Reuters Market Talk: Fed has ‘no real grasp’ on where economy is headed

April 16, 2025

Following Federal Reserve Chair Jerome Powell’s remarks acknowledging that tariff increases were larger than anticipated, Michael Landsberg, Chief Investment Officer at Landsberg Bennett Private Wealth Management, joined Market Talk to offer his perspective.“I think he understands they don’t have a real grasp of where anything’s going to go,” said Landsberg, highlighting the Fed’s uncertainty and how it contrasts with current market expectations.

Key Takeaways:

1. Tariff escalation caught the Fed off-guard: Landsberg pointed out that Powell’s admission—that tariffs were higher than the Fed expected—may have shaken investor confidence. “The idea that it was larger than expected in terms of the tariffs… scared some of the market participants,” he said.
2. Fed’s forecasting credibility remains in question: Citing the Fed’s misreads on inflation over the past two years, Landsberg noted, “I’m not sure what data Chairman Powell’s looking at… at this time last year, he thought [inflation] was going to go to two, and it went to three.”
3. Markets may be pricing in rate cuts on sentiment, not data: Despite Powell’s comments, many investors still expect the Fed to begin cutting rates in June. Landsberg believes this is likely. “I think the Fed’s going to cut multiple times this year simply because the fear of a recession is going to be here,” he said.
4. No surprise in actual tariffs, but reaction was delayed: Landsberg emphasized that markets had time to prepare. “Trump gave everybody a month before liberation day… it’s tough for me to believe that nobody thought we’re going to see tariffs,” he said.
5. Caution remains the practice’s approach in current conditions: The practice has not been buying dips amid volatility. “We rebalanced… took some exposure off the table in February, specifically in tech and the MAG 7,” Landsberg said, adding that prior outperformance made rebalancing a prudent move.
6. Positioning focused on what’s working, not what’s falling: Rather than chase beaten-down names, the practice continues to focus on sectors that have shown stability. “Gold miners have worked, insurance has worked, staples has worked,” said Landsberg. “I don’t want to be buying tech simply because I think tariffs can continue.”
7. Uncertainty around China limits visibility: With ongoing trade tension, particularly with China, Landsberg sees additional risk for specific sectors. “Large supplier of product in the tech market… we don’t know what’s going to happen,” he said.

Landsberg remains cautious in the face of mixed signals from policymakers and persistent tariff uncertainty. “It’s probably better to be patient than not,” he advised. While the economic data has shown resilience in areas like jobs, concerns over decelerating earnings and market concentration are driving the practice’s more defensive positioning.