1
00:00:00,080 --> 00:00:06,760
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

2
00:00:11,600 --> 00:00:15,440
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

3
00:00:15,440 --> 00:00:18,400
Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each

4
00:00:18,480 --> 00:00:21,360
Speaker 2: day for insight from the best in markets, economics, and

5
00:00:21,400 --> 00:00:24,720
Speaker 2: geopolitics from our global headquarters in New York City. We

6
00:00:24,760 --> 00:00:27,400
Speaker 2: are live on Bloomberg Television weekday mornings from six to

7
00:00:27,480 --> 00:00:31,000
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify

8
00:00:31,200 --> 00:00:33,479
Speaker 2: or anywhere else you listen, and as always on the

9
00:00:33,479 --> 00:00:36,960
Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Brian Levitt of

10
00:00:37,000 --> 00:00:39,400
Speaker 2: Invesco writing, tariffs are likely to lead to a more

11
00:00:39,479 --> 00:00:43,560
Speaker 2: volatile investment environment rather than result in a bear market

12
00:00:43,600 --> 00:00:46,600
Speaker 2: for equities. I would not expect a broad decline in

13
00:00:46,680 --> 00:00:50,360
Speaker 2: risk assets or a recession in the economy. Brian joined

14
00:00:50,400 --> 00:00:51,920
Speaker 2: us now for more bran, good morning, good to see you,

15
00:00:52,000 --> 00:00:53,599
Speaker 2: Nice to see it too. Where does that more optimistic

16
00:00:53,680 --> 00:00:54,960
Speaker 2: view come from? What underpins that?

17
00:00:55,480 --> 00:00:55,560
Speaker 3: So?

18
00:00:55,640 --> 00:00:58,600
Speaker 4: What underpins it is ultimately a belief that we will

19
00:00:58,640 --> 00:01:01,320
Speaker 4: start to see or move towards greater clarity. But that

20
00:01:01,400 --> 00:01:04,560
Speaker 4: gets called into question the longer that this persists. So

21
00:01:05,000 --> 00:01:09,040
Speaker 4: my view in writing it was Ultimately the administration will

22
00:01:09,080 --> 00:01:12,559
Speaker 4: provide greater clarity around this look. Tariff's result in less

23
00:01:12,600 --> 00:01:13,640
Speaker 4: optimal outcomes.

24
00:01:13,680 --> 00:01:16,119
Speaker 5: But as long as we know the rules of the game,

25
00:01:16,280 --> 00:01:17,840
Speaker 5: businesses will get through it.

26
00:01:17,920 --> 00:01:20,520
Speaker 4: And of the belief that you know, the Federal Reserve,

27
00:01:20,720 --> 00:01:23,279
Speaker 4: given the recent inversion in the Y'll curve, will start

28
00:01:23,319 --> 00:01:27,640
Speaker 4: to sound the more dubbish signal. But the longer it

29
00:01:27,760 --> 00:01:30,440
Speaker 4: takes for us to get there were a greater risk

30
00:01:30,480 --> 00:01:31,520
Speaker 4: of these things happening.

31
00:01:31,600 --> 00:01:33,760
Speaker 2: When things like this do happen, they happen often. We

32
00:01:33,800 --> 00:01:36,240
Speaker 2: have these growth scartes. You're waiting for that cathartic moment,

33
00:01:36,280 --> 00:01:38,800
Speaker 2: Peter Sheev Academy said, this is the first day that

34
00:01:38,840 --> 00:01:42,480
Speaker 2: feels like a real washout has been occurring. Mister Krinsky

35
00:01:42,600 --> 00:01:45,240
Speaker 2: over at BTIG, Jonathan saying, if you were hoping for

36
00:01:45,280 --> 00:01:47,760
Speaker 2: an entry point, this is your chance. Have we had

37
00:01:47,800 --> 00:01:49,040
Speaker 2: that cathartic moment yet?

38
00:01:49,080 --> 00:01:51,440
Speaker 4: I'm not sure we've had the full cathartic moment. I mean,

39
00:01:51,440 --> 00:01:54,040
Speaker 4: I went back yesterday though, and I looked at yesterday.

40
00:01:54,040 --> 00:01:56,440
Speaker 4: It was the ninety third worst day of the Nasdaq

41
00:01:56,480 --> 00:01:59,200
Speaker 4: in thirty years. So let's put it into some perspective.

42
00:01:59,240 --> 00:02:01,280
Speaker 4: I went back, I'm not the best at Excel. I'm

43
00:02:01,280 --> 00:02:04,120
Speaker 4: almost fifty years old, but I brought up my Excel

44
00:02:04,200 --> 00:02:07,280
Speaker 4: spreadsheet and I looked at the other ninety two worst

45
00:02:07,360 --> 00:02:09,760
Speaker 4: days and said, well, what if I added money on

46
00:02:09,800 --> 00:02:12,080
Speaker 4: each of those days? What if I withdrew money on

47
00:02:12,120 --> 00:02:14,680
Speaker 4: each of those days? And obviously you were better off

48
00:02:14,800 --> 00:02:17,520
Speaker 4: adding money on each of those bad days.

49
00:02:17,720 --> 00:02:18,640
Speaker 5: Right, So I think.

50
00:02:18,480 --> 00:02:22,000
Speaker 4: Most investors don't think that way, So you don't necessarily

51
00:02:22,160 --> 00:02:24,720
Speaker 4: need the cathartic moment. I don't think we're there yet.

52
00:02:24,880 --> 00:02:26,480
Speaker 4: I think there's more to go in terms of a

53
00:02:26,560 --> 00:02:30,080
Speaker 4: bottoming process. But even if you're investing in you're halfway

54
00:02:30,280 --> 00:02:31,399
Speaker 4: through a correction.

55
00:02:32,160 --> 00:02:34,720
Speaker 5: Historically that's been quite good for investors. More to go.

56
00:02:35,280 --> 00:02:38,240
Speaker 3: What needs to happen for that cathartic moment and then, frankly,

57
00:02:38,639 --> 00:02:41,960
Speaker 3: for a steady climb upward. What kind of information do

58
00:02:42,040 --> 00:02:42,920
Speaker 3: people need to say.

59
00:02:42,840 --> 00:02:43,440
Speaker 5: We need clarity?

60
00:02:43,440 --> 00:02:46,120
Speaker 4: I think Jonathan said the exact right word, which is

61
00:02:46,160 --> 00:02:48,799
Speaker 4: we need policy clarity. And I go back to twenty

62
00:02:48,840 --> 00:02:51,880
Speaker 4: eighteen thinking about what was going on then when we

63
00:02:51,880 --> 00:02:54,280
Speaker 4: were dealing with the US China trade war. So what

64
00:02:54,440 --> 00:02:57,520
Speaker 4: ultimately led to a bottoming in the market The United

65
00:02:57,520 --> 00:03:01,320
Speaker 4: States and China got together and said, okay, truth that

66
00:03:01,360 --> 00:03:06,000
Speaker 4: doesn't fully eliminate uncertainty. But ninety day truths, Federal Reserve

67
00:03:06,120 --> 00:03:08,280
Speaker 4: came forward and said, all right, we're done raising rates.

68
00:03:08,800 --> 00:03:11,280
Speaker 4: We may even be lowering rates in twenty nineteen. And

69
00:03:11,840 --> 00:03:14,320
Speaker 4: that type of policy clarity is how you start to

70
00:03:14,360 --> 00:03:16,800
Speaker 4: move forward. So long as we're in this environment where

71
00:03:17,080 --> 00:03:20,639
Speaker 4: consumers don't know the rules, businesses don't know the rules,

72
00:03:20,880 --> 00:03:22,200
Speaker 4: you're going to be challenged for a while.

73
00:03:22,400 --> 00:03:24,560
Speaker 3: Right now, the bulls on the street are basically coming

74
00:03:24,560 --> 00:03:26,960
Speaker 3: out and telling us, doesn't really matter if we have

75
00:03:27,080 --> 00:03:30,160
Speaker 3: ongoing policy uncertainty on the fiscal side. As long as

76
00:03:30,160 --> 00:03:32,440
Speaker 3: the Fed comes out and rescues markets, as long as

77
00:03:32,480 --> 00:03:35,720
Speaker 3: they cut rates by enough, then you end up with

78
00:03:35,960 --> 00:03:37,720
Speaker 3: a rally and a supported market.

79
00:03:37,760 --> 00:03:40,120
Speaker 4: Do you agree, Well, it can't hurt, But I think

80
00:03:40,160 --> 00:03:42,520
Speaker 4: you're going to need it beyond just the Federal Reserve

81
00:03:42,640 --> 00:03:46,040
Speaker 4: this time. You can't be making the cuts that you're

82
00:03:46,040 --> 00:03:49,600
Speaker 4: making on the fiscal side and creating the uncertainty you

83
00:03:49,640 --> 00:03:51,720
Speaker 4: have on the trade side and think that the Fed

84
00:03:51,760 --> 00:03:54,920
Speaker 4: oor Reserve alone just bringing rates to neutral can solve this.

85
00:03:54,920 --> 00:03:58,240
Speaker 4: I mean, the reality is most Americans have fixed rate

86
00:03:58,360 --> 00:04:02,920
Speaker 4: mortgages anywhay. Most Americans didn't recognize the move up and rights.

87
00:04:02,920 --> 00:04:04,640
Speaker 4: They're not necessarily going to feel it on the move

88
00:04:04,760 --> 00:04:08,120
Speaker 4: down either. So you're going to need more than that.

89
00:04:08,160 --> 00:04:10,840
Speaker 4: You're going to need trade and fiscal policy. Get to

90
00:04:10,880 --> 00:04:13,840
Speaker 4: a place where we understand where it's going when.

91
00:04:13,760 --> 00:04:14,720
Speaker 5: It comes to trade, though.

92
00:04:14,800 --> 00:04:17,080
Speaker 1: That uncertainty is why Donald Trump thinks he can have

93
00:04:17,120 --> 00:04:20,320
Speaker 1: this negotiating power. How long do you think the market

94
00:04:20,440 --> 00:04:23,279
Speaker 1: could sustain this uncertain period, because it could.

95
00:04:23,080 --> 00:04:26,400
Speaker 5: Be months, Well, it could be months. I mean, I

96
00:04:26,400 --> 00:04:26,720
Speaker 5: don't know.

97
00:04:26,960 --> 00:04:30,479
Speaker 4: So the word sustain, I mean we can fall further

98
00:04:30,520 --> 00:04:32,440
Speaker 4: from here, right, I mean we were used to five

99
00:04:32,480 --> 00:04:35,080
Speaker 4: to ten percent corrections. They happen every year. Greater than

100
00:04:35,160 --> 00:04:39,159
Speaker 4: ten are less frequent, but they're almost always the result

101
00:04:39,200 --> 00:04:44,200
Speaker 4: of policy uncertainty, and so the market could continue to

102
00:04:44,200 --> 00:04:46,680
Speaker 4: feel pressure from it until you finally understand what the

103
00:04:46,760 --> 00:04:47,479
Speaker 4: rules were going to be.

104
00:04:47,839 --> 00:04:50,280
Speaker 1: Do you sense there's a pain threshold within this Trump

105
00:04:50,320 --> 00:04:51,000
Speaker 1: two point zero?

106
00:04:51,160 --> 00:04:53,480
Speaker 4: We certainly hope so, right, you know, I mean the

107
00:04:53,760 --> 00:04:56,679
Speaker 4: idea of that Trump put is being called into question

108
00:04:56,920 --> 00:05:00,840
Speaker 4: right now. But ultimately I don't think this an administration

109
00:05:00,920 --> 00:05:03,000
Speaker 4: that wants to see the markets moving the way.

110
00:05:02,839 --> 00:05:03,440
Speaker 5: They are now.

111
00:05:03,440 --> 00:05:07,839
Speaker 4: They may have an ideology around trade that they want

112
00:05:07,839 --> 00:05:10,080
Speaker 4: to pursue and they're not going to move away from it.

113
00:05:10,200 --> 00:05:12,440
Speaker 5: But let's let's.

114
00:05:12,160 --> 00:05:12,560
Speaker 6: Get with it.

115
00:05:12,640 --> 00:05:14,520
Speaker 4: Let's let's figure out what the rates are, what the

116
00:05:14,560 --> 00:05:16,120
Speaker 4: tariffrates are going to be, and let's move on.

117
00:05:16,320 --> 00:05:18,560
Speaker 2: Twenty eighteen. They tolerate sed much more than this, didn't they.

118
00:05:18,640 --> 00:05:20,400
Speaker 5: Ye twenty eighteen we were down twenty percent.

119
00:05:20,920 --> 00:05:22,039
Speaker 2: Is that what you're looking for now?

120
00:05:22,279 --> 00:05:25,120
Speaker 5: It seems like you're moving towards that. I mean right now.

121
00:05:25,160 --> 00:05:27,760
Speaker 4: The SMP's down eight and a half percent. I mean

122
00:05:27,760 --> 00:05:29,760
Speaker 4: we were down eight percent when the Bank of Japan

123
00:05:29,839 --> 00:05:33,240
Speaker 4: raised interest rates once last year. So this seems a

124
00:05:33,279 --> 00:05:36,839
Speaker 4: little bit more challenged of an environment than that. Again,

125
00:05:36,920 --> 00:05:38,960
Speaker 4: I come back to the fact, though, if you're an

126
00:05:38,960 --> 00:05:41,440
Speaker 4: investor and you invest halfway through a downturn, you should

127
00:05:41,440 --> 00:05:44,000
Speaker 4: be okay. So let's not try and get too cute

128
00:05:44,000 --> 00:05:46,159
Speaker 4: with this. But it doesn't feel like the bottom is

129
00:05:46,160 --> 00:05:46,400
Speaker 4: in you.

130
00:05:46,560 --> 00:05:50,080
Speaker 2: Consumer discretionary is down twenty percent from the recent highs

131
00:05:50,360 --> 00:05:53,160
Speaker 2: led by Tesla, of course, but the airlines have stud

132
00:05:53,160 --> 00:05:55,800
Speaker 2: its participate down to this morning, down by something like

133
00:05:55,800 --> 00:05:58,760
Speaker 2: eleven percent. What do you do with consumer exposed names.

134
00:05:58,760 --> 00:06:00,760
Speaker 2: When you hear Advasti in the town to CEO say

135
00:06:00,800 --> 00:06:07,000
Speaker 2: things like mid February consumer business purchases activity just tried

136
00:06:07,080 --> 00:06:09,320
Speaker 2: to stall. He says, it's going to be transitory. Do

137
00:06:09,320 --> 00:06:10,400
Speaker 2: you think it's going to be transitory.

138
00:06:10,480 --> 00:06:13,520
Speaker 4: I do think it'll be transitory because this was an

139
00:06:13,600 --> 00:06:17,640
Speaker 4: economy that came in with fundamental strength the consumer, where

140
00:06:17,640 --> 00:06:20,400
Speaker 4: household net worth is at all time highs, where the

141
00:06:20,480 --> 00:06:23,520
Speaker 4: unemployment rate was near all time low. So it's a

142
00:06:23,520 --> 00:06:25,839
Speaker 4: consumer that's coming into this in good shape. It's a

143
00:06:25,839 --> 00:06:28,880
Speaker 4: consumer that's not over levered. It's an economy that's not

144
00:06:29,000 --> 00:06:33,520
Speaker 4: over levered. We were in a good backdrop. The consumer

145
00:06:33,600 --> 00:06:36,799
Speaker 4: right now is tightening their belt a little bit because

146
00:06:36,839 --> 00:06:39,600
Speaker 4: they don't know. You know, if they work for the

147
00:06:39,640 --> 00:06:42,800
Speaker 4: federal government, you're not sure what your employment picture is

148
00:06:42,880 --> 00:06:46,080
Speaker 4: going to look like. If you're in the market, you're

149
00:06:46,120 --> 00:06:49,240
Speaker 4: not entirely sure your household net worth is going so

150
00:06:49,320 --> 00:06:54,239
Speaker 4: you tighten your belt a little bit. But it doesn't

151
00:06:54,360 --> 00:06:56,520
Speaker 4: feel like a recessionary environment.

152
00:06:56,600 --> 00:06:56,760
Speaker 5: Now.

153
00:06:56,800 --> 00:06:59,720
Speaker 4: Could you get there with a prolonged period of uncertainty, sure,

154
00:06:59,800 --> 00:07:02,279
Speaker 4: But when you look at the usual indicators on a

155
00:07:02,320 --> 00:07:06,679
Speaker 4: path to a recession, big leverage, big excess, corporate bond

156
00:07:06,720 --> 00:07:08,040
Speaker 4: spreads blowing out.

157
00:07:08,240 --> 00:07:08,920
Speaker 5: None of that.

158
00:07:09,320 --> 00:07:14,320
Speaker 4: Exists today, and until corporate spreads really start blowing out,

159
00:07:15,080 --> 00:07:18,080
Speaker 4: I'm not ready to think of this as a much

160
00:07:18,200 --> 00:07:22,360
Speaker 4: more meaningful downturn, severe recession. It's just not what the

161
00:07:22,400 --> 00:07:23,720
Speaker 4: picture is telling us right now.

162
00:07:23,760 --> 00:07:25,760
Speaker 3: Initially a lot of Wall Street firms agreed with you,

163
00:07:26,120 --> 00:07:28,320
Speaker 3: but the downgrades have started to pour in. We've seen

164
00:07:28,360 --> 00:07:30,600
Speaker 3: it from HSBC, We've seen it from Golden Sax and

165
00:07:30,680 --> 00:07:34,480
Speaker 3: JP Morgan, City Group coming out downgrading the US equities

166
00:07:34,560 --> 00:07:37,520
Speaker 3: to neutral and upgrading Chinese equities.

167
00:07:38,080 --> 00:07:39,760
Speaker 5: At what point would you agree.

168
00:07:39,440 --> 00:07:41,920
Speaker 3: With them and say that, actually, at the very least,

169
00:07:41,920 --> 00:07:45,560
Speaker 3: to quote City Group, US exceptionalism atas is at least

170
00:07:45,560 --> 00:07:46,040
Speaker 3: on pause.

171
00:07:46,400 --> 00:07:49,000
Speaker 4: Well, we're upgrading European equities as well. I mean, we've

172
00:07:49,040 --> 00:07:52,200
Speaker 4: increased our exposure to European equities earlier this year. And

173
00:07:52,360 --> 00:07:57,800
Speaker 4: why it's not complicated leading indicators in Europe we're climbing.

174
00:07:58,240 --> 00:08:02,120
Speaker 4: The economic indices were surprising to the upside. The European

175
00:08:02,200 --> 00:08:05,360
Speaker 4: Central Bank was easing. It was a better mix versus

176
00:08:05,600 --> 00:08:08,440
Speaker 4: sentiment in the United States declining in a period where

177
00:08:08,520 --> 00:08:12,280
Speaker 4: valuations were more heightened. So you're getting these cyclical bounces.

178
00:08:12,320 --> 00:08:14,600
Speaker 4: I always say these markets, everyone's waiting for things to

179
00:08:14,640 --> 00:08:15,400
Speaker 4: be good in Europe.

180
00:08:15,440 --> 00:08:17,960
Speaker 5: No markets move on better or worse. By the time

181
00:08:18,000 --> 00:08:18,640
Speaker 5: you wait for.

182
00:08:18,600 --> 00:08:22,680
Speaker 4: Good, it's already happened. The bigger question on Europe now

183
00:08:23,120 --> 00:08:24,840
Speaker 4: is not just the cyclical bounce.

184
00:08:24,920 --> 00:08:26,480
Speaker 5: Is this something more structural?

185
00:08:26,640 --> 00:08:30,160
Speaker 4: And with the investment that you're seeing, the borrowing that

186
00:08:30,200 --> 00:08:32,920
Speaker 4: you're likely to see out of Germany, is this more structural?

187
00:08:32,960 --> 00:08:33,559
Speaker 5: They have a chance.

188
00:08:33,840 --> 00:08:36,480
Speaker 4: Now, can we get twenty seven countries to agree on it.

189
00:08:36,559 --> 00:08:40,080
Speaker 4: We'll find out, but there is certainly a chance. And yeah,

190
00:08:40,160 --> 00:08:43,319
Speaker 4: I mean sometimes it's real simple. If you're easing policy,

191
00:08:43,720 --> 00:08:48,280
Speaker 4: it's a better backdrop. If you're pursuing tighter policies, it's.

192
00:08:48,080 --> 00:08:49,280
Speaker 5: A worse backdrop.

193
00:08:49,400 --> 00:08:52,440
Speaker 4: And it behooves investors to think about those parts of

194
00:08:52,440 --> 00:08:54,559
Speaker 4: the world that are being more stimulative right now.

195
00:08:54,640 --> 00:08:56,640
Speaker 2: ASSISI making the point that the better news will come

196
00:08:56,640 --> 00:08:59,160
Speaker 2: from elsewhere over the next several months. It won't come

197
00:08:59,320 --> 00:08:59,679
Speaker 2: from here.

198
00:09:00,000 --> 00:09:02,559
Speaker 3: What's interesting is that City Group thinks that that better

199
00:09:02,600 --> 00:09:05,400
Speaker 3: news is going to come from China, whereas HSBC thinks

200
00:09:05,400 --> 00:09:07,079
Speaker 3: that better news is going to come from Europe. Is

201
00:09:07,200 --> 00:09:09,360
Speaker 3: sort of like pick your poison where in the world

202
00:09:09,480 --> 00:09:12,400
Speaker 3: you think that it could potentially have better information on that.

203
00:09:12,400 --> 00:09:15,160
Speaker 2: Cool that Dan grated US Equities HSBC joining us a

204
00:09:15,200 --> 00:09:17,439
Speaker 2: little bit later this hour, so look out for that.

205
00:09:17,600 --> 00:09:20,600
Speaker 2: Small business confidence came in about twelve minutes ago, and

206
00:09:20,720 --> 00:09:23,600
Speaker 2: small business confidence came in lower, four month low. There

207
00:09:23,640 --> 00:09:25,559
Speaker 2: is a nugget in here though that got my attention

208
00:09:25,720 --> 00:09:27,720
Speaker 2: and I think it got les us too. The share

209
00:09:27,760 --> 00:09:29,360
Speaker 2: of owners you said it would be a good time

210
00:09:29,400 --> 00:09:33,120
Speaker 2: to expand declined by the most since April twenty twenty

211
00:09:33,520 --> 00:09:37,360
Speaker 2: and engage capital spending plans matched and almost five year low.

212
00:09:37,800 --> 00:09:39,840
Speaker 2: That is not what we want to see coming into

213
00:09:39,840 --> 00:09:41,719
Speaker 2: twenty twenty five. Bran, thank you, it's going to see

214
00:09:41,720 --> 00:09:53,640
Speaker 2: you as always, Sir Brian Leavitte of Investment the Bank

215
00:09:53,679 --> 00:09:57,439
Speaker 2: of America Institute releasing its latest Consumer Checkpoints survey. The

216
00:09:57,480 --> 00:10:00,559
Speaker 2: team right in the following the consumer is still restraining

217
00:10:00,760 --> 00:10:04,200
Speaker 2: underlying forward momentum that we at a more measured pace

218
00:10:04,480 --> 00:10:06,080
Speaker 2: and place to say. They're giving us some time. This

219
00:10:06,120 --> 00:10:09,280
Speaker 2: morning is Holly O'Neil, the president of Retail Banking at

220
00:10:09,320 --> 00:10:12,240
Speaker 2: Bank of America. Holly, welcome back to the program. A

221
00:10:12,320 --> 00:10:14,720
Speaker 2: warm welcome to Bloomberg surveillance. We've heard from a few

222
00:10:14,760 --> 00:10:17,600
Speaker 2: companies in the last twenty four hours, from Delta air Lines,

223
00:10:17,600 --> 00:10:19,920
Speaker 2: from American Airlines that maybe the consumer was a bit

224
00:10:19,960 --> 00:10:23,000
Speaker 2: softer in February. We're just wondering, Holly, whether you see

225
00:10:23,280 --> 00:10:25,760
Speaker 2: anything of the same at all in your business.

226
00:10:27,720 --> 00:10:30,240
Speaker 6: So I think you had it right when you said

227
00:10:30,679 --> 00:10:33,959
Speaker 6: continued forward momentum, but at a more measured pace. And

228
00:10:34,200 --> 00:10:38,120
Speaker 6: in February, we saw little softness mid month in certain

229
00:10:38,120 --> 00:10:40,920
Speaker 6: regions in Texas on the East Coast, we really thank

230
00:10:41,040 --> 00:10:44,320
Speaker 6: driven by weather, and in most of those locations it

231
00:10:44,440 --> 00:10:46,480
Speaker 6: recovered by the end of the month. So when you

232
00:10:46,600 --> 00:10:50,080
Speaker 6: look at the February spending data that we have, it

233
00:10:50,240 --> 00:10:53,360
Speaker 6: was up month over month when you seasonally adjust it.

234
00:10:53,520 --> 00:10:57,679
Speaker 6: So even though there was some mid month disruptions with weather,

235
00:10:57,800 --> 00:11:01,320
Speaker 6: we saw most locations recover from that.

236
00:11:01,800 --> 00:11:05,040
Speaker 3: Ollie on what though, recover in terms of spending on

237
00:11:05,320 --> 00:11:08,719
Speaker 3: consumer discretionary on groceries. I mean, we've been talking all

238
00:11:08,720 --> 00:11:11,360
Speaker 3: morning about the airlines coming out and saying that they

239
00:11:11,360 --> 00:11:14,080
Speaker 3: really haven't yet seen that recovery in some of the

240
00:11:14,200 --> 00:11:18,600
Speaker 3: domestic travel spend. Is that really being focused in say

241
00:11:19,080 --> 00:11:22,439
Speaker 3: buying food for families? Sure?

242
00:11:22,600 --> 00:11:26,520
Speaker 6: So overall, spend recovered, So our total debit and credit

243
00:11:26,559 --> 00:11:30,160
Speaker 6: card spend was up month over month seasonally adjusted, so

244
00:11:30,240 --> 00:11:33,960
Speaker 6: that includes everything. When you dig in underneath. On the

245
00:11:33,960 --> 00:11:38,280
Speaker 6: grocery front, grocery spending was up, and we actually within

246
00:11:38,400 --> 00:11:43,960
Speaker 6: those numbers, you saw value grocery spending up, premium grocery

247
00:11:43,960 --> 00:11:48,640
Speaker 6: spending down a little bit, so overall groceries up, but

248
00:11:48,800 --> 00:11:52,960
Speaker 6: you saw the consumer adjusting where they were spending their money.

249
00:11:53,480 --> 00:11:55,320
Speaker 3: So this voter goes to this question of is this

250
00:11:55,360 --> 00:11:57,800
Speaker 3: a headfake? Are people getting a little too carried away

251
00:11:57,800 --> 00:12:01,080
Speaker 3: with the narrative that sentiment is toora so rapidly that

252
00:12:01,120 --> 00:12:02,840
Speaker 3: spending is falling off a cliff, and that's going to

253
00:12:02,840 --> 00:12:04,920
Speaker 3: stein me any kind of American exceptionalism.

254
00:12:05,160 --> 00:12:06,720
Speaker 2: Would you push back against.

255
00:12:06,440 --> 00:12:08,320
Speaker 3: That and say, actually, what we see is just the

256
00:12:08,320 --> 00:12:11,400
Speaker 3: same of what we saw before, which is a moderating trend.

257
00:12:11,440 --> 00:12:14,120
Speaker 3: People looking for value, but otherwise a consumer that's still

258
00:12:14,120 --> 00:12:15,720
Speaker 3: pretty healthy.

259
00:12:16,520 --> 00:12:19,520
Speaker 6: That's right, a moderating trend, and you really do have

260
00:12:19,600 --> 00:12:24,400
Speaker 6: to separate what sentiment says versus what consumers are actually doing.

261
00:12:24,880 --> 00:12:27,720
Speaker 6: And so that spend data, the grossery trends that we

262
00:12:27,840 --> 00:12:31,120
Speaker 6: talked about, the overall spent that is what consumers are

263
00:12:31,160 --> 00:12:34,160
Speaker 6: actually doing, and we do at times see a difference

264
00:12:34,200 --> 00:12:37,520
Speaker 6: in sentiment and their actual behavior, and I think that's

265
00:12:37,720 --> 00:12:42,000
Speaker 6: very important. So again, continued forward momentum, but at a

266
00:12:42,040 --> 00:12:45,400
Speaker 6: more measured pace for the consumer. We did not see

267
00:12:45,440 --> 00:12:47,439
Speaker 6: spend fall off a cliff. As you said.

268
00:12:47,600 --> 00:12:50,160
Speaker 3: We've also talked about the fact that delinquencies on credit

269
00:12:50,200 --> 00:12:53,120
Speaker 3: cards have been creeping higher. We have seen some signs

270
00:12:53,160 --> 00:12:56,760
Speaker 3: of distress in auto loans. I'm just wondering where fact

271
00:12:56,800 --> 00:12:59,840
Speaker 3: mats fiction right, where stories have gotten carried away from

272
00:12:59,840 --> 00:13:04,400
Speaker 3: your each other, from themselves, versus any kind of true

273
00:13:04,840 --> 00:13:07,520
Speaker 3: warning signs that you're seeing in any of the trends

274
00:13:07,520 --> 00:13:08,199
Speaker 3: that you monitor.

275
00:13:10,080 --> 00:13:14,120
Speaker 6: So from a credit perspective, we're seeing a very normalized

276
00:13:14,240 --> 00:13:18,760
Speaker 6: environment at Bank of America, and in fact, we're seeing delinquencies,

277
00:13:18,840 --> 00:13:21,440
Speaker 6: you know, somewhat stabilized and are expecting them to come

278
00:13:21,480 --> 00:13:24,640
Speaker 6: down as the year goes forward. So we're not seeing

279
00:13:24,679 --> 00:13:27,280
Speaker 6: any unusual patterns there and I would call it a

280
00:13:27,360 --> 00:13:30,640
Speaker 6: very normalized credit environment from what we're seeing with our clients.

281
00:13:30,960 --> 00:13:34,719
Speaker 1: You mentioned the potential tariff impact in your report. What

282
00:13:34,840 --> 00:13:37,120
Speaker 1: sectors is that is that are you seeing that bleed

283
00:13:37,160 --> 00:13:40,520
Speaker 1: into this potential increase in prices when it and then

284
00:13:40,559 --> 00:13:42,880
Speaker 1: potentially what it might be harder for consumers.

285
00:13:44,720 --> 00:13:47,560
Speaker 6: So we'll look at the consumer as a whole, right,

286
00:13:47,720 --> 00:13:50,320
Speaker 6: and we'll look at high income consumers. We'll look at

287
00:13:50,320 --> 00:13:54,679
Speaker 6: low income income consumers and watch what their patterns are.

288
00:13:54,720 --> 00:13:57,480
Speaker 6: But as we talked about with the groceries, consumers do

289
00:13:57,679 --> 00:14:01,439
Speaker 6: self regulate with shifting price and I would expect nothing

290
00:14:01,480 --> 00:14:06,040
Speaker 6: different no matter what tariff environment comes through. So we'll

291
00:14:06,080 --> 00:14:09,600
Speaker 6: watch the consumers really closely as to how they adjust

292
00:14:09,640 --> 00:14:12,200
Speaker 6: their spending patterns if prices were to increase.

293
00:14:12,600 --> 00:14:15,960
Speaker 1: Do you see any policies out of Washington hitting consumers

294
00:14:16,040 --> 00:14:17,560
Speaker 1: right now? Besides trade?

295
00:14:19,600 --> 00:14:22,880
Speaker 6: We are not, I mean again, across the board, we're

296
00:14:22,920 --> 00:14:28,560
Speaker 6: seeing very normalized, good momentum with the consumer overall, so

297
00:14:28,600 --> 00:14:33,120
Speaker 6: we're not seeing anything underneath from Washington come through.

298
00:14:32,920 --> 00:14:35,320
Speaker 2: Now, Hollie. Just to finish on what's been happening with

299
00:14:35,360 --> 00:14:38,160
Speaker 2: interest rates. Interest rates have stayed much higher for longer

300
00:14:38,240 --> 00:14:40,880
Speaker 2: the Federal reserve, but rates of the long end something

301
00:14:40,880 --> 00:14:43,520
Speaker 2: that this administration has celebrates that have started to move lower,

302
00:14:43,760 --> 00:14:46,200
Speaker 2: which is important for mortgages. What are you seeing in

303
00:14:46,280 --> 00:14:49,000
Speaker 2: terms of credit access and our consumers trying to step

304
00:14:49,080 --> 00:14:50,120
Speaker 2: up or they hold him back.

305
00:14:51,920 --> 00:14:55,880
Speaker 6: I would say consumers continue to borrow. Consumers continue to

306
00:14:55,920 --> 00:14:58,240
Speaker 6: borrow at a normalized rate, and we see that in

307
00:14:58,240 --> 00:15:01,880
Speaker 6: our credit card data. Bridge borrowing from our credit card

308
00:15:01,920 --> 00:15:06,240
Speaker 6: borrowers is slightly above where it was pre pandemic, so

309
00:15:06,640 --> 00:15:09,400
Speaker 6: they still have access to credit. I think from a

310
00:15:09,440 --> 00:15:13,280
Speaker 6: mortgage perspective, we haven't quite seen the demand really fled

311
00:15:13,360 --> 00:15:17,160
Speaker 6: back into the market. We're still seeing purchase volume, but

312
00:15:17,280 --> 00:15:20,960
Speaker 6: again because of the rate environment, that refive volume is

313
00:15:20,960 --> 00:15:24,120
Speaker 6: certainly at the lower end. But that's something that we

314
00:15:24,160 --> 00:15:26,560
Speaker 6: would expect to come back as the rates change.

315
00:15:26,760 --> 00:15:29,000
Speaker 2: Holly appreciate it. This was an important update on a

316
00:15:29,040 --> 00:15:30,920
Speaker 2: day where a lot of people are concerned about the

317
00:15:30,920 --> 00:15:43,760
Speaker 2: consumer Holly O'Neil there of Bank of America. So there's

318
00:15:43,760 --> 00:15:46,320
Speaker 2: the lasst this morning. US Treasury is rallying yesterday as

319
00:15:46,360 --> 00:15:49,400
Speaker 2: the S and P five hundred nearest correction territory. Kelsey

320
00:15:49,400 --> 00:15:52,840
Speaker 2: Barrow of JP Morgan, writing, amid the uncertainty, one detail

321
00:15:52,960 --> 00:15:55,960
Speaker 2: is clear, an allocation to high quality fixed income is

322
00:15:56,000 --> 00:15:59,800
Speaker 2: once again serving as a diversifying ballast in investor por

323
00:15:59,800 --> 00:16:02,400
Speaker 2: fo oleos Cansey joined us Now for more. Calsey, good morning,

324
00:16:02,400 --> 00:16:02,880
Speaker 2: Good to see you.

325
00:16:03,120 --> 00:16:03,600
Speaker 5: Good morning.

326
00:16:03,720 --> 00:16:05,840
Speaker 2: Let's pick up on what Steve Scheferin said there at

327
00:16:05,840 --> 00:16:09,400
Speaker 2: the end, maybe some austerity in America, and I stress maybe,

328
00:16:09,800 --> 00:16:12,720
Speaker 2: and you put that up against perhaps a real expansion

329
00:16:12,760 --> 00:16:16,360
Speaker 2: of the fiscal deficit over in places like Germany. What

330
00:16:16,400 --> 00:16:19,960
Speaker 2: does that mean for treasuries in an international bond market.

331
00:16:20,520 --> 00:16:23,280
Speaker 7: Yeah, so I think that you've hit on a really

332
00:16:23,360 --> 00:16:26,640
Speaker 7: key point. We've been very focused on the US what's

333
00:16:26,720 --> 00:16:30,920
Speaker 7: happening in the White House, but there are seismic shifts

334
00:16:31,000 --> 00:16:35,920
Speaker 7: happening outside of the US right now, and the shift

335
00:16:36,040 --> 00:16:40,840
Speaker 7: in Europe towards defense spending and towards infrastructure spending is

336
00:16:41,600 --> 00:16:46,280
Speaker 7: really an important shift that we're seeing. And while we're

337
00:16:46,280 --> 00:16:50,000
Speaker 7: talking about in the US that bonds are serving as

338
00:16:50,040 --> 00:16:54,160
Speaker 7: a diversifying safe haven. So while stocks are going down,

339
00:16:54,480 --> 00:16:58,200
Speaker 7: bond prices you have US treasuries, agency, mortgages, investment, good

340
00:16:58,200 --> 00:17:00,480
Speaker 7: credit all up in price yesterday.

341
00:17:01,240 --> 00:17:02,880
Speaker 5: In Germany you have.

342
00:17:03,160 --> 00:17:06,639
Speaker 7: Essentially the opposite, which is bonds have been hit massively,

343
00:17:06,720 --> 00:17:10,440
Speaker 7: body yields are up, but stocks are up in Europe too.

344
00:17:10,800 --> 00:17:14,760
Speaker 7: One of the biggest trades that's been in place for

345
00:17:14,840 --> 00:17:18,840
Speaker 7: at least a year has been the investment of foreign

346
00:17:18,920 --> 00:17:22,800
Speaker 7: investors in US equities on an unhedged basis.

347
00:17:23,160 --> 00:17:23,320
Speaker 4: Right.

348
00:17:23,720 --> 00:17:26,400
Speaker 7: They wanted the US equities and they wanted it unheedged

349
00:17:26,440 --> 00:17:28,600
Speaker 7: because nothing's ever going to happen to the dollar, right.

350
00:17:29,080 --> 00:17:31,800
Speaker 7: That I think is the biggest trade that is in

351
00:17:31,880 --> 00:17:34,120
Speaker 7: the process of being re evaluated right now.

352
00:17:34,240 --> 00:17:36,960
Speaker 2: You think we're unwinding that big dollar long we've built

353
00:17:37,000 --> 00:17:39,920
Speaker 2: up over the last several years. That is what it appears.

354
00:17:39,960 --> 00:17:42,199
Speaker 7: It's not going to be a straight line, right. But

355
00:17:42,280 --> 00:17:45,840
Speaker 7: I do think that what has been underestimated is not

356
00:17:46,240 --> 00:17:50,000
Speaker 7: what the US is doing, because that's been out there.

357
00:17:50,160 --> 00:17:53,240
Speaker 7: Trump's been talking about tariffs, Trump's been talking about layoffs.

358
00:17:53,760 --> 00:17:58,239
Speaker 7: What's been underestimated is the response from the rest of

359
00:17:58,280 --> 00:18:01,520
Speaker 7: the world. We knew they would respond, the magnitude of

360
00:18:01,520 --> 00:18:04,080
Speaker 7: the response has been the surprise.

361
00:18:04,720 --> 00:18:09,159
Speaker 3: There's a real question embedded in this observation about the

362
00:18:09,200 --> 00:18:12,359
Speaker 3: shift in the balance of dollars and the dollar long,

363
00:18:12,840 --> 00:18:16,200
Speaker 3: which is, if money is moving away from the United States,

364
00:18:16,760 --> 00:18:19,800
Speaker 3: do long term treasuries offer the same kind of ballast

365
00:18:20,240 --> 00:18:22,320
Speaker 3: or will there not be the same degree of demand

366
00:18:22,400 --> 00:18:25,120
Speaker 3: for them because some of that money is diverted elsewhere,

367
00:18:25,160 --> 00:18:26,320
Speaker 3: say to Germany.

368
00:18:27,200 --> 00:18:30,879
Speaker 7: So I think that we can differentiate a bit between

369
00:18:31,400 --> 00:18:35,399
Speaker 7: the equity markets and the dollar trade and the bond trade.

370
00:18:36,680 --> 00:18:39,360
Speaker 7: Typically you think about them together, but what we've seen

371
00:18:39,440 --> 00:18:41,840
Speaker 7: over the past few weeks is you can have periods

372
00:18:41,840 --> 00:18:45,400
Speaker 7: where the treasury market is getting a bid, long term

373
00:18:45,480 --> 00:18:50,240
Speaker 7: years are falling, and the dollar is softening modestly. It

374
00:18:50,320 --> 00:18:52,720
Speaker 7: sounds like a bit of a paradox, but I do

375
00:18:52,760 --> 00:18:56,200
Speaker 7: think it's something that can continue to occur. One thing

376
00:18:56,320 --> 00:18:58,960
Speaker 7: that will be on investors' minds as we move forward

377
00:18:59,720 --> 00:19:04,160
Speaker 7: is the deficit trajectory. Right in the two places in Europe,

378
00:19:04,440 --> 00:19:09,080
Speaker 7: we're seeing for the first time. Germany is considering a deficit,

379
00:19:09,520 --> 00:19:13,399
Speaker 7: considering more deficits as an advantage to them. At the

380
00:19:13,440 --> 00:19:18,400
Speaker 7: same time, the US is considering the fact that deficits

381
00:19:18,920 --> 00:19:21,399
Speaker 7: are not our friend anymore and we need to be

382
00:19:21,520 --> 00:19:26,680
Speaker 7: managing them much more closely. As long as those two

383
00:19:27,080 --> 00:19:30,879
Speaker 7: that sentiment continues, I think that you can continue to

384
00:19:30,920 --> 00:19:34,359
Speaker 7: see the support in long end treasuries, and on the

385
00:19:34,400 --> 00:19:38,560
Speaker 7: other hand, I would expect Europe Germany to continue to underperform.

386
00:19:38,600 --> 00:19:40,280
Speaker 3: I would love you to have a debate with Asha

387
00:19:40,320 --> 00:19:43,320
Speaker 3: Ka Batya of Newburger Berman, who is on the show yesterday.

388
00:19:43,480 --> 00:19:45,560
Speaker 3: At some point I would love to witness you guys

389
00:19:45,560 --> 00:19:47,520
Speaker 3: have a discussion about this. He was saying, he actually

390
00:19:47,560 --> 00:19:49,840
Speaker 3: is getting a little bit more bearish on long term treasuries.

391
00:19:50,119 --> 00:19:52,840
Speaker 3: What he sees is this concern that even as people

392
00:19:52,880 --> 00:19:56,720
Speaker 3: price in federalers or rate cuts, that stickiness and inflation

393
00:19:56,880 --> 00:19:59,399
Speaker 3: and that real kind of floor under how far the

394
00:19:59,440 --> 00:20:02,280
Speaker 3: Fed can go, and ongoing deficit concerns that they're not

395
00:20:02,320 --> 00:20:06,000
Speaker 3: going to get fixed by simply cutting on the edges.

396
00:20:06,080 --> 00:20:08,720
Speaker 3: It will take something more sustainable is going to really

397
00:20:09,080 --> 00:20:11,600
Speaker 3: create a problem longer term for the United States and

398
00:20:11,640 --> 00:20:14,240
Speaker 3: for the Federal Reserve. Why do you disagree with that

399
00:20:14,240 --> 00:20:16,400
Speaker 3: that the term premium is just going to be structurally

400
00:20:16,480 --> 00:20:18,280
Speaker 3: higher in the United States.

401
00:20:18,000 --> 00:20:22,160
Speaker 7: Well, I think the term premium already is structurally higher. Right,

402
00:20:22,200 --> 00:20:25,399
Speaker 7: So if you're a longer term investor, if you are

403
00:20:26,840 --> 00:20:29,360
Speaker 7: looking at the market over a five to ten year horizon,

404
00:20:29,400 --> 00:20:33,240
Speaker 7: you're already observing that term premium in the US is

405
00:20:33,280 --> 00:20:37,480
Speaker 7: substantially higher. Yields are substantially higher than they were before.

406
00:20:37,520 --> 00:20:40,680
Speaker 7: So I think that that story is already essentially in

407
00:20:40,760 --> 00:20:44,520
Speaker 7: the price and what we're looking at now is that

408
00:20:44,560 --> 00:20:48,480
Speaker 7: there's quite a bit of demand at these yield levels,

409
00:20:48,880 --> 00:20:53,200
Speaker 7: particularly when you have a FED that is maintaining an

410
00:20:53,240 --> 00:20:58,840
Speaker 7: easing bias. Yes, inflation has been a bit stickier than before.

411
00:20:58,880 --> 00:21:02,480
Speaker 7: But it's our view that ultimately what is going to

412
00:21:02,480 --> 00:21:05,040
Speaker 7: get the FED moving more aggressively in terms of rate

413
00:21:05,119 --> 00:21:09,040
Speaker 7: cuts is if we start to see the weakness translate

414
00:21:09,080 --> 00:21:10,680
Speaker 7: into weaker labor market data.

415
00:21:10,800 --> 00:21:13,800
Speaker 2: Hiyold spreads wady yesterday by almost twenty basis points back

416
00:21:13,840 --> 00:21:16,359
Speaker 2: through three hundred. Is that a buy yet? What are

417
00:21:16,359 --> 00:21:16,920
Speaker 2: you looking for?

418
00:21:17,680 --> 00:21:21,400
Speaker 7: So it is interesting this goes back to this kind

419
00:21:21,400 --> 00:21:24,960
Speaker 7: of question of is it the spread move that people

420
00:21:25,000 --> 00:21:29,119
Speaker 7: care about or the price move. So spread buyers are saying, great, Okay,

421
00:21:29,119 --> 00:21:31,800
Speaker 7: we've had a bit of a backup. Maybe this is

422
00:21:31,840 --> 00:21:35,800
Speaker 7: an opportunity to get in on a price basis. Most

423
00:21:35,840 --> 00:21:38,160
Speaker 7: of the high high quality part of the high old

424
00:21:38,200 --> 00:21:41,520
Speaker 7: index has those bonds have not really moved down in

425
00:21:41,600 --> 00:21:45,800
Speaker 7: price very much because the yield movement has offset the

426
00:21:45,960 --> 00:21:47,040
Speaker 7: spread widening.

427
00:21:47,400 --> 00:21:49,760
Speaker 8: So I think you could view that in two ways.

428
00:21:50,000 --> 00:21:52,840
Speaker 7: One, maybe there's a little bit more pain to come,

429
00:21:53,359 --> 00:21:57,520
Speaker 7: but also I would say it's really credit towards the

430
00:21:58,000 --> 00:22:02,720
Speaker 7: strong fundamental starting point for investment grade and high old

431
00:22:02,760 --> 00:22:05,840
Speaker 7: bonds in this market. And I don't think we we

432
00:22:05,880 --> 00:22:09,919
Speaker 7: shouldn't lose sight of that. Coming into this year, growth

433
00:22:10,040 --> 00:22:14,080
Speaker 7: was very strong. Defaults continue to remain very low.

434
00:22:14,600 --> 00:22:17,080
Speaker 5: Margins for companies.

435
00:22:16,760 --> 00:22:18,720
Speaker 7: Were at the higher end of their ranges.

436
00:22:19,160 --> 00:22:21,240
Speaker 5: So companies are.

437
00:22:21,119 --> 00:22:24,720
Speaker 7: Probably as best place as they possibly can be for

438
00:22:25,040 --> 00:22:26,800
Speaker 7: the difficult times ahead.

439
00:22:27,040 --> 00:22:30,560
Speaker 2: Counsel appreciate it. Councy power that of JP Morgan Asset Management,

440
00:22:40,000 --> 00:22:43,480
Speaker 2: Linday ros Sans Joint is now not getting into that. Lindsay,

441
00:22:43,480 --> 00:22:46,359
Speaker 2: welcome to the program. We don't want to get into that.

442
00:22:46,920 --> 00:22:49,199
Speaker 8: Not aggressive on the airlines, not big thank you.

443
00:22:49,720 --> 00:22:51,399
Speaker 2: Something you said to us last time. I think that

444
00:22:51,480 --> 00:22:53,840
Speaker 2: the dis is your friend. What's the dates of telling

445
00:22:53,920 --> 00:22:54,199
Speaker 2: you now?

446
00:22:54,760 --> 00:22:56,719
Speaker 8: The data is telling you right now that you are

447
00:22:56,800 --> 00:22:59,480
Speaker 8: paid to pause. And what we mean by that is

448
00:22:59,720 --> 00:23:01,520
Speaker 8: it may make sense to take a page from the

449
00:23:01,560 --> 00:23:04,679
Speaker 8: Fed's book. There's nothing we have to do in markets

450
00:23:04,800 --> 00:23:09,040
Speaker 8: right now to reposition necessarily, so for us, we're just

451
00:23:09,200 --> 00:23:12,000
Speaker 8: waiting to see how the data unfolds. We need to

452
00:23:12,080 --> 00:23:14,440
Speaker 8: learn more. Jolts is not going to give us much

453
00:23:14,440 --> 00:23:17,959
Speaker 8: information unfortunately today because it's really January. But we need

454
00:23:18,080 --> 00:23:21,280
Speaker 8: to see that. Back to your prior guests, has the

455
00:23:21,320 --> 00:23:24,119
Speaker 8: consumer changed their path? We think not but all of

456
00:23:24,160 --> 00:23:25,600
Speaker 8: this data is really going to help us.

457
00:23:26,000 --> 00:23:26,920
Speaker 3: This sounds so calm.

458
00:23:27,160 --> 00:23:27,840
Speaker 2: I mean, I love this.

459
00:23:28,000 --> 00:23:29,840
Speaker 3: You know, if people are talking about slaying of the

460
00:23:29,880 --> 00:23:32,680
Speaker 3: sacred cow and a parade of horrible and you're saying,

461
00:23:32,840 --> 00:23:34,600
Speaker 3: we can just say, come and take a look at

462
00:23:34,600 --> 00:23:36,240
Speaker 3: what's going on and we don't have to change anything,

463
00:23:36,359 --> 00:23:37,679
Speaker 3: what are you waiting for? I mean there's a lot

464
00:23:37,680 --> 00:23:39,000
Speaker 3: of pretty heated rhetoric out there.

465
00:23:39,480 --> 00:23:39,680
Speaker 4: Yeah.

466
00:23:39,720 --> 00:23:41,920
Speaker 8: I think what we're waiting for is prices that make sense.

467
00:23:42,359 --> 00:23:44,960
Speaker 8: And so we've been saying that fixed income makes sense

468
00:23:45,000 --> 00:23:47,240
Speaker 8: in a portfolio. If you look, you're to date. I

469
00:23:47,320 --> 00:23:49,400
Speaker 8: think if there's a lot of concern right now about

470
00:23:49,400 --> 00:23:52,040
Speaker 8: what's happened with stocks off a percent from the peak,

471
00:23:52,400 --> 00:23:55,440
Speaker 8: down maybe four percent overall, this isn't a massive move.

472
00:23:55,680 --> 00:23:58,359
Speaker 8: But contrast that, which we think is really important, with

473
00:23:58,480 --> 00:24:00,680
Speaker 8: what fixed income's done for you. It's earned you in

474
00:24:00,720 --> 00:24:02,560
Speaker 8: the front end of the curve two percent, in the

475
00:24:02,600 --> 00:24:05,760
Speaker 8: middle of the curve, four percent back end. Even more so,

476
00:24:06,240 --> 00:24:09,239
Speaker 8: I think we're calm because we're bond people, but we're

477
00:24:09,280 --> 00:24:13,919
Speaker 8: calm because we have a good setup in our portfolio construction. Overall,

478
00:24:14,000 --> 00:24:15,600
Speaker 8: with bonds as a ballast.

479
00:24:15,840 --> 00:24:18,760
Speaker 3: There's a question about how long term bonds can really

480
00:24:18,800 --> 00:24:22,160
Speaker 3: remain a ballast if people start to get concerned about

481
00:24:22,440 --> 00:24:26,760
Speaker 3: higher overall inflation from a deglobalized world, the idea that

482
00:24:26,800 --> 00:24:30,400
Speaker 3: supply chains will have more built in and efficiency. How

483
00:24:30,440 --> 00:24:32,800
Speaker 3: do you cope with those kinds of discussions. Do you

484
00:24:32,920 --> 00:24:35,440
Speaker 3: just assume that there isn't going to be price appreciation,

485
00:24:35,600 --> 00:24:37,159
Speaker 3: that yields are going to sort of stay around here,

486
00:24:37,240 --> 00:24:39,800
Speaker 3: and that that's fine because it's relatively good to be

487
00:24:39,880 --> 00:24:40,840
Speaker 3: paid to wait.

488
00:24:41,880 --> 00:24:45,040
Speaker 8: Well, what will be a problem, certainly would be if

489
00:24:45,080 --> 00:24:47,600
Speaker 8: tariffs are on the maximalist size of the side of things,

490
00:24:47,720 --> 00:24:50,840
Speaker 8: and what we've seen recently is tariffs on, tariffs off

491
00:24:51,040 --> 00:24:53,320
Speaker 8: tariffs being placed out there at a higher level than

492
00:24:53,400 --> 00:24:56,520
Speaker 8: brought on at lower levels. I think until we see

493
00:24:56,640 --> 00:25:00,280
Speaker 8: a full blown, really aggressive tariff regime, I think you

494
00:25:00,320 --> 00:25:04,080
Speaker 8: can feel confident in bonds. They have good coupons, We're

495
00:25:04,080 --> 00:25:06,640
Speaker 8: starting at a good spot there. They will be support,

496
00:25:06,880 --> 00:25:10,000
Speaker 8: we think as we wait to find out more. But again,

497
00:25:10,200 --> 00:25:13,320
Speaker 8: we don't have to daytrade our portfolios, and I think

498
00:25:13,400 --> 00:25:16,560
Speaker 8: that's the important thing. There's been a lot of just

499
00:25:16,760 --> 00:25:20,200
Speaker 8: prenetic behavior in the markets right now. We were talking

500
00:25:20,320 --> 00:25:22,320
Speaker 8: before we got on that it's hard to think about

501
00:25:22,320 --> 00:25:24,600
Speaker 8: even taking a day off from the markets. You can't

502
00:25:24,600 --> 00:25:27,720
Speaker 8: take a vacation I think right now under this administration.

503
00:25:28,200 --> 00:25:29,840
Speaker 8: But as we learn more, I think we're going to

504
00:25:29,880 --> 00:25:31,960
Speaker 8: be emboldened that rates are going.

505
00:25:31,880 --> 00:25:32,240
Speaker 5: To help you.

506
00:25:32,520 --> 00:25:35,200
Speaker 1: When you're looking at potentially that maximus approach to trade,

507
00:25:35,240 --> 00:25:37,879
Speaker 1: it sounds like you're basically waiting for April second.

508
00:25:38,040 --> 00:25:38,680
Speaker 5: Is that accurate.

509
00:25:39,200 --> 00:25:41,440
Speaker 8: Yeah, we're waiting for April second, just like we waited

510
00:25:41,480 --> 00:25:43,480
Speaker 8: for March and we waited for February. I mean, I

511
00:25:43,520 --> 00:25:46,520
Speaker 8: think there's a lot of markers that we keep waiting for.

512
00:25:47,400 --> 00:25:49,600
Speaker 8: At some point, I think there will be an end

513
00:25:49,640 --> 00:25:51,760
Speaker 8: to kicking the can a month a month, a month,

514
00:25:52,520 --> 00:25:55,440
Speaker 8: and we'll have what is the final here, And that's

515
00:25:55,480 --> 00:25:57,200
Speaker 8: what really people are waiting for. And I think that

516
00:25:57,400 --> 00:26:00,800
Speaker 8: uncertainty doesn't do the market well. And so hopefully April

517
00:26:00,880 --> 00:26:03,040
Speaker 8: second is maybe the beginning of the end of we

518
00:26:03,200 --> 00:26:04,399
Speaker 8: know what the permanent state will be.

519
00:26:04,600 --> 00:26:08,360
Speaker 1: We're seeing some economic advisors outside the administration but close

520
00:26:08,400 --> 00:26:10,960
Speaker 1: to the president, like Steve Moore saying you gotta push

521
00:26:11,000 --> 00:26:12,720
Speaker 1: out the tax cuts. You can't wait for the end

522
00:26:12,720 --> 00:26:13,120
Speaker 1: of the year.

523
00:26:13,200 --> 00:26:14,320
Speaker 5: Do you think that's an.

524
00:26:14,240 --> 00:26:16,760
Speaker 1: Accurate assumption that they need to be able to balance

525
00:26:17,200 --> 00:26:19,960
Speaker 1: some of this uncertainty and bad rhetoric around tariffs with

526
00:26:20,040 --> 00:26:22,360
Speaker 1: some of the good policy changes they're trying to get through.

527
00:26:22,720 --> 00:26:24,600
Speaker 8: Yeah, I think you're bringing up a great point. If

528
00:26:24,600 --> 00:26:26,680
Speaker 8: you think about what happened post election. We had this

529
00:26:26,840 --> 00:26:29,200
Speaker 8: big euphoria bubble, and I think a lot of people

530
00:26:29,240 --> 00:26:31,399
Speaker 8: have said that the errors out of this bubble or

531
00:26:31,400 --> 00:26:34,000
Speaker 8: the balloon has burst, so to speak, because all the

532
00:26:34,080 --> 00:26:37,440
Speaker 8: good stuff was thought about, deregulation, tax cuts, well, we

533
00:26:37,520 --> 00:26:40,840
Speaker 8: haven't had those yet because the sequencing takes time. Instead,

534
00:26:40,960 --> 00:26:44,159
Speaker 8: we've seen the more negative things, potentially like tariffs, and

535
00:26:44,240 --> 00:26:47,360
Speaker 8: so it's really hard when everybody was banking on really

536
00:26:47,440 --> 00:26:50,440
Speaker 8: positive things to happen, the negative ones happen first, and

537
00:26:50,520 --> 00:26:53,840
Speaker 8: we're still waiting for the positive things later on. They

538
00:26:53,920 --> 00:26:57,200
Speaker 8: are coming, I think they're coming much more slowly. Certainly,

539
00:26:57,240 --> 00:26:58,880
Speaker 8: if we sed them up, I think people would feel

540
00:26:58,920 --> 00:26:59,640
Speaker 8: a lot better.

541
00:27:00,240 --> 00:27:02,800
Speaker 2: Policy clarity abroad. And I wonder how you and the

542
00:27:02,840 --> 00:27:05,720
Speaker 2: team are thinking about the search. We've seen in European

543
00:27:05,800 --> 00:27:08,800
Speaker 2: bond yields over the past week or so, specifically in

544
00:27:08,880 --> 00:27:11,600
Speaker 2: Germany the forty basis point move last week. These are

545
00:27:11,680 --> 00:27:14,359
Speaker 2: regime shifts in policy, particularly in Germany that we haven't

546
00:27:14,359 --> 00:27:17,480
Speaker 2: seen in decades. How are things changing? View and the team?

547
00:27:17,480 --> 00:27:19,560
Speaker 2: How do you think about the global bankdrop for fixed

548
00:27:19,600 --> 00:27:20,080
Speaker 2: income now?

549
00:27:20,440 --> 00:27:23,560
Speaker 8: Yeah, So what we've said really since twenty twenty four

550
00:27:23,720 --> 00:27:26,359
Speaker 8: is that there are great opportunities of divergence and that

551
00:27:26,400 --> 00:27:28,359
Speaker 8: we should be able to take advantage of them in

552
00:27:28,440 --> 00:27:31,920
Speaker 8: our macro strategies. What's happened in Germany is, to your point,

553
00:27:32,040 --> 00:27:37,200
Speaker 8: something totally new, large significant. We actually don't think that

554
00:27:37,320 --> 00:27:39,520
Speaker 8: the backup in yields is over yet, so we wouldn't

555
00:27:39,560 --> 00:27:42,439
Speaker 8: hop in yet. Still prefer the US, but I think

556
00:27:42,440 --> 00:27:44,200
Speaker 8: it's really important to think what that means for a

557
00:27:44,240 --> 00:27:47,719
Speaker 8: backdrop for credit. So from a credit perspective, Europe has

558
00:27:47,720 --> 00:27:50,879
Speaker 8: actually outperformed the US. So when we're thinking about how

559
00:27:50,920 --> 00:27:53,840
Speaker 8: to position our portfolios, we're still leaning into US because

560
00:27:53,880 --> 00:27:56,280
Speaker 8: we feel like there's more opportunity there. But should that

561
00:27:56,400 --> 00:27:59,359
Speaker 8: be dislodged, it'll be a good opportunity to shift the

562
00:27:59,400 --> 00:28:01,639
Speaker 8: portfolio and add back in European credit.

563
00:28:02,040 --> 00:28:03,879
Speaker 5: Once we get more clarity.

564
00:28:03,720 --> 00:28:06,200
Speaker 8: On in fact, if the defense spending will be passed,

565
00:28:06,520 --> 00:28:07,440
Speaker 8: what will really happen.

566
00:28:07,720 --> 00:28:10,480
Speaker 3: What's more compelling to you the pushing away from the

567
00:28:10,640 --> 00:28:13,800
Speaker 3: US effect of a potential deterioration in the data or

568
00:28:14,000 --> 00:28:17,399
Speaker 3: a potential positive shift not only with respect to the

569
00:28:17,440 --> 00:28:19,720
Speaker 3: spending getting passed, but a sense that maybe it could

570
00:28:19,760 --> 00:28:22,680
Speaker 3: ignite some kind of growth and infrastructure spending on the

571
00:28:22,720 --> 00:28:23,119
Speaker 3: heels of it.

572
00:28:23,240 --> 00:28:26,040
Speaker 8: In Europe. Yeah, so this is the big change, and

573
00:28:26,119 --> 00:28:28,200
Speaker 8: I think you're seeing that with the yields in Europe.

574
00:28:28,280 --> 00:28:30,879
Speaker 8: This is big spending and I think now you're starting

575
00:28:30,960 --> 00:28:33,520
Speaker 8: to see that all the views that there could in

576
00:28:33,600 --> 00:28:35,720
Speaker 8: fact be a recession in Europe or things are looking

577
00:28:35,760 --> 00:28:39,440
Speaker 8: really really weak. That's changed a lot because spending is

578
00:28:39,480 --> 00:28:42,720
Speaker 8: a huge part of GDP government spending, so that does

579
00:28:43,520 --> 00:28:46,440
Speaker 8: change the tone out there. But what's important is it

580
00:28:46,600 --> 00:28:48,880
Speaker 8: is a global environment, and I think what we've seen

581
00:28:49,000 --> 00:28:51,920
Speaker 8: with stocks with bonds so far and the big volatility

582
00:28:51,960 --> 00:28:54,680
Speaker 8: and performance is that you want to do active management

583
00:28:54,760 --> 00:28:57,239
Speaker 8: to take advantage of all of these differences and all

584
00:28:57,280 --> 00:28:58,760
Speaker 8: these movements because they're happening quickly.

585
00:28:59,480 --> 00:29:01,600
Speaker 2: It's going to say, as always, appreciate the update. Thank

586
00:29:01,640 --> 00:29:05,160
Speaker 2: you Linday Roseen and Goldman Sachs. This is the Bloomberg

587
00:29:05,240 --> 00:29:08,960
Speaker 2: Surveillance Podcast, bringing you the best in markets, economics, and

588
00:29:09,080 --> 00:29:11,840
Speaker 2: Gio politics. You can watch the show live on Bloomberg

589
00:29:11,920 --> 00:29:15,080
Speaker 2: TV weekday mornings from six am to nine am Eastern.

590
00:29:15,360 --> 00:29:18,720
Speaker 2: Subscribe to the podcast on Apple, Spotify, or anywhere else

591
00:29:18,760 --> 00:29:21,360
Speaker 2: you listen, and as always, on the Bloomberg Terminal and

592
00:29:21,480 --> 00:29:22,640
Speaker 2: the Bloomberg Business opp