CSPAN - Washington Journal Dominic Chu

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April 26, 2025 00:38-01:16 - CSPAN

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Washington Journal Dominic Chu

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greta brawner

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greta brawner ▲ ● ▼		This morning, we are joined by Dominique Chu, who's a senior markets correspondent with CNBC here to talk about the financial markets.
		Mr. Chu, the markets have been up and down, up and down for the past couple of weeks.
		What is behind the volatility?
unidentified		There's no doubt about it.
		It's certainly trade and tariff policy that's been driving a lot of the market volatility that we've seen as of late.
		If you go back to just what we saw on that so-called Liberation Day, the day that the tariff policy was unveiled by the Trump administration, that was when you started to really see the real pickup, the roller coaster ride in markets.
		And for the first at least few days or so, the first week or so of it, it was pretty much all to one side and that was to the downside.
		Meanwhile, you've had a lot more of the kind of upside, downside swings since then.
		And all of it has been due to either hard news or headlines or source reporting coming out of Washington, coming out of the White House with regard to possible changes, course corrections and whatnot in what that tariff and trade policy could be.
		So if you're looking for the proximate cause, the primary driver, the catalyst, if you will, over the course of the last few weeks, it's definitely tariffs and trade policy.
greta brawner ▲ ● ▼		Well, tell us about the who.
		Who's on the floor or who is doing the trading that we're seeing prices go up and down?
		For those people who don't watch or follow this every single day.
unidentified		Sure.
		At the end of the day, financial markets are driven by end demand.
		And for a lot of those people out there, it is actually people like you and me and many of your audience out there who have either brokerage accounts or 401k plans, individual retirement accounts and whatnot.
		There's institutional traders, you know, mutual fund hedge fund types who all serve as clients.
		But at the end of the day, what you're looking at are investors out there who are trying to take a view or protect themselves against downside.
		And that's the reason why the markets behave the way that they do.
		Now, when you talk about people, say, on the floor of the New York Stock Exchange or people who work at your brokerage company or your investment manager and whatnot, many of those people are conducting activity, trades, right?
		Doing transactions at the behest of clients.
		So if I and thousands or millions of my counterparts and peers in the population of America who have, say, a 401k account are doing something with it, in aggregate what that causes is somebody to have to place an order to buy or sell to fulfill my request for a trade.
		If you do that across just every single market, every single corner of our economy or market, that's why you start to see the size, if you will, the dollar amounts being moved around.
		So when you look at at the end of the day, if we have a lot of people out there who are either very worried or very bullish or optimistic, that is when you'll start to see some of the bigger swings that we've seen both to the downside and to the upside, Greta.
greta brawner ▲ ● ▼		So these same people are buying one day, selling the next?
unidentified		Yes, it is that simple.
		And the reason why, by the way, it's not normally like this.
		I would say that the evolution of technology from the Wall Street perspective has made it so that it's easier for people to transact or trade, to kind of call up their broker, or these days just hop on their smartphone or their computer to place a trade to buy or sell.
		That speed is what's causing a lot of this right now.
		And by the way, it's not just the speed at which you can do things at, it's also the idea that when you have potential catalysts that can either drive downside fright or upside bullishness coming out on a more regular and more frequent basis, that is what causes the volatility as well.
		And just case in point, in the last couple of weeks, since Liberation Day, right, since the tariff policy was announced, there has been a lot of reporting with regard to whether or not it's as solid or as firm as some of the numbers would dictate.
		There have been a lot of escalations and even de-escalations of those policies.
		Escalations of those policies tend to be dampeners of the market.
		People tend to get a little bit more pessimistic when trade rhetoric ramps up.
		At the same time, when we hear about maybe deals possibly being cut, hypothetically being cut, if we hear about, hey, X number of countries have approached the U.S. about seeking a potential deal, there is then optimism that promotes people to want to get more bullish and buy things.
		The problem right now is that because of the way that the news flow has evolved, there are not that many people out there who are saying, hey, I'm going to bet the farm that all of these trade policies are going to be resolved in the next few days or weeks.
		At the same time, there are not that many people who are willing to bet the farm that there's just going to be continued downside in the market.
		So what you have are people trying to stay nimble in these investing markets, buying and selling, which is the reason why some of these moves seem like they're massive to the upside and massive to the downside, but at the end of the day, they haven't really moved all that much.
		Now, net net, we are still negative in the markets since the tariff policy was announced, but that's the reason why you're seeing such up and down movement to the degree that we're seeing.
		And that's one of the reasons why there's at least a little bit more negative sentiment in the marketplace because of the way the markets are reacting right now.
greta brawner ▲ ● ▼		So Dummy, to explain basing your decisions on rhetoric, and is that normal?
greta brawner ▲ ● ▼		So basing your decision on buying and selling, and you're changing that based on the rhetoric coming out of Washington.
unidentified		It's not something that is, I don't believe that to the people I've spoken to, either on the retail investor side or the institutional investor side, I'm not sure rhetoric is something that people like to focus on more.
		If you are a long-term investor, like millions of Americans should be, what you want to know is that when you, say, buy a stock or buy an index fund or have your money put away for retirement, that in the next, say, three, five, 10, 15, 20 years, that the value of the money that you put into your account is going to be worth more than the money that you put in X number of years ago.
		And if it's not going to be better, then we have bigger problems as a country than just kind of what we're talking about right now.
		The idea of trading rhetoric is something that is not normal for many investors out there because there are only so many people who are tuned and watching the markets on a tick-by-tick, minute-by-minute type basis where they can see what those headlines are that are driving the volatility.
		For the most part, many of us, and myself included, every couple of weeks have money raked out of my paycheck and then kind of put into a 401k.
		That 401k invests in things like index funds or target date funds that plan for a certain retirement date down the line.
		And I just need to know that by the year 20, 35, 40, 45, 50, that I'm going to have a good amount of money saved so that I can retire.
		There are institutional investors out there who are paid and get paid to watch these things on a second-by-second basis.
		You compound that with the idea that computers and technology have now made the speed of trading not just in minutes and hours, but in seconds and microseconds and milliseconds and whatnot.
		That is what's at least driving some of the volatility that we're seeing right now.
		To trade headlines, to trade rhetoric, is something that a lot of investors normally aren't in tune to, but this is a fundamental paradigm shift, at least for the last few months, with regard to how people are viewing these things.
		Now, whether or not they should be trading rhetoric or not, that's a huge debate for a lot of investment advisors out there with their clients.
greta brawner ▲ ● ▼		What overall net impact will it have on the trading of rhetoric when the rhetoric seems to be a reversal of itself from one day to the next?
unidentified		Well, the sense that I get from the sources I talk to, the people I talk to, the traders on Wall Street and whatnot about this are that with every subsequent move with regard to trading rhetoric, it has a lot of force in the beginning, right?
		That kind of that big headline, that big trade policy, that big announcement.
		The more and more you start to see kind of the fine-tuning, or I mentioned course correcting, if you will, right?
		The rhetoric being not just one-sided.
		If you have a certain trade policy, an escalation that happens, and then you have reports that maybe things could be tempered, and then reports contrary to that that say, no, no, no, things aren't going to be tempered.
		This is very much something we're going to see through to the end.
		And then you magnify it and amplify it by having multiple parties involved.
		For instance, the Trump administration and the White House putting out their policies and saying one thing with regard to possible negotiations with China.
		And then at the same time, having the Chinese Ministry of Commerce say, no, no, no, there are no ongoing talks between the U.S. and China.
		All of these things tend to lead to a more dampening effect, meaning that it is a huge shock first off the bat, right off the bat.
		At that point, every time you do it more often, you start to see a little bit less of that kind of effect because the traders who have traded on those headlines and have gotten burned or lost money on those are not willing to bank as much of it on any future bet or trade that they've placed.
		If that continues in that way, in some ways it's a blessing because what you have is more dampened volatility.
		There won't be as many of these massive wild swings.
		Volatility will still be there, but like I said, nobody's willing to bet the farm that everything is going to be great on the trade front in the next several weeks or months.
		And at the same time, because of that same headline risk, nobody wants to short the market, bet on the downside in the market, because all it takes is one headline for all of those short bets or those negative bets to start losing money.
		So in that way, what you might start to see is a little bit more dampened.
		You may not see these massive thousand-point swings in the Dow.
		You could still see swings, but they won't be as big.
		And by the way, if you look at it in that way, it's going to take something kind of big and something more solid in terms of policy in order for people to feel really good about not trading the rhetoric, but then trading the corporate and economic fundamentals as to where the economy is headed in the next one, two, three quarters and the next one, two, and three years.
greta brawner ▲ ● ▼		And are you seeing those big indicators anywhere coming down the line?
unidentified		Well, no, I'm not seeing them at all right now.
		And based upon a lot of the reporting that we have on our side from our reporters here in D.C., based upon the reporting that we've seen from a lot of other big news agencies out there, there may be developments.
		The wheels are turning, so to speak, but they're not turning in a way or quick enough where anybody's willing to say that, hey, we have a trade deal imminent, or yes, we have a massive de-escalation regime in global trade eminent.
		Now, if that were to happen, hypothetically, Greta, if you could say that, hey, the administration thinks that we could be on the verge of something massive and groundbreaking, that could have a massive upside catalyst move, an upside catalyst effect for the markets.
		At the same time, if there is rhetoric or indications coming from either the administration here in America or from other big trading partners around the world, like say in Europe or in China or elsewhere, that say that maybe no deal can be counted on anytime soon, then that could have the same effect to the downside.
		We're not seeing any signs yet.
		We do have public comments from folks like Treasury Secretary Scott Besant that, you know, 100 countries have approached the U.S. about trying to negotiate a deal.
		We have comments coming from Trump himself, the president himself, about this notion that people are willing to negotiate or that we want to get a deal done.
		All of those things are great, but until you start seeing some kind of a real solid framework, something that you can bank on, so to speak, I feel as though, based upon the conversations I've had with a lot of institutional investors and folks who kind of have watched these markets for years, that the volatility that we are seeing is going to continue.
		It may not be as massively wide, but you are not going to find an environment where stocks are going to break out of their range, either to the downside or to the upside, without any big catalyst coming up.
		And that's the thing that I think a lot of folks on Wall Street are still watching for, whether or not there is something from the administration with regard to some kind of a breakthrough or a real stalling out in those negotiations as well.
greta brawner ▲ ● ▼		All right, Dominique Chu is our guest here this morning.
		He'll take your questions, your comments on financial markets.
		We'll get to those calls in a second.
		But first, Mr. Chu, how long does it take to negotiate and get a trade deal agreed to?
unidentified		Well, we don't know.
		I think that's the huge portion right now.
		And by the way, there hasn't been a precedent for this kind of a thing, at least in recent economic or modern history, right?
		The idea that you want to take a trade construct and policy that has been built up to the way that it is, at least up until the last couple of months, that has been built up over decades and maybe even arguably 50 plus years, certainly since the end of World War II.
		Global trade policy and global geopolitical, I guess, constructs have been evolving over the course of the last 50 or 60 years to the way that we've seen it right now prior to the Trump administration coming in.
		Many of those things, if it takes that long to put something like that together, to kind of build or evolve a global trade policy or construct the way that it is, it's hard to see a reality where you can just dissolve all of that and reshape global trade policy within a matter of days or weeks.
		It seems as though if you're going to get a blanket groundbreaking change in the way that U.S. economic and trade policy fits into the global picture of things, it doesn't feel as though, it doesn't track as though it can happen in just days or weeks.
		It's probably the reason why you're seeing a lot more of these talks take longer because it's just not that simple.
		It's hard work and it's not going to come without risk or sacrifice or any kind of pain at some point.
		If that is the case, you can have perhaps indications from either this administration or other countries around the world that we're on the right path, that we have an agreement in principle, that we want to do things a different way, a certain way.
		And that can happen within the, say, the matter of weeks or months or quarters.
		But to actually execute and put those things into place and have the effects be felt, that could take years down the line.
		I'm pretty sure that right now, from a policy standpoint, it's not just corporate America and the politicians here and abroad that are trying to wrestle with that.
		It's also the notion that the American public is going to have to figure out what their tolerance is for the kinds of volatility and the kinds of possible downside risk that we'll see in order to set up for a bigger and brighter future down the line.
		That is where I think you're seeing a lot of this debate come to light right now to really see what exactly is the pain threshold that we can tolerate for us to be able to say, yes, we can set up global trade in a way that's more advantageous to America and for all of us as Americans going forward.
greta brawner ▲ ● ▼		All right, let's get to calls.
greta brawner ▲ ● ▼		Charles, Fort Collins, Colorado, independent.
unidentified		Morning, Charles.
greta brawner ▲ ● ▼		One last time for Charles, Fort Collins, Colorado, independent.
		All right, Marshall, Nashville, Tennessee, Republican.
		Good morning.
unidentified		Current, how you doing?
		I would like to put forth an analogy to you and ask your opinion afterwards.
		I was outside and I got a mosquito bike, and of course it is, and I scratched it.
		And I'm talking about our national debt, and I scratched it.
		And a couple days later, I noticed I was trying to get infected.
		And I stressed it a little bit more, and then I went and washed it, of course.
		But I never did anything to eradicate the infection.
		All I ever did was just kind of wash over it.
		Now here we are, I'm 65, and I know for 65 years this has been going on.
		And now we're at the point where the infection is so bad that we have to either, we go to the doctor and he says we have to amputate the arm or it's going to cost your life $36 trillion in the hole.
		And we are actually questioning whether or not we want to go through the pain and the absolute feelings of that limb being gone or if we want to die.
		I'll accept your opinion offline.
		Sure, Greta, should I take that one?
greta brawner ▲ ● ▼		Yeah, go ahead.
unidentified		No, no.
		So that's exactly what you're saying right now is exactly what millions of other Americans are feeling about the way that our financial and economic markets have evolved over the course of, like you said, the last 50 or 60 years.
		There is, I don't believe, any real doubt that the path that this country is on is unsustainable, that you cannot keep doing things the way that you're doing in order to set yourself up for long-term success.
		The issue right now that you're dealing with is whether or not there is going to be the feeling that people want to take and undertake that change.
		What we've seen in the course of the last couple of just weeks, maybe even a couple of months by extension, is that you have a feeling that the economy in America was ripe for a bullish catalyst, a more positive catalyst because of some of the things that the administration, that the Trump administration had made promises on with regard to its campaign and then after its election as well.
		And that is for things like deregulation and that is for things like tax reform.
		The one thing, though, that hasn't really been tackled as much and is still being tackled right now are things on the spending front, to address your point about where the deficits are and where our spending has gotten to.
		There has been highly publicized efforts by the Department of Government Efficiency, Doge, right, by Elon Musk to try to cut government spending.
		There are also plans in place with regard to policy coming out of Congress with regard to how we can possibly cut spending down the line.
		At the end of the day, though, this is still a democracy where people are going to vote based upon how they feel their lives have been impacted or how their own personal families and their small business or business well-beings can be impacted by that.
		The downside volatility that we've seen has caused some folks to question whether or not the types of policies that are being talked about are right for them.
		And that's not for me to say.
		That's just everybody's individual takes are a little bit different.
		We do know that spending has to change.
		We do know that the way things are moving have to change.
		But if you start telling people, and I'm saying hypothetically, if you start cutting certain programs that have benefited certain people at some points in their lives and you say, hey, we can't do this anymore, there are understandably going to be folks out there who feel as though, no, no, no, I deserve that.
		I want that.
		But I've always had this.
		We need to keep this in place.
		I guess my point is that there are going to have to be hard choices.
		I just don't know how people will actually respond and make those choices once they know that there's going to have to be some kind of a sacrifice at the end.
		What I will say is that you will start to see some of those feelings manifest themselves in state and local elections later on this year.
		You'll start to see a lot more of that impact, at least I'm watching for it, in the midterm elections and then certainly in the elections to come as to whether or not we feel as though as a country, as an electorate, as a citizenry, that this is the path that we want to go on.
		But until then, no, there's no doubt that the spending and fiscal situation is something that a lot of people are watching closely, whether or not there's the will to change it.
		There hasn't really been that will to change it over the decades now at this point.
greta brawner ▲ ● ▼		Well, as you were alluding to, Republicans return to Washington next week and they're going to start right away on the president's tax and spending proposal, making permanent those 2017 tax cuts.
		And then also Republicans disagree on how much, but they're looking at trillions in spending cuts.
		What will determine how the market reacts to that piece of legislation if it passes through both chambers and the president signs it?
unidentified		So there's going to be a lot of debate and there's going to be a lot of folks out there making analyses on what future policy from the fiscal side of things could look like in terms of economic impact.
		There are a lot of folks out there much smarter than I am with PhDs in economics and finance and everything else who are going to try to project based upon assumptions what those policies could do to things like inflation, to things like the jobs picture in America, and by extension,
		what exactly our economic growth picture could look like in, say, the immediate one to two to three years after a policy or set of policies is enacted, and then what the economic growth trajectory can look like, say, three, five, or seven, ten years down the line.
		Those are all assumptions-driven projections.
		Nobody knows the future.
		What you can do is, though, take the past and then try to see in your models, in your spreadsheets, or whatever you use for projection, what that could look like.
		The markets are going to be a little bit more in tune and react more solidly and more forcefully to ideas or policies that are going to lead to drastic changes in the economic trajectory down the line.
		The markets are a leading indicator, meaning that the markets tend to price in what is expected already.
		They're a forward-looking instrument.
		So as people make projections over what this tax policy, what the spending policy and whatnot could look like, what is it going to do to the economic trajectory of this country, of the world, and then how exactly do companies operate in that new set of assumptions or forecasts?
		Do they end up making more money?
		Do their profit margins expand or get squeezed?
		All of those things are things that are going to drive the way that markets perform.
		If you look at markets from the stock market side of things, right?
		Because those are companies.
		If those companies are poised to do better, those stocks tend to go up in value because they discount the future optimism into a price today.
		And those prices today can go higher.
		At the same time, the flip side of the coin is if we feel as though, or the assumptions are though, the companies don't fare as well on a relative basis.
		It's not to say that they're going to go out of business, but if they don't do as well, then the value of those companies, the stocks themselves, and then by extension, say the Dow Jones Industrial Index or the S ⁇ P 500 or the NASDAQ Composite will start going lower.
		Those are the things, I think, Greta, that are going to drive a lot more of the market reaction.
		Now, the bond market is completely different.
		Not completely, but the bond market's going to be focused a lot more on things like the macroeconomic, the bigger picture economic trajectory for this country and for the companies that operate in them.
		So that's going to be, I think, what drives more of the Wall Street reaction.
greta brawner ▲ ● ▼		All right, let's go to Nancy, North Royalton, Ohio, Independent.
unidentified		Hello.
		Thank you.
		Can you hear me?
greta brawner ▲ ● ▼		We can.
greta brawner ▲ ● ▼		Go ahead with your question or comment, please.
unidentified		Thank you.
		I have a two-part question.
		The first one is, I read that the yield rates in the bond market went up, and I'm wondering what impact will that increase in the interest on bonds have on individual borrowers and lenders.
		And by de facto, didn't that just increase the interest on our national debt?
		And my second part question is, it seems like the Federal Reserve has been not raising or lowering interest rates the last two times the Board of Governors met.
		It seems that President Trump wants to deliver some kind of relief to debt holders.
		And do you think that that will be changing?
		I know it's hard to say, but do you think that the Federal Reserve will ultimately lower interest rates in the next six to 12 months?
		Thank you.
		And I'll listen off the air.
greta brawner ▲ ● ▼		Thanks, Nancy.
greta brawner ▲ ● ▼		Two good questions for you, Dominique, too.
unidentified		Oh, absolutely.
		So she's absolutely correct with regard to the first point.
		We did see a rise in interest rates.
		The simple mechanics are interest rates rise when the value of bonds falls.
		So if a bond is worth less, the interest rate that it gives you or interest rates in general tend to go higher.
		We have seen that play out a little bit more.
		And yes, it is absolutely correct that if interest rates rise, especially on things like benchmark Treasury securities, our sovereign bond market, that the interest that we pay on our national debt also goes higher.
		By extension, those benchmark interest rates that happen at the Treasury security level, Treasury bonds, Treasury notes and bills, those are benchmark items.
		And the things that are benchmarked to those Treasury rates are things like credit card rates, are things like auto loan rates, or things like home mortgage borrowing rates.
		So as those treasury rates go higher and the value of our treasury securities goes lower, you will start to see the effects of higher interest rates take their toll on consumers because anybody who borrows to do anything, whether it be for a car or house or anything else credit card-wise, will see their interest costs expand and go higher.
		So that's the first part of your question.
		The second part of your question or the second question with regard to whether or not there's any kind of relief down the line.
		The simple construct right now is that we live in a world where central banks are operating or are supposed to operate independently of any kind of political influence.
		The president, President Trump, has been one of the first in as far as I can remember and certainly in kind of more modern market history to actively take an interventions type role in trying to influence policy from the Federal Reserve.
		The reality right now is there's a reason why the Federal Reserve has not done anything with regard to interest policy just yet.
		And it's because they're waiting to see what real market effects these kinds of policies coming from the White House will have on the broader economy.
		The reason why I say that is because the general economic consensus is that tariff policy will have a negative impact on the economy.
		What is to be seen is how much of that impact is due to inflationary threats.
		When you start to put import taxes on things that we consume on a regular basis, what that tends to do is have an upward effect on prices, causing inflation, right?
		And inflation is something which I think is interesting from a journalist standpoint.
		We were very, and I was one of them, very concerned about the effects of higher prices, 40-year high inflation rates, not longer than maybe a couple of years ago, two, three years ago, right?
		So that threat is something that we all felt and we don't want to feel again.
		The Fed has responsibility for that.
		And there are those who blamed the Fed and other policies for stoking that inflation to begin with.
		Understandably, the Federal Reserve might be a little bit more gun-shy about lowering interest rates if they feel as though that inflationary threat has not been snuffed out and could be in play back again.
		Nobody wants to go through that high, high inflation again, all over again.
		At the same time, if you do see a situation where these current economic policies that have been laid out start to really have a downward effect on the economy, and most importantly, by one of the Fed's primary responsibilities, which is to try to create the maximum sustainable employment picture in America, if you start to see job losses hypothetically start to accelerate, more layoffs, more widespread industry furloughs and job losses,
		that is when the Fed will start to have to step in and lower interest rates to keep the economy higher.
		But there has been no hard economic data so far, at least notably so, that has said that we are due for an imminent job loss recession or sky-high inflation.
		Hence the kind of stay still, wait, see what happens.
		They're data-dependent.
		You'll hear that term a lot.
		That's the reason why the Fed is kind of doing what it's doing right now.
greta brawner ▲ ● ▼		Dominique Chu, coming up here on the Washington Journal, we're going to ask our viewers how the economy has impacted their housing plans.
		Front page of the Wall Street Journal this morning, home sales see steepest decline in two years.
		Set up this conversation for us.
unidentified		Sure, the conversation around real estate is nuanced and not so at the same time.
		And what I mean by that is I think most Americans who are out there, Greta, who are in the market for a home, either to buy one or sell one, understand the big picture macro headwinds and tailwinds that are at play.
		For the most part, what we have seen are at least issues with supply, and that has been keeping prices up.
		There's just not enough houses out there for people to buy.
		And if those houses come to market, there tend to be bidding wars around them.
		At the same time, one of the things that's putting a damper on some of those purchases is the idea that you're seeing at least higher interest rates.
		They're not nearly as high.
		I remember hearing stories from my parents about the 19, 20% 30-year fixed rate mortgages they had when they first bought a house when I was a young child.
		Meanwhile, there are still millions of Americans out there who are living in homes that might have a two and a half to three and a half or three and three quarter percent 30 year fixed rate mortgage.
		There is no incentive for those people to leave those homes because their costs of borrowing and financing those homes are so low.
		Those are those so-called silver or golden handcuffs that you'll hear talk about in the real estate market.
		That being said, home buyers are trying to find ways either to get in on the existing homes that come to supply right off the bat and putting bids and accelerated bids and outbidding or putting multiple bids in for homes or trying to find new home construction that can help ease some of that supply concern.
		All of these things are in play because the dynamic that's developed over the last 10, 15 years on interest rates has kind of led us to where we are now.
		And by the way, I remember in college, I took a real estate course one time and they said, you know, real estate is the most fixed of fixed assets.
		There's only so much land out there.
		So as we talk about the housing dynamic, it's not just about interest rate policy.
		It's also about supply.
		And by the way, supply is impacted by things like regulatory issues, who can build homes where.
		All of those things become in play at this point, Greta.
greta brawner ▲ ● ▼		And of course, the cost of construction too right now as those products go up.
		Dominique Chu, thank you very much, CNBC Senior Markets Correspondent.
		We always appreciate a conversation with you.
		We know you have to run and talk to your viewers, but thank you for talking to ours this morning.
unidentified		Thanks for having us here, Greta.
		Appreciate it.
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