WEBVTT - How Equities are Pricing in Trump Policies 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.240 --> 0:00:30.120 The Conversation of the Day, Amy with Silverman, joins us 0:00:30.280 --> 0:00:34.480 from the Royal Bank of Canada RBC Capital Markets. Amy, 0:00:34.520 --> 0:00:37.640 you take the four cross moments and you bringing it 0:00:37.720 --> 0:00:43.800 into the dispersion in the market, the huge variance of opinions. 0:00:44.200 --> 0:00:48.440 How does one navigate the markets with such wide dispersion? 0:00:50.640 --> 0:00:53.239 Hi, Tom, Yeah, it's a great question. It's one that 0:00:53.320 --> 0:00:55.800 folks have been noodling on because when you do have 0:00:55.920 --> 0:00:58.880 high dispersion in the market, so meaning some stocks are 0:00:58.880 --> 0:01:01.240 going one way, others are going the other way, you 0:01:01.320 --> 0:01:04.200 do have this effect of it kind of canceling out 0:01:04.240 --> 0:01:07.640 on the index level and making signals like the VIX 0:01:07.760 --> 0:01:10.680 look lower than I think we feel it ought to be. Right, 0:01:10.959 --> 0:01:13.800 you have closed the closed VIX hasn't even surpassed that twenty, 0:01:14.200 --> 0:01:16.600 but we all feel the whiplash of those headlines and 0:01:16.680 --> 0:01:19.319 part of the culprit for why it feels lower from 0:01:19.319 --> 0:01:22.679 a volatility perspective, is that dispersion is so high, we 0:01:22.680 --> 0:01:27.000 don't have this big correlated co move particularly during earning. 0:01:27.520 --> 0:01:29.640 And now as we go into February, we have our 0:01:29.680 --> 0:01:33.480 Hobbsey and double negative moment with Amy Woo Silverman. Amy, 0:01:33.680 --> 0:01:36.760 is it what I do do in the market or 0:01:36.880 --> 0:01:39.920 is what matter now? What I avoid, what I do 0:01:40.080 --> 0:01:41.960 not choose to do. 0:01:44.080 --> 0:01:47.319 You know, when you have these high dispersion environments, it 0:01:47.600 --> 0:01:51.120 really really matters what you what you do do. And 0:01:51.200 --> 0:01:53.760 you know, my favorite stat about this is you could 0:01:53.760 --> 0:01:55.720 have the same level of vix tom, you could have 0:01:55.760 --> 0:01:58.040 the same level s and P draw down, but in 0:01:58.040 --> 0:02:00.680 a high dispersion environment, if you made the right stock 0:02:00.720 --> 0:02:03.640 pick versus the wrong stock pick, you know, that outperformance 0:02:03.680 --> 0:02:06.760 differential could really be huge. It really matters if you're 0:02:06.760 --> 0:02:08.600 in the right sector. Is it really matters if you're 0:02:08.600 --> 0:02:11.720 in the right stocks versus a high correlation environment where 0:02:11.720 --> 0:02:13.960 it's all macro, we're all riding one wave. 0:02:14.200 --> 0:02:16.720 She's like the Queen of active management. I mean, that's 0:02:16.720 --> 0:02:18.960 what we're talking about here. Amy. 0:02:19.000 --> 0:02:20.679 There seems to be you know, now we have a 0:02:21.240 --> 0:02:24.120 President Trump back in office. Here, the the headline risk 0:02:24.200 --> 0:02:27.160 seems to be back into this market. How do you 0:02:27.200 --> 0:02:30.760 suggest that investors hedge that? Should they hedge that, should 0:02:30.760 --> 0:02:32.760 they not worry about it? Should they look through it? 0:02:33.400 --> 0:02:33.959 What do you say? 0:02:35.760 --> 0:02:38.120 You know, look, I, first of all, I don't drive, 0:02:38.160 --> 0:02:40.680 but for some reason, I really like driving analogies and 0:02:40.720 --> 0:02:44.920 my volatility outlook was called watch out for potholes. And 0:02:44.919 --> 0:02:47.079 that's exactly what we're going to get. You know, when 0:02:47.120 --> 0:02:50.280 you have someone like Trump in power, it's we're just talking. 0:02:50.520 --> 0:02:52.640 There are these potholes you're going to get. It could 0:02:52.639 --> 0:02:54.320 be like in August fifth, it could be like a 0:02:54.360 --> 0:02:56.560 February twenty eighteen. You know, we got our fingers and 0:02:56.600 --> 0:02:59.040 toes cross. But because of that, you know, I do 0:02:59.080 --> 0:03:02.120 think hedging makes sense, and simply because the positioning has 0:03:02.120 --> 0:03:05.200 gotten a lot more long after two consecutive twenty plus 0:03:05.240 --> 0:03:08.639 percent s a p years, right, there's just more to hedge. 0:03:08.680 --> 0:03:11.200 And we do see that starting to climb up in 0:03:11.240 --> 0:03:14.079 the skw in Tom's favorite word, the Kurtross, you are 0:03:14.120 --> 0:03:16.800 seeing that hedging demand rise much more than it has 0:03:16.919 --> 0:03:18.280 in the past two years. 0:03:18.760 --> 0:03:22.000 So I guess maybe one of the more recent headlines 0:03:22.240 --> 0:03:26.120 risk has just been terrorists. Do your clients care about that? 0:03:26.440 --> 0:03:28.120 Do they think it's a risk. Do they kind of 0:03:28.160 --> 0:03:31.079 look through that and say, hey, it's just a negotiating tool. 0:03:31.080 --> 0:03:32.840 We're not going to worry about the economic impacts. 0:03:34.680 --> 0:03:36.800 You know, it's so funny when we have these kind 0:03:36.840 --> 0:03:40.640 of macro client round tables. The most surprising kind of 0:03:40.760 --> 0:03:44.280 anecdote I can tell you is clients just say that 0:03:44.400 --> 0:03:47.600 they believe Trump will manage the stock market. And obviously 0:03:47.640 --> 0:03:50.240 there's no sort of fundamental analysis there. But I can't 0:03:50.280 --> 0:03:52.440 tell you how many times I've heard that that they 0:03:52.560 --> 0:03:54.880 just think the stock market will be okay, that this 0:03:55.000 --> 0:03:58.080 is all just part of a negotiation tactic. And that's 0:03:58.120 --> 0:04:00.920 another reason why I think you don't see these volatiley 0:04:00.960 --> 0:04:03.880 potholes kind of priced out to these fat or left 0:04:03.960 --> 0:04:06.360 tails that you feel like they ought to be given 0:04:06.400 --> 0:04:08.960 the headlines that you know, that is anecdotally what investors 0:04:09.000 --> 0:04:09.560 keep telling me. 0:04:09.720 --> 0:04:12.119 I'm reading Roger Altman as I try to get into 0:04:12.120 --> 0:04:14.760 the baseball season, one of his classic books from Here's Ago, 0:04:14.760 --> 0:04:18.120 It's a Tigers in nineteen sixty eight. Norm cash ol 0:04:18.200 --> 0:04:21.080 Kline amys Woo doesn't know what this is, but the 0:04:21.160 --> 0:04:24.800 answer is the baseball analogy, Amy Wood. It sort of 0:04:24.839 --> 0:04:27.359 like a batting average, thirty percent of the stocks go 0:04:27.520 --> 0:04:31.760 up in seventy percent don't really participate. Which way are 0:04:31.760 --> 0:04:34.640 we in that direction? Are we talking about fewer winners 0:04:35.200 --> 0:04:38.000 in more malaise or the other way around? 0:04:39.760 --> 0:04:41.960 You know, I really think investors hope it's the other 0:04:42.000 --> 0:04:44.200 way around. And we've seen fits and starts of that, 0:04:44.360 --> 0:04:47.800 right So, you particularly after the deep seek news, there 0:04:47.880 --> 0:04:50.719 was this question of if Megacaptec's going to keep holding 0:04:50.960 --> 0:04:53.200 us up? And when you saw that rotation, when that 0:04:53.279 --> 0:04:55.160 Monday that news came out, where did we go to? 0:04:55.200 --> 0:04:57.839 We went to all the breadth widening trades that have 0:04:57.920 --> 0:05:00.040 had fits and starts since last year. But I do 0:05:00.080 --> 0:05:03.039 you think that's what investors still believe is their keystone 0:05:03.440 --> 0:05:05.839 for this market being healthy. Of course, make a captech 0:05:05.880 --> 0:05:07.760 has to be, okay, Tom, it's just too much of 0:05:07.760 --> 0:05:10.719 a concentration not to be. But you know, small mid 0:05:10.760 --> 0:05:13.640 cap or what breadth widening traits that that's still what 0:05:13.720 --> 0:05:16.200 investors are really hoping for this market to be bowied 0:05:16.279 --> 0:05:17.120 up to this year. 0:05:17.839 --> 0:05:20.560 Amy, where do you see value in this market? I 0:05:20.560 --> 0:05:22.599 think some people, you know, they're trying to get away 0:05:22.640 --> 0:05:24.760 a little bit from maybe the mag seven kind of 0:05:24.800 --> 0:05:27.800 concentration risk into this market looking for maybe some value 0:05:27.839 --> 0:05:28.440 outside of that. 0:05:28.480 --> 0:05:29.760 Where do you guys see that? 0:05:31.640 --> 0:05:33.960 So one thing that we've talked about as one of 0:05:33.960 --> 0:05:38.320 our pillars for hedging is because you have this index suppression, 0:05:38.360 --> 0:05:41.680 you know SMP hedging may not necessarily be your best bet. 0:05:41.800 --> 0:05:44.000 We have a lot of thematic baskets where we think 0:05:44.040 --> 0:05:46.320 that hedging differential makes a lot of sense. So you know, 0:05:46.520 --> 0:05:48.880 if you believe in I versus you don't believe in 0:05:48.880 --> 0:05:52.600 an A actually using those thematic basket differentials and hedges 0:05:52.720 --> 0:05:54.520 versus using your traditional tools. 0:05:54.600 --> 0:05:58.200 Like we keep us out of suspense, I understand the 0:05:58.200 --> 0:06:01.800 New York Mets are the attic basket, particularly after bringing 0:06:01.839 --> 0:06:05.080 Alonzo on board. Give us an example, Amy with Silverman 0:06:05.400 --> 0:06:07.360 of a thematic basket. 0:06:08.680 --> 0:06:11.120 So we have a lot of them, and it's it's 0:06:11.120 --> 0:06:13.320 sort of you know, it's very driven by clients. But 0:06:13.600 --> 0:06:18.120 a good example is what stocks would benefit from AI continuing. 0:06:18.160 --> 0:06:20.520 They don't necessarily have to be AI specific names. They 0:06:20.520 --> 0:06:23.080 could be AI adjacent names like utilities. And then we 0:06:23.400 --> 0:06:26.400 have the opposite, right, we have your traditional cyclical baskets. 0:06:26.600 --> 0:06:29.480 When you look at that differential TOM in the weighted 0:06:29.480 --> 0:06:32.599 average applied volatilities. To me, that gives you a much 0:06:32.640 --> 0:06:35.560 better sense of where risk is right now than just 0:06:35.680 --> 0:06:38.839 purely using something like the SMP index. And we look 0:06:38.880 --> 0:06:41.599 at those differentials really closely because it gives us a 0:06:41.640 --> 0:06:44.919 sense much more of skew nowadays than just looking at 0:06:44.920 --> 0:06:45.600 the index level. 0:06:45.600 --> 0:06:47.760 Okay, well, where's the value trap right now? On a 0:06:47.839 --> 0:06:50.600 quantitative basis when you look at the harmful you got 0:06:50.640 --> 0:06:55.360 to hedge? And if you want to avoid a value trap, 0:06:55.800 --> 0:06:58.919 how do you study that? And what do you avoid? 0:07:00.760 --> 0:07:03.360 You know, I think what you avoid right now is 0:07:03.920 --> 0:07:07.360 getting trapped in the dispersion on that index level. So 0:07:07.440 --> 0:07:10.160 for instance, you know, if you are thinking about a 0:07:10.200 --> 0:07:12.440 hedge right now, you may actually be better off with 0:07:12.520 --> 0:07:16.520 idiosyncratic hedges because of where dispersion is than using something 0:07:16.720 --> 0:07:19.640 like S and P or something that is much more 0:07:19.760 --> 0:07:22.280 going to benefit if you get a pickup in correlation. 0:07:22.480 --> 0:07:24.800 To me, that's the difference right now in this market 0:07:25.080 --> 0:07:27.920 that wasn't true in a higher correlation environment. To me, 0:07:27.960 --> 0:07:30.280 that's the trick right now when you're thinking about hedging 0:07:30.280 --> 0:07:30.640 your reports. 0:07:31.840 --> 0:07:34.640 I mean, that's just what she just said there. 0:07:34.720 --> 0:07:37.680 Let me translated, folks, She said, use the Boston Red 0:07:37.760 --> 0:07:39.240 Sox as an age. 0:07:39.520 --> 0:07:40.440 That's what she said. 0:07:40.720 --> 0:07:44.120 Amy, You know what, the stock markets adder near all 0:07:44.160 --> 0:07:47.880 time highs. Here are you seeing downside protection? Are folks 0:07:48.000 --> 0:07:49.680 hedging some of their gains? 0:07:49.680 --> 0:07:49.840 Here? 0:07:51.680 --> 0:07:55.040 They are? They? And you know, to me, it's really interesting, 0:07:55.120 --> 0:07:57.760 right because if you look the past two years, we 0:07:57.760 --> 0:08:01.560 were in this fomo yolo market, one was buying call options. 0:08:01.600 --> 0:08:03.720 But you know, the one distinction I'll tell you is 0:08:03.760 --> 0:08:07.280 it's really a dichotomy between what institutional investors are doing 0:08:07.360 --> 0:08:10.800 and what retail is doing. We're actually still continuing to 0:08:10.880 --> 0:08:13.800 see that fits to the right tail on the retail side, 0:08:13.840 --> 0:08:17.400 it's mostly the institutional investors that are now thinking more 0:08:17.640 --> 0:08:20.000 about protecting their portfolio. And then that goes back to 0:08:20.040 --> 0:08:21.840 what I had said earlier about well, how do we 0:08:21.880 --> 0:08:25.040 protect our portfolios right now in a high dispersion environment. 0:08:25.080 --> 0:08:27.560 You know, do we use our traditional indices or do 0:08:27.640 --> 0:08:30.760 we think much more sector and stock specific, use those 0:08:31.080 --> 0:08:33.079 thematic baskets. I don't know baseball at all, but I 0:08:33.120 --> 0:08:35.320 guess they're like the Boston Red Sox, but you know, 0:08:35.480 --> 0:08:38.600 be much more specific about that in an environment where 0:08:38.600 --> 0:08:40.400 you know, some things are going one way and some 0:08:40.440 --> 0:08:41.800 things are going the other way. 0:08:42.080 --> 0:08:43.840 When you see the ten year yield come in, I 0:08:43.840 --> 0:08:46.880 mean it's more like a Francis Donald question. But when 0:08:46.880 --> 0:08:49.920 you see the yield space come in in the somewhat 0:08:49.960 --> 0:08:53.840 exuberance within the cacophony of political news, including in Canada 0:08:54.320 --> 0:08:56.840 any with Silverman, is this a bull market? And the 0:08:56.880 --> 0:09:00.240 answer is, I'm sorry, we're printing higher at seeames. 0:09:02.040 --> 0:09:04.679 We certainly are. And you know, to me, it's one 0:09:04.720 --> 0:09:07.120 of those like it's going to be great until you 0:09:07.160 --> 0:09:09.600 get that volatility potfule, right, it's going to be great 0:09:09.640 --> 0:09:12.199 till you get that August fifth or that February twenty eighteen. 0:09:12.280 --> 0:09:14.199 But you know, the one thing I'll say about what 0:09:14.240 --> 0:09:17.880 Besson said about targeting that yield versus marketing rates is 0:09:18.679 --> 0:09:21.360 we have to really be careful Tom about watching the 0:09:21.520 --> 0:09:26.239 rates versus equity wall correlations changing, because that's a relationship 0:09:26.280 --> 0:09:28.960 we've been counting on, just like bond equity correlations. But 0:09:29.000 --> 0:09:31.160 you know, when people start to kind of say we're 0:09:31.240 --> 0:09:33.679 thinking about this, then you have to watch that relationship 0:09:33.720 --> 0:09:35.760 because if that breaks, we see a lot of other 0:09:35.800 --> 0:09:37.040 things breaking to I. 0:09:37.040 --> 0:09:39.800 Mean, nobody cares. All they want to know is skylt 0:09:39.800 --> 0:09:45.040 Caruso over People Magazine has Jason confirming Taylor Swift will 0:09:45.040 --> 0:09:48.760 be at the Super Bowl to support Travis. Okay, great, 0:09:49.280 --> 0:09:52.960 we have to remind everyone, Amy Wu Silverman dragged I say, 0:09:53.080 --> 0:09:56.360 dragged her daughter to see Taylor. So they said they're 0:09:56.400 --> 0:10:00.360 looking and screaming like Row six or something. I mean, Taylor, 0:10:01.080 --> 0:10:04.040 Adam and all that. Give us a Taylor Swift update, 0:10:04.320 --> 0:10:06.400 Amy Wo Silverman, I mean, do you go with the 0:10:06.520 --> 0:10:08.840 Chiefs just because she's going to darken the door in 0:10:08.880 --> 0:10:09.520 New Orleans? 0:10:11.480 --> 0:10:11.920 I guess. 0:10:12.040 --> 0:10:14.600 Look, I know so little about football, like it's worse 0:10:14.640 --> 0:10:17.560 than what I know about baseball. But if that's where 0:10:17.559 --> 0:10:19.600 tem Taylor is, I guess that's where we are too, 0:10:19.679 --> 0:10:20.600 So go chief. 0:10:20.880 --> 0:10:24.040 Okay, Amy Wo Silverman, thank you so much, greatly appreciate it. 0:10:24.160 --> 0:10:26.439 RBC Capital Markets. 0:10:31.400 --> 0:10:35.000 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:10:35.040 --> 0:10:38.200 weekday afternoons from seven to ten am Eastern. Listen on 0:10:38.280 --> 0:10:41.960 Applecarplay and Android Otto with the Bloomberg Business app, or 0:10:42.120 --> 0:10:43.560 watch us live on YouTube. 0:10:43.679 --> 0:10:48.400 David Rosenberg leads his note this morning with comments on 0:10:48.440 --> 0:10:51.520 the Secretary of Treasury. David just to begin with, can 0:10:51.559 --> 0:10:55.880 the Secretary of Treasury single handedly lower the ten year yield. 0:10:58.640 --> 0:11:01.959 No US, there you go. 0:11:02.480 --> 0:11:04.520 So what do you expect to hear from our secretary 0:11:04.520 --> 0:11:07.040 of the treasure What would you like to hear from 0:11:07.360 --> 0:11:08.079 the secretary? 0:11:09.200 --> 0:11:13.280 Well, you know, I mean the assumption is that Besson 0:11:13.360 --> 0:11:16.640 has any real influence on the president. I think that 0:11:17.760 --> 0:11:19.400 we don't really know the answer to that. But we 0:11:19.520 --> 0:11:22.360 know that Donald Trump is going to do what he 0:11:22.400 --> 0:11:26.480 wants to do. So it really comes down to you know, 0:11:27.280 --> 0:11:30.920 what he says and ultimately what he does and what 0:11:31.080 --> 0:11:34.880 you think his objectives are. But to me, you know, 0:11:34.960 --> 0:11:39.280 the most important voice, by far is what the President 0:11:39.280 --> 0:11:41.360 has to say. I don't think Scott Besson has the 0:11:41.360 --> 0:11:44.960 same degree of influence on Trump say that Bob Rubin 0:11:45.040 --> 0:11:45.920 may have had on. 0:11:46.480 --> 0:11:47.840 Bill Clinton back in the day. 0:11:48.000 --> 0:11:51.400 So, you know, tremendous respect for the Treasury secretary, but 0:11:51.600 --> 0:11:53.520 I question just how much influence he really has. 0:11:53.600 --> 0:11:55.440 We're going to get to this with David Rosenberg. I 0:11:55.480 --> 0:11:57.680 did a panel with him up in Toronto. It was 0:11:57.760 --> 0:12:01.319 like riveting on the politics of Canada and the I've 0:12:01.320 --> 0:12:04.480 been reading the Globe and mail, David Shreeman and others 0:12:04.520 --> 0:12:04.680 up there. 0:12:04.720 --> 0:12:05.880 I want to get to that in a moment. 0:12:06.160 --> 0:12:10.120 You have a headline David Rosenberg's classic David, and it's 0:12:10.160 --> 0:12:15.120 the bond bullion barbell outpaces the equity market. 0:12:15.440 --> 0:12:16.800 To me, that's fascinating. 0:12:17.120 --> 0:12:21.839 Describe the bond bullion barbell. 0:12:21.960 --> 0:12:29.040 Well, it's the barbell or the blended return between the 0:12:29.080 --> 0:12:36.439 two save havens, which are treasuries and gold, which combined 0:12:36.679 --> 0:12:40.880 have generated a total return of around six percent so 0:12:40.960 --> 0:12:43.920 far this year, the SMB one hundred total returns four 0:12:43.960 --> 0:12:47.000 and a half percent. Just a reminder to people out 0:12:47.040 --> 0:12:49.800 there who have ice in their veins and the risk 0:12:49.920 --> 0:12:54.560 on momentum trade that's dominating the headlines that actually, when 0:12:54.600 --> 0:12:58.600 you look risk for reward, combined bonds and gold have 0:12:58.679 --> 0:13:03.160 actually been a better strategy year to date, still early on, 0:13:04.160 --> 0:13:07.079 than the equity market's been. So that was basically the 0:13:07.080 --> 0:13:10.360 message is that if you're looking for alternatives, that particular 0:13:10.400 --> 0:13:13.760 strategy is actually a great stabilizer, not just a stabilizer, 0:13:14.160 --> 0:13:16.800 but also is adding alpha to your total portfolio. 0:13:17.640 --> 0:13:19.760 David Tomorrow, here in the United States, we're going to 0:13:19.800 --> 0:13:22.000 get the non farm payrolls here. 0:13:22.160 --> 0:13:23.120 What are you looking for? 0:13:23.240 --> 0:13:23.440 Him? 0:13:23.800 --> 0:13:25.920 How do you think the Fed's gonna kind of look 0:13:25.920 --> 0:13:26.480 at this data? 0:13:27.640 --> 0:13:30.960 Well, it's a great question. I mean, the question is 0:13:30.960 --> 0:13:34.840 not just about non farm payrolls, but about just the 0:13:34.920 --> 0:13:37.640 data right now in general. How much influence are they 0:13:37.640 --> 0:13:40.640 going to have because the Fed is already lead down 0:13:40.679 --> 0:13:44.080 the gauntlet that nothing is happening in the first half 0:13:44.080 --> 0:13:46.360 of the year. And you remember, you go back a 0:13:46.400 --> 0:13:48.400 few months ago, we had a ton of rate cuts 0:13:48.760 --> 0:13:52.800 being priced in immediately, and that's not happening because of 0:13:52.840 --> 0:13:57.200 all the Trump uncertainty. So I'm not so sure that 0:13:57.520 --> 0:14:00.160 tomorrow's number is going to have a big influence on 0:14:00.200 --> 0:14:04.120 the Fed. Of course, you know, the markets trade around it. 0:14:04.600 --> 0:14:06.559 We just had back to back months. You know the 0:14:07.040 --> 0:14:11.440 new Powell inflation indicators no longer you know the super core, 0:14:12.640 --> 0:14:17.360 you know the CPI X energy X shelter. It's the 0:14:17.400 --> 0:14:20.960 market based core pc the flavor, which he's discussed several times, 0:14:21.680 --> 0:14:25.040 and that metric has come in at zero point one 0:14:25.080 --> 0:14:29.280 percent each of the past two months. And I think 0:14:29.320 --> 0:14:33.960 without all the Trump uncertainty, especially regarding tariffs, and you 0:14:33.960 --> 0:14:36.800 could argue also a fiscal policy, although right now fiscal 0:14:36.840 --> 0:14:39.160 policy is tightening on the spending side, so it's really 0:14:39.200 --> 0:14:42.480 mostly about tariffs. The FED would still be talking about 0:14:42.480 --> 0:14:44.640 cutting rates right now. When you're talking about what the 0:14:44.720 --> 0:14:49.280 trend in the market based core PC to flavor, you know, 0:14:49.440 --> 0:14:51.760 it's running now on a three and six month basis 0:14:52.320 --> 0:14:54.880 right of the two percent target. And this has become 0:14:55.080 --> 0:14:59.080 Powell's favorite indicator. But they're actually signaling that they're on 0:14:59.160 --> 0:15:02.880 hold in definitely, and that's because of all the policy 0:15:02.920 --> 0:15:05.240 uncertainty that we have in front of us, and we 0:15:05.280 --> 0:15:07.080 have to wait for that clarity to come to the 0:15:07.120 --> 0:15:09.040 fore whenever it does come to the fore. But the 0:15:09.080 --> 0:15:12.560 Fed right now is signaling nothing's going on rate wise 0:15:12.640 --> 0:15:16.200 until the summer. So tomorrow's number, I don't think is 0:15:16.240 --> 0:15:18.560 going to bear a lot unless you know, we're going 0:15:18.640 --> 0:15:22.280 to get revisions to the household survey and the payroll survey. 0:15:22.360 --> 0:15:24.320 They'll probably show some convergence. 0:15:24.320 --> 0:15:27.240 We're going to get, you know, the numbers coming off 0:15:27.280 --> 0:15:31.280 that new population count based on the immigration file or 0:15:31.320 --> 0:15:33.640 the previous boom and immigration. So the question for me 0:15:33.760 --> 0:15:36.760 is going to be the big number tomorrow Actually after 0:15:36.800 --> 0:15:39.200 we all look at the non farm payroll headline and 0:15:39.240 --> 0:15:42.640 the visions is what how did this affect the unemployment rate? 0:15:44.040 --> 0:15:46.440 And so so far as that nudge is the unemployment 0:15:46.480 --> 0:15:49.840 rate up tells the fad, there's more slack than they thought, 0:15:50.840 --> 0:15:54.160 and that could you know, maybe bring marginally the date 0:15:54.200 --> 0:15:56.480 forward for when they might start cutting interest rates again. 0:15:56.560 --> 0:15:58.640 But to me, nothing much beyond that. 0:15:59.280 --> 0:16:01.000 David, I know in your note this morning, you talk 0:16:01.040 --> 0:16:04.480 about the US trade deficit and the big dent to 0:16:04.760 --> 0:16:08.520 US growth coming from the widening trade deficit. You're focused 0:16:08.560 --> 0:16:10.720 on the trade deficit, but I don't think the folks 0:16:10.760 --> 0:16:12.360 in Congress are How do you think about the US 0:16:12.400 --> 0:16:13.040 trade deficit? 0:16:14.240 --> 0:16:17.640 Well, I'm looking more at at the components, Like we've 0:16:17.680 --> 0:16:24.600 had a big decline in exports in December and they're 0:16:24.640 --> 0:16:28.360 down precipitously through the past four months. And what that's 0:16:28.400 --> 0:16:32.000 telling me is one thing is about the impact of 0:16:32.040 --> 0:16:34.520 the super strong US dollar. People, I don't think you're 0:16:34.520 --> 0:16:38.200 recognizing just how much financial conditions in the US of 0:16:38.280 --> 0:16:40.960 titan over the course of the past few months. And 0:16:41.000 --> 0:16:44.400 on top of that, it's also telling me that this 0:16:44.560 --> 0:16:48.440 how weak the global economy is right now that we're 0:16:48.480 --> 0:16:52.280 seeing the exports side really starting to not just accelerate 0:16:52.320 --> 0:16:55.240 but now contract, So of course it's going to lead 0:16:55.280 --> 0:16:58.640 to fourth quarter GDP downward revisions to what we already 0:16:58.680 --> 0:17:01.920 saw from the commerce Department. But it's telling us something 0:17:01.920 --> 0:17:04.480 about the state of the global economy, both in Asia 0:17:04.480 --> 0:17:06.760 and Europe, that it's coming back to hit home in 0:17:06.840 --> 0:17:09.320 terms of the reduction and exports, and exports have a 0:17:09.400 --> 0:17:12.639 very powerful multiplier impact on the rest of the industrial sector. 0:17:13.160 --> 0:17:15.479 And you're right, nobody else is talking about it. So 0:17:15.560 --> 0:17:17.520 I thought, Okay, I guess I'll order that. 0:17:17.560 --> 0:17:21.920 Mart David Rosenberg wh this week continue with Rosenberg Research, Toronto. 0:17:21.920 --> 0:17:25.239 Thrilled he's with us this morning. Futures up sixteen. They 0:17:25.240 --> 0:17:28.399 advance across the arc of the morning here nineteen minutes 0:17:28.440 --> 0:17:31.239 away from a market open. We welcome all of you 0:17:31.720 --> 0:17:35.760 on a commute across the nation, across Canada as well, 0:17:35.800 --> 0:17:39.440 and of course on YouTube subscribe to Bloomberg Podcast. Paul 0:17:39.440 --> 0:17:42.199 and I really humbled by the statistics for January. They 0:17:42.320 --> 0:17:44.840 let us into the statistics. I have to buy lunch, 0:17:44.920 --> 0:17:46.800 you know, yep, they forced me to buy lunch. 0:17:46.840 --> 0:17:48.440 But you know that's fine, thods just fine. 0:17:48.440 --> 0:17:50.639 There we were, David Rosenberg, you and I did this 0:17:50.760 --> 0:17:53.560 panel up in Toronto. I was shocked at what I 0:17:53.720 --> 0:17:57.960 perceived is the struggle of the Canadian spirit in Toronto. 0:17:58.480 --> 0:18:00.720 And I want you to explain the power right now, 0:18:00.800 --> 0:18:05.040 I've got CBC here with the Conservatives with forty three 0:18:05.119 --> 0:18:07.560 percent of the vote, the Liberals, whoever's going to replace 0:18:07.640 --> 0:18:11.000 Trudeau with twenty three percent of the vote. Is it 0:18:11.119 --> 0:18:14.960 like France where they get together in a coalition or 0:18:15.040 --> 0:18:19.120 is it just in our translation Republicans versus Democrats. 0:18:20.920 --> 0:18:22.439 Well, another great question. 0:18:22.920 --> 0:18:25.879 You know, it's a parliamentary system here, but it's not 0:18:26.000 --> 0:18:28.640 as it's not as fragmented as it. 0:18:28.560 --> 0:18:30.679 Is over in Europe. 0:18:30.760 --> 0:18:35.199 There's really three main parties and actually, for the past 0:18:35.560 --> 0:18:40.199 several years, because the Liberals didn't have a majority, the 0:18:40.359 --> 0:18:43.080 justin Trudeau Liberals had to team up with the Socialist 0:18:43.160 --> 0:18:47.560 and DP party to be able to well not have 0:18:47.600 --> 0:18:50.120 a majority, but have a coalition so that they wouldn't. 0:18:49.760 --> 0:18:50.960 Be a non confidence vote. 0:18:51.359 --> 0:18:53.760 A few months ago that coalition broke and now of 0:18:53.760 --> 0:18:58.080 course we're in a leadership race and Parliament is closed 0:18:58.160 --> 0:19:00.000 right now, and then we'll have it probably to life 0:19:00.400 --> 0:19:03.320 sometime I would expect during the spring. 0:19:04.440 --> 0:19:05.719 So it's not as fragmented. 0:19:06.200 --> 0:19:09.400 I don't think that unless we have a minority government, 0:19:09.680 --> 0:19:11.960 we're not going to have a coalition. If the polls 0:19:12.000 --> 0:19:14.040 are accurate right now, I'm not so sure that they are, 0:19:14.080 --> 0:19:16.240 because we don't know who's going to be leading a 0:19:16.240 --> 0:19:20.680 Liberal party. Mark Carney, being an outsider and being hailed 0:19:20.720 --> 0:19:24.359 of course, is having all these tremendous global economic and 0:19:24.400 --> 0:19:28.120 financial credentials, and he's not going to be tainted by 0:19:29.080 --> 0:19:33.280 the past number of years of failed Liberal policies. He'll 0:19:33.280 --> 0:19:35.399 be a fresh face. I would expect that if we 0:19:35.440 --> 0:19:37.400 have this conversation a couple of months from now, Tom, 0:19:37.400 --> 0:19:39.520 that those polls are going to narrow win. If Carney 0:19:39.520 --> 0:19:42.479 wins the Liberal leadership race, which I think he probably 0:19:42.520 --> 0:19:45.720 will at this point. But if the election was held 0:19:45.760 --> 0:19:48.520 today based on those polls, it would be it would 0:19:48.520 --> 0:19:51.920 be a Brian mulroney like landslide majority of the Conservatives. 0:19:51.920 --> 0:19:56.120 But I wouldn't extrapolate that because Carney. If Carney emerges victorious, 0:19:56.600 --> 0:19:58.359 he's going to pack a very powerful punch. 0:19:58.840 --> 0:20:01.560 Do you or anyone have any idea what happens? What 0:20:01.640 --> 0:20:05.680 is it twenty seven days? Like David, do you have 0:20:05.720 --> 0:20:08.400 any idea what happens in twenty seven days? 0:20:09.359 --> 0:20:12.040 Well, I don't think the tariffs are going to be coming. 0:20:12.359 --> 0:20:15.959 I'm notwithstanding the quotes thirty day reprieve because we have 0:20:16.040 --> 0:20:19.560 to look at the facts that are presented in front 0:20:19.600 --> 0:20:22.840 of us, you know, Friday, last Friday at the White House, 0:20:23.560 --> 0:20:26.760 when asked if there was any chance that the tariffs 0:20:26.840 --> 0:20:29.880 on Canada and Mexico would be averted, he said, no, 0:20:29.920 --> 0:20:33.000 not a chance. They're a done deal. And then one 0:20:33.000 --> 0:20:39.600 phone call on Monday with Mexico and two in Canada. 0:20:39.680 --> 0:20:42.120 Next thing, you know, well, no, we've got a thirty 0:20:42.160 --> 0:20:47.880