Moneybeat: Unforced error

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MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: Time now to talk business, markets, and the economy with financial analyst and advisor David Bahnsen. David heads up the wealth management firm the Bahnsen Group, and he is here now. 

Good morning, David. 

DAVID BAHNSEN: Well good morning, Nick. Good to be with you.

EICHER: Well David, with the holiday weekend behind us, we are officially into the second half of 2026.

And before the break, you went back and graded—not exactly your predictions, but the big economic trends you identified at the beginning of the year. And as you looked back over the first six months—the markets, AI, jobs, the broader economy—what stood out to you the most?

BAHNSEN: Well, when you look at the two biggest areas, the AI impact and the tug of war within the economy, as far as just data points competing, as to whether or not we’re moving forward or whether or not we’re kind of stuck in the mud in the economy, and those things really have been the two biggest themes so far this year.

And I say that with a war having broken out at the beginning of March, and at one point oil prices spiking over 100 and then doing kind of a round trip back. And I don’t think that people would have necessarily predicted it would play out this way.

I think it’s funny sometimes how this goes, that I’ve been on this theme for a little while, that the labor markets were incrementally encouraging me and looking a little bit better. 

And literally, Nick, last week, as I was writing on Thursday, which was two days after the job openings, the JOLTS data had come out, the day after the ADP private sector number came out. On Thursday, before we got ready for the holiday weekend, we got one of those infamous jobs reports where not only was it about half of what was expected, but it went back and revised the good news from the last month or so down—not, not altogether, but tens of thousands of jobs less than had previously been reported.

And so it’s incredibly frustrating right now. I continue to hold on to the weekly jobless claims as the best data point we have. But as we sit here at the midyear point, I don’t think the economy is doing great, and I most certainly don’t think the economy is doing terrible.

I think it is in a kind of middle-ground, muddle-through moment. And as it pertains to investors, there’s a lot of crazy stuff going on, and then a lot of things that have been crazy that markets are starting to look at as crazy.

EICHER: Well David, the jobs report came as a surprise—and then the downward revisions to prior months. And then you look at the unemployment rate dropping, which seems on the surface a good thing, but it happened for the wrong reason: people leaving the labor force.

So here we go again on the labor-force participation rate.

BAHNSEN: Oh, brutal.

EICHER: You and I have talked again and again over the years about this. And now it’s back down to 61.5%—the lowest since March of 2021. And then we were still kind of talking about the COVID malaise and people simply not working.

So, a disappointing month for jobs is one thing, but able-bodied people choosing not to work—that’s a considerable deeper problem in the job market, isn’t it?

BAHNSEN: Well, the labor force doesn’t really speak to the jobs picture, and that might seem kind of ironic to people, but it speaks to the people picture, you know? 

The unemployment rate is telling you how many people that want a job and can’t find one. The labor participation rate is telling you how many people don’t want a job.

And you can look at it in two different ways, but economically, it doesn’t speak to the economy not producing enough opportunity when there are jobs available and people don’t want them.

You know, the labor participation rate is back to the COVID number, but it most certainly looks to me to be headed lower than that, and I would suggest that it’s 61.5 percent. This isn’t like a month-over-month kind of situation, you know, the trend line goes back to financial crisis.

And in all those years post-crisis, as it dipped from basically 67-68 percent and got down to 63, then it dipped into the 61s during COVID. It did come back up a bit, but now we’re back here at 61, 61.5.

There is always a portion of that that’s addressable by perfectly understandable decisions. There’s retired people that don’t work, that are able-bodied. There’s a lot of single-income homes with more traditional family structures. There are things like that.

But what we’re talking about here, Nick, and you and I have talked about this so many times over the years, but people can’t stop talking about it, is that there is a kind of trend that we’ve had in place that is broken, multiyear broken. And that what is broken, it is able-bodied prime-working-age men that are choosing not to work. Millions.

EICHER: Yeah. 

David, let’s turn to trade now. 

The Trump administration declined this week to renew the U.S.-Mexico-Canada trade agreement. This is the deal President Trump negotiated in his first term to replace NAFTA—the North American Free Trade Agreement.

Nothing expires right now, but with the United States the lone holdout, we're into annual reviews and, as I understand it, a 10-year clock toward expiration.

Here's what I don’t quite understand: The administration says that it wants companies to move supply chains out of Asia and into North America. But if the rules for North American trade are constantly up for negotiation, why would any company make that move?

BAHNSEN: They wouldn’t, and they won’t.

And I think that this is a negotiating tactic for the president, but I don’t know what it is he’s negotiating for. But I think that he feels that by kinda hanging it over Mexico and Canada, he’ll end up getting some better headline announcements out of it.

But I think you’re right that the overall impact will be to disincentivize people that are utilizing Asian supply chains from utilizing North American. And of course the clock is not in the president’s favor because Mexico and China know that he has two years left in his term. So I don’t think that there’s a lot of leverage embedded there. But I also think that they’re just going to continue with mostly status quo, which is why I don’t think there’s a big impact out of saying we’re going to let this go year by year.

For the most part, I think that it’s just going to end up continuing to be business as usual. It’s been a while since any trade threats have gotten any headline or response at all. This is one area where you might say the hand got overplayed.

EICHER: Yeah. Well David, one other newsworthy item before we go today. 

President Trump’s financial disclosure came out last week—almost 1,000 pages. Now obviously President Trump was rich before he became a politician, but there was a Wall Street Journal editorial late last week that made the point that the problem is not wealth, it is profiting from the presidency.

So how do you draw the line on this? When does legitimate private wealth become a conflict of interest? And do you see a problem in this disclosure here?

BAHNSEN: Yeah, Nick, I see a major problem. 

But I’m going to just pretend for a second that none of it’s President Trump—it could be a Republican, it could be a Democrat, it could be a president that one loves or one hates or is in the middle.

The question is not so much the wealth itself. As you point out, President Trump was wealthy before he came in, he was most certainly not this wealthy or this liquid, but you know, he was a wealthy person.

But no, the issue to me in this is, A, it’s entirely unnecessary.

Avoid the distrust in the public it creates, and avoid the appearance, and just force them to buy-and-hold index fund or buy-and-hold a bond fund or something along those lines.

But thousands of trades with very niche companies specific to deals being done, doesn’t really matter, it looks awful.

But the far bigger issue is with foreign governments. The crypto-related matters with foreign governments.

I think that we really want, not just for this president, but for any future president, an avoidance of appearance of conflict and having special deals of people that end up getting pardoned and things like that. 

Some of it may very well be not above board, but even the stuff, if someone could say, "no, I think it is," it doesn’t look like it is. And aren’t we living in a moment where we need as much trust in public institutions as possible?

So I feel like this is just a really unfortunate development, and it’s an unforced error. 

And I would add, politically, it’s not going to go away. It’s going to get far worse. In a 50-50 country, on the margin, moving 1, 2, 3 percent, that changes elections.

EICHER: All right. David Bahnsen is founder, managing partner, and chief investment officer of The Bahnsen Group. David writes at DividendCafe.com and at WORLD Opinions. 

David, thank you, we'll see you next week.

BAHNSEN: Thanks so much, Nick.

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