WEBVTT - Bloomberg Surveillance TV: December 18th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.440 with Lisa Bromwitz and a Marie Hortenn. Join us each 0:00:18.520 --> 0:00:21.440 day for insight from the best in markets, economics, and 0:00:21.480 --> 0:00:24.759 geopolitics from our global headquarters in New York City. We 0:00:24.800 --> 0:00:27.479 are live on Bloomberg Television weekday mornings from six to 0:00:27.560 --> 0:00:31.040 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.240 --> 0:00:33.519 or anywhere else you listen, and as always on the 0:00:33.520 --> 0:00:35.880 Bloomberg Terminal and the Bloomberg Business app. 0:00:36.600 --> 0:00:40.280 Frend Judy of Northwestern Mutual Wealth Management joining us. Now, Brent, 0:00:40.360 --> 0:00:43.040 what's your first reaction to the CPI print. How much 0:00:43.080 --> 0:00:45.800 does it color how you see investing next year and 0:00:45.840 --> 0:00:46.840 the backdrop for the FED. 0:00:48.000 --> 0:00:49.680 I think it certainly helps the parts of the market 0:00:49.680 --> 0:00:51.680 that you mentioned before, small caps that have been harmed 0:00:51.680 --> 0:00:53.320 by higher rates, and so if you think about the 0:00:53.360 --> 0:00:56.080 economy the past few years, it has certainly been bifurcated, 0:00:56.120 --> 0:00:58.520 as has the market. It's been narrow both in the 0:00:58.560 --> 0:01:01.040 economy and the markets where you've had heavy lifting done 0:01:01.200 --> 0:01:04.360 by a few stocks tied to higher income consumers. And 0:01:04.440 --> 0:01:06.440 the AI theme I think as you look at twenty 0:01:06.440 --> 0:01:08.520 twenty six, we do see broadening where you see small 0:01:08.520 --> 0:01:10.960 caps doing better, where you see the average SMP stock 0:01:11.000 --> 0:01:13.679 doing better. I think it's a risk management tool, but 0:01:13.760 --> 0:01:16.880 it's also in twenty twenty six a return enhancement tool, 0:01:17.240 --> 0:01:18.959 and so that's my first thought. My second thought is 0:01:18.959 --> 0:01:22.200 what's happening underneath in the economy when you see inflation 0:01:22.240 --> 0:01:24.400 pull back this much, how the week is actually demand? 0:01:24.640 --> 0:01:26.479 And you mentioned the labor market, which I think people 0:01:26.520 --> 0:01:29.920 are giving coastal clear because of non farm payrolls being 0:01:29.920 --> 0:01:32.880 around sixty thousand, which I remind you they were overstated 0:01:32.880 --> 0:01:35.360 by seventy thousand in the data going through to March 0:01:35.440 --> 0:01:38.120 of this year, and the thunder Reserve chair Palell mentioned 0:01:38.160 --> 0:01:40.720 he still thinks they're being overstated by sixty k so 0:01:40.760 --> 0:01:43.440 they are right around zero, and that's where I think 0:01:43.480 --> 0:01:45.280 there's some risks still out that are out there. 0:01:45.480 --> 0:01:47.880 Do you think that the market response that if this 0:01:47.960 --> 0:01:51.080 gives the green light to cut rates, then that's positive 0:01:51.120 --> 0:01:53.480 for equities is correct? Or do you think that it's 0:01:53.520 --> 0:01:55.640 coming more from the labor market weakness that you were 0:01:55.680 --> 0:01:56.360 just referencing. 0:01:57.760 --> 0:01:59.800 I think it's positive for a broader set of equities. 0:02:00.000 --> 0:02:01.800 That's where I think I come back to it. No 0:02:01.800 --> 0:02:03.800 one knows exactly what's going to happen in the next 0:02:03.800 --> 0:02:06.560 six months. I think forecasting is always difficult, but there 0:02:06.600 --> 0:02:10.080 certainly is this odd kind of mix of policy that 0:02:10.200 --> 0:02:11.919 is out there, and I think you can see that 0:02:11.960 --> 0:02:13.760 through the Federal Reserve eyes, where if you had all 0:02:13.840 --> 0:02:15.919 nineteen voters voting, it would have been twelve to seven, 0:02:16.480 --> 0:02:18.280 and you see those descents, And that's where I just 0:02:18.280 --> 0:02:20.400 think it's hard to figure out what's going on in 0:02:20.440 --> 0:02:22.639 the near term. But if I think about the long term, 0:02:22.680 --> 0:02:25.160 I do want to pay attention to valuation, and that's 0:02:25.200 --> 0:02:27.000 where I go back to those areas of the market 0:02:27.000 --> 0:02:30.000 that people have largely ignored. They haven't done as well 0:02:30.000 --> 0:02:32.440 because of the impact of higher rates. I think, pushing 0:02:32.440 --> 0:02:35.600 forward in twenty twenty six, you have valuation with you, 0:02:35.680 --> 0:02:39.560 and you have potentially the impact of rising earnings in 0:02:39.560 --> 0:02:41.000 those parts of the market for the first time in 0:02:41.040 --> 0:02:41.560 a few years. 0:02:41.760 --> 0:02:43.880 Right, let's have some fun here with counterfactuals. You've opened 0:02:43.880 --> 0:02:45.160 the doors, so I'm going to drive my truck right 0:02:45.200 --> 0:02:48.520 through it. You know, I'm very curious if we'd gotten 0:02:48.520 --> 0:02:51.120 these data before the last FED meeting, how that conversation 0:02:51.520 --> 0:02:53.880 in the Equos building would have been different, if at all. 0:02:53.919 --> 0:02:55.240 I mean, we talked a lot about this being an 0:02:55.240 --> 0:02:57.800 insurance cut. There was certainly a lot of questions about 0:02:57.800 --> 0:02:59.720 whether the FED should move that or wait till January. 0:03:00.280 --> 0:03:02.120 Do the data that we've got today give you any 0:03:02.120 --> 0:03:04.359 sense that it would have come the outcome would have 0:03:04.360 --> 0:03:07.200 been different last week had FED officials gotten them. 0:03:08.040 --> 0:03:10.720 Potentially, But I don't think people's concerns about inflation longer 0:03:10.800 --> 0:03:13.079 term are going away. This could be a certainly tied 0:03:13.120 --> 0:03:15.400 to the government shut down with inflation coming down. It 0:03:15.400 --> 0:03:18.200 could certainly be tied to labor market weakening. Look, I 0:03:18.200 --> 0:03:20.560 think inflation is a longer term phenomenon. We have not 0:03:20.639 --> 0:03:23.320 yet returned to two percent. The FEDS dot plot doesn't 0:03:23.320 --> 0:03:25.359 show it returning till what twenty twenty eight, which is 0:03:25.400 --> 0:03:28.040 seven years since. And this is where I think there's 0:03:28.080 --> 0:03:31.040 concerns about what happens next year when stimulus gets layered, on, 0:03:31.040 --> 0:03:32.560 what happens next year when we get a new Federal 0:03:32.560 --> 0:03:35.960 Reserve chairman, and what happens longer term to help pay 0:03:36.000 --> 0:03:38.040 back some of that debt. And that's just where I 0:03:38.040 --> 0:03:41.640 think inflation probably still is the longer term outcome, and 0:03:41.680 --> 0:03:43.960 that's where I think the concern of some of those 0:03:44.080 --> 0:03:46.160 people on the Federal Reserve would not have gone away. 0:03:46.200 --> 0:03:48.040 Perhaps you would have swayed one or two more people, 0:03:48.320 --> 0:03:50.640 but I think there are still legitimate concerns and questions 0:03:50.640 --> 0:03:53.560 about do we get back to two percent inflation absence 0:03:53.600 --> 0:03:56.560 some sort of economic contraction in twenty twenty six, which 0:03:56.560 --> 0:03:57.760 no one is pricing in right now. 0:03:58.280 --> 0:03:58.520 Brent. 0:03:58.800 --> 0:04:01.120 The overlay here, of course, is this AI story. We've 0:04:01.120 --> 0:04:02.800 been tracking that day in and day out, all the 0:04:02.880 --> 0:04:05.200 ups and downs. Certainly micro on the latest kind of 0:04:05.280 --> 0:04:09.520 chapter in that narrative, we heard policymakers engaging more with 0:04:09.560 --> 0:04:11.320 this issue of productivity. What this is going to mean 0:04:11.360 --> 0:04:14.240 for the economy or could mean for the economy going forward. 0:04:14.240 --> 0:04:15.880 How are you thinking about that in light of what 0:04:15.920 --> 0:04:18.240 you're talking about here, the kind of the persistence of 0:04:18.279 --> 0:04:21.240 inflation into twenty twenty six, the challenges facing this US 0:04:21.240 --> 0:04:22.159 economy going forward. 0:04:23.000 --> 0:04:24.720 I mean, we'll see. On the productivity aspect of it, 0:04:24.920 --> 0:04:27.240 I think companies are still trying to figure out how 0:04:27.279 --> 0:04:29.800 to use it to increase employees productivity, and I think 0:04:29.800 --> 0:04:31.960 that's a prime question as you head into twenty twenty six, 0:04:32.440 --> 0:04:34.080 I think the reality is you are starting to see 0:04:34.080 --> 0:04:35.960 it move through different parts of the economy. So it 0:04:36.040 --> 0:04:38.440 started out in the picks and shovels, I guess, and 0:04:38.440 --> 0:04:41.400 now it's moving along to companies like Micron. I eventually 0:04:41.480 --> 0:04:44.200 assume it will do much like the Internet did, which 0:04:44.200 --> 0:04:47.160 has increased the productivity and efficiency of all companies who 0:04:47.200 --> 0:04:49.840 actually use it. And so that's where I think you've 0:04:49.880 --> 0:04:52.480 seen winners and losers change. I think you will continue 0:04:52.520 --> 0:04:54.120 to see that in the future. And that's where I 0:04:54.120 --> 0:04:57.279 think anyone investing solely in AI right now, we're concentrating 0:04:57.320 --> 0:04:59.040 their portfolio, and it is taking risks they don't need 0:04:59.080 --> 0:05:01.960 to be taking. I think there are opportunities as it 0:05:02.000 --> 0:05:05.520 continues to shift, as it continues to spread through the economy, 0:05:05.680 --> 0:05:08.240 for those companies and stocks that have previously been left 0:05:08.240 --> 0:05:10.359 out to start benefiting from it. And that's where you 0:05:10.400 --> 0:05:13.640 saw this broadening in two thousand through two thousand and seven. 0:05:13.920 --> 0:05:17.599 That occurred post kind of the concentration in nineteen ninety 0:05:17.600 --> 0:05:20.520 eight nineteen ninety nine, which is eerily similar to today, 0:05:20.760 --> 0:05:22.960 where a few stocks did the heavy lifting for a 0:05:23.000 --> 0:05:26.640 few years, people concentrated in those unfortunately, and then the 0:05:26.720 --> 0:05:28.680 game change going forward, which I think is what's going 0:05:28.720 --> 0:05:31.400 to happen as you push forward into twenty twenty six and. 0:05:31.320 --> 0:05:34.720 Beyond, stay with us Mulblomberg surveillance coming up. 0:05:35.040 --> 0:05:46.520 Off to this, Eric and a jeriot of Ubs writing 0:05:46.720 --> 0:05:49.880 Biggs might be more motivated to close larger deals ahead 0:05:49.920 --> 0:05:51.120 of any potential shift in. 0:05:51.160 --> 0:05:52.160 Power in Congress. 0:05:52.400 --> 0:05:54.839 The first half of twenty twenty six could be a 0:05:54.920 --> 0:05:58.160 robust time for deal announcements. Erica, I'm so pleased to say, 0:05:58.240 --> 0:06:00.680 joins us now, Erica, great to see you. I'm not 0:06:00.720 --> 0:06:02.640 saying that open Ai and Vidio are going to merge, 0:06:02.640 --> 0:06:05.160 but there is this feeling that there is an acceleration 0:06:05.480 --> 0:06:08.680 in the deal space. Just how much pipeline is there 0:06:08.720 --> 0:06:09.159 behind that. 0:06:09.960 --> 0:06:12.920 I think bankers are not going to have a fun 0:06:13.040 --> 0:06:15.200 Christmas season. I think they're going to be at their 0:06:15.240 --> 0:06:19.720 desk working because I think twenty twenty six is going 0:06:19.760 --> 0:06:22.240 to be the year of big you know, you know, 0:06:22.320 --> 0:06:24.880 I cover banks, so whenever we talk about M and A, 0:06:25.000 --> 0:06:28.960 we think about regional banks merging for synergies. But given 0:06:29.080 --> 0:06:34.480 the deregulatory framework, and given that you do have the midterms, 0:06:34.480 --> 0:06:38.160 a sort of an important waypoint in time. You know, 0:06:38.279 --> 0:06:41.680 I think you could have banks and other companies across 0:06:41.720 --> 0:06:46.280 the space really thinking about where their strategic holes are 0:06:46.520 --> 0:06:48.440 and addressing it that way. So I think it's going 0:06:48.520 --> 0:06:51.039 to be more than just Okay, we're going to do 0:06:51.200 --> 0:06:54.120 deals to cut costs. I think they're going to use 0:06:54.160 --> 0:06:56.080 this as sort of a you know, once in a 0:06:56.200 --> 0:07:02.000 generation opportunity to redeploy capital in a very specific strategic way. 0:07:02.080 --> 0:07:03.599 So because a lot of the deals we've seen have 0:07:03.720 --> 0:07:06.240 been really big, I mean, whether it be an IPOs, 0:07:06.320 --> 0:07:09.239 the medline IPO coming on the market earlier this year, 0:07:09.400 --> 0:07:12.080 with EA, the huge amount of numbers that are being 0:07:12.120 --> 0:07:14.400 put to that, whatever is going to happen with Warner 0:07:14.440 --> 0:07:17.160 Brothers Discovery. Maybe we add that in that whole hot 0:07:17.200 --> 0:07:19.280 mess of potato in with that too. How much of 0:07:19.320 --> 0:07:22.840 this and the resurgence of deals are about big size 0:07:22.880 --> 0:07:25.080 deals versus volume of deals. 0:07:25.480 --> 0:07:28.440 I think you could get both right. So, first of all, 0:07:28.440 --> 0:07:33.080 the sponsors haven't really you know, exited much, so we're 0:07:33.120 --> 0:07:35.400 waiting for that. You know, the market is at all 0:07:35.440 --> 0:07:38.520 time highs, breads are at all time tights, so it 0:07:38.600 --> 0:07:41.200 feels like now is the time and I was here 0:07:41.280 --> 0:07:43.840 last week when I had this analogy that this administration 0:07:44.000 --> 0:07:47.280 was going to put lipstick and contour on this economy 0:07:47.360 --> 0:07:49.640 to get it through the finish line for you know, 0:07:49.800 --> 0:07:52.640 to you know, through the November, you know, midterms, right, 0:07:53.040 --> 0:07:55.800 and so you could have sort of also a macro 0:07:55.960 --> 0:07:59.040 backdrop and maybe we get one or two rate cuts. 0:07:59.280 --> 0:08:01.680 That's quite favorable for this environment. 0:08:02.280 --> 0:08:04.080 By the way, can I just say we should only 0:08:04.120 --> 0:08:06.960 start using makeup metaphors and no more baseball metaphors, no 0:08:07.040 --> 0:08:09.520 more innings, only lift sick in contour. I'm absolutely on 0:08:09.520 --> 0:08:12.520 board with that. Erica. How much of this though when 0:08:12.560 --> 0:08:16.600 it comes to strategics versus private capital, Because to your point, 0:08:16.600 --> 0:08:19.320 they're still sitting on a lot that they need to exit. 0:08:19.720 --> 0:08:21.920 Are they willing to take a discount or is the 0:08:22.040 --> 0:08:24.120 environment gotten so good that things that they may be 0:08:24.200 --> 0:08:27.640 overspent on twenty one in twenty twenty two they can 0:08:27.680 --> 0:08:29.440 sell at a price that they agree to. 0:08:29.560 --> 0:08:32.600 Well, I think you still have a pretty significant valuation disparity, 0:08:33.040 --> 0:08:36.200 and I think you also have you know, your deployment 0:08:36.240 --> 0:08:38.480 of capital is not going to be as you know, 0:08:38.800 --> 0:08:41.360 those investments are not necessarily going to be as good 0:08:41.679 --> 0:08:44.000 as those that you're trying to exit, right, So I 0:08:44.000 --> 0:08:46.080 think it's going to be, you know, continuing to be 0:08:46.160 --> 0:08:49.959 a challenge. But nevertheless, I think in particular, I think 0:08:49.960 --> 0:08:54.400 the advisory pipeline is going to be is actually quite strong, 0:08:54.520 --> 0:08:57.000 and you had the government shut down, so the fourth 0:08:57.040 --> 0:08:59.520 quarter is going to look a little bit light. So 0:08:59.600 --> 0:09:02.760 that's going to have the effect of pushing a lot 0:09:02.760 --> 0:09:05.439 of these announcements into the first quarter. And so you're 0:09:05.640 --> 0:09:09.040 you know, every sort of Sunday evening or Monday morning 0:09:09.160 --> 0:09:11.560 is going to be boom boom boom in terms of announcement. 0:09:11.640 --> 0:09:13.280 I think when we kickstart the year. 0:09:13.400 --> 0:09:15.079 Talk to me a little bit more about the financial 0:09:15.240 --> 0:09:18.320 m and A on the strategic side, what are the 0:09:18.320 --> 0:09:20.920 strategic priorities of an M and A for for banks 0:09:20.960 --> 0:09:22.480 at this point if it's going to happen in the 0:09:22.480 --> 0:09:23.360 first half of next year. 0:09:23.760 --> 0:09:28.679 So scale and completeness, okay in my opinion, and additionally 0:09:29.600 --> 0:09:33.040 an edge in tech. So for example, you know, it's 0:09:33.120 --> 0:09:36.080 pretty clear that scale is getting to be even more 0:09:36.120 --> 0:09:42.160 important given the technological demands, the investments that are needed 0:09:42.240 --> 0:09:44.800 in AI and the like. Right, So that's number one. 0:09:44.960 --> 0:09:47.880 You know Number two, you know, you work at a 0:09:47.880 --> 0:09:51.360 company that's very diverse for example, Right. And so the 0:09:51.400 --> 0:09:55.560 whole idea of a booming money center, complete money center bank, 0:09:55.679 --> 0:09:58.800 I think is you know, highly subscribed by the market. 0:09:59.120 --> 0:10:02.240 So let's say you're or an investment bank, maybe you're 0:10:02.280 --> 0:10:07.240 seeking more of a wealth aspect or you know, wells 0:10:07.240 --> 0:10:11.880 Fargo you know has you know mentioned potentially expanding in 0:10:11.920 --> 0:10:14.920 growth areas if it were appropriate. So these are sort 0:10:14.960 --> 0:10:18.600 of the strategic you know, points that I think are 0:10:18.640 --> 0:10:20.440 going to be addressed in the new year. 0:10:20.720 --> 0:10:23.480 A lot of people are very excited about financials at 0:10:23.480 --> 0:10:26.480 the same time that they're very concerned about some sort 0:10:26.480 --> 0:10:29.520 of glut and private credit, some sort of excess that 0:10:29.559 --> 0:10:31.920 could potentially come to roost in twenty twenty six. 0:10:32.400 --> 0:10:34.199 Is there a dissonance in this the. 0:10:34.160 --> 0:10:36.480 Idea that people think that there is no credit risk 0:10:36.840 --> 0:10:39.880 in banks, but there is full credit risk in private credit. 0:10:40.679 --> 0:10:45.200 You can't have an explosion without getting shrapnel, right, So 0:10:45.440 --> 0:10:47.720 I would say a couple of things. Number One, everybody 0:10:47.800 --> 0:10:52.479 is hyped about bank stocks, but bank stocks rarely outperformed 0:10:52.520 --> 0:10:55.000 the S and P two years in a row. Right. 0:10:55.080 --> 0:10:58.040 And when it's happened, it's happened on the back of 0:10:58.080 --> 0:11:01.960 a recovery cycle, right, think GFC or post the dot 0:11:02.120 --> 0:11:05.560 you know, the dot com bubble, right, So the bar 0:11:05.760 --> 0:11:10.120 is high. Second, we have to watch this sector rather 0:11:10.280 --> 0:11:13.960 than just say, okay, there's something you know out there 0:11:14.000 --> 0:11:15.800 that we have to be nervous about. What do I mean? 0:11:16.080 --> 0:11:18.680 Is there froth and data centers is their frauth and 0:11:19.000 --> 0:11:21.720 you know other ads. So it's really a sector issue 0:11:21.800 --> 0:11:25.319 rather than structure. So really it's going to be you know, right, 0:11:25.520 --> 0:11:28.520 what the banks have done is they've indirectly lent to 0:11:28.559 --> 0:11:33.440 financial institutions that then lent to the companies. Right. And 0:11:33.640 --> 0:11:37.520 we saw in the matter of the you know, First 0:11:37.559 --> 0:11:42.200 brands for example, that when you have you know, an explosion, 0:11:42.600 --> 0:11:46.040 you know obviously there's fraud, the banks will catch some shrapnel. 0:11:46.280 --> 0:11:47.000 So we'll see. 0:11:47.080 --> 0:11:49.120 Well, Tom toierpoint from this point, I mean, how much 0:11:49.120 --> 0:11:52.080 are people understating some of the credit risks here given 0:11:52.480 --> 0:11:55.320 the concerns about the likes of Tricolor, our First Bryant brands. 0:11:55.480 --> 0:11:56.920 I think what Eric is trying to drive out here 0:11:56.960 --> 0:11:59.000 too is the important piece of this. It can't be 0:11:59.240 --> 0:12:00.880 just private credits the issue and not the banks. I mean, 0:12:00.960 --> 0:12:04.079 let's just acknowledge that up front but as you're moving 0:12:04.120 --> 0:12:06.199 through this fraud, I think this the way you made 0:12:06.200 --> 0:12:08.600 the comment about the fraud is when we look back 0:12:08.600 --> 0:12:10.840 in history, guys, fraud is a bankruptcy. It's not a oh, 0:12:10.880 --> 0:12:13.839 it's fraud that gets an asterix like we have. If 0:12:13.840 --> 0:12:15.760 we have these types of problems that are going to surface, 0:12:16.080 --> 0:12:17.640 I do think the banks will get tied down to that. 0:12:17.679 --> 0:12:21.400 So maybe Erica last question, as you separate these, which 0:12:21.440 --> 0:12:24.120 banks are best positioned into twenty twenty six if we 0:12:24.120 --> 0:12:27.080 were to hit a default cycle, just the well diversified 0:12:27.120 --> 0:12:29.920 banks or is there something to that were an angle 0:12:29.960 --> 0:12:30.720 that you focus on. 0:12:30.880 --> 0:12:32.920 And by the way, it's not a coincidence that Tricol 0:12:32.960 --> 0:12:35.520 owned First Brands. We're in the same sector, right, So 0:12:35.559 --> 0:12:37.840 this this goes back to what I was saying. It 0:12:37.880 --> 0:12:40.920 has to be a sector. Look, I really like Bank 0:12:40.960 --> 0:12:44.640 of America here, right, So all the things that you know, 0:12:44.720 --> 0:12:48.000 perhaps was a negative or Bank of America to directly 0:12:48.000 --> 0:12:51.600 answer your question, not growing as fast as others, you know, 0:12:51.640 --> 0:12:54.840 being a little bit more conservative in an environment where 0:12:55.200 --> 0:12:57.600 you know, there's a little bit more uncertainty, and maybe 0:12:57.600 --> 0:13:01.280 we are just band aiding the ACCO, you know, I 0:13:01.320 --> 0:13:04.840 think they could potentially perform well, and the valuation is 0:13:05.160 --> 0:13:08.600 you know, not all that demanding. You know, a company 0:13:08.720 --> 0:13:12.440 like you know, Capital One. You know that lower end 0:13:12.480 --> 0:13:15.240 of the K has taken hits already, right. I Mean, 0:13:15.360 --> 0:13:17.720 we've talked a lot about the K shape economy, but 0:13:18.000 --> 0:13:21.080 who has been dealing with inflation since twenty twenty one. 0:13:21.360 --> 0:13:23.680 It's been the lower end of the K. So I 0:13:23.720 --> 0:13:26.280 think that you know, those two stocks that really well. 0:13:26.160 --> 0:13:29.559 For twenty six stay with us multile IMPEG. Savannah's coming 0:13:29.640 --> 0:13:30.640 up off to this. 0:13:40.440 --> 0:13:41.000 Joining us now. 0:13:41.040 --> 0:13:44.520 Henrietta Trace, director of Economic policy research at Beta Partners. Henrietta, 0:13:44.679 --> 0:13:47.160 what was your take from the announcement at the speech 0:13:47.280 --> 0:13:47.880 last night. 0:13:47.960 --> 0:13:51.440 Well, it definitely wasn't about the Christmas decorations. Ninety percent 0:13:51.559 --> 0:13:54.840 of Americans, according to the latest Tspool believe that inflation 0:13:55.080 --> 0:13:56.200 is the biggest. 0:13:55.760 --> 0:13:56.840 Problem facing them. 0:13:57.040 --> 0:13:58.960 And what's a little bit off putting is that the 0:13:59.000 --> 0:14:02.120 President tauday a lot of data sets that just are 0:14:02.240 --> 0:14:05.520 not resonating with American voters are factually accurate. 0:14:05.600 --> 0:14:06.880 So anybody who's. 0:14:06.720 --> 0:14:09.959 Turned on the news this year has seen AI and 0:14:10.240 --> 0:14:14.679 data centers driving electricity prices up thirteen percent for residential 0:14:14.800 --> 0:14:18.360 electricity prices nationwide on average. You know, if you tell 0:14:18.400 --> 0:14:20.840 me that the cost of drugs is dropping by four 0:14:20.920 --> 0:14:23.360 or five six hundred percent, which is what the President 0:14:23.400 --> 0:14:26.480 said last night, that means you're paying me to take drugs. 0:14:26.520 --> 0:14:27.960 And you don't have to be like good at math 0:14:27.960 --> 0:14:28.400 and know that. 0:14:28.280 --> 0:14:29.400 That's not how drugs work. 0:14:29.840 --> 0:14:33.560 And finally, I would say the eighteen trillion dollar investment 0:14:33.640 --> 0:14:36.760 that he touted from the trade wars that he's launched 0:14:36.800 --> 0:14:40.440 and the deals that he's reached is outrageous. I mean, 0:14:40.840 --> 0:14:44.880 this is like China's entire GDP. So you need to 0:14:44.920 --> 0:14:47.600 put some things in context that American voters can actually 0:14:47.680 --> 0:14:49.120 take with them to the grocery store. 0:14:49.320 --> 0:14:51.600 And that's not what we got last night, Henriette. 0:14:51.640 --> 0:14:53.760 And just that point, I mentioned this before that Scotland's 0:14:53.760 --> 0:14:55.800 a comb of Cato Institute was talking about the fact 0:14:55.840 --> 0:14:57.960 that this is the tenth thing that Trump has promised 0:14:57.960 --> 0:15:01.160 to fund with tariffs. I'm going to be honest, chat 0:15:01.160 --> 0:15:02.800 GBT help me with this list, but I was just 0:15:02.840 --> 0:15:04.440 looking at some of the things that were promised the 0:15:04.440 --> 0:15:10.040 military checks, tariff dividend, farm aid and targeted bailouts, childcare, 0:15:10.200 --> 0:15:13.640 social programs, tax cuts or elimination of income tax, foreign 0:15:13.720 --> 0:15:17.240 or industrial subsidy funds, Henrieta. I know a lot of 0:15:17.240 --> 0:15:20.640 those are a wishless to Lisa's point versus actual policy. 0:15:21.080 --> 0:15:23.680 But what happens if he does try to fund some 0:15:23.760 --> 0:15:27.040 of these with the tariff income? Is that even possible 0:15:27.200 --> 0:15:28.600 with the amount of money coming in? 0:15:29.440 --> 0:15:31.200 I mean, first off, find me the votes. 0:15:31.240 --> 0:15:33.880 If you can find me fifty one votes in the 0:15:33.960 --> 0:15:37.400 United States Senate for a four hundred and fifty billion dollars, 0:15:37.520 --> 0:15:41.200 two thousand dollars check to the American public, I would 0:15:41.200 --> 0:15:42.800 love to see it. I can't count you the votes. 0:15:42.840 --> 0:15:44.920 I can't get you a reconciliation bill. I can't even 0:15:44.920 --> 0:15:47.280 get you a budget for physically your twenty twenty six. 0:15:47.720 --> 0:15:51.800 So the idea of even getting these things through is 0:15:52.840 --> 0:15:56.120 not realistic. And then the bond market, of course, is 0:15:56.160 --> 0:15:59.960 counting on this. What CBO estimates is three trillion dollars 0:16:00.120 --> 0:16:02.760 revenue brought in by these tires over a decade, and 0:16:02.880 --> 0:16:03.680 we've already spent it. 0:16:03.680 --> 0:16:04.640 We've more than spent it. 0:16:04.640 --> 0:16:07.240 It's only been eighty nine billion dollars brought in by 0:16:07.240 --> 0:16:10.320 the AIPA tires going back to October. So I mean, 0:16:10.320 --> 0:16:12.080 the money is just not there. And the boats aren't 0:16:12.080 --> 0:16:12.720 there either. 0:16:12.800 --> 0:16:15.200 Henrietta, It's a great point. I also want to get 0:16:15.200 --> 0:16:17.200 back to one of the other things you just mentioned too, 0:16:17.240 --> 0:16:20.560 this idea of the consumer feeling also the affordability pain 0:16:20.600 --> 0:16:23.560 of what's happening with their electricity prices. We saw the 0:16:23.600 --> 0:16:25.880 Blue Owl and Oracle deal. Part of the reason it 0:16:25.880 --> 0:16:29.119 crumbled was because of the politics in Michigan of lawmakers 0:16:29.120 --> 0:16:32.040 pushing back against tax subsidies. Earlier in the week, we 0:16:32.080 --> 0:16:34.680 also heard from Bernie Sanders saying that there needs to 0:16:34.720 --> 0:16:38.320 be a moratorium on building on data centers, partially because 0:16:38.400 --> 0:16:41.520 of what you're describing with the prices. Is it likely 0:16:41.560 --> 0:16:45.000 as affordability becomes a bigger issue that lawmakers will really 0:16:45.040 --> 0:16:47.520 start to push back against some of the data center 0:16:47.600 --> 0:16:50.320 construction and spending that is happening in America. 0:16:51.080 --> 0:16:52.960 Yeah, you can see it all over the place in 0:16:53.040 --> 0:16:57.040 terms of physical pushback. AOC had some tweets about it yesterday. 0:16:57.080 --> 0:17:00.160 I saw It's definitely a popular talking point. There's not 0:17:00.160 --> 0:17:02.120 going to be any legislation to prevent it, so this 0:17:02.160 --> 0:17:05.200 would have to be active boots on the ground, district led, 0:17:05.560 --> 0:17:07.679 you know, sort of protests against the construction of new 0:17:07.760 --> 0:17:09.919 data centers, and they're gonna have to conflict that with 0:17:10.160 --> 0:17:13.159 the job creation, which in many of these cases is 0:17:13.160 --> 0:17:15.719 the only job creation that you're seeing in say the 0:17:15.720 --> 0:17:19.080 manufacturing sector. So it's a it's a pretty heavy lift 0:17:19.200 --> 0:17:23.320 to get something done legislatively and then certainly to have 0:17:23.400 --> 0:17:26.040 the protests be maintained in order to actually effectuate those 0:17:26.040 --> 0:17:27.119 pauses or stoppages. 0:17:27.440 --> 0:17:30.840 Stay with US, multiple IMPERG surveillance coming up off. 0:17:30.680 --> 0:17:30.960 To this. 0:17:39.960 --> 0:17:43.960 Puja Kumra European and UK rate Senior strategy with with 0:17:44.080 --> 0:17:47.280 CD Securities joining us now for more. Puja, what's your 0:17:47.320 --> 0:17:49.800 take on this given the fact they did cut rates 0:17:49.880 --> 0:17:52.480 as widely expected, but what you did see was that 0:17:52.640 --> 0:17:54.760 fissure increasingly on the committee. 0:17:56.000 --> 0:17:59.720 Yeah, no, exactly. It's surprising that the committee is still 0:17:59.760 --> 0:18:02.200 very has seen from the vote as well as when 0:18:02.200 --> 0:18:04.439 it comes to the guidance, they have not given a 0:18:04.480 --> 0:18:07.080 clear path with respect to the face of cuts or 0:18:07.600 --> 0:18:11.280 we know that boees in the upper end of the neutral, 0:18:11.280 --> 0:18:14.080 which is basically two to three point seventy five, but 0:18:14.160 --> 0:18:16.800 the guidance around how much below they want to go 0:18:16.880 --> 0:18:19.200 towards the neutral is really lacking, and I think that 0:18:19.240 --> 0:18:22.960 has come as a disappointment to markets after yesterday's week 0:18:23.080 --> 0:18:25.919 CPI print, and that's why you are seeing gilts actually 0:18:25.960 --> 0:18:30.040 selling off. Even on the budget side, they consider it 0:18:30.119 --> 0:18:33.600 to add a point or two on growth. On inflation, 0:18:33.760 --> 0:18:36.720 they are still seeing medium tommentation to increase by zero 0:18:36.720 --> 0:18:39.480 point one to zero point two. So I think overall 0:18:39.760 --> 0:18:42.040 the messaging is very mixed. Even if you look at 0:18:42.080 --> 0:18:45.600 Andrew Bailey's comments here, they are looking at the downward 0:18:45.720 --> 0:18:48.679 trend on labor market, but they still don't want to 0:18:48.760 --> 0:18:51.800 overreat into it, and same with inflation, they don't want 0:18:51.840 --> 0:18:54.800 to overreact into the numbers that we've seen last time. 0:18:55.119 --> 0:18:57.880 So overall, I would just say that the mixed messaging 0:18:57.960 --> 0:19:01.280 is something that's not changed. Markets were still worried about 0:19:01.280 --> 0:19:04.639 the pace of easing by the BOE. You know, markets 0:19:04.680 --> 0:19:09.080 were pricing around the next cut around April, and the 0:19:09.880 --> 0:19:13.120 current messaging does not really change that situation. 0:19:13.280 --> 0:19:14.680