Opinions
Larry Berman CFA, CMT, CTA A Comment -- General Comments From an Expert A Commentary COMMENT Aug 11, 2025
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Depends where you look. Yes in some places, not so much in others. It'll be covered more in-depth in today's Educational Segment.
This week we get CPI, PPI, and retail sales. If we think about how the intersection of growth and inflation affect the world and the consumer, this is the big week for markets. We should start to see the beginning of the tariff impact.
Right now, given the weak employment situation, the tilt is moving toward a rate cut in September. But we'll see. Current makeup of the Fed Reserve Board is on pause. Jackson Hole is coming up in a couple of weeks where, if they're going to think about cutting, they'll almost certainly give that indication.
You can't not like them, except for the breadth. Many companies are doing well, but the concentration of earnings growth remains very narrow in the big tech areas. That's not robust. President Trump is trying to change that, but it'll be a couple of years before we see the benefits of less regulation and a broadening of the US economy.
He's not a crypto expert. Exposure at his firm is done very conservatively. He's long bitcoin, which is the generic way to play, with an options strategy embedded. This mitigates the risk on the downside during periods of high volatility, while capping the upside.
Blockchain is very real, the technology is very real. But when you buy a coin, you don't own the cashflow and that's the problem he has with the sector. Could bitcoin go to $1M? Absolutely. Limited supply and lots of demand. It's all about whether you can handle the volatility along the way.
He doesn't recommend this for everyone. Thinks a lot of these products turn out to be Ponzi schemes.
Inflation
White House is pretty adamant that their tariff policies aren't inflationary. Last week, we saw President Trump nominate Stephen Miren for the Fed Reserve Board. If you go to Larry's post from today on BNN, there's a link to a paper by Miren. Go read it. It gives you the vision of why they're doing what they're doing. One of the reasons is the hollowing out of the US middle class in terms of jobs.
Larry brought a chart titled "Inflation pressures intensifying". Looking at the ISM prices paid survey, the prices paid component has a direct correlation to CPI. Prices are going up. Questions are: by how much and when will it start? You may see it start this week, but prices are going up over the next couple of quarters.
The Fed will want to know if this is transitory. Last time prices went up, the Fed was late. Now they're on pause. Maybe they're making a similar mistake in the other direction.
Miren believes that the way Trump is doing this is not going to be inflationary, based on how currencies adjust around the world. Lots of debate here.
Why are they doing all these things? They're trying to improve growth, trying to make jobs better in the US. The chart titled "Manufacturing employment" is part of Miren's paper. Looks at the total number of manufacturing jobs in the US post-WW2, and as a percentage of employment overall. Globalization has led to the gutting of the US manufacturing sector, and this is nothing new. Trump's policies using tariffs is to change that whole picture.
Wall Street appears to believe the proposed outcome depicted in the chart, and that inflation will either not come to pass or will be transitory. We'll see. For the next few quarters prices are going up, and we'll see what the policy response is from the Fed. Suspects they'll be on hold unless the US employment picture continues to weaken, and that's the right move.
The TSX and U.S. markets are somewhat linked and there are several headwinds such as high valuations. In Canada we're more resource focused and energy is in the de-valued category. We're poised for continued strength because our valuations are at a relative discount to the U.S. This gap will close as earnings from TSX companies are likely to increase and there is increasing confidence in the market. With no trade deals being made this will likely add to the volatility but he sees the market higher in six months in spite of the overhang keeping it somewhat weak. He's not even sure if a trade deal adds much value. He doesn't think we are headed for an all-out recession in Canada. Stick with diversification and value deals.
The question was on his outlook for oil and gas. He feels that gas is likely to stay flat for a while. The full production of LNG is not ramping up for 8 to 9 months. Oil as a global fuel has a low growth forecast of around 2.5%. There is an appetite in international markets for natural gas. In Canada it trades at a premium to Europe. Coal production in the U.S. is in decline and being replaced by natural gas. Natural gas is a transition fuel to the full use of clean energy and will be around for quite some time.
The question was on crude oil. OPEC has brought on some production but the worry is that the discipline with restraint hasn't been there. Globally the traditional bases are rolling over and he is bullish on Canadian energy. Oil is not renewable and he sees a slight decline in the U.S., Russia, and Mexico too. The western basins are not in the same struggle as others and we are sitting in the crown seat. Getting it out of the ground is what hampers us and that needs to improve. Trump's tariffs on Russia and India help.
The worst economic outlook, bar none, is stagflation -- when prices are rising and growth is slowing. That, to him, is the biggest risk of a lot of these policy choices by the US administration. We have to get through this period. That's a big challenge. If he had a crystal ball he could tell you exactly what to do, but he doesn't.
If you look at the polymarkets and some of the betting pools, the expectation is that we get a slightly better-than-expected CPI number. So we could see equity markets continue to perk up. The YOY report for CPI is expected at 2.8%, and that's tomorrow. The betting markets have it coming in at 2.6-2.7%, and that would be flat to last month. If we get that, markets will grind higher.