The next couple of weeks will certainly be interesting. The Federal Open Market Committee (FOMC) will decide on whether to lower the federal funds rate (FFR) on July 30. Then on Aug. 1, the US will impose reciprocal tariffs on goods imported from America's trading partners, observes Ed Yardeni, editor of Yardeni QuickTakes.
Furthermore, administration officials will undoubtedly continue to beat up on the Fed, especially if the FOMC decides not to lower the FFR next week. US Treasury Secretary Scott Bessent recently called for a comprehensive review of the Federal Reserve, questioning its effectiveness and suggesting it has not succeeded in its mission.
(Editor’s Note: Ed Yardeni will be speaking at the 2025 MoneyShow Masters Symposium Sarasota, scheduled for Dec. 1-3. Register HERE.)
In a CNBC interview on "Squawk Box," Bessent criticized the Fed for "fear-mongering" over President Trump's tariffs, noting that inflation has remained low despite these policies. He remarked, "They were fear-mongering over tariffs, and thus far we have seen very little, if any, inflation." He also expressed frustration with the Fed's staff, stating, "All these PhDs over there, I don’t know what they do."
This latest attack by the administration on the Fed weighed on the US Dollar Index and boosted the price of gold. The S&P 500 Index (^SPX) is still trading around a record high. It's as though investors are anticipating that the FOMC won't cut the FFR next week, but will signal that a September cut is likely.
At the same time, investors must wonder if the stock market rally might be about to be walloped by Trump's Aug. 1 tariffs if they are too high and are countered with higher tariffs on US goods exported to the rest of the world. There is also a seasonal tendency for S&P 500 rallies to stall in August and weaken during September before experiencing a year-end rally.
