Morning Brew Daily
Fed Holds Rates Steady & Disney Opening a Theme Park in Abu Dhabi
Thu, 08 May 2025
Episode 578: Neal and Toby discuss the Fed making the decision to hold rates steady amidst an uncertain economy. Then Apple reportedly says goodbye to google to move AI to search and Disney announces a new theme park in Abu Dhabi. Then Neal shares his favorite numbers and headlines you need to know to start your day. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here: https://www.swap.fm/l/mbd-note Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Happy 5/8 Day 03:00 - Fed Holds Interest Rates Steady 06:35 - Apple Dropping Google in Safari 10:45 - Disney Heads to Abu Dhabi 16:20 - Neal’s Numbers 20:50 - Headlines All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Cryptocurrency trading services are offered by Bakkt Crypto Solutions (NMLS ID 1890144), which is licensed to engage in virtual currency business activity by the NYSDFS. Cryptocurrency is highly speculative and involves a high degree of risk. Cryptocurrency holdings are not protected by the FDIC or SIPC. APY as of 3/18/25, subject to change. *Terms and Conditions apply. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Why did the Fed hold interest rates steady?
Then a single sentence uttered by an Apple exec shaved $150 billion off of Google's market cap. It's Thursday, May 8th. Let's ride.
It is a very special day for me and everyone else who is 5'8". May 8th, 5'8", is our height day. So happy height day to all the just below average kings celebrating today, including Zac Efron, Ed Sheeran, Eminem, Robert Downey Jr., and Tom Holland.
What a crew. Neil, I could have sworn, at least according to your dating profile, that your height day isn't until tomorrow, though. Funny how that works. But must be the shoes you're wearing today. Anyways, my height day isn't for a while. Cannot wait for July 9th, everyone.
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You know when you're driving and it starts raining really hard, like enough so that your wipers can't keep up and you just pull over to the side of the road and wait it out? That is what the Federal Reserve is doing right now. The U.S. central bank held interest rates steady at their meeting yesterday.
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Chapter 2: What did Apple say about dropping Google as a default search engine?
Chapter 3: What are the details of Disney's new theme park in Abu Dhabi?
Get your hands on the oat milk that has it all. Visit planetoat.com for more.
You know when you're driving and it starts raining really hard, like enough so that your wipers can't keep up and you just pull over to the side of the road and wait it out? That is what the Federal Reserve is doing right now. The U.S. central bank held interest rates steady at their meeting yesterday.
The same level rates have been at since December because Chair Jerome Powell says the economic picture is too foggy to do anything but hang on the sidelines. We don't feel like we need to be in a hurry. We feel like it's appropriate to be patient, he said. And when things develop, of course, we have a record of, we can move quickly when that's appropriate. Powell and millions of U.S.
businesses have been sent scrambling in the past few months after President Trump launched massive tariffs on the rest of the world to reshore manufacturing. Many of those tariffs remain in limbo, but 145% tariffs on China are in effect and trade is plummeting. In a stark warning for the economy, Powell predicted that tariffs could drive up inflation and slow economic growth down the road.
And probably the headline quote from his press conference, he said, if the large increases in tariffs that have been announced are sustained, they're likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.
In other words, he's warning of stagflation, an unusual but noxious combo for the economy where prices are higher, but people are still getting laid off from work at the same time. Still, this is Powell gazing into his crystal ball because as it stands, tariffs have not yet significantly impacted the economy. And so Powell remains in wait and see mode.
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Chapter 4: What are Neal's favorite numbers and headlines?
Chapter 5: How does the current economy impact inflation and growth?
In other words, he's warning of stagflation, an unusual but noxious combo for the economy where prices are higher, but people are still getting laid off from work at the same time. Still, this is Powell gazing into his crystal ball because as it stands, tariffs have not yet significantly impacted the economy. And so Powell remains in wait and see mode.
I feel for him a little bit here, Neil, because how many different ways did the dude have to say things are uncertain? We're going to have to wait and see, which is exactly what he did again yesterday at the news conference. He used some version of the word wait twice. 22 times, 22 times the cost of waiting to see further are fairly low. We think so. That's what we're doing.
That was another big takeaway alongside the stagflation quote. And I don't blame him either because things are uncertain. The Fed does need to wait and see because for every data point of weakness, you can turn around and find an equal data point of strength. For example, April's job reports report. Strong, exceeded expectations. The economy added 177,000 jobs.
But the latest GDP report, weak, ew, gross. The economy contracted 0.3% in the first quarter of the year, albeit with a surge in imports. So you are seeing so-called pieces of hard data, which is what Jerome Powell wants to look at, kind of contrasting each other, not even to mention the bits of soft data that the hard data is also contrasting.
And the soft data would be like plunging consumer sentiment and people generally feeling bad about the economy. And the reason that Powell is in this position of paralysis is that because their two goals are really in tension right now. They're butting up against each other. Their two goals, the Fed, this is their mandate. They want low unemployment and low inflation.
But in the scenario that he predicts, this stagflationary scenario, that leads to very confusing moves with interest rates, because if the Fed was more scared by inflation from these tariffs, then they'd keep rates high because that brings down inflation. But if they were more scared by the job market cratering, which is economic slow growth, then they'd cut rates.
So there's two things that are being held in tension right now. It's like opening up your fridge and you see your three day leftovers and you also see like moldy carrots, and you're just like, eh, I'm probably just going to go to bed without eating dinner because both these situations are awful. And that's exactly what Powell is facing right now.
I'm ordering out if that happens. But we're also seeing a divided monetary policy between the U.S. and the rest of kind of the U.S. 's peer groups around the world. For instance, the European Central Bank, they've cut rates seven times. April was their seventh rate cut in as many consecutive months. meetings for them. So the divergence there is pretty stark, and it's also pretty straightforward.
Other economies are imposing this large tax on imported goods, so that's probably one thing that's diverging the U.S. from the rest of the world's monetary policy. And then let's look ahead into our crystal ball a little bit. We'll rely on what traders are expecting. Fed to do going forward. And right now there's a 76% chance the Fed holds rates steady again at its next meeting in June.
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Chapter 6: What is the significance of the U.S. and global monetary policy divergence?
And that's why some analysts were theorizing that maybe Q was playing some 4D chess here by announcing that there was true competition to Google search. And, you know, they started this trial... you know, they first launched this suit many years ago before AI was even a thing. So maybe, yes, they earned $20 billion a year from this, and Apple very well knows that.
So maybe this was him incepting into the judge's mind that, yes, Google does have competition because it would be bad for both Apple and Google.
Let's move on. Disney reported earnings yesterday, and that sound you're hearing... It's their flywheel spinning. Yep, that's the sound of a flywheel. Revenue was up 7% as it relied on some old magic to drive new dollars. The theme park segment was once again the standout, with revenue in the parks experience in product segments rising 10% compared to last year.
Though the sell America sentiment creeped into global markets a little bit and rained on Disney's parade abroad, Disney's outposts in Shanghai and Hong Kong saw lower attendance and increased costs. hurting operating income. But Disney is unfazed by some international headwinds and dropped some pretty big news yesterday alongside its earnings.
It's beginning work on a new theme park in Abu Dhabi that represents the company's first foray into the Middle East. Once it opens, potentially amid the early 2030s, it will be Disney's seventh global property as it tries to milk more out of the park segment that contributed nearly 60% of the company's operating income in 2024.
Elsewhere around the flywheel, its movie business is still humming along with the live-action Mufasa The Lion King pulling in a very quiet $720 million worldwide contributing to this quarter's revenue as well. And Thunderbolts is still sitting as the top movie in the world. It's been a little bit of a rocky stretch for Disney, Neil, but it looks like it's got its emperor's new groove back.
If you think Orlando is hot in the summer, oh boy, the misters are going to be purring in Abu Dhabi. Let's talk about this new theme park. Very strategic location for Disney. It is the largest global airline hub between Abu Dhabi and Dubai. More than 120 million passengers travel through those two places each year.
One third of the world's population lives within a four hour flight of Abu Dhabi and then a key flight here is the flight from Mumbai to Abu Dhabi. It takes just three hours and 17 minutes. India is the world's largest population. There's a growing middle class there. And Disney is moving into these markets to create the next generation of Moana fans.
And this terms of agreement that they have with Abu Dhabi, I mean, they are putting up zero money at all.
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