WEBVTT - Bloomberg Surveillance TV: March 11, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:36.960 Bloomberg Terminal and the Bloomberg Business App. Brian Levitt of 0:00:37.000 --> 0:00:39.400 Invesco writing, tariffs are likely to lead to a more 0:00:39.479 --> 0:00:43.560 volatile investment environment rather than result in a bear market 0:00:43.600 --> 0:00:46.600 for equities. I would not expect a broad decline in 0:00:46.680 --> 0:00:50.360 risk assets or a recession in the economy. Brian joined 0:00:50.400 --> 0:00:51.920 us now for more bran, good morning, good to see you, 0:00:52.000 --> 0:00:53.599 Nice to see it too. Where does that more optimistic 0:00:53.680 --> 0:00:54.960 view come from? What underpins that? 0:00:55.480 --> 0:00:55.560 So? 0:00:55.640 --> 0:00:58.600 What underpins it is ultimately a belief that we will 0:00:58.640 --> 0:01:01.320 start to see or move towards greater clarity. But that 0:01:01.400 --> 0:01:04.560 gets called into question the longer that this persists. So 0:01:05.000 --> 0:01:09.040 my view in writing it was Ultimately the administration will 0:01:09.080 --> 0:01:12.559 provide greater clarity around this look. Tariff's result in less 0:01:12.600 --> 0:01:13.640 optimal outcomes. 0:01:13.680 --> 0:01:16.119 But as long as we know the rules of the game, 0:01:16.280 --> 0:01:17.840 businesses will get through it. 0:01:17.920 --> 0:01:20.520 And of the belief that you know, the Federal Reserve, 0:01:20.720 --> 0:01:23.279 given the recent inversion in the Y'll curve, will start 0:01:23.319 --> 0:01:27.640 to sound the more dubbish signal. But the longer it 0:01:27.760 --> 0:01:30.440 takes for us to get there were a greater risk 0:01:30.480 --> 0:01:31.520 of these things happening. 0:01:31.600 --> 0:01:33.760 When things like this do happen, they happen often. We 0:01:33.800 --> 0:01:36.240 have these growth scartes. You're waiting for that cathartic moment, 0:01:36.280 --> 0:01:38.800 Peter Sheev Academy said, this is the first day that 0:01:38.840 --> 0:01:42.480 feels like a real washout has been occurring. Mister Krinsky 0:01:42.600 --> 0:01:45.240 over at BTIG, Jonathan saying, if you were hoping for 0:01:45.280 --> 0:01:47.760 an entry point, this is your chance. Have we had 0:01:47.800 --> 0:01:49.040 that cathartic moment yet? 0:01:49.080 --> 0:01:51.440 I'm not sure we've had the full cathartic moment. I mean, 0:01:51.440 --> 0:01:54.040 I went back yesterday though, and I looked at yesterday. 0:01:54.040 --> 0:01:56.440 It was the ninety third worst day of the Nasdaq 0:01:56.480 --> 0:01:59.200 in thirty years. So let's put it into some perspective. 0:01:59.240 --> 0:02:01.280 I went back, I'm not the best at Excel. I'm 0:02:01.280 --> 0:02:04.120 almost fifty years old, but I brought up my Excel 0:02:04.200 --> 0:02:07.280 spreadsheet and I looked at the other ninety two worst 0:02:07.360 --> 0:02:09.760 days and said, well, what if I added money on 0:02:09.800 --> 0:02:12.080 each of those days? What if I withdrew money on 0:02:12.120 --> 0:02:14.680 each of those days? And obviously you were better off 0:02:14.800 --> 0:02:17.520 adding money on each of those bad days. 0:02:17.720 --> 0:02:18.640 Right, So I think. 0:02:18.480 --> 0:02:22.000 Most investors don't think that way, So you don't necessarily 0:02:22.160 --> 0:02:24.720 need the cathartic moment. I don't think we're there yet. 0:02:24.880 --> 0:02:26.480 I think there's more to go in terms of a 0:02:26.560 --> 0:02:30.080 bottoming process. But even if you're investing in you're halfway 0:02:30.280 --> 0:02:31.399 through a correction. 0:02:32.160 --> 0:02:34.720 Historically that's been quite good for investors. More to go. 0:02:35.280 --> 0:02:38.240 What needs to happen for that cathartic moment and then, frankly, 0:02:38.639 --> 0:02:41.960 for a steady climb upward. What kind of information do 0:02:42.040 --> 0:02:42.920 people need to say. 0:02:42.840 --> 0:02:43.440 We need clarity? 0:02:43.440 --> 0:02:46.120 I think Jonathan said the exact right word, which is 0:02:46.160 --> 0:02:48.799 we need policy clarity. And I go back to twenty 0:02:48.840 --> 0:02:51.880 eighteen thinking about what was going on then when we 0:02:51.880 --> 0:02:54.280 were dealing with the US China trade war. So what 0:02:54.440 --> 0:02:57.520 ultimately led to a bottoming in the market The United 0:02:57.520 --> 0:03:01.320 States and China got together and said, okay, truth that 0:03:01.360 --> 0:03:06.000 doesn't fully eliminate uncertainty. But ninety day truths, Federal Reserve 0:03:06.120 --> 0:03:08.280 came forward and said, all right, we're done raising rates. 0:03:08.800 --> 0:03:11.280 We may even be lowering rates in twenty nineteen. And 0:03:11.840 --> 0:03:14.320 that type of policy clarity is how you start to 0:03:14.360 --> 0:03:16.800 move forward. So long as we're in this environment where 0:03:17.080 --> 0:03:20.639 consumers don't know the rules, businesses don't know the rules, 0:03:20.880 --> 0:03:22.200 you're going to be challenged for a while. 0:03:22.400 --> 0:03:24.560 Right now, the bulls on the street are basically coming 0:03:24.560 --> 0:03:26.960 out and telling us, doesn't really matter if we have 0:03:27.080 --> 0:03:30.160 ongoing policy uncertainty on the fiscal side. As long as 0:03:30.160 --> 0:03:32.440 the Fed comes out and rescues markets, as long as 0:03:32.480 --> 0:03:35.720 they cut rates by enough, then you end up with 0:03:35.960 --> 0:03:37.720 a rally and a supported market. 0:03:37.760 --> 0:03:40.120 Do you agree, Well, it can't hurt, But I think 0:03:40.160 --> 0:03:42.520 you're going to need it beyond just the Federal Reserve 0:03:42.640 --> 0:03:46.040 this time. You can't be making the cuts that you're 0:03:46.040 --> 0:03:49.600 making on the fiscal side and creating the uncertainty you 0:03:49.640 --> 0:03:51.720 have on the trade side and think that the Fed 0:03:51.760 --> 0:03:54.920 oor Reserve alone just bringing rates to neutral can solve this. 0:03:54.920 --> 0:03:58.240 I mean, the reality is most Americans have fixed rate 0:03:58.360 --> 0:04:02.920 mortgages anywhay. Most Americans didn't recognize the move up and rights. 0:04:02.920 --> 0:04:04.640 They're not necessarily going to feel it on the move 0:04:04.760 --> 0:04:08.120 down either. So you're going to need more than that. 0:04:08.160 --> 0:04:10.840 You're going to need trade and fiscal policy. Get to 0:04:10.880 --> 0:04:13.840 a place where we understand where it's going when. 0:04:13.760 --> 0:04:14.720 It comes to trade, though. 0:04:14.800 --> 0:04:17.080 That uncertainty is why Donald Trump thinks he can have 0:04:17.120 --> 0:04:20.320 this negotiating power. How long do you think the market 0:04:20.440 --> 0:04:23.279 could sustain this uncertain period, because it could. 0:04:23.080 --> 0:04:26.400 Be months, Well, it could be months. I mean, I 0:04:26.400 --> 0:04:26.720 don't know. 0:04:26.960 --> 0:04:30.479 So the word sustain, I mean we can fall further 0:04:30.520 --> 0:04:32.440 from here, right, I mean we were used to five 0:04:32.480 --> 0:04:35.080 to ten percent corrections. They happen every year. Greater than 0:04:35.160 --> 0:04:39.159 ten are less frequent, but they're almost always the result 0:04:39.200 --> 0:04:44.200 of policy uncertainty, and so the market could continue to 0:04:44.200 --> 0:04:46.680 feel pressure from it until you finally understand what the 0:04:46.760 --> 0:04:47.479 rules were going to be. 0:04:47.839 --> 0:04:50.280 Do you sense there's a pain threshold within this Trump 0:04:50.320 --> 0:04:51.000 two point zero? 0:04:51.160 --> 0:04:53.480 We certainly hope so, right, you know, I mean the 0:04:53.760 --> 0:04:56.679 idea of that Trump put is being called into question 0:04:56.920 --> 0:05:00.840 right now. But ultimately I don't think this an administration 0:05:00.920 --> 0:05:03.000 that wants to see the markets moving the way. 0:05:02.839 --> 0:05:03.440 They are now. 0:05:03.440 --> 0:05:07.839 They may have an ideology around trade that they want 0:05:07.839 --> 0:05:10.080 to pursue and they're not going to move away from it. 0:05:10.200 --> 0:05:12.440 But let's let's. 0:05:12.160 --> 0:05:12.560 Get with it. 0:05:12.640 --> 0:05:14.520 Let's let's figure out what the rates are, what the 0:05:14.560 --> 0:05:16.120 tariffrates are going to be, and let's move on. 0:05:16.320 --> 0:05:18.560 Twenty eighteen. They tolerate sed much more than this, didn't they. 0:05:18.640 --> 0:05:20.400 Ye twenty eighteen we were down twenty percent. 0:05:20.920 --> 0:05:22.039 Is that what you're looking for now? 0:05:22.279 --> 0:05:25.120 It seems like you're moving towards that. I mean right now. 0:05:25.160 --> 0:05:27.760 The SMP's down eight and a half percent. I mean 0:05:27.760 --> 0:05:29.760 we were down eight percent when the Bank of Japan 0:05:29.839 --> 0:05:33.240 raised interest rates once last year. So this seems a 0:05:33.279 --> 0:05:36.839 little bit more challenged of an environment than that. Again, 0:05:36.920 --> 0:05:38.960 I come back to the fact, though, if you're an 0:05:38.960 --> 0:05:41.440 investor and you invest halfway through a downturn, you should 0:05:41.440 --> 0:05:44.000 be okay. So let's not try and get too cute 0:05:44.000 --> 0:05:46.159 with this. But it doesn't feel like the bottom is 0:05:46.160 --> 0:05:46.400 in you. 0:05:46.560 --> 0:05:50.080 Consumer discretionary is down twenty percent from the recent highs 0:05:50.360 --> 0:05:53.160 led by Tesla, of course, but the airlines have stud 0:05:53.160 --> 0:05:55.800 its participate down to this morning, down by something like 0:05:55.800 --> 0:05:58.760 eleven percent. What do you do with consumer exposed names. 0:05:58.760 --> 0:06:00.760 When you hear Advasti in the town to CEO say 0:06:00.800 --> 0:06:07.000 things like mid February consumer business purchases activity just tried 0:06:07.080 --> 0:06:09.320 to stall. He says, it's going to be transitory. Do 0:06:09.320 --> 0:06:10.400 you think it's going to be transitory. 0:06:10.480 --> 0:06:13.520 I do think it'll be transitory because this was an 0:06:13.600 --> 0:06:17.640 economy that came in with fundamental strength the consumer, where 0:06:17.640 --> 0:06:20.400 household net worth is at all time highs, where the 0:06:20.480 --> 0:06:23.520 unemployment rate was near all time low. So it's a 0:06:23.520 --> 0:06:25.839 consumer that's coming into this in good shape. It's a 0:06:25.839 --> 0:06:28.880 consumer that's not over levered. It's an economy that's not 0:06:29.000 --> 0:06:33.520 over levered. We were in a good backdrop. The consumer 0:06:33.600 --> 0:06:36.799 right now is tightening their belt a little bit because 0:06:36.839 --> 0:06:39.600 they don't know. You know, if they work for the 0:06:39.640 --> 0:06:42.800 federal government, you're not sure what your employment picture is 0:06:42.880 --> 0:06:46.080 going to look like. If you're in the market, you're 0:06:46.120 --> 0:06:49.240 not entirely sure your household net worth is going so 0:06:49.320 --> 0:06:54.239 you tighten your belt a little bit. But it doesn't 0:06:54.360 --> 0:06:56.520 feel like a recessionary environment. 0:06:56.600 --> 0:06:56.760 Now. 0:06:56.800 --> 0:06:59.720 Could you get there with a prolonged period of uncertainty, sure, 0:06:59.800 --> 0:07:02.279 But when you look at the usual indicators on a 0:07:02.320 --> 0:07:06.679 path to a recession, big leverage, big excess, corporate bond 0:07:06.720 --> 0:07:08.040 spreads blowing out. 0:07:08.240 --> 0:07:08.920 None of that. 0:07:09.320 --> 0:07:14.320 Exists today, and until corporate spreads really start blowing out, 0:07:15.080 --> 0:07:18.080 I'm not ready to think of this as a much 0:07:18.200 --> 0:07:22.360 more meaningful downturn, severe recession. It's just not what the 0:07:22.400 --> 0:07:23.720 picture is telling us right now. 0:07:23.760 --> 0:07:25.760 Initially a lot of Wall Street firms agreed with you, 0:07:26.120 --> 0:07:28.320 but the downgrades have started to pour in. We've seen 0:07:28.360 --> 0:07:30.600 it from HSBC, We've seen it from Golden Sax and 0:07:30.680 --> 0:07:34.480 JP Morgan, City Group coming out downgrading the US equities 0:07:34.560 --> 0:07:37.520 to neutral and upgrading Chinese equities. 0:07:38.080 --> 0:07:39.760 At what point would you agree. 0:07:39.440 --> 0:07:41.920 With them and say that, actually, at the very least, 0:07:41.920 --> 0:07:45.560 to quote City Group, US exceptionalism atas is at least 0:07:45.560 --> 0:07:46.040 on pause. 0:07:46.400 --> 0:07:49.000 Well, we're upgrading European equities as well. I mean, we've 0:07:49.040 --> 0:07:52.200 increased our exposure to European equities earlier this year. And 0:07:52.360 --> 0:07:57.800 why it's not complicated leading indicators in Europe we're climbing. 0:07:58.240 --> 0:08:02.120 The economic indices were surprising to the upside. The European 0:08:02.200 --> 0:08:05.360 Central Bank was easing. It was a better mix versus 0:08:05.600 --> 0:08:08.440 sentiment in the United States declining in a period where 0:08:08.520 --> 0:08:12.280 valuations were more heightened. So you're getting these cyclical bounces. 0:08:12.320 --> 0:08:14.600 I always say these markets, everyone's waiting for things to 0:08:14.640 --> 0:08:15.400 be good in Europe. 0:08:15.440 --> 0:08:17.960 No markets move on better or worse. By the time 0:08:18.000 --> 0:08:18.640 you wait for. 0:08:18.600 --> 0:08:22.680 Good, it's already happened. The bigger question on Europe now 0:08:23.120 --> 0:08:24.840 is not just the cyclical bounce. 0:08:24.920 --> 0:08:26.480 Is this something more structural? 0:08:26.640 --> 0:08:30.160 And with the investment that you're seeing, the borrowing that 0:08:30.200 --> 0:08:32.920 you're likely to see out of Germany, is this more structural? 0:08:32.960 --> 0:08:33.559 They have a chance. 0:08:33.840 --> 0:08:36.480 Now, can we get twenty seven countries to agree on it. 0:08:36.559 --> 0:08:40.080 We'll find out, but there is certainly a chance. And yeah, 0:08:40.160 --> 0:08:43.319 I mean sometimes it's real simple. If you're easing policy, 0:08:43.720 --> 0:08:48.280 it's a better backdrop. If you're pursuing tighter policies, it's. 0:08:48.080 --> 0:08:49.280 A worse backdrop. 0:08:49.400 --> 0:08:52.440 And it behooves investors to think about those parts of 0:08:52.440 --> 0:08:54.559 the world that are being more stimulative right now. 0:08:54.640 --> 0:08:56.640 ASSISI making the point that the better news will come 0:08:56.640 --> 0:08:59.160 from elsewhere over the next several months. It won't come 0:08:59.320 --> 0:08:59.679 from here. 0:09:00.000 --> 0:09:02.559 What's interesting is that City Group thinks that that better 0:09:02.600 --> 0:09:05.400 news is going to come from China, whereas HSBC thinks 0:09:05.400 --> 0:09:07.079 that better news is going to come from Europe. Is 0:09:07.200 --> 0:09:09.360 sort of like pick your poison where in the world 0:09:09.480 --> 0:09:12.400 you think that it could potentially have better information on that. 0:09:12.400 --> 0:09:15.160 Cool that Dan grated US Equities HSBC joining us a 0:09:15.200 --> 0:09:17.439 little bit later this hour, so look out for that. 0:09:17.600 --> 0:09:20.600 Small business confidence came in about twelve minutes ago, and 0:09:20.720 --> 0:09:23.600 small business confidence came in lower, four month low. There 0:09:23.640 --> 0:09:25.559 is a nugget in here though that got my attention 0:09:25.720 --> 0:09:27.720 and I think it got les us too. The share 0:09:27.760 --> 0:09:29.360 of owners you said it would be a good time 0:09:29.400 --> 0:09:33.120 to expand declined by the most since April twenty twenty 0:09:33.520 --> 0:09:37.360 and engage capital spending plans matched and almost five year low. 0:09:37.800 --> 0:09:39.840 That is not what we want to see coming into 0:09:39.840 --> 0:09:41.719 twenty twenty five. Bran, thank you, it's going to see 0:09:41.720 --> 0:09:53.640 you as always, Sir Brian Leavitte of Investment the Bank 0:09:53.679 --> 0:09:57.439 of America Institute releasing its latest Consumer Checkpoints survey. The 0:09:57.480 --> 0:10:00.559 team right in the following the consumer is still restraining 0:10:00.760 --> 0:10:04.200 underlying forward momentum that we at a more measured pace 0:10:04.480 --> 0:10:06.080 and place to say. They're giving us some time. This 0:10:06.120 --> 0:10:09.280 morning is Holly O'Neil, the president of Retail Banking at 0:10:09.320 --> 0:10:12.240 Bank of America. Holly, welcome back to the program. A 0:10:12.320 --> 0:10:14.720 warm welcome to Bloomberg surveillance. We've heard from a few 0:10:14.760 --> 0:10:17.600 companies in the last twenty four hours, from Delta air Lines, 0:10:17.600 --> 0:10:19.920 from American Airlines that maybe the consumer was a bit 0:10:19.960 --> 0:10:23.000 softer in February. We're just wondering, Holly, whether you see 0:10:23.280 --> 0:10:25.760 anything of the same at all in your business. 0:10:27.720 --> 0:10:30.240 So I think you had it right when you said 0:10:30.679 --> 0:10:33.959 continued forward momentum, but at a more measured pace. And 0:10:34.200 --> 0:10:38.120 in February, we saw little softness mid month in certain 0:10:38.120 --> 0:10:40.920 regions in Texas on the East Coast, we really thank 0:10:41.040 --> 0:10:44.320 driven by weather, and in most of those locations it 0:10:44.440 --> 0:10:46.480 recovered by the end of the month. So when you 0:10:46.600 --> 0:10:50.080 look at the February spending data that we have, it 0:10:50.240 --> 0:10:53.360 was up month over month when you seasonally adjust it. 0:10:53.520 --> 0:10:57.679 So even though there was some mid month disruptions with weather, 0:10:57.800 --> 0:11:01.320 we saw most locations recover from that. 0:11:01.800 --> 0:11:05.040 Ollie on what though, recover in terms of spending on 0:11:05.320 --> 0:11:08.719 consumer discretionary on groceries. I mean, we've been talking all 0:11:08.720 --> 0:11:11.360 morning about the airlines coming out and saying that they 0:11:11.360 --> 0:11:14.080 really haven't yet seen that recovery in some of the 0:11:14.200 --> 0:11:18.600 domestic travel spend. Is that really being focused in say 0:11:19.080 --> 0:11:22.439 buying food for families? Sure? 0:11:22.600 --> 0:11:26.520 So overall, spend recovered, So our total debit and credit 0:11:26.559 --> 0:11:30.160 card spend was up month over month seasonally adjusted, so 0:11:30.240 --> 0:11:33.960 that includes everything. When you dig in underneath. On the 0:11:33.960 --> 0:11:38.280 grocery front, grocery spending was up, and we actually within 0:11:38.400 --> 0:11:43.960 those numbers, you saw value grocery spending up, premium grocery 0:11:43.960 --> 0:11:48.640 spending down a little bit, so overall groceries up, but 0:11:48.800 --> 0:11:52.960 you saw the consumer adjusting where they were spending their money. 0:11:53.480 --> 0:11:55.320 So this voter goes to this question of is this 0:11:55.360 --> 0:11:57.800 a headfake? Are people getting a little too carried away 0:11:57.800 --> 0:12:01.080 with the narrative that sentiment is toora so rapidly that 0:12:01.120 --> 0:12:02.840 spending is falling off a cliff, and that's going to 0:12:02.840 --> 0:12:04.920 stein me any kind of American exceptionalism. 0:12:05.160 --> 0:12:06.720 Would you push back against. 0:12:06.440 --> 0:12:08.320 That and say, actually, what we see is just the 0:12:08.320 --> 0:12:11.400 same of what we saw before, which is a moderating trend. 0:12:11.440 --> 0:12:14.120 People looking for value, but otherwise a consumer that's still 0:12:14.120 --> 0:12:15.720 pretty healthy. 0:12:16.520 --> 0:12:19.520 That's right, a moderating trend, and you really do have 0:12:19.600 --> 0:12:24.400 to separate what sentiment says versus what consumers are actually doing. 0:12:24.880 --> 0:12:27.720 And so that spend data, the grossery trends that we 0:12:27.840 --> 0:12:31.120 talked about, the overall spent that is what consumers are 0:12:31.160 --> 0:12:34.160 actually doing, and we do at times see a difference 0:12:34.200 --> 0:12:37.520 in sentiment and their actual behavior, and I think that's 0:12:37.720 --> 0:12:42.000 very important. So again, continued forward momentum, but at a 0:12:42.040 --> 0:12:45.400 more measured pace for the consumer. We did not see 0:12:45.440 --> 0:12:47.439 spend fall off a cliff. As you said. 0:12:47.600 --> 0:12:50.160 We've also talked about the fact that delinquencies on credit 0:12:50.200 --> 0:12:53.120 cards have been creeping higher. We have seen some signs 0:12:53.160 --> 0:12:56.760 of distress in auto loans. I'm just wondering where fact 0:12:56.800 --> 0:12:59.840 mats fiction right, where stories have gotten carried away from 0:12:59.840 --> 0:13:04.400 your each other, from themselves, versus any kind of true 0:13:04.840 --> 0:13:07.520 warning signs that you're seeing in any of the trends 0:13:07.520 --> 0:13:08.199 that you monitor. 0:13:10.080 --> 0:13:14.120 So from a credit perspective, we're seeing a very normalized 0:13:14.240 --> 0:13:18.760 environment at Bank of America, and in fact, we're seeing delinquencies, 0:13:18.840 --> 0:13:21.440 you know, somewhat stabilized and are expecting them to come 0:13:21.480 --> 0:13:24.640 down as the year goes forward. So we're not seeing 0:13:24.679 --> 0:13:27.280 any unusual patterns there and I would call it a 0:13:27.360 --> 0:13:30.640 very normalized credit environment from what we're seeing with our clients. 0:13:30.960 --> 0:13:34.719 You mentioned the potential tariff impact in your report. What 0:13:34.840 --> 0:13:37.120 sectors is that is that are you seeing that bleed 0:13:37.160 --> 0:13:40.520 into this potential increase in prices when it and then 0:13:40.559 --> 0:13:42.880 potentially what it might be harder for consumers. 0:13:44.720 --> 0:13:47.560 So we'll look at the consumer as a whole, right, 0:13:47.720 --> 0:13:50.320 and we'll look at high income consumers. We'll look at 0:13:50.320 --> 0:13:54.679 low income income consumers and watch what their patterns are. 0:13:54.720 --> 0:13:57.480 But as we talked about with the groceries, consumers do 0:13:57.679 --> 0:14:01.439 self regulate with shifting price and I would expect nothing 0:14:01.480 --> 0:14:06.040 different no matter what tariff environment comes through. So we'll 0:14:06.080 --> 0:14:09.600 watch the consumers really closely as to how they adjust 0:14:09.640 --> 0:14:12.200 their spending patterns if prices were to increase. 0:14:12.600 --> 0:14:15.960 Do you see any policies out of Washington hitting consumers 0:14:16.040 --> 0:14:17.560 right now? Besides trade? 0:14:19.600 --> 0:14:22.880 We are not, I mean again, across the board, we're 0:14:22.920 --> 0:14:28.560 seeing very normalized, good momentum with the consumer overall, so 0:14:28.600 --> 0:14:33.120 we're not seeing anything underneath from Washington come through. 0:14:32.920 --> 0:14:35.320 Now, Hollie. Just to finish on what's been happening with 0:14:35.360 --> 0:14:38.160 interest rates. Interest rates have stayed much higher for longer 0:14:38.240 --> 0:14:40.880 the Federal reserve, but rates of the long end something 0:14:40.880 --> 0:14:43.520 that this administration has celebrates that have started to move lower, 0:14:43.760 --> 0:14:46.200 which is important for mortgages. What are you seeing in 0:14:46.280 --> 0:14:49.000 terms of credit access and our consumers trying to step 0:14:49.080 --> 0:14:50.120 up or they hold him back. 0:14:51.920 --> 0:14:55.880 I would say consumers continue to borrow. Consumers continue to 0:14:55.920 --> 0:14:58.240 borrow at a normalized rate, and we see that in 0:14:58.240 --> 0:15:01.880 our credit card data. Bridge borrowing from our credit card 0:15:01.920 --> 0:15:06.240 borrowers is slightly above where it was pre pandemic, so 0:15:06.640 --> 0:15:09.400 they still have access to credit. I think from a 0:15:09.440 --> 0:15:13.280 mortgage perspective, we haven't quite seen the demand really fled 0:15:13.360 --> 0:15:17.160 back into the market. We're still seeing purchase volume, but 0:15:17.280 --> 0:15:20.960 again because of the rate environment, that refive volume is 0:15:20.960 --> 0:15:24.120 certainly at the lower end. But that's something that we 0:15:24.160 --> 0:15:26.560 would expect to come back as the rates change. 0:15:26.760 --> 0:15:29.000 Holly appreciate it. This was an important update on a 0:15:29.040 --> 0:15:30.920 day where a lot of people are concerned about the 0:15:30.920 --> 0:15:43.760 consumer Holly O'Neil there of Bank of America. So there's 0:15:43.760 --> 0:15:46.320 the lasst this morning. US Treasury is rallying yesterday as 0:15:46.360 --> 0:15:49.400 the S and P five hundred nearest correction territory. Kelsey 0:15:49.400 --> 0:15:52.840 Barrow of JP Morgan, writing, amid the uncertainty, one detail 0:15:52.960 --> 0:15:55.960 is clear, an allocation to high quality fixed income is 0:15:56.000 --> 0:15:59.800 once again serving as a diversifying ballast in investor por 0:15:59.800 --> 0:16:02.400 fo oleos Cansey joined us Now for more. Calsey, good morning, 0:16:02.400 --> 0:16:02.880 Good to see you. 0:16:03.120 --> 0:16:03.600 Good morning. 0:16:03.720 --> 0:16:05.840 Let's pick up on what Steve Scheferin said there at 0:16:05.840 --> 0:16:09.400 the end, maybe some austerity in America, and I stress maybe, 0:16:09.800 --> 0:16:12.720 and you put that up against perhaps a real expansion 0:16:12.760 --> 0:16:16.360 of the fiscal deficit over in places like Germany. What 0:16:16.400 --> 0:16:19.960 does that mean for treasuries in an international bond market. 0:16:20.520 --> 0:16:23.280 Yeah, so I think that you've hit on a really 0:16:23.360 --> 0:16:26.640 key point. We've been very focused on the US what's 0:16:26.720 --> 0:16:30.920 happening in the White House, but there are seismic shifts 0:16:31.000 --> 0:16:35.920 happening outside of the US right now, and the shift 0:16:36.040 --> 0:16:40.840 in Europe towards defense spending and towards infrastructure spending is 0:16:41.600 --> 0:16:46.280 really an important shift that we're seeing. And while we're 0:16:46.280 --> 0:16:50.000 talking about in the US that bonds are serving as 0:16:50.040 --> 0:16:54.160 a diversifying safe haven. So while stocks are going down, 0:16:54.480 --> 0:16:58.200 bond prices you have US treasuries, agency, mortgages, investment, good 0:16:58.200 --> 0:17:00.480 credit all up in price yesterday. 0:17:01.240 --> 0:17:02.880 In Germany you have. 0:17:03.160 --> 0:17:06.639 Essentially the opposite, which is bonds have been hit massively, 0:17:06.720 --> 0:17:10.440 body yields are up, but stocks are up in Europe too. 0:17:10.800 --> 0:17:14.760 One of the biggest trades that's been in place for 0:17:14.840 --> 0:17:18.840 at least a year has been the investment of foreign 0:17:18.920 --> 0:17:22.800 investors in US equities on an unhedged basis. 0:17:23.160 --> 0:17:23.320 Right. 0:17:23.720 --> 0:17:26.400 They wanted the US equities and they wanted it unheedged 0:17:26.440 --> 0:17:28.600 because nothing's ever going to happen to the dollar, right. 0:17:29.080 --> 0:17:31.800 That I think is the biggest trade that is in 0:17:31.880 --> 0:17:34.120 the process of being re evaluated right now. 0:17:34.240 --> 0:17:36.960 You think we're unwinding that big dollar long we've built 0:17:37.000 --> 0:17:39.920 up over the last several years. That is what it appears. 0:17:39.960 --> 0:17:42.199 It's not going to be a straight line, right. But 0:17:42.280 --> 0:17:45.840 I do think that what has been underestimated is not 0:17:46.240 --> 0:17:50.000 what the US is doing, because that's been out there. 0:17:50.160 --> 0:17:53.240 Trump's been talking about tariffs, Trump's been talking about layoffs. 0:17:53.760 --> 0:17:58.239 What's been underestimated is the response from the rest of 0:17:58.280 --> 0:18:01.520 the world. We knew they would respond, the magnitude of 0:18:01.520 --> 0:18:04.080 the response has been the surprise. 0:18:04.720 --> 0:18:09.159 There's a real question embedded in this observation about the 0:18:09.200 --> 0:18:12.359 shift in the balance of dollars and the dollar long, 0:18:12.840 --> 0:18:16.200 which is, if money is moving away from the United States, 0:18:16.760 --> 0:18:19.800 do long term treasuries offer the same kind of ballast 0:18:20.240 --> 0:18:22.320 or will there not be the same degree of demand 0:18:22.400 --> 0:18:25.120 for them because some of that money is diverted elsewhere, 0:18:25.160 --> 0:18:26.320 say to Germany. 0:18:27.200 --> 0:18:30.879 So I think that we can differentiate a bit between 0:18:31.400 --> 0:18:35.399 the equity markets and the dollar trade and the bond trade. 0:18:36.680 --> 0:18:39.360 Typically you think about them together, but what we've seen 0:18:39.440 --> 0:18:41.840 over the past few weeks is you can have periods 0:18:41.840 --> 0:18:45.400 where the treasury market is getting a bid, long term 0:18:45.480 --> 0:18:50.240 years are falling, and the dollar is softening modestly. It 0:18:50.320 --> 0:18:52.720 sounds like a bit of a paradox, but I do 0:18:52.760 --> 0:18:56.200 think it's something that can continue to occur. One thing 0:18:56.320 --> 0:18:58.960 that will be on investors' minds as we move forward 0:18:59.720 --> 0:19:04.160 is the deficit trajectory. Right in the two places in Europe, 0:19:04.440 --> 0:19:09.080 we're seeing for the first time. Germany is considering a deficit, 0:19:09.520 --> 0:19:13.399 considering more deficits as an advantage to them. At the 0:19:13.440 --> 0:19:18.400 same time, the US is considering the fact that deficits 0:19:18.920 --> 0:19:21.399 are not our friend anymore and we need to be 0:19:21.520 --> 0:19:26.680 managing them much more closely. As long as those two 0:19:27.080 --> 0:19:30.879 that sentiment continues, I think that you can continue to 0:19:30.920 --> 0:19:34.359 see the support in long end treasuries, and on the 0:19:34.400 --> 0:19:38.560 other hand, I would expect Europe Germany to continue to underperform. 0:19:38.600 --> 0:19:40.280 I would love you to have a debate with Asha 0:19:40.320 --> 0:19:43.320 Ka Batya of Newburger Berman, who is on the show yesterday. 0:19:43.480 --> 0:19:45.560 At some point I would love to witness you guys 0:19:45.560 --> 0:19:47.520 have a discussion about this. He was saying, he actually 0:19:47.560 --> 0:19:49.840 is getting a little bit more bearish on long term treasuries. 0:19:50.119 --> 0:19:52.840 What he sees is this concern that even as people 0:19:52.880 --> 0:19:56.720 price in federalers or rate cuts, that stickiness and inflation 0:19:56.880 --> 0:19:59.399 and that real kind of floor under how far the 0:19:59.440 --> 0:20:02.280 Fed can go, and ongoing deficit concerns that they're not 0:20:02.320 --> 0:20:06.000 going to get fixed by simply cutting on the edges. 0:20:06.080 --> 0:20:08.720 It will take something more sustainable is going to really 0:20:09.080 --> 0:20:11.600 create a problem longer term for the United States and 0:20:11.640 --> 0:20:14.240 for the Federal Reserve. Why do you disagree with that 0:20:14.240 --> 0:20:16.400 that the term premium is just going to be structurally 0:20:16.480 --> 0:20:18.280 higher in the United States. 0:20:18.000 --> 0:20:22.160