WEBVTT - Reacting to PCE Data and Previewing Trump's April 2 Tariffs 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 --> 0:00:30.080 I think the narrative in this market is, you know, 0:00:30.080 --> 0:00:32.600 we've got a new administration, We've got some new trade 0:00:32.640 --> 0:00:35.839 policy focusing on tariffs that's creating a certain amount of 0:00:36.159 --> 0:00:40.600 uncertainty in the market. Maybe immigration policy changes pending also 0:00:40.720 --> 0:00:44.159 in bringing in some uncertainty into this market. And we've 0:00:44.200 --> 0:00:46.360 been told since day one the market's stole on uncertainty. 0:00:46.360 --> 0:00:48.560 So net net, you've got the SMP kind of pulling 0:00:48.600 --> 0:00:50.959 back about seven eight percent from its recent peak. You've 0:00:50.960 --> 0:00:52.880 got the dollar a little bit weaker. But it's the 0:00:52.960 --> 0:00:55.320 end of the day. What does this really mean for 0:00:55.400 --> 0:00:58.080 the economy? I guess we have to wait and see. 0:00:58.080 --> 0:01:00.279 But Tiffany Wilding, we're gonna ask her that question. She's 0:01:00.280 --> 0:01:04.840 an economist in covering the North America for PIMPCO. I 0:01:05.080 --> 0:01:09.800 was with her colleague mister Clarida last evening up in Stanford, Connecticut, 0:01:09.800 --> 0:01:13.319 talking about these markets. So got the pimp COO view 0:01:13.319 --> 0:01:17.080 for mister Clarida Tiffany at the end of the day, 0:01:17.560 --> 0:01:19.960 when you plugged these things into your model, whether it's 0:01:20.000 --> 0:01:22.360 tariffs and we'll find out more, I guess April second, 0:01:22.400 --> 0:01:25.480 on tariffs, whether it's maybe some tweaks to the labor 0:01:25.480 --> 0:01:29.880 market in terms of less migrant additions to the labor market. 0:01:30.440 --> 0:01:32.840 How's it changed your economic outlook for twenty five. 0:01:35.040 --> 0:01:37.360 Yeah, I mean, I think the bottom line for US 0:01:37.440 --> 0:01:40.520 is is that, you know, although you could have you know, 0:01:40.720 --> 0:01:43.959 medium term better outcomes with more investment in the United States, 0:01:44.040 --> 0:01:47.200 as a result of these various policies, there's going to 0:01:47.200 --> 0:01:50.520 be some near term disruption. And that's simply because you know, 0:01:50.560 --> 0:01:53.920 tariffs raise costs, so they raise costs on investment as 0:01:53.920 --> 0:01:56.560 well as consumption. So if you're you know, trying to 0:01:56.560 --> 0:01:58.320 get more investment in the United States at the same 0:01:58.320 --> 0:02:01.560 time you're making it more costly, you know, that is 0:02:01.960 --> 0:02:04.520 potentially problematic. You know, But I think the bottom line 0:02:04.520 --> 0:02:06.920 for US is is that there is some adjustment period 0:02:07.320 --> 0:02:08.560 that that will happen. 0:02:08.919 --> 0:02:09.080 You know. 0:02:09.160 --> 0:02:11.720 The teariff policies that we've seen have been I think 0:02:11.800 --> 0:02:15.320 much more aggressive, you know than anybody has expected there 0:02:15.360 --> 0:02:18.040 will be some near term price level adjustments, some near 0:02:18.120 --> 0:02:21.640 term inflationary pressures from that, and we'll also see you know, 0:02:21.720 --> 0:02:25.440 growth and labor market outcomes, you know, really accelerate as 0:02:25.440 --> 0:02:25.880 a result. 0:02:25.919 --> 0:02:27.679 Tiffany, what did you make of the numbers we just got. 0:02:30.000 --> 0:02:32.440 Yeah, so so we'll have to obviously dig into the 0:02:32.480 --> 0:02:35.280 details on the income data, but I didn't want to. 0:02:35.320 --> 0:02:37.080 You know, I do think the spending data, you know, 0:02:37.280 --> 0:02:39.520 was a little bit weaker here. You know, we we 0:02:39.600 --> 0:02:42.080 got some of this from the retail sales report, which 0:02:42.120 --> 0:02:45.600 was incredibly strong. As I mentioned, consumers and so the 0:02:45.600 --> 0:02:48.359 fact that today's data, which includes everything not only good 0:02:48.440 --> 0:02:52.520 spending but services, today's data suggests that consumers are shifting 0:02:52.560 --> 0:02:56.839 away from services at this point and spending focused much 0:02:56.880 --> 0:02:59.679 more on on goods types of spending. And you know, 0:02:59.760 --> 0:03:02.079 we've we definitely think that is the result of their 0:03:02.120 --> 0:03:05.600 expectations that you will get higher tariffs, and so they're 0:03:05.639 --> 0:03:08.440 trying to front load ahead of that. And I think, 0:03:08.560 --> 0:03:10.520 you know, that kind of belies, you know, this kind 0:03:10.560 --> 0:03:13.040 of underlying weakness in the economy. You're getting a front 0:03:13.040 --> 0:03:15.600 loading behavior that's sort of propping up spending for now. 0:03:16.080 --> 0:03:18.040 But that's not going to last forever, you know, so 0:03:18.080 --> 0:03:19.560 the question is it win does. 0:03:19.360 --> 0:03:21.040 That wane and how much? 0:03:21.520 --> 0:03:23.839 You know, when we do think that the higher uncertainty 0:03:24.120 --> 0:03:27.720 you know, plus higher prices, you know, will result in consumers, 0:03:27.760 --> 0:03:29.680 you know, really taking a step down in terms of 0:03:29.720 --> 0:03:33.520 growth and the it's been the high income consumer that 0:03:33.560 --> 0:03:37.480 has really been driving consumption growth over the last couple 0:03:37.480 --> 0:03:41.200 of years, and we think they are poised to you know, 0:03:41.240 --> 0:03:43.120 just kind of take a step down here as as 0:03:43.120 --> 0:03:45.920 we have this higher uncertainty, lower equity prices, and we 0:03:45.960 --> 0:03:47.080 will see that moving forward. 0:03:47.760 --> 0:03:51.480 How long do you think, Tiffany, that the lag effect 0:03:51.640 --> 0:03:54.240 is when I don't know, tariffs go into effect and 0:03:54.240 --> 0:03:57.600 then the other countries slap tariffs on our goods, And 0:03:58.520 --> 0:04:00.840 how does this kind of play at in econyes? Is 0:04:00.920 --> 0:04:03.800 something that's a three, four, five, six month time type 0:04:03.800 --> 0:04:04.400 of process. 0:04:06.680 --> 0:04:11.120 Yeah, well, I think it's different for different variables. So 0:04:11.360 --> 0:04:14.280 I think for inflation. You know, what, what we've learned 0:04:14.320 --> 0:04:16.520 over you know, the pandemic, and I would say the 0:04:16.560 --> 0:04:19.240 last several years, you know, is that with the increased 0:04:19.320 --> 0:04:24.279 digitization of retail and commerce, you don't have these quote 0:04:24.360 --> 0:04:26.840 unquote menu costs anymore. So that was you know, kind 0:04:26.880 --> 0:04:29.960 of economist jargon for when you want to change a price, 0:04:30.279 --> 0:04:32.360 you literally have to print a new menu, and there's 0:04:32.400 --> 0:04:35.159 some cost to that, so you might not change as quickly. 0:04:35.720 --> 0:04:37.360 But now you don't have to do that. You can 0:04:37.400 --> 0:04:40.560 literally change in real time, you know, if you have 0:04:40.600 --> 0:04:43.800 a digital platform, and so that results in you getting 0:04:44.000 --> 0:04:48.359 much quicker passed through, potentially to higher prices. Now the 0:04:48.640 --> 0:04:50.159 you know, one of the things with us that the 0:04:50.240 --> 0:04:53.160 businesses will have to be optimizing for is that when 0:04:53.160 --> 0:04:56.880 you raise prices, you usually reduce volumes, and so they'll 0:04:56.920 --> 0:04:58.839 have to be you know, again optimizing for that. I 0:04:58.839 --> 0:05:01.440 think there's some question around the extent to which these 0:05:01.440 --> 0:05:04.279 tariffs can actually be passed through to consumers. You know, 0:05:04.320 --> 0:05:06.839 consumers are not as strong as they were several years 0:05:06.880 --> 0:05:10.400 ago when they had big fiscal you know, paychecks in 0:05:10.440 --> 0:05:14.000 their accounts that you know that helped fuel spending despite 0:05:14.040 --> 0:05:16.359 higher prices. So, you know, I think those are the 0:05:16.440 --> 0:05:18.600 kinds of things that we'll be looking for in terms 0:05:18.600 --> 0:05:20.360 of the labor market effects. You know, I think it's 0:05:20.400 --> 0:05:23.560 really a question of how businesses and how this impacts 0:05:23.600 --> 0:05:26.039 their bottom line, how much of that price passed through 0:05:26.080 --> 0:05:28.160 how much of the price increase can they pass through? 0:05:28.520 --> 0:05:31.200 You know, if there's you know, much more margin compression, 0:05:31.279 --> 0:05:35.240 then they might be looking towards you know, optimizing, you know, 0:05:35.320 --> 0:05:38.200 reducing you know, some of their labor inputs and so 0:05:38.279 --> 0:05:40.080 that you know, I think will take a little bit 0:05:40.120 --> 0:05:42.640 more time to play out as we see how this goes. 0:05:43.040 --> 0:05:45.719 But you know, we we think in the manufacturing sector 0:05:45.720 --> 0:05:48.440 in particular, you could see some you know, some furloughs 0:05:48.480 --> 0:05:51.600 and things like that, you know, as these things are 0:05:51.640 --> 0:05:54.719 sort of passed through, you know, through through the you know, 0:05:54.760 --> 0:05:55.360 through the hopper. 0:05:55.640 --> 0:05:56.800 All right, Tiffany, thanks a lot. 0:05:56.839 --> 0:06:00.360 We really appreciated Tiffany Wilding economists over at So let's 0:06:00.400 --> 0:06:02.120 just get a recap on these numbers. Right, you had 0:06:02.160 --> 0:06:04.760 personal income for February jumping eight tents of one percent, 0:06:04.800 --> 0:06:07.479 but the spending slowing a bit to four tenths of 0:06:07.520 --> 0:06:12.000 one percent versus expectations. Then you had the PCE index. 0:06:12.080 --> 0:06:14.640 So that is what the FED winds up looking at 0:06:14.680 --> 0:06:17.159 on a year on year basis, coming into two point 0:06:17.240 --> 0:06:19.760 five percent and the core so you're backing out the 0:06:19.800 --> 0:06:22.400 more volatile numbers that's coming up on a month on 0:06:22.440 --> 0:06:24.960 month basis to four tenths of one percent. So as 0:06:24.960 --> 0:06:28.039 we digest, want to get more on this with Stephanie Roth, 0:06:28.160 --> 0:06:31.680 chief economist at Wolf Research. All Right, Stephane, first, blush, 0:06:31.800 --> 0:06:34.200 what's your takeaway from these numbers? What stands out? 0:06:34.800 --> 0:06:36.400 Yeah, I'm going to give two things. One is on 0:06:36.440 --> 0:06:39.920 the price perspective. We're starting off at a fairly elevated 0:06:39.960 --> 0:06:42.200 place and this is before teriffs have a big impact. 0:06:42.680 --> 0:06:45.559 So we're in a tough situation. Just given the extent 0:06:45.560 --> 0:06:47.119 of the tariffs that are likely to put in place, 0:06:47.680 --> 0:06:50.679 they could have an impact of nearly a percentage point 0:06:50.720 --> 0:06:52.120 on price inflation. 0:06:51.800 --> 0:06:52.520 For the next year. 0:06:53.080 --> 0:06:56.360 Of course, Powell last week made it sound like they 0:06:56.360 --> 0:06:58.240 wanted to look through it, but at some point this 0:06:58.320 --> 0:07:01.120 could become a real challenge for the Fed. And then 0:07:01.120 --> 0:07:03.400 you are seeing a more sluggish consumer on the spending 0:07:03.480 --> 0:07:07.720 side as well. The income numbers are a little bit overstated. 0:07:08.160 --> 0:07:12.400 Some of that came from rental income and some other 0:07:12.440 --> 0:07:14.600 sort of one off stuff from government, So I would 0:07:14.640 --> 0:07:16.559 look at the income as slightly less than the numbers 0:07:16.600 --> 0:07:18.800 would suggest. But all in all, you're looking at a 0:07:18.800 --> 0:07:21.160 consumer that is pulling back a little bit and that's 0:07:21.240 --> 0:07:23.800 likely to continue even more so as the consumer becomes 0:07:23.800 --> 0:07:25.640 a little bit more concerned about the backdrop. 0:07:26.240 --> 0:07:28.960 Stephanie, how do you think the Federal Reserve will look 0:07:29.000 --> 0:07:30.880 at this data? Will that give them maybe a little 0:07:30.920 --> 0:07:33.600 bit more confidence to maybe just kind of sit on 0:07:33.640 --> 0:07:34.480 their hands for a while. 0:07:35.720 --> 0:07:36.960 Yeah, I think they're going to want to sit on 0:07:37.000 --> 0:07:39.280 their hands kind of either way. The policy backdrop is 0:07:39.320 --> 0:07:42.720 so complicated. There's two main things that they're likely to 0:07:42.720 --> 0:07:44.760 be looking at when we're thinking about what's going to 0:07:44.800 --> 0:07:47.200 happen in the next couple months. On the tariff side, 0:07:47.200 --> 0:07:50.160 of course, what gets implemented, and then how do inflation 0:07:50.280 --> 0:07:53.520 expectations react as a result. This is the primary transmission 0:07:53.560 --> 0:07:57.080 mechanism to which the Fed would initially become concerned. If 0:07:57.080 --> 0:08:00.720 you start to see consumers really become worried about the 0:08:00.720 --> 0:08:04.880 inflation outlook, which you miss, inflation expectations started to show 0:08:04.920 --> 0:08:07.040 a little bit of a flavor of that, that's going 0:08:07.120 --> 0:08:09.080 to make them want to become more hawkish than would 0:08:09.080 --> 0:08:11.160 otherwise be the case. And then they're also going to 0:08:11.160 --> 0:08:13.600 want to look on the immigration side, which people aren't 0:08:13.640 --> 0:08:17.520 talking about enough. But Trump this week ended the visa 0:08:17.560 --> 0:08:20.680 status for five hundred thousand people from Cuba, Haiti, Nicaragua, 0:08:20.680 --> 0:08:23.960 and Venezuela effectively overnight on April twenty fourth, and that's 0:08:23.960 --> 0:08:26.400 going to be felt both from a real labor market 0:08:26.400 --> 0:08:29.680 perspective but also in the non from perials data. 0:08:29.760 --> 0:08:33.800 So okay, to that point, though, what's the transmission mechanism 0:08:33.880 --> 0:08:36.280 in that we get the sentiment kind of rolls over? 0:08:36.400 --> 0:08:38.880 When does that actually feed into the hard data? Because 0:08:38.960 --> 0:08:40.760 if you take a look, like a lot of President 0:08:40.760 --> 0:08:43.280 Trump's polling is still really strong, So there is this 0:08:43.440 --> 0:08:46.880 like divergence in terms of maybe where individuals feel the 0:08:46.880 --> 0:08:48.320 country is headed and then. 0:08:48.240 --> 0:08:50.199 How they feel about their pocketbooks. 0:08:51.240 --> 0:08:54.559 Yeah, and there's been a big discrepancy between consumer confidence 0:08:54.600 --> 0:08:56.800 and spending for a number of years at this point, 0:08:56.880 --> 0:08:58.800 so it's not as if confidence is going to be 0:08:59.120 --> 0:09:02.200 predictive of but in this instance, I do think at 0:09:02.280 --> 0:09:05.320 least directionally, it's telling you that people are getting more concerned. 0:09:05.760 --> 0:09:07.560 When does it feed into the real data. That's probably 0:09:07.600 --> 0:09:10.440 when the price is actually take effect. So when things 0:09:10.440 --> 0:09:14.720 become legitimately more expensive. Based on our analysis, it looks 0:09:14.720 --> 0:09:16.920 like it takes about three to six months for prices 0:09:17.160 --> 0:09:20.760 from TERFF implementation in implementation to prices actually showing off 0:09:20.760 --> 0:09:23.400 at the stores. So I would imagine over the summer 0:09:23.440 --> 0:09:25.640 is when consumers may really start to feel the pain, 0:09:26.040 --> 0:09:28.880 and that's when you really could see people pulling back 0:09:28.960 --> 0:09:29.920 even more materially. 0:09:30.480 --> 0:09:33.040 Stephanie, is it I hate to go to labels, but 0:09:33.120 --> 0:09:37.920 is it fair to label this teriff price increase that 0:09:38.000 --> 0:09:41.640 may occur in this US economy as transitory or is 0:09:41.640 --> 0:09:42.520 it something more than that? 0:09:45.240 --> 0:09:47.920 I wouldn't use the word transitory, and to be fair, 0:09:47.960 --> 0:09:49.840 I'm surprised that POW will use it as well, just 0:09:49.840 --> 0:09:53.160 given the whole background with that word. I think it's 0:09:53.240 --> 0:09:56.080 right that it's a price level shock. The problem is 0:09:56.160 --> 0:09:59.800 similar to the last supply shock. Transitory was expected to 0:09:59.800 --> 0:10:01.640 be of a short term thing, called it less than 0:10:01.679 --> 0:10:03.800 a year, and we're likely to see the effects of 0:10:03.840 --> 0:10:07.240 this for for way more than a year, because if 0:10:07.240 --> 0:10:09.680 you start to see the supply chain and autos get 0:10:09.880 --> 0:10:12.760 get sort of snarled to some extent, then that feeds 0:10:12.760 --> 0:10:15.439 through into motor vehicle insurance. And we saw how long 0:10:15.480 --> 0:10:17.720 that took to feed its way into the inflation data. 0:10:17.840 --> 0:10:20.680 So I agree that it's a price level shock. It's 0:10:20.720 --> 0:10:24.280 not a sort of an ongoing inflationary spiral type of thing. 0:10:24.559 --> 0:10:26.920 But transitory kind of implies at this point that it's 0:10:26.960 --> 0:10:29.000 going to be very short lived, and that's that's perhaps 0:10:29.040 --> 0:10:30.040 a little bit too optimistic. 0:10:30.080 --> 0:10:32.000 But I feel like the distinction though, is like it's 0:10:32.040 --> 0:10:35.200 a one time price hike and then it stops versus 0:10:35.400 --> 0:10:37.360 keeps going up. And if it keeps going up, then 0:10:37.360 --> 0:10:40.040 that's obviously going to be more harbinger for the FED. 0:10:40.080 --> 0:10:42.840 If it's just a one time price increase, the economy 0:10:42.920 --> 0:10:44.920 is still growing, We're still in a good spot even 0:10:44.960 --> 0:10:46.920 if we go one point six one point seven percent. 0:10:46.920 --> 0:10:47.640 Can we handle it? 0:10:49.320 --> 0:10:51.120 Yeah, I think we can, and I think the ultimate ultimately, 0:10:51.160 --> 0:10:52.640 the Fed's gonna have to cut as a result, because 0:10:52.679 --> 0:10:55.160 we're going to see the economy weekend on the back 0:10:55.200 --> 0:10:59.840 of caraffs uncertainty. We're hearing, you know, capex is stalling 0:11:00.080 --> 0:11:02.480 starting to stall out pretty materially, So realistically this is 0:11:02.480 --> 0:11:03.960 likely to be a growth shock, in which case the 0:11:04.000 --> 0:11:07.640 FED can react uvishly, but they can't react until the 0:11:07.720 --> 0:11:10.920 data start to show that real weakness and we're several 0:11:10.920 --> 0:11:12.720 months away from that, which is just a challenge for 0:11:12.760 --> 0:11:14.880 markets at this point because the FED kind of has 0:11:14.880 --> 0:11:16.480 to sit on its hands for a little while until 0:11:16.520 --> 0:11:19.360 they can actually react and come out a bit more rubbishly. 0:11:19.679 --> 0:11:22.280 What it's proved that this is more like a price 0:11:22.360 --> 0:11:26.080 level shock and the impact on growth is notably softer. 0:11:26.559 --> 0:11:28.840 So, Stephanie, have you in the good folks over at 0:11:28.840 --> 0:11:32.640 Wolf have you materially changed maybe your GDP forecast, your 0:11:32.679 --> 0:11:36.640 inflation forecast to account for what appears to be pretty 0:11:37.040 --> 0:11:39.040 steady tariff policy here. 0:11:40.080 --> 0:11:40.719 Yeah, we have. 0:11:40.840 --> 0:11:43.360 So coming into the year we were a little bit 0:11:43.360 --> 0:11:45.559 above two percent. We were more optimistic on the growth 0:11:45.760 --> 0:11:49.120 once we realized that Trump was much more serious on 0:11:49.240 --> 0:11:51.559 doing tariff, certainly earlier in the year we were expecting 0:11:51.559 --> 0:11:55.040 it to be later once the DOS layoffs started to well, 0:11:55.280 --> 0:11:57.800 they didn't actually play out, but the headlines weren't great. 0:11:58.760 --> 0:12:00.960 Once the negative stuff started to happen, more so than 0:12:01.000 --> 0:12:04.120 anything positive that could potentially play out. We changed our 0:12:04.120 --> 0:12:07.439 outlook from two point two to one point six on GDP, 0:12:07.720 --> 0:12:11.360 it's inflation from two three to two seven. And realistically, 0:12:11.440 --> 0:12:13.640 the risks are that we might have to do a 0:12:13.640 --> 0:12:16.200 similar type of you know, move again if you start 0:12:16.240 --> 0:12:18.640 to just see more of an impact from it from 0:12:18.679 --> 0:12:20.160 a tariff perspective. 0:12:20.960 --> 0:12:22.680 I mean, yeah, it's not negative. 0:12:22.720 --> 0:12:24.040 I'm just saying, Oh, it's not negative. 0:12:24.120 --> 0:12:26.800 Okay, I'm trying I vacillate between like glass half full 0:12:26.800 --> 0:12:27.720 of glass half empty. 0:12:27.880 --> 0:12:29.880 So it's like has a good. 0:12:29.679 --> 0:12:35.520 Point, which is companies adjust, consumers adjust, market suggest you 0:12:35.520 --> 0:12:37.160 have to give everybody smart credit. 0:12:37.280 --> 0:12:38.400 Yeah, well, but I think that's right. 0:12:38.480 --> 0:12:40.400 I think the economy will adjust and we're not. I 0:12:40.400 --> 0:12:43.000 think we'll still grow, it's just a slower pace we were. 0:12:43.080 --> 0:12:45.520 We've been growing in an environment where growth has been 0:12:45.640 --> 0:12:46.720 three percent or above for the. 0:12:46.720 --> 0:12:48.440 Past couple of years. Yeah, and it just has to 0:12:48.480 --> 0:12:49.400 have a level shift down. 0:12:49.679 --> 0:12:53.079 It also just depends on what that transition period looks like, 0:12:53.080 --> 0:12:55.120 like is it a couple months, is it a year, like? 0:12:55.200 --> 0:12:56.360 Is it six months? Like that? 0:12:56.400 --> 0:12:58.760 Really then depends on how maybe you ask it allocate 0:12:58.840 --> 0:13:04.719 or like what that grow trajectory winds up looking like, Yeah, I. 0:13:04.640 --> 0:13:07.640 Think that's fair for through much of this year, I 0:13:07.640 --> 0:13:10.160 would be sort of concerned. From an equity perspective, I 0:13:10.160 --> 0:13:11.920 think we might see a lot more volatility. At some 0:13:11.960 --> 0:13:14.719 point it might be abundantly more clear that there's a 0:13:14.760 --> 0:13:16.679 lot of sort of risk price into the markets, and 0:13:16.679 --> 0:13:19.080 then it would make more sense to take a sort 0:13:19.080 --> 0:13:21.040 of a stab at it, right now it just doesn't 0:13:21.080 --> 0:13:23.280 feel like enough is in the price, just given the 0:13:23.320 --> 0:13:24.960 tariff news that's likely coming. 0:13:25.360 --> 0:13:27.920 Stephanie, thanks so much for joining us. Always appreciate getting 0:13:28.120 --> 0:13:31.480 your thoughts there. Stephanie Roth, chief economist at Wolf Research. 0:13:31.960 --> 0:13:36.760 She got a master's in statistics. You couldn't get pay me, literally, 0:13:36.800 --> 0:13:38.760 you could not pay me nil money to get a 0:13:38.840 --> 0:13:40.079 master's in statistics. 0:13:40.200 --> 0:13:40.480 Wow. 0:13:40.559 --> 0:13:45.480 I had one course at business school and statistics first quiz, 0:13:45.520 --> 0:13:48.559 I got a seven out of twenty. Why because I 0:13:48.559 --> 0:13:52.040 don't like statistics? And b I slept out the entire 0:13:52.080 --> 0:13:54.480 weekend of Cameron into Or Stadium to get season tickets 0:13:54.520 --> 0:13:55.280 to Duke basketball. 0:13:55.360 --> 0:13:58.320 Well, I mean, like this priority totally totally worth it. 0:13:58.360 --> 0:14:01.120 I think I took a statistics yep. And I say 0:14:01.200 --> 0:14:03.199 think because like I actually don't remember. I think it 0:14:03.240 --> 0:14:04.959 was my best friend and her boyfriend, and I think. 0:14:04.760 --> 0:14:08.480 That maybe he helped us. Yeah, but that's in the testing. 0:14:08.920 --> 0:14:10.559 You can't do that for a little bit, all right, 0:14:11.040 --> 0:14:13.440 joining us now in our studio, which is a treat 0:14:13.480 --> 0:14:16.200 a larn Goodwin, chief market strategist that New York Life 0:14:16.200 --> 0:14:21.280 Investment Management. So we got some inflation data today kind 0:14:21.280 --> 0:14:23.600 of came in line with expectations. Anything on the economic 0:14:23.640 --> 0:14:26.960 data recently that's jumping out of you and maybe changing 0:14:26.960 --> 0:14:28.560 the way you're thinking about these markets. 0:14:28.840 --> 0:14:32.880 It's really difficult to take the today economic data and 0:14:33.080 --> 0:14:35.360 tell us much about the markets moving forward because we're 0:14:35.400 --> 0:14:39.000 in a really interesting and awkward in between spot. We 0:14:39.120 --> 0:14:42.680 know that policy uncertainty is changing the way that businesses 0:14:42.720 --> 0:14:45.560 can and consumers think, we don't know the extent to 0:14:45.600 --> 0:14:48.040 which that will impact the hard data, and so as 0:14:48.080 --> 0:14:50.840 we think about asset allocation, we're thinking about a couple 0:14:50.880 --> 0:14:54.560 of different themes in relation to data like this. One 0:14:54.640 --> 0:14:57.280 is how do you build resilience in the near term 0:14:57.800 --> 0:15:01.160 to what we expect to be a RelA relatively meager 0:15:01.640 --> 0:15:05.360 equity market backdrop? And the second is what do we 0:15:05.400 --> 0:15:09.200 see happening that we can really anchor on long term? 0:15:09.320 --> 0:15:14.240 And as we approach Liberation Day as it's being called, 0:15:14.240 --> 0:15:17.400 I think investors could be forgiven for not feeling particularly liberated. 0:15:18.040 --> 0:15:19.720 But as we approach liberation. 0:15:19.440 --> 0:15:25.240 Day, even if tariffs disappeared from the policy framework, there 0:15:25.280 --> 0:15:28.520 are mega trends in place related to supply chains and 0:15:28.600 --> 0:15:30.640 AI that are on their way. These are things that 0:15:30.680 --> 0:15:33.280 we believe we can allocate around regardless of the near 0:15:33.360 --> 0:15:34.080 term volatility. 0:15:34.120 --> 0:15:36.280 See, I feel like Lauren was someone who definitely had 0:15:36.360 --> 0:15:37.480 did well in statistics. 0:15:38.120 --> 0:15:42.080 I did, I did, I did really well in statistical Yeah, 0:15:43.080 --> 0:15:45.520 this in no way surprises me. When when when you 0:15:45.640 --> 0:15:50.560 got into like the seventh eighth order, like apply to conumetrics, 0:15:50.600 --> 0:15:51.880 that's when I was calling. 0:15:51.680 --> 0:15:54.760 Yeah totally, I mean that's like for me that, I mean, 0:15:54.800 --> 0:15:56.760 I actually sailed past that part. It was the next 0:15:56.760 --> 0:15:59.840 part that no, I'm kidding, know what you're talking about. Okay, 0:15:59.880 --> 0:16:01.560 So then the question that I've kind of been wondering, 0:16:01.640 --> 0:16:03.360 and I should point out that futures are around the 0:16:03.400 --> 0:16:07.240 lost of the session right now. Will Wednesday be a 0:16:07.920 --> 0:16:11.160 clearing event, like will we have will be clearing event 0:16:11.200 --> 0:16:13.200 for the market, or it's just going to be more 0:16:13.280 --> 0:16:15.360 volatility and adaptation after that. 0:16:15.920 --> 0:16:18.240 I think many of the answers that I've heard from 0:16:18.280 --> 0:16:21.040 the program already today suggests that it can't possibly be 0:16:21.080 --> 0:16:22.880 a clearing event. It could be a clearing event for 0:16:22.880 --> 0:16:25.640 Wednesday and Thursday, and then on Friday we get a 0:16:25.760 --> 0:16:27.760 labor market report that's going to start to show the 0:16:27.760 --> 0:16:33.680 impact of government layoffs, and so it's again, I honestly 0:16:33.720 --> 0:16:36.000 think that if you gave me a spreadsheet that said 0:16:36.080 --> 0:16:38.080 these are the tariffs that are going to be implemented 0:16:38.160 --> 0:16:41.680 on these countries on this timeline. I've heard investors say 0:16:41.800 --> 0:16:43.600 that's all we need, then we can do the math. 0:16:44.200 --> 0:16:45.040 I don't agree. 0:16:45.560 --> 0:16:49.520 We don't know how countries are going to react. And frankly, 0:16:50.360 --> 0:16:52.600 there are places in the world that have a lot 0:16:52.600 --> 0:16:55.920 of leverage on the US economy. And so even though 0:16:56.280 --> 0:16:59.080 some clarity over the path of tariffs, if we receive 0:16:59.200 --> 0:17:02.640 that can be helpful for those next steps to start 0:17:02.760 --> 0:17:07.120 locking into place. Just the mere fact that we are 0:17:07.280 --> 0:17:11.719 on this path towards more regionalized supply chains, more energy 0:17:11.760 --> 0:17:15.320 and tech independence. That's a capital intensive trend that's on 0:17:15.440 --> 0:17:17.800 its way. It's going to happen regardless, and so I'm 0:17:17.800 --> 0:17:21.040 not really angering on feeling better on Wednesday. 0:17:22.000 --> 0:17:25.840 Have you been rebalancing your portfolio, reallocating your portfolio, de 0:17:26.040 --> 0:17:27.960 risking it, what have you done anything that kind of 0:17:27.960 --> 0:17:28.920 your recommendations. 0:17:29.520 --> 0:17:33.960 We're in the camp of recommending actually pretty significant changes 0:17:34.000 --> 0:17:37.159 to a multi asset portfolio. And just to give a 0:17:37.200 --> 0:17:39.720 little bit of backdrop, if you look back in the 0:17:39.800 --> 0:17:44.360 last fifteen years, knowing what we know now, your ideal 0:17:44.440 --> 0:17:48.800 asset allocation would be ninety percent US large cap growth equity, 0:17:49.320 --> 0:17:53.879 and frankly, even in twenty twenty one twenty two, we 0:17:54.080 --> 0:17:56.840 the investing public were starting to say, oh that lower 0:17:56.880 --> 0:17:59.280 for longer interest rate environment is changing. The world might 0:17:59.280 --> 0:18:01.840 look a little different. The AI boom bought us a 0:18:01.880 --> 0:18:04.880 little time of by the think about US large cap 0:18:04.880 --> 0:18:09.280 growth equity before all that's changing. We're looking forward at 0:18:09.359 --> 0:18:13.040 a market environment that is more volatile, more inflation aware, 0:18:13.400 --> 0:18:17.520 more capital intensive, and that's an environment where I believe 0:18:17.560 --> 0:18:21.840 we need to be building more resilient equity portfolios, closing 0:18:21.880 --> 0:18:26.760 international underweights, looking to generate income within the equity portfolio, 0:18:26.800 --> 0:18:30.840 because we probably can only expect five to seven percent 0:18:30.960 --> 0:18:33.040 on US equity this year, So what does that mean? 0:18:34.480 --> 0:18:38.159 Well for starters. Many of the investors, despite some of 0:18:38.160 --> 0:18:40.679 the news we've seen out of Europe, and frankly, despite 0:18:40.720 --> 0:18:43.760 a much more a much quicker interest rate cutting cycle, 0:18:44.040 --> 0:18:47.359 have ignored the cyclical uplift in international equity, and so 0:18:47.640 --> 0:18:51.600 we're calling on investors to close those underweights. We're staying 0:18:51.640 --> 0:18:55.240 focused on quality in large caps, dividend payers, those that 0:18:55.280 --> 0:18:58.440 are lined up for stock buybacks, but we're also taking 0:18:58.760 --> 0:19:01.720 more equity like risk in credit, and the reason for 0:19:01.840 --> 0:19:06.680 that is as you see economic risks rise, or if 0:19:06.680 --> 0:19:10.080 we see that, certainly spreads will widen. We're already seeing 0:19:10.119 --> 0:19:13.080 it a bit. But on a two to three year 0:19:13.359 --> 0:19:16.960 forward looking basis, I have very little concern that the 0:19:17.080 --> 0:19:20.760 US high yield market, especially in the higher quality issuers, 0:19:21.200 --> 0:19:23.800 won't be able to pay back their debt. And so 0:19:24.000 --> 0:19:26.560