WEBVTT - Bloomberg Surveillance TV: February 6, 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 --> 0:00:18.360 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:36.760 Bloomberg Terminal and the Bloomberg Business app. We begin this 0:00:36.840 --> 0:00:39.200 sound with stocks looking for a third straight day of gains. 0:00:39.280 --> 0:00:42.760 Daryl Kronk of Wells Fargo with optimism ahead, writing this, 0:00:43.080 --> 0:00:45.440 we expect stock prices to march hard by year, rent 0:00:45.479 --> 0:00:48.839 driven primarily by earnings growth that should broaden some more 0:00:48.920 --> 0:00:50.720 cyclically or insed areas. 0:00:50.880 --> 0:00:51.919 Daryl joins us now for more. 0:00:52.000 --> 0:00:52.200 Darrel. 0:00:52.240 --> 0:00:53.280 Good to see you, you too join. 0:00:53.280 --> 0:00:54.960 A bit of heat coming out of the American story. 0:00:55.040 --> 0:00:56.720 It's not bad, just a little bit of heat coming 0:00:56.720 --> 0:01:00.680 out m services. Job openings will get claims later roast tomorrow. 0:01:00.840 --> 0:01:01.520 It's not a good thing. 0:01:02.400 --> 0:01:04.440 I think it's a good thing. You want that economic growth. 0:01:04.560 --> 0:01:07.240 I mean, we walked into this year thinking the economy 0:01:07.280 --> 0:01:10.520 would run hotter than most of our friends up and 0:01:10.520 --> 0:01:13.080 down Wall Street, right, So we were a good half 0:01:13.080 --> 0:01:15.640 a point above an economic growth. We thought rates would 0:01:15.640 --> 0:01:18.520 be higher, we thought inflation would be meaningfully higher than 0:01:18.560 --> 0:01:20.480 the consensus. We were almost a full point ahead of 0:01:20.520 --> 0:01:24.360 everybody else on your end CPI for twenty twenty five. 0:01:25.080 --> 0:01:27.000 And we think earnings will deliver. I mean you're already 0:01:27.000 --> 0:01:28.560 seeing it here in the fourth quarter. We're on a 0:01:28.600 --> 0:01:32.240 run rate of about five percent revenue growth and just 0:01:32.280 --> 0:01:35.400 over ten percent earnings growth. Five percent revenue growth is 0:01:35.440 --> 0:01:38.199 the real element, I think, right, because you can drive 0:01:38.240 --> 0:01:41.399 that down in operating leverage through the margins and straight 0:01:41.440 --> 0:01:43.640 to the bottom line. So if you can maintain that 0:01:43.720 --> 0:01:47.720 kind of revenue growth and get decent nominal growth, let's 0:01:47.720 --> 0:01:49.680 call it two and a half percent GDP growth with 0:01:50.600 --> 0:01:52.840 we're gonna say three to three and a half percent inflation, 0:01:53.320 --> 0:01:55.160 are your end targets three point three? 0:01:55.520 --> 0:01:58.440 That's five and a half six percent nomenal If you. 0:01:58.400 --> 0:02:01.600 Think that the economy was run hot last year, is 0:02:01.800 --> 0:02:04.559 some of the uncertainty that we see right now coming 0:02:04.560 --> 0:02:09.040 from policy that hampers corporate spending. Is that a feature 0:02:09.480 --> 0:02:12.519 not a bug to help with the disinflationary process, where 0:02:12.520 --> 0:02:16.200 otherwise some of these pro growth policies can be somewhat inflationary. 0:02:17.800 --> 0:02:20.640 I I guess the way we've thought about, at least 0:02:20.680 --> 0:02:24.840 is when the dust settles at year end, the positive 0:02:24.880 --> 0:02:26.000 policy impacts. 0:02:25.680 --> 0:02:26.720 Need to outweigh the negatives. 0:02:26.800 --> 0:02:26.920 Right. 0:02:26.960 --> 0:02:28.680 And you've got both ends of it, right, So you've 0:02:28.720 --> 0:02:31.239 got tariffs and immigration you can call negative, and you 0:02:31.280 --> 0:02:33.160 can call deregulation and. 0:02:33.160 --> 0:02:34.240 Tax cuts positive. 0:02:34.600 --> 0:02:34.799 Right. 0:02:34.880 --> 0:02:37.360 We haven't got to the ladder yet, right, we're still 0:02:37.440 --> 0:02:38.960 kind of you know, stewing on it. 0:02:39.000 --> 0:02:40.840 We've been all about, you know, early. 0:02:40.639 --> 0:02:43.880 Days, tariffs, what we do, control of the border, all 0:02:43.919 --> 0:02:48.200 that stuff. So ironically, the markets have weathered that quite well, right, 0:02:48.520 --> 0:02:50.960 I mean we're sitting here in a tight band, whether 0:02:51.000 --> 0:02:53.000 you look at the stock market, the bond market, right, 0:02:53.000 --> 0:02:54.919 which we're talking about with the tenure, thank you, We 0:02:55.520 --> 0:02:58.320 remember that, you know, when the Feds first started cutting 0:02:58.400 --> 0:03:02.720 rates in September of last year, rating the TENUREUS three seventy, right, 0:03:03.280 --> 0:03:07.160 it's four forty five today. All of that's term premium, right, 0:03:07.200 --> 0:03:09.440 because the long end of the curve is term premium, 0:03:09.520 --> 0:03:13.400 a growth premium, and an inflation premium almost fifty fifty. 0:03:13.680 --> 0:03:14.760 Or fifty five basis points. 0:03:14.760 --> 0:03:17.720 So that's term premium, which is just a function of 0:03:17.760 --> 0:03:19.800 the uncertainty around the policy. 0:03:19.919 --> 0:03:22.919 Okay, so if you do get some of that term 0:03:22.919 --> 0:03:24.639 premium taken out of the system, if you have longer 0:03:24.720 --> 0:03:26.600 term yell, it's returned to sort of where they were 0:03:26.919 --> 0:03:30.120 back on September eighteenth. How much is that part of 0:03:30.160 --> 0:03:31.639 your call for the broadening out? 0:03:31.680 --> 0:03:33.120 How important is that. 0:03:33.240 --> 0:03:35.480 To see the rotation out of just some of the 0:03:35.800 --> 0:03:38.200 magnificent seven stocks into the rest of the index? 0:03:38.480 --> 0:03:39.120 Well, certainly. 0:03:39.240 --> 0:03:40.680 So what I would say is this, like when you 0:03:40.720 --> 0:03:42.680 think about twenty twenty five and what has to happen, 0:03:43.360 --> 0:03:45.600 You've got two fives that need to happen. Tenure needs 0:03:45.640 --> 0:03:48.800 to stay below five percent, right, Unemployment rate needs to 0:03:48.800 --> 0:03:52.520 stay low five percent. Earning's growth needs to deliver, and 0:03:52.560 --> 0:03:55.480 earning's breadth needs to broaden out to your point, Inflation 0:03:55.600 --> 0:03:57.120 needs to stay less than three and a half percent. 0:03:57.480 --> 0:03:59.320 The dollar, if you want to measure it by the 0:04:00.200 --> 0:04:03.880 why needs to stay below one ten, right, And the 0:04:04.360 --> 0:04:07.320 positives of policy need out to outweigh the negatives, right, 0:04:07.520 --> 0:04:10.120 If you get those things to happen, I think you're 0:04:10.160 --> 0:04:12.520 in a good place and markets can do quite well. 0:04:12.880 --> 0:04:15.360 Any one of those spiking above some of those thresholds 0:04:15.360 --> 0:04:19.320 start to inject risk into outlooks and the system. 0:04:19.360 --> 0:04:21.479 Basically, I want to pick up on your point about tariffs, 0:04:21.480 --> 0:04:23.520 and now you're saying the market's weathering it pretty well. 0:04:23.520 --> 0:04:25.960 But isn't the market just pricing in the fact that 0:04:26.080 --> 0:04:28.680 there will be eleven hour deals like we saw with 0:04:28.720 --> 0:04:29.600 Canada Mexico. 0:04:30.760 --> 0:04:33.159 Yeah, I mean I think you have to separate, right, 0:04:33.200 --> 0:04:34.640 you know the old adage of like you've got to 0:04:34.640 --> 0:04:37.040 take President Trump seriously but not literally. 0:04:37.120 --> 0:04:38.640 We were learning that quickly, right. 0:04:40.640 --> 0:04:43.280 Not all tariffs are created equal, right, remember Trump one 0:04:43.320 --> 0:04:46.560 dot Oh, the tariffs were very surgical, right, it was 0:04:46.560 --> 0:04:49.680 washing machine parts, solar panels and stealing aluminum. 0:04:49.760 --> 0:04:52.320 This time, they're very broad. They're like a stick, right. 0:04:52.400 --> 0:04:55.400 Twenty five percent on Canada, twenty five percent on Mexico, 0:04:55.440 --> 0:04:56.279 ten percent on China. 0:04:56.320 --> 0:04:58.080 They're at the country level, right. 0:04:57.880 --> 0:05:00.839 So we're using the emergency powers and instead of three 0:05:00.839 --> 0:05:03.159 oh one two thirty two powers this time, right, which 0:05:03.200 --> 0:05:05.840 is a very different equation. I think, when it's all 0:05:05.880 --> 0:05:09.080 said and done, you know, the the Canada, Mexico. 0:05:08.760 --> 0:05:09.760 And call it the friends. 0:05:09.920 --> 0:05:14.080 Tariffs including the the Eurozone are more about leverage and 0:05:14.120 --> 0:05:17.560 getting what you want. China is more about geopolitics. Right, 0:05:17.680 --> 0:05:20.160 That's where the real rub is with China. And I 0:05:20.200 --> 0:05:24.080 would expect the durability the Chinese tariffs to stick and stay, 0:05:24.640 --> 0:05:28.400 and that means very specific things for certain industries. 0:05:28.480 --> 0:05:28.640 Right. 0:05:28.680 --> 0:05:31.320 We still get most of our tech hardware and a 0:05:31.320 --> 0:05:34.200 lot of our semis from parts of China. 0:05:34.320 --> 0:05:34.560 Right. 0:05:34.680 --> 0:05:40.400 Autos are a big element there, Metals, energy prices, those 0:05:40.400 --> 0:05:42.520 are the areas. So it's gonna it's gonna come down 0:05:42.520 --> 0:05:46.080 to those segments, sectors and industries that where the tariffs 0:05:46.080 --> 0:05:47.560 are going to matter as they get applied. 0:05:47.720 --> 0:05:47.880 Him. 0:05:48.080 --> 0:05:52.280 Are you concerned at that point then about inflation rising, 0:05:52.360 --> 0:05:54.320 because this is the opening salvo when it comes to 0:05:54.400 --> 0:05:55.160 Chinese tariffs. 0:05:55.600 --> 0:05:56.200 Yeah, I I. 0:05:56.400 --> 0:05:59.040 Mean as I said, I I think are the inflation 0:05:59.240 --> 0:06:00.960 is You can call it stick year, you can call 0:06:01.000 --> 0:06:03.120 it more durable, whatever you want to call it. If 0:06:03.320 --> 0:06:05.680 if when we walked into this year, the rest of 0:06:05.720 --> 0:06:08.400 the streets said, you know, if you measured us CPI 0:06:08.560 --> 0:06:10.480 as they were saying two to two and a half, 0:06:10.520 --> 0:06:12.159 we were at three point three right, which is that 0:06:12.200 --> 0:06:12.960 full point a head. 0:06:13.160 --> 0:06:14.320 Which is why when you. 0:06:14.240 --> 0:06:16.200 Look at go back to Atleasa's tenure, I know we 0:06:16.279 --> 0:06:18.440 got to keep coming back to this, which is why 0:06:18.640 --> 0:06:21.800 our ten year Sorry John didn't she yes. 0:06:21.920 --> 0:06:23.200 She doesn't own the ten year bond. 0:06:25.480 --> 0:06:28.120 Why we have the tenuere a year end this year 0:06:28.160 --> 0:06:31.240 at four seventy five, Like we don't think when we 0:06:31.240 --> 0:06:34.080 were doing the math right about everybody else was in 0:06:34.120 --> 0:06:36.320 the threes on the ten year right for year end 0:06:36.320 --> 0:06:36.839 twenty five. 0:06:37.920 --> 0:06:40.320 You can't make that math work right. So I think 0:06:40.440 --> 0:06:41.200 rates are higher. 0:06:41.240 --> 0:06:43.839 I think inflation is more durable, and that inflation premium 0:06:43.880 --> 0:06:47.040 is the year goes on gets stacked into the into the. 0:06:46.960 --> 0:06:49.320 Eelds scope best. And they said, so it's a bradmos. 0:06:50.520 --> 0:06:50.599 Ye. 0:06:51.200 --> 0:06:51.479 Well, I. 0:06:53.040 --> 0:06:55.440 Spoke Aid last night and they said, no, he watches 0:06:55.520 --> 0:06:57.599 everything every indicy. They're like, also, he looks at the 0:06:57.600 --> 0:06:59.480 barrels on the market. He wants to know where oil. 0:06:59.320 --> 0:07:01.279 Is everything, no doubt about that. But I think coming 0:07:01.279 --> 0:07:04.760 into this year, just bigger picture, we thought maybe because 0:07:04.760 --> 0:07:06.640 they were going to run this hot, there would be 0:07:06.720 --> 0:07:08.960 a risk that the deficit would get away from them. 0:07:09.000 --> 0:07:11.920 The treasury yields would run away as well. January, you'd 0:07:12.000 --> 0:07:14.760 started to push up back towards five percent. We've retreated 0:07:14.760 --> 0:07:17.760 by forty basis points. When you hear the Treasury Secretary 0:07:17.800 --> 0:07:20.680 say things like I'm focused on the tenure yield, how 0:07:20.720 --> 0:07:23.360 much comfort do you take from that? Because we talked 0:07:23.400 --> 0:07:25.160 about this to close out last year. Would they be 0:07:25.200 --> 0:07:29.600 constrained regulated by stocks or regulated by bunts? I think 0:07:29.640 --> 0:07:31.040 a lot of people thought that maybe they might be 0:07:31.040 --> 0:07:33.280 regulated by the bond market. Do you take any comfort 0:07:33.320 --> 0:07:33.600 from that? 0:07:34.440 --> 0:07:36.400 I do think that's the right focal point. 0:07:36.480 --> 0:07:38.960 Right, rates matter in this environment because it matters for 0:07:39.200 --> 0:07:42.200 equity evaluations, It will matter ultimately for earnings, it matters 0:07:42.200 --> 0:07:45.600 for small caps. Right, So I look, there was a 0:07:45.600 --> 0:07:47.280 lot of short positions sitting right on the four and 0:07:47.280 --> 0:07:49.960 a half percent line on the tenure that scrambled to cover, 0:07:50.080 --> 0:07:52.640 which is why we ended up at four forty yesterday 0:07:52.680 --> 0:07:56.120 on the back of the Treasury refunding, which was no news, right, 0:07:56.200 --> 0:07:59.360 And we didn't see, you know, Treasury Secretary Busset turn 0:07:59.400 --> 0:08:02.200 around and say I'm going to start layering out more 0:08:02.320 --> 0:08:04.800 and heavier auctions in the ten and thirty year, right, 0:08:04.840 --> 0:08:06.960 the three, the ten and the thirty were all spot 0:08:07.040 --> 0:08:09.720 on where expectations were and have been for the last 0:08:09.720 --> 0:08:11.800 four months. So this whole idea that they're going to 0:08:11.840 --> 0:08:15.120 stop issuing as many bills and start issuing more long 0:08:15.200 --> 0:08:17.480 bonds maybe in the future, but it's not in the 0:08:17.480 --> 0:08:21.440 current right. And if that happens, then you start increasing supply. 0:08:21.760 --> 0:08:25.400 Right. The risk you run is the auctions get sloppy, John. 0:08:25.360 --> 0:08:28.280 And we saw that back in October of twenty twenty three, 0:08:28.360 --> 0:08:31.120 where there just wasn't enough demand. Everybody was crowding to 0:08:31.160 --> 0:08:32.880 the short side of the curve on the demand, and 0:08:32.920 --> 0:08:35.600 the bid tocover ratios on those long auctions were messy. 0:08:35.679 --> 0:08:37.600 And then yet it made some changes, and it looks 0:08:37.640 --> 0:08:39.480 like those changes might be sticking, at least for now. Now, 0:08:39.480 --> 0:08:52.079 I'm just going to see it Downald Trunk wels Fanka 0:08:52.480 --> 0:08:55.080 joining Guess now is at Mills of Raymond James now 0:08:55.280 --> 0:08:57.840 ed welcome to the program. I wonder what consequences this 0:08:57.920 --> 0:09:01.040 might have, if any, for the tax cuts over the 0:09:01.120 --> 0:09:02.079 next few months. 0:09:02.600 --> 0:09:04.959 Yeah, John, there's a lot to talk about here, because 0:09:05.040 --> 0:09:07.120 you know, the first thought I have is, as soon 0:09:07.120 --> 0:09:10.520 as the Treasury Secretary says Donald Trump is not focused 0:09:10.559 --> 0:09:13.960 on the Fed lowering rates. We're almost near guaranteed getting 0:09:14.000 --> 0:09:16.080 a headline from Donald Trump saying the Fed needs to 0:09:16.080 --> 0:09:17.520 lower the front end of the rates. 0:09:18.200 --> 0:09:19.280 I do think that. 0:09:19.320 --> 0:09:22.800 When I hear these comments, it is going to be 0:09:22.880 --> 0:09:25.920 difficult to do as much of the tax cuts as 0:09:25.960 --> 0:09:30.040 Republicans want to do. Another thing in that interview, Treasury 0:09:30.080 --> 0:09:33.679 Secretary Besson said that they should do a score that 0:09:33.720 --> 0:09:39.280 would allow Republicans to make the tax cuts permanent, extending 0:09:39.320 --> 0:09:41.920 out current baseline. If we are going to see a 0:09:42.080 --> 0:09:46.040 four or five trillion dollar plus increase in the debt 0:09:46.080 --> 0:09:49.040 and the deficit over the next ten years, that's more 0:09:49.080 --> 0:09:52.280 than what the bond market's been looking for. And finally, 0:09:52.320 --> 0:09:54.240 I guess the thing I would highlight here is that 0:09:54.280 --> 0:09:57.240 in Trump one point zero, everyone was focused on the 0:09:57.280 --> 0:10:01.160 equity market and that was the barometer of Trump's success. Increasingly, 0:10:01.280 --> 0:10:03.960 clients at Raymond James have been asking me, is the 0:10:04.000 --> 0:10:08.160 bond market the new barometer? And last night Treasury Secretary 0:10:08.320 --> 0:10:11.760 best And kind of made that official that we're going 0:10:11.840 --> 0:10:14.200 to be watching the tenuere to see how successful Trump 0:10:14.280 --> 0:10:15.240 policies are going to be. 0:10:15.440 --> 0:10:16.080 And ed, isn't that. 0:10:16.080 --> 0:10:18.440 Because the bond market has a seat at the table 0:10:18.480 --> 0:10:21.560 when it comes to what you're discussing this huge tax 0:10:21.600 --> 0:10:23.360 bill and whether or not they can go as far 0:10:23.400 --> 0:10:24.120 as they'd like to go. 0:10:25.120 --> 0:10:27.560 Yeah, And when I've talked to folks in and around 0:10:27.640 --> 0:10:29.600 kind of the Trump administration, one of the things that 0:10:29.640 --> 0:10:33.360 they want to highlight is tax cuts are only one 0:10:33.520 --> 0:10:36.160 part of the story. They want to talk about the 0:10:36.200 --> 0:10:39.600 deregulatory agenda. They want to talk about, Doge. They want 0:10:39.640 --> 0:10:41.800 to talk about the amount of money that's going to 0:10:41.840 --> 0:10:45.200 be collected Anne Marie from all of the tariffs that 0:10:45.240 --> 0:10:48.240 are going into place. And so if you want to 0:10:48.280 --> 0:10:51.160 get what the Treasury Secretary is describing, I think the 0:10:51.200 --> 0:10:53.200 market has to be prepared that there's going to be 0:10:53.400 --> 0:10:57.440 other sources of tax revenue that's coming in and other 0:10:57.679 --> 0:11:01.800 cuts to the federal government spent. And so the aggressiveness 0:11:01.800 --> 0:11:04.719 that we are seeing right now by Elon Muskin Doge 0:11:05.040 --> 0:11:08.319 is part and parcel giving political cover for the Hill 0:11:08.360 --> 0:11:10.800 to go a little bit further or a lot further 0:11:11.040 --> 0:11:12.600 than they thought they might be able to do. 0:11:12.920 --> 0:11:15.040 Well, let's discuss how they're going to do that. Centators 0:11:15.080 --> 0:11:17.439 will sit down with Trump this weekend and they're talking 0:11:17.480 --> 0:11:21.200 about this two path bill. I caught up with Congressman 0:11:21.400 --> 0:11:24.560 Jason Smith yesterday, who still wants this one big, beautiful bill, 0:11:24.760 --> 0:11:27.840 but that seems to be collapsing in real time. What's 0:11:27.880 --> 0:11:31.839 your take on the next steps for the Republicans in Congress. 0:11:32.640 --> 0:11:35.720 Well, next step, Sammary, is getting a budget. You can't 0:11:35.760 --> 0:11:39.120 start the budget reconciliation process. You have nothing to reconcile 0:11:39.240 --> 0:11:42.120 until you pass the budget. And so this is where 0:11:42.160 --> 0:11:45.400 the fact that Republicans have as slim as possible of 0:11:45.440 --> 0:11:48.960 a majority, you lose one vote, you can't get this done. 0:11:49.080 --> 0:11:51.480 So Donald Trump is also going to be having a 0:11:51.480 --> 0:11:54.760 conversation later today with House Republicans. He's going to see 0:11:54.760 --> 0:11:57.920 if he can get them to pass something to start 0:11:57.960 --> 0:12:01.840 the process. They're still fighting over process. Until you figure 0:12:01.840 --> 0:12:05.000 out the process, you can't get a bill. I absolutely 0:12:05.000 --> 0:12:07.800 still think we're going to get the tax bill done. 0:12:07.920 --> 0:12:08.840 It could be permanent. 0:12:08.880 --> 0:12:11.840 They could add tax cuts to this if they use 0:12:12.360 --> 0:12:15.440 the score that they're talking about. But until there is 0:12:15.600 --> 0:12:18.880 leadership from the White House to instruct them on what 0:12:19.080 --> 0:12:21.400 to do, we don't know what we get from the 0:12:21.480 --> 0:12:22.640 Hill until that point. 0:12:22.880 --> 0:12:25.040 And I loved how we started this conversation about how 0:12:25.080 --> 0:12:27.080 important the tenure is and how this might be the 0:12:27.160 --> 0:12:29.679 ultimate check on the market. I thought that the photograph 0:12:30.160 --> 0:12:33.120 that we showed really set it up perfectly. Where you 0:12:33.120 --> 0:12:35.000 have Donald Trump in the middle, and you have Scott 0:12:35.040 --> 0:12:38.480 Besson on one side, bond representative, and then you have 0:12:38.559 --> 0:12:41.480 Howard Lutnik on the other side, who in some ways 0:12:41.480 --> 0:12:44.160 the stock representative, growth representative, trying to get some of 0:12:44.200 --> 0:12:47.680 these other things across. Who has the louder voice, the 0:12:47.760 --> 0:12:50.640 louder influence over the man in the middle, Donald Trump, 0:12:50.640 --> 0:12:52.600 at a time where there are a lot of competing egos, 0:12:52.800 --> 0:12:55.600 a lot of competing wishes, and it's not clear just 0:12:55.679 --> 0:12:58.760 how constrained some of those people are going to be 0:12:59.080 --> 0:13:00.480 by say the ten yield. 0:13:01.559 --> 0:13:03.880 Yeah, Lisa, I guess my flippant answer to that would 0:13:03.880 --> 0:13:06.880 be the last person who spoke to him. That's what 0:13:06.920 --> 0:13:10.440 we have seen countless times. In this he has once 0:13:10.520 --> 0:13:13.840 again instilled what we'd call a team of rivals. And 0:13:13.880 --> 0:13:18.359 we've seen this and elsewhere too on trade on Tariff's 0:13:18.360 --> 0:13:21.880 there is a huge match between Team Econ, which is 0:13:21.920 --> 0:13:26.079 Scott Bessen's World versus Team Tariff that is Lutnick. That's 0:13:26.120 --> 0:13:28.640 going to be Jamison Greer, as mentioned, he's having his 0:13:28.760 --> 0:13:30.840 hearing today for US Trade representative. 0:13:31.000 --> 0:13:32.080 That's Peter Navarro. 0:13:32.880 --> 0:13:36.360 So what I've been instructed to do when I'm listening 0:13:36.400 --> 0:13:40.439 to all these competing voices is find areas of commonality, 0:13:40.760 --> 0:13:43.880 and that's going to be the likely policy. And one 0:13:43.920 --> 0:13:45.679 of the things that I think the market has been 0:13:45.720 --> 0:13:49.480 missing is the most dubvish view coming out of that 0:13:49.640 --> 0:13:53.120 kind of team of rivals on tariffs is only starting 0:13:53.120 --> 0:13:55.680 at two point five percent of a universal tariff and 0:13:55.720 --> 0:13:58.920 getting to somewhere to ten to twenty percent. If that's 0:13:58.960 --> 0:14:01.199 the dubbish view, I want to know what the hawkish 0:14:01.280 --> 0:14:01.800 view is. 0:14:02.400 --> 0:14:04.520 At that point ed, how do you advise clients? How 0:14:04.520 --> 0:14:08.080 do you advise companies that want to make plans, want 0:14:08.120 --> 0:14:10.640 to understand what their footprint should look like, want to 0:14:10.720 --> 0:14:13.600 understand where they can expand in the world. Are you 0:14:13.679 --> 0:14:16.120 telling them to just hold off and that frankly, they 0:14:16.160 --> 0:14:17.520 will not know just what. 0:14:17.440 --> 0:14:19.080 That hawkish view is and how high. 0:14:18.880 --> 0:14:19.320 It could go. 0:14:20.320 --> 0:14:22.480 Yeah, I'm not telling them to hold off, but I 0:14:22.520 --> 0:14:24.880 am telling them to expect volatility. I was at a 0:14:24.880 --> 0:14:27.760 conference yesterday down at our headquarters in Saint Pete at 0:14:27.840 --> 0:14:31.280 Raymond James talking about how volatility is back and that 0:14:31.480 --> 0:14:34.800 you have to kind of not react to everything to 0:14:35.000 --> 0:14:38.280 get some of the big conversation right. And so there 0:14:38.360 --> 0:14:41.080 are a number of things out of this administration that 0:14:41.080 --> 0:14:43.680 could be viewed as market positive. There are other things 0:14:43.680 --> 0:14:45.920 that could be viewed as market negative. The way in 0:14:45.960 --> 0:14:49.920 which they implement that, the timing in the degree, all 0:14:49.960 --> 0:14:53.240 are going to be the big conversations of twenty twenty five. 0:14:53.560 --> 0:14:55.120 But don't stay paralyzed. 0:14:55.200 --> 0:14:59.040 Because we stay paralyzed, you miss out on a lot 0:14:59.040 --> 0:15:01.680 of opportunity. Been doing this job for a while, I 0:15:01.720 --> 0:15:04.840 can always tell you the risk, but that has not 0:15:04.960 --> 0:15:07.040 been the right strategy before, and I don't think it's 0:15:07.040 --> 0:15:08.280 the right strategy now, Lisa. 0:15:08.400 --> 0:15:10.480 Sequencing matter is that I think we've all been saying 0:15:10.520 --> 0:15:12.680 out over the last several months. We wanted to know 0:15:12.680 --> 0:15:14.920 what would come first. We found out the focus was 0:15:14.960 --> 0:15:17.680 on trade, and pretty quickly for this market. At the moment, 0:15:17.720 --> 0:15:19.920 I wonder how quickly things could change again when we 0:15:20.000 --> 0:15:22.200 really start to see what's going to happen with the 0:15:22.240 --> 0:15:24.320 tax package. When do we start to get a better 0:15:24.360 --> 0:15:26.440 idea of the contours of That's it going to take weeks? 0:15:26.640 --> 0:15:27.080 Months? 0:15:27.120 --> 0:15:30.680 How long I think we'll get some idea within the 0:15:30.680 --> 0:15:32.440 next couple of weeks. As I mentioned, you have to 0:15:32.440 --> 0:15:36.200 pass the budget first. In Republicans, if we can get 0:15:36.240 --> 0:15:41.320 a budget in the February March time period, people will 0:15:41.320 --> 0:15:43.640 get optimistic on what can get done. 0:15:43.960 --> 0:15:45.840 And then I want to see what score they're using. 0:15:45.880 --> 0:15:48.240 It's a technical thing, but if they use a score 0:15:48.280 --> 0:15:50.440 that says extend out current policy, which is what the 0:15:50.480 --> 0:15:53.800 Treasury Secretary is expecting to say, that's where we have 0:15:53.880 --> 0:15:56.160 the conversation about these tax cuts being permanent. 0:15:56.360 --> 0:15:57.840 That's not priced into the market. 0:15:58.120 --> 0:16:00.760 If we are in March and April talk about permanent 0:16:00.760 --> 0:16:04.080 tax cuts as a high probability event, that's a market 0:16:04.160 --> 0:16:05.360 positive from where I sit. 0:16:05.560 --> 0:16:07.280 It might have an impact on the. 0:16:07.200 --> 0:16:09.760 Tenure that the Treasury Secretary does not want, and that 0:16:09.840 --> 0:16:11.320 might be the binding constraint. 0:16:11.800 --> 0:16:13.360 But I do expect. 0:16:12.960 --> 0:16:17.600 That we will have moments of clarity followed by everything 0:16:17.640 --> 0:16:21.360 falling apart before it ultimately gets done. And one thing 0:16:21.400 --> 0:16:24.920 I say about DC is that things appear impossible right 0:16:25.000 --> 0:16:27.800 up until the moment they're inevitable. But I do think 0:16:27.800 --> 0:16:30.600 it is inevitable this year we will get something done 0:16:30.680 --> 0:16:31.400 on tax cuts. 0:16:31.440 --> 0:16:33.280 And this was brittiant looking forward to being on the 0:16:33.360 --> 0:16:35.800 journey with you as most of frankmonc jans on a 0:16:35.800 --> 0:16:48.000 path forward for the year had Sonya masking a ups 0:16:48.000 --> 0:16:49.920 stop and buying for more Sonya get to see you? 0:16:50.640 --> 0:16:52.640 What are you looking for from tomorrow's number? And to 0:16:52.720 --> 0:16:55.440 Jonathan Pingo's point of ittakes this why is January so 0:16:55.600 --> 0:16:56.880 hard to forecast? 0:16:57.920 --> 0:17:01.360 You know, January tends to be quiet, seasonal. There's also 0:17:01.520 --> 0:17:04.440 weather effects as well, so we have this impact of seasonality, 0:17:04.480 --> 0:17:06.400 and we've had this historically, I think for at least 0:17:06.440 --> 0:17:10.000 a few years that is amplified in January compared to 0:17:10.040 --> 0:17:12.359 other months. But in addition, here we're going to have 0:17:12.400 --> 0:17:16.080 benchmark revisions, so the underlying assumptions of how we're estimating 0:17:16.160 --> 0:17:19.119 data might change as well from the Census Bureau. So 0:17:19.160 --> 0:17:22.400 we're looking forward to hundred k. But really, as we've published, 0:17:22.840 --> 0:17:24.879 this is just an exercise and predicting noise. 0:17:25.840 --> 0:17:29.200 An exercise and predicting noise, we should collect these and 0:17:29.280 --> 0:17:32.240 exercise and predicting noise in a random number generator. 0:17:32.280 --> 0:17:33.119 This is fantastic. 0:17:33.440 --> 0:17:35.680 I am curious about what your takeaway is, just more 0:17:35.720 --> 0:17:38.960 broadly from the random number generator, you know, exercise and 0:17:39.000 --> 0:17:43.280 noise the stagnancy of this market. That's not a stagnation 0:17:43.400 --> 0:17:45.040 of this market. The idea that we're not seeing a 0:17:45.080 --> 0:17:46.800 lot of hiring or we're not seeing a lot of firing. 0:17:47.640 --> 0:17:51.840 Do you take that as being implicitly a negative, suggesting 0:17:52.000 --> 0:17:55.600 a brittleness that makes this labor market more susceptible to 0:17:55.640 --> 0:17:57.440 some sort of shock. That's the way some people have 0:17:57.520 --> 0:17:58.239 been describing it. 0:17:58.520 --> 0:18:01.280 Well, that's possible, yes, and tariffs could be one of 0:18:01.320 --> 0:18:05.040 those shocks, actually, and we would expect the unemployment rate 0:18:05.080 --> 0:18:08.440 to go up if there if the tariffs against you know, Canada, Mexico, 0:18:08.560 --> 0:18:13.280 China are in fact sustained, especially Canada and Mexico. But 0:18:13.400 --> 0:18:15.640 on the other hand, the US is doing considerably better 0:18:15.680 --> 0:18:17.840 than the rest of the world, so that is a. 0:18:17.880 --> 0:18:18.760 Strength for us. 0:18:18.800 --> 0:18:21.439