Finance

For all the power it wields over the global economy, the Federal Reserve projects remarkable cool. Whereas rate-setters at other central banks frequently disagree with each other over the direction of monetary policy, Fed policymakers tend to stick together. That serenity is now being ruptured, just as President Donald Trump ramps up his attacks on the Fed, and his tariffs put America’s economy to the test. On July 30th two rate-setters, Christopher Waller and Michelle Bowman, voted against the majority decision to keep interest rates unchanged at 4.25-4.5%, preferring to cut them by a quarter of a percentage point instead. It is the first “double dissent” by governors on the Fed’s board in more than 30 years. More

For all the power it wields over the global economy, the Federal Reserve projects remarkable cool. Whereas rate-setters at other central banks frequently disagree with each other over the direction of monetary policy, Fed policymakers tend to stick together. That serenity is now being ruptured, just as President Donald Trump ramps up his attacks on the Fed, and his tariffs put America’s economy to the test. On July 30th two rate-setters, Christopher Waller and Michelle Bowman, voted against the majority decision to keep interest rates unchanged at 4.25-4.5%, preferring to cut them by a quarter of a percentage point instead. It is the first “double dissent” by governors on the Fed’s board in more than 30 years. More

The Federal Open Market Committee voted 9-2 to keep the federal funds rate set in a range between 4.25%-4.5%.
The decision was met with opposition from Governors Michelle Bowman and Christopher Waller, both of whom have advocated for the Fed to start easing. This was the first time since late 1993 that multiple governors cast no votes on a rate decision.
President Donald Trump has been pushing the central bank to cut the benchmark rate.
During a news conference, Powell said the FOMC hadn’t yet made a decision about what they would do at a September meeting.

WASHINGTON – A divided Federal Reserve on Wednesday voted to keep its benchmark interest rate steady, despite a barrage of criticism from President Donald Trump and dissents from two top officials.
The Federal Open Market Committee, the group that sets the overnight borrowing rate, voted 9-2 to stay on hold. The federal funds rate will continue to be set in a range between 4.25%-4.5%. The level sets what banks charge each other for overnight lending, but influences a slew of other rates across the economy.

However, the decision met opposition from Governors Michelle Bowman and Christopher Waller, both of whom have advocated for the Fed to start easing in acknowledgement that inflation is under control and the labor market could start weakening soon. This was the first time since late 1993 that multiple governors cast no votes on a rate decision.
The post-meeting statement offered only a couple changes in how the committee views economic conditions.
“Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year,” the document stated. “The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.”
At the June meeting, the committee had a more optimistic view, saying the economy “continued to expand at a solid pace.”
The Wednesday statement said uncertainty about conditions “remains elevated,” also a less upbeat assessment from June, which noted that uncertainty had “diminished but remains elevated.”

A slower economy would boost the argument for lower interest rates, though the committee stopped short of endorsing that view.

‘No decisions about September’

Markets had overwhelmingly expected no action on rates, but stocks headed lower after Fed Chair Jerome Powell said at a news conference that the committee hadn’t yet determined whether it would cut rates at its September meeting.
 “We have made no decisions about September,” he said. “We don’t do that in advance. We’ll be taking that information into consideration and all the other information we get as we make our decision.”
He further explained that the central bank is watching the potential impact of tariffs on inflation.
“Our obligation is to keep longer term inflation expectations well anchored and to prevent a one time increase in the price level from becoming an ongoing inflation problem,” he said.
Traders had been expecting the Fed to cut in September, but after Powell’s comments, the likelihood of a quarter percentage point reduction slipped to 46% from 64%, according to the CME FedWatch tool. In June, Fed officials narrowly indicated they see two cuts in total this year. The committee normally has 12 voters but was without Governor Adriana Kugler at the July meeting.
“It is an exceedingly rare occurrence when two Fed governors dissent at an FOMC meeting, but it was the most well telegraphed dissention ever at today’s FOMC meeting,” said Jack McIntyre, portfolio manager at Brandywine Global. “The driver of the dissension was about the timing of rate cuts, not the direction of policy adjustments. Not a big deal. The real impact of the dissenters was to pull Powell toward the dovish camp for September.”
McIntyre said he expects the Fed will cut in September, barring any major surprises in the July and August employment reports.
The news follows a remarkable stretch for an entity with great sway over the economy but one that has mostly avoided the political fray, at least overtly.

Trump’s push for rate cuts

Trump has called for Powell’s resignation and even toyed with the legally questionable idea of firing him. Though he’s largely backed off the threat of sacking Powell, the president has kept up the criticism of a former appointee whom he now regularly calls “Too Late.”
The president has suggested the Fed lower its benchmark rate by 3 percentage points, which he said would reduce bowering costs on the surging national debt and help the moribund housing market.
In addition to the hectoring over rates, the Trump administration has ripped Powell and the central bank for cost overruns on a massive remodeling project at two of the Fed’s buildings in Washington. Powell has insisted that the overruns are not the product of mismanagement but rather escalating costs since the project began.
Wednesday brought more news that could influence the Fed’s path, Trump’s badgering notwithstanding.
The Commerce Department reported that gross domestic product grew at a 3% annualized rate in the second quarter, considerably stronger than expected. Though much of the headline gain was propelled by a reversion of a massive import surge in the first quarter ahead of Trump’s tariffs, the report nevertheless reinforced the notion of an economy still on solid ground.
Moreover, the report showed inflation running at just a 2.1% rate for the period, according to the Fed’s main forecasting tool. Core inflation was a bit higher at 2.5%, but both numbers plunged from their first-quarter levels and neared the Fed’s 2% bogey.
“We at the White House 100% respect their independence, but we also like to respect their analysis,” National Economic Council Director Kevin Hassett said Wednesday on CNBC. “We expect that the Fed will catch up to the data soon. That’s going to be a really big, positive story.”
The Fed next will gather at its annual retreat in Jackson Hole, Wyoming, in late August. The event historically has featured a major policy speech from the chair.

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This is a comparison of Wednesday’s Federal Open Market Committee statement with the one issued after the Fed’s previous policymaking meeting in June.
Text removed from the June statement is in red with a horizontal line through the middle.

Text appearing for the first time in the new statement is in red and underlined.
Black text appears in both statements.

Arrows pointing outwards More

Attitudes on Capitol Hill toward exchange-traded funds and cryptocurrency may be changing. 
Teucrium CEO and CIO Sal Gilbertie told CNBC’s “ETF Edge” regulators are becoming “more friendly” under President Donald Trump versus the Biden administration.

“It’s a completely different environment in Washington right now,” Gilbertie said on Monday. “It’s more welcoming towards innovation — especially in crypto… and that’s a relief for us.”
Gilbertie’s firm oversees the Teucrium 2x Long Daily XRP ETF (XXRP), which aims to return double the daily performance of the cryptocurrency XRP, according to the fund’s website. As of Tuesday’s close, the ETF is up 96% since its April 7 launch.
Gilbertie said Teucrium’s role in pitching funds has not changed, but the reception from regulators has.

‘No animosity anymore’

“The steps that we take to list the fund are the same, but there’s no animosity anymore,” Gilbertie said. “We’re not feeling like they’re antagonistic, that they’re looking for a problem, that they’re looking to actually go against whatever it is you’re trying to do.”
With discussion of regulating newer market players, like ETFs and crypto, Gilbertie said investors need to be savvy and “understand what they’re owning” as new products enter the playing field.

“The U.S. markets are the safest markets in the world for a reason, because we have tight and very thorough regulations,” he said. “But I think investors always need to be learning.”
The Teucrium 2x Long Daily XRP ETF is geared toward investors with a high risk tolerance. In a news release this month, the firm noted the ETF “carries distinct risks” due to its use of leverage and warned it may not be suitable for all investors.
Investment Company Institute CEO Eric Pan is also encouraged by what he sees in Washington — particularly when it comes to the Securities and Exchange Commission engaging with industry players. He thinks cryptocurrency regulation discussions are in the early stages.
“They’re [regulators] very interested in hearing the views of groups like mine at the ICI. They want to talk to member firms. They want to understand what they’re seeing in the marketplace,” said Pan in the same interview, adding that this is a “really positive step.”
The process of rolling out crypto-related ETF products is not much different from ETFs containing traditional stocks, bonds and commodities, Pan said. In both cases, he said regulatory certainty is important to mitigate risk for firms and investors, but he also wants to see room for innovation.
“We like the idea that, through competition, firms [and] our members can come up with new products, try them out, see if there’s an interest in them,” Pan said. “That’s really what we’ve been advocating for, both on Capitol Hill and with the SEC.”
The excitement comes just weeks after President Trump signed the GENIUS Act, a law regulating stablecoins. Stablecoins are a type of cryptocurrency that’s pegged to a fiat currency, like the U.S. dollar. The legislation marks a major legislative win for cryptocurrency and furthers Trump’s goal to make the U.S. the “crypto capital of the world.”

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UBS doubled its second-quarter net profit amid hikes at its investment banking and global wealth management operations.
“Investor sentiment remains broadly constructive, tempered by persistent macroeconomic and geopolitical uncertainties,” UBS said Wednesday.
The bank said client conversations and deal pipelines signaled a “high level of readiness among investors and corporates to deploy capital, as conviction around the macro outlook strengthens.”

A logo of Swiss banking giant UBS in Zurich, on March 23, 2023.
Fabrice Coffrini | Afp | Getty Images

Swiss banking titan UBS on Wednesday doubled net profit year-on-year, beating expectations on the bottom line amid a boost from its investment bank and global wealth management divisions.
Net profitable attributable to shareholders hit $2.395 billion in the second quarter, up from $1.136 billion in the same period of last year and beating a mean LSEG analyst forecast of $1.901 billion. The bank’s revenues over the period reached $12.112 billion, just below analyst expectations of $12.45 billion.

Other second-quarter highlights included:

Return on tangible equity was 11.8%, compared with 8.5% in the March quarter.
CET 1 capital ratio, a measure of bank solvency, was 14.4%, after hitting 14.3% in the first three months of the year.

The lender’s global markets unit of its investment banking arm achieved a 25% annual hike to $2.3 billion in revenues, “tracking the exceptional levels of volatility early in quarter.” The global wealth management division saw transaction-based income up 12% in the three months to the end of June.
Yet UBS CEO Sergio Ermotti said that, while equity markets are now up 30% from the lows of April when the White House first disclosed its so-called reciprocal tariffs, activity levels reflected a “healthy” but not record environment.
“So clients are still on a kind of wait-and-see attitude, not only institutional and private clients, but… also corporate clients. So you see the deployment of cash, but the conviction level is not yet to the extent that it will make it more constructive,” he told CNBC’s Carolin Roth on Wednesday.
In its earnings release, UBS said the third quarter kicked off with “strong market performance in risk assets, particularly international equities, combined with a weak US dollar.”

Net interest

The lender’s net interest income (NII) — the difference between gains made of loans and investments, and the interest paid on deposits — was $1.965 billion, after UBS had guided for a “low single-digit percentage” of declines in the second quarter.
In the third quarter, the bank expects “broadly stable” NII at its global wealth management and corporate bank divisions in Swiss francs, while “in US dollar terms, this translates to a sequential low single-digit percentage increase.”
“The outlook suggests that NII has finally troughed and existing financial targets have been reiterated, but there is no update on capital return plans and it appears UBS’ lobbying efforts on recent Swiss capital proposals is set to continue,” Citi analysts said in a note following the results release.

The NII performance is of particular concern to investors, given Switzerland’s June return to 0% interest rates in a broader battle to stave off the fall in national inflation and the strength of the Swiss franc.
“For the time being, it’s going to be difficult to see that [interest] rates will go up,” Ermotti said. “The economy is still quite resilient and, and inflation has not abated to the level necessary, probably, to take actions.”
UBS’ integration of embattled rival Credit Suisse, which it took over in 2023, “remains on track,” with one-third of Swiss client accounts now migrated and 70% of the expected $13 billion gross savings implemented, UBS said Wednesday. The bank otherwise said it has completed $1 billion in share buybacks in the first half of the year, with another $2 billion in repurchases to follow in the second six-month stretch.

U.S. tariffs

UBS shares have been on a bumpy ride this year, with the lender suffering as a result of its exposure to U.S. markets in the wake of Washington’s imposition of so-called reciprocal tariffs on most global trade partners, which have triggered uncertainty over the outlook for the world’s largest economy.
“Investor sentiment remains broadly constructive, tempered by persistent macroeconomic and geopolitical uncertainties,” UBS said Wednesday. “Against this backdrop, our client conversations and deal pipelines indicate a high level of readiness among investors and corporates to deploy capital, as conviction around the macro outlook strengthens.”
“People need to see the endgame of all these [trade] discussions,” Ermotti said. “Probably there is a little bit of a news fatigue.”
Domestically, UBS has been trapped in a drawn-out row with Swiss authorities, which in June proposed strict new capital rules requiring the bank to hold an additional $26 billion in core capital. The measures are particularly meant to address concerns over UBS’ ability to buffer potential losses at its foreign units. Following UBS’ takeover of Credit Suisse, Swiss regulators assessed the lender has become “too big to fail” and would drag down Switzerland’s national economy and financial system in the event of its default.

UBS has been fighting the designation and in June said it supported “in principle” the regulatory proposals, while disagreeing with the “extreme” increase in capital requirements, which it estimates would push it to hold around $42 billion in additional CET1 capital in total.
Higher capital requirements can considerably diminish a bank’s balance sheet and credit supply, dampen risk appetite and potentially impact availabilities of discretionary funds.
In late June, a Swiss parliamentary committee backed a motion that could delay some of the UBS banking proposals, according to Reuters.
Asked on the new capital requirement proposals on Wednesday, Ermotti said UBS must remain focused on finalizing the Credit Suisse integration against this backdrop.
“It’s very much clear to me that we will need to see exactly when the proposals are finalized, approved, and then we will consider appropriate actions to protect the interests of our shareholders,” he said. More

Tom Lee, managing partner and the head of research at Fundstrat Global Advisors, speaks on CNBC’s “The Exchange” on Oct. 31, 2023.
Adam Jeffery | CNBC

An ETF driven by Tom Lee, an unabashed bull on Wall Street with a big online fandom, just hit another milestone.
His first exchange-traded fund Fundstrat Granny Shots US Large Cap ETF (GRNY) has surpassed $2 billion in assets under management in less than nine months since its inception in November.

It marks a rare success story in an industry where raising just 10% of that level can take years.
GRNY, an actively managed ETF, invests in around 35 high-quality stocks in the S&P 500. The fund, with top holdings such as Robinhood and Oracle, is up more than 18% year to date, outperforming the S&P 500 by over 9 percentage points.
The Fundstrat co-founder and former JPMorgan strategist gained a huge online following by making bold calls on the market and communicating with investors frequently and timely.
“We want to make investing in our ETF understandable and transparent,” Lee said in a statement.
“Granny shot” is a reference to shooting a basketball underhand at the free throw line where the player releases the ball from below the waist. For Fundstrat, it means identifying stocks that fall under multiple key investment themes over the next five to 10 years. Those themes include energy and cyber security, an AI-category called global labor suppliers, and the impact of millennials.

The Granny Shots fund has an expense ratio of 0.75%.
Disclosure: Tom Lee is a CNBC contributor. More

JPMorgan Chase is nearing a deal to take over the Apple Card portfolio from Goldman Sachs, people familiar with the matter told CNBC.
Earlier contenders for the card including American Express, Synchrony and Barclays have fallen to the side, said the people.
A deal for JPMorgan to take over the Apple Card and its huge book of loans would further burnish the bank’s reputation as a leader in American finance.

Source: Apple

JPMorgan Chase, already the largest credit card issuer in the U.S., is nearing a deal to take over the Apple Card portfolio from Goldman Sachs, people familiar with the matter told CNBC.
The banks declined to comment to CNBC. Apple did not immediately respond to CNBC’s request for comment.

Negotiations between JPMorgan and Apple have progressed as earlier contenders for the card including American Express, Synchrony and Barclays have fallen to the side, said the people, who declined to be identified speaking about the agreement.
A deal for JPMorgan to take over the Apple Card and its huge book of loans would further burnish the bank’s reputation as a leader in American finance. With JPMorgan-branded and co-branded cards, the Jamie Dimon-led company is the country’s largest issuer by purchase volume.
For Goldman, offloading the Apple Card business would help it move past a rocky chapter for CEO David Solomon. Goldman entered the credit card business with great fanfare in 2019 by beating out other issuers for the Apple Card.
But the high growth rates of the card, coupled with accounting requirements that forced it to front-load reserves for future losses, caught Goldman flat footed. Solomon, who was facing pressure from partners unhappy about the consumer business, made the call to divest the card business partly out of concern that loan losses would rise in a recession, according to one of the sources.
Goldman had $20.5 billion in total credit card loans at the end of March. The bank is also in the process of moving its General Motors card business to Barclays.

For Apple, JPMorgan would bring stability after years marked by high growth, but also regulatory scrutiny over how Goldman handled billing and refunds in the business. Goldman had signed up to service the card through at least 2029.
JPMorgan is seen as more disciplined than Goldman was in that it will only sign an agreement if concessions are made over how the Apple Card is serviced, among other sticking points, one of the people familiar with the discussions said.
The Wall Street Journal earlier reported on the advanced card talks.

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