WEBVTT - Bloomberg Surveillance TV: October 14th, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.720 Terminal and the Bloomberg Business app. Stock sliding as investors 0:00:37.720 --> 0:00:40.040 comed down to the start of earning season, Keith Lerner 0:00:40.080 --> 0:00:42.840 of truest Right in the following the current bullmarket likely 0:00:42.840 --> 0:00:46.600 still has further upside, underscoring the importance of staying focused 0:00:46.600 --> 0:00:49.880 on the broader trajectory rather than short term turbulence. Keith 0:00:49.960 --> 0:00:51.960 joins us now for more. Keith, Welcome to the program. 0:00:52.080 --> 0:00:55.040 Are you expecting some short term turbulence this earning season? 0:00:56.320 --> 0:00:56.520 Yeah? 0:00:56.560 --> 0:00:58.440 Well, first, great to be with you. I think it 0:00:58.480 --> 0:01:00.760 may be a little bit of a spookier October. 0:01:00.800 --> 0:01:02.200 We didn't get the seasonal weakness. 0:01:02.600 --> 0:01:04.360 A lot a lot of folks were looking for in 0:01:04.400 --> 0:01:07.160 August and September, and as you just discussed, like we 0:01:07.240 --> 0:01:09.240 have this big meeting, it's at the end of the month, 0:01:09.440 --> 0:01:11.160 the Fed's meetings at the end of the month. 0:01:11.560 --> 0:01:13.800 I think earnings continue to be the north star. 0:01:13.920 --> 0:01:15.959 But I will say heading into the earning season and 0:01:16.280 --> 0:01:19.160 we've had just one of the strongest six month rallies 0:01:19.160 --> 0:01:22.360 we've seen in history, expectations are somewhat high. You did 0:01:22.360 --> 0:01:25.000 see some complacency put the call ratios were really low 0:01:25.080 --> 0:01:27.880 going into this as well. And as I look at 0:01:27.880 --> 0:01:30.760 the overall market, you're just see in some minor cracks. 0:01:30.760 --> 0:01:32.720 So I just think this month is going to be 0:01:32.760 --> 0:01:34.480 a bit more turbulence. We still think we're in a 0:01:34.480 --> 0:01:37.560 bull market, a bull market that deserves the benefit of 0:01:37.640 --> 0:01:40.600 the doubt, but I think this turbulence is likely to 0:01:40.680 --> 0:01:42.000 continue through this month. 0:01:42.160 --> 0:01:44.320 Keith Imbory and Lisa, we're talking about the tension between 0:01:44.319 --> 0:01:47.600 the US and China somehow failing somewhat different going into 0:01:47.680 --> 0:01:50.120 negotiations at the end of this month, and I think 0:01:50.120 --> 0:01:52.360 you can see that in the price section. Yesterday's bound 0:01:52.400 --> 0:01:55.040 smaller than Friday sell off, and the sell off resumes 0:01:55.040 --> 0:01:57.880 again this morning. Keith, is there something different about things 0:01:57.880 --> 0:01:58.600 this time around. 0:01:59.600 --> 0:02:03.480 Well, the biggest challenge from a market perspective is this 0:02:03.560 --> 0:02:06.320 that you're going into this with higher expectations. 0:02:06.360 --> 0:02:07.800 You're at a twenty two multiple. 0:02:08.120 --> 0:02:10.640 As I mentioned, you've had this big run, so you 0:02:10.800 --> 0:02:15.120 just have you're more vulnerable to bad news. Whether this 0:02:15.200 --> 0:02:18.160 actually from a political side is different, you know, we 0:02:18.240 --> 0:02:19.760 just don't know yet. I mean, that's just the reality. 0:02:19.760 --> 0:02:20.200 We don't know. 0:02:20.280 --> 0:02:22.920 I think what we've seen over the last you know, 0:02:23.120 --> 0:02:25.320 six months, is that when we start to have more 0:02:25.360 --> 0:02:29.320 tension in the markets, eventually, you know, coolerheads prevail. But 0:02:29.639 --> 0:02:31.720 as as just mentioned, we just made new highs in 0:02:31.720 --> 0:02:34.200 the market, So the question becomes, you know, how much 0:02:34.400 --> 0:02:37.320 how much of a move down do we need before 0:02:37.360 --> 0:02:39.799 we start to see kind of a backup. And we're 0:02:39.840 --> 0:02:42.280 only a few percent from all time high, so I 0:02:42.680 --> 0:02:45.120 suspect that we actually still have some more work to 0:02:45.160 --> 0:02:49.040 move on the downside before investors start to focus back 0:02:49.080 --> 0:02:50.720 on what we think is the north store of this 0:02:50.760 --> 0:02:52.079 blow market, which is still earning. 0:02:52.280 --> 0:02:54.040 So, Keith, this isn't a biable dip yet for you? 0:02:54.120 --> 0:02:54.760 Is that correct? 0:02:55.680 --> 0:02:57.200 This is not a place where I wouldn't say I 0:02:57.200 --> 0:02:58.480 would be aggressively buying here. 0:02:58.720 --> 0:02:58.800 No. 0:02:59.200 --> 0:03:01.840 I think you know, if we look back historically, we 0:03:01.880 --> 0:03:05.359 haven't had even a five percent pullback since April. 0:03:06.280 --> 0:03:06.480 You know. 0:03:06.520 --> 0:03:09.560 That's also we often talk about pullbacks or the admission 0:03:09.560 --> 0:03:13.000 price to the to the to the market to eventually 0:03:13.080 --> 0:03:15.240 higher prices. So you know, we're a few percent from 0:03:15.240 --> 0:03:16.600 an all time highs with these kind of a little 0:03:16.600 --> 0:03:19.320 bit of a craft. I like a little bit deeper 0:03:19.520 --> 0:03:22.160 of a pullback. And I'm not saying, you know, fifteen percent. 0:03:22.280 --> 0:03:24.280 I think something in the five to ten percent range 0:03:24.280 --> 0:03:27.560 would be something where we would say, potentially be more aggressive. 0:03:27.800 --> 0:03:29.520 I wonder what your read through is going to be 0:03:29.560 --> 0:03:31.680 from the bank earnings that do kick off shortly. We 0:03:31.760 --> 0:03:34.880 are expecting based on what Jeffreys reported a while ago, 0:03:35.120 --> 0:03:36.920 this boom and m and A, this idea that there's 0:03:36.960 --> 0:03:39.720 more corporate confidence we're seeing that surveys. Does that do 0:03:40.000 --> 0:03:43.960 enough to alleviate concerns elsewhere and make you have conviction 0:03:44.480 --> 0:03:46.320 to buy in a more broad based manner? 0:03:47.840 --> 0:03:49.640 Yeah, well, I do think that's important. 0:03:49.640 --> 0:03:52.160 I think, you know, we're all looking at whatever economic 0:03:52.240 --> 0:03:55.320 data that we have, and there's certainly some divertencies between 0:03:55.440 --> 0:03:58.120 like say Atlanta GDP, which is well above three percent 0:03:58.600 --> 0:04:01.200 and the softening in the labor market, And it's really 0:04:01.280 --> 0:04:03.680 about what are the banks seeing, What are we seeing 0:04:03.680 --> 0:04:06.840 on credit, what are we seeing on lended on lending, 0:04:07.120 --> 0:04:08.720 you know, and I'll view, we're we're seeing it's still 0:04:08.760 --> 0:04:10.840 this kind of two speed economy where the high end 0:04:10.960 --> 0:04:14.280 is doing well and there's more challenges, especially at the 0:04:14.320 --> 0:04:16.040 lower end. So I want to see if that continues. 0:04:16.080 --> 0:04:18.479 We did get you know, Delta last week, which was 0:04:18.600 --> 0:04:22.400 encouraging talking about, you know, an upgrade to their view 0:04:22.480 --> 0:04:25.280 based on the high end consumer. So I suspect that continues. 0:04:25.320 --> 0:04:27.920 But I think it is important And to be frank, 0:04:27.960 --> 0:04:30.200 we're not selling here. We're sticking with the underlying trend. 0:04:30.240 --> 0:04:32.560 But for us to add more to risk at this point, 0:04:32.760 --> 0:04:35.720 we would prefer at least a little bit of a 0:04:36.200 --> 0:04:39.479 further pullback or more of a consolidation in time where 0:04:39.480 --> 0:04:42.560 you kind of chop around and kind of reduce these expectations. 0:04:42.560 --> 0:04:45.640 This morning, they'd be of a fund survey came out 0:04:45.640 --> 0:04:49.440 and we saw that sentiment or allocations or the highest 0:04:49.640 --> 0:04:52.840 since February of this year. That was prior to the 0:04:53.600 --> 0:04:57.440 setback which was exacerbated by the terriff and certanty. 0:04:57.279 --> 0:04:59.560 Keith, when you're looking for catalysts to look at what 0:05:00.000 --> 0:05:03.000 actually be a pullback in the market to then buy more. 0:05:03.120 --> 0:05:05.479 Is it going to be this month as the tensions 0:05:05.600 --> 0:05:07.440 ratchet up between Washington and Beijing. 0:05:09.000 --> 0:05:11.320 Yeah, I think I think it could be. And the 0:05:11.360 --> 0:05:13.479 other thing I've been looking for, Listen, I expect to 0:05:13.480 --> 0:05:16.120 have a good earning season. You know, one thing, as 0:05:16.120 --> 0:05:17.960 I mentioned, the north star of this bull market has 0:05:18.000 --> 0:05:20.480 been earnings. So I'll be really interested to see how 0:05:20.560 --> 0:05:24.120 stocks react to good earnings. Your last quarter, we went 0:05:24.120 --> 0:05:26.800 into the earning season and expectations were really low. 0:05:26.839 --> 0:05:28.520 There's a lot of us certainty around terrace. 0:05:28.760 --> 0:05:31.960 What's interesting about heading into this earning season is analysts 0:05:32.320 --> 0:05:35.320 have been raising their estimates into the earning season. 0:05:35.400 --> 0:05:36.440 That's highly unusual. 0:05:36.560 --> 0:05:39.400 Last time we saw that was in for the Q 0:05:39.640 --> 0:05:43.120 four twenty twenty one. So that just also means we 0:05:43.160 --> 0:05:46.719 have higher expectations and then it also comes down all. 0:05:46.960 --> 0:05:47.680 You know, later on. 0:05:47.640 --> 0:05:49.360 We'll come down to tech. Tech's the big part of this. 0:05:49.440 --> 0:05:51.840 Markeer Wistol bullsh on tech. Longer term, we still think 0:05:51.880 --> 0:05:55.120 the dominant theme is tech. But you know, I want 0:05:55.160 --> 0:05:57.640 to see how stocks react to good news because I 0:05:57.680 --> 0:06:00.200 certainly think we'll have a decent earning season of all. 0:06:00.560 --> 0:06:02.440 So, Keith, we have seen these pockets are credit stress. 0:06:02.440 --> 0:06:05.240 I think we should explore it as well. First Brands, trick 0:06:05.240 --> 0:06:07.359 a Law, Tricolor. Have we decided which one is Brando 0:06:07.600 --> 0:06:10.360 Tricolor Tricolor. 0:06:09.640 --> 0:06:12.160 If you go south of the border. I think that 0:06:12.160 --> 0:06:12.960 that's end. 0:06:14.320 --> 0:06:16.400 Thank you, that's great, So, Keith, we've seeing those pockets 0:06:16.440 --> 0:06:20.560 are credit stress, whatever Lisa said, and First Brands as well. Keith, 0:06:20.600 --> 0:06:22.919 do you think that's a private market issue and the 0:06:22.960 --> 0:06:26.840 public markets are insulcted from what's happening there, particularly financial institutions. 0:06:26.960 --> 0:06:28.880 How are you in the team thinking about that situation. 0:06:30.480 --> 0:06:33.719 For the most part, we do think it's idiosyncratic, but 0:06:33.760 --> 0:06:35.600 we have to keep an open mind. We have seen 0:06:35.680 --> 0:06:38.600 credit spreads over the last week and week or so 0:06:38.760 --> 0:06:40.760 really kind of rise for the first time in a while. 0:06:40.880 --> 0:06:43.320 We all know that credit spreads of you know, at 0:06:43.320 --> 0:06:47.080 the lowest in some areas since the nineties, and you know, Friday, 0:06:47.240 --> 0:06:49.240 in our view as a portfolio manager, was a good 0:06:49.240 --> 0:06:52.640 stress test for us to see, you know, does diversifications 0:06:52.640 --> 0:06:54.560 still work? I mean, you know, we've got some questions 0:06:54.560 --> 0:06:56.920 for people why don't I own only tech or why 0:06:56.960 --> 0:06:59.560 don't I only you know, why don't own any bonds? 0:06:59.560 --> 0:07:02.520 And what we saw, especially on Friday is a good stress. 0:07:02.520 --> 0:07:06.320 As we show high quality bonds do well outperform, we 0:07:06.320 --> 0:07:11.080 show gold outperform, and then we show crypto actually underperformed. 0:07:11.120 --> 0:07:12.840 So basic diversification works. 0:07:12.840 --> 0:07:13.080 Again. 0:07:13.160 --> 0:07:15.160 I am paying attention to the credit marks. We have 0:07:15.240 --> 0:07:18.120 seen spreads move up, not even an alarming way, but 0:07:18.160 --> 0:07:20.360 something we should at least, you know, at least pay 0:07:20.360 --> 0:07:20.880 attention to. 0:07:21.120 --> 0:07:23.880 Keith, you mentioned the Bank of America Fund Manager survey, 0:07:24.080 --> 0:07:26.440 and in that survey, it showed that fifty seven percent 0:07:26.480 --> 0:07:30.880 of all respondents thought that private credit private equity is 0:07:31.000 --> 0:07:33.480 the latest source or the greatest source of any kind 0:07:33.480 --> 0:07:37.000 of systemic risk or systemic credit event in the near future. 0:07:37.160 --> 0:07:39.600 That is the most conviction that we've seen in terms 0:07:39.680 --> 0:07:42.560 of a potential catalyst going back to twenty twenty two. 0:07:42.680 --> 0:07:43.480 Do you agree with that? 0:07:43.720 --> 0:07:46.200 Is that where you're looking for potential catalysts for some 0:07:46.240 --> 0:07:47.520 sort of disruption. 0:07:48.400 --> 0:07:51.040 Well, a lot of times the issues in in the 0:07:51.080 --> 0:07:53.480 overle equity market begin with the credit market. 0:07:53.560 --> 0:07:56.240 So is that the most concerning thing? You know? 0:07:56.280 --> 0:07:58.600 I don't know, as I think about more of the 0:07:58.640 --> 0:08:01.240 public markets. You know, we have a lot of companies 0:08:01.280 --> 0:08:04.000 that have term you know, term dead, they have big 0:08:04.080 --> 0:08:07.480 you know, cash balances, Earnings have been relatively positive. So 0:08:08.000 --> 0:08:09.600 I don't know that we have like, you know, a 0:08:09.640 --> 0:08:12.920 big credit event unfolding here. But we all do know 0:08:12.960 --> 0:08:14.960 that there's been a huge amount of money into these 0:08:15.040 --> 0:08:18.360 private markets. They're more more opaque, and I think that's 0:08:18.400 --> 0:08:20.760 that's something that could kind of creep up more on 0:08:20.840 --> 0:08:21.800 investors because. 0:08:21.560 --> 0:08:23.360 It's just like, you know, we have less information there. 0:08:23.320 --> 0:08:25.040 I think about, we have less information. 0:08:24.720 --> 0:08:27.000 On the overall economy right now with without you know, 0:08:27.040 --> 0:08:30.880 some of these you know, these economic reports, government reports. 0:08:30.920 --> 0:08:34.080 So in the in the private credit markets, you just 0:08:34.120 --> 0:08:37.080 have less information. So when things, you know, start to 0:08:37.559 --> 0:08:40.280 unravel a little bit, you have less information to understand 0:08:40.320 --> 0:08:42.800 more broadly what's happening. But again, as I think about 0:08:42.800 --> 0:08:44.600 more of the public markets, it's not something that at 0:08:44.600 --> 0:08:48.280 this point, you know, we really see the systemic issue. 0:08:50.280 --> 0:08:53.720 Stay with us, multiple IMPERG survanance coming up after this. 0:09:02.840 --> 0:09:05.520 John Cassidy of MBC Capital Markets Bank with us for 0:09:05.559 --> 0:09:08.080 a final word on things. So today we've heard from 0:09:08.120 --> 0:09:11.680 JP Morgan, Goldman City welst fago tomorrow. Morgan Stanley and 0:09:11.720 --> 0:09:14.440 Bank of America. What have we learned this morning and 0:09:14.520 --> 0:09:16.000 how does that inform your view of what we can 0:09:16.040 --> 0:09:18.360 expect tomorrow, John, I. 0:09:18.360 --> 0:09:20.880 Think what we should expect tomorrow is the fact that 0:09:21.640 --> 0:09:24.440 the trading results from Morgan stillly in Bank America are 0:09:24.440 --> 0:09:27.679 will likely mirror what you saw today from the big banks, 0:09:27.880 --> 0:09:30.120 which were very good. You know, the FICK numbers in 0:09:30.160 --> 0:09:33.239 particular year of the year were strong, and we anticipate 0:09:33.280 --> 0:09:36.120 that we'll see that for the others. Also, the investment 0:09:36.160 --> 0:09:39.640 banking results, as you pointed out already earlier in the show, 0:09:39.880 --> 0:09:42.680 we're also strong and we should expect that as well 0:09:42.679 --> 0:09:45.680 from Bank America and Morgan Silly and finally on Bank 0:09:45.760 --> 0:09:49.000 America since they've got a real deep dive into the consumer. 0:09:49.240 --> 0:09:52.880 The consumer numbers we've seen today, whether it's JP, Morgan 0:09:53.000 --> 0:09:56.600 City or Wells Fargo, all who were resilient, and we 0:09:56.640 --> 0:09:59.880 would expect Bank America's numbers to be resilient in any 0:10:00.000 --> 0:10:00.760 are as well. 0:10:01.000 --> 0:10:03.680 And on the call that John was mentioning JP Morgan 0:10:03.800 --> 0:10:06.480 call the CFO of that bank saying that he's not 0:10:06.520 --> 0:10:09.000 really seeing any cracks in the credit market aside from 0:10:09.040 --> 0:10:12.320 a couple of vidiosyncratic areas, and says that for investment banking, 0:10:12.640 --> 0:10:15.640 all drivers are pretty much in place. I do wonder, though, 0:10:15.679 --> 0:10:17.720 that what we heard from the Wells Fargo on their 0:10:17.800 --> 0:10:21.240 call is that middle market clients are still cautious on borrowing. 0:10:21.400 --> 0:10:23.960 How much to expect the success to be mirrored in 0:10:24.080 --> 0:10:26.720 smaller and mid size banks that are going to report 0:10:26.800 --> 0:10:29.360 that might be more leveraged to those middle market clients. 0:10:31.400 --> 0:10:35.080 It's going to be interesting, Lisa, because certainly Wells has 0:10:35.160 --> 0:10:37.320 got a good read on the middle market of the 0:10:37.440 --> 0:10:41.640 US is predominantly a US bank, and the regional banks, though, 0:10:41.920 --> 0:10:45.920 could also benefit from the fact that the capital expenditures 0:10:46.000 --> 0:10:49.560 that we're anticipating due to the big beautiful bill that 0:10:49.720 --> 0:10:52.920 was passed in July, with the depreciation of one hundred 0:10:52.920 --> 0:10:57.000 percent of those capital expenditures in year one, could drive 0:10:57.080 --> 0:11:00.640 commercial and industrial loan demand. It's interesting to know JP 0:11:00.760 --> 0:11:03.280 Morgan's long growth year of the year was seven percent. 0:11:03.760 --> 0:11:06.400 Wells was much lower, closer to two percent. So I 0:11:06.400 --> 0:11:08.640 think what you're going to see is that Wells is 0:11:08.760 --> 0:11:10.839 still coming out of that asset half. 0:11:10.960 --> 0:11:12.000 It's going to take time. 0:11:12.360 --> 0:11:15.480 They have indicated that and so I think the read 0:11:15.559 --> 0:11:18.760 to the regionals is still positive based upon what we 0:11:18.800 --> 0:11:20.800 saw from JP Morgan's long growth. 0:11:21.160 --> 0:11:23.920 Gerard, I know that you probably don't want to pick 0:11:23.960 --> 0:11:26.720 favorites or winners, but so far it is early. Who 0:11:26.760 --> 0:11:28.960 do you think is winning the earning season right now? 0:11:31.320 --> 0:11:32.400 Of the four that came out? 0:11:32.600 --> 0:11:36.520 Obviously, JP Morgan's numbers were very strong across the board, 0:11:36.679 --> 0:11:38.280 so you probably have to put them up at the 0:11:38.280 --> 0:11:41.520 top of the leaderboard. City's numbers were also very good. 0:11:41.720 --> 0:11:44.160 They had a higher tax rate, which on the bottom 0:11:44.320 --> 0:11:48.000 line basis impacted EPs, so he probably put them up second. 0:11:48.280 --> 0:11:50.680 And then you know the other two Goldman and Wells 0:11:50.720 --> 0:11:52.920 are tied for third. You know, there's gold, silver, and 0:11:52.960 --> 0:11:56.120 bronze for everybody. 0:11:57.080 --> 0:11:59.600 Stay on the Federal Reserve, Joe Davis a Vanguard Rights 0:11:59.640 --> 0:12:01.560 the follow up, We expect the Fed to ease once 0:12:01.600 --> 0:12:05.559 more in twenty five, with October that meeting being slightly 0:12:05.559 --> 0:12:07.959 more likely to join us now for more Joe, welcome 0:12:07.960 --> 0:12:10.680 to the program. What makes October more likely given we 0:12:10.720 --> 0:12:13.119 are lights on economic takes at the moment. 0:12:14.679 --> 0:12:16.440 Well, I think it's just the slowdown we've seen in 0:12:16.480 --> 0:12:19.280 the labor market. Clearly there's a number of forces at work. 0:12:19.320 --> 0:12:22.040 We've seen some supply come down materially over the course 0:12:22.080 --> 0:12:24.880 of this year, but the fact is demand and businesses 0:12:25.000 --> 0:12:27.560 have held back on hiring too, and so for that reason, 0:12:28.400 --> 0:12:30.319 you know, our assessment over for over two years is 0:12:30.360 --> 0:12:33.600 the Federal Reserve has been restrictive, perhaps not as restrictive 0:12:33.640 --> 0:12:36.600 as something, and so this is really getting them to 0:12:36.600 --> 0:12:38.960 that elusive neutral rate, which no one knows what it is, 0:12:39.040 --> 0:12:41.400 but I think their approaching where it should be. 0:12:41.600 --> 0:12:43.600 Jomike McKee talked about it, the amount of division on 0:12:43.600 --> 0:12:45.920 the Federal Reserve. I assume you believe there is a 0:12:45.920 --> 0:12:49.199 consensus on how to move forward. I'm struggling to identify 0:12:49.240 --> 0:12:51.960 that consensus given the amount of different views I see 0:12:52.120 --> 0:12:55.559 in the FED speed What do you see? 0:12:55.800 --> 0:12:59.520 Well, I think this is actually somewhat typical of the 0:12:59.600 --> 0:13:01.600 various fastest the ecomomy you could look at when you're 0:13:01.600 --> 0:13:04.320 actually close to let's call it appropriate. I mean, you 0:13:04.400 --> 0:13:07.640 have a GDP numbers that would at the margin say 0:13:08.000 --> 0:13:10.440 you shouldn't be easy at all. The inflation would point 0:13:10.480 --> 0:13:12.040 to that as well. But then you've got the labor 0:13:12.080 --> 0:13:15.040 market that would suggest that you've got to take a 0:13:15.080 --> 0:13:17.920 little risk management in these policy So I think with 0:13:18.080 --> 0:13:22.320 that depend upon how policymakers wait those various data feeds. Again, 0:13:22.360 --> 0:13:24.679 we're going to have a lack of visibility here. I 0:13:24.720 --> 0:13:26.960 think that's actually par for the course where we're at now. 0:13:27.160 --> 0:13:29.760 I just wonder how much they are prioritizing the labor 0:13:29.760 --> 0:13:32.199 market if they cut rates by another fifty basis points. 0:13:32.240 --> 0:13:34.360 I mean, what is the direct read through to actually 0:13:34.440 --> 0:13:35.600 supporting the labor market. 0:13:37.559 --> 0:13:40.280 Well, I think that's the key issue. And actually the 0:13:40.320 --> 0:13:44.160 gap between where GDP is and where the jobs market 0:13:44.280 --> 0:13:46.920 is I think is the key issue for the next 0:13:46.960 --> 0:13:50.079 six or twelve months, because there's the gap close because 0:13:50.120 --> 0:13:52.640 protivity is starting the rise, and we'll start to see 0:13:52.679 --> 0:13:54.960 then a stabilization and perhaps the modest firming in the 0:13:55.000 --> 0:13:55.600 labor market. 0:13:55.640 --> 0:13:56.719 That's case A. 0:13:56.960 --> 0:13:59.959 Case B though, is that the labor market is simply 0:14:00.800 --> 0:14:03.280 of weaker growth ahead and then GDP would come down. 0:14:03.320 --> 0:14:06.240 That's a more recessionary impulse. We lean on the form 0:14:06.320 --> 0:14:09.120 or not the latter, but it's explaining that gap. That's 0:14:09.160 --> 0:14:11.679 the critical policy diagnosis over the next six months. 0:14:11.760 --> 0:14:15.160 How much is this sort of quietly a federal reserve 0:14:15.240 --> 0:14:18.920 that is aware of the fiscal sustainability of the United States. 0:14:18.920 --> 0:14:21.080 And I say this with a lot of questions around 0:14:21.080 --> 0:14:24.000 FED independence, but this is an issue facing central banks 0:14:24.000 --> 0:14:25.840 around the world, the idea that there is just so 0:14:25.960 --> 0:14:29.960 much government debt outstanding that inflation concerns have to be 0:14:30.040 --> 0:14:33.680 paired much more with fiscal sustainability and paying back that 0:14:33.800 --> 0:14:36.680 debt than they do, say anything else. I mean, how 0:14:36.760 --> 0:14:38.560 much is that coming into play here in the back 0:14:38.560 --> 0:14:39.560 of some people's minds. 0:14:41.320 --> 0:14:43.840 I think it's in the backdrop, but it's increasingly will 0:14:43.840 --> 0:14:45.800 be in the forefront of the next several years. And 0:14:45.840 --> 0:14:47.640 you see that in the price of gold, which would 0:14:47.680 --> 0:14:50.920 seem inconsistent its rise with the S and P five 0:14:51.000 --> 0:14:53.400 hundred in our framework, it's not. I mean, what we 0:14:53.480 --> 0:14:56.040 have said for two years is that there's this coming 0:14:56.080 --> 0:15:00.280 tug of war between AI's transformative ability on a positive side, 0:15:00.320 --> 0:15:03.000 and then if it disappoints some of the deficit pressures, 0:15:03.000 --> 0:15:04.920 which again you're mentioning. You see a little bit that 0:15:05.000 --> 0:15:07.640 in the so called the basement trade. We are just 0:15:07.680 --> 0:15:09.680 starting this sort of tug of war, and that is 0:15:09.840 --> 0:15:11.600 how the market is going to play out over the 0:15:11.600 --> 0:15:12.240 next three years. 0:15:12.280 --> 0:15:15.080 Is that tension Joe air inflation concern is going to 0:15:15.120 --> 0:15:17.040 be more front and center for the FED at the 0:15:17.080 --> 0:15:18.440 end of the month, not just because we're going to 0:15:18.440 --> 0:15:21.440 get the CPI report, but also because the rationing up 0:15:21.480 --> 0:15:25.560 of tensions and rhetoric and sanctions between Washington and Beijing. 0:15:26.840 --> 0:15:30.200 Yeah, I think they're still assuming and I think it's 0:15:30.200 --> 0:15:33.320 appropriate that although inflation has been sticky, some of the 0:15:33.360 --> 0:15:36.240 so called dare I say transitory factors are the tariffs, 0:15:37.360 --> 0:15:38.840 You have to look through some of that. That was 0:15:38.840 --> 0:15:41.280 our thesis that the Federal Reserve would start to ease policy, 0:15:41.320 --> 0:15:43.160 and its some one of the biggest rationales for us 0:15:43.200 --> 0:15:46.120 expecting it in October, and I think it's appropriate. I 0:15:46.160 --> 0:15:49.160 think the FED will look at the financial markets, less 0:15:49.160 --> 0:15:53.000 so gold, but more break even inflation rates, term premium, 0:15:53.080 --> 0:15:56.720 the treasury market, and that's still somewhat reassuring that we 0:15:56.720 --> 0:15:59.000 don't have a material inflation problem, certainly not what we 0:15:59.080 --> 0:16:00.000 had in twenty twenty two. 0:16:00.040 --> 0:16:00.280 Too. 0:16:00.640 --> 0:16:03.360 The key question comes back to where's the labor market 0:16:03.480 --> 0:16:05.760 six to twelve months. In a federal reserve that has ease, 0:16:06.120 --> 0:16:07.480 then there would be a reassessment. 0:16:07.880 --> 0:16:10.960 But when it comes to the recent trade rhetoric and 0:16:11.000 --> 0:16:13.560 the tit for tap between Washington and Beijing. If we 0:16:13.640 --> 0:16:16.120 don't get some sort of deal by the end of 0:16:16.120 --> 0:16:19.480 the month and this bleeds into twenty twenty six, how 0:16:19.560 --> 0:16:21.960 much more concerning does this story become for them? 0:16:22.160 --> 0:16:22.920 How challenging? 0:16:25.040 --> 0:16:29.040 Well, it becomes certainly concerning. Again, this is not a 0:16:29.080 --> 0:16:31.440 great shock if you're central banker, if you're an investor, 0:16:31.480 --> 0:16:33.640 to face right, because you have downward pressure on growth 0:16:33.640 --> 0:16:35.880 if tariff goes up even from the uncertainty, and you 0:16:35.920 --> 0:16:39.720 push up the inflation rates. So it's clearly stagflation area. 0:16:40.240 --> 0:16:42.280 It's a sort of card you don't want to be 0:16:42.720 --> 0:16:44.960 to have dealt I think you have a federal reserve. 0:16:45.000 --> 0:16:48.080 That's assuming the inflation is more temporary than the labor market. 0:16:48.360 --> 0:16:50.360 There's a little bit of risk in that assessment, but 0:16:50.560 --> 0:16:53.480 I think that's fair for now. But the drag into 0:16:53.480 --> 0:16:56.240 twenty twenty six that would be I think unexpected should 0:16:56.440 --> 0:16:57.680 the trade rhetoric. 0:16:57.320 --> 0:17:12.840 Accelerateed this more Bloomberg surveillance coming up after this. So 0:17:12.880 --> 0:17:15.280 here's the likes this morning, Americans feeling the pinch of 0:17:15.359 --> 0:17:18.399 the shutdown Stown May. President Trump promising to pay troops 0:17:18.440 --> 0:17:21.480 tomorrow but holding back checks from other federal workers. And 0:17:21.480 --> 0:17:23.840 I'm happy to say we can extend the conversation with 0:17:24.000 --> 0:17:26.840 New York Congressman Michael Laula Congressman. Welcome back to the 0:17:26.880 --> 0:17:29.560 program sir. The good news the military looks like it's 0:17:29.560 --> 0:17:31.520 getting paid. Can you just walk us through how you 0:17:31.520 --> 0:17:33.840 would characterize current negotiations. 0:17:35.760 --> 0:17:40.600 Well, the Democrats refused to do their job. You know, 0:17:40.680 --> 0:17:45.679 Ham Jeffries talks about getting permission. The reality here is 0:17:45.720 --> 0:17:50.320 that AOC and Zorn Mandani and the progressive left are 0:17:50.359 --> 0:17:54.359 who's driving this ship here. Chuck Schumer and Hakeem Jeffries 0:17:54.480 --> 0:17:58.080 have been petrified to do their jobs, and so they 0:17:58.119 --> 0:18:02.840 shut the government down for fear of a primary challenge 0:18:02.880 --> 0:18:06.800 from the left and to show their progressive base that 0:18:06.880 --> 0:18:12.000 they're quote unquote fighting back, resisting you know, President Trump. 0:18:12.760 --> 0:18:17.520 And it's fundamentally wrong. They are holding the American people hostage. 0:18:18.080 --> 0:18:23.000 House Republicans passed a clean continuing resolution over three weeks 0:18:23.040 --> 0:18:26.120 ago to keep the government funded, to pay for all 0:18:26.160 --> 0:18:30.000 of these critical programs, to ensure that our troops are paid, 0:18:30.040 --> 0:18:34.040 to ensure that border patrol agents are paid. And yet 0:18:34.280 --> 0:18:39.680 Democrats have voted over eight times against the clean CR. 0:18:40.119 --> 0:18:43.320 And we'll see what Chuck Schumer and Senate Democrats do today. 0:18:44.040 --> 0:18:45.359 But it doesn't look good. 0:18:46.320 --> 0:18:49.840 And you know, when I was in Washington last week, 0:18:50.280 --> 0:18:53.800 I went and confronted Hakeem Jeffries to his face and 0:18:53.960 --> 0:18:57.440 pointed out that if he's serious about tackling the healthcare 0:18:57.520 --> 0:19:01.640 challenges in our country, sign on to the bipartisan legislation 0:19:02.040 --> 0:19:05.160 that would do that. And he refused. So this really 0:19:05.280 --> 0:19:09.160 is not about healthcare. It's not about a specific policy outcome. 0:19:09.520 --> 0:19:13.520 This is about Democrats showing their progressive base that they're 0:19:13.560 --> 0:19:17.600 fighting back against President Trump. Meanwhile, look at the juxtaposition. 0:19:18.040 --> 0:19:20.879