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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app. Junian and Manuel I've

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Speaker 2: ever caught our sight joined us around the table. Julian,

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Speaker 2: good warning to you. I'm going to use your words

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Speaker 2: to set up the first question. The sentiment shift during

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Speaker 2: February to the type of pessimism more consistent with major

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Speaker 2: bottoms after protracted salofs rather than sold near all time

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Speaker 2: highs is nothing short of extraordinary. We're five percent away

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Speaker 2: from all time highs.

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Speaker 3: VIE.

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Speaker 2: Pessimism is falling off the cliff right now. There is

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Speaker 2: literally no confidence at the moment from business leaders, from consumers,

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Speaker 2: from the people we speak to day after day. What

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Speaker 2: gives Eve the sentiment needs to catch out pull the

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Speaker 2: market needs to catch down.

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Speaker 4: Well, two things, just to highlight how extraordinary it really is.

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Speaker 4: We looked at bear sentiment and at these levels the

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Speaker 4: average draw down from the high is twenty nine percent.

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Speaker 4: When you get these levels, the lowest draw down was

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Speaker 4: thirteen percent, and as you mentioned, less than five percent.

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Speaker 4: It's really what it is is. You know, again, as

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Speaker 4: you pointed out earlier, there was not an expectation that

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Speaker 4: we were going to get what we've gotten this morning,

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Speaker 4: that the tariffs are actually on and in place, and

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Speaker 4: to be fair, our house view is that they will

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Speaker 4: not last that long because the damage to the economy

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Speaker 4: is too great. But you know, this is classic financial

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Speaker 4: market risk reward, and when you talk to investors, they

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Speaker 4: don't see the potential reward outweighing the risks of being

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Speaker 4: aggressive here.

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Speaker 5: We started the show saying that people who thought that

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Speaker 5: these tariffs were just a negotiating tool are now saying

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Speaker 5: it's not going to last very long, and they're still

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Speaker 5: just a negotiating tool. At what point does it become

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Speaker 5: irreversible in terms of the effect on markets. The idea

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Speaker 5: that even if they stay on for a prolonged period

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Speaker 5: of time, that requires some sort of response in supply chains,

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Speaker 5: in growth expectations, in frankly, trade relationships globally.

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Speaker 4: Well, you're certainly starting to see it. And I think

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Speaker 4: the uncertainty is also a function of the geopolitical chess

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Speaker 4: pieces being reconfigured as well. And again that ism data,

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Speaker 4: you know, incredible price is paid, elevated, you know, in

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Speaker 4: terms of precautionary buying of goods, and then of course

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Speaker 4: new orders falling off the cliff because you already bought

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Speaker 4: the goods. There's a psychology aspect to this which is

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Speaker 4: what is very important. And I think it's also interesting

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Speaker 4: because if you look back the original trade war in

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Speaker 4: twenty eighteen, when the stock market backed off, President Trump's

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Speaker 4: rhetoric backed off. Okay, the danger here is, particularly when

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Speaker 4: you look at fifty seven hundred in our view, is

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Speaker 4: important because that's where the market was on election day

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Speaker 4: twenty twenty four, and he's never had what we'd call

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Speaker 4: an adverse mark to market in either Trump forty five

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Speaker 4: or obviously Trump forty seven. Does the rhetoric change and

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Speaker 4: the market is not so certain of that, you.

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Speaker 5: Mean, the test of the Trump put whether that actually

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Speaker 5: still is in effect, if it isn't in effect, what's

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Speaker 5: the downside? I mean, are you becoming actually bearish or

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Speaker 5: are you just saying that there's more heightened uncertainty on

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Speaker 5: both sides.

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Speaker 4: So we have viewed twenty twenty five as a continuation

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Speaker 4: of the rally, but with the different character of what

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Speaker 4: we call three steps forward, two steps back heightened volatility.

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Speaker 4: So whatever the baseline of volatility was in the Vics

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Speaker 4: last year fourteen fifteen, that number is now more consistent

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Speaker 4: with the long run average of nineteen Could you get

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Speaker 4: to a downside where growth sub two percent and inflation

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Speaker 4: sticky towards three percent without a recession causes a test

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Speaker 4: of a number like fifty two hundred. It's certainly not

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Speaker 4: outside of the realm of possibility. We'd treat that as

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Speaker 4: a buying opportunity. But when you have this kind of uncertainty,

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Speaker 4: you have to expand how you're thinking about the tales

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Speaker 4: Julian only.

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Speaker 1: Six weeks into this administration, though, if he was to

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Speaker 1: back off, now that he's a boy who cried wolf

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Speaker 1: for every other date on that calendar.

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Speaker 4: Yeah, and that's part of the fact that you know, again,

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Speaker 4: what did he learn from the first administration? Is that

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Speaker 4: history tells you, regardless of circumstances, you're likely to lose

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Speaker 4: the majority in the House in twenty eighteen, and we

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Speaker 4: know the way politics works, they'll start running. They'll start

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Speaker 4: running for the twenty twenty six campaign this fall. You've

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Speaker 4: got to front load everything. So the accumulated uncertainty is

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Speaker 4: in these first few weeks, and it's sort of you know,

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Speaker 4: let the chips fall where they're going to fall.

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Speaker 2: Would you buy stock?

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Speaker 4: Say we want to see a little bit more despair

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Speaker 4: quite honestly consistent with that bearish reading. Yes, the market

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Speaker 4: has acted as if it is approaching despair. But to us,

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Speaker 4: when you think about all the catalysts, you think about

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Speaker 4: that speech tonight where clearly he's going to talk tough,

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Speaker 4: no question about it. You think about the potential for

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Speaker 4: the government shut down on March fourteenth, which matters now

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Speaker 4: because of the reception of Doge. The risk is not

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Speaker 4: quite balanced versus the reward at this point.

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Speaker 2: Feedle March nineteenth, What does all this change that meeting

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Speaker 2: in a couple of weeks time, two weeks tomorrow.

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Speaker 4: I don't know that the rhetoric is going to deviate

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Speaker 4: that much. You might see downgrades to their economic forecast

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Speaker 4: a little bit. If you're thinking about market confidence, you

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Speaker 4: might want to see a slight downgrade to the inflation forecast,

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Speaker 4: but you're not likely to see it because we really

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Speaker 4: don't know what the effect of the tariffs are. The

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Speaker 4: bond market's telling you that the inflation problem is not

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Speaker 4: the problem, it's growth, but the statistics don't confirm that yet.

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Speaker 2: The final question, you're in price target sixty eight hundred, correct.

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Speaker 2: It is for a lot of people looking back to

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Speaker 2: the election in that November they made the argument that

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Speaker 2: the overall policy mix was positive for stocks, pro risk,

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Speaker 2: pro growth. The trade was going to be a tricky

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Speaker 2: part of it, but it was one piece of a

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Speaker 2: much bigger policy platform. Is that still the correct way

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Speaker 2: to look at this country?

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Speaker 4: It is, but again there has to be an understanding

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Speaker 4: of how the pieces fit and the sensitivity around the

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Speaker 4: fact that words, clearly even before the actions have been implemented,

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Speaker 4: have consequences. And you know, from our point of view,

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Speaker 4: are our guiding light is that earnings growth still looks

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Speaker 4: nine percent to us. We have not moved. We don't

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Speaker 4: anticipate that's going to come off it.

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Speaker 2: Julian appreciate your time, as always say what a start

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Speaker 2: at the way Julian and Manuel of everco side at

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Speaker 2: Knows of Ryman James Jones just now for more, Ed,

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Speaker 2: welcome to the programs. We said just moments ago that

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Speaker 2: the people who didn't believe this day would come now

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Speaker 2: believe this day won't last very long. And what's your

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Speaker 2: message for them?

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Speaker 3: My message is, I feel like I've been the Paul

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Speaker 3: Revere of tariffs all this year, kind of the tariffs

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Speaker 3: are coming, the tariffs are coming, and no one has

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Speaker 3: really believed me. I think that there is an element

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Speaker 3: of this that is absolutely about negotiation, absolutely about using

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Speaker 3: the economic strength of the United States to push our

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Speaker 3: allies in many cases to make changes. And I think

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Speaker 3: that's the base case. But I also have told folks

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Speaker 3: here at Raymond James, expect a lot of these tariffs.

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Speaker 3: If it's not at twenty five percent permanently, does it

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Speaker 3: come in at five or ten percent permanently? Because bucket

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Speaker 3: one is changing policy, Bucket two is having enough revenue

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Speaker 3: to potentially pay for policies like the extension of the

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Speaker 3: tax cuts in a couple of months.

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Speaker 1: Here, Ed, what kind of timeline are you giving for

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Speaker 1: some of these exemptions or potentially the lowering of the

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Speaker 1: tariff freight.

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Speaker 3: It's really hard to give a timeline because most, if

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Speaker 3: not all, of this tariff authority is solely within Donald

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Speaker 3: Trump's discretion. He can decide at twelve o'clock today to

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Speaker 3: take it all off, you can decide at twelve oh

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Speaker 3: one to put it all in. When I've talked to

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Speaker 3: Cloueiences at Raymond James, they're expecting there to be exemptions

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Speaker 3: on medical equipment, things for humanitarian aids, things that are

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Speaker 3: going to be specifically important to consumers, like energy. We

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Speaker 3: do have a lower energy rate here from Canada. Donald

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Speaker 3: Trump very much cares about inflation, but he also wants

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Speaker 3: to be able to show as we have the Joint

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Speaker 3: Session of Congress, I'm not going in at the State

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Speaker 3: of the Union tonight where he is going to push

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Speaker 3: hard and we're going to have reciprocal tariffs come April first,

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Speaker 3: April second, more terrorists. This is a steady drum beat

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Speaker 3: that's going to happen, and Donald Trump turning it on,

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Speaker 3: turning it off is going to be part of the negotiation.

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Speaker 1: What's driving these tariffs is really the fentanyl deaths. Donald

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Speaker 1: Trump has talked about that. The president as well as

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Speaker 1: officials have spoken to me about that as well. Kelly

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Speaker 1: and Shaw negotiator Trump. One point, I said on Bloomberg

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Speaker 1: Television earlier this morning, this is the new normal. They

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Speaker 1: seem to be swapping what maybe you'd use sanctions for tariffs,

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Speaker 1: and this is the new real politic. In that sense,

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Speaker 1: then how do you decipher what's negotiation for national security

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Speaker 1: and what's going to be a revenue raiser.

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Speaker 3: That's up to Donald Trump as well. I mean, I

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Speaker 3: think Amory, you're absolutely right. Donald Trump has been very

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Speaker 3: concerned about fentanyl, and I think with a conversation about China,

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Speaker 3: a conversation about Mexico absolutely part of the conversation and

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Speaker 3: absolutely a huge issue that needs to be dealt with.

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Speaker 3: When I talk to my Canadian clients, they're not, you know,

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Speaker 3: not really understanding why ventanyl is as big of an issue.

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Speaker 3: There has been shipments across the Canadian border, but it

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Speaker 3: doesn't actually happen all that often, as especially compared to others.

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Speaker 3: Donald Trump is going to use whatever excuse he has

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Speaker 3: to push forward these tariffs trying to get those changes,

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Speaker 3: and it's not quite clear exactly what he asked for.

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Speaker 3: When I talk to a lot of my contacts, foreign

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Speaker 3: leaders are concerned about trying to strike a deal with

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Speaker 3: Donald Trump only to be embarrassed. We'll get the Oval

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Speaker 3: Office meeting with Zelensky last week. If you are a

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Speaker 3: foreign leader, you say, do I actually respond to these

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Speaker 3: and how aggressively do I respond to these? Or if

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Speaker 3: I get to the White House, I think I have

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Speaker 3: a deal and it just evolves from there. That's a

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Speaker 3: real concern globally.

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Speaker 5: And has there been a shift in tone from your

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Speaker 5: clients in terms of their belief and just this being

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Speaker 5: sequencing that the hard stuff comes first and that good

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Speaker 5: stuff comes later.

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Speaker 3: So I'm right now at the Raymond James Institutional Investor Conference.

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Speaker 3: We have over a thousand companies and investors, and every

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Speaker 3: single conversation I had last night was is this going

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Speaker 3: to be worse than we expected? We don't have a

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Speaker 3: lot of conviction. There is a lot of angst out there.

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Speaker 3: You go company by company, they haven't really disclosed exactly

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Speaker 3: what the impact for them, oftentimes because they did not

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Speaker 3: think this was going to happen, And so that uncertainty

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Speaker 3: is a huge shift in tone, that kind of concerned

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Speaker 3: that this could last. Is a huge shift in tone

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Speaker 3: hopeful that this comes off. And I think the base

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Speaker 3: case is that twenty five percent on Canada in Mexico

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Speaker 3: does not last for very long. But as soon as

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Speaker 3: that gets pulled off, what happens with the Europe, what

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Speaker 3: happens with the rest of the world. Those concerns which

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Speaker 3: were kind of completely pushed aside Lisa, are our front

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Speaker 3: and center in every conversation I'm having right now at

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Speaker 3: our Raymond James conference, And how.

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Speaker 5: Much at those dinners were people saying that they just

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Speaker 5: are putting everything on hold. This is just a time

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Speaker 5: to wait and see and any plans of very investment,

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Speaker 5: any plans for deals are just going to have to

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Speaker 5: wait until there is some more clarity.

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Speaker 3: Yeah, I think for investors, most need to be fully invested,

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Speaker 3: so they are trying to figure out where they can hide,

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Speaker 3: what are the opportunities for them to not get kind

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Speaker 3: of hit by a buzzsaw on transactions and m and

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Speaker 3: A on IPOs that is a lot more frozen or

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Speaker 3: sluggish than expected. And that was a big theme as

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Speaker 3: well in my conversations, like what was expected after November

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Speaker 3: and into December, and that euphoria. People are like, we

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Speaker 3: need to understand where rates go, where terrorifts go, what

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Speaker 3: tax policy is? The long list of Trump concerns is

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Speaker 3: the new conversation I'm having with clients at Raymond James.

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Speaker 2: It's a big change from where we were a few

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Speaker 2: months ago. And appreciate your time, sir, Thank you at

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Speaker 2: Millstare of Raymond Change. Let's turn to foreign exchange traders

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Speaker 2: digesting President Trump's twenty five percent tariffs on Mexico and Canada,

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Speaker 2: Kitchens of Soft Gen writes in This This Morning sharka

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Speaker 2: is the Canadian dollar is up despite tariffs arriving. Friday's

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Speaker 2: Canadian jobs numbers might be important as the US wants

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Speaker 2: kit joined US now for more. Kate, welcome to the program.

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Speaker 2: Let's talk about that muted response, if we can call

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Speaker 2: it that in foreign exchange, kid, what gives well?

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Speaker 6: I mean, the big response in the sense has been

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Speaker 6: this is bad for growth in states. And you've heard

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Speaker 6: some of that the market's pricing in rate moose that

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Speaker 6: it wasn't or more rate mooves that it was and

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Speaker 6: looking negative. We have seen no shift in consensus forecasts

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Speaker 6: down in the US GDP growth yet and We've seen

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Speaker 6: a series of upward revisions to economists forecasts for this

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Speaker 6: year since September that drove the dollar higher. But what

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Speaker 6: we're seeing is the market is going ahead away from

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Speaker 6: the economy. It's the strategist to getting negative. The traders,

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Speaker 6: the investors are nervous about what this means. So we

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Speaker 6: have a weeker dollar and that protects the Canadian dollar

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Speaker 6: where we've been talking about the taris for a while

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Speaker 6: and the Canadian dollar has been beaken up. But I

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Speaker 6: do think it means that it puts more of a

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Speaker 6: focus in a sense on growth in North America. What

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Speaker 6: is the ism service number can look like tomorrow in

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Speaker 6: the States, what a payrol is going to look like

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Speaker 6: on Friday, and what a Canadian job is going to

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Speaker 6: look like on Friday. Because all this betting on more

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Speaker 6: rate cuts faster is going to need some validation reasonably

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Speaker 6: quickly to be able to sustain itself.

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Speaker 5: K saying that people expected tariffs to be worse for

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Speaker 5: the rest of the world than the United States late

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Speaker 5: last year and early this year, and that that story

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Speaker 5: has shifted and now people are thinking that base and

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Speaker 5: where valuations are. This actually could be a bigger hit

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Speaker 5: to the US economic growth trajectory based on expectations than

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Speaker 5: the rest of the world.

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Speaker 7: Yeah.

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Speaker 6: Look, I think we start from the US exceptionalism position,

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Speaker 6: where we've been revising up US growth forecasts for a

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Speaker 6: long time, revising them down everywhere else, talking about how

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Speaker 6: exceptional the US is, expecting higher rates than in other places,

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Speaker 6: and watching the dollar get to extraordinary heights. So we're

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Speaker 6: hyper sensitive, if you like, to anything that suggests that

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Speaker 6: actually the US economy might really be able to slow. Now,

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Speaker 6: whether it's going to slow as fast or as much

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Speaker 6: as people are contemplating. What you have is a big

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Speaker 6: position adjustment in the market, a growing awareness of the

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Speaker 6: fact that foreigners own sixty five trillion dollars worth of

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Speaker 6: US assets and if they get nervous, that is a problem.

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Speaker 6: And so you know, these stories are beginning to happen.

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Speaker 6: That the reaction in the market looks big relative to

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Speaker 6: the news flow so far, but I guess that's what

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Speaker 6: happens when you're at a turning punt kit.

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Speaker 5: Right now, I'm looking at the euro that's actually at

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Speaker 5: the strongest level going back to early December versus the dollar.

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Speaker 5: Is this because of concerns about US growth or is

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Speaker 5: this because of optimism of some sort of spending plan

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Speaker 5: is laid out by Ursula V underline today.

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Speaker 6: I mean it's a little bit of both in the

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Speaker 6: sense if you look at if you look at it,

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Speaker 6: you're a dollar tracks to to year interrastrate differential painfully

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Speaker 6: closely at the moment. And what's happened, Well, we've taken

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Speaker 6: us to your rates down. So that's been the single

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Speaker 6: biggest driver of that over the last few days. There

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Speaker 6: is some optimism about the program. There would have been

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Speaker 6: much more optimism into the Europe if you had a

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Speaker 6: sweeping win for a party in the German government elections

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Speaker 6: last week last week home how long ago was now

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Speaker 6: that there would have delivered an end to the debt

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Speaker 6: break that hamstrings their fiscal policy and is completely ludicrous

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Speaker 6: that that would be a bigger game changer. Also, we're

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Speaker 6: also we're saying, you know, we spent the last two

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Speaker 6: years in a zero point ninety five one thirteen range,

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Speaker 6: not a big range. We're just drifting up to the

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Speaker 6: middle of it.

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Speaker 1: But kit what happens on April second, when potentially we

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Speaker 1: get tariffs on the European Union from the United States,

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Speaker 1: That one oh five. Directionally, where does it go?

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Speaker 6: Well, I think that I think that that's the sort

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Speaker 6: of thing that can you know, makes me think that

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Speaker 6: a move to one ten looks really unlikely. Unfortunately, it

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Speaker 6: anchors us. That's where we've been for a long time now,

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Speaker 6: is anchored with a very cheap dollar, sorry, very cheap,

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Speaker 6: you'roine a very expensive dollar. We get a focus on

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Speaker 6: the on the tariffs on Europe when we get growth

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Speaker 6: concerns coming through. I think that just keeps US in

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Speaker 6: a range. If I want euro dollars to go back

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Speaker 6: to that one thirteen level, that it's the highest it's

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Speaker 6: been in two years, I need some signs of growth,

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Speaker 6: helped by easier fiscal policy or help by anything. I

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Speaker 6: just need some growth.

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Speaker 1: What about a peace agreement? Would that do it?

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Speaker 6: Yep? That would that a proper preasea agreement is you know,

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Speaker 6: particularly if I've got a peace agreement with an agreement

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Speaker 6: that we're going to do some investing, that we're going

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Speaker 6: to walk back some of this ridiculously type fiscal policy

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Speaker 6: or that that would be a massive game changer. I mean,

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Speaker 6: deregulation in Europe would be another game changer. But so

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Speaker 6: I can see things that could change it. I do

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Speaker 6: not have those yet.

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Speaker 2: Unfortunately, Kit plenty of headline risk on the horizon. I

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Speaker 2: appreciate your time as always, Kit Jukes there of sof

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Speaker 2: gen Ever Eisenstadt, the former NEC deputy director, writing business

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Speaker 2: must brace for unpredictable and shopping waters over the next

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Speaker 2: few months as more actions are likely to come. Ever,

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Speaker 2: it joins us now for more, So, Efverett, walk us

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Speaker 2: through what you think happens here, because there are some

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Speaker 2: people a lot of people watching this program right now

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Speaker 2: who don't believe the tariffs that went on overnight will

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Speaker 2: stay on for very long. What's your message for them?

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Speaker 7: I think they will stay on. The President had an

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Speaker 7: opportunity to delay these tariffs again. He decided not to

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Speaker 7: do that. And so unless there's some see change in

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Speaker 7: how Canada and Mexico are dealing with the fetodol crisis,

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Speaker 7: is satisfied as the President and I don't see immediate

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Speaker 7: a relief in the near term. So I think the

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Speaker 7: tariffs are on for a bit yet effort.

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Speaker 1: Speaking to some sources this morning, what I hear from

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Speaker 1: them is they want more private sector growth, less public spending,

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Speaker 1: and they want manufacturing back to the United States. But

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Speaker 1: how does that work with a very intricate supply chain

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Speaker 1: when it comes to an auto sector, and already that's

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Speaker 1: under a trade agreement of USMCA.

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Speaker 7: This is pretty incredible, honestly, I think to see such

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Speaker 7: a rapid change in the market so quickly with two

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Speaker 7: of our largest trading partner, It's going to impact a

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Speaker 7: lot of companies in different ways. And some companies may

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Speaker 7: be able to absorb those tariffs or put them distribute

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Speaker 7: the costs throughout their supply chains. Others may simply not

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Speaker 7: have any choice and may may be forced with actually

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Speaker 7: thinking about move to the United States. And I think

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Speaker 7: the President has a mindset that he's going to do

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Speaker 7: everything he can to facilitate more manufacturing investment in the

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Speaker 7: United States. So the terriff actions seem to be part

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Speaker 7: of a larger picture of deregulation, investment incentives, and perhaps

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Speaker 7: tax cuts to draw more manufacturing back to the United States.

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Speaker 7: So this is the first part of a very long story,

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Speaker 7: I'm afraid, but I think we were in for, as

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Speaker 7: I said earlier, some choppy waters in the near term.

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Speaker 1: I was reminded by another source very early this morning

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Speaker 1: that in Trump one point oh, a few months after

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Speaker 1: some tariffs went on, there were exceptions. Do you expect

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Speaker 1: that to happen this time?

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Speaker 7: We'll have to see. There are some products that we

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Speaker 7: cannot get in the United States. We simply don't produce them,

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Speaker 7: and so for those I would think it would seem

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Speaker 7: to make sense to include exceptions for those products. There's

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Speaker 7: really no reason not to, but I think we'll see.

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Speaker 7: Another thing to keep in mind is, on top of

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Speaker 7: the terriffs that went into effect last night, we've got

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Speaker 7: this steel tariffs that are going into effect on March twelfth,

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Speaker 7: and those are going to be broader, They're going to

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Speaker 7: cover more products, they're going to be difficult to administer,

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Speaker 7: and over time, as these begin to resonate throughout the economy,

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Speaker 7: I think there are going to be calls for some exceptions.

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Speaker 7: Even if we've got exactly what the President wanted, which

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Speaker 7: is to get all manufacturing back to the United States,

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Speaker 7: it simply can't happen overnight. So at a minimum, it

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Speaker 7: would seem that a delay to enable some manufacturing to

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Speaker 7: come back would make sense. Today we're not seeing that,

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Speaker 7: but we'll have to see how these terrorists they resonate

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Speaker 7: throughout the economy, what kind of feedback, you know, members

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Speaker 7: of Congress get and others in the administration about how

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Speaker 7: they're being implemented. I'll just note that there was, as

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Speaker 7: you might recall, there's a deminimus exception for products coming

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Speaker 7: into the United States duty free, that they're under eight

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Speaker 7: hundred dollars, they're able to enter the United States duty free.

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Speaker 7: The President had taken that dominimus exception away, and then

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Speaker 7: when the com and the Customs tried to administer it,

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Speaker 7: they couldn't do it, so they had to walk back

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Speaker 7: from that. I don't know if we'll see something similar,

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Speaker 7: but we may see that in certain sectors for certain products.

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Speaker 2: Hey, Everett've got to leave it there. It's got to

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Speaker 2: catch up. Evera. Eisenstad there, the former NEC Deputy director

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Speaker 2: on the trade effort in Washington, DC. This is the

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