COLLIN MARTIN: I'm Collin Martin.

LIZ ANN SONDERS: And I'm Liz Ann Sonders.

COLLIN: And this is On Investing, an original podcast from Charles Schwab. Every week we analyze what's happening in the markets and discuss how it might affect your investments.

LIZ ANN: Well, hi, Collin. So your world has been interesting lately. I feel like there's been relative calm in my neck of the woods, in the equity market, although some volatility, but your world is in the news, and it's a big world because it's not just the move up in bond yields that has occurred in the United States. It's a global phenomenon. So let me just toss to you a really broad question: What's going on? And what's to blame for the for the move up in yields? And then maybe I'll weigh in on implications for the equity market.

COLLIN: Yeah, Liz Ann, it's very exciting. I sort of have a gauge of "Is the bond market making headlines or not?" And it's if my dad texts me. And so he did text me this morning. So it's, you know, Wednesday, August 19th, and said "What's going on with bond yields?" So if he's asking, I know a lot of people are asking, and there's a lot of drivers. You kind of alluded to them before. What happened, though? So we saw long-term yields rise pretty sharply recently. The 30-year Treasury yield touched 5.3% earlier this week, highest since June of 2007. The 10-year Treasury yield rose above 4.7% earlier this week. I think there's a lot of drivers of what's been moving them higher.

A big driver is really the Fed's hawkish bias. And if we have the Fed no longer likely to cut rates like what we and many expected earlier this year, if they're going to hold steady or potentially hike, that supports the case for higher long-term yields. There's a number of ways we can track what's driving Treasury yields. There's models we get from the Federal Reserve. And there's two things that we can point to. One is really just the expected short-term rate. If the Fed's going to hold or hike, that results in kind of a higher bias across the the yield curve, but also the term premium. So the term premium, you can call it a risk premium. It can be described as the premium you earned for, you know, the Fed to not necessarily deliver what markets are expecting over a certain time frame, or if expectations don't meet or if the Fed doesn't deliver what markets are expecting. I just think it's an uncertainty premium, though. And I think that's a key factor right now. If you asked me two weeks ago what was the driver, it was mostly expected short-term rate, but over the past two weeks or so, it has been that term premium, which is more uncertainty, inflation uncertainty, fiscal concerns, things like that.

The way I phrased that just now, inflation uncertainty is important because it's not high inflation expectations. I want to make that pretty clear, because we can get inflation expectations from the Treasury market and the Treasury Inflation Protected Securities market, the TIPS market. Inflation expectations are very well behaved. They ticked up a little bit over the past few weeks but are still down from where they were in earlier this March and kind of at the lower end of their recent two- or three-year range. So it's really not an inflation expectation story right now. I do think it's more about term premium, uncertainty, fiscal concerns.

We could point to, although I think it's a minor factor, you know, the large supply of corporate bond issuance we've seen. There's this idea that "Is corporate bond issuance crowding out, you know, Treasury supply?" I don't think that's necessarily the case, but we're just seeing a lot of issuance right now, whether it's corporate bonds, the Treasury, equity, IPOs, initial public offerings, a lot of supply coming to the market, which means you need to find buyers. But I think what's important when we look at what's happening with our Treasury yields, and you mentioned this at the start, Liz Ann, it's a global phenomenon. Most global yields are up year to date. If we look at 10-year Treasury yields, through Tuesday, August 18th, the 10-year Treasury yield was up about 54 basis points. Japan was up even more, about 83 basis points.

United Kingdom 10-year bond up 60 basis points. France, 55 basis points. So it's not just a U.S. story. It's a global story. I think that's important because there's also this idea of "Is this a Fed credibility issue? Is the Fed holding, and markets are getting concerned that it can result in higher inflation down the road?" I'd say the global aspect of this tells me that it's not necessarily a Fed credibility issue. And it's a number of things. I think if time goes on, and the Fed, let's say, doesn't hike, and the data suggests they should, then we'd have a credibility issue. We're not there just yet.

But it's making a lot of headlines right now when you see a 30-year yield above 5% or the 10-year approaching 5%, it's obviously concerning for our government finances because we need to we fund ourselves through Treasury issuance. So we have a lot more debt outstanding now, which means higher yields and higher borrowing costs on a much larger base of debt outstanding. And I think that's part of the puzzle right there. And when you add all that together, it supports our case that we're in this higher-for-longer period right now. But higher-for-longer in our view doesn't mean significantly higher. We're not necessarily worried that long-term yields are going to jump much higher, like, let's say, 6% plus on the 30-year or well above 5% on the 10-year Treasury yield. But we think yields might have some sort of a floor here, given all those concerns we're seeing, and given that it's a global phenomenon. So that's kind of my view. So I've a … you know, what's front and center for you? But I guess is there a tie-in, are higher yields, are they impacting the stock market at all?

LIZ ANN: Yeah, so I think, you know, the feeder of what happens in the bond market to the stock market, as it relates specifically to Treasury yields moving higher, there's several factors that define whether it's … you get, if it's an orderly move on the bond yield side, it tends to be a little bit more orderly within the equity market. Anything that is disorderly or really sharp from a time duration standpoint tends to upset the equity market a bit more. We certainly saw that about 15 months ago in the aftermath of Liberation Day. But you can also look under the surface of the indexes to understand what have already been some of these implications on the equity market because you've got higher real yields obviously raise the discount rate applied to forward-looking earnings. And that mechanically compresses multiples, you know, valuation levels.

And it tends to hit what we … and it's a bond market term, but we can apply it to equities too, it hits long-duration growth stocks the hardest. So areas like tech and communications services because their cash flows are most backloaded. So that's a feeder into where you see an impact on the market. You also have the interest sensitive segments of the market like real estate, like utilities where there's now more competition for those types of stocks, higher-yielding stocks, from the relative safety of Treasuries. And that's why you're seeing the weakest performance and the weakest breadth over the past month or so in areas like the real estate sector and the utilities sector.

And I think ultimately, though, the critical question as we look ahead is whether higher yields reflect stronger nominal growth. That tends to be a pretty beneficial time for equities, or maybe a structural repricing of, as you mentioned, Collin, the term premium and inflation risk, and that tends to be more damaging. And it's part and parcel with what we have been writing about and talking about for quite a few years now. And in fact, and maybe we'll put it in the show notes a link, a report that Kevin and I wrote last month about, and it was an update because we've written about it before about having exited the so-called "Great Moderation Era" which was the era from the late '90s up until the 2022 inflation spike.

And there were lots of forces in that era, not least being globalization, the energy boom, but it was an environment of very little inflation volatility, generally a disinflationary trend, which meant fairly benign interest-rate backdrop, and in turn less uncertainty with regard to Fed policy. But the 30-plus years prior to that, the mid-sixties to the late '90s, was distinctly different. And that was an era of more inflation volatility, more uncertainty with regard to monetary policy, demand shocks, supply shocks, some of which we're seeing right now. The most important distinction between those two eras that ties your world, the bond market, with my world, the equity market, is the relationship between bond yields and stock prices.

So in the Great Moderation era, for the most part, save for a brief period in 2008, bond yields and stock prices moved in the same direction because bond yields were keying more off the growth side of the equation, less off the inflation side of the equation. So stronger growth without the attendant concern or risk of inflation, that's sort of nirvana for the equity market. Well, you go back to what we've been calling the "Temperamental Era" from the mid-'60s to the late '90s, almost that entire 30-plus year period of time, bond yields and stock prices moved in the opposite direction because bond yields were keying more off of what was happening with inflation. So higher yields because of higher inflation, not necessarily because of higher growth, negative environment for equities, and vice versa.

So I think this is an environment not only to understand the short-term gyrations that are happening in the bond market and the implications for the equity market, but thinking in more structural terms. So I'd encourage anybody that didn't take a look at that piece to check it out because it really frames with a length that we don't have time for on our lovely little podcast here.

COLLIN: Yeah, it's a great point. And it does tie into the bond market outlook in terms of Treasury yields and Fed policy, where, if you get supply shocks, you maybe you can look through them if it is a one-time supply shock, but we're getting a lot more supply shocks these days. And I brought this up on our interview last week. We had a former Fed official, Dr. Richard Clarida, and I asked him about that. "How do you view monetary policy through the lens of 'now we're seeing a lot more supply shock'?" So it's harder to kind of figure out what is a one-time thing versus is this something we should expect going forward. And that's a great segue to you, Liz Ann, because this week, you're interviewing someone else who has a lot of interesting thoughts on this topic, also.

LIZ ANN: Yeah, so like our guest last week that you had the great fortune of interviewing, the wonderful Rich Clarida. Now this week's guest is also a former long-standing member of the Federal Reserve's Federal Open Market Committee, or FOMC, and it's Jim Bullard. So Jim served as CEO and president of the Federal Reserve Bank of St. Louis for 15 years. And before becoming president in 2008, Bullard served in various roles at the Federal Reserve Bank of St. Louis, starting in 1990 as an economist in the research division and later serving as vice president and deputy director of research for monetary analysis.

In July of 2023, he was chosen as the inaugural dean of the reimagined Daniel School of Business at Purdue University. During his time as an academic economist and financial policy scholar, Bullard's research has appeared in premier journals, including the American Economic Review, the Journal of Monetary Economics, Macroeconomic Dynamics, and the Journal of Money, Credit, and Banking. The majority of Jim's research is some form of macroeconomic analysis, tends to focus on monetary policy, inflation, deflation, and macroeconomic stability.

Bullard received his doctorate in economics from Indiana University, and he holds bachelor of science degrees in economics and in quantitative methods and information systems from St. Cloud State University.

So Jim, thanks so much for joining us. Much appreciated.

JIM BULLARD: Glad to be here. Thanks for having me.

LIZ ANN: Sure. So let's start on maybe the obvious subject, core inflation, which has been pretty stubbornly above target for a number of years. So maybe start with where the line is between patiently restrictive policy and the risk of falling behind the curve again.

JIM: Well, I think the committee is very much at risk of falling behind the curve because they've been tolerating 3% core PCE inflation for several years. I checked, and at the end of 2023, it was 3%. At the end of 2024, 3% or higher, at the end of 2025, 3% again, and now they're projecting for 2026 that core PCE inflation will be probably 3.2%, which is actually the highest of all those. So really, no progress over four years. It looks like they're accepting 3% as the inflation target. Chairman Warsh has said forcefully that he does not want to do that, and he wants to push inflation down to 2%. Now exactly how he's going to do that, I don't know, but this is really the issue. This is a bigger issue, I think, than whether the last inflation report came in hot or cold. I think the main issue is, you know, what is the strategy for the committee to get inflation down to 2%? Now you can say, you know, we think some of these factors are temporary, and we think that policy is restrictive, and that will push inflation back down to 2% gradually. But that was the Powell Fed's policy. So whether Chairman Warsh wants to adopt that policy or not, I think, is one of the key questions going forward.

LIZ ANN: So Jim, what data do you think is most important? And do you think market watchers and Fed watchers are aligned in the thinking around what data matters most relative to right now what the Fed is thinking about what data matters most?

JIM: No, I think they're aligned. They're … you know, Chairman Warsh doesn't like to talk about the most recent data and doesn't like to give forward guidance, but I think the parameters of the discussion are well established. You know, certainly labor market data is important. Certainly growth and productivity is important. The AI boom is feeding into that, some international factors as well. And then of course the inflation data itself. So I think that constellation is unchanging, and I think that'll be the same going forward.

LIZ ANN: Let me pull on the AI thread a little bit since you mentioned it. There's the ongoing debate about whether AI will ultimately boost productivity enough to improve the inflation growth tradeoff. So how are you thinking about it, and what would you need to see before you think that we will collectively treat AI as a truly meaningful macro force, to a greater degree than what's in place right now, which is a little bit more of a market force.

JIM: Yeah, I think the AI boom is very much in progress. There have been a lot of analogies drawn to the internet boom, and I think that's probably a good place to draw some lessons. The internet boom was … eventually permeated the entire economy and did change the way we work, the way we play, the way we think, everything, so it was very much a general-purpose technology that mattered. But nevertheless, there are booms and busts within that. Some companies rise, other companies fall, and even the whole market fell in 2000, 2001. And so I think something similar will happen with AI.

I think some of the conceptions that are around today about how AI is going to permeate the economy are probably not right, others are spot on, and what the market will do is sort out winners and losers as we go forward. And we're hearing all kinds of reports every day about how that contest is moving forward. So you know, it's exciting and I do think it's eventually going to be a general-purpose technology that will permeate the whole economy, be very important. But that doesn't mean every single thing that's going on is going to be the thing that is the important thing going forward.

LIZ ANN: Have you done much work on or do you worry about the circularity of financing and how many more debt deals are done these days to finance the build-out? Is that something that you've put a lot of thought into?

JIM: I've thought about it. I don't have any independent research on it or anything, but I do think that this is part of the culture and style of Silicon Valley is to have circular deals. Sometimes it works; a lot of times it doesn't. So I think Wall Street is right to call that out and question that.

And generally speaking, I would say the West Coast is still very hot on AI. And I think one thing is you have to keep in mind that you've got these IPOs coming up, there's a lot of money to be made, so there's a lot of hype coming out. And I think Wall Street's been right and global financial markets have been right to call some of that into question and start to ask tough questions about where's the revenue coming from.

LIZ ANN: Speaking of markets, these days markets are so fast moving. There's so much more fast money in the market, whether it's on the institutional side, the systematic funds and hedge funds and commodity trading advisors and other rapid-fire trading, and what we see, especially the ability to monitor what the expectations are for upcoming Fed meetings, do you think markets are maybe moving too quickly to price in changes in Fed policy? And do you think investors have become overly confident in what either they're trying to do in forecasting what the Fed is going to do or how they perceive what the market message is about what the Fed is going to do?

JIM: I mean, I would say with the coming of Chairman Warsh that they've become less confident about what they think the Fed will do and the direction that he really wants to go. I think he's, you know, pushed in some directions which sound, you know, pretty traditionally hawkish, especially the defense of the inflation target, his rhetoric that inflation is a choice. He's definitely taking responsibility for the ultimate inflation outcomes for the U.S. economy.

But he said other things that make markets wonder. I think this issue about possibly changing the goalpost, possibly switching the metrics around the inflation target when it happens to be convenient to do so. I think that's something that's made markets a little bit nervous, and his reluctance to say anything about, "Well, you know, we'll raise rates in order to get inflation down to 2%." He maybe has other ideas about how to do that, maybe the balance sheet, but that's all pretty puzzling at this point exactly how that would fit together. And so I think markets are less sure about exactly how policy will proceed under the Warsh Fed.

LIZ ANN: Well, and you know, you mentioned some of the areas that there's a lot of uncertainty as to Warsh's plans, but of course he's created a task force for most of those. So what are your thoughts on that framework and maybe some of the members of the task forces? I mean, I think the reviews have generally been fairly favorable in terms of who he has put in charge of some of these task forces. But do you have thoughts on when we might hear anything and ultimately whether those will be seen as significant in how Warsh is thinking about the changes he wants to enlist at the Fed?

JIM: Yeah, I thought the task force idea, I think, is generally a good one when you're coming in with a reform agenda as the new leader. So that part, I think, is good. I think he chose people that are credible choices, and mostly outsiders, not completely, but mostly outsiders for this. And I think that's appropriate.

So I think you'll get some … a fresh look at all these issues. And you know, they'll make their reports, I think. On the timeline, I think it'll be by the end of the year. I don't think he wants to let it go on too long from there. And at that point, the committee will look at all these issues and start to make some decisions about directions that they want to go in.

So another thing, though, is that as the task forces are meeting and getting up and running, that's a process that also has to be managed. And I don't think you can just say, "Well, they're going to go behind that curtain over there." And the task forces themselves should be calling in other people and bringing together the widest variety of opinion that they can get on their particular topic. So I think it'll all be very interesting.

LIZ ANN: So I want to widen the aperture a little bit and talk about the economy more broadly. When you were running the St. Louis Fed, you introduced a regime-based approach to forecasting. So maybe I'll pose the question in what regime do you think best describes the U.S. economy now?

I've written a lot about this, viewing the cycle in the post-pandemic environment being less linear maybe than it's been in the past, where you've got these distinct phases that represent what in the aggregate the economy is doing from, you know, recession to recovery, late cycle. but where do you think we are? Do you view this cycle as being a bit unusual? And if so, will that be persistent? But if you think we are in a more traditional cycle, where would you put us on that linear timeline?

JIM: Yeah, I guess what I would say on this issue is that we've only had two recessions in the last 25 years, and they both had very clear causes, the global financial crisis in 2008, 2009, and 2007 maybe as well, if you want to throw that in there.

And then the pandemic in 2020. Other than that, in the last 25 years, the U.S. has been in expansion. So I think … and even before that there was just the one recession in 2001, going back to 1990. So recessions are really … have been rarer in the modern era than they were, and they've had pretty clear proximate causes.

So I'm not sure that we can line that set of data up against the earlier era, the pre-1985 era, where it had a lot of recessions, a lot of volatility. So I think regimes are probably the right way to look at it. The … you stay in the growth regime until something big happens, and that's certainly been a good model. And then you have to think about, "Well, what would the recovery from that, a big shock like the crisis, the financial crisis or the pandemic, what would the recovery from those two events look like?" And those two were very different actually in terms of their recovery. So I do think the regime switching is a good way to look at it. But I'm not sure we can say late cycle or early cycle based on that sort of thinking about how this works. You would stay in the growth regime until there's some proximate event that drives you into the recession regime, and we don't know when that would occur.

LIZ ANN: I mean one of the one of the ways we've been describing it and writing about it is that you haven't had a major credit crunch. There has not been a … other than the 2022 period, which of course brought on the bear market, significant tightening or at least surprise tightening in monetary policy. And as a result, what we have had in the post-pandemic environment are rolling sectoral recessions and rolling expansions. Certainly coming out of the pandemic, it started with the initial boom on the manufacturing side of the economy, when services was still completely shut down. And then manufacturing rolled over, went into its own recession, at a time when then services boomed for a while.

So that's the way I've been thinking about these regimes. Do you think we … it's possible we could stay in that kind of backdrop where you do get these individual sector or industry recessions, but because you've got offsets of strengths in other areas, that the overall economy stays relatively healthy, but that there's a lot more churn under the surface?

JIM: Yeah, I think that's very reasonable, and I would say that that happens during expansions. Some sectors do very well. Others don't do that well, even though the whole economy on the whole is expanding, and I think it was so maybe this year that the energy stocks were the leading, you know, the leading …

LIZ ANN: Oh yeah, that is this year.

JIM: And so you might say, "Well that's a commoditized thing," and you know, but it turned out to be booming for a while for various reasons related to the geopolitics. But I think it's very reasonable to think about some industries up, some industries down, but the overall economy is still expanding. That, you know, the recession, when the recession comes, everything's down. And you really know it at that point.

LIZ ANN: Yeah. So maybe it's not leaving recession aside, but thinking about risks to the economy right now. How would you think about sort of rank ordering risk? Whether is it inflation persistent? Is it labor market weakness? Is it fiscal policy or maybe lack thereof? Is it geopolitics? Financial conditions?

When you think about … cause we're all in in our roles, your current role, your prior role, we have to think about not just opportunities but risks. What do you think the biggest risks are right now? What worries you most? What's the, you know, the answer to the question, "What keeps you up at night?"

JIM: Yeah, I mean, I'd say it's geopolitics. The world is fracturing compared to what it was. And you're entering an era, or already are in an era, of great power competition and, you know, a cold war, I would say, and to the extent that that gets worse, the global economy fractures further, you get breakdowns in economic relationships. New alliances form. I would say that sort of situation is more fraught because you could have major flare-ups at any time.

And we all get used to the idea that "OK, well, Russia and Ukraine have been at war for a long time," but it could get much worse very quickly. And I would say the Iranians are settling in for the long haul and, you know, they're kind of, they just see themselves as on a revolutionary mission, and they're going to fight for a very long time, and they might be able to get at least surreptitiously support from other parts of the geopolitical sphere.

So I think that's where the main risks are. I think the AI build-out is very, very substantial, and you have a hard time seeing whether this is really going to pay off or not. So that could enter a bust cycle. I would say, at some point, that that might be big enough to really cause problems for the U.S. economy. So I would say that's also a risk.

And people have talked about private credit. My assessment of that is probably too small at this point, but I say that with some humility because we thought subprime was, you know, too small. So I think that's also something a lot of investors piled into in this earlier low-interest-rate era, and now they're trying to … they're finding it's not very liquid when they're trying to exit. So those are some of the main things. But I think there are eyes on all these things, so I don't think they would be that big of a surprise if that … if any of them actually materialized.

LIZ ANN: Well, and that would obviously influence how financial markets behave, too. So I want to ask a question on that front because there's so much greater interconnectivity between what's going on in the financial markets and what's going on in the economy right now through, you know, the wealth effect channels. So what are your thoughts on how much the Fed should take financial markets, whether it's the stock market or the bond market, into account when setting policy, especially if equity strength starts to help ease financial conditions, or if credit spreads stay tight, you've got easier financial conditions, and the Fed is trying to figure out what levers to pull as it relates to the inflation problem. But how do you think about the Fed and its thoughts on the interconnectivity between financial markets and the economy and how much the Fed should take what the stock market, as a for instance, is doing into consideration?

JIM: Yeah, the committee has not wanted to take the stock market into account. This was debated, as you recall, very extensively in the Greenspan era, so a long time ago. But here you've got, even now, record highs or near-record highs in equity markets, and the wealth-to-disposable-income ratio, Warren Buffett's favorite picture, is at all-time high. So I think that is a very bullish factor for the economy as a whole, because it probably drives consumption for the part of the economy that provides most of the consumption. So I think that part is very bullish, but the committee has not, in recent times, talked as much about do they worry about that, do they want to scale that back? Do they want to raise policy rate in order to put downward pressure on that? But historically that's been argued a lot. Should you sort of prick the equity bubble, and I guess something that could be debated again, but hasn't really come up in the recent conversations.

LIZ ANN: So I have a final broad question, I guess. As you know, Charles Schwab manages assets for mostly individual investors. You're now in the world of academia, and you're dealing with students. So whether it's from the perspective of individual investors, from the perspective of students and trying to navigate all these uncertainties and maybe in particular Fed uncertainty. Are there any misconceptions that you find people have about monetary policy that sort of go unchecked by reality?

JIM: Well one misconception, I think, that has been very pervasive during the AI boom here is that a new technology coming on can create mass unemployment. And you know, the U.S. economy over 250 years has been nothing but new technologies coming on all the time and some of them gigantic. Railroads are an example. Agriculture is an example. So I think people have something in their head that says, "Well, when the technology changes, all of a sudden no one's going to have anything to do." And I just think I wish those people would take more time to study macroeconomics and development economics and how it works, because all the prices change, the value of the labor changes, the people have to work, so they go off and do something else. And all of that happened previously and will happen this time.

So I think that's a huge misconception, and that's been fed by the hype around AI, but it's very unfortunate because it's now, it's got people not liking AI because they're worried about that, and that … I think another thing that people should be saying is that any technology that comes online could be used for good or ill. Airplanes are an example. Airplanes meant that the nature of warfare changed, but it also meant that you had commercial uses that were extremely valuable, and people can now get around to places that they never would have been able to get around to before, and so I think that's a perfect example of technology is kind of morally neutral. It's people that have the good intentions. So those are some misconceptions that I think us economists should push back on and try to get people more grounded in economics and how it actually works.

LIZ ANN: That's a wonderful place to end. I couldn't agree with you more. We've tried to be also a voice in getting investors to understand that these technologies in the past have been revolutionary. You do go through the disruption phase, Joseph Schumpeter, creative destruction, but you come out the other side with brand new industries and jobs. And so I love ending some of these discussions, which these days we're always talking a lot about risks, but also with some optimism.

So Jim, thank you again for joining us. We really appreciate it.

JIM: Well, thanks for having me. It's always fun to be on.

COLLIN: So Liz Ann, as always, it's time to look ahead to next week. So what is on your radar, and what do you think investors should be watching?

LIZ ANN: Well, I'm guessing when I toss it back to you, you're going to have one of the same responses, which is we get the Personal Consumption Expenditures price index next week, which is ostensibly the Fed's preferred measure. We'll continue to hear more about that, or at least we hope we hear more about that, from Fed Chair Kevin Warsh. But for now anyway, that's considered the Fed's preferred measure. We're also getting a lot of housing data. I won't go through the list of everything, but that I think is back in the spotlight for maybe some obvious reasons given the move up in yields.

We also get some trade data, personal income and spending to see what the balance is there. And then we get both versions of how consumers are feeling. So we get the Conference Board's Consumer Confidence Index that has a lot of subcomponents too, and then we get University of Michigan's Consumer Sentiment Index, that also has a lot of subcomponents, including inflation expectations. So what about you, Collin?

COLLIN: Yeah, lots of overlap. Of course, for me, as it relates to Fed policy, the Personal Consumption Expenditures report, the PCE, that is the Fed's preferred inflation gauge. As long as it's not a positive or hotter than expected reading, it probably doesn't have too much of an impact on Fed policy because we can look at the CPI, the Consumer Price Index, and the Producer Price Index and have a good idea of how it's going to come in. And expectations are for it to come in relatively tame, headline PCE expected at 0.1% on a month-over-month basis. Core expected to come at 0.2% on a month-over-month basis. That should be enough for the Fed to continue holding.

You mentioned we get the personal income and spending reports. We also get the first revision, second release of gross domestic product, or GDP. And in that report, I like to look at personal consumption. I want to see if the consumer is still consuming because they are the driver of the economy. And then finally next Friday we get the Jackson Hole speech from Fed Chair Kevin Warsh. I wish I could give you a preview, but clearly we don't know what he's going to say because he doesn't tell us much. There's been some leaks about maybe he'll try to clarify, you know, how he's viewing things. But I think there's no shortage of opinions about what he might say next week, whether it's his stance on monetary policy, maybe an update on some of the task forces. Who knows? But I do know that I'll be watching very closely to see if he might provide some clarity about how he's thinking about monetary policy today and maybe what we can expect going forward. So that'll be super interesting.

So Liz Ann, that's it for this week. As always to our listeners, thank you for listening. As a reminder, you can always keep up with us in real time on social media. I'm @CollinMartinCS on both X and LinkedIn. It's Collin with two L's, and the CS is for Charles Schwab.

LIZ ANN: And I'm @LizAnnSonders on X and LinkedIn. Please make sure you are following the real me.

And you can also find all of our written reports. Those always include a lot of charts and graphs and other visuals, and those are all found at schwab.com/learn.

COLLIN: And if you've enjoyed the show, please consider leaving us a review on Apple Podcasts, a rating on Spotify, or feedback wherever you listen. And please tell a friend or more about the show, and we will be back with a new episode next week.

For important disclosures, see the show notes, or visit schwab.com/OnInvesting, where you can also find the transcript.