? what you're talking about, scott, if you look at the two year, two year shot up because what happened is they took out that statement that we've made progress on inflation. powell then comes to the to the dais and he says that's not really a big deal. we're just cleaning up the language market rallied again on that. yields fell. you can even look at the stock market. it was spooked by that and then came back. of course there was also the added positivity or positive comments that happened on the employment front as well. i think jeff has and you have have zeroed in on a really important question. and it was important for powell to say that we are meaningfully restrictive, and let's listen to what he said there and what is happening. >> i would say we're meaningfully above it. i am i

have no illusion that that anyone knows precisely how much that is. and but, you know, not knowing that and having cut 100 basis points means that it's appropriate that we that we not be in a hurry to make further adjustments. >> so that's kind of the answer to the question there, which is why do they stay stand pat? because they've already cut 100, has to work its way through the system. and then i do believe, as jeff suggested, he took march directly off the table. you look at the probabilities. right now we're at just 22%. that's fallen. you can see we're below 50% on may. and then there's the two cuts that look to be priced in a june and a december 1st. but it's not like there is overwhelming conviction on really either of those, especially that second cut in december. so and that gets scott to what you know already, which is all of this uncertainty about fiscal policy. he basically said, we're on hold until we know what the heck's going on here. >> yeah he did. you're just on

hold waiting to see that it's hard to make assumptions, is what the chair said. steve, thank you very much. that's steve liesman just out of the room. got the first. question today to the fed chair as well. jeffrey, i'll bring you back in. in terms of inflation, it was the chair who said, quote, we seem to be set up for further progress. and in fact, recent reads on inflation were more calming. i think we could agree. do you think we've seen the peak in the in the backup in rates that we. witnessed from the cut, that we sat together on the very first one that jumbo cut, then rates backed up, we both sort of looked at the screen and were like, whoa, you know, that's interesting. >> and they. >> continued their march. certainly the, you know, the ten year towards 5%, it felt like it was going to get there. but then they backed off of late. had rates peaked. >> i think that rates have not peaked. >> on the long end. >> i think rates. >> will have. another move up on the long end. >> it is interesting. that the chair says.

>> you know, that we've cut rates. >> by 100 basis points. and that's true. >> on. >> the fed funds rate. >> but the ten year. treasury rate is up by 80. basis points. >> since that first cut. >> so mortgage. >> rates, which priced off the ten year treasury had relaxed. >> a little bit. >> and so. >> housing got. >> a little bit of improvement. >> but rates are back up to about 7% on 30. >> year mortgages. and i. think the longer they stay at that level, the shock of, you know, people remember the 3% mortgage rates. and then all of a sudden they were seven. and that's kind of a shock. >> but now they've been up. >> at seven for around seven for really a. >> year and a half. >> and so but. >> i think. >> that that. >> the. >> the budget deficit. >> problem is primarily. responsible i. >> think for this backup. >> and long rates. >> even though the. fed's cutting interest rates, this. >> is by. >> far the. >> worst performance of the ten year. >> during a fed cutting cycle. usually bonds rally when the fed starts cutting rates. but that didn't. >> happen at all. >> in fact, rates went up. >> so i think. >> that inflation is not going

to easily go back. >> down to 2%. >> we're well. above 2%. i mean, we're at 2.9 on the core cpi and you know, or 2.6 or 2.7 on the headline. i mean, we got to get below. two and. >> a. >> half, i think. >> to talk. about putting. >> rate cuts back on the table. and chair. >> powell was quite clear. >> in stating. >> that we don't need to see a 2.00 inflation number. and i think. >> he. >> uses the. pce primarily, but we don't need to see 2% to talk about cutting rates. it's almost like it's the direction of the cpi. and right now the direction of cpi is sideways and he needs it to start. >> coming down. >> i see that the owners equivalent rent can filter through. there is merit to that idea, but i. >> don't really see. >> it from the commodity complex. >> and we'll see what happens with tariffs. >> so there's a lot. >> of uncertainty. >> and for that reason i think we're only six. >> days or eight. >> days. >> whatever. >> it is into the administration. >> for that reason, i think the. >> fed being on hold, corroborating the, you know, with the fed funds rate totally

corroborated by the two year treasury, it's appropriate the fed is on hold. and so this was an inconsequential meeting versus expectations. a little bit of hawkishness with that no hurry language. but he he he he was he was a good three handed economist on the one hand, on the other hand, on the other hand. >> and it's. >> a wait and see situation. >> given your view of the deficit and certainly the longer end of the yield curve. is that why you. is it fact i guess. is it a. >> fact that you. >> still like intermediate dated bonds? nothing longer than the ten year? like you told me before. >> yeah. we still believe. >> that the yield. >> curve continues to steepen irregularly. >> of course. but you know, we were -108. the two year treasury was 108 basis points above. >> the ten year back in. >> last summer. and now it's at 34. >> basis points positive. we've had a. >> huge swing on. >> that, and i. >> think it has a lot to do with supply problems. and i don't believe that the deficit is going to improve under the trump

administration. >> you can find. >> you know, $50. >> million. >> here and $6. >> million. >> there through. >> something called, you know, the doge thing. >> or. >> the dog e, as i call it. but i don't think you're with a with looking at some tax cuts and forever spending on wars and, and natural disasters and all this stuff. i don't think the deficit is. >> going to go. >> down under trump, and that's going to be a problem with the fed on hold. >> and now. >> the bonds that were rolling off from five years ago with coupons. >> of one half. >> of 1% or 1%, it looks like they're going to be solidly in the four and a quarter to maybe five and a quarter range when those bonds roll over, and there's a lot of them coming up. so the long end i would i would continue to avoid it. i like the intermediate part of the market. >> it's not nearly. >> as attractive as it was 18 months ago. spreads are much tighter on credit products. the treasury rates are lower than 18 months ago. but when you take a look at the inflation rate, even

it's even it's at 2.5% to 3%. you have a real rate of return from fixed income. i think that's you should always have a real rate of return from fixed income. we've we've lived through so many years of repression of interest rates that we had zero or negative interest rates versus the inflation rate for a long time. we should always have a term premium in in bonds. and we have one now. so bonds aren't all that risky. but i. do think that under the fiscal situation that we will likely see another move up in the ten year treasury yield. >> everybody obviously you, me, every investor, the fed chair himself, as he made it clear today trying to figure out what the impact on the economy and inflation tariffs are going to have. their proposed commerce secretary, jeffrey howard lutnick, said today on capitol hill that it's, quote, nonsense, that tariffs are inflationary. what do you think? >> well, he's. >> got an example to point to. it's a sample set of one. but

the last time the tariffs came through we. >> did not have an. >> inflation problem. back under the. >> first trump. administration there were tariffs. >> and inflation. did not stir whatsoever. so i'm open minded on the idea. >> that tariffs. >> do not have to have an inflationary impact. >> but first we. >> have to see what the tariffs are going to look like. and there's an awful lot of saber rattling going on with the tariffs. if you do something that the president. doesn't like it's instantly tariff talk. and i don't know i don't think that's really healthy as a one tool reaction to all policy programs. you know if you have a if you have a hammer, every problem looks like a nail. and if you're a tariff guy and you're going to respond to policies of foreign countries that you don't like and you're just constantly going to tariffs, i don't know. i think the effect of that will incrementally wear off, but we'll wait and see what the tariffs look like. and they need not be inflationary. >> you have argued against the renewal of the tax cuts. i've asked you about.

>> that on several occasions. >> you've been pretty unwavering on that. is that still your view today? >> yes. >> i want i want the budget. >> deficit to shrink. >> and you're not. >> going to do that. >> by more. >> tax cuts. >> so i don't. really like the salt thing in the tax cuts. i think it's really kind of absurd that that was put. >> on way back in the first trump. >> administration, that one i'd like to see go away. but otherwise the tax cuts i don't want to see tax cuts, i want to see spending cuts. and i don't know if we're going to get that. certainly, history has not given you confidence that talk of reducing. spending was going to result in a reality of cutting spending. but we shall see. i don't trump was a deficit spender in his first term, and i don't see any indications that that's going to change. and that's why i caution against high risk positions right now, because. >> i think. >> long term interest rates can

go up. >> and valuations. >> as i said at the outset, are very high. >> on. >> credit in the bond market and on obviously parts of the equity market. so i'm favoring, again, equal weighted equity exposure rather than market weighted. that seems to have started to work. >> and i think fading the trends. >> of growth versus value and small cap versus large cap, equal weighted versus market weighted, i. think those got. >> very extended. >> during 2024, and i would. >> not. >> want to be betting on just a momentum trade. >> that that continues. >> so i like equal weighted in the s&p. i continue to like. cash because. >> the. >> fed's not going to cut rates. bonds on the shorter end intermediate range. the price off of a fed on hold will continue to deliver. you can get 6% fairly easily. it's not going. >> to make. >> you rich, but it's a real rate of return of more than 3%. and i think you can live to fight another day when you get cheaper valuations in both stocks and credit bonds.

>> on that note, has has what i like to refer to as the gundlach model portfolio changed in any way you like? cash. you said last time 30% cash, 50% short term bonds, 20% in us stocks. that's still sound, right? given what we know today. >> that's a. >> that's about right. >> i might. >> change something, you know, in zero five here or there. but broadly speaking that's the right parameter. about half money in relatively you know middle middle credit to upper credit bonds in the shorter you know, the five year area, three year area of the yield curve. i don't like stocks at these valuations. and i would still maintain maybe some of that cash you might want to hold in a real asset, perhaps a commodity fund, which seems to be showing signs of life. and gold i think has another move higher as high as well, although it is near the all time highs. so but i still think dollar cost averaging into

into gold makes. >> sense in this. >> uncertain geopolitical environment. >> sure. >> before i let you go, jeffrey, i know. >> and i. >> you. >> know, we've talked before and i could see from some. >> of your social. >> media posts that you're out in the palisades. and it's really hard to comprehend those pictures, especially 3000 miles away here in new york for many. i just wanted to say, we wish you well, everybody out there, our hearts with everybody. just a terrible situation that's going to take a long time to recover from. >> it's much worse than anybody realizes in terms of the disorganization. there's nobody in charge. there was no preparation. and nobody knows what rebuilding is supposed to look like or how it's going to be organized. but i was spared. i was evacuated for three weeks, but i was able to get back this week and i. >> had some damage. >> to my property. but fortunately my house is inside, is completely intact. i if you go through the neighborhood, it's it truly does look like the

pictures you saw of dresden from world war two. and all that's left in most houses is a bunch of powder on the ground and a chimney, and the chimneys are evocative of a tombstone, and there's an awful lot of them. thousands and thousands of them. it's absolutely brutal to go through the. >> neighborhood. >> and i don't it's not going to be a short period of time. it's going to be years and years before this gets to some level of stability and livability. so thank you for the for the thoughts and lots of lots of people dislocated. i've had quite a few employees have their houses burned to the ground. >> yeah. it's hard to process all of it. we wish you and everybody well we'll see you next time jeffrey. >> thank you. >> okay. >> thanks, judge. we'll see you next time. good luck everybody. you bet. >> yeah that's jeffrey gundlach. >> up next. >> got some big events. >> in overtime tonight including. >> oh yeah meta. >> and microsoft. >> they report at the top of the

hour. we'll run you up. >> to that next. do you have a life insurance policy you no longer need? now you can sell your policy - even a term policy - for an immediate cash payment. call coventry direct to learn more. we thought we had planned carefully for our retirement. but we quickly realized we needed a way to supplement our income. our friend sold their policy to help pay their medical bills, and that got me thinking. maybe selling our policy could help with our retirement. i'm skeptical, so i did some research and called coventry direct. they explained life insurance is a valuable asset that can be sold. we learned we could sell all of our policy, or keep part of it with no future payments. who knew? we sold our policy. now we can relax and enjoy our retirement as we had planned. if you have $100,000 or more of life insurance, you may qualify to sell your policy. don't cancel or let your policy lapse without finding out what it's worth. visit coventrydirect.com to find out if your policy qualifies. or call the number on your screen. coventry direct, redefining insurance.

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power e*trade's easy-to-use tools make complex trading less complicated. custom scans can help you find new trading opportunities, while an earnings tool helps you plan your trades and stay on top of the market. e*trade from morgan stanley. ♪♪ minimums. >> all right. >> we're now in the closing bell market zone. cnbc senior. markets correspondent. commentator mike santoli. >> is here to break down the crucial moments of the trading day. >> i gave you two titles. >> are that important. take it. all right. plus two heavyweight hitter. earnings in overtime. >> you know by now. >> steve kovach on what to expect. >> from microsoft julia boorstin. >> on what to. >> expect from meta. >> i'll go to you first, michael. >> your reactions. >> to the fed, how the market initially reacted. >> and then how. >> it may. >> be recalibrated itself for. >> the word. >> of the. >> last few months. >> it's funny, in the noon hour,

i, of course, said, look, low drama meeting, but the market will probably find something to trade. and they did that sort of 5 degrees tweak of the language toward maybe a slightly hawkish direction. but i think the takeaway was a kind of well-earned patience that powell feels right now. i'm not seeing tremendous risk to waiting even longer, waiting perhaps beyond march as the way the market sees it right now to change rates at all. and i do think it does reflect, as he frequently says, policy is in a good place. it matches up with where the economy and the markets are. we're at this kind of equilibrium point. i think it's worth reflecting on the fact that 2.5% real gdp growth, 2.5% ish inflation, 4.1% unemployment. these are things that for most points in history, you would absolutely sign up for, so you wouldn't be clamoring for some kind of change. so i think that's all to the good. now the market of course, is already priced for some good stuff, and we're dealing with our other issues in terms of a concentrated market dealing with a rethink of the

eye trade. and so you do have more stocks down than up. we're chopping around the 6000 mark in the s&p. no big deal there. but i do think the bond market is still sensitive to this idea that higher for longer might again create this test of whether the economy can handle the housing market can handle rates up here. but so far okay. >> steve cohen yesterday talked about. >> valuation of the market. >> fed chair today was asked about it said. >> valuation metrics. >> somewhat elevated. >> by almost. >> any metric. >> now he made. >> the point. he was like. >> looking at. >> tech and ai. >> but look when. >> the fed chair says something about the valuation of markets. >> you sit up and take note. >> you do. now, he didn't walk into that room kind of wanting and intending to make a broad comment about equity valuations. but when asked, he did observe that it's hard to ignore the fact that valuations do look elevated. it's just what reality tells you. we're going to hear from these companies today that trade at 30 ish times forward

earnings for the biggest companies in the world. there's no way of saying that that's not elevated. what he did say, though, is it's nothing systemic. it doesn't seem as if financial market participants are way out on a limb or that the banks are vulnerable. so from their perspective, that's just what stock markets do. they sometimes, you know, overshoot. >> it's going to be a. >> big evening obviously meta and microsoft and tesla. we'll talk microsoft first with you steve kovach. what are we most need to pay attention to. >> yeah, it's going to be capex. deep seek has just. >> raised all these. >> new questions, scott, about capital expenditures for artificial intelligence. a week ago, $80 billion for this fiscal year of 2025 ending in june. $80 billion sounded reasonable in order to win this ai race that we've been talking about so much. and then deep tech just really shook up that narrative. so i really expect on this call, starting at 530 tonight for nadella and his cfo, amy hood, to really talk about whether or not they need to continue spending. ai will give them credit, though. over the last

several quarters on these calls, scott nadella has said, we are always gauging our demand for artificial intelligence. the demand is there. we can't meet that demand. but if we see things move the other way, we're going to be nimble. we're going to be dynamic and pull back spending if we need to. so it's going to be on everyone's mind today going into that call, will they give some sort of indication if that 80 billion needs to come down? and going into the back half of the calendar year, if they're still going to be accelerating these ai investments, or if they're going to be pulling back a little bit and taking a pause and really looking at the landscape here and seeing what they've learned from this deep tech moment in the market. by the way, microsoft shares are still lagging behind its peers here. started off last year really hot. but the one year chart when you're looking versus apple, meta, amazon and google, those are all up double digit percentage points in the last year. microsoft not so much. scott. >> the fact of the matter is, too, steve. it's probably just too soon to know what they're going to have to do with spending. we're reacting in a matter of a 48, 72 hours to this

news, and they are as well. >> yeah. and it's a justifiable question. and that's why i go back to these previous comments where before in a pre deep tech era, yes, the demand was there. yes. they thought they needed to spend this much money. does that calculation change or are they taking this position that it's great what deep tech was able to do with a more limited budget and more limited technology? but we have plans that require us to continue spending, to continue spending with nvidia. >> and all these. >> other hyperscalers in order to make what we want to do in this ai race happen. so yes, it's been a short amount. >> of time, but. >> it is. the question on everyone's mind, is this spending justified? and i'm sure we'll. >> find out in just a matter of hours here. we will, and we'll be with you when that happens. steve. thank you. steve kovach to julia boorstin now on meta trying to figure out what the over under today might be on the words open source. >> how many. >> times we might hear. >> that i'm sure we will hear a lot about open source and also a

lot of questions about capital expenditures. just last week mark zuckerberg pre-announced up to $65 billion in capex this year. and of course a lot of that is about building out ai infrastructure. and i well like with microsoft be center stage for meta. now meta meta shares are up 68% in the past year and up 8% in the past week. meta has been a rare mega-cap tech stock that has benefited from the surprise explosion of deep seek, because its success is seen as validating meta's open source approach to ai, and also because meta is seen as a key beneficiary of ai, both in terms of its ad business and in terms of its consumer chatbot. my ai, so meta ai. so the question now is how meta's ai investments are going to pay off this quarter. just last week, the company guided to that 65 billion in capex this year. but revenue growth is expected to slow to 17% this quarter and to 14% in q1, down from 19% last quarter. so we'll have to see whether these new ai tools, whether more

monetization of messenger and whatsapp, the fact that ads are coming to threads can all help rev up growth and stop that declining revenue growth rate. back over to you. >> all right julia, thanks. we'll look forward to those numbers when they hit. and your analysis of course when they do. how are you thinking about these now? >> yeah. it's fascinating i mean, steve mentioning how microsoft has really decelerated and been an underperformer for the last year, but in the first year after the unveiling of chatgpt, microsoft got all the benefit of it. so it's much to me more about the sequencing of how the market is now reading, how ai plays out and flows into the company's bottom lines. i could make the argument that the expectations are pretty low for microsoft, but again, you had such a massive ramp that we've just been consolidating for a while. it's still 31 times forward earnings. i don't think it's necessarily make or break for the overall market. you can have some of these do well and some of them have more of a reset lower. and we've seen this over the last six months that

the market can absorb that on some level, as long as they're not all down at once. so open minded about it. i think tesla is interesting. it's obviously got a massive meme factor involved in terms of why the stock does what it does. it's 20% off its highs. it's below where it was in november of 2021, but it's up massively since the election. so to me that's a crapshoot in terms of how we read the long term kind of mission and story there. >> i mean. it's the. >> first time. >> really that. >> musk presumably will be on the call and. that he's going to be asked about all the hats that he is wearing. >> now. >> with an additional one related to doge and the white house and everything else that he has going on. and analysts are going to be able to. ask him questions. >> again. >> assuming he is on that call. >> sure. it's funny because, i mean, how many ceo roles did he have to have before, you know, anybody got concerned about that? to me, it's more about i wonder if he'll be asked specifically how would deregulatory moves accelerate the robotaxi adoption or

whatever. whatever the company and the stock have been given credit for is being better positioned under the new administration. talk about specifics and practical terms and tangible ways. maybe that'll that'll come through here. but, you know, again, we're trying to figure out if this market can make its way forward without that kind of concentrated leadership. >> you know, and as it. >> relates to capex from the mega-caps, i mean, any pullback. >> in any. >> way i could imagine would be viewed other than positive. we've been questioning how much these companies. >> are willing. >> to spend. it's the fall. on effect for the nvidia's of the. world that you would first look at. and the others the broadcom's, which were negative again today. >> and stocks like that. >> it's certainly a net loss for the hardware companies. but also i mean, you have to wonder exactly how you make your peace with how much has already been spent, whether some of it's viewed as sunk cost, whether they're seeing diminishing returns. everyone seems to know that ultimately you spend up until you perceive you're

getting to a wall. nobody knows where the wall is. we don't know if it's close or far, so it'll be interesting to see how they characterize that. >> all right. good stuff, michael. thank you very much. that's mike santoli. bell's going to ring us out. read fed chair says no. hurry no move. >> today. >> maybe no move next time. >> and then. >> we'll. >> have to see. >> after that for us. >> big earnings coming up. >> that's the end of regulation. >> brinker international. >> ringing. >> the closing bell at the new york. >> stock exchange. >> will dan group doing the honors. >> at the nasdaq. stocks mostly. >> lower in a. >> choppy. >> session as the fed holds rates steady and signals potential concerns. >> on. >> inflation. >> while nvidia. >> pulls back on fresh worries about export controls. >> now attention turns to. one of the most important hours of earnings season. that's the scorecard on wall street. but the action is just getting started. >> welcome to closing. >> bell overtime i'm morgan brennan with john ford. >> yeah. buckle up for a massive afternoon of. quarterly reports. >>