Trump’s Fed chair tease, July rate cut buzz

• Stocks fizzled and ended mixed. Futures point to an UP day today.
• JJ continues to be coy – not committing to anything.
• Trump teases a new FED chair nomination.
• Markets are beginning to bet on a July cut.
• Is BP in ‘play’?
• Try the Short Rib Burgers for 4^th of July.

Stocks struggled yesterday – which should not be a surprise….I pointed to the RSI (Relative Strength index) yesterday morning – telling you that while it was not ‘overbot’ yet – we were close and so if we saw the market churn a bit that would be ok….….and that’s what happened – the broader indexes churned….the Dow lost 106 pts, the S&P was flat, the Nasdaq gained 61pts, the Russell gave up 25 pts, the Transports lost 165 pts, the Equal Weighted S&P gave up 54 pts, while the Mag 7 added 127 pts.

Look, we had a dramatic selloff in the early spring due to economic uncertainty and geo-political risk and then we had a dramatic reversal even as those same risks remained a top concern….in the end – we are today where we were in February – S&P 6100. Those that panicked are licking their wounds while those that rode it out find themselves in a better position today than they were when the fire started. Which again speaks to the having that plan.

Only 2 of the 11 S&P sectors rose – Tech + 0.85% (thank NVDA for that +4.4% and closed a new high) and Healthcare – it closed up 0.1% (small but a win). The other 9 sectors ended lower with Real Estate in the lead – down 2.5% (think Zohran Mamdani – surely you know that name!), Utilities and Consumer Staples were next – down 1.3%, Consumer Discretionary – 1.2%, Basic Materials – 1%, Industrials – 0.9%, Energy – 0.4%, Financials – 0.3% and Communications – 0.1%.

JJ, as discussed, went back to Capitol Hill to get grilled by the Senators and as expected nothing new came of it. He continued to say that the FED is struggling to assess the impact of tariffs on the economy and the consumer. He reiterated that the US economy remains strong, therefore it is prudent to move slowly.

Well, he is starting to get real push back and calls for a July rate cut are now the narrative. And while I didn’t think it was going to happen, my gut now says that the pressure is on. The question now is – will he cut by 25 bps or 50 bps? Currently, the market is pricing at a 20% chance of a 25-bps rate cut in July with an 80% chance of 25 bps in September. But it’s early…..the next FOMC meeting is July 29/30^th – So Nicky T at the WSJ and our friends at Goldman Sachs have 4 weeks to prepare the markets for a July cut. Anyone interested in taking that BET?

Now, let me tell you who is not moving slowly – Trump. He continues to challenge JJ and yesterday announced that he has narrowed his choice of a new FED Chair down to “3 or 4 people” – now remember – JJ’s term isn’t up until May 2026, but by announcing that he has culled the field, he is creating a ‘shadow’ FED Chair and he is putting ‘pressure’ on JJ. An announcement in the fall, which is what he intimated, would essentially castrate JJ. Speculation is running rampant on who it will be – and we can thank the almighty that San Fran’s Mary Daly of Silicon Valley Bank fame is NOT in the running.

The four most likely candidates he is considering are:

Kevin Warsh: A former Federal Reserve Governor (2006–2011) who has been frequently mentioned as a frontrunner. Warsh has criticized the Fed's handling of inflation and aligns with Trump’s preference for lower interest rates. His Wall Street experience and prior consideration for Treasury Secretary make him a strong contender. 20% chance.

Scott Bessent: The current Treasury Secretary, Bessent (appears to be the favorite) and has emerged as a serious candidate due to his economic expertise and Wall Street background, including roles at Soros Fund Management and Key Square Capital Management. His name has been floated by Trump’s advisers, and he has confirmed the administration’s timeline for interviewing candidates. 40% chance

Chrissy Waller: A current Federal Reserve Governor appointed by Trump in 2020, Waller has expressed views favoring interest rate cuts to prevent economic slowdown, which may align with Trump’s preferences. His current role at the Fed makes him a plausible internal candidate. Recall – Chrissy was the first one last week to call for a July rate cut post the FOMC meeting, this after JJ left played it safe. Chrissy is auditioning for the role and so is Mishy Bowman – but my gut says neither are in the running. 10% chance.

Kevin Hassett: A White House economic adviser and former Chair of the Council of Economic Advisers under Trump, Hassett is seen as a loyalist with conservative credentials. His name has been mentioned in reports and prediction markets as a potential pick. 30% chance.

Bonds advanced slightly yesterday leaving yields in line.

Oil is churning at the $65 level – just above trendline support at $64.70.

Gold is trading up $11 at $3,354 – hugging the trendline at $3,348 – something I said would not surprise me at all. If we fail to hold the line, then I suspect we could see gold trade down to $3,290ish…. For now, I think the upside is limited, which doesn’t mean anything other than I think the upside is limited.

The VIX (Fear Index) has settled back into the ‘complacent zone’ – which makes sense based on what we’ve seen over the past week. The temperature has been turned down in the middle east, the economic data in the US remains mostly bullish and the market is betting that the FED is about to change course. A complacent VIX suggests further upside for stocks and lower rates supports that as well…so – Stick to the plan!

Eco data today includes Retail Inventories m/m of -0.1%, Personal Consumption of +1.2% (strong), Final revision to 1^st Qtr. GDP – unchanged at +3.7% and the Core PCE Q/Q of +3.4% - which is a bit inflationary.

US futures are up this morning…. Dow + 123 pts, S&P + 21 pts, the Nasdaq is up 108 pts while the Russell is up 6. Now the S&P RSI at 65.107- remains just below the overbot line (70) – so a push higher would not be a surprise…but all that means is don’t go chasing stuff – patience is a virtue. I suspect we will see the S&P pull back just a bit over the next couple of weeks – thinking 5980 ish…

European mkts consolidated yesterday and like US futures – markets across the zone are all higher this morning. Germany + 0.7%, with the UK up 0.35%, Italy is in last place up 0.1% Everyone else is in between. European defense stocks are higher after NATO members agree to spend MORE on defense. Yesterday – BP shares surged by 10% after a ‘story’ came out saying that Shell was actively courting them….this morning Shell came out to say that they are NOT actively pursuing an offer for BP – yet BP is up $3 or 0.9% as the markets suspects that they are in play. Potential bidders could include the majors – XOM, CVX, TOT, but another consideration could be the PE activist investor Elliot Management that owns 5% of BP and is pushing for a strategic overhaul – think a breakup of the BP assets. In any event – where there is smoke, there is fire.

The S&P closed at 6092 – flat on the day. This morning it looks like another risk on day – although I think it fades just because it feels exhausted and the RSI is teasing overbot. We are coming into the July 4^th holiday next week – so expect volumes to decline as we move thru the week – but remember – lower volumes can lead to exaggerated moves in either direction….so stick to the plan.

I believe the focus will be on the ‘big, beautiful bill’ and how those negotiations are going. The world is safer today than it was yesterday.

Short rib burgers

These are crazy good.... They are a bit of work, but if you have the time and you really want to impress - go for it.

Refer back to the Short Rib recipe below. Make 1/2 dozen ribs - the night before......cool and then shred the meat off of the bone.... Now when ready.... Bring the shredded meat to room temp and then mix the cooked short rib meat with the ground chuck (now use real ground chuck - not lean hamburger meat...you want it to have the fat for flavor) season with s&p and form the burgers. Light the grill and let it get nice and hot and cook. Top with sautéed onions and Monterey jack to complete this burger.

While this is cooking, butter the Brioche buns and toast either on the grill or in a frying pan......Then place the cooked burger on your bun - with fresh lettuce and the sautéed onions. Mayo and Ketchup on the side. Outstanding.

Braised Short Ribs

Begin with 6 / 8 beef short ribs. season with s&p and then brown in a frying pan with a bit of Olive oil. Make sure to brown all sides being careful not to burn the meat. After you have browned them - place them in a large/deep baking pan. Lining them up on their sides.

Next - large Chop - 2 lg White Spanish Onions, 1 bunch of celery stalk, 1 bag of carrots. Smash 4 /5 cloves of garlic and add to the meat - making sure you disperse the garlic all around. Next add the chopped veggies right on top.

In the frying pan that you used to brown the meat - add: 1 can of beef broth, 1 can tomato paste, and 1/4 to 1/2 bottle of red wine. mix well and let the broth come to a boil for a couple of mins as you steam away some of the alcohol in the wine. Bathe the short ribs in this mixture and cover tightly. Place the baking dish in the oven - preheated to 350 degrees. Let cook for 4 hours - tightly covered.