Markets Defy Predictions in Trump’s First Month

Summary

WSJ What’s News: Markets Defy Predictions in Trump’s First Month
Release Date: February 21, 2025

The latest episode of WSJ What’s News, hosted by Luke Vargas and produced by The Wall Street Journal, delves into the unexpected performance of financial markets during President Donald Trump’s inaugural month. The discussion encompasses a range of topics from political maneuverings and economic policies to housing market dynamics and global tensions. Below is a detailed summary capturing the key points, insights, and notable quotes from the episode.

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1. Senate Republicans Pass $340 Billion Budget Blueprint

Overview:
The episode kicks off with Senate Republicans successfully passing a $340 billion budget blueprint aimed at funding new expenditures for border security and the military. This achievement followed a strenuous overnight session where Democrats introduced numerous non-binding amendments attempting to challenge Republican priorities.

Key Points:

• Democratic Opposition: Democrats proposed amendments on housing, energy costs, and tax breaks for the wealthy, aiming to expose what they label as Republican hypocrisy on critical issues.
• Budget Reconciliation Process: The approved framework utilizes budget reconciliation, allowing Republicans to bypass filibuster rules and potentially pass Trump’s fiscal agenda with a simple majority in the future.

Notable Quote:

Chuck Schumer: "We will have late nights here on the floor exposing Republicans' hypocrisy on health care, on national security, on job creation, on inflation and most of all on where their main focus is their North Star—tax breaks for their billionaire buddies."
[01:34]

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2. Middle East Tensions: Hamas and Israeli Hostages

Overview:
The podcast transitions to the ongoing conflict in the Middle East, highlighting a troubling incident involving Hamas and Israeli hostages.

Key Points:

• Hostage Situation: Israel reported that one of the four bodies handed over by Hamas did not match the identification of a captured mother and her two young sons, signaling potential violations of the Gaza ceasefire.
• Government Response: The Israeli military condemned the incident as a severe breach of the agreement, while Hamas remained silent on the matter.

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3. Markets Under Trump’s First Month: Expectations vs. Reality

Overview:
Finance Editor Alex Frangos provides an analysis of why financial markets did not align with the optimistic predictions made before Trump’s inauguration.

Key Points:

• Dollar Weakness: Contrary to expectations, the US dollar weakened by 1.6% during the first month.
• Stock Market Performance: US stocks saw modest gains, trailing behind European markets, which was unexpected given Trump’s pro-business policies.
• Tariff Policies: The administration’s cautious stance on implementing tariffs, particularly with Canada and Mexico, led markets to view tariff threats as negotiation tactics rather than lasting policies.

Notable Quotes:

Alex Frangos: "Renters could feel a bit more pressure in their budgets and they should definitely expect competitiveness in the rental market to heat up."
[00:54]

Chuck Schumer: "Markets take a long time to digest big changes in policy. The whole tariff thing is a negotiation ploy and not a permanent fixture of economic policy."
[03:25]

Chuck Schumer: "The broad dollar measured against a basket of currencies is down 1.6% in the first month of the Trump administration. So let's not get overexcited."
[05:48]

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4. Bird Flu Outbreak: Impact on Egg Prices and the Meat Industry

Overview:
A significant bird flu outbreak has led to soaring egg prices, prompting egg producers to call for government intervention.

Key Points:

• Egg Producers' Appeal: The industry is urging regulators to approve a vaccine for chickens to mitigate the outbreak.
• Meat Processing Concerns: Companies like Tyson Foods and Pilgrim's Pride warn that vaccinating flocks could jeopardize their export markets, potentially resulting in a $5 billion annual loss.
• Regulatory Hurdles: Despite a conditional license granted by the Agriculture Department, the vaccine remains unauthorized for farm use, delaying its availability to poultry producers.

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5. Business and Market Highlights

Overview:
The episode highlights movements in significant global companies and upcoming economic indicators.

Key Points:

• Nissan Motor: Shares surged in Tokyo following reports of a potential investment from a high-level Japanese group, despite recent merger talks with Honda falling through and Moody's downgrading Nissan's debt to junk status.
• Alibaba: Hong Kong-listed shares climbed nearly 15% after the company credited its AI strategy for driving third-quarter revenue growth, contributing to a rally in Chinese tech stocks.
• Upcoming Data: The National Association of Realtors is set to release January home sales figures, expected to show a decline due to persistent high home prices and mortgage rates.

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6. Housing Market Trends: Rising Rents and Slowing Apartment Construction

Overview:
Journal housing reporter Rebecca Picciotto and Finance Editor Alex Frangos discuss the shifting dynamics of the US rental market, highlighting the end of an apartment rent decline trend.

Key Points:

• Oversupply Absorption: Previously empty units in regions like the Sun Belt are being leased as the oversupply from the construction boom during the early pandemic years is finally being absorbed.
• Construction Slowdown: New apartment projects are declining due to fears of increased material costs from tariffs and labor shortages caused by migrant deportations.
• Rising Demand: High mortgage rates and extended periods of renting are sustaining strong demand for rental properties.

Notable Quotes:

Alex Frangos: "It's worth saying that a lot of renters are still feeling the squeeze of the double-digit rent spikes that we saw in the early years of the pandemic. ... But renters could feel a bit more pressure in their budgets and they should definitely expect competitiveness in the rental market to heat up."
[09:42]

Alex Frangos: "This could have real implications for the Federal Reserve's fight against inflation. Shelter costs account for roughly a third of the overall inflation measure."
[11:14]

Alex Frangos: "At the end of the day, housing is very much a locally regulated industry, so a lot of municipalities are looking at new zoning laws, maybe faster permitting processes that make it easier and cheaper to build housing."
[12:17]

Implications:

• Federal Reserve: Persistent high shelter costs could hinder the Fed's efforts to achieve a 2% inflation target, potentially prolonging high interest rates.
• Economic Ripple Effects: Continued high interest rates may impact broader economic activities beyond the housing sector.
• Policy Initiatives: While local governments are exploring zoning and permitting reforms to boost housing supply, federal interventions remain limited amidst other legislative priorities.

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Conclusion

The episode of WSJ What’s News provides a comprehensive analysis of the interplay between political decisions, economic policies, and market reactions during President Trump’s initial month in office. From unexpected market performances and housing market shifts to global tensions and industry-specific challenges, the discussion underscores the complexity and unpredictability of economic landscapes under new administrations.

For listeners seeking deeper insights into the US rental market, the episode directs attention to the Your Money Briefing podcast, which explores landlords' new strategies for handling rental disputes by targeting credit scores.

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Produced by: Kate Bulavant, Daniel Bach, and supervising producer Christina Rocca.
Host: Luke Vargas
Further Information: For more details on the US rental market and other topics discussed, listeners can visit the Wall Street Journal’s website or access linked podcasts in the show notes.

Transcript

[Luke Vargas]

I can say to my new Samsung Galaxy S25 Ultra, hey, find a keto friendly restaurant nearby and text it to Beth and Steve. And it does without me lifting a finger so I can get in more squats anywhere I can. 1, 2, 3 will that be cash or credit?

[Alex Frangos]

Credit.

[Luke Vargas]

4 Galaxy S25 Ultra the AI companion that does the heavy lifting so you can do you get [e-mail] compatible with select apps. Requires Google Gemini account. Results may vary based on input. Check responses for accuracy. Senate Republicans advance their budget blueprint after Democrats stage an overnight amendment marathon Plus Finance editor Alex Frangos explains why markets performed in unexpected ways during President Trump's first month in the White House and America's apartment glut dries up, raising the prospect of higher rents.

[Alex Frangos]

Renters could feel a bit more pressure in their budgets and they should definitely expect competitiveness in the rental market to heat up.

[Luke Vargas]

It's Friday, February 21st. First, I'm Luke Vargas for the Wall Street Journal and here is the AM edition of what's news, the top headlines and business stories moving your world today. Senate Republicans have passed a $340 billion budget blueprint that would eventually fund new spending for border security and the military. That followed an all night fight with Democrats who proposed a number of non binding amendments meant to put Republicans on the record on a range of issues. Democratic Min.

[Chuck Schumer]

Chuck Schumer we will have late nights here on the floor exposing Republicans hypocrisy on health care, on national security, on job creation, on inflation and most of all on where their main focus is their North Star tax breaks for their billionaire buddies.

[Luke Vargas]

Democratic proposed votes relating to housing, energy costs and blocking tax breaks for the wealthy were defeated, along with measures to reinstate some fired government employees and ramp up support for Ukraine. The framework approved this morning sets up a process known as budget reconciliation, which would enable the chamber to bypass filibuster rules and allow Republicans to pass Trump's fiscal agenda later this year with a simple majority. Turning to the Middle east now, Israel says one of the four bodies that Hamas turned over yesterday isn't that of a mother who was kidnapped with her two young sons. The Israeli military said that it had informed the Bibas family that the bodies of two boys, which were also handed over yesterday, had been identified, but that another body Israel received didn't belong to their mother, nor did it match any other hostage. The Israeli military said Hamas is required to return four dead hostages under the Gaza ceasefire and called the incident a violation of utmost severity. A Hamas spokesman didn't respond to a request for comment. It has been just over a month since President Trump's inauguration. In the lead up to his taking office, a number of economists predicted that Trump's economic policies would continue to fuel the dollar's strong run as well as the outperformance of the US Stock market. But as Journal finance editor for Europe Alex Frangos told me, that's not how month one's unfolded.

[Chuck Schumer]

In the first month we've seen the dollar weaken. US Stocks are up, but not as much as stocks in Europe, which is surprising to a lot of people. I think it's partly a situation of it's only, and sometimes markets take a long time to digest big changes in policy. And partly it's traders were bidding up these things going into the administration. Basically, everyone thought there was going to be big tariffs. There's obviously been a lot of talk about tariffs. But his first move with Canada and Mexico was, oh, we're going to slap these huge tariffs, but then said, we'll give a delay. And so the markets basically interpreted that the whole tariff thing is a negotiation ploy and not a permanent fixture of economic policy.

[Luke Vargas]

Alex, over on the issue of currency, President Trump has long complained about the strength of the dollar. And I'm curious, given his focus on closing the US Trade deficit and helping domestic manufacturing, is there a sense maybe among market watchers that he might try to take some steps to actively weaken the greenback?

[Chuck Schumer]

It's really hard to move what's the most traded asset in the world, which is the US Dollar. There's policies that they can take that will, over time weaken the dollar, but unclear that what they've done so far should do that. I mean, tariffs in general, we would expect the dollar to strengthen. What's much, much more important is what the Fed does. And if the Fed reacts to tariffs by keeping rates high, that'll keep the dollar strong, because the higher rates are in the U.S. the more people want to hold U.S. dollars because they're getting paid more in their savings or owning a bond or whatever it is. So it will take months, if not years before you would see the desire of the president to have a weak dollar make the dollar weak. It's just not something you can snap your fingers and do.

[Luke Vargas]

All right, so how should we interpret the dollar's recent moves then?

[Chuck Schumer]

I think what we're seeing with the dollar weaken a little bit in the first month of the administration is one, the sense that the Ukraine war, there might be a pathway to ending, which is good for Europe, and so the Euro has strengthened a little bit. The Japanese yen has strengthened because the sense is the bank of Japan is going to raise interest rates. They have inflation in Japan for the first time in a long time. So there's a bunch of things going on outside. And then again, the sense that the tariffs more of a tactic and a bluff than a permanent thing, that's colored people's expectations of where the dollar should go. That said, the broad dollar measured against a basket of currencies is down 1.6% in the first month of the Trump administration. So let's not get overexcited.

[Luke Vargas]

That was the Journal's finance editor for Europe, Alex Frankos. Egg companies are calling for a stronger government response to a bird flu outbreak that has sent egg prices soaring, asking regulators to greenlight a vaccine given to chickens on farms. But meat processing companies including Tyson Foods, Pilgrim's Pride and Purdue Farms say bird flu vaccinations could have a devastating impact on their export business, worth roughly $5 billion annually, according to officials. If the US started vaccinating flocks, other countries would cancel orders and each nation would need to sign off on the American vaccination strategy before resuming purchases. Last week, the Agriculture Department granted a bird flu vaccine a conditional license, but it hasn't been authorized for use on farms, and poultry producers can't buy it. The department says it plans to roll out a strategy to fight the disease in the coming days. And in business and markets news, shares in Nissan Motor jumped in Tokyo today after the Financial Times reported that a high level Japanese group is planning to approach Tesla for an investment in the struggling carmaker, whose merger talks with Honda fell apart. Just earlier today, credit ratings agency Moody's cut Nissan's debt rating to junk status. Meanwhile, Hong Kong listed shares in Alibaba jumped nearly 15% after the company said its AI strategy helped to drive revenue growth in the third quarter, sparking a Chinese tech stock rally. And on deck today, home sales figures are set to be in focus when the national association of Realtors releases data for January at 10am Eastern. Sales likely declined as home prices and mortgage rates stayed too high to attract buyers. And coming up, we'll look at the outgrowth of that trend, rising demand for rental properties that could send prices higher this year. That's after the break. My dad works in B2B marketing. He came by my school for career day and said he was a big Roas man. Then he told everyone how much he loved calculating his return on ad spend. My friends still laugh at me to this day. Not everyone gets B2B. But with LinkedIn you'll be able to reach people who do get $100 credit on your next ad campaign. Go to LinkedIn.com results to claim your credit. That's LinkedIn.com results. Terms and conditions apply. LinkedIn the place to Be, to Be A spike in rents during the early years of the pandemic sparked a historic apartment construction boom in 20, 23 and 20, which led to oversupply and caused rents to fall in much of the country. But as Journal housing reporter Rebecca Picciotto told my colleague Kate Bullivant, the era of falling apartment rents seems to be drawing to a close.

[Alex Frangos]

So the oversupply that has been weighing down rent growth over the past few years, it's now getting absorbed into the market, meaning that those previously empty units in the Sun Belt, for example, are getting leased out to renters. Plus, construction of new apartments is slowing down. So already we' seeing fewer shovels in the ground for new projects than we were just a few years ago. Not to mention, developers and builders are pretty fearful that new tariffs and migrant deportations are going to increase the cost of their materials, make it harder to find workers, and generally slow down construction timelines. And at the same time, demand for rentals is expected to stay strong. Mortgage rates are still high. A lot of people are renting for longer. So you put those two things together, slowing supply with growing demand, and you get a market where landlords could have a lot more pricing power than they did a few years ago.

[Rebecca Picciotto]

So how significant could these tariffs on Canada and Mexico be?

[Alex Frangos]

For the U.S. roughly a quarter of U.S. building material imports come from Canada and Mexico, according to the national association of Home Builders. And undocumented workers make up about 13% of the construction labor force. So the prospect of more aggressive tariff hikes and mass migrant deportations could really increase the cost of doing some of these projects.

[Rebecca Picciotto]

Some people listening to this might be thinking that rent prices are already high. What exactly should we expect here, right?

[Alex Frangos]

I mean, it's worth saying that a lot of renters are still feeling the squeeze of the double digit rent spikes that we saw in the early years of the pandemic. No one expects rent growth to hit that kind of record high level this year, and everyone has a slightly different estimate. But as one example, the real estate services firm CBRE projects that national rent growth will be at about 2.8% by the end of 2025. We might see more people start to sign multi year leases over the next few months to try to lock in the last remaining low prices. But on the whole, renters could feel a bit more pressure in their budgets and they should definitely expect competitiveness in the rental market to heat up. So I spoke to one renter in New York who submitted inquiries for about 60 apartments and often found herself waiting in line behind at least a dozen people. Those kinds of stories could become more common across the country over the next year.

[Rebecca Picciotto]

How could we see these higher rents kind of ripple across the economy?

[Alex Frangos]

This could have real implications for the Federal Reserve's fight against inflation. Shelter costs account for roughly a third of the overall inflation measure. So if housing costs stay high, that could make it harder for the Fed to meet its 2% inflation target and that might make the central bank more likely to continue to pause its rate cutting cycle. And if interest rates don't come down further, that certainly trickles across the rest of the economy.

[Rebecca Picciotto]

And finally, are there any political initiatives on the cards here to address this potential upcoming housing crunch?

[Alex Frangos]

At the end of the day, housing is very much a locally regulated industry, so a lot of municipalities are looking at new zoning laws, maybe faster permitting processes that make it easier and cheaper to build housing. On the federal level. There's certainly talk in Congress of trying to boost some of the tax incentive programs to help developers build more housing. But some lawmakers certainly see housing policy stuck in limbo given some of the other legislative priorities that have been on the agenda so far.

[Rebecca Picciotto]

That was Journal housing reporter Rebecca Picciotto. Rebecca, thanks so much for your time.

[Alex Frangos]

Thanks for having me.

[Luke Vargas]

And for more on the US Rental market, check out today's episode of our your Money Briefing podcast, where Journal reporter Kaitlin Ostroff detailed a new strategy some landlords are embracing to tackle rental disputes targeting credit scores. We've left a link to the episode in our show notes, or you can queue up your money briefing right now on whatever platform you're using to listen to us. And that is what's news for this Friday morning. Today's show was produced by Kate Bulavant and Daniel Bach, with supervising producer Christina Rocca. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Otherwise, have a great weekend and thanks for listening. Sat.