Squawk Pod: Kevin Hassett on tariffs & Ken Burns on the American Revolution - 11/17/25 | Audio Only

Here's a comprehensive summary of the YouTube video transcript, maintaining the original language and technical precision:

Key Concepts

• Affordability and Inflation: The discussion centers on the rising cost of living in America, the president's response through tariff cuts, and differing perspectives on the causes and solutions for inflation.
• Market Valuations and Debt: Concerns are raised about the health of the bull market, particularly regarding high equity valuations, increasing margin debt, and the potential for a market downturn.
• AI Stocks and Market Concentration: The significant influence of AI-related stocks on market performance is highlighted, along with the associated jitters and valuation concerns.
• Private Credit Market: The lack of transparency and potential interconnectedness within the private credit market are identified as areas of anxiety.
• The American Revolution: Filmmaker Ken Burns discusses his new documentary series, emphasizing its relevance to contemporary political discourse and the complex, multifaceted nature of the revolution.
• Federal Reserve Policy: The role and independence of the Federal Reserve, along with potential policy errors and the dual mandate of employment and inflation, are debated.
• Labor Market and AI Impact: The potential for AI to increase worker productivity and influence hiring decisions, leading to a "quiet time" in the labor market, is explored.

Affordability and the President's Response

The segment begins by addressing the issue of affordability in America and President Trump's actions to combat rising prices.

• Tariff Cuts on Food: President Trump has cut tariffs on over 200 food products, including coffee, beef, bananas, and tomatoes. The White House fact sheet states that these exemptions are due to progress on trade deals and because these items are not grown or processed in the US.
• Economic Rationale: National Economic Council Director Kevin Hasset explains that the prices for these goods were not solely driven by tariffs. Removing tariffs will increase the supply of these goods into the US, leading to lower prices.
• Broader Economic Plans: Wall Street Journal reports indicate that President Trump's aides are developing plans to address voter frustrations over the cost of living, including potential deals with pharmaceutical companies and increased offshore drilling.
• Differing Perspectives on Inflation:
  • Kevin Hasset's Argument: Hasset argues that the current cost problem is not solely attributable to the current administration. He points to the "big hole" dug by previous administration policies, citing a significant increase in monthly grocery costs from when President Trump last left office ($400) to when President Trump took office ($512), with minimal increase since then. He also criticizes the expansion of Obamacare subsidies during COVID-19, which he claims inflated insurance policy prices and contributed to inflation.
  • Counterpoint on Wages: The argument is made that real average weekly wages fell during the Biden years due to inflation. While inflation is currently at 3%, it is on top of previous inflation, meaning prices are still higher.
  • Hasset's Rebuttal on Purchasing Power: Hasset reframes the discussion by stating that purchasing power has increased, with real wages (W/P) rising by approximately $1,200 this year. He suggests that while a $3,000 hole was dug by previous policies, $1,200 has been recovered, offering hope for future wage increases to outpace inflation. He also mentions efforts like reducing the cost of buying a car through interest deductibility.
• Tariffs and Affordability: When questioned if reversing tariffs acknowledges their role in higher prices, Hasset clarifies that exemptions for goods not produced domestically are not new and are based on supply and demand economics. The recent blanket movement on food tariffs is a strategic decision to avoid individual item-by-item reviews.
• India Trade Deal: Hasset notes that a trade deal with India was close but became complicated due to India's interactions with Russia and other variables. Hope remains for a resolution.

Market Dynamics: Valuations, Debt, and AI

The discussion shifts to the state of the stock market, with a focus on valuations, debt, and the influence of AI stocks.

• Bond Investor's Caution: Noted bond investor Jeffrey Gunlack recommends a 20% cash position to hedge against a severe market downturn, which he believes is brewing due to an overhyped promise of AI-driven transformation. He criticizes "garbage lending" and flags concerns about nearly $2 trillion in the private credit market. Gunlack considers the US equity market one of the least healthy he's seen.
• Equity Expert's Perspective (Lorie Calvacina): Lorie Calvacina of RBC Capital Markets acknowledges a "plain old-fashioned valuation problem." While cautious, she remains somewhat optimistic, seeing potential for upside into next year. She believes valuations are bumping against a ceiling, causing nervousness, but this doesn't necessarily imply a GFC-type downturn or a tech bubble. She suggests stocks can "get a little bit over our skis" and require consolidation.
• Earnings and Margins: Earnings gains were better than expected this past earning season, with higher beat rates for earnings and sales compared to the prior reporting season. However, operating margin expectations declined slightly, offsetting strength in tech. Margin expectations increased for tech but decreased for industrials, materials, and energy, highlighting an "AI versus cyclical economy" dichotomy.
• Investor Sentiment: Investor sentiment has become less bullish, though not outright bearish. The AI net bulls have been "chopping around" and recently returned to earlier summer/fall highs before pulling back. Sentiment indicators like NFIB and consumer sentiment surveys show a stall across the board, contributing to a sideways market trend after a significant run.
• Market Breadth and AI Concentration: While market breadth had been improving, it has started to decline, with a decrease in the percentage of stocks above their 50-day and 100-day moving averages. This is unusual, as the AI stocks are carrying the market's weight, yet there's significant "jitters" around them, leading to mixed trading days.
• Momentum and Defensive Factors: Momentum has seen a strong run. High-quality and low-volatility factors are performing better, and healthcare is experiencing a significant move as investors become jittery, indicating a shift towards more defensive factors and sectors.
• Valuation Metrics:
  • The S&P 500 is trading at approximately 23 times earnings, but this is not as high as it was previously due to strong earnings.
  • The S&P 490 (excluding the top 10 market cap names) is trading at just above 18 times earnings, which is not considered expensive historically, though it was higher in 2021.
  • The top 10 names in the S&P 500 are trading around 28 times earnings, approaching post-tech bubble highs.
• Nvidia's Importance: Nvidia's upcoming third-quarter earnings report is a key event for the markets. The discussion highlights the importance of forward P/E multiples for rapidly growing companies like Nvidia, contrasting it with the 1999 tech bubble.
• Private Credit Market Concerns:
  • Lack of Transparency: There is anxiety about the private credit market due to a lack of transparency regarding loan interconnectedness and collateralization, making it difficult to assess risk, especially compared to the pre-2008 banking system.
  • Comparison to Commercial Real Estate: The situation is compared to the commercial real estate issue a few years ago, which garnered significant attention and hand-wringing but ultimately turned out "kind of okay." The vigilance of many eyes on the issue provides some comfort.
  • Historical Parallels: Past crises like the GFC and the tech bubble have instilled a sense of caution in those who lived through them, leading to a greater awareness of emerging risks.
• Margin Debt: Margin debt has reached a record high, which has historically preceded S&P 500 consolidations. While not an immediate predictor of a crash, it indicates a high level of leverage in the market.
• JP Morgan Chart on PE Multiples: A JP Morgan chart suggests that buying into the market at a P/E multiple above 23 times has historically resulted in only 2% to -2% returns over the subsequent 10 years. This underscores the importance of long-term investing and avoiding short-term market timing.

Ken Burns on "The American Revolution"

Documentary filmmaker Ken Burns discusses his new PBS series, "The American Revolution," and its relevance to contemporary America.

• Scope and Duration: The series, which took nearly 10 years to produce, is a deep dive into what Burns considers the most important event since the birth of Christ: the creation of the United States. It aims to explore the transition from subjects to citizens.
• Relevance to Today: Burns acknowledges that while the series was not timed for the 250th anniversary, its themes are as timely as ever. He emphasizes that history "rhymes" and that the complexities of the revolution resonate with current political divisions.
• Filmmaking Approach:
  • Reenactments: Burns typically avoids reenactments but found a way to use them impressionistically in this series. He filmed reenactors over several years in various conditions, treating the footage like paintings to convey the atmosphere and emotion without focusing on individual actors' performances.
  • First-Person Accounts: The series features 400 first-person quotes read by renowned actors, including Tom Hanks, Meryl Streep, and Morgan Freeman, to bring the historical narrative to life.
  • Complexity of the Revolution: Burns stresses that the revolution was not just about great ideas but was also a bloody civil war and a world war. It involved Native Americans, enslaved and free Black people, and women, all of whom played central roles.
• Key Lessons and Themes:
  • Origin Story: Burns hopes the series will help Americans understand their "origin story" and the complexity of the nation's formation, fostering a greater awareness of its founding values.
  • The Power of "Liberty": The profound impact of the word "liberty" on individuals, even children, during the revolution is highlighted.
  • Putting the "US" back in the US: Burns aims to reconnect Americans with their shared history and identity through this film.
  • Celebrating Complexity: In a politically fractured world, Burns advocates for celebrating the complexity of the American Revolution and, by extension, contemporary issues, suggesting that disagreement doesn't equate to enmity.
  • George Washington's Role: Burns identifies George Washington as a pivotal, albeit flawed, figure whose ability to inspire, defer to Congress, pick talent, and crucially, give up power twice (military commission and presidency) was essential to the success of the American experiment.
  • Sacrifice and Citizenship: The film explores the willingness of individuals to pledge their lives, fortunes, and sacred honor for a cause, a concept that resonates with modern-day acts of sacrifice.
• "Complicated" as a Guiding Principle: The neon sign in his editing room, "Complicated," encapsulates his approach to historical storytelling.

Federal Reserve and Labor Market Outlook

The discussion touches upon the Federal Reserve's policy and the future of the labor market.

• Fed Independence and Policy Errors: Kevin Hasset agrees with Kevin Warsh's op-ed in the Wall Street Journal, stating it's time for the Fed to be independent and data-driven, acknowledging past policy errors.
• Dual Mandate: Hasset believes neither side of the Fed's dual mandate (employment and inflation) is currently at risk, but the Fed needs to get ahead of potential issues.
• Labor Market and AI: Hasset suggests a potential "quiet time" in the labor market. He posits that AI is making workers so productive that firms may not need to hire as many new graduates. However, strong output and income growth are expected to lead to the emergence of new spending avenues.
• Inflation Outlook: Hasset points to the recent CPI report, which surprised economists to the downside, as a positive sign for inflation. He anticipates inflation to head lower.
• Chairman Powell's Successor: Hasset is unsure when a decision on Chairman Powell's successor will be announced, suggesting it might depend on Powell's own decision to step down. The White House is currently focused on other legislative priorities.
• Reconciliation Bill: Hasset believes another reconciliation bill is likely next year, with discussions ongoing about the possibility of one this year.

Conclusion

The Squawk Pod episode covered a range of critical economic and historical topics. On the economic front, concerns about affordability and inflation were addressed, with the administration highlighting tariff cuts and wage growth as positive steps, while acknowledging the lingering impact of past policies. The market outlook was characterized by a cautious tone, with discussions on high valuations, increasing margin debt, and the concentrated influence of AI stocks. The private credit market's lack of transparency was identified as a significant area of concern. In the historical realm, Ken Burns' new documentary on the American Revolution was presented as a timely exploration of the nation's complex origins and its relevance to contemporary divisions. The episode concluded with a look at the Federal Reserve's role and a nuanced perspective on the labor market's future, influenced by the growing impact of AI.