Packets of Pringles chips, manufactured by Kellanova, for sale at a supermarket in Palma de Mallorca, Spain, on Wednesday, Aug. 14, 2024. (Andrey Rudakov/Bloomberg via Getty Images)
(NEW YORK) — As more consumers reach for generic labels to save on money groceries, M&M’s maker Mars is spending big bucks on a new acquisition to gain even more shelf space in the snack aisle.
The candy bar giant, known for brands such as Snickers and Twix, is gearing up to purchase global snacking company Kellanova in an all-cash deal valued at $35.9 billion, which will add well-known packaged foods like Eggo, Pop-Tarts and Pringles to its portfolio.
The family-owned, Virginia-based company announced the deal with the multinational food manufacturer — formerly known as the Kellogg Company — in joint press releases on Wednesday, marking one of the largest CPG mergers in years.
“Mars will acquire all outstanding equity of Kellanova for $83.50 per share in cash,” the release stated. “All of Kellanova’s brands, assets and operations, including its snacking brands, portfolio of international cereal and noodles, North American plant-based foods and frozen breakfast are included in the transaction.”
The deal is expected to close in the first half of next year. Upon completion, Kellanova will become part of Mars Snacking, which is led by Global President Andrew Clarke.
Kellanova, which was spun off from the Kellogg Co. last fall when it officially split up into two different companies, also includes other popular consumer brands such as Cheez-Its, Rice Krispies Treats, MorningStar Farms, NutriGrain and RXBAR. The Chicago-based company reported more than $13 billion in net sales in 2023.
Privately owned Mars, which also has a pet food and veterinary care arm in addition to its confectionery business, previously expanded its scope beyond sweets when it bought healthy snack brand KIND North America for $5 billion in 2020.
Poul Weihrauch, CEO of Mars, Inc. called the forthcoming deal “a substantial opportunity for Mars to further develop a sustainable snacking business that is fit for the future.”
“We will honor the heritage and innovation behind Kellanova’s incredible snacking and food brands while combining our respective strengths to deliver more choice and innovation to consumers and customers,” his statement continued.
Steve Cahillane, chairman, president and CEO of Kellanova, added that the “historic combination” of companies was both a “cultural and strategic fit.”
Boasting the “attractive purchase price” of the all-cash transaction, Cahillane said the move “creates new and exciting opportunities for our employees, customers, and suppliers,” stating he’s “confident Mars is a natural home for the Kellanova brands and employees.”
The sweet-meets-salty food merger resembles a similar strategy from competitor The Hershey Company, which added SkinnyPop with the $1.6 billion buyout of Amplify Snack Brands Inc. in 2017, followed by Dot’s Pretzels in 2021.
A box of Kellogg Co. Famous Amos brand chocolate chip and pecan cookies is arranged for a photograph in Ottawa, Illinois, U.S., on Monday, April 1, 2019. (Daniel Acker/Bloomberg via Getty Images)
(NEW YORK) — Wallace “Wally” Amos Jr., the founder of Famous Amos cookies, has died, his family said Wednesday. He was 88.
He died “peacefully” at home following a battle with dementia, his family said.
Amos, a native of Tallahassee, Florida, opened the first Famous Amos cookie shop in Hollywood, California on the famed Sunset Blvd. in 1975. Amos’ cookie brand exploded in popularity over the years, becoming known for its signature beige packaging and blue lettering.
“With his Panama hat, kazoo, and boundless optimism, Famous Amos was a great American success story, and a source of Black pride,” read a statement from the Amos family.
The statement continued, “It’s also a part of our family story for which we will forever be grateful and proud. Our dad taught as the value of hard work, believing in ourselves, and chasing our dreams. He was a true original Black American hero.”
The statement also asked for contributions to Alzheimer’s Association.
“We also know he would love it if you had a chocolate chip cookie today,” the statement finished.
Amos was recognized as the Horatio Alger Award recipient in 1987, an award who recognizes Americans who are “contemporary role models whose experiences exemplify that opportunities for a successful life are available to all individuals who are dedicated to the principles of integrity, hard work, perseverance and compassion for others.”
Amos’ membership page on the award’s website details a career as a music agent prior to Famous Amos. The founder also authored several books including The Famous Amos Story: The Face That Launched a Thousand Chips, The Cookie Never Crumbles: Practical Recipes for Everyday Living and The Man with No Name: Turn Lemons into Lemonade.
(NEW YORK) — Stock market turmoil earlier this month prompted some investors to ditch stocks in favor of an alternative typically viewed as safer but less exciting: bonds.
The renewed popularity of bonds follows months of heightened interest, since investors have sought to lock in high yields in anticipation of interest rate cuts at the Federal Reserve, experts told ABC News.
Lower interest rates would push bond yields downward and raise the value of pre-existing bonds obtained at a higher rate of return.
A surge in bonds has also coincided with a perception among some investors that equities have become overpriced, experts said.
“Investors have been interested in locking in higher yields before interest rates go down,” Reena Aggarwal, A professor of finance and director of the Georgetown Psaros Center for Financial Markets and Policy, told ABC News.
Bonds are essentially loans made by investors to corporations or governments. The price of a bond moves in the opposite direction as its yield, or the amount of interest accrued by a bondholder. In other words, when bond yields go down, bond prices go up.
Yields are heavily influenced by interest rates set by central banks, since the cost of borrowing determines how much interest an investor can charge a government entity or corporation in exchange for his or her loan.
Starting in 2022, a series of interest rate hikes at the Fed sent bond yields surging. That meant investors could obtain relatively high rates of return at low prices, Adam Lampe, CEO of Mint Wealth Management, told ABC News.
“For the first nearly 20 years of my career, bonds were boring,” Lampe said. “In the last couple years we were able to buy a lot of bonds at discount.”
At the outset of this year, however, the Fed forecasted three interest rate cuts, citing progress in its fight to bring down inflation. But price increases accelerated over the early months of 2024, prompting the Fed to all but abandon those cuts.
In recent months, good news in the inflation fight has brought the Fed back to the brink of an interest rate cut. The expectation of a coming interest rate has added urgency to the bond market, Lampe said.
“The window is closing very quickly,” Lampe added. “We’re at the peak, so bond values have the potential to go down.”
The chances of an interest rate cut at the Fed’s next meeting in September are all but certain, according to the CME FedWatch Tool, a measure of market sentiment. Market observers are split roughly down the middle about whether the Fed will impose its typical cut of a quarter of a percentage point or opt for a larger half-point cut.
“The more that rates are cut, bond prices will go up higher but bond yields will go down lower,” said Aggarwal.
Bonds also offer investors a relatively safe option in the event of a possible recession, some experts said.
A disappointing jobs report earlier this month raised concern that the economy may be slowing down faster than previously known.
The unemployment rate has soared this year from 3.7% to 4.3%. That trend has triggered a recession indicator known as the “Sahm Rule,” which says that a rise of 0.5 percentage points in the unemployment rate within a 12-month period typically precedes a recession.
Bonds provide investors with fixed, predictable returns, sheltering them from a potential downturn in the stock market if economic performance cratered, Yiming Ma, a finance professor at Columbia University Business School, told ABC News.
“The economy is slowing down and the risk of a downturn is going up,” Ma said. “That is usually when investors want to seek something safer.”
(NEW YORK) — Consumer prices rose 2.9% in July compared to a year ago, cooling slightly from the previous month and extending a monthslong slowdown of price increases. The fresh inflation reading outperformed economists’ expectations, reaching its lowest level since 2021.
Inflation has slowed for five consecutive months, reversing a surge in prices that took hold at the outset of this year. Price increases have cooled significantly from a peak of more than 9%, but inflation remains a percentage point higher than the Fed’s target rate of 2%.
The latest inflation data will further ease pressure on consumers saddled by a yearslong bout of elevated price increases. Despite the ongoing slowdown, consumer prices remain roughly 20% higher than where they stood three years ago.
Prices for some household staples are rising slower than overall inflation. Food prices increased 2.2% in July compared to a year ago, while energy prices inched upward 1.1%, U.S. Bureau of Labor Statistics data showed.
Prices for rice, flour and fish fell in July compared to a year ago. Prices for eggs, however, soared 19% over that period, data showed.
The latest inflation data arrived within days of a dramatic bout of market turmoil triggered in part by heightened pessimism about the chances of a “soft landing,” in which the U.S. averts a recession while inflation returns to normal levels.
The unrest on Wall Street followed a weaker-than-expected jobs report that indicated the economy may be slowing down more quickly than previously known.
Since last year, the Federal Reserve has held interest rates at their highest level in more than two decades. High borrowing costs for everything from mortgages to credit card loans have helped slow the economy and lower inflation, but the policy risks tipping the U.S. into a recession.
The chances of an interest rate cut at the Fed’s next meeting in September are all but certain, according to the CME FedWatch Tool, a measure of market sentiment. Market observers are split roughly down the middle about whether the Fed will impose its typical cut of a quarter of a percentage point or opt for a larger half-point cut.
The Fed is guided by a dual mandate to keep inflation under control and maximize employment. In theory, low interest rates help stimulate economic activity and boost employment; high interest rates slow economic performance and ease inflation.
A monthslong stretch of good news for inflation alongside bad news for unemployment has prompted the Fed to give additional consideration to its goal of keeping Americans on the job, Fed Chair Jerome Powell said last month.
“For a long time, since inflation arrived, it’s been right to mainly focus on inflation. But now that inflation has come down and the labor market has indeed cooled off, we’re going to be looking at both mandates. They’re in much better balance,” Powell said at a meeting of The Economic Club of Washington, D.C.
“That means that if we were to see an unexpected weakening in the labor market, then that might also be a reason for reaction by us,” Powell added.
The weak jobs report released earlier this month appeared to align with that hypothetical situation described by Powell.
Speaking at a press conference in Washington, D.C., in late July, before the jobs report, Powell said the central bank may reduce interest rate cuts in September, depending on economic performance.
“We’ve made no decisions about future meetings and that includes the September meeting,” Powell said. “We’re getting closer to the point at which we’ll reduce our policy rate, but we’re not quite at that point yet.”
(NEW YORK) — Fresh inflation data on Wednesday will show whether the U.S. has extended a monthslong stretch of progress in the fight to slow price increases.
The latest price reading is set to arrive within days of a dramatic bout of market turmoil triggered in part by heightened pessimism about the chances of a “soft landing,” in which the U.S. averts a recession while inflation returns to normal levels.
The unrest on Wall Street followed a weaker-than-expected jobs report that indicated the economy may be slowing down more quickly than previously known.
Economists expect prices to have risen 3% in July compared to a year ago. That figure would leave the inflation rate unchanged from June but still well below the 3.5% year-over-year rate recorded in March.
Inflation has cooled for four consecutive months, reversing a surge in prices that took hold at the outset of 2024. Price increases have slowed significantly from a peak of more than 9%, but inflation remains a percentage point higher than the Fed’s target rate of 2%.
Since last year, the Federal Reserve has held interest rates at their highest level in more than two decades. High borrowing costs for everything from mortgages to credit card loans have helped slow the economy and lower inflation, but the policy risks tipping the U.S. into a recession.
The chances of an interest rate cut at the Fed’s next meeting in September are all but certain, according to the CME FedWatch Tool, a measure of market sentiment. Market observers are split roughly down the middle about whether the Fed will impose its typical cut of a quarter of a percentage point or opt for a larger half-point cut.
The Fed is guided by a dual mandate to keep inflation under control and maximize employment. In theory, low interest rates help stimulate economic activity and boost employment; high interest rates slow economic performance and ease inflation.
A monthslong stretch of good news for inflation alongside bad news for unemployment has prompted the Fed to give additional consideration to its goal of keeping Americans on the job, Fed Chair Jerome Powell said last month.
“For a long time, since inflation arrived, it’s been right to mainly focus on inflation. But now that inflation has come down and the labor market has indeed cooled off, we’re going to be looking at both mandates. They’re in much better balance,” Powell said at a meeting of The Economic Club of Washington, D.C.
“That means that if we were to see an unexpected weakening in the labor market, then that might also be a reason for reaction by us,” Powell added.
The weak jobs report released earlier this month appeared to align with that hypothetical situation described by Powell.
Speaking at a press conference in Washington, D.C., in late July, before the jobs report, Powell said the central bank may reduce interest rate cuts in September, depending on economic performance.
“We’ve made no decisions about future meetings and that includes the September meeting,” Powell said. “We’re getting closer to the point at which we’ll reduce our policy rate, but we’re not quite at that point yet.”
(NEW YORK) — Are a 1938 Alfa Romeo 8C 2900B Lungo Spider and a 1960 Ferrari 250 GT SWB California enough to convince wealthy collectors to shell out millions of dollars at California’s Monterey Car Week?
As thousands descend on Monterey and Carmel for the world’s largest car event, deep-pocketed collectors have pulled back their spending on vintage and classic cars in the past year. Some insiders worry the recent stock market turmoil and murmurs of a potential recession may have convinced interested buyers to instead wait out the uncertainty.
Five auction houses — RM Sotheby’s, Bonhams, Mecum, Broad Arrow and Gooding & Company — have assembled more than 500 vintage and rare cars for serious collectors and enthusiasts to bid on starting Thursday. Some cars could fetch $5 million, or even $30 million. At least 150 may soon be worth seven figures.
“We have all seen a tougher market in 2024. The market is normalizing after pent-up demand during COVID,” Bryon Madsen, president of RM Sotheby’s, told ABC News. “Geo-political events have more influence on the mindsets of buyers [than] any economic indicators. The U.S. election, regardless of who wins, will have an impact.”
RM Sotheby’s is offering 201 cars this year, nearly the same number as 2023. Twenty cars could sell in the $2 million to $5 million range, Madsen said, noting that a 1995 Ferrari F50 “could do well above its estimate” of $4.5 million to $5 million.
“Investing in cars … has proven positive over several decades,” he said. “Automobiles have long been regarded as alternative assets, as well as an inflation hedge. Cash exists with the buyers in this market.”
According to Hagerty Automotive Intelligence, this year’s Monterey auctions could rake in a combined $459 million. Last year the auction receipts totaled $403 million, down from $471 million in 2022.
McKeel Hagerty, the CEO of Hagerty, an automotive enthusiast brand that also owns Broad Arrow, said once-in-a-lifetime consignments, such as the 1938 Alfa Romeo 8C 2900B Lungo Spider from Gooding & Co., will draw strong demand and bidding. He said he’s optimistic that buyers will spend as usual when the cars roll up to the auction stage.
“The stock market volatility can be correlated with Monterey sales … sometimes these market conditions result in folks pulling back and waiting while sometimes they encourage enthusiasts to deploy capital in nonpecuniary ways,” he told ABC News. “The classic car market is about 10% below its December 2022 peak so it’s already had a healthy reset.”
He added, “Why not own, drive and enjoy a classic if stock market returns are going to be flat? We’re just going to have to wait-and-see a few more days.”
Even the rising cost of buying a hotel room is Monterey and paying hundreds — if not thousands — for a ticket to the prestigious Pebble Beach Concours or The Quail have done little to dissuade enthusiasts from attending these famous events, according to Bring a Trailer founder Randy Nonnenberg.
“I hear people saying, ‘I am coming, I missed it last year,'” he told ABC News. “It’s not a financial decision … people will find a way to come to Pebble. Automakers are using Monterey as the primary place to release cars and that brings a different audience and a different energy. There are way more eyes on Monterey than in the past and bigger visibility leads to bigger auction results.”
Sandra Button, chairman of the Pebble Beach Concours d’Elegance, pointed out that automotive fans will make the pilgrimage to Pebble “even in a year when car values are going down.”
She said she tries to make her show “accessible as much as possible” to all enthusiasts and attendance on Sunday could reach 20,000, on par with previous years. Moreover, there will be 215 cars on the show field — including 50 from outside the country — a sign, she said, that investors are returning to Pebble in force.
“We sold out on hotel rooms and VIP tickets,” she told ABC News. “The collectors are getting younger and there’s a generational shift happening. The balance of cars shown is shifting to post war. There is a 125-year span of cars on the field — that has never happened before.”
Eric Minoff, a vice president at Bonhams, said 2024 could still be a banner year for car auctions, even though prices have been flat since January. Last year Bonhams sold a 1967 Ferrari 412P Berlinetta for $30.25 million, the top-selling car that entire week. Minoff said he hopes he can replicate that success this year.
“If the COVID period taught us anything, it’s that there’s value to get away from everywhere else,” he told ABC News. “Cars give you an opportunity to escape everything else that’s going on. There are plenty of folks still eager to buy cars.”
A sign is posted in front of a Chuck E. Cheese pizza restaurant on Dec. 18, 2023 in Hayward, Calif. (Justin Sullivan/Getty Images, FILE)
(NEW YORK) — Chuck E. Cheese has just the ticket for parents looking to save some cheddar on family fun outings, thanks to its new membership plans.
The Texas-based pizzeria and family entertainment chain that brings arcades and animatronic shows under one roof, announced its first-ever nationwide, unlimited-visit monthly membership program to help unlock new discounts for one low monthly fee.
After a successful test run of its Summer Fun Pass boasting strong consumer demand, Chuck E. Cheese laid out details for the new program that will allow families to “visit Chuck E. Cheese as often as they want, play up to 250 games per day, and enjoy discounts of up to 50% off on most food and drinks,” the company said in a press release.
“We wanted to create a program that makes Chuck E. Cheese more affordable for families,” Mark Kupferman, the chain’s executive vice president, said in a statement. “Amid rising costs, our goal was to offer great value, and develop an easy, and fun solution for everyone. After nearly a year of successful testing in several markets, and great demand, we’ve seen firsthand how much families love it. We’re thrilled to launch this program nationwide.”
Personal finance expert and senior editor for Business Insider Katherine Fan told ABC News’ Good Morning America that “families can get a lot of value out of the Chuck E. Cheese Fund Pass, because it allows them to bring up to six family members on a single power pass.”
She added, “let’s say you go in on a Tuesday and you have the highest tier pass, which gets you 250 points. You can go right back again the next day and play 250 games again.”
What’s included in Chuck E. Cheese new membership plan?
There are three tiers with varying levels of gameplay and pricing, two of which are monthly memberships with unlimited visits. A single Fun Pass can be shared by a family with multiple children.
The Monthly Fun Pass Membership offers unlimited daily visits for one low, recurring monthly fee, whereas the Two-Month Fun Pass provides unlimited visits for two months for a one-time charge. Both packages offer the same benefits, with the main difference being the billing method.
The three tiers of Fun Pass are: Bronze Fun Passes for $7.99 per month with 40 games per visit and 20% off most food and drinks; Silver Fun Pass for $11.99 per month with 100 games per visit and 30% off most food and drinks, plus extra play points; and the Gold Fun Pass for $29.99 a month with 250 games per visit, plus 50% off most food, drinks and extra play points.
“For families looking for unlimited visits over a short period, like a holiday break or summer, the Two-Month Pass is a perfect fit,” Kupferman explained. “For those who love the idea of visiting year-round, the Monthly Membership is an outstanding choice. Both options provide incredible value and endless fun.”
Passes may be used at over 470 participating Chuck E. Cheese locations throughout the U.S.
New pricing plans from Chuck E. Cheese signals reboot
Like most indoor event spaces and restaurants, Chuck E. Cheese struggled amid the COVID-19 pandemic, and declared bankruptcy in 2021. But now the family entertainment chain is looking for a reboot to draw families back to their arcade style restaurant.
“The hardest part of any business is getting people in through the door or to your website. And with this fun pass — members are more incentivized to go through Chuck E. Cheese on a more regular basis,” Fan explained. “You’ll then be tempted to buy some drinks or get some food. Or maybe you’ll want to pay a little bit extra to play the crane games or have your kids play on the trampoline.”
This comes on the heels of other entertainment companies, including movie theaters, that have opted to test subscription pricing.
AMC Theaters reported the average ticket price in 2023 was $11.23, which for a family of four makes an outing to the movies $45, without any concessions.
But for regulars moviegoers, memberships can offer an opportunity to save. MoviePass, for example, starts at $10 a month for three free movies.
AMC Stubs A-List offers 3 free movies a week for a $25 monthly fee, with price contingent on location.
(NEW YORK) — Junk, resort, destination, urban, and amenity fees are pseudonyms for the mandatory, often unexpected surcharges you might find tackled on your hotel bill. According to the Council of Economic Advisers (CEA), these fees cost Americans nearly $3.4 billion annually and despite recent bipartisan efforts by the Biden administration to combat junk fees entirely, they still seem to pop up when it’s time to pay for your stay.
“The consumer is the loser” when it comes to junk fees, Clint Henderson, managing editor at The Points Guy, told ABC News’ Good Morning America.
The value of what’s being delivered has fallen dramatically for consumers, who are now paying all-encompassing fees for erroneous line items such as Wi-Fi, phone calls, fax machines, towels, beach access, breakfast, parking, fitness centers and more — the list goes on, and “it’s getting hard to keep up,” Henderson said.
“The consumer can only take so much of these [fees] before they break,” said Henderson, adding that “spending hundreds of dollars more on a seven-day holiday can make the cost of travel out of reach for some people.”
Depending on the type of accommodation and length of stay, consumers can expect to pay an average of $38.82 more per night at hotels that charge resort fees, according to a 2024 analysis from NerdWallet.
The push to eliminate junk fees
Overwhelming ‘fee fatigue’ among Americans has led to increased regulatory scrutiny at the federal and state levels. The House of Representatives passed in June the No Hidden FEES Act, which would create federal guidelines for being transparent about hidden costs at stays and the Federal Trade Commission (FTC) would pursue those who are in violation.
“Americans are tired of being played for suckers,” said President Joe Biden during his February State of the Union address in which he announced his administration’s proposed Junk Fee Prevention Act aimed at eliminating hidden fees and encouraging customers to fight unfair charges.
In October, the FTC proposed a rule to prohibit hidden and bogus fees in all sectors of the U.S. economy, including hotels and short-term lodging.
At the state level, California’s SB 478 law, which went into effect July 1, requires businesses to advertise or list prices inclusive of all mandatory charges. At least 10 other states have followed suit by proposing or enacting junk fee statutes targeting increased fee transparency.
“While price clarity helps, hotels still have a vested interest in keeping these fees…it’s pure profit for them,” said Henderson.
Critics argue that resort fees allow a hotel to effectively increase room rates without changing their advertised prices nor paying extra taxes.
“Whether hidden or not, [junk fees] contribute to these companies’ bottom lines and are still making their way into your bills,” said Henderson.
Protect yourself from junk fees
Henderson shared some tips to protect yourself from added junk fees when booking your next stay:
1. Search for places that don’t charge resort fees
The best way to avoid junk fees is by not being charged them in the first place.
“Knowledge is power for consumers and the more you know, the more you can make smart decisions with your money,” said Henderson, who suggests using sites like Kill Resort Fees to locate high-fee hotels ahead of time.
Bonus: Henderson also advises to plan for tips in your calculations to make sure you’re choosing a destination that fits your budget.
“Even in foreign countries, Americans are often expected to offer something,” he said.
2. Ask to remove resort fees
Speaking up can go a long way. When making your hotel reservation or when checking-in, Henderson recommends asking the hotel if they will simply remove the fee from your total.
“Negotiating is an option, too,” he said.
3. Call your local congressperson and complain about junk fees
“The louder we are, the more political pressure there is on these companies to stop junk fees,” said Henderson, “we’re seeing some progress, but there is still a long way to go.”
(NEW YORK) — Former President Donald Trump recently said the president should have a role in setting interest rates that determine costs for everything from mortgages to credit card loans.
The proposal would mark a major shift from the longstanding norm of political independence at the Federal Reserve, which currently retains control over interest rate policy. The nation’s central bank is in the midst of a yearslong fight to dial back inflation.
“I feel the president should have at least [a] say in there,” Trump said during a press conference at his Mar-a-Lago resort in Florida last week. “I feel that strongly. I think that in my case, I made a lot of money, I was very successful, and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman.”
The policy idea elicited opposition from both liberal and conservative economists who spoke to ABC News.
They warned that any president, including Trump, would likely seek low interest rates in an effort to improve the nation’s short-term economic growth. That approach would risk runaway inflation that could wreak significant economic damage long after a given president has left office, they added.
“It’s an absolutely bad idea,” George Selgin, senior fellow and director emeritus of the Center for Monetary and Financial Alternatives at the libertarian Cato Institute, told ABC News.
“Presidents are known to be very shortsighted when it comes to monetary policy,” Selgin added. “They’re happy to try and take advantage of a temporary boost that easy money can give to economic activity and downplay or overlook the longer-run consequences, which can include inflation getting out of control.”
Paul Wachtel, a professor of economics at New York University who studies monetary policy, echoed that rebuke.
“I can’t think of anything that economists across the spectrum agree upon more than the importance of central bank independence,” Wachtel told ABC News.
In response to a request for comment from the Trump campaign, a representative of the Republican National Committee (RNC) faulted the Biden administration for a rise in inflation in recent years that prompted the Fed to raise interest rates.
“The president’s policies already affect interest rates — the failed Harris-Biden economic agenda has led to the fastest increase in mortgage rates since 1981,” RNC spokesperson Anna Kelly told ABC News. “As the deciding vote on the so-called ‘Inflation Reduction Act’ that actually spiked prices and made housing unaffordable for families across the country, Kamala Harris co-owns the disastrous impact of Bidenomics, and no one can afford another four years.”
The proposal from Trump arrives at a time when the Fed has held interest rates at their highest level in more than two decades. The central bank has helped bring inflation down significantly from its peak, but elevated interest rates risk tipping the U.S. into a recession.
Scrutiny over the Fed’s role in a potential economic downturn reached a fever pitch earlier this month when a weaker-than-expected jobs report showed that the economy may be slowing faster than previously known.
“It’s one of those occasions when people can second-guess the Fed and wonder whether Trump would’ve made a better decision, but one can’t just base a decision on who should govern monetary policy on a single event,” said Selgin.
Critics of an expanded role for the president point to a bout of high inflation in the 1970s and 1980s. Before the inflation took hold, President Richard Nixon had urged Fed Chair Arthur Burns to cut rates in the run-up to the 1972 presidential election.
Nixon’s advocacy is widely viewed as a contributing factor for lower-than-necessary interest rates that enabled inflation to get out of control, Mark Zandi, chief economist at Moody’s Analytics, told ABC News.
“Allowing the president, any president, to help set monetary policy would eventually wreck the U.S. economy,” Zandi said.
To be sure, the Fed does retain direct ties to the federal government. The Fed chair is appointed to a four-year term by the president and must receive confirmation from the Senate. Further, the general guidelines for interest rate policy are rooted in legislation approved by Congress.
Selgin, of the Cato Institute, acknowledged that the Fed doesn’t retain full political independence.
“The Fed’s independence is far from absolute,” Selgin said. “Precisely because it’s so limited, it’s important to keep as much of that independence as exists.”
Vice President Kamala Harris, the Democratic presidential nominee, said on Friday that she disagreed with the proposal voiced by Trump.
“The Fed is an independent entity and as president I would never interfere in the decisions that the Fed makes,” Harris told reporters in Phoenix, Arizona.
The Fed is guided by a dual mandate to keep inflation under control and maximize employment. In theory, low interest rates help stimulate economic activity and boost employment; high interest rates slow economic performance and ease inflation.
The chances of an interest rate cut at the Fed’s next meeting in September are all but certain, according to the CME FedWatch Tool, a measure of market sentiment. Market observers are split roughly down the middle about whether the Fed will impose its typical cut of a quarter of a percentage point or opt for a larger half-point cut.
An interest rate cut in September would arrive during the final months of the presidential campaign.
Last month, Fed Chair Jerome Powell said coming rate decisions would depend solely on economic conditions.
“Congress has, we believe, ordered us to conduct our business in a nonpolitical way at all times, not just some of the time,” Powell said at a press conference in Washington, D.C., last month.
“We never use our tools to support or oppose a political party, a politician, or any political outcome. The bottom line is, if we do our very best to do our part and we stick to our part, that will benefit all Americans,” Powell added.
(NEW YORK) — Volatility overtook the stock market last week, amplifying worries about a possible recession and stoking panic among investors.
By the end of the week, however, the markets had almost fully recovered. Days after suffering its worst trading day since 2022, the S&P 500 rallied for its best trading session dating back to that same year. For the week, the S&P 500 ended nearly flat, inching downward 0.05%.
The rapid recovery is owed to a realization among traders that risk of an impending recession, as well as damage from a selloff on the Japanese stock market, had likely been overstated, experts told ABC News. The drop-off in stock prices transitioned quickly from an alarm blaring across Wall Street, to an opportunity for traders seeking newly discounted shares, they said.
“When we panic, we lower our expectations so far that any news short of disaster feels like rain in the desert. Then, people pile back in,” Callie Cox, chief market strategist at Ritholtz Wealth Management, said in a Monday blog post about the recovery.
“When lots of investors brace for a punch – or sell their stocks – they tend to discover that the actual punch doesn’t hurt as bad,” Cox added.
The stock market downswing was set off by a disappointing jobs report earlier this month. Employers hired 114,000 workers in July, falling well short of economist expectations of 185,000 jobs. Additionally, the unemployment rate climbed to 4.3%, the highest level since October 2021.
The lackluster jobs data fueled concern about a potential recession, as well as calls for an interest rate cut.
The heightened worry about an economic cooldown coincided with interest rate hikes imposed by Japan’s central bank. Those rising rates prompted an unwinding of a so-called “carry trade” in which investors borrowed Japanese yen at low interest rates and used it to purchase assets, including U.S. stocks.
When Japan then hiked interest rates, investors sold off some of those assets and sent stock prices falling. Japan’s main Nikkei 225 stock index last Monday dropped more than 12%, its worst trading session since 1987. The following day, however, the index soared 10%, then increased slightly over the remainder of the week.
The seesaw performance of the Nikkei 225 mirrored that of U.S. stocks, Avanidhar Subrahmanyam, a professor of finance at the University of California, Los Angeles, told ABC News.
“People saw a buying opportunity and stepped in,” Subrahmanyam said, noting that markets often recover quickly from a downturn. “The entire episode was simply a panic followed by a correction.”
Between 1980 and 2023, the S&P 500 posted a positive return over each calendar year 82% of the time, Wells Fargo Investment Institute told clients in a note last week. The market experienced a drop-off of at least 10% in nearly half of those years, Wells Fargo said, adding, “The data shows that a market downturn does not necessarily mean markets will perform poorly for the year.”
Prior to last week’s volatility, the stock market had displayed a banner performance in 2024. Before the weak jobs report on Aug. 2, the S&P 500 had climbed more than 14% this year.
In turn, some observers believed that stocks had become overpriced. While the prices reflected robust corporate profits, they also had soared on account of enthusiasm about artificial intelligence and optimism about the chances of an economic “soft landing,” some experts told ABC News.
The perception of overpriced stocks left the market vulnerable to a fit of bad news that could exacerbate those jitters, the experts added.
“When there’s a perception that things are overvalued, people are already nervous,” said Subrahmanyam, of the University of California, Los Angeles. “When any small precipitating factor occurs, the sellers panic.”
However, the price gains over the ensuing days suggested a view among some traders that such worries had gone too far, Jay Ritter, a professor of finance at the University of Florida, told ABC News. The rapid recovery, he added, appeared to indicate a recognition that strong stock performance this year had been fueled in part by one of the market’s most fundamental metrics: corporate profits.
“U.S. earnings have gone up so much more than the rest of the world,” Ritter told ABC News. “So the stock market has gone up a lot.”
