WEBVTT - Bloomberg Surveillance TV: September 4th, 2025 0:00:02.400 --> 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 Amerie 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 --> 0:00:38.280 Terminal and the Bloomberg Business App. Ohmar Aguila schwarmasset Management 0:00:38.320 --> 0:00:42.040 CEO and CIO writing. Economic uncertainty is still high, So 0:00:42.120 --> 0:00:46.080 think long term, stay disciplined, stay invested, and stay diversified. 0:00:46.240 --> 0:00:48.959 No need to be a hero. Omar joins us now 0:00:48.960 --> 0:00:51.680 for more. Omar, Welcome to the program, sir. Let's talk 0:00:51.720 --> 0:00:54.600 about that economic uncertainty. How are you getting a clean 0:00:54.680 --> 0:00:56.680 read on the economy in America? 0:00:58.000 --> 0:01:01.120 Well, you know the big part of of the trade 0:01:01.160 --> 0:01:06.520 offs right now between inflation, unemployment, economic deceleration and overall, 0:01:06.800 --> 0:01:09.959 you know, the path that we're seem to be going here, 0:01:10.280 --> 0:01:14.280 it is unclear how the consumers are actually driving you know, 0:01:14.319 --> 0:01:18.920 the majority of economic growth we have seen so far 0:01:19.080 --> 0:01:23.320 this case shape economy, where the top end of earners 0:01:23.440 --> 0:01:26.880 continue to drive GDP growth, and the wealth affact coming 0:01:26.920 --> 0:01:30.399 from equity markets, coming from housing, coming from anything else 0:01:30.440 --> 0:01:34.840 seem to be very consistently supporting economic growth, where the 0:01:35.000 --> 0:01:39.080 other part of the economy, the ower income consumers, seems 0:01:39.120 --> 0:01:42.000 to be you know, suffering from you know, the pressures 0:01:42.040 --> 0:01:45.520 on inflation, the increasing prices. So that sort of case 0:01:45.560 --> 0:01:48.120 shape economy seems to be the one driving a lot 0:01:48.160 --> 0:01:51.040 of these economic concernity and the trend seems to pointing 0:01:51.080 --> 0:01:52.320 out towards deceleration. 0:01:52.960 --> 0:01:55.240 No need to be a hero. I keep thinking about that. 0:01:55.440 --> 0:01:59.040 The implication is focus on quality. As you say, what 0:01:59.080 --> 0:02:02.040 does quality mean? How is the idea of quality changing 0:02:02.520 --> 0:02:06.440 given the backdrop potentially of inflation, the backdrop given of 0:02:06.840 --> 0:02:10.400 slow growth with this sort of persistent price pressure. 0:02:12.040 --> 0:02:15.519 Yeah, the big part here, Lisa, is that we have 0:02:15.840 --> 0:02:19.519 these forces that are sort of going at each other. 0:02:19.960 --> 0:02:22.760 You know, inflation seems to be very sticky and stubborn. 0:02:23.480 --> 0:02:27.600 We see in the economic value and the unemployment being 0:02:27.639 --> 0:02:31.120 in these no higher, no fire situation. We see wage 0:02:31.160 --> 0:02:34.240 growth still ticking up a little bit putting pressure on 0:02:34.280 --> 0:02:37.200 inflation and something at some point is probably have to 0:02:37.240 --> 0:02:41.200 give up. What that means is that in certain way 0:02:41.280 --> 0:02:47.200 that deceleration supports stronger balance sheets, supports discipline in management, 0:02:48.760 --> 0:02:53.400 supports capital expenditures, supports areas that define the quality of 0:02:53.440 --> 0:02:57.440 a company. Where Corporate America is using all the potential 0:02:57.480 --> 0:03:00.400 tailwinds coming from the economy to be able to manage 0:03:00.440 --> 0:03:02.800 their business in a way that is consistent with what 0:03:02.880 --> 0:03:05.440 the consumers expect, but at the same time have the 0:03:05.480 --> 0:03:09.160 potential for a sustainable and that's the definition of quality, 0:03:09.360 --> 0:03:13.239 sustainable earnings growth. When you put that into context, that's 0:03:13.280 --> 0:03:16.440 what we refers to say, look for those companies that 0:03:16.560 --> 0:03:20.119 allows you to stay invested, that continues to have strengthened 0:03:20.120 --> 0:03:22.440 the balance sheets, and that will be stronger even if 0:03:22.480 --> 0:03:25.360 the economy decelerates. So that's a big part of what 0:03:25.400 --> 0:03:27.360 we have on both on fixed income as well as 0:03:27.440 --> 0:03:28.040 on equities. 0:03:28.120 --> 0:03:33.160 Can you find more quality, more reliability in corporations versus 0:03:33.240 --> 0:03:34.280 governments right now? 0:03:35.880 --> 0:03:38.520 You know, corporations have been very disciplined over the entire 0:03:38.560 --> 0:03:41.080 period since the pandemic, and if you actually look at 0:03:41.120 --> 0:03:43.120 a big part of the driver, you can see it 0:03:43.120 --> 0:03:46.040 in the credit market. The credit spreads have been incredibly tight, 0:03:46.160 --> 0:03:49.040 and most importantly, not only the level, but if you 0:03:49.200 --> 0:03:52.000 actually see the level of volatility of the credit market, 0:03:52.160 --> 0:03:55.000 is actually very surprising to just see that, even though 0:03:55.000 --> 0:03:58.160 we have seen all kinds of uncertainty coming from headlines 0:03:58.200 --> 0:04:02.200 and everything else, we see this incredibly you know, well 0:04:02.240 --> 0:04:05.920 positioned for for quiet quality companies. What leverage has not 0:04:06.040 --> 0:04:08.840 been high, you know, obvious lead their companies that have 0:04:09.000 --> 0:04:11.200 done it and that have been in the process of 0:04:11.240 --> 0:04:15.640 potentially you know, disappointing in terms of their future, but 0:04:15.800 --> 0:04:18.880 overall that quality is being very faired in credit. When 0:04:18.920 --> 0:04:22.520 you think about governments, deficits have ballooned, and you actually 0:04:22.520 --> 0:04:24.480 see what's going on in the UK, what's going on 0:04:24.560 --> 0:04:27.520 in the United States. You know clearly you know, a 0:04:27.520 --> 0:04:30.400 little a little bit of that defense expending as well 0:04:30.440 --> 0:04:33.760 as capital expenditures that has been positive for the economy. 0:04:33.920 --> 0:04:36.279 It obviously puts a little bit more pressure on the 0:04:36.400 --> 0:04:39.120 long part of the fixed income curve. You can actually 0:04:39.200 --> 0:04:41.680 see just that level of volatility and that we see 0:04:41.800 --> 0:04:44.040 in the in the long end of the of the 0:04:44.160 --> 0:04:45.160 of the Yale curve. 0:04:45.360 --> 0:04:47.159 This is why it's so challenging when you look at 0:04:47.200 --> 0:04:48.880 what the Supreme Court has in front of them. This 0:04:48.920 --> 0:04:52.040 could actually impact potentially what bonds do, given the fact 0:04:52.040 --> 0:04:54.760 that trillions of dollars coming to United States from terrorists 0:04:54.839 --> 0:04:57.880 is supposed to be depleting the deficit. Omar, if we 0:04:57.880 --> 0:05:00.760 were to see the Supreme Court strike down what is 0:05:00.800 --> 0:05:02.920 going on with AIPA and the President United States, what 0:05:02.920 --> 0:05:04.440 would that mean for the bond market. 0:05:05.680 --> 0:05:10.000 Well, first of all, the things that are actually very clear. 0:05:10.080 --> 0:05:13.240 The trend for the Yeald curve is too steeper. I 0:05:13.240 --> 0:05:17.039 think we are convinced, you know, in our research that 0:05:17.279 --> 0:05:20.680 you know, overall, the uncertainty and the long end long 0:05:20.839 --> 0:05:23.120 end of the yeal curve you know, will continue. We 0:05:23.160 --> 0:05:25.520 see that even just in the last twenty four hours 0:05:25.680 --> 0:05:28.440 where we see volatility on the third year you know 0:05:28.560 --> 0:05:31.680 yield on bonds you know, being you know, quite dramatic. 0:05:32.240 --> 0:05:35.200 A lot of that is because a inflation expectations, but 0:05:35.240 --> 0:05:37.360 two it's also you know, what will be the long 0:05:37.480 --> 0:05:40.520 term you know views in terms of the deficit regarding 0:05:40.839 --> 0:05:44.160 you know, to the setup that may happen within certain entireists. 0:05:44.200 --> 0:05:47.279 It's kind of interesting to see that uncertainty tireiffs you know, 0:05:47.360 --> 0:05:50.000 started by affecting sort of the short part of the 0:05:50.080 --> 0:05:52.719 Yeald curve and now has been pushed towards towards the 0:05:52.760 --> 0:05:55.120 long end of the curve precisely for what would you 0:05:55.240 --> 0:05:58.120 just describe which is a big part of why, you know, 0:05:58.240 --> 0:06:01.000 the the the middle of the curve seems to be 0:06:01.040 --> 0:06:04.520 the one that has been the most stable, and even 0:06:04.560 --> 0:06:06.880 with the yield curve you know, starts to steepend, you 0:06:06.920 --> 0:06:10.000 can actually still see some stability in that area. 0:06:11.040 --> 0:06:14.520 Stay with US multil Index savanas coming up off to this, 0:06:23.800 --> 0:06:26.480 joining us Nasmonic Aguerra of Molch and Stanley to discuss 0:06:26.520 --> 0:06:28.800 some of this Just how much deficit risk is in 0:06:28.839 --> 0:06:31.080 play with this core decision. 0:06:31.320 --> 0:06:35.440 A significant amount. You know, the OBVA added four point 0:06:35.440 --> 0:06:37.760 five trillion to the to the deficit and the last 0:06:37.800 --> 0:06:40.559 you know estimate that they gave when they modeled things out. 0:06:41.080 --> 0:06:43.600 When we're thinking about this revenue, we're looking at about 0:06:43.640 --> 0:06:47.920 you know, twenty billion plus a month. That's a huge shift. 0:06:47.920 --> 0:06:51.120 It was five billion prior monthly. So again there's a 0:06:51.160 --> 0:06:53.520 lot at risk here when you're looking at that two 0:06:53.640 --> 0:06:56.880 to three trillion dollars range of revenue that they're expecting. 0:06:57.200 --> 0:06:59.359 That's enough to really offset a lot of those budget 0:06:59.360 --> 0:07:01.400 hawk concerns right especially around the deficit. 0:07:01.520 --> 0:07:04.720 And this is one reason why Marcus haven't freaked out 0:07:04.839 --> 0:07:07.440 at some of the budget deficit concerns. There is a 0:07:07.520 --> 0:07:10.040 question of why there hasn't been more of a response 0:07:10.080 --> 0:07:11.640 in the long end of the yield curve to this 0:07:11.760 --> 0:07:15.200 court ruling. And some people argue, well, that revenue will 0:07:15.240 --> 0:07:17.400 keep coming in regardless one way or another. Do you 0:07:17.440 --> 0:07:18.120 agree with that. 0:07:18.640 --> 0:07:20.760 Yeah, So it's our base case that even if the 0:07:20.800 --> 0:07:23.440 Supreme Court does rule against Trump, that, you know, if 0:07:23.480 --> 0:07:25.840 there's a will, there's a way, And we've seen that 0:07:25.960 --> 0:07:30.239 not just through them exploring other options of loving tariffs 0:07:30.240 --> 0:07:32.720 through different federal agencies, but also through different you know, 0:07:32.840 --> 0:07:35.240 sections of tarifflaw. You know section two thirty two, Section 0:07:35.320 --> 0:07:38.119 three oh one. There's a ton there's a whole list. 0:07:38.680 --> 0:07:41.240 We recently published a report where we really get into 0:07:41.240 --> 0:07:43.640 the details on each one, the timeframes, how it works, 0:07:43.800 --> 0:07:46.480 and while some are limited, they can layer these and 0:07:46.640 --> 0:07:48.880 there are some that are more long term. So there 0:07:48.920 --> 0:07:51.800 are options out there, and I think that markets understand 0:07:51.840 --> 0:07:54.600 that and that they're trying to look through any volatility 0:07:54.680 --> 0:07:55.680 around the Supreme Court. 0:07:55.800 --> 0:07:59.000 Direction of travel is clear they're going to find a 0:07:59.040 --> 0:08:01.760 way to increased tariffs even if the Supreme Court does 0:08:01.800 --> 0:08:03.880 strike this down. But do you think the Supreme Court 0:08:03.960 --> 0:08:06.320 is that your base case? Will they uphold di Bote 0:08:06.320 --> 0:08:07.040 they strike it down. 0:08:07.680 --> 0:08:09.920 I'm not the expert on the Supreme Court, but what 0:08:09.960 --> 0:08:11.760 I can say is I think that there is a 0:08:11.920 --> 0:08:15.520 strong likelihood that they will rule in favor of the President, 0:08:16.080 --> 0:08:18.000 and then if not, right, it's just how do we 0:08:18.040 --> 0:08:20.720 get there? And we also have to remember that right now, 0:08:20.720 --> 0:08:22.960 the terriffs are still in place, so it's not like 0:08:23.000 --> 0:08:27.400 they've completely rolled off. We're still collecting revenues right as 0:08:27.440 --> 0:08:29.680 we go along. And even if we do end up 0:08:29.680 --> 0:08:34.280 with a patchwork and say you get ten billion a month, 0:08:34.320 --> 0:08:36.560 that's still double what we were receiving before, and that 0:08:36.679 --> 0:08:38.000 is a help towards that deficit. 0:08:38.120 --> 0:08:40.040 How messy is that unwind going to be? 0:08:40.120 --> 0:08:40.360 Though? 0:08:40.640 --> 0:08:43.120 If they were half, if they were going to have 0:08:43.160 --> 0:08:45.520 to potentially give back some of those funds, I mean, 0:08:45.559 --> 0:08:47.520 it would be it would be messy. 0:08:47.559 --> 0:08:50.720 You know, if you're thinking about even negotiations with the EU. 0:08:50.960 --> 0:08:53.280 You know they're trying to proceed proceed as you know, 0:08:53.360 --> 0:08:56.560 business as usual, but they're being very cognizant that some 0:08:56.600 --> 0:08:59.120 of these things may have to be unwound if things 0:08:59.200 --> 0:09:03.120 are unstable. Now, what's interesting is that when other foreign 0:09:04.000 --> 0:09:06.520 entities have been asked in the recent days, you know, 0:09:06.800 --> 0:09:10.079 how are you approaching this, they're still continuing negotiations as 0:09:10.120 --> 0:09:12.480 if things are in play, and so we have to, 0:09:12.559 --> 0:09:14.400 you know, keep that in mind that there's a strong 0:09:14.480 --> 0:09:17.040 belief that tariffs are coming one way or the other. 0:09:17.280 --> 0:09:20.120 So this sounds very technical, but I have been getting 0:09:20.559 --> 0:09:23.640 a little bit overly technical recently. The stay from the 0:09:23.679 --> 0:09:26.920 court only goes to October fourteenth. To keep these tariffs on, 0:09:27.559 --> 0:09:30.400 the Supreme Court has to decide to take this up 0:09:30.760 --> 0:09:34.600 and then rule on it, and that stay expires. What 0:09:34.800 --> 0:09:38.080 happens then, I mean, can't companies go to the government 0:09:38.120 --> 0:09:39.880 and say, can you give me my money back because 0:09:40.000 --> 0:09:41.600 I paid you a couple of billion dollars. 0:09:42.400 --> 0:09:45.360 It's unclear to me if that's retroactive, right, so if 0:09:45.360 --> 0:09:48.160 you're already paying you know, I'm not sure about the 0:09:48.160 --> 0:09:50.400 logistics there. I doubt it is. I'm sure the money 0:09:50.440 --> 0:09:53.280 that the government has collected will stay in the treasury 0:09:53.320 --> 0:09:56.920 where it's safe and sound. I would say the biggest 0:09:56.960 --> 0:09:59.240 concern for us from a markets lens, right, is that 0:09:59.280 --> 0:10:02.720 if there's more polatility here, especially for businesses come October, 0:10:02.840 --> 0:10:05.120 you know, are people going to hold cash on the sidelines? 0:10:05.280 --> 0:10:07.280 Are they going to continue to wait on say, cap 0:10:07.360 --> 0:10:11.360 box expenditures. What is the longer term economic impact right 0:10:11.400 --> 0:10:13.480 from that VOLATILITYA. 0:10:13.679 --> 0:10:17.199 Stay with us. More Bloomberg surveillance coming up after this. 0:10:26.240 --> 0:10:28.960 Let's turn to the economy and to retailers may see 0:10:29.000 --> 0:10:31.760 surging twenty percent in Wednesday's trading following an up be 0:10:31.920 --> 0:10:34.640 forecast on the consumer. The retail team at Goldman Sex 0:10:34.679 --> 0:10:38.120 writing quote, where there continues to be concerns around spending behavior, 0:10:38.160 --> 0:10:41.640 we remain cautiously optimistic going into twenty twenty six. Joining 0:10:41.720 --> 0:10:44.240 us now from the Goldman sax Global Retailing Conference is 0:10:44.280 --> 0:10:48.040 Goldman's leader Peril analyst Brooke roach Brook. Welcome to the program. 0:10:48.120 --> 0:10:51.360 Let's just talk about this. So the retailers are talking 0:10:51.440 --> 0:10:53.880 up a better story. The economic data is not so 0:10:54.000 --> 0:10:56.000 great at the moment. What's the call from you and 0:10:56.040 --> 0:10:59.280 the team? 0:10:59.360 --> 0:11:02.280 Good morning and thank you. It's great to be with 0:11:02.320 --> 0:11:05.360 you this morning from the Goldman Sachs Global Retailing Conference. 0:11:05.440 --> 0:11:08.280 This is our thirty second annual conference and we're with 0:11:08.320 --> 0:11:12.480 nearly eighty companies talking about strategy and what's happening in 0:11:12.480 --> 0:11:16.280 the state of retail. Bottom line is that the consumer 0:11:16.440 --> 0:11:17.720 remains resilient. 0:11:19.320 --> 0:11:21.640 This is what we're hearing from a lot of different companies, 0:11:21.679 --> 0:11:23.720 And yesterday I was there and I was speaking with 0:11:23.800 --> 0:11:28.000 one CEO who said, it's sort of like a flat surface, 0:11:28.040 --> 0:11:28.840 a hard surface. 0:11:28.960 --> 0:11:29.559 Under the hood. 0:11:29.760 --> 0:11:31.880 There's a lot going on and a lot of molecules 0:11:31.920 --> 0:11:33.440 that are kind of battling each other, but it all 0:11:33.520 --> 0:11:35.760 comes together to kind of a flat surface. What are 0:11:35.760 --> 0:11:37.720 people looking at that could potentially break it to the 0:11:37.840 --> 0:11:41.880 upside the sort of stealthy bull case that we keep 0:11:41.880 --> 0:11:42.520 hearing about. 0:11:45.320 --> 0:11:48.160 That's a very good question. I think overall, as we 0:11:48.200 --> 0:11:50.520 put together all of the various inputs of what might 0:11:50.559 --> 0:11:53.960 be driving consumer discretionary demand on a go forward basis, 0:11:54.280 --> 0:11:57.040 we see a better outlook into twenty twenty six, with 0:11:57.120 --> 0:12:01.840 discretionary cash flow modestly stronger across income quintiles, and with 0:12:01.920 --> 0:12:05.800 some real opportunities for consumers to engage with great product 0:12:05.840 --> 0:12:09.319 and great retailers. What we're seeing overall is that trends 0:12:09.360 --> 0:12:11.920 have been better throughout the back to school season, and 0:12:12.040 --> 0:12:14.959 this strong back to school season start is real is 0:12:15.040 --> 0:12:17.720 much better than expected, and I think there is a 0:12:17.880 --> 0:12:21.520 view from many retailers that there is some cautious optimism 0:12:21.559 --> 0:12:24.920 that hopefully this will continue. But I think retailers are 0:12:25.040 --> 0:12:27.880 very cognizant that there is a tougher com be head 0:12:28.120 --> 0:12:30.920 and that there is some uncertainty on what the pricing 0:12:30.960 --> 0:12:34.120 backdrop might mean and what that might mean for consumer engagement. 0:12:34.280 --> 0:12:37.280 From a demand perspective, the good news is that we 0:12:37.400 --> 0:12:39.640 haven't yet seen price less to see of demand and 0:12:39.760 --> 0:12:42.560 back to school has been strong, so what could break it? 0:12:42.840 --> 0:12:45.480 I think there's a lot of questions on what could 0:12:45.480 --> 0:12:48.520 be the case for consumers in terms of their mood 0:12:48.880 --> 0:12:51.280 or what might be happening, But we believe that the 0:12:51.320 --> 0:12:52.760 outlook is fairly robust. 0:12:53.040 --> 0:12:55.120 What you just said there is actually really important, the 0:12:55.200 --> 0:12:58.040 idea that a lot of these retailers are increasing prices 0:12:58.080 --> 0:12:59.959 and people are still buying. In other words, they say 0:13:00.200 --> 0:13:03.480 have the power to increase prices and it's not destructing demand, 0:13:03.760 --> 0:13:06.080 and you're seeing that pretty much across the board. They're 0:13:06.120 --> 0:13:09.200 able to raise prices in select ways. Do they have 0:13:09.240 --> 0:13:11.280 a sense of whether this is coming from wealthy individuals, 0:13:11.320 --> 0:13:13.800 whether this is coming particularly from more luxury sectors, or 0:13:13.800 --> 0:13:16.600 whether this is across the board through all the tiers 0:13:16.720 --> 0:13:17.880 of different income levels. 0:13:20.920 --> 0:13:23.120 I think at this point retailers are trying to do 0:13:23.200 --> 0:13:26.240 their best to protect the consumer and to protect their businesses, 0:13:26.520 --> 0:13:30.760 but they are seeing some cost increases overall. At this juncture, 0:13:30.840 --> 0:13:34.360 we've only seen modest price increases across the board based 0:13:34.400 --> 0:13:37.160 on what retailers are telling us, but there is some 0:13:37.400 --> 0:13:39.920 question about what that price might look like into the 0:13:39.920 --> 0:13:42.280 back half of the year as we think about that 0:13:43.679 --> 0:13:46.360 the change so far, given that it has been modest 0:13:46.360 --> 0:13:48.960 and it hasn't been broad based across the board as 0:13:49.120 --> 0:13:52.240 far as what retailers are saying right now, consumers have 0:13:52.280 --> 0:13:55.360 been able to absorb these price increases. They do have 0:13:55.480 --> 0:13:58.679 higher discretionary cash flow in they do have a stronger 0:13:58.720 --> 0:14:01.960 wallet right now, and so far, it does appear that 0:14:02.040 --> 0:14:03.840 many retailers are looking to try it to do it 0:14:03.840 --> 0:14:06.480 in a way that won't hurt the consumer, whether that 0:14:06.640 --> 0:14:10.240 is a mixshift into different types of products or categories, 0:14:10.440 --> 0:14:11.439 or otherwise. 0:14:11.440 --> 0:14:13.520 Broke before you go. Can we lend some thoughts to 0:14:13.559 --> 0:14:15.839 the idea that maybe the C suite I think is 0:14:15.880 --> 0:14:18.839 struggling with this cultural moment in America as well. I'd 0:14:18.880 --> 0:14:20.880 love your thoughts on this, And while you're hearing from 0:14:20.880 --> 0:14:23.880 management teams, I'm thinking more recently of Cracker Barrel almost 0:14:23.920 --> 0:14:27.720 blowing its south up American Eagle leaning into controversy and 0:14:27.760 --> 0:14:29.520 it benefits them. The stock is up nice in the 0:14:29.520 --> 0:14:32.440 pre market so far this morning. What's your understanding of 0:14:32.480 --> 0:14:34.800 how the C suite is wrestling with this moment? 0:14:37.760 --> 0:14:40.520 You know, I don't know about your specific examples that 0:14:40.560 --> 0:14:43.160 you gave, but what I would say is that retailers 0:14:43.200 --> 0:14:46.560 are focused on engaging with their core consumer. They're investing 0:14:46.600 --> 0:14:49.600 more in marketing, They're looking to try and create better 0:14:49.760 --> 0:14:53.280 products that will drive strong consumer demand, regardless of what 0:14:53.280 --> 0:14:55.720 the macro backdrop looks like. And we're seeing more and 0:14:55.760 --> 0:14:58.120 more retailers lean into that. And we heard that a 0:14:58.160 --> 0:15:02.600 lot yesterday with various about marketing, consumer engagement, and great 0:15:02.680 --> 0:15:03.200 new product. 0:15:05.080 --> 0:15:08.600 Stay with us more Bloomberg Surveillance coming up after this. 0:15:17.760 --> 0:15:21.640 Sibant is Chaffer of self Gen remaining slightly cautious, writing this, well, 0:15:21.680 --> 0:15:24.080 the hope is for lower policy rates to stimulate the 0:15:24.080 --> 0:15:27.080 mortgage market. That could bag fire. We could see a 0:15:27.120 --> 0:15:30.360 repeat of last September when a fifty basis point rate 0:15:30.400 --> 0:15:34.480 cut resulted in higher long end yields. Sibantra joins us 0:15:34.480 --> 0:15:36.600 now for more savantric go morning, Good morning. Going to 0:15:36.600 --> 0:15:38.200 pick up on the line of questioning that we finished 0:15:38.200 --> 0:15:41.600 the last interview, Is this federal reserve cutting into strength? 0:15:42.440 --> 0:15:44.080 It feels like it because if you look at a 0:15:44.120 --> 0:15:46.760 lot of the data that's come in, economic surprises have 0:15:46.840 --> 0:15:49.760 been to the positive side. You know, the growth momentum 0:15:49.800 --> 0:15:52.320 into the second quarter is also on the positive side. 0:15:52.560 --> 0:15:55.840 Inflation is high and sticky, the job market is Mike 0:15:55.920 --> 0:15:58.520 McKee was pointing out there's no hirings, there's no firings. 0:15:58.640 --> 0:16:01.800 It's in a state of stasis. So to me, it 0:16:01.880 --> 0:16:04.400 feels like that, plus all of the fiscal stimulus that 0:16:04.440 --> 0:16:07.880 could potentially come down the pike could be something that 0:16:08.200 --> 0:16:11.000 could move the markets higher. So it feels to me 0:16:11.120 --> 0:16:13.120 like some of these cuts that are priced into the 0:16:13.120 --> 0:16:17.440 market are more preemptive than really something that's warranted. 0:16:17.680 --> 0:16:19.720 Is this something that's tradable now or is this a 0:16:19.760 --> 0:16:22.240 sort of warning shot ahead of what could be a 0:16:22.280 --> 0:16:23.760 tumultuous couple of months. 0:16:24.000 --> 0:16:24.400 I think so. 0:16:24.440 --> 0:16:26.400 I mean, the market's pricing in nearly six cuts between 0:16:26.440 --> 0:16:29.680 now and the end of next year. The markets, you know, 0:16:29.760 --> 0:16:32.720 people are looking at a cut and maybe three cuts 0:16:32.760 --> 0:16:35.640 this year. To me, it feels like if they cut 0:16:36.040 --> 0:16:38.320 sooner and more aggressively, they won't be able to cut 0:16:38.320 --> 0:16:40.440 as much next year. So the neutral rate is going 0:16:40.520 --> 0:16:42.480 to have to be a lot higher given the fact 0:16:42.520 --> 0:16:44.800 that inflation is still high and stick into the risk 0:16:44.880 --> 0:16:47.960 is that you could see a reacceleration of inflationary pressure. 0:16:48.080 --> 0:16:50.960 So the market to me feels like it's overpricing cuts 0:16:51.000 --> 0:16:51.920 between now and the end of. 0:16:51.880 --> 0:16:54.880 Next year, even with the political impetus, right, I mean, 0:16:54.920 --> 0:16:57.320 how do you sort of overlay any kind of political 0:16:57.320 --> 0:17:00.560 interference with this given that right now this is a 0:17:00.600 --> 0:17:03.600 FED that has a dubbish bias and may have an 0:17:03.600 --> 0:17:05.760 even more dubbish bias by the time we get around 0:17:05.800 --> 0:17:06.560 to twenty twenty six. 0:17:06.680 --> 0:17:08.479 So that's the part that's stricty, and I think that 0:17:08.480 --> 0:17:10.280 that's part of the reason why the market's pricing in 0:17:10.320 --> 0:17:11.600 six cuts by the end of next year. So the 0:17:11.600 --> 0:17:13.679 market's really looking at what the FED could do as 0:17:13.720 --> 0:17:16.919 opposed to what the FED should do. So to me, 0:17:17.000 --> 0:17:20.240 it's very hard to really kind of separate the two aspects. 0:17:20.320 --> 0:17:23.160 One is, if you have a very dubbish committee next 0:17:23.240 --> 0:17:25.840 year that could really change the dynamics in the market. 0:17:26.000 --> 0:17:28.520 But over the long run, that to me leads to 0:17:28.600 --> 0:17:31.320 FED credibility. A lot of times we look at the 0:17:31.359 --> 0:17:35.159 market and say that, you know, the bond market is 0:17:35.560 --> 0:17:38.080 very complacent right now. Volatility is very very low, but 0:17:38.119 --> 0:17:40.399 you could see a pretty significant set off in bonds. 0:17:40.520 --> 0:17:42.840 Vonnie is in a very short amount of time if 0:17:43.240 --> 0:17:45.080 there is a crisis of confidence, but. 0:17:45.040 --> 0:17:46.919 There isn't right now. How much are you going to 0:17:46.920 --> 0:17:51.080 be watching this Stephen Myern Senate confirmation hearing just to really, 0:17:51.160 --> 0:17:53.520 as Terry Haynes put it, read the body language of 0:17:53.560 --> 0:17:55.439 the Senate, which, at the end of the day, the 0:17:55.520 --> 0:17:58.000 purview of the Fed does belong to Congress. 0:17:58.680 --> 0:18:01.160 Yeah, I mean it is important. We will be paying 0:18:01.200 --> 0:18:04.880 attention to what's he's saying, but it's really a committee 0:18:04.920 --> 0:18:07.240 this decision as of now. It really depends on what 0:18:07.280 --> 0:18:09.800 the composition of the committee is going to be next year, 0:18:10.280 --> 0:18:13.400 who President Trump nominates to be the next FED chair. 0:18:13.880 --> 0:18:15.760 So again there's a lot of uncertainty, but there's a 0:18:15.800 --> 0:18:18.959 lot of complacency I think in the bond markets. You know, 0:18:19.119 --> 0:18:21.720 just going back into the last say, you know, a 0:18:21.800 --> 0:18:26.280 few years, we've seen many episodes when when bond years 0:18:26.320 --> 0:18:29.359 arisen sharply. We saw, you know, one hundred hundred and fifty 0:18:29.320 --> 0:18:33.159 basis points of bonniears rise after you know, August of 0:18:33.520 --> 0:18:36.480 twenty twenty three, when you know the treasury issuance, you know, 0:18:36.520 --> 0:18:39.840 coup punishment size has changed. We saw a pretty decent 0:18:39.880 --> 0:18:42.600 sell off in bonds even last year when the FED 0:18:42.640 --> 0:18:45.560 cut rates by fifty basis points. So, you know, to me, 0:18:45.680 --> 0:18:49.040 it feels like there is just that feeling that everything 0:18:49.080 --> 0:18:51.840 is going to be status quo when there's just a 0:18:51.880 --> 0:18:54.399 lot of uncertainty coming down the pike, whether it be 0:18:54.400 --> 0:18:56.720 FED independence, whether it be the trajectory for debt and 0:18:56.720 --> 0:19:00.080 deficits not just in the US but also globally and 0:19:00.160 --> 0:19:04.119 other kind of you know, extreme age factors like terrots 0:19:04.640 --> 0:19:07.399 and that. Working through the legal system, I think you. 0:19:07.400 --> 0:19:09.359 Build an incredible case. But what's been surprising for me 0:19:09.480 --> 0:19:12.280 is just how stable the treasury market actually has been. Yes, 0:19:12.280 --> 0:19:15.320 we've had stepning in America like we've had stepening in Europe, 0:19:15.440 --> 0:19:17.600 but this step ning has been completely different. It's been 0:19:17.640 --> 0:19:20.040 led by the front end. Tens and thirties have been 0:19:20.359 --> 0:19:24.360 really resilient, really resilient relative to some of the chaos 0:19:24.359 --> 0:19:27.080 in France, some of the chaos in the UK. What's 0:19:27.119 --> 0:19:30.040 supporting the treasury market right now? Maybe that's an interesting 0:19:30.119 --> 0:19:32.520 question to ask, what is supporting this? What is keeping 0:19:32.560 --> 0:19:35.359 tens at four to twenty thirties away from five percent? 0:19:36.359 --> 0:19:39.560 So I think that when you look at the composition 0:19:39.680 --> 0:19:42.120 of where people can invest, I mean, clearly the front 0:19:42.240 --> 0:19:45.359 end is speG defed expectations and market is pricing in 0:19:45.440 --> 0:19:47.400 as I said, a lot of cuts over the next year, 0:19:47.440 --> 0:19:50.280 in year and a half, and then when that trades 0:19:50.400 --> 0:19:52.800 matched out, investors kind of move on to the belly 0:19:52.800 --> 0:19:55.720 of the curve. And the belly is really where you've 0:19:55.760 --> 0:19:57.840 seen a lot of the flows. I mean, the two 0:19:57.920 --> 0:20:01.119 S five curve actually inverted a few times. You're seeing 0:20:01.119 --> 0:20:03.240 a lot of demand for the five and tenure part 0:20:03.240 --> 0:20:05.879 of the yell curve, and investors broad is speaking a 0:20:05.960 --> 0:20:09.520 concern about putting money beyond that tenure sector because there's 0:20:09.520 --> 0:20:11.560 a lot of volatility in the very long end, not 0:20:11.760 --> 0:20:14.280