Dinner With Trump and Trudeau

The Fed chair's latest comments... Signals from today's jobs report... Over oysters and crab cocktail... Trump and Trudeau talk tariffs, immigration, and trade... Meet this 'Mar-a-Lago man' tomorrow...

Before we get to the dinner, let's talk briefly about the Fed...

Here are the latest comments from Federal Reserve Chair Jerome Powell, at an event hosted by the New York Times this afternoon...

"The U.S. economy is in remarkably good shape," Powell said, referencing the most recent data about GDP (running near 3% annualized) and unemployment (4.1%). And while noting that the Fed's preferred inflation measure (2.8%) has been "a little higher," Powell spun that as a positive regarding potential Fed policy moving ahead.

"We can afford to be a little bit more cautious as we find neutral," Powell said, referring to a federal-funds rate that is neither too stimulative nor too restrictive. He said the Fed's goal is to get to a "less restrictive level over time" and that the central bank's 50-basis-point first cut in September was meant to be a signal the Fed was ready to support the labor market.

Leading into that decision several months ago, the unemployment rate had risen by nearly a full percentage point from 3.5% in the summer of 2023 to 4.3% this July. But in the months since then, the labor market has shown signs of strengthening, if anything.

"The economy is strong, and it's stronger than we thought it was going to be in September," Powell said today.

So, now, the Fed chair is saying that larger rate cuts aren't quite needed, but that the Fed still wants to take some pressure off the economy. Translation: Expect another rate cut at the Fed's next meeting, but likely of the more typical 25-basis-point variety like the central bank did last time around on November 1.

This was Powell's last public speaking appearance before Fed members go into a media "blackout" ahead of their next policy meeting on December 17 and 18. So, it was the final time he could publicly relay signals to investors about what to expect from the Fed.

What we heard today was essentially the status quo. The central bank is still on a path to whatever it considers a neutral fed-funds rate – which isn't quite known with certainty, but which Fed members appear to believe is lower than the current range of 4.5% to 4.75%.

Friday's "nonfarm payrolls" report, which brings an updated unemployment rate, could also play a role in the Fed's calculus, especially if it illustrates a stronger-than-expected labor force.

As I (Corey McLaughlin) have noted lately, there are signs of high(er) inflation reaccelerating already. Paired with a decent jobs market, that would mean less and less reason for the Fed to keep lowering rates.

That's not to say it won't keep cutting anyway, though. Multiple Fed officials have been saying lately that they are leaning toward another rate cut – likely of 25 basis points – and sound like they're content to see what happens over the next month or two before suggesting any change in course.

In the meantime, though, inflation can keep pushing prices higher.

As for today's jobs report...

This morning's private-payrolls report from ADP showed an increase of 146,000 jobs in November. That was below economists' consensus estimate of 163,000, but overall, the report wasn't extreme in one direction or the other.

If anything, the report included some signs of more potential labor-market strengthening.

According to ADP data from anonymized payroll numbers of nearly 10 million U.S. employees, folks who stayed in their jobs saw an average year-over-year pay gain of 4.8%. That was higher than October's growth, the first month-over-month increase in more than two years. For folks who changed jobs, pay gains rose to 7.2%.

Those are whiffs of a signal that the labor market could be tilting in employees' favor, generally speaking... which means the potential for wage inflation returning.

That could be good news for employees, but maybe not so much for macroeconomic risk as the Fed continues to publicly disregard the idea of inflation reaccelerating.

Today, the major U.S. indexes all rose, with the Nasdaq Composite Index and benchmark S&P 500 Index both making new all-time highs for the third straight trading day. The Nasdaq closed 1.3% higher, the S&P 500 and Dow Jones Industrial Average were up 0.6%, and the Russell 2000 Index gained 0.4%.

Oh, Canada...

The threat of tariffs from President-elect Donald Trump creates questions for investors about what they might look like, if anything (and potential inflationary consequences). These include 25% tariffs on goods imported from Canada. But Trump's threats are at least entertaining and somewhat insightful.

Here is Fox News' report on a dinner meeting between Trump and Canadian Prime Minister Justin Trudeau last Friday evening at Trump's Mar-a-Lago estate, citing two anonymous sources who were sitting at the table with them...

President-elect Trump suggested to Canadian Prime Minister Justin Trudeau last week that if a tariff for failing to address trade and immigration issues would kill the neighbor to the north's economy, maybe it should become the 51st state, sources told Fox News.

Last Friday, Trudeau flew to Mar-a-Lago unannounced after Trump threatened to impose sweeping tariffs on Canadian products. Specifically, Trump is threatening to impose 25% tariffs on Canada and Mexico over their failures to curb the flow of illegal immigrants and illicit drugs from those countries into the U.S.

Canada's ambassador to the U.S., Kirsten Hillman, recounted the substance of the meeting in an interview with the Associated Press news service...

Hillman said the bulk of Friday night's dinner centered around Trump's border concerns. The ambassador said a priority of Trudeau's was to point out the degree of difference.

Hillman said there really is no comparison, noting there is essentially zero trafficking of fentanyl from Canada to the United States. She said there are seizures but authorities say those are personal use seizures and not criminal trafficking. She said that 99.8% of the fentanyl seized by U.S. authorities in the U.S. comes from Mexico.

"Also with respect to individuals, illegal individuals crossing illegally, Canada last year was less than one percent, 0.6 percent were of total interceptions from Canada," Hillman said.

U.S. customs agents seized 43 pounds of fentanyl at the Canadian border last fiscal year, compared with 21,100 pounds at the Mexican border. On immigration, the U.S. Border Patrol made 56,530 arrests at the Mexican border in October alone and 23,721 arrests at the Canadian border between October 2023 and September 2024 – and Hillman said the migrant numbers are coming down since the summer.

Overall, Hillman told the AP, "The message that our border is so vastly different than the Mexican border was really understood."

Still, Trump continued his tariff threat, also complaining that Canada enjoys a $100 billion trade surplus with the U.S., according to Fox News. (Hillman's estimate to the AP was $75 billion.) In response to Trudeau's objections that tariffs would cripple Canada's economy, Trump turned to humor...

Trump then suggested to Trudeau that Canada become the 51st state, which caused the prime minister and others to laugh nervously, sources told Fox News.

But he continued, telling Trudeau that prime minister is a better title, though he could still be governor of the 51st state.

Sources told Fox News someone at the table chimed in and advised Trump that Canada would be a very liberal state, which received even more laughter. Trump suggested that Canada could possibly become two states: a conservative and a liberal one.

He told Trudeau that if he cannot handle his list of demands without ripping the U.S. off in trade, maybe Canada should really become a state or two and Trudeau could become a governor.

While sources say the exchange got many laughs, Trump delivered the message that he expected change by January 20.

Trump described the meeting with Trudeau as 'very productive'...

That was in a social media post on Sunday.

All kidding about annexing Canada aside... the fact that we have learned so quick what was discussed at this dinner – over oysters, crab cocktail, and meatloaf, reportedly, and with Trump using his iPad to play Celine Dion songs, seriously – is a win.

What's clear is the tariff threats are clearly a negotiating tactic from Trump. They may not come to fruition, at least at the level that has been suggested initially. But it just might work to get concessions on other subjects... or at least facilitate conversations with foreign leaders.

As Hillman told the AP later...

I don't think it could have been better, to be frank. OK, I'll take that back, I'll change that. If he obviously said there would be no tariffs, that would have been better. But there was no realistic expectation of that.

Here's a picture of the smiling couple, courtesy of Trudeau on social media...

Speaking of Mar-a-Lago...

Tomorrow morning, you can meet a man who has been there, done that – including dining with the president-elect...

This "Mar-a-Lago man" served as an adviser to Trump during his last term... and has a network of billionaire and multimillionaire friends. He has made a fortune, twice, with the help of the insights he has gleaned from them.

After building a successful business as a young man, the person who we want to introduce you to went broke about 17 years ago, had to sell his house, and moved in with his in-laws. He recovered and rebuilt an eight-figure fortune far faster than he'd ever imagined possible, thanks to those secrets he uncovered.

Tomorrow, in a free event, he is going to share what nearly 30 billionaires and multimillionaires have taught him about wealth... including the strange places they keep some of their most prized assets... and the insights he has gained from his network of ultra-wealthy contacts. It's something that anyone can put to work.

We urge you to tune in...

This presentation should look like something new to you. From what we've heard, you'll follow this "Mar-a-Lago man" to the U.S. towns and projects where he got his start in business... And he'll show you one of the most storied buildings in the South, where the kind of deals this analyst used to build his fortune have been going on for more than a century.

This man is also going to share the top move he recommends making before the Trump administration takes over in 2025, which could alone be worth the time. You can get the full details starting tomorrow at 10 a.m. Eastern time.

Again, the event is free. We just ask that you register in advance so you don't miss anything. You can find more details and sign up here.

New 52-week highs (as of 12/3/24): CF Industries (CF), CME Group (CME), Compass (COMP), Costco Wholesale (COST), Flutter Entertainment (FLUT), Meta Platforms (META), ProShares Ultra QQQ (QLD), Spotify Technology (SPOT), ProShares Ultra S&P 500 (SSO), The Trade Desk (TTD), Twilio (TWLO), Vanguard S&P 500 Fund (VOO), and Westlake Chemical Partners (WLKP).

In today's mailbag, feedback on yesterday's edition, which noted that our Stansberry's Investment Advisory lead editor Whitney Tilson is running for mayor of New York City... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Dear Whitney, I believe you would be a solid and very worthy candidate for mayor of NYC. You're a very logical thinker. You are intuitive. I think you have the public service mentality. I believe those three things make you a valuable candidate.

"I will be following this race to see where it goes." – Subscriber Kathy S.

"That's exciting to hear Whitney running for such an important job in this country. My only criticism of him is that he wasn't running for President a few months sooner..." – Stansberry Alliance member Daniel Z.

All the best,

Corey McLaughlin
Baltimore, Maryland
December 4, 2024