“Transitory” is back
Jay Powell wants businesses and investors to know: The Fed chair shares their concerns about President Trump’s tariff skirmishes as the economic outlook dims.
But there is a silver lining, he said Wednesday at a news conference. Tariff-driven inflation is likely to be “transitory” and just for this year. That’s the “base case,” he added, words that seemed to lift stocks. S&P 500 futures were climbing on Thursday as traders price in roughly two to three interest rate cuts this year.
But the “transitory” label — one that Treasury Secretary Scott Bessent has embraced — has set off alarm bells elsewhere.
It remains a loaded term, especially for critics of the Fed’s handling of pandemic-era inflation. Some worry that Powell may be mistakenly playing down the risks of Trump’s trade war, as he did in 2022 when he wrongly called inflation “transitory.”
Several economists see tariffs disrupting global supply chains, raising prices and denting growth. And Trump has reiterated that more tariffs are coming. “April 2nd is Liberation Day in America!!!,” he wrote on Wednesday on Truth Social, presumably referring to the date when reciprocal tariffs on major trading partners are expected to go into effect.
It’s too early to say if “the inflationary effects will be transitory, especially given that companies and households still have fresh in their minds the recent history of high unanticipated inflation,” Mohamed El-Erian, the economist who called the Fed too cautious in handling the last inflation surge, wrote on X.
Trump has also questioned the central bank — over its rates decision, which kept things unchanged, at 4.25 percent to 4.5 percent. “The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy,” Trump wrote on Truth Social. “Do the right thing.”
The central bank does see some tariff risks. The Fed’s new outlook is for the economy to expand by 1.7 percent this year, down from a previous 2.1 percent growth forecast. It also forecasts unemployment and inflation ticking up. Otherwise the economy is “solid,” Powell said.
Some companies and households see things differently. Surveys show business sentiment weakening and consumers’ inflation fears growing. Such downbeat vibes were around during the Biden administration. But add trade war uncertainty, and some economists and Wall Street analysts have begun to raise the odds of a recession.
Powell played that down on Wednesday. “We do understand that sentiment has fallen off pretty sharply, but economic activity has not yet and so we are watching carefully,” he said. “I would tell people the economy seems to be healthy.”
Not everyone is buying that assessment. Torsten Slok, the chief economist at Apollo Global Management, told Bloomberg Television this morning that the recent stock bump appeared “unwarranted,” and he expressed surprise at Powell’s transitory assessment.
“This is assuming only one set of tariffs are coming,” he said. “There are so many other dominoes.”
HERE’S WHAT’S HAPPENING
Elon Musk’s X is said to raise almost $1 billion in new equity funding. The investment — including from Musk, Darsana Capital Partners and the conservative-focused 1789 Capital — values the social media platform at about $32 billion, according to Bloomberg. (That’s about the same equity valuation that Musk bought the company for in 2022; add the $12.5 billion that Musk borrowed, and you get the more famous $44 billion enterprise value, though these figures may not compare.) X has said that its advertising revenue had rebounded — but Democratic senators have called for an inquiry into whether Musk used his newfound political influence to pressure marketers into returning to X.
President Trump again targets higher education. His administration moved to freeze $175 million in federal funding to the University of Pennsylvania over its support of transgender athletes. His pressure on universities appears to be getting results, including the University of California no longer requiring the use of diversity statements in hiring and Columbia reportedly preparing to give in on several demands after he paused $400 million in funds. More broadly, he is expected to sign an executive order on Thursday aimed at dismantling the Education Department. (It cannot be broken up without Congress’s approval.)
Paul Weiss’s chair is said to seek a deal with Trump. Brad Karp, a top adviser to corporate leaders and a prominent Democratic donor, has been meeting this week with administration officials to repair relations after Trump cracked down on the law firm, Semafor reports. It’s a sign of how existential Trump’s attacks on law firms like Paul Weiss, Covington & Burling and Perkins Coie are becoming; Paul Weiss has reportedly lost at least one client over the clash, according to Reuters.
A Tesla bull gets nervous
While Elon Musk’s political power is showing few signs of diminishing, the company that remains the vast source of his wealth is continuing to struggle.
Tesla’s woes — including a falling stock price; a plummeting reputation with Democrats, a core segment of the E.V. buyer market; and growing competition from Chinese rivals — have mounted to the point that even some of the company’s most fervent supporters are starting to sweat. And they’re pointing the finger at the carmaker’s C.E.O.
“Tesla is going through a crisis,” Dan Ives, a Wedbush Securities analyst, wrote in a research note on Wednesday. He noted the vandalism and violence at several of the company’s dealerships and the surge in protests against Musk, both of which the analyst says is now weighing on Tesla’s stock.
That’s in addition to Tesla sales falling worldwide, especially in Europe and even in China. Speaking of which, Chinese rivals are continuing to out-innovate Musk’s carmaker in critical technology like battery charging, critics say, posing more challenges for Tesla in one of its biggest markets.
The problem, Ives writes, is Musk’s focus on his government work. The billionaire’s cost-cutting efforts for the Trump administration reflect seemingly extraordinary power for a private businessman, and have earned key political support for his businesses. Consider that Attorney General Pam Bondi has labeled attacks on Tesla dealerships as domestic terrorism, or that President Trump and Commerce Secretary Howard Lutnick have both praised the company publicly.
But that’s a double-edged sword, Ives adds. “This has essentially turned Tesla into a political symbol,” he writes. “And this is a bad thing.”
Other longtime Tesla bulls are also worried about Musk’s political activities, including the investors Ross Gerber and Christopher Tsai.
Musk needs better time management, Tesla bulls agree. Ives writes that the company should announce that Musk will balance leading the carmaker and the so-called Department of Government Efficiency, as well as lay out a road map for producing cheaper models. Ives previously told Bloomberg that he had brought his concerns to the Tesla board, urging Musk to “come home,” and to do so now.
Separately, Gerber said that Musk should step down as Tesla’s chief or as the leader of the department.
Musk himself told Fox Business Network recently that his DOGE work could last another year.
That said, many supporters still have high hopes for Tesla. Ives’s price target for the company is $550 a share, nearly double Wednesday’s closing price of $235.86. In fact, the average stock price target set by Tesla analysts is $365.70, according to FactSet — a sign that, for all of the company’s woes, Wall Street still believes that Musk can turn things around.
What TheSkimm deal says about digital media
TheSkimm was once a fast-growing newsletter aimed at young women that was considered by many to be the future of publishing.
On Wednesday, the company announced its sale to Ziff Davis, the century-old publisher that operates older digital media sites such as Mashable and CNET, along with lifestyle brands like Everyday Health.
Here’s one way to look at the deal: TheSkimm found a way to survive. It reportedly peaked at seven million subscribers, though that figure has since come down. The company raised about $28 million and now runs other newsletters, podcasts and an affiliate marketing business, all standard elements of today’s publishing playbook.
But TheSkimm failed to become a big enough brand to thrive alone. When asked by Axios if the company was profitable, its co-founders said it had a track record as a company of profitability.
Deal terms weren’t disclosed. The company’s co-founders, Danielle Weisberg and Carly Zakin, will continue to run the business. (The New York Times Company bought a 1 percent stake in the company in 2016 at a $55 million valuation.)
The more accurate picture: TheSkimm is another in a long line of media start-ups that has struggled to build a major news brand, helping prove a widespread thesis for the industry: There may only be a few profitable models for digital news.
Consider that BuzzFeed, which was once valued at $1.7 billion and viewed as a potential rival to The Times, has since disbanded its news division and now trades at an $80 million valuation on the Nasdaq. Vice Media went bankrupt in 2023, and its new private equity owner has since gutted the staff. The Daily Beast’s new owners are cutting costs.
Other women-focused media efforts have also foundered, including Lenny Letter, founded by the actress and producer Lena Dunham, and Rookie, created by the writer and actress Tavi Gevinson.
But other new digital media companies are succeeding, including many built on newsletter platforms like Beehiiv and Substack. Among them are Matt Yglesias’s politics-focused Slow Boring, which grosses more than $1 million a year, and Oliver Darcy’s media-focused Status, which is on track to hit that number.
Notably, these are small operations with targeted areas of interest that charge for access, something that the digital media entrepreneur Jessica Lessin recently told DealBook was an often-overlooked market.
“What great media entrepreneurs are figuring out now — after a decade of learning the wrong lessons about how to build media businesses — is that there is so much growth and opportunity and impact we can have by serving those communities,” she said, adding, “The large media organizations haven’t gotten the memo.”
To be fair, there are also thriving start-ups that are aiming for broader audiences, such as Semafor, which now runs about a dozen newsletters, a podcast and a conferences business.
(Hey, Ben Smith and Justin Smith, DealBook’s open to a Q&A with you — if you’ll reveal some hard numbers.)
THE SPEED READ
Deals
Artificial intelligence
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The Italian newspaper Il Foglio says it has published an edition put together entirely by A.I., including headlines, quotes and summaries — with journalists’ reduced to “asking questions” of the A.I. agent. (The Guardian, Il Foglio)
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The Chinese tech giant Tencent plans to sharply increase its spending on A.I. to keep pace with rivals like DeepSeek and Alibaba. (Bloomberg)
Best of the rest
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Ben & Jerry’s accused its corporate parent, Unilever, of firing its C.E.O. for allowing the ice cream maker to speak out on political issues. (NYT)
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“UBS Client Says His Wife Moved In With Their Wealth Adviser. It Got Messy” (Bloomberg)
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