WEBVTT - Bloomberg Surveillance TV: June 10, 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 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.240 Terminal and the Bloomberg Business app. Might Wilson and morgod 0:00:37.240 --> 0:00:39.760 stand be taking a very constructive view on things, writing 0:00:39.800 --> 0:00:42.320 the rate of changes turn for the better on most fronts. 0:00:42.600 --> 0:00:45.640 This keeps us positive on US equities on a twelvemonth basis. 0:00:45.680 --> 0:00:49.600 We expect pullbags to be shallow and unsatisfying to those 0:00:49.680 --> 0:00:52.239 looking for a fatter pitch. Mike joins us now from 0:00:52.240 --> 0:00:54.280 what Mike, Good morning, Good morning Jane. I love the 0:00:54.320 --> 0:00:56.520 reson No, don't fight it. So let's talk about don't 0:00:56.560 --> 0:00:58.920 fight what? What elements of the market move shouldn't we fight? 0:00:59.160 --> 0:01:00.520 Well, it's kind of what we're doing talking about. 0:01:00.560 --> 0:01:03.400 I mean, the headlines remained very noisy and uncertain, and 0:01:03.440 --> 0:01:05.039 I think, you know, this has been the case for 0:01:05.080 --> 0:01:05.640 the whole year. 0:01:05.880 --> 0:01:07.759 Our view, as you know, has been a bit different. 0:01:07.840 --> 0:01:10.160 We came in thinking the first half would be tougher 0:01:10.680 --> 0:01:12.280 and the way to change and a lot of things 0:01:12.280 --> 0:01:14.080 like Earnie's re visions and some of the headline would 0:01:14.120 --> 0:01:14.640 be negative. 0:01:14.959 --> 0:01:16.480 And in fact that what we think happens. 0:01:16.520 --> 0:01:20.000 That all got priced in the week after Liberation Day, right, 0:01:20.040 --> 0:01:22.399 it was violent, it was a de leveraging and so 0:01:22.480 --> 0:01:24.720 now as we look at the data itself, it's all 0:01:25.120 --> 0:01:28.560 inflected higher. And so you know, don't ignore everything, but 0:01:28.640 --> 0:01:30.880 ignoring the headlines is probably a good strategy and just 0:01:30.920 --> 0:01:33.840 focus on the data has turned up for the most part. 0:01:33.920 --> 0:01:35.560 And I think, you know, I don't know where the 0:01:35.600 --> 0:01:38.119 trade negotiations are going. Nobody does, but I think it's 0:01:38.200 --> 0:01:40.199 very unlikely we're going to go back to where we were, 0:01:40.520 --> 0:01:42.280 you know, a month and a half ago, like we 0:01:42.440 --> 0:01:46.440 bottomed in terms of the pain of that initial you know, 0:01:46.440 --> 0:01:49.640 announcement and how bad those tariffs were. So unless it 0:01:49.720 --> 0:01:52.960 really re escalates in a negative fashion, I don't think 0:01:53.000 --> 0:01:54.840 the trade issue is even going to be enough to 0:01:54.920 --> 0:01:56.160 kind of take the momentum out of. 0:01:56.080 --> 0:01:56.840 This market right now. 0:01:56.920 --> 0:01:58.520 You know what the bad view sounds like. They would 0:01:58.520 --> 0:02:00.440 say that maybe some of the data, some of the 0:02:00.480 --> 0:02:02.880 innings we've seen have been flatted by pull forward and 0:02:02.880 --> 0:02:04.440 we'll get the bill for that lakes to this summer. 0:02:04.480 --> 0:02:06.080 Do you think we priced for that kind of slowed down, 0:02:06.080 --> 0:02:08.120 that weakness we could see in a summer months. 0:02:08.280 --> 0:02:09.320 That's probably right. 0:02:09.400 --> 0:02:10.560 And when we had that view too, there was a 0:02:10.600 --> 0:02:12.240 pull forward in Q one Q one of being better 0:02:12.280 --> 0:02:15.000 than they feared because you know, the numbers came down 0:02:15.040 --> 0:02:17.639 a bunch. I think the second quarter, though, is expected 0:02:17.680 --> 0:02:19.679 now to be weaker, so that's going to be the key. 0:02:19.800 --> 0:02:21.560 I think the biggest risk for the market's going to 0:02:21.560 --> 0:02:23.679 probably be either rates as we've talked about in the past, 0:02:23.720 --> 0:02:25.280 you know, north of four and a half percent, or 0:02:25.639 --> 0:02:27.720 we do go in an earning season it's not as 0:02:27.720 --> 0:02:29.760 good as you know, people were hoping for, and we 0:02:29.840 --> 0:02:32.280 have maybe a five to seven percent correction, but that's 0:02:32.400 --> 0:02:35.240 not what people kind of want. People want a ten 0:02:35.360 --> 0:02:37.800 you know, another ten to fifteen percent draw down to 0:02:37.880 --> 0:02:40.760 get better, to get more exposure, and I just don't 0:02:40.760 --> 0:02:42.560 think you're going to get that. I mean, I've seen 0:02:42.600 --> 0:02:45.200 this a million times you want it, but you're just 0:02:45.200 --> 0:02:46.680 going to have to have a shorter trigger finger. 0:02:47.080 --> 0:02:50.120 Well, you had seen retail largely buying the dip, that's 0:02:50.160 --> 0:02:53.560 who participated when you got those ruptures in April. If 0:02:53.560 --> 0:02:55.440 we're not going to get dips like that anymore, what 0:02:55.600 --> 0:02:59.280 is the willingness of institutions to continue to put money 0:02:59.280 --> 0:03:01.160 to work right now? Especially they didn't even buy the 0:03:01.160 --> 0:03:02.160 past dips we saw. 0:03:02.440 --> 0:03:05.200 Yeah, I think institutions have re risk, but there's still 0:03:05.200 --> 0:03:07.480 more to go. The one the area I think that 0:03:07.600 --> 0:03:10.400 you have to watch is the is the systematic strategies, 0:03:10.440 --> 0:03:13.680 the CTAs that price momentum money. We saw almost five 0:03:13.760 --> 0:03:16.720 hundred billion dollars of de leveraging in that period of 0:03:16.720 --> 0:03:20.360 early March through mid April, and they've re risked maybe 0:03:20.560 --> 0:03:23.440 thirty forty percent of that. So that's another bid that's 0:03:23.440 --> 0:03:26.720 sort of it's not fundamentally driven, it's just price momentum. 0:03:26.760 --> 0:03:28.600 So that's that's going to be kind of underlying bid. 0:03:28.600 --> 0:03:30.839 And then I think, you know, most institutions have re risk, 0:03:31.160 --> 0:03:33.640 but one thing I haven't talked about yet is it's 0:03:33.800 --> 0:03:36.400 people are still making the quality bet and we agree 0:03:36.440 --> 0:03:39.080 with that, meaning this isn't the beginning of a news cycle. 0:03:39.520 --> 0:03:41.400 It's once again an extension of. 0:03:41.320 --> 0:03:43.800 The existing cycle, and the Fed's probably going to be 0:03:43.800 --> 0:03:46.000 cutting at some point later this year early next year, 0:03:46.240 --> 0:03:50.560 and that really behooves the large cap quality equities. 0:03:50.840 --> 0:03:54.760 Does it behoove companies specifically who can also weigh out 0:03:54.800 --> 0:03:56.800 some of the tariff uncertainty because this has been a 0:03:56.800 --> 0:03:59.240 big part of the narrative, right no one's making decisions 0:03:59.280 --> 0:04:02.720 cap exsually stalled unless your tech is there an element 0:04:02.760 --> 0:04:05.720 where even though we don't have tears resolved, that you 0:04:05.760 --> 0:04:07.920 get companies who just get on with it and start 0:04:07.920 --> 0:04:08.880 to put capital to work. 0:04:08.920 --> 0:04:10.920 Yeah, they got to run a business. And that's another 0:04:10.920 --> 0:04:13.200 reason why large cab quality businesses can do this. They 0:04:13.200 --> 0:04:16.120 can mitigate some of these risks, whether it's terrifs, whether 0:04:16.160 --> 0:04:18.559 it's you know, maybe the government cutting back on certain 0:04:18.560 --> 0:04:20.440 types of spending. And one of the things that is 0:04:20.440 --> 0:04:22.240 getting through this tax build that I think is still 0:04:22.320 --> 0:04:26.200 underappreciate is the tax incentives for cap X and R 0:04:26.240 --> 0:04:28.279 and D spending. We think that could add three to 0:04:28.360 --> 0:04:31.680 five percent to earnings growth or cash earnings for these 0:04:31.760 --> 0:04:32.919 large multinationals. 0:04:33.160 --> 0:04:35.400 That's a big tail. In addition to the weaker dollars. 0:04:35.400 --> 0:04:37.280 So there's just a lot of tailwinds I see from 0:04:37.279 --> 0:04:40.240 an earning standpoint, And this is almost a perfect. 0:04:39.960 --> 0:04:41.960 Environment to climb the wall of worry because. 0:04:41.760 --> 0:04:46.000 The economic data, the political geopolitical data is messy, it's noisy, 0:04:46.040 --> 0:04:49.039 it's scary sometimes. But as long as the revision factors 0:04:49.040 --> 0:04:51.680 for earnings are heading north, it's just hard for stacks 0:04:51.720 --> 0:04:52.159 to go down. 0:04:52.320 --> 0:04:54.240 When you say campex, I just think of a handful 0:04:54.240 --> 0:04:56.760 of tech companies. Do you think it goes beyond just 0:04:56.760 --> 0:04:57.520 tech leadership? 0:04:57.600 --> 0:04:58.200 Oh? Absolutely. 0:04:58.240 --> 0:04:59.840 I think this is about capital goods. I think this 0:05:00.120 --> 0:05:03.200 is not just about AI capbacks. Also, one thing to 0:05:03.240 --> 0:05:06.239 just keep in mind, the IT capbacks that's been good 0:05:06.400 --> 0:05:10.880 the last several years has really been concentrated just in AI. Okay, 0:05:10.760 --> 0:05:14.360 the traditional kind of upgrades you see in the enterprise 0:05:14.520 --> 0:05:17.120 and in the household have not been happening because there 0:05:17.160 --> 0:05:19.560 was a giant pull forward, remember in twenty twenty and 0:05:19.560 --> 0:05:20.400 twenty twenty one for. 0:05:20.480 --> 0:05:21.119 Work from home. 0:05:21.360 --> 0:05:23.359 So if you actually look at the IT capback cycle 0:05:23.360 --> 0:05:25.360 from twenty two to twenty four, it was kind of 0:05:25.360 --> 0:05:27.920 a software session. And that's another part of our thesis. 0:05:27.960 --> 0:05:31.200 We've been going through these rolling recessions. And look, to me, 0:05:31.279 --> 0:05:34.200 the big catalyst to keep in mind for broadening out 0:05:34.360 --> 0:05:36.320 is going to be when the FED starts to signal 0:05:36.400 --> 0:05:38.800 they're more dubbish. I don't know when that's going to be, 0:05:38.960 --> 0:05:40.920 but my guess is sometime in the third coorter they're 0:05:40.920 --> 0:05:43.000 going to start to signal that, and that's where you're 0:05:43.000 --> 0:05:44.440 going to get a more broadening out to the lower 0:05:44.520 --> 0:05:45.080 quality parts of. 0:05:45.360 --> 0:05:48.000 Just the Why matter, do we need it because inflation 0:05:48.080 --> 0:05:49.960 has comeing in or is it going to be because the 0:05:50.040 --> 0:05:51.200 labor market is cracking? 0:05:51.440 --> 0:05:54.000 Well, I mean, look at last fall it was both right. 0:05:54.120 --> 0:05:56.840 The labor market was cracking last summer. As soon as 0:05:56.880 --> 0:05:59.320 they signaled they were ready to step in, the market. 0:05:59.040 --> 0:05:59.719 Went up anyway. 0:05:59.800 --> 0:06:02.120 So that's why I mean, I actually think of recession. 0:06:02.160 --> 0:06:05.640 If we finally get the broad recession labor cycle, I 0:06:05.640 --> 0:06:07.680 don't think the equity markets are going anywhere near the 0:06:07.680 --> 0:06:10.120 April lows because the FED will be able to act quickly, 0:06:10.360 --> 0:06:13.400 and we're like Pavlovian, right, And if retail is buying 0:06:13.680 --> 0:06:16.280 when the FED wasn't even cutting, if they are cutting, 0:06:16.440 --> 0:06:17.680 there's going to be a big bid there. 0:06:17.720 --> 0:06:19.760 So look, there's always risks in the market. 0:06:19.760 --> 0:06:21.960 There's always something to be worried about, there's always things 0:06:22.000 --> 0:06:23.680 to be bearishan, and there's things to be bullish on. 0:06:23.760 --> 0:06:24.440 And that's our job. 0:06:24.480 --> 0:06:26.400 And I think, you know, this year we've navigated that 0:06:26.440 --> 0:06:28.400 pretty well, being in the right places. And I think 0:06:28.400 --> 0:06:30.160 we're going to continue to have to shift what we 0:06:30.200 --> 0:06:31.960 want to own, not so much how much you want 0:06:31.960 --> 0:06:32.200 to own. 0:06:32.320 --> 0:06:34.680 You've acknowledged the one thing that could be a handwind 0:06:34.680 --> 0:06:37.120 for equities. It's interest rates. He wrote about it over 0:06:37.160 --> 0:06:40.040 the weekend. What is it about four fifty that's challenging 0:06:40.120 --> 0:06:42.600 to this equity market? Because based on the running we've 0:06:42.600 --> 0:06:44.120 seen over the past few weeks, we don't see much 0:06:44.120 --> 0:06:44.799 of a challenge. 0:06:44.920 --> 0:06:46.559 Well, it's stabilized at four fifty. 0:06:46.680 --> 0:06:49.560 So we've identified this level like almost two years ago, 0:06:49.680 --> 0:06:52.760 and it's been like a charm. I mean, as soon 0:06:52.760 --> 0:06:54.640 as you cross four to fifty in the fside, the 0:06:54.680 --> 0:06:58.520 correlation between stocks and rates goes negative and vice versa. Now, 0:06:58.560 --> 0:07:00.360 I do think that we kind of want to four 0:07:00.480 --> 0:07:03.640 seventy in the April period and then they calm down again. 0:07:03.720 --> 0:07:06.120 I think the market is getting comfortable that they have 0:07:06.360 --> 0:07:08.920 enough tools, because you know, the Treasury Secretary has talked 0:07:08.920 --> 0:07:11.880 about that to keep it four fifty or below if 0:07:11.880 --> 0:07:13.640 they need to, And I think we talked about this 0:07:13.720 --> 0:07:16.120 last time I was here. Four seventy five is like 0:07:16.120 --> 0:07:18.960 the worst place because that's where markets get really nervous. 0:07:19.200 --> 0:07:22.600 Five percent I actually get bullish because then I know 0:07:23.040 --> 0:07:25.040 that they're going to come and intervene with either liquidity 0:07:25.080 --> 0:07:27.320 injections or they're going to use these other tools that 0:07:27.360 --> 0:07:29.800 the treasure secretary has talked about. So we're, you know, 0:07:30.080 --> 0:07:33.080 we're we're optimistic that that could be managed. And in 0:07:33.080 --> 0:07:35.160 other words, that risk could be a risk for five 0:07:35.240 --> 0:07:37.840 or seven percent, but ultimately that risk will get managed. 0:07:37.840 --> 0:07:39.600 To do you get CLIENTSOSKC and you now about the 0:07:39.600 --> 0:07:42.080 dead oceans, asking the equity strying to just about the 0:07:42.080 --> 0:07:43.600 dead otions that take place in the week. 0:07:43.760 --> 0:07:45.560 Well, I really ask the equity folks, But I mean 0:07:45.600 --> 0:07:47.120 people do ask about it. 0:07:47.000 --> 0:07:47.360 For sure. 0:07:47.400 --> 0:07:50.760 I mean, and once again we have seen many auctions, 0:07:50.920 --> 0:07:53.680 soft auctions for the last two or three years, seen 0:07:53.680 --> 0:07:54.800 this occur and then. 0:07:54.720 --> 0:07:56.000 They get control of it. Again. 0:07:56.480 --> 0:07:58.160 I don't want to dismiss the risk from the back 0:07:58.240 --> 0:08:01.680 end of the market that is still to me. The risk, 0:08:01.760 --> 0:08:04.880 I mean, is the risk not only for markets. It's 0:08:04.920 --> 0:08:07.880 the risk for the US, like we have too much 0:08:07.960 --> 0:08:10.840 debt and this is a focus. And if we don't, 0:08:11.280 --> 0:08:13.400 I mean ultimately, if we don't you know, cut the 0:08:13.400 --> 0:08:15.640 budget over time like and maybe the market is now 0:08:15.720 --> 0:08:17.960 giving them a lead like okay, we'll give you twelve months, 0:08:18.320 --> 0:08:21.080 you know, but if we don't get serious about you know, 0:08:21.280 --> 0:08:24.240 budget reconciliation and actually reducing the size of the budget 0:08:24.240 --> 0:08:26.400 over time, this is an issue that's going to stay 0:08:26.400 --> 0:08:26.760 with us. 0:08:27.080 --> 0:08:29.640 Mike Wilson of Morgan Stanley three words out of the weekend, 0:08:29.800 --> 0:08:32.240 don't fight it. Don't fight this market, Mike, Thank you, sir. 0:08:32.320 --> 0:08:44.720 They appreciate it. Joining us now to continue the conversation. 0:08:45.080 --> 0:08:48.559 Hendra to Trace of Veda pantas Hen, Welcome to the program. 0:08:48.600 --> 0:08:51.680 So this was frame quite simply yesterday going into the room, 0:08:51.880 --> 0:08:53.920 we would tell the US would push to drop some 0:08:54.000 --> 0:08:56.240 restrictions on their site in order to ease the limits 0:08:56.280 --> 0:08:59.240 on rare earth shipments from the Chinese side. Now, I 0:08:59.240 --> 0:09:02.520 guess we've got two. Now, either that's proving more difficult 0:09:02.559 --> 0:09:05.760 to do as we go intoday two or they're shooting 0:09:05.760 --> 0:09:08.520 for something much bigger than just that. Is there reason 0:09:08.559 --> 0:09:10.360 to believe it's one and maybe not the other. 0:09:11.440 --> 0:09:14.360 Well, I'd like to offer a third alternative and connect 0:09:14.360 --> 0:09:16.679 a few dots here. I don't think we're talking about 0:09:16.679 --> 0:09:18.079 tariffs anymore, and. 0:09:18.040 --> 0:09:19.719 I think that's something that this street is. 0:09:19.960 --> 0:09:23.560 Coming to understand right now, and China has already grasped, 0:09:24.040 --> 0:09:27.280 which is that when we got a CBO score suggesting 0:09:27.280 --> 0:09:29.800 that these tariffs that are in place today are generating 0:09:29.800 --> 0:09:32.560 two point eight trillion dollars in revenue, and the White 0:09:32.600 --> 0:09:37.000 House starts immediately putting out memos incorporating that threshold into 0:09:37.080 --> 0:09:40.600 their public presentations on the state of the tax bill 0:09:40.640 --> 0:09:42.240 and the reconciliation package. 0:09:42.360 --> 0:09:44.760 We're not negotiating for tariffs to come down. 0:09:45.080 --> 0:09:47.440 The tariffs that are in place today are very likely 0:09:47.440 --> 0:09:50.560 to continue across all nations, not just China, but Japan, 0:09:50.640 --> 0:09:53.800 South Korea, the EU, and they're going to also see 0:09:53.840 --> 0:09:59.480 sectoral tariffs on pharmaceuticals, semiconductors, trucking, aircraft in the months ahead. 0:10:00.120 --> 0:10:03.720 Being negotiated are the extraneous issues that, of course, since 0:10:03.720 --> 0:10:06.880 the Geneva meeting, both sides have ratcheted up, whether that's 0:10:06.920 --> 0:10:10.240 on limiting student access to the United States for Chinese 0:10:10.280 --> 0:10:15.040 students or the Huawei chips or AI or rare earth magnets. 0:10:15.160 --> 0:10:17.920 They're expanding the scope of this war and no longer 0:10:17.960 --> 0:10:19.600 negotiating just the tariff rates. 0:10:19.640 --> 0:10:21.440 I think that they're looking for an excuse. 0:10:21.120 --> 0:10:23.920 To get past Liberation Day, which in this case is 0:10:24.200 --> 0:10:27.080 in August, and come up with any reason to keep 0:10:27.120 --> 0:10:30.040 tarifrates where they are while they fight on different fronts. 0:10:30.400 --> 0:10:34.000 Henrietta, can they use tariffs as a crutch then? Can 0:10:34.040 --> 0:10:36.440 they use the terriffs in the negotiation or are you 0:10:36.520 --> 0:10:39.440 suggesting that they are just completely to one side. They 0:10:39.480 --> 0:10:41.720 will remain and that's not going to be touched for 0:10:41.760 --> 0:10:42.760 the foreseeable future. 0:10:43.880 --> 0:10:46.319 I think they can go up. I don't think that 0:10:46.360 --> 0:10:49.079 they're going to come much further down. Thirty percent, as 0:10:49.080 --> 0:10:51.080 we all recall, is obviously way lower. 0:10:50.840 --> 0:10:52.240 Than the President initially wanted. 0:10:52.280 --> 0:10:54.440 He gave best at the go ahead to drop rates 0:10:54.440 --> 0:10:57.480 down to eighty. We know that anything above fifty percent 0:10:57.600 --> 0:11:01.360 is effectively a embargo on trade, and thirty percent, you know, 0:11:01.400 --> 0:11:02.240 cargo is just. 0:11:02.240 --> 0:11:04.960 Now starting to get back to where it was in before. 0:11:04.679 --> 0:11:07.760 April second, or before Trump took office. I don't think 0:11:07.800 --> 0:11:09.880 they're going to go much lower than thirty percent. Again, 0:11:09.920 --> 0:11:11.920 that revenue score of two point eight straight is just 0:11:11.960 --> 0:11:15.800 too attractive. So the threat is permanently there of tariff's rising, 0:11:15.840 --> 0:11:18.280 and I believe they will on a sector basis. And 0:11:18.440 --> 0:11:21.120 I was speaking with another former USTR recently and he 0:11:21.200 --> 0:11:23.560 suggested that one or two nations could be made an 0:11:23.600 --> 0:11:25.600 example of Nicaragua. 0:11:25.000 --> 0:11:25.600 For example. 0:11:26.400 --> 0:11:28.280 But for the most part, these tariffs are here, they're 0:11:28.320 --> 0:11:29.600 here to stay, and we're going to have to fight 0:11:29.640 --> 0:11:30.280 on other fronts. 0:11:30.400 --> 0:11:34.080 What does that say about negotiations with other countries? Henrietta, 0:11:34.120 --> 0:11:37.520 When the ninety day pause comes due in July, is 0:11:37.520 --> 0:11:40.640 it your expectation that we also get a resumption of 0:11:40.720 --> 0:11:43.240 higher levels of tariff, something like we saw in Liberation Day. 0:11:44.160 --> 0:11:46.080 I don't think so. For most nations. 0:11:46.280 --> 0:11:48.800 I think that the administration is looking for an excuse 0:11:48.840 --> 0:11:51.880 to extend the July ninth date out into the future. 0:11:51.920 --> 0:11:53.079 I don't have a good sense of. 0:11:53.000 --> 0:11:55.520 How long they want to extend it out into thirty 0:11:55.559 --> 0:11:56.720 sixty ninety days. 0:11:56.840 --> 0:11:58.240 But one thing that I. 0:11:58.320 --> 0:12:02.640 Really can't square is that the Liberation Day of two 0:12:02.679 --> 0:12:05.760 point zero July ninth is well before. 0:12:05.440 --> 0:12:07.280 When I anticipate the tax bill passing. 0:12:07.320 --> 0:12:11.640 So you have this awkward dance between Republican lawmakers trying 0:12:11.679 --> 0:12:14.920 to pass this bill on the Hill, and the July fourth, 0:12:14.960 --> 0:12:17.080 you know, fourth of July rally that the President is 0:12:17.080 --> 0:12:20.679 helping to have, and then the July ninth expiration date. 0:12:20.760 --> 0:12:23.040 So I think the dates are a little bit fuzzy 0:12:23.600 --> 0:12:26.400 and they don't really quite have a streamlined narrative. The 0:12:26.440 --> 0:12:29.719 tariffs and the tax bill haven't quite blended perfectly, and 0:12:29.760 --> 0:12:31.520 I wonder whether that might come into the conversation. 0:12:31.720 --> 0:12:33.240 There's one more piece of a parzzle at the moment, 0:12:33.280 --> 0:12:35.720 as you know, the White House increasingly distracted by what's 0:12:35.720 --> 0:12:38.680 happening on the West coast in Los Angeles, Henrietta, do 0:12:38.720 --> 0:12:40.719 you take the point, maybe make the argument that they're 0:12:40.760 --> 0:12:44.040 much more comfortable with that story developing in Los Angeles, 0:12:44.080 --> 0:12:45.839 and maybe that takes some heat off the passage of 0:12:45.880 --> 0:12:47.640 the bill, the tax bill in Washington. 0:12:48.240 --> 0:12:49.880 Oh yeah, they got to love it. And the timing 0:12:49.960 --> 0:12:50.480 is perfect. 0:12:50.760 --> 0:12:54.360 Tomorrow or Thursday, the Judiciary Committee is putting out their 0:12:54.400 --> 0:12:57.320 one hundred and seventy five billion dollar package that is 0:12:57.360 --> 0:12:58.160 going to spend. 0:12:58.000 --> 0:12:58.880 Money on immigration. 0:12:59.200 --> 0:13:01.120 And one of the things that has been lost in 0:13:01.160 --> 0:13:02.559 the last week of Elon Musk and. 0:13:02.480 --> 0:13:05.960 Donald Trump feuding over Twitter is that the whole package. 0:13:05.960 --> 0:13:08.120 The reason we're doing one big, beautiful bill and set 0:13:08.160 --> 0:13:10.680 it too is because there's a tremendous amount of dessert 0:13:10.720 --> 0:13:13.040 in this bill. There's three hundred and fifty billion dollars 0:13:13.080 --> 0:13:16.160 in funding for the military and immigration, and that's. 0:13:16.040 --> 0:13:17.959 What's going to carry this bill over the finish line. 0:13:17.960 --> 0:13:20.880 I've only seen one Senator come out against those spending levels, 0:13:20.920 --> 0:13:21.760 and that's Rand Paul. 0:13:22.160 --> 0:13:24.480 And even he wants some level of spending, it's seventy 0:13:24.480 --> 0:13:26.319 five billion. He just doesn't think we need the full 0:13:26.360 --> 0:13:27.680 one hundred and seventy five billion. 0:13:27.800 --> 0:13:29.040 So I one hundred. 0:13:28.760 --> 0:13:32.679 Percent expect for this immigration conversation, the raids in LA 0:13:32.840 --> 0:13:35.600 sending in the National Guard advances. My odds that the 0:13:35.600 --> 0:13:38.200 OBBB gets signed into law. 0:13:38.480 --> 0:13:40.440 When all is set and down, how different will that 0:13:40.520 --> 0:13:42.480 bill look to what was passed in the House. 0:13:43.320 --> 0:13:45.360 It's going to be substantially more deficit increasing. 0:13:45.400 --> 0:13:48.320 I'd say at least four hundred billion dollars more in deficits. 0:13:49.400 --> 0:13:51.160 The saltcap is not going to be as generous. 0:13:51.200 --> 0:13:54.400 The IRA tax credits cannot be cut back as much 0:13:54.440 --> 0:13:56.960 as they have been. This is just a tremendous job 0:13:57.200 --> 0:14:01.559 growth in Key states that need it include Alaska, North Carolina, 0:14:01.600 --> 0:14:03.880 where there's that risk for publican members, it's. 0:14:03.720 --> 0:14:04.640 Going to change quite a bit. 0:14:04.960 --> 0:14:07.079 I'm going to trace if I depart, I to thank you. 0:14:17.360 --> 0:14:19.320 So here's the like this this morning. One hundred and 0:14:19.440 --> 0:14:22.120 nineteen billion dollars in treasury notes up for auction this 0:14:22.200 --> 0:14:25.000 week as try to look to gage appetite for US debt. 0:14:25.240 --> 0:14:29.040 Tony Rodriquez a Neuveine writing long duration is attractive as 0:14:29.040 --> 0:14:32.520 a hedge for equities and broader risk assets. Tiny joint 0:14:32.560 --> 0:14:34.000 us Now for more, Tonyk Mornic. 0:14:33.760 --> 0:14:34.480 Come morning, Jackthon. 0:14:34.520 --> 0:14:37.560 Could you think that more comfortable correlation does return that? 0:14:37.600 --> 0:14:38.560 Are you seeing signs of that? 0:14:38.840 --> 0:14:39.840 We are seeing signs of that. 0:14:39.880 --> 0:14:41.840 You've seen that in some of the little hiccups we've 0:14:41.840 --> 0:14:44.280 had in the equity market, and we think about why 0:14:44.320 --> 0:14:47.000 that's taking place, is that we finally have a yield 0:14:47.240 --> 0:14:51.520 level that's reasonably attractive, and you also have markets that 0:14:51.600 --> 0:14:54.320 we would argue are fully valued. Whether you look at 0:14:54.360 --> 0:14:56.920 the equity market where you look at risk assets, it's 0:14:56.920 --> 0:15:00.680 hard to argue anything's super cheap. So now when you're 0:15:00.680 --> 0:15:04.600 looking at the economy slowing down, rates being high, an 0:15:04.600 --> 0:15:07.720 investor is looking for income and a hedge. We think 0:15:07.760 --> 0:15:10.560 you'll see that rally and treasuries because we think that 0:15:10.600 --> 0:15:14.360 will really reduce any inflationary pressure that comes into the 0:15:14.400 --> 0:15:19.440 economy through wage pressures, and therefore rates can fall in 0:15:19.520 --> 0:15:22.280 a really negative outcome, which is not our base case, 0:15:22.600 --> 0:15:24.720 but in that tail risk, we think it will serve 0:15:24.720 --> 0:15:25.280 as a good head. 0:15:25.440 --> 0:15:27.840 That's the risk version test for the treasury. Let's talk 0:15:27.840 --> 0:15:29.920 about the supply test for the treasury market this week. 0:15:30.400 --> 0:15:32.800 Four fifty close to that on tens, close to five 0:15:32.800 --> 0:15:36.360 percent on thirty sufficient levels to bring in that demand 0:15:36.360 --> 0:15:38.080 when we get those auctions this week. 0:15:37.960 --> 0:15:39.760 Yeah, we don't think they're cheap enough to bring in 0:15:39.920 --> 0:15:42.280 access demands, so you're not going to get the strongest 0:15:42.320 --> 0:15:45.040 auction statistics you've ever seen. Who we think we're at 0:15:45.040 --> 0:15:48.040 fair value, so we're not expecting to see a failed 0:15:48.080 --> 0:15:52.360 auction this time. But we haven't really seen that right 0:15:52.400 --> 0:15:55.280 so bit the coverations has been okay, the tails have 0:15:55.360 --> 0:15:59.240 been average. We're expecting a similar story, but everybody's on 0:15:59.280 --> 0:16:03.200 alert for that first auction that actually, you know, shows 0:16:03.240 --> 0:16:05.080 a really negative soft outcome. 0:16:05.280 --> 0:16:07.600 It seems like we've been on alert for a while, Tony, 0:16:07.760 --> 0:16:09.960 and it has yet to happen. Where it has happened 0:16:10.280 --> 0:16:12.320 is abroad. You saw weak auctions from Japan and that 0:16:12.440 --> 0:16:14.920 was enough to move around the US treasury market. How 0:16:14.960 --> 0:16:18.200 fragile and how exposed are we still to international results 0:16:18.200 --> 0:16:20.920 from auctions and just more generally higher bond yields across 0:16:20.960 --> 0:16:21.400 the ocean. 0:16:21.640 --> 0:16:24.840 Yeah, they're very correlated markets. We've seen term premium rise 0:16:24.960 --> 0:16:29.000 across multiple global markets, right, we've seen yields rising, so 0:16:29.240 --> 0:16:31.720 very integrated. So we are sensitive to that. But the 0:16:31.760 --> 0:16:35.800 good news is that you've seen policymakers also respond to that. 0:16:36.080 --> 0:16:39.160 So the bankers Japan responded to that, so they're quantitative tiding. 0:16:39.200 --> 0:16:40.400 They might slow that down. 0:16:40.840 --> 0:16:44.600 We saw the US Treasury Secretary say that they may 0:16:44.640 --> 0:16:50.520 consider adjusting some of their supply you expectations over the 0:16:50.520 --> 0:16:54.920 coming months. So policymakers are responding to the potential for 0:16:55.320 --> 0:16:59.119 soft demand and longer duration assets and that's supportive. 0:16:59.400 --> 0:17:01.880 Is that not a problem though, that policymakers have to 0:17:01.920 --> 0:17:04.199 respond Tony. This is usually the thing you see in 0:17:04.240 --> 0:17:08.119 emerging markets that there's not enough demand for longer term debts, 0:17:08.160 --> 0:17:10.600 so you get changes, or you get inability to actually 0:17:10.640 --> 0:17:14.280 issue longer term debt is the very actions within the 0:17:14.280 --> 0:17:16.000 then selves. The fact that they have to do it 0:17:16.200 --> 0:17:16.879 a problem. 0:17:17.200 --> 0:17:18.920