Who better to join us on the most important Fed Day since the last Fed Day than Peter Boockvar, CIO of One Point BFG Wealth Partners and author of The Boock Report?
POWELL IS “GOING TO SIT ON HIS HANDS”
As expected, the Fed yesterday held interest rates steady for the first time since July last year - a move Peter agrees with as he says “the main pain point of the economy is cost pressures for business and inflation for consumers, [so] price stability or lower prices should be the main focus of the Fed.”
“The only notable thing [from that announcement] is that unless we get a further drop in inflation, and/or a further rise in the unemployment rate, Jay Powell is just going to sit on his hands in his last two meetings.”
Of course, the next Fed chair, whoever that is, will take over in June, and will likely push for a cut. However, Peter says “in order to get enough votes, I think the macro circumstances are going to have to change, rather than that person just being able to cut rates just because they want to and are told to.”
As ever, we’re back to the same old question - how independent is the Fed really?
THE AI TRADE: NOW THE MEMORY TRADE?
“A couple of bells are ringing that have my antennae up,” Peter said. “The growing competition [in the gen AI trade] is making people more aware that not everyone can win in this build out.” Basically, the AI trade is becoming more bifurcated as the market “becomes more discriminatory with respect to what they buy.”
Last time Peter was on Talking Markets, he flagged Oracle’s 30% slide from September to November. That slide has continued, as people “realized how overextended they are getting with a lot of their data center build-out obligations.”
AI cloud computing company CoreWeave is “down well off its highs”
NVIDIA “reported a phenomenal quarter but hasn’t really been able to break out”
💡”Now, the recent run has been in memory names and storage, like Seagate, Rambus, Western Digital and SanDisk, because there is a legitimate deficit in memory,” Peter said. “But as fast as these stocks are going up, and they could continue to go up, it will be as fast when they fall as supply catches up to demand.”
PETER’S EQUITY OUTLOOK
The S&P briefly touched 7,000 yesterday before paring gains a little.
Peter flagged that other areas of the markets that have done very well are small and mid-cap stocks and international stocks, helped by the weaker dollar, and the fact that “Trump is incentivizing a lot of countries to make themselves great again and rely less on the US.”
That international trade, which we saw last year, is “carrying over and I think will continue to do so,” Peter said. However, that doesn’t mean there wouldn’t be contagion if the market “loses that gen AI trade” completely.
💡Peter hasn’t moved totally away from the US: he still likes “a lot of cheap, boring stuff in the consumer staples sector, which has been really beaten up over the last 12 months.”
EUROPE
Peter recognizes the “clear challenges” Europe faces, including energy issues, sclerotic growth, welfare state.
They’re all known knowns, Peter said, and the question is, “can Trump’s attacks, with the tariffs, Greenland, and everything else, can that make Europe great again?”
Peter thinks they possibly can, as evidenced by the landmark Europe/India trade deal announced this week, which included India cutting tariffs on European auto imports. “So you have a market of 1.4 billion people that maybe over time are going to drive more Volkswagens and Mercedes and BMWs and other cars.”
METALS AND ENERGY
“I think the industrial/precious metals bull market is going to expand to energy and ag,” Peter said.
So, what would be the catalyst for that rotation?
1. US Dollar Weakness
Because of the inflationary nature of a weaker currency, it directly raises the cost of imports and raw materials. Peter says that if dollar weakness persists, oil prices could be pushed higher.
2. Energy Market Dynamics
Peter identified several sector-specific catalysts for a rotation into energy:
Extreme Undervaluation: At $60, Peter considers oil to be one of the “cheapest assets in the world” and notes it has been unable to break down further despite negative sentiment.
Producer Pain Points: He said half of OPEC cannot make money when oil is in the mid-to-low $50s. Saudi Arabia has already begun trimming government spending and halted quota increases because prices are too low.
Underinvestment and Supply Lag: The market is facing the consequences of years of underinvestment in oil and gas. Furthermore, Peter argues that expected supply increases, such as those from Venezuela, will actually take years to ramp up.
Extended Demand Outlook: The International Energy Agency (IEA) recently pushed its estimates for peak oil demand out from 2030 to 2050, suggesting a longer runway for the sector than previously anticipated.
3. Agriculture (Ag) Market Dynamics
For the agriculture sector, Peter sees the rotation occurring as the market hits the bottom of its natural cycle:
Bottom of the Cycle Pricing: He believes the time to buy is when prices are at their floor, specifically citing corn at $4, soybeans at $10, and wheat at $5.
Depressed Related Assets: He said fertilizer prices and related stocks are currently depressed, which often precedes a reversal.
Environmental and Harvest Catalysts: While the agricultural cycle is faster than mining, the ultimate trigger for a price reversal higher will likely be a poor harvest, tough weather, or a drought.
4. Geopolitical and Capital Flows
Peter pointed out that the current trade environment is forcing countries like Canada to embrace fossil fuels and build pipelines to ship energy to Asia to remain competitive.
Additionally, as international markets outperform the US, capital flows are seeking new destinations, which benefits commodities and international equities
ASIAN CURRENCIES
Chinese Yuan: Peter says the strength of the Chinese yuan is one of the most significant developments of the year, It has reached its highest level against the dollar since May 2023, in what he said is a deliberate move by the Chinese government. This yuan strength is part of a broader breakout in the Asian dollar index, which includes the Singapore dollar reaching a 10-year high against the US dollar. Crucially, Peter believes the yuan’s ascent “creates cover” for other regional currencies, specifically the Japanese yen, to begin their own rallies.
Japanese Yen: The situation in Japan is central to Peter’s thesis on global rates. He describes the Bank of Japan (BOJ) as being “so far behind” where they should be, with inflation running between 2.5% and 3% while overnight rates remain at only 75 basis points. He expects further rate hikes from the BOJ this year to stabilize the weak yen and respond to skyrocketing Japanese Government Bond (JGB) yields. Peter warns that rising JGB yields will drag global bond yields higher. Also, because Japan is a net capital creditor, a stronger yen and higher domestic yields could trigger an increase in the repatriation trade, where Japanese investors pull money out of US assets to bring it home.
TARIFF IMPACT
Peter said tariffs are acting as a persistent inflationary tax rather than a simple one-time adjustment.
He pointed out that 40% of US imports are intermediate goods, as in raw materials or components used to create finished products within the US. When these are tariffed, it directly raises the cost of domestic production. While proponents might argue that tariffs make the US more competitive, Peter warns that these benefits are often dramatically offset by the rising costs of these essential inputs.
And the corporate way of dealing with it can be illustrated by General Motors:
General Motors reported that tariffs cost them $3.1 billion in 2025.
Companies are only able to mitigate a portion of these costs. GM, for instance, mitigated about 40%. And they do so through hiring less, cost reductions, and price increases.
Because businesses cannot hit consumers with a sudden 20% price hike without losing customers, they instead “piecemeal” out price increases over several years (e.g., 3% to 4% annually) to slowly recapture lost profit margins
Thank you Prometheus Research, Mat Lainer, Reading Account, Daliah Savino, Joseph Battelle, and many others for tuning in live, and thanks to everyone for reading…! We’ll be back Talking Markets on Friday at 4pm ET with the one and only Coach Dale Pinkert.
Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.
