WEBVTT - Trump Tariffs, ISM Data, Auto 0:00:02.720 --> 0:00:10.520 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.520 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:17.840 Eastern on Apple, Corplay and Android Auto with the Bloomberg 0:00:17.880 --> 0:00:21.000 Business App. Listen on demand wherever you get your podcasts, 0:00:21.320 --> 0:00:23.040 or watch us live on YouTube. 0:00:23.560 --> 0:00:25.560 You're looking at a market that's actually turning around, an 0:00:25.640 --> 0:00:26.360 unbelievable move. 0:00:26.400 --> 0:00:28.040 It's similar to what we saw yesterday. 0:00:28.040 --> 0:00:30.760 Also, the NASTAC now up by five tenths of one percent, 0:00:30.840 --> 0:00:33.240 joining us as Henry to treas Managing partner and director 0:00:33.560 --> 0:00:36.800 of Economic Policy at Beta Partners, Henrietta. What the market 0:00:36.840 --> 0:00:39.199 seems to want to understand is if tomorrow's going to 0:00:39.440 --> 0:00:42.519 be a clearing event or the end of the beginning 0:00:42.600 --> 0:00:44.960 before the next phase here of turmoil. 0:00:46.479 --> 0:00:46.720 Yeah. 0:00:46.760 --> 0:00:49.720 I mean that's obviously the critical question. I see no 0:00:49.840 --> 0:00:51.920 indication that this is going to be a clearing event. 0:00:51.960 --> 0:00:53.400 I'll give you a couple of reasons why. 0:00:53.720 --> 0:00:57.240 Number one, we know that today the President instructed almost 0:00:57.320 --> 0:00:58.800 three months ago, the. 0:01:00.320 --> 0:01:02.040 Federal Trade agencies. 0:01:02.000 --> 0:01:07.800 USTR, Commerce and Treasury to provide him with about fifteen 0:01:08.120 --> 0:01:12.520 or more different reports about different components of our trade landscape, 0:01:12.520 --> 0:01:15.600 trade relations, with twenty different countries, Not a single one 0:01:15.640 --> 0:01:19.440 of those reports has been publicly released yet, So the 0:01:19.480 --> 0:01:23.960 background to justify the forthcoming tariffs is something that you 0:01:24.000 --> 0:01:28.240 would expect to see publicly released, formalized and a Federal 0:01:28.280 --> 0:01:32.480 Register update. We're even discussed with the media in advance 0:01:32.520 --> 0:01:35.399 of a publication, should be all laid out if this 0:01:35.440 --> 0:01:36.640 is going to be clear. 0:01:36.400 --> 0:01:37.800 Cut and ready to go tomorrow. 0:01:38.080 --> 0:01:40.919 So the disarray that we're seeing, the sort of knives 0:01:40.959 --> 0:01:44.520 out reporting we're seeing for Howard Lutnick at Commerce, and 0:01:44.640 --> 0:01:48.440 the general disarray and lack of cohesiveness from the White 0:01:48.480 --> 0:01:50.760 House around this suggests that while we're going to get 0:01:50.800 --> 0:01:54.040 a lot of tariffs announced tomorrow and implemented at midnight, 0:01:54.440 --> 0:01:57.040 there's still going to be a substantial amount of uncertainty. 0:01:57.080 --> 0:02:02.240 I'm especially concerned about India additional Section three h one investigations, 0:02:02.720 --> 0:02:04.160 what it means to pull out of the Phase one 0:02:04.200 --> 0:02:06.760 trade deal with China, declare them in violation, and how 0:02:06.800 --> 0:02:09.760 that impacts the tariffs will see on China and obviously 0:02:09.840 --> 0:02:12.880 Canada and Mexico, which is maybe the most discomforting of 0:02:12.919 --> 0:02:15.360 all the tariffs, especially to the auto manufacturers right. 0:02:15.280 --> 0:02:18.359 Now, Henrietta, maybe it's just me but I haven't heard 0:02:18.400 --> 0:02:22.720 a whole lot from the US Congress either house about 0:02:23.040 --> 0:02:26.840 their views on trade policies and potential changes and potential tariffs. 0:02:27.000 --> 0:02:27.720 Is that unusual. 0:02:29.240 --> 0:02:33.280 It's not unusual, but it is, you know, certainly notable, 0:02:33.440 --> 0:02:37.280 and I think should be relatively embarrassing for a chamber 0:02:37.360 --> 0:02:40.800 that used to pride itself on having authority over you know, 0:02:40.919 --> 0:02:44.480 tax policy and trade policy and has been seating those 0:02:45.040 --> 0:02:45.919 controls to the. 0:02:45.880 --> 0:02:48.000 White House since the seventies, if not before. 0:02:48.280 --> 0:02:50.760 However, I will say they are going to hold a 0:02:50.840 --> 0:02:54.680 vote as early as this evening on the AIPA tariffs 0:02:54.680 --> 0:02:57.799 against Canada, and there are a number of Republicans in 0:02:57.840 --> 0:03:00.640 the Senate who are telegraphing that they're going to cross 0:03:00.639 --> 0:03:04.120 party lines and vote against the President's declaration of national 0:03:04.120 --> 0:03:07.000 emergency against Canada, including Senator. 0:03:06.639 --> 0:03:07.680 Collins of Maine. 0:03:08.000 --> 0:03:10.920 I wouldn't be surprised if Obviously Ram Paul, who's a 0:03:10.919 --> 0:03:13.320 co sponsor of the legislation from Kentucky, will be there, 0:03:13.600 --> 0:03:17.320 Chuck Grassley. Obviously, the farm state senators are the most 0:03:17.360 --> 0:03:19.839 exposed here. We know that the USDA is already talking 0:03:19.919 --> 0:03:23.600 about another bailout for farmers as we head into a 0:03:23.720 --> 0:03:26.960 global transformation of trade that will hurt them substantially. 0:03:27.960 --> 0:03:30.160 Do we get the sense that if there is a 0:03:30.320 --> 0:03:32.880 short term pain for US companies that the administration is 0:03:32.880 --> 0:03:34.600 going to help subsidize it, which is really what we 0:03:34.639 --> 0:03:36.920 saw with farmers back in the first time of administration. 0:03:36.960 --> 0:03:37.760 And is that kind of. 0:03:37.680 --> 0:03:40.400 What the tax bill will be or is it going 0:03:40.440 --> 0:03:41.440 to be something more beefy. 0:03:42.760 --> 0:03:45.480 No, the tax bill should not be considered subsidization because 0:03:45.480 --> 0:03:47.760 it's an extension of the status quo and it's so 0:03:47.920 --> 0:03:51.440 expensive already four point six trillion dollars just to keep 0:03:51.680 --> 0:03:54.200 things where they are that you should not expect additional 0:03:54.240 --> 0:03:58.000 subsidization or tax cuts for either businesses or individuals. That 0:03:58.120 --> 0:04:02.080 is a point blank declaration from Senate staff that I 0:04:02.120 --> 0:04:04.680 speak with on Capitol Hill. I would go a little 0:04:04.680 --> 0:04:08.560 bit further and say the endeavor they they endeavor to 0:04:08.920 --> 0:04:11.960 cut the deficit by one and a half trillion dollars. 0:04:12.080 --> 0:04:14.320 My expectation is they ultimately come in at around four 0:04:14.360 --> 0:04:16.440 hundred to eight hundred billion dollars and more. 0:04:16.480 --> 0:04:18.080 Paid lip service to deficit reduction. 0:04:18.360 --> 0:04:21.080 But you cannot call it deficit reduction when you'll simultaneously 0:04:21.080 --> 0:04:23.360 writing off a four point six trillion dollar extension of 0:04:23.400 --> 0:04:27.760 the existing rates. So unless you consider, like many staffers do, 0:04:28.400 --> 0:04:32.720 the idea that providing certainty and permanency for individual tax 0:04:32.839 --> 0:04:36.000 rates constitute stimulus, there will not be stimulus in this 0:04:36.080 --> 0:04:38.640 tax bill. So these TIFFs are coming, they are tax hikes. 0:04:38.839 --> 0:04:40.120 There are not tax cuts coming. 0:04:41.480 --> 0:04:44.240 Henriette, can you explain to politics of this tariff thing here? 0:04:44.320 --> 0:04:47.200 I mean the markets, you know, stock markets down nine 0:04:47.200 --> 0:04:51.280 to ten percent, the dollars trading lower. The markets are 0:04:51.520 --> 0:04:54.160 just don't like the uncertainty, I guess more than anything else. 0:04:55.200 --> 0:04:58.440 And the concern is it may slow down in this economy, 0:04:58.480 --> 0:05:01.240 may push it into a recession, may cause some inflation. 0:05:02.160 --> 0:05:05.239 Historically that's not been good politically, it's the economy stupid. 0:05:05.640 --> 0:05:08.120 What's the political call here? On behalf of President Trump 0:05:08.160 --> 0:05:08.840 and the administration. 0:05:09.960 --> 0:05:12.640 The view from the White House is that they have 0:05:12.680 --> 0:05:15.760 a mandate. They have the House, the Senate, and the presidency. 0:05:16.520 --> 0:05:21.560 They won the swing states, and they have successfully come 0:05:21.560 --> 0:05:23.360 back from a loss in twenty twenty. So they are 0:05:23.400 --> 0:05:26.520 going as if this is something that all of America 0:05:26.560 --> 0:05:29.279 and certainly their voters, are fully behind. 0:05:29.480 --> 0:05:31.719 The polls suggest that that's not the case. 0:05:31.960 --> 0:05:34.760 The lowest amount of support for President Trump comes on 0:05:34.839 --> 0:05:38.159 his tariff's strategy. The American public is very aware that 0:05:38.200 --> 0:05:41.080 tariffs are not tax cuts, as the President has proclaimed, 0:05:41.240 --> 0:05:41.840 and they do not. 0:05:41.880 --> 0:05:43.600 View tomorrow as liberation Day. 0:05:44.200 --> 0:05:46.440 They view it as a scenario where we're going to 0:05:46.480 --> 0:05:50.680 see more tariffs and taxes, mostly because, of course, that 0:05:50.800 --> 0:05:52.279 is what is coming, and you can see it in 0:05:52.279 --> 0:05:55.960 the pull forward purchases at auto sectors, for example, or 0:05:56.080 --> 0:05:56.839 auto sales. 0:05:57.200 --> 0:05:58.680 So you have a. 0:05:58.640 --> 0:06:01.640 Pretty material disconnect between what the White House things that 0:06:01.680 --> 0:06:05.400 does a mandate for, and what voters are suggesting they support. 0:06:05.760 --> 0:06:08.800 But on Capitol Hill, as you point out, the Senators 0:06:08.839 --> 0:06:10.800 and the House members, the best that they can do, 0:06:10.920 --> 0:06:15.080 given President Trump's stranglehold on their voters and the incredible 0:06:15.120 --> 0:06:18.720 popularity that he shares, is that they have to go 0:06:18.760 --> 0:06:20.440 along with this now. And the best they can do 0:06:20.960 --> 0:06:25.359 is expect that the uncertainty is really the problem here. 0:06:25.560 --> 0:06:28.320 So once we get past tomorrow, you'll hear folks say 0:06:28.360 --> 0:06:30.680 eighty percent of the whole market downturn is because things 0:06:30.720 --> 0:06:34.560 are uncertain. It's much more likely that once we get 0:06:34.600 --> 0:06:36.640 past tomorrow, things will calm down, and then they're very 0:06:36.640 --> 0:06:39.719 optimistic that some of these tariffs on especially Canada and 0:06:39.720 --> 0:06:42.040 Mexico will start to come off over the summer in 0:06:42.080 --> 0:06:44.080 time for a turnaround going into the twenty twenty six 0:06:44.200 --> 0:06:46.559 midterm elections, which is about eighteen months away. 0:06:46.839 --> 0:06:49.880 Is there any real data that points to the fact 0:06:49.920 --> 0:06:50.839 that that could happen. 0:06:52.160 --> 0:06:54.719 Well, there's no real data on anything except for what's 0:06:54.720 --> 0:06:55.719 in Trump's. 0:06:55.320 --> 0:06:58.560 Mind on what could come and what might come off. 0:06:58.800 --> 0:07:01.920 But there is very real concrete data that I think 0:07:02.000 --> 0:07:04.839 keeps being ignored, which is that the president has imposed 0:07:05.200 --> 0:07:08.240 twenty percent tariffs on nearly five hundred billion dollars worth 0:07:08.279 --> 0:07:11.080 of goods coming in from China and twenty five percent 0:07:11.160 --> 0:07:14.520 tariffs on all trade coming from Canada and Mexico on 0:07:14.680 --> 0:07:19.280 about forty percent of imports. There's also an underreported narrative 0:07:19.280 --> 0:07:20.920 that I think we'll hear about in the coming months, 0:07:21.080 --> 0:07:25.040 which is that the disruption at the border is incredibly 0:07:25.080 --> 0:07:30.040 widespread and underappreciated because you have no one to go 0:07:30.080 --> 0:07:33.160 to at USTR that you can get recourse for if 0:07:33.160 --> 0:07:36.360 you want to explain that you are USMCA compliant or 0:07:36.640 --> 0:07:37.800 seeking an exclusion. 0:07:38.160 --> 0:07:39.080 So there's these. 0:07:38.880 --> 0:07:42.440 Backlogs and confusion at the border taking place right now. 0:07:42.680 --> 0:07:45.040 The most concrete example would be when the president be 0:07:45.160 --> 0:07:47.960 executive order changed the deminimous rules and created such a 0:07:47.960 --> 0:07:51.240 logjam we had to pull it off. That's actually occurring 0:07:51.280 --> 0:07:53.880 at the border right now. It's being underreported, I think 0:07:53.920 --> 0:07:57.480 in part because businesses are still trying to get exclusions 0:07:57.480 --> 0:07:59.400 and they're not able to speak with anybody that they 0:07:59.440 --> 0:08:02.600 don't want to rough feathers in the anticipation of hopefully 0:08:02.600 --> 0:08:04.280 being able to get an audience in the months ahead. 0:08:04.880 --> 0:08:07.920 All Right, it's not just terifs. At some point, Congress 0:08:07.920 --> 0:08:09.520 has got to fund the government and do all that 0:08:09.560 --> 0:08:11.120 kind of stuff. How should we think about the to 0:08:11.200 --> 0:08:14.320 do list for Congress in the coming days and weeks. 0:08:14.880 --> 0:08:17.680 There's so much there, Okay, So first things. 0:08:17.480 --> 0:08:22.920 First, I would say, the Senate budget that they're working 0:08:22.920 --> 0:08:24.880 on right now, I understand, is going to include a 0:08:24.920 --> 0:08:27.760 five trillion dollar hike to the debt ceiling. 0:08:28.400 --> 0:08:30.240 Now, that is an exorbitant figure. 0:08:30.480 --> 0:08:32.560 The last time we hiked the debt ceiling by any 0:08:32.559 --> 0:08:35.480 dollar figure, it was one point two trillion dollars. 0:08:35.200 --> 0:08:37.440 So five trillion is shocking. 0:08:38.080 --> 0:08:42.440 This belies the reality that current policy baseline accounting for 0:08:42.520 --> 0:08:43.839 extending the existing. 0:08:43.480 --> 0:08:46.920 Tax rates is not free. It does matter to the Treasury. 0:08:47.000 --> 0:08:49.840 They do need a five trillion dollar increase in the 0:08:49.840 --> 0:08:52.360 debt ceiling, and by the way, that's only to get 0:08:52.360 --> 0:08:52.600 through the. 0:08:52.559 --> 0:08:53.800 Twenty twenty six midterms. 0:08:54.000 --> 0:08:55.880 That's not for Trump's full term, which is what I 0:08:55.920 --> 0:08:58.800 originally anticipated when I heard that number a month ago. 0:08:59.280 --> 0:09:01.720 So first things first, we have to deal with that. 0:09:01.840 --> 0:09:03.160 I expect it to be in the budget that we 0:09:03.160 --> 0:09:05.000 should see from the Senate as early as tonight. 0:09:05.240 --> 0:09:06.920 That'll come due in July. 0:09:07.200 --> 0:09:09.360 Secretary Bessett will give us an update on that in May, 0:09:09.840 --> 0:09:11.280 and then, as you point out, we do have a 0:09:11.280 --> 0:09:13.800 government funding bill that's going to be due September thirtieth, 0:09:13.840 --> 0:09:15.840 and I think that's where we're going to see the 0:09:15.920 --> 0:09:20.680 farmers bailout, housed aid to California wildfires, and depending on 0:09:20.679 --> 0:09:22.719 the scale and scope of this tax bill, it could 0:09:22.760 --> 0:09:24.679 be where you see an expansion of the child tax 0:09:24.760 --> 0:09:28.000 credit and extension of the ECA subsidies. The reality is 0:09:28.000 --> 0:09:31.439 you need probably ten to twenty Democratic votes in the 0:09:31.480 --> 0:09:34.000 Senate for any bill to keep the government open, and 0:09:34.040 --> 0:09:36.480 we all saw what happened to Minority Leader Schumer last 0:09:36.520 --> 0:09:39.800 go around, so I expect that September period to be 0:09:39.920 --> 0:09:44.840 really fraught with negotiations and a lot of tension, much 0:09:44.840 --> 0:09:47.000 of which we'll see play out as a result of 0:09:47.040 --> 0:09:50.840 the elections in Florida's sixth and first districts tonight. So 0:09:50.920 --> 0:09:53.000 that'll be a fascinating precursor to how this will all 0:09:53.000 --> 0:09:53.640 play out. 0:09:53.760 --> 0:09:56.320 All right, Henrita, thanks a lot. We really appreciate your analysis, 0:09:56.320 --> 0:09:58.800 Henry A. Trist Managing partner and director of Economic Policy 0:09:58.800 --> 0:10:00.640 of Beta Partners. Which then raised the question too, and 0:10:00.679 --> 0:10:02.800 we talk about a clearing event with all that in store, 0:10:03.240 --> 0:10:04.679 how could anything be a clearing event. 0:10:04.880 --> 0:10:05.439 That's a great point. 0:10:05.520 --> 0:10:06.520 Yeah, at this point, yep. 0:10:06.640 --> 0:10:08.640 So I mean you're going to have tomorrow some terrors. 0:10:08.679 --> 0:10:10.480 Hopefully that will provide a little bit of clarity for 0:10:10.920 --> 0:10:12.080 some members of the marketplace. 0:10:13.760 --> 0:10:17.440 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:10:17.520 --> 0:10:20.640 weekdays at ten am Eastern on Apple, Coarcklay, and Android 0:10:20.640 --> 0:10:23.920 Auto with the Bloomberg Business app, Listen on demand wherever 0:10:24.000 --> 0:10:27.120 you get your podcasts, or watch us live on YouTube. 0:10:27.600 --> 0:10:29.480 Right now, let's go to Tim Fiori break it down 0:10:29.880 --> 0:10:32.840 the He's the chairman of the Manufacturing Business Survey for 0:10:32.880 --> 0:10:36.120 the Institute for Supply Management. Tim talk to us about 0:10:36.120 --> 0:10:38.839 this im data. The manufacturing headline came into forty nine, 0:10:38.880 --> 0:10:40.680 below the consensus and below last month. 0:10:41.760 --> 0:10:44.120 Yeah, I think we disappointed here, but there's no huge 0:10:44.160 --> 0:10:46.640 surprise to this. I think the important thing is after 0:10:46.720 --> 0:10:48.839 I look through all the data, I had to step 0:10:48.880 --> 0:10:51.800 back and say what am I seeing here? And essentially 0:10:51.840 --> 0:10:53.920 what you got here is we're not sure what to 0:10:53.960 --> 0:10:57.679 do and we're so confused. So if you look at 0:10:57.679 --> 0:11:01.200 the three elements, outputs, demands, and input, this PMI is 0:11:01.200 --> 0:11:04.400 being supported again by the input strength, which is really 0:11:04.440 --> 0:11:06.200 being driven by the terriff issue. 0:11:06.520 --> 0:11:06.920 So if you. 0:11:06.960 --> 0:11:08.800 Remove that out, this month would have been about a 0:11:08.840 --> 0:11:11.000 forty eight three, just like last month would have been 0:11:11.000 --> 0:11:13.760 a forty eight three. Our demand is still non existent 0:11:13.800 --> 0:11:16.880 really because we're waiting to make investments. But I think 0:11:16.880 --> 0:11:19.400 the biggest the biggest story here in this month's report 0:11:19.840 --> 0:11:22.559 is that revenue is down this month. We're continuing to 0:11:22.640 --> 0:11:25.600 d staff and it's all being driven by the uncertainty 0:11:25.800 --> 0:11:29.600 around the near term the moderate term market development as 0:11:29.640 --> 0:11:32.320 tariffs get deployed. The good thing is tomorrow should shed 0:11:32.320 --> 0:11:33.000 a lot more light. 0:11:33.559 --> 0:11:39.600 Yes, well maybe tim to that point. If this uncertainty persists, 0:11:39.760 --> 0:11:42.720 what's the end result to that, like is it more destocking, 0:11:42.760 --> 0:11:45.560 is it more layoffs, is it less investment, or is 0:11:45.559 --> 0:11:46.520 it just deferred. 0:11:47.360 --> 0:11:50.000 Well, so you know our inventory number will drop because 0:11:50.000 --> 0:11:51.600 we're probably trying to get two or three months with 0:11:51.640 --> 0:11:54.320 the inventory in hand here to avoid the first hits 0:11:54.320 --> 0:11:56.400 of the of the tariffs. But I think it's becoming 0:11:56.440 --> 0:11:58.720 clear now that these things probably aren't going to go away. 0:11:59.280 --> 0:12:00.920 So what's going to happen. Happening is is that it's 0:12:00.960 --> 0:12:03.800 going to limit our willingness to invest in capital. We 0:12:03.840 --> 0:12:06.960 are investing in inventory, as you can see, we're not 0:12:07.080 --> 0:12:10.280 investing in capital goods to replace capital, to expand capital, 0:12:10.600 --> 0:12:13.160 R and D capital. That's really all on hold here 0:12:13.240 --> 0:12:15.520 until this whole thing settles out. Here, we are one 0:12:15.600 --> 0:12:18.400 day before a major day and we're still not sure 0:12:18.400 --> 0:12:21.000 of the details, So a lot of uncertainty here. You know, 0:12:21.200 --> 0:12:24.680 the market manufacturer does not like uncertainty. We're in the 0:12:24.720 --> 0:12:26.920 middle of the uncertainty here. Going to need a little 0:12:26.920 --> 0:12:28.559 bit more time to see where this goes. But in 0:12:28.600 --> 0:12:30.760 the meantime, you think this would have been a forty 0:12:30.760 --> 0:12:34.120 eight to five forty eight three if it was denormalize 0:12:34.160 --> 0:12:36.800 for a normal behavior here, which right now we don't have, 0:12:36.920 --> 0:12:39.840 so we did disappoint I think we underperformed forty nine. 0:12:40.000 --> 0:12:41.800 I think the average was supposed to be forty nine 0:12:41.840 --> 0:12:44.440 to five. Not a huge difference. You know, we're not 0:12:44.480 --> 0:12:47.800 collapsing here, but we're still reducing our revenue and reducing 0:12:47.800 --> 0:12:50.080 our head count, which in a moderate term may not 0:12:50.120 --> 0:12:51.920 be good in any kind of recovery cycle. 0:12:52.200 --> 0:12:53.840 All right, Tim, thank you so much for joining us. 0:12:53.880 --> 0:12:56.880 Tim Fury, chairman of the Manufacturing Business Survey the Institute 0:12:56.920 --> 0:13:00.000 for Supply Management. Again the ICE in headline data, manufacturing 0:13:00.040 --> 0:13:02.760 data came into forty nine. The consensus was forty nine 0:13:02.760 --> 0:13:05.080 to five, so anything below fifty means a contraction into 0:13:05.120 --> 0:13:10.560 manufacturing economy. The ICE prices paid search the sixty nine 0:13:10.600 --> 0:13:14.199 point four, well above where folks were looking. And employment 0:13:14.880 --> 0:13:19.200 remains weak and actually weaker than expectations, so some issues 0:13:19.200 --> 0:13:22.640 there in the manufacturing sector as well. 0:13:22.800 --> 0:13:26.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:13:26.600 --> 0:13:29.959 weekdays at ten am Eastern on Applecarplay and Android Auto 0:13:30.080 --> 0:13:33.160 with the Bloomberg Business App. Listen on demand wherever you 0:13:33.200 --> 0:13:36.160 get your podcasts, or watch us live on YouTube. 0:13:37.160 --> 0:13:38.800 This is Bloomberg Intelligence Radio. 0:13:38.880 --> 0:13:41.120 We cover all the top news and business, economics and 0:13:41.160 --> 0:13:43.640 finance through a lens of our Bloomberg intelligence folks. They 0:13:43.640 --> 0:13:45.920 cover two thousand companies and one hundred and thirty industries 0:13:46.240 --> 0:13:48.600 all around the world, and we also like updating you 0:13:48.720 --> 0:13:52.040 on the view outside of Bloomberg. Sarah Ponzik is financial 0:13:52.040 --> 0:13:54.840 officer at UBS Private Wealth Management. She joins us now 0:13:54.880 --> 0:13:58.240 from Boca Raton, Florida for her take on the market. Sarah, 0:13:58.320 --> 0:14:00.280 you have private wealth, so your clients are in this 0:14:00.360 --> 0:14:03.280 for the long term, but uncertainty can last for quite 0:14:03.320 --> 0:14:06.640 a long time. How do you rethink of portfolio to 0:14:06.679 --> 0:14:10.120 take advantage of upside but also protection in this weird. 0:14:09.840 --> 0:14:13.880 Time, uncertainty can last for a long time. And what's 0:14:13.920 --> 0:14:17.600 interesting is, although you can say ever since we entered 0:14:17.600 --> 0:14:20.760 the new year, ever since the new administration took over, 0:14:20.960 --> 0:14:23.800 there's been uncertainty, really hasn't been that long. It's only 0:14:23.880 --> 0:14:25.840 been a couple of months. But I think we can 0:14:25.880 --> 0:14:28.520 all agree it feels like a lifetime. And we have 0:14:28.600 --> 0:14:32.560 certainly seen it affect sentiment in sentiment surveys and also 0:14:32.840 --> 0:14:35.360 in you know, sentiment from our clients as well. Plenty 0:14:35.400 --> 0:14:38.680 of calls, plenty of emails are having conversations every day. 0:14:39.160 --> 0:14:41.480 But as your question Alex of how do you think 0:14:41.480 --> 0:14:45.200 about this in terms of long term portfolios and rejriggering portfolios, 0:14:45.440 --> 0:14:46.760 I think at the end of the day, we all 0:14:46.800 --> 0:14:48.920 have to understand volatilities here today. 0:14:49.200 --> 0:14:50.000 It's not going away. 0:14:50.040 --> 0:14:53.080 It's not as though tomorrow is Liberation Day. We're going 0:14:53.120 --> 0:14:55.120 to find out exactly what's happening with tariffs and all 0:14:55.120 --> 0:14:57.040 of a sudden it's going to be the sailing from here. 0:14:57.200 --> 0:14:59.000 That's not the case. There's still going to be a 0:14:59.000 --> 0:15:00.920 lot of back and forth, a lot of ups and 0:15:00.960 --> 0:15:03.440 downs in markets, a lot of inter day volatility, and 0:15:03.480 --> 0:15:05.760 we have to get used to it. But something that 0:15:05.800 --> 0:15:09.640 I do think is very important for people to understand 0:15:09.680 --> 0:15:13.800 here is that in the past ten percent corrections, which 0:15:13.840 --> 0:15:15.600 is just about where we are on the S and 0:15:15.680 --> 0:15:19.640 P five hundred, have been great entry points into the 0:15:19.680 --> 0:15:20.280 stock market. 0:15:20.360 --> 0:15:21.360 And yes, you have to. 0:15:21.440 --> 0:15:23.640 Have a very strong stomach to be able to weather 0:15:23.640 --> 0:15:24.960 the volatility. 0:15:24.400 --> 0:15:25.280 As it continues. 0:15:25.720 --> 0:15:28.280 But if you look at if you what have you know, 0:15:28.360 --> 0:15:30.920 phased into the stock market at a ten percent correction 0:15:31.480 --> 0:15:34.200 on average throughout history, you would have been well off 0:15:34.240 --> 0:15:34.920 into the future. 0:15:35.760 --> 0:15:37.960 What are your clients doing sir, are they going to cash, 0:15:38.040 --> 0:15:39.560 are they buying the dip? What are they doing? 0:15:40.880 --> 0:15:43.800 So we've had some clients ask about going to cash, 0:15:43.840 --> 0:15:47.040 but that's not necessarily our recommendation at this point in time. 0:15:47.520 --> 0:15:48.040 One. 0:15:48.320 --> 0:15:50.280 I also think it's important to point out if you're 0:15:51.400 --> 0:15:55.479 you know someone who's an investor, and you are well diversified, 0:15:55.520 --> 0:15:59.200 you're also diversified in high quality bonds, some private investments 0:15:59.240 --> 0:16:02.720 like private credit, private equity. You're not only invested in 0:16:02.760 --> 0:16:04.840 tech in the market. Yes, it might be a significant 0:16:04.840 --> 0:16:07.320 part of your portfolio, but that's not your only investment. 0:16:07.960 --> 0:16:09.720 I think a lot of people might be surprised to 0:16:09.800 --> 0:16:12.160 understand that if you look at your portfolios your to date, 0:16:12.480 --> 0:16:14.720 you're maybe flat to down two percent. 0:16:15.280 --> 0:16:16.440 We really have not. 0:16:16.840 --> 0:16:22.040 Seen big moves yet to the downside that would really 0:16:22.200 --> 0:16:27.000 qualify as something extremely scary or extremely extreme. So when 0:16:27.040 --> 0:16:28.840 you think about the flip side, if you're going to 0:16:28.880 --> 0:16:31.520 go sell investments that you've held for a long time, 0:16:31.680 --> 0:16:34.360 go to cash. One, you're probably going to be facing 0:16:34.360 --> 0:16:36.320 a big tax bill next year because you're going to 0:16:36.320 --> 0:16:38.120 be taking realize gains at the end of the day, 0:16:38.360 --> 0:16:40.240 and know you don't want the tax to tail to 0:16:40.400 --> 0:16:42.480 waighl the to wag of the investment dog. 0:16:42.560 --> 0:16:44.520 You don't want to be the only reason you don't 0:16:44.520 --> 0:16:45.080 do anything. 0:16:45.600 --> 0:16:48.760 But it's more so investors and clients of ours who 0:16:48.760 --> 0:16:50.680 have had cash on the sidelines and who have been 0:16:50.720 --> 0:16:54.600 waiting for an opportunity. It's more so you take advantage 0:16:54.600 --> 0:16:56.840 of the stock market. You take advantage of this volatility, 0:16:56.840 --> 0:16:58.920 You get your cash to work slowly, and you also, 0:16:59.240 --> 0:17:01.640 you know, do assessment. If you're someone who sees your 0:17:01.640 --> 0:17:04.400 portfolio down two percent year to date and you're freaking out, 0:17:04.720 --> 0:17:06.879 maybe you have too much risk in your portfolio, that 0:17:06.960 --> 0:17:07.920 is a reason to do risk. 0:17:08.200 --> 0:17:09.080 It's such a good point. 0:17:09.640 --> 0:17:11.520 The other side of it is if we see rates 0:17:11.880 --> 0:17:14.400 a little lower, a little higher for longer, and there's 0:17:14.440 --> 0:17:16.520 obviously a debate for that, because we're seeing a big 0:17:16.560 --> 0:17:19.200 bid into the bond market. Goldman Sachs now sees three 0:17:19.240 --> 0:17:21.760 cuts for the Fed this year. But if we don't 0:17:21.800 --> 0:17:24.639 get that because there is inflation and it's stickier, you 0:17:24.640 --> 0:17:28.520 need to diversify more into higher yielding products. 0:17:29.240 --> 0:17:32.800 Well, it gives you the ability to honestly sit in 0:17:32.840 --> 0:17:37.000 cash or buy bombs for longer and lock in interest rates. 0:17:37.000 --> 0:17:39.639 I know so many people have been talking about you know, 0:17:39.800 --> 0:17:42.200 locking and cash rates, locking and cash rates for really 0:17:42.200 --> 0:17:44.320 the past year and a half because the expectation where 0:17:44.400 --> 0:17:46.800 rates were going to come down and rates just didn't 0:17:46.800 --> 0:17:50.959 come down as quickly as expected. They've been, you know, 0:17:51.119 --> 0:17:54.320 pretty tough in staying where they are. So if you're 0:17:54.359 --> 0:17:56.760 an investor who still has plenty of cash, it's giving 0:17:56.760 --> 0:17:59.359 you this opportunity to lock and yields further into the 0:17:59.359 --> 0:18:02.280 future by quality bonds and make sure you do lock 0:18:02.400 --> 0:18:05.040 yields before rates come down. Our economists are of the 0:18:05.160 --> 0:18:08.919 view that, you know that Chair Powell has said that 0:18:08.960 --> 0:18:11.920 he expects any inflationary pressures from teriffs to be more so. 0:18:12.240 --> 0:18:14.400 I don't want to say transitory, because everyoney's that word. 0:18:14.520 --> 0:18:17.560 Now after a couple of years ago you put, you know, 0:18:17.640 --> 0:18:20.840 not long standing, and that if there are more so 0:18:21.040 --> 0:18:23.800 pressures on growth on the economy, if there are concerns 0:18:23.800 --> 0:18:26.920 about the teeriating growth in a recession, than our economists 0:18:26.920 --> 0:18:29.160 are of the view that the FED, even with tariffs 0:18:29.160 --> 0:18:31.240 in place, would probably start to cut rates at that 0:18:31.280 --> 0:18:32.040 point in time too. 0:18:32.560 --> 0:18:35.520 So dividends are they important in the UBS kind of 0:18:35.520 --> 0:18:36.520 equity allocation? 0:18:38.000 --> 0:18:40.959 They are I would say dividends are certainly important, especially 0:18:41.000 --> 0:18:43.840 if you are an income focused investor. I think the 0:18:43.880 --> 0:18:46.760