WEBVTT - Consumer Confidence Plummets as Market Uncertainty Grows 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.280 --> 0:00:28.840 Where is the Federal Reserve going to go? 0:00:28.880 --> 0:00:30.880 We've got a lot of economic data out there that 0:00:31.680 --> 0:00:34.480 I guess, with the hindsight, still looks okay. But boy, 0:00:34.479 --> 0:00:36.240 if you look at some of the survey data, whether 0:00:36.280 --> 0:00:38.639 it's you miss data from a couple of weeks ago, 0:00:38.640 --> 0:00:41.960 which we'll get some updated you miss data on this Friday, 0:00:42.200 --> 0:00:44.199 whether it's some other survey data, it shows that the 0:00:44.280 --> 0:00:48.240 consumers a little bit concerned out there, inflation expectations a 0:00:48.280 --> 0:00:49.120 little bit heightened. 0:00:49.320 --> 0:00:51.199 So how does the Fed take that into account? Well? 0:00:51.200 --> 0:00:54.240 I know Danielle di Martino Booth, she'll have some thoughts here. 0:00:54.280 --> 0:00:57.640 She's the CEO and chief strategist at QI Research. Danielle, 0:00:57.640 --> 0:01:00.920 what's the data you're looking at? Give you a sense 0:01:00.920 --> 0:01:04.480 of where this economy really is today? Maybe we're inflation 0:01:04.680 --> 0:01:08.320 expectations are today? Because the Fed probably needs to be 0:01:08.319 --> 0:01:10.119 a little bit nimble here, don't they? 0:01:11.959 --> 0:01:14.039 Yes, good morning, and thank you for having me. And 0:01:14.080 --> 0:01:18.000 absolutely the FED does need to be nimble. We actually 0:01:18.040 --> 0:01:20.640 saw with the Durable Goods report that came out kind 0:01:20.680 --> 0:01:24.720 of the first hard data that agrees with you. Across 0:01:24.760 --> 0:01:28.320 the board, every single regional Federal Reserve survey has shown 0:01:28.360 --> 0:01:33.760 reduced capital expenditure planning going into the future, reduced employment 0:01:33.840 --> 0:01:37.679 going into the future as well. And most of what 0:01:37.720 --> 0:01:40.240 we've been seeing has been, as you said, soft survey data. 0:01:40.360 --> 0:01:42.399 Now we have hard data to back that up with 0:01:42.480 --> 0:01:45.800 this morning's report, and so the Fed's going to have 0:01:45.840 --> 0:01:49.200 to start thinking. The Dallas Federal Reserve did some great 0:01:49.240 --> 0:01:52.120 work about a year ago that showed that it is investment, 0:01:52.240 --> 0:01:56.000 business investment that leads the US economy in and out 0:01:56.040 --> 0:01:59.280 of recession. With the looks that that is going to 0:01:59.320 --> 0:02:02.240 be turning down, and again corroborated by every single regional 0:02:02.320 --> 0:02:04.200 FED survey all the way down to the Richmond FED 0:02:04.480 --> 0:02:06.840 and Philly FED that we've had these last few days, 0:02:07.080 --> 0:02:09.760 the Fed's going to have to become more concerned, as 0:02:09.800 --> 0:02:14.040 we saw in that CFO survey, about the possibility of recession. 0:02:14.360 --> 0:02:16.600 So they're going to have to balance the two when 0:02:16.600 --> 0:02:20.320 they're making their policy there's two non farm pair reports 0:02:20.440 --> 0:02:23.880 before they meet again on May six and seventh. 0:02:23.800 --> 0:02:25.320 And that's what I was going to say, six weeks 0:02:25.320 --> 0:02:27.800 away before we get the next Federal Reserve decision, and 0:02:27.800 --> 0:02:30.320 you were mentioning those key economic data points that are 0:02:30.320 --> 0:02:31.960 going to be coming ahead of that, as well as 0:02:32.000 --> 0:02:35.040 that reciprocal tariff deadline on April A second here, So 0:02:35.400 --> 0:02:37.919 what's the playbook you think ahead of this Federal Reserve 0:02:37.960 --> 0:02:39.680 meeting and what do you think needs to happen in 0:02:39.720 --> 0:02:42.320 the data depending on what could force them to move 0:02:42.360 --> 0:02:43.239 in a particular way. 0:02:44.560 --> 0:02:47.600 So, you know, given the magnitude of the challenge, your 0:02:47.639 --> 0:02:50.320 Grand Christmas layoffs one hundred and seventy two thousand, only 0:02:50.360 --> 0:02:53.920 sixty two thousand of which we're attributable to the public sector. 0:02:53.960 --> 0:02:56.640 In February, we're at about the same run rate. We're 0:02:56.680 --> 0:02:59.240 running at about one hundred and fifty thousand layoffs layoffs 0:02:59.240 --> 0:03:02.720 announced in the month of March. It's looking like the 0:03:02.800 --> 0:03:06.519 Fed might get to that four point four percent year 0:03:06.760 --> 0:03:10.440 end unemployment rate target by the time they meet again. 0:03:11.360 --> 0:03:14.320 So I think that the real risk is that Powell's 0:03:14.360 --> 0:03:17.480 going to have to pivot again in favor of the 0:03:17.520 --> 0:03:21.000 employment mandate. If what we're seeing on the ground with 0:03:21.160 --> 0:03:24.800 layoffs and of course Bcygo bankruptcy is runing at about 0:03:24.800 --> 0:03:29.359 a twenty two pace for fifty million or more liabilities 0:03:29.880 --> 0:03:32.280 on the terminal that you can follow, they're going to 0:03:32.360 --> 0:03:34.960 have to start paying more attention to what higher for 0:03:35.080 --> 0:03:38.000 longer is doing to the real economy. 0:03:38.520 --> 0:03:41.640 So what is the focus here right now? 0:03:41.680 --> 0:03:45.120 If you think of the Fed danielle is inflation is 0:03:45.120 --> 0:03:45.840 an employment? 0:03:46.120 --> 0:03:47.680 How do they balance that these days? 0:03:48.320 --> 0:03:52.080 So they're definitely focused on inflation expectations. We saw you 0:03:52.280 --> 0:03:56.240 fairly Dubvish voter Austin Goolsby saying we really have to 0:03:56.240 --> 0:03:59.600 pay attention to see if these inflation expectations become on 0:03:59.760 --> 0:04:03.640 him and start to filter their way into the actual 0:04:03.640 --> 0:04:07.360 inflation metrics. But we haven't seen that yet. And the 0:04:07.400 --> 0:04:10.360 fact is, what we're hearing from one company after another 0:04:10.800 --> 0:04:13.480 is that there's a margin squeeze going on. They are 0:04:13.600 --> 0:04:15.760 having to deal with higher input prices. There was a 0:04:15.800 --> 0:04:19.760 lot of stockpiling ahead of the potential for imposed tariffs, 0:04:19.760 --> 0:04:22.080 not that we know what they're going to look like yet, 0:04:22.480 --> 0:04:25.360 but companies are reporting one after another that they cannot 0:04:25.440 --> 0:04:28.560 pass through these prices to the end consumer, whether you're 0:04:28.600 --> 0:04:31.600 talking about Walmart or Dollar Tree. 0:04:32.480 --> 0:04:35.800 That's interesting too because when I've talked to Tom Barkin 0:04:35.880 --> 0:04:38.240 before at the Richmond FED, he talked about how he 0:04:38.240 --> 0:04:41.080 would actually look at the price mixed volume. When you're 0:04:41.080 --> 0:04:42.960 looking at a lot of these companies and consumer package 0:04:43.000 --> 0:04:46.000 good companies, whether it's like a Coca Cola, PepsiCo, craft 0:04:46.000 --> 0:04:48.599 times and especially what it was meaning for inflation and 0:04:48.680 --> 0:04:51.320 things like that, what do you like to look at 0:04:51.320 --> 0:04:53.400 Because I mean, you have so much experience. You previously 0:04:53.400 --> 0:04:56.000 were an advisor at the Fed Bank of Dallas during 0:04:56.360 --> 0:04:58.920 the global financial crisis. So when you're looking at some 0:04:58.960 --> 0:05:01.040 of these key consumers type names, and what do you 0:05:01.040 --> 0:05:03.400 think it could mean for infleetion other forms of growth 0:05:03.440 --> 0:05:06.320 on the other side of the employment thing, what are 0:05:06.400 --> 0:05:07.200 you watching there? 0:05:08.320 --> 0:05:10.359 So you know, I think everybody's focus right now is 0:05:10.360 --> 0:05:14.080 on consumer discretionary But to Barkin's point and to your point, 0:05:14.240 --> 0:05:17.839 we're actually seeing the staples come under pressure because of 0:05:17.880 --> 0:05:20.560 what we've heard from some of the lowest cost retailers 0:05:20.560 --> 0:05:23.240 out there, and that's that some US households are even 0:05:23.279 --> 0:05:26.560 beginning to cut back on essential spending. They're moving away 0:05:26.600 --> 0:05:29.640 from brands. They're moving away from packaged goods. Whereas these 0:05:29.640 --> 0:05:32.720 companies were able to pass through these prices for several 0:05:32.800 --> 0:05:36.320 years following the pandemic, now they're hitting a wall. McCormick 0:05:36.400 --> 0:05:38.960 was the latest to come out and make those types 0:05:39.000 --> 0:05:41.600 of comments here in the last forty eight hours or so. 0:05:41.600 --> 0:05:44.600 So we really do have to be cognizant of the 0:05:44.600 --> 0:05:48.080 potential for a margin squeeze here, and that I think 0:05:48.160 --> 0:05:50.039 has to be on the feder radar. Again. It is 0:05:50.160 --> 0:05:54.680 business investment and not consumption. Despite consumption being a record 0:05:54.760 --> 0:05:59.279 seventy one percent of USGDP, business investment has always led 0:05:59.320 --> 0:06:02.760 the US economy in and out of its cycles of 0:06:02.800 --> 0:06:04.280 expansion and recession. 0:06:05.160 --> 0:06:08.560 I'm looking at the WRP function Danielle in the Bloomberg 0:06:08.600 --> 0:06:11.400 terminal of the world interest rate probability. It looks like 0:06:11.680 --> 0:06:13.640 the market's pricing and maybe just a little bit more 0:06:13.680 --> 0:06:15.520 than two rate cuts this year. 0:06:15.560 --> 0:06:17.040 I feel like it's always all over the place. Though 0:06:17.040 --> 0:06:18.279 when we look at that function. 0:06:18.040 --> 0:06:19.440 It is, it is, and I have it, you know, 0:06:20.520 --> 0:06:22.919 you know, not a whole lot of confidence in it, 0:06:23.040 --> 0:06:26.800 not to say it's not very representative or interesting and useful, 0:06:26.839 --> 0:06:28.680 but boy, it's all over the place, but a little 0:06:28.680 --> 0:06:31.080 more than two rate cuts this year, Danielle, Does that 0:06:31.120 --> 0:06:32.200 seem reasonable to you? 0:06:33.720 --> 0:06:35.960 You know, I really think we're going to see maybe 0:06:36.160 --> 0:06:37.559 double that or more. 0:06:37.720 --> 0:06:38.040 Wow. 0:06:38.120 --> 0:06:40.520 We're setting up for the September meeting a lot like 0:06:40.600 --> 0:06:42.440 exccuse me. We're setting up for the main meeting a 0:06:42.520 --> 0:06:45.279 lot like we did in between July and September of 0:06:45.360 --> 0:06:48.280 twenty twenty four. Some non farm PAI reports are a 0:06:48.279 --> 0:06:51.159 little bit lagged in terms of their release. The April 0:06:51.160 --> 0:06:54.120 report is actually released on May second, so that is 0:06:54.200 --> 0:06:57.240 five days before the FED meets again, but during blackout. 0:06:57.680 --> 0:06:59.880 So the Fed's going to have to be very very 0:07:00.040 --> 0:07:04.280 cognisant of its employment mandate because I think that that 0:07:04.320 --> 0:07:07.920 in particular is moving in such a way the momentum. 0:07:08.040 --> 0:07:11.080 We're seeing it with fewer jobs in the Consumer Confidence Report, 0:07:11.200 --> 0:07:14.080 we're seeing with sixty six percent of Americans in you 0:07:14.240 --> 0:07:17.240 Mish saying that they anticipate the unemployment rates going to 0:07:17.320 --> 0:07:19.760 rise in a year. We've never been at these levels, 0:07:20.160 --> 0:07:23.040 whether it's Conference Board or University of Michigan, when the 0:07:23.120 --> 0:07:26.600 US economy has not already been in recession. Looking through 0:07:26.600 --> 0:07:27.920 the mirror, all. 0:07:27.880 --> 0:07:30.680 Right, we're going to get some more new University of 0:07:30.720 --> 0:07:33.400 Michigan data this Friday, so we'll be having that for. 0:07:33.280 --> 0:07:35.480 You as well. Danielle give Martino Booth. 0:07:35.560 --> 0:07:40.120 She's the CEO and chief strategist at QI Research. One 0:07:40.120 --> 0:07:41.840 of the smarter folks we talked to when it comes 0:07:41.840 --> 0:07:43.520 to all things Fed, a reserve, and kind of how 0:07:43.520 --> 0:07:46.040 the Fed's trying to deal with current economic condition. 0:07:46.240 --> 0:07:50.120 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:07:50.160 --> 0:07:53.160 starting at seven am Eastern on Apple Cocklay and Android 0:07:53.200 --> 0:07:56.239 Auto with the Bloomberg Business App. You can also listen 0:07:56.320 --> 0:07:59.600 live on Amazon Alexa from our flagship New York station. 0:08:00.160 --> 0:08:02.840 Just say Alexa, play Bloomberg eleven thirty. 0:08:03.000 --> 0:08:06.000 The next move the Federal Reserve will take maybe a 0:08:06.280 --> 0:08:08.880 hike this fall. You don't see that every day, So 0:08:08.880 --> 0:08:10.800 that's where I want to start. Skylar Linen joins his 0:08:11.120 --> 0:08:14.200 CIO of Reagan Capital Management down at the Hedge Fund 0:08:14.200 --> 0:08:17.000 Hotel down in Dallas, Texas to the Crescent Court. Spent 0:08:17.080 --> 0:08:19.720 many a day there, got tons of II votes there, 0:08:19.760 --> 0:08:23.840 stayed at the hotel there. It's a good place to be. Skyler, 0:08:23.920 --> 0:08:25.640 talk to us about kind of how. 0:08:25.520 --> 0:08:26.920 You're approaching the market these days. 0:08:26.920 --> 0:08:29.520 We've had that ten percent pullback in the market got 0:08:29.560 --> 0:08:30.280 people's attention. 0:08:30.680 --> 0:08:32.559 We've bounced off that a little bit. Where do you 0:08:32.600 --> 0:08:36.080 think we go from here? Long term? Up? 0:08:36.320 --> 0:08:38.320 Oh, sure, you know it's going to be volatile. But 0:08:38.960 --> 0:08:42.520 what we're seeing is that the consumer and corporations in 0:08:42.559 --> 0:08:47.160 the US are still so strong. Corporate leverage levels are 0:08:47.160 --> 0:08:51.320 the lowest they've been in recorded history at about twenty percent, 0:08:51.880 --> 0:08:55.760 and consumer balance sheets are extremely strong. In aggregate, you're 0:08:55.760 --> 0:08:58.920 looking at one hundred and sixty trillion dollars of net 0:08:58.960 --> 0:09:02.040 wealth in the United States. A lot of that has 0:09:02.080 --> 0:09:05.720 come from the stock market and real estate, and so 0:09:06.320 --> 0:09:09.160 you know that spending is going to come. But for 0:09:09.320 --> 0:09:11.319 right now, you know, people are a little bit nervous 0:09:11.640 --> 0:09:13.720 corporate activity, corporate M and A are in the same 0:09:13.720 --> 0:09:17.800 boat as consumers. But long term, you know, we kind 0:09:17.800 --> 0:09:20.080 of see this this market running for at least the 0:09:20.120 --> 0:09:22.880 next three to four years based on how much dry 0:09:22.880 --> 0:09:25.920 powder is available for consumers and corporations. 0:09:26.000 --> 0:09:28.720 So you're thinking of potential hike maybe in the fall, 0:09:28.760 --> 0:09:31.280 of what would need to happen in order for that. 0:09:31.240 --> 0:09:34.640 To occur, it's already happening, right, So look at inflation, 0:09:35.160 --> 0:09:39.000 look at what was really interesting about the recent FED 0:09:39.040 --> 0:09:42.480 meeting a week ago was not only you know the 0:09:42.720 --> 0:09:44.240 press are and what they did, but if you look 0:09:44.280 --> 0:09:47.719 at the dot plot and if you look at their predictions, 0:09:47.720 --> 0:09:50.440 they make those predictions once a quarter of where GDP 0:09:50.600 --> 0:09:53.240 is going, where PCE is going, and where inflation's going. 0:09:54.200 --> 0:09:58.320 They're predicting pcee to to actually it moved up from 0:09:58.360 --> 0:10:02.600 December to December to March. And they're predicting that rates, 0:10:02.640 --> 0:10:04.360 you know, inflation is not going to fall below two 0:10:05.040 --> 0:10:09.480 for yours you know, two plus years. They're predicting unemployment 0:10:09.559 --> 0:10:14.600 to actually fall. So unemployment's coming down, inflation's going up. 0:10:15.840 --> 0:10:19.319 Those are their two mandates, right, and so there is 0:10:19.480 --> 0:10:22.160 absolutely no one can make any reasoning for me as 0:10:22.200 --> 0:10:25.679 to why they would hike in this environment. Okay, yes, 0:10:25.960 --> 0:10:29.720 financial conditions are restrictive. They're saying they're fairly restrictive right now. 0:10:30.080 --> 0:10:33.760 But if terrorists come to come to boot and if 0:10:33.800 --> 0:10:37.240 that causes inflation, we're going to see another you know, 0:10:37.320 --> 0:10:39.480 Paul Voker type of moment where they're like, all right, 0:10:39.559 --> 0:10:41.080 we need to get this under control. We need to 0:10:41.120 --> 0:10:43.960 hike back up to you know, four fifty to five percent. 0:10:44.400 --> 0:10:47.720 So given that backdrop here, we've gotten, I guess, a 0:10:47.760 --> 0:10:49.480 lot of noise that the markets have to deal with 0:10:49.520 --> 0:10:52.600 on a short term basis with policy decisions coming out 0:10:52.600 --> 0:10:57.280 of Washington. Are we embracing risk in the equity markets, 0:10:57.280 --> 0:11:00.000 are we embracing risk in the fixed income markets? Are 0:11:00.040 --> 0:11:02.959 kind of just holding back a little bit on. 0:11:02.960 --> 0:11:05.920 The fixed income side, you still have to stay short. 0:11:06.200 --> 0:11:10.040 You know, the Fed cut last September, roughly six months ago. 0:11:10.840 --> 0:11:14.080 Fixed income has not done very well since then. The 0:11:14.160 --> 0:11:16.080 agg was up one in a quarter last year. It's 0:11:16.160 --> 0:11:18.360 up about two percent so far this year. So the 0:11:18.400 --> 0:11:21.920 egg's done okay, but from September to day it's down okay, 0:11:22.280 --> 0:11:25.320 So it's basically flat. So and if you look at 0:11:25.320 --> 0:11:28.040 the shape of the curve, you're not getting paid. You know, 0:11:28.160 --> 0:11:31.319 you can sit there in cash at four thirty. You 0:11:31.840 --> 0:11:35.600 can buy agency government guaranteed mortgage bonds that are floating 0:11:35.640 --> 0:11:38.240 rate at five and a quarter okay, so you get 0:11:38.240 --> 0:11:41.880 paid five handle yield to sit there, and the belly 0:11:41.920 --> 0:11:44.559 of the curves inverted. International. 0:11:44.600 --> 0:11:47.760 A lot of people are talking to me about international markets, 0:11:47.760 --> 0:11:50.280 and they've had such a good start European markets. 0:11:49.920 --> 0:11:51.600 In particular this year. 0:11:51.600 --> 0:11:53.760 How do you guys think about the US versus non 0:11:53.880 --> 0:11:54.640 US these days. 0:11:55.280 --> 0:11:57.680 Well, part of that's due to the dollar. You know, 0:11:57.760 --> 0:12:00.720 the dollars come down. If you look at Asia, for example, 0:12:01.679 --> 0:12:04.680 Asia's not done very well this year, but dollar adjusted 0:12:04.720 --> 0:12:08.480 it has so that's part of it. But you know, 0:12:08.679 --> 0:12:10.280 so that's helped out ur it a little bit. But 0:12:10.640 --> 0:12:13.400 you know, Germany announces that they're going to turn the 0:12:13.440 --> 0:12:16.440 printers on and they're going to issue tons of debt, 0:12:17.000 --> 0:12:20.480 and going back to World War One, Germany is a 0:12:20.600 --> 0:12:24.400 very austere economy and now all of a sudden, you know, 0:12:24.480 --> 0:12:26.280 based on the Ukraine War, all right, we're going to 0:12:26.320 --> 0:12:28.880 see a ton of debt printing and so that's really 0:12:28.920 --> 0:12:33.200 ignited a certain sectors, obviously like defense. So yeah, it 0:12:33.200 --> 0:12:36.320 pays to be you know, well diversified both in terms 0:12:36.360 --> 0:12:38.960 of uh, you know, equities, but also in terms of 0:12:38.960 --> 0:12:39.840 locations as well. 0:12:39.880 --> 0:12:42.440 How long does that story last for international just because 0:12:42.559 --> 0:12:46.160 they underperformed so much relative to the last year and 0:12:46.240 --> 0:12:48.320 especially the last two years of the bull market run 0:12:48.320 --> 0:12:50.320 in the s and P five hundred because of what 0:12:50.440 --> 0:12:52.480 was going on with AI and obviously these are the 0:12:52.559 --> 0:12:53.360 corners were cheaper. 0:12:53.360 --> 0:12:54.400 But is this something more. 0:12:54.280 --> 0:12:57.040 Temporary that you think is going to happen more international? 0:12:57.240 --> 0:12:57.800 Does it stick? 0:12:58.440 --> 0:12:58.640 Yeah? 0:12:58.760 --> 0:13:03.280 So, you know, we're a couple months into the administration, 0:13:03.440 --> 0:13:06.880 two and a half months, right, and they came out, 0:13:06.920 --> 0:13:09.120 you know, the administration came out and said, hey, look 0:13:09.280 --> 0:13:11.920 we're going to break some things for the first hundred days. 0:13:12.240 --> 0:13:13.560 So what do we got. 0:13:13.760 --> 0:13:14.720 We're halfway there. 0:13:14.760 --> 0:13:17.760 We're halfway to one hundred days basically, So, you know, 0:13:17.920 --> 0:13:20.160 three four months into it, we got a couple months 0:13:20.200 --> 0:13:23.400 to go before the spotlight comes back on the United 0:13:23.400 --> 0:13:26.760 States and volatility decreases. We're seeing that in the VIX. 0:13:27.080 --> 0:13:29.880 You know, VIX almost hit sixteen handle yesterday, and so 0:13:29.920 --> 0:13:32.600 when that volatility subsides, I think the spotlight comes back 0:13:32.600 --> 0:13:36.319 onto the US, it comes back onto the big meg seven, tech, AI, 0:13:36.480 --> 0:13:37.000 you name it. 0:13:37.240 --> 0:13:40.120 Thirty seconds left. Earnings, what's your feeling earnings? Can we 0:13:40.160 --> 0:13:41.720 depend upon earnings to drive this market? 0:13:42.040 --> 0:13:44.880 No? No, So earnings will be there, but at a 0:13:44.920 --> 0:13:49.640 decreasing rate. Okay, So we've had a Gangbuster three years 0:13:49.880 --> 0:13:52.640 right in, you know, two and a half years, so 0:13:53.760 --> 0:13:57.080 earnings will be coming down on a you're over your basis. 0:13:57.480 --> 0:14:00.560 We can't continue to produce just Gangbuster. You're over your 0:14:00.679 --> 0:14:03.880 earnings and so yeah, you know, you know, maybe the 0:14:03.920 --> 0:14:06.680 stock market eeks out five eight percent this year, but 0:14:06.760 --> 0:14:09.200 above and beyond that, seeing the twenty plus percent that 0:14:09.240 --> 0:14:11.599 we saw the last few years, that's not gonna happen. 0:14:11.559 --> 0:14:13.440 Right, That's kind of kind of what we've been hearing 0:14:13.440 --> 0:14:15.600 from a lot of folks looking at an earnings growth 0:14:15.720 --> 0:14:17.800 rate or stock market return rate, if you know, kind 0:14:17.800 --> 0:14:19.400 of mid to high single digits, as opposed to the 0:14:19.400 --> 0:14:21.520 twenty twenty five percent we've seen over the last couple 0:14:21.520 --> 0:14:23.040 of years. Skylar Wine, and thank you so much for 0:14:23.080 --> 0:14:23.440 joining us. 0:14:23.440 --> 0:14:23.920 Skylar Wine. 0:14:23.960 --> 0:14:27.120 And he's the cio Reagan Capital Management. They're based down 0:14:27.160 --> 0:14:30.520 there in the Big d Dallas, Texas, but he's joining 0:14:30.600 --> 0:14:33.040 us here live in our Bloomberg Interactive Broker Studio. 0:14:38.640 --> 0:14:42.240 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:14:42.280 --> 0:14:45.440 weekday afternoons from seven to ten am Eastern Listen on 0:14:45.520 --> 0:14:49.200 Applecarplay and Android Auto with the Bloomberg Business app, or 0:14:49.360 --> 0:14:50.800 watch us live on YouTube. 0:14:50.960 --> 0:14:56.200 Joy Yang, head of index product manager at market Vector Indexes. 0:14:55.760 --> 0:14:58.000 Joins us here in our Bloomberg Interactive Broker studio. 0:14:58.280 --> 0:15:00.440 Joey, are you surprised we haven't seen we're not seeing 0:15:00.440 --> 0:15:03.080 a higher level of the VIX given some of the 0:15:03.160 --> 0:15:05.960 uncertainty that I think a lot of investors feel so 0:15:06.040 --> 0:15:06.640 far this year. 0:15:06.880 --> 0:15:11.560 Yeah, thanks for having me so. Yes, I think it's undeniable. 0:15:11.640 --> 0:15:15.560 We're in a period of heightened uncertainty. But uncertainty is 0:15:15.600 --> 0:15:19.640 actually quite hard to measure, and as you mentioned, when 0:15:19.680 --> 0:15:23.040 you look at the VIX, it's unusually low for what 0:15:23.120 --> 0:15:27.720 we should expect in a fear oriented market. But if 0:15:27.760 --> 0:15:32.960 you look at the Economic Policy Uncertainty Index, that's shooting 0:15:33.040 --> 0:15:36.120 straight up and it's a it's second time high, and 0:15:36.160 --> 0:15:40.440 I think this is reflecting two kind of very rational 0:15:40.800 --> 0:15:44.000 strategies that we're seeing in the market. One is this 0:15:44.160 --> 0:15:47.480 kind of weight and see because people just don't know 0:15:47.520 --> 0:15:50.520 what's going to happen next, and they've been burnt previously, 0:15:50.720 --> 0:15:53.200 so I think they're going to park their assets in 0:15:53.280 --> 0:15:56.760 something liquid and be ready to pivot very quickly. So 0:15:56.840 --> 0:15:59.600 that's gold and we're seeing this all time high and gold. 0:16:00.000 --> 0:16:03.200 I keep for pointing out this US Economic Policy Uncertainty Index. 0:16:03.280 --> 0:16:05.440 I wasn't that familiar with it, but you're right, it 0:16:05.480 --> 0:16:10.040 is now screaming higher. Baker, Bloom and Davis are the 0:16:10.040 --> 0:16:12.200 source there. So if you're in front of a terminal, 0:16:12.320 --> 0:16:14.760 just type in you know, US economic uncertainly and you 0:16:14.880 --> 0:16:17.720 see this indexing, you can graph it and says, oh, yeah, 0:16:17.960 --> 0:16:19.080 that's that's the thing. 0:16:19.360 --> 0:16:22.000 And to your point, Paul, because you were talking about 0:16:22.040 --> 0:16:24.120 the VICS. When I was talking to a lot of treaders, 0:16:24.200 --> 0:16:26.560 especially once it got close to thirty inch a day 0:16:26.640 --> 0:16:28.400 earlier this month, a lot of them didn't want to 0:16:28.440 --> 0:16:30.880 pay for puts above that because it just would have 0:16:30.880 --> 0:16:33.080 been too expensive. So I was curious joy your thoughts 0:16:33.120 --> 0:16:36.200 on the dynamic there and what that tells us because 0:16:36.200 --> 0:16:38.320 we still see realized wall picking up. 0:16:38.840 --> 0:16:42.000 Yeah, so I think, you know, this is just kind 0:16:42.000 --> 0:16:45.880 of the lull before we get clarity, and I think 0:16:45.920 --> 0:16:51.120 we're getting clarity in April second. Maybe possibly right, but 0:16:51.240 --> 0:16:54.040 people want to stay invested. You know, you really don't 0:16:54.080 --> 0:16:58.080 want to be holding cash, So staying invested means buying 0:16:58.160 --> 0:17:01.120 something that's liquid, but we'll still will offer you either 0:17:01.240 --> 0:17:04.000 hedge or some growth opportunity, and that's gold. Right now, 0:17:04.000 --> 0:17:06.120 it's at all time high and we're seeing a lot 0:17:06.200 --> 0:17:09.880 of flows into gold and gold dtfs and. 0:17:09.880 --> 0:17:12.960 Gold up another six dollars here today, three thy sixty one. 0:17:13.000 --> 0:17:15.040 I go back to the Goldman Sax call maybe a 0:17:15.040 --> 0:17:17.320 month ago, five weeks ago, Yeah, thirty one hundred on 0:17:17.400 --> 0:17:19.120 gold when it was a twenty eight hundred. Great call 0:17:19.200 --> 0:17:21.760 there by your buddies at Goldman Sax. A lot of 0:17:22.080 --> 0:17:25.800 money is going to international stocks, including Asia, not just 0:17:25.840 --> 0:17:27.000 Europe but Asia as well. 0:17:27.080 --> 0:17:30.000 Is that a trend or is that a trade? Do 0:17:30.080 --> 0:17:30.400 you think? 0:17:30.520 --> 0:17:32.680 Well, if you go back and you see this other 0:17:33.160 --> 0:17:36.040 kind of strategy people are playing, is you know, we 0:17:36.080 --> 0:17:39.320 don't know what's going on, but we do know that, 0:17:39.480 --> 0:17:43.639 you know, US markets have been up unusually high, So 0:17:43.880 --> 0:17:46.639 I think that's really kind of the unusual period, not 0:17:46.760 --> 0:17:49.920 this correction that we're seeing, but up twenty percent over 0:17:50.000 --> 0:17:54.280 two years. So let's go back to maybe focusing things 0:17:54.359 --> 0:17:56.960 that we do know, which is, you know, markets are volatile, 0:17:57.600 --> 0:18:00.240 but let's look at fundamentals. So when you look get 0:18:00.280 --> 0:18:02.960 fundamentals and you think that corrections are a good time 0:18:03.000 --> 0:18:07.360 to buy, well, Europe, Asia they've had bigger corrections than 0:18:07.480 --> 0:18:09.840 what we've seen in the US. And if you look 0:18:09.840 --> 0:18:13.320 at fundamentals, you know the companies that are trading in 0:18:13.359 --> 0:18:17.040 these markets, whether it's Ali Baba Bid, they're trading at 0:18:17.160 --> 0:18:21.040 you know, half the pe of their American counterparts, so 0:18:21.119 --> 0:18:24.639 that's a great buying opportunity. And the same with European 0:18:25.040 --> 0:18:28.879 you know, whether it's European defense stocks, European other you know, 0:18:28.920 --> 0:18:29.880 any other industry. 0:18:29.960 --> 0:18:32.600 You're like, yeah, those European defense stocks really taking off, 0:18:32.600 --> 0:18:34.080 and a lot of them when you're looking at those 0:18:34.080 --> 0:18:36.840 PEU ratios being a lot cheaper than some of their 0:18:36.880 --> 0:18:39.800 peers more internationally, how long do you think that can continue? 0:18:39.840 --> 0:18:42.480 Is this something more shorter term? Just given their underperformance 0:18:42.480 --> 0:18:45.080 in recent years relative to the US and the first 0:18:45.080 --> 0:18:47.480 two year a full run fueled by AI. 0:18:47.800 --> 0:18:51.159 Well, this is definitely a structural shift because you know, 0:18:51.320 --> 0:18:55.440 the US message was very clear, you know, whether intended 0:18:55.560 --> 0:18:58.440 or unintended, as we saw in text messages this week, 0:18:58.520 --> 0:19:01.720 that we're not going to go out there and support 0:19:02.200 --> 0:19:04.320 the rest of the world. Right, So you know, the 0:19:04.359 --> 0:19:07.560 Europeans are looking at this and they're reinvesting back to 0:19:07.640 --> 0:19:14.360 their own military autonomy. And we know that government defense 0:19:14.359 --> 0:19:18.080 spending is physical stimulus, right, but it's it's big and 0:19:18.160 --> 0:19:22.520 it's long. So these are big, structural you know, dynamics. 0:19:22.520 --> 0:19:25.959 And we think that European defense stocks, which have already 0:19:25.960 --> 0:19:29.359 been up double digits here today will continue because there's 0:19:29.400 --> 0:19:31.640 going to be more to come. But I would also 0:19:31.640 --> 0:19:35.080 say don't discount US defense stocks, you know, because I 0:19:35.119 --> 0:19:38.159 think the rest of the world still needs some of 0:19:38.200 --> 0:19:40.840 the technology. And I think, you know, warfare has moved 0:19:40.880 --> 0:19:45.720 from ground to air to cyber security. So companies like Talenteer, 0:19:45.760 --> 0:19:48.760 which are AI intelligence, are still going to be quite 0:19:48.760 --> 0:19:49.879 important in this space. 0:19:50.040 --> 0:19:52.280 I look at Ali Baba for variety reasons, one of 0:19:52.320 --> 0:19:54.679 which is my good buddies the co founder there. But 0:19:54.880 --> 0:19:57.560 it is a for me at least, a proxy on 0:19:57.600 --> 0:20:01.520