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Speaker 3: A rally is one way to put it. Maybe Vince
Speaker 3: Signerello would call it a rip your face off rally.
Speaker 3: The Nasdaq can posit higher by ten point nine percent,
Speaker 3: the S and P five hundred up by eight and
Speaker 3: a half percent, the dowd Jones Industrial average up by
Speaker 3: seven point four percent. I do want to bring in
Speaker 3: Vince Signerello. He's Bloomberg News macro strategist. He joins us
Speaker 3: this afternoon from White Plains. How do you describe the
Speaker 3: market action the tape today?
Speaker 4: I've ripping your face off a really, really good way
Speaker 4: to put it. Put it, Tim, I mean, this is
Speaker 4: you know, I've often get asked by traders, what was
Speaker 4: it like trading in the eighties? And this is about
Speaker 4: as close as I've seen it in a very very
Speaker 4: very long time.
Speaker 5: So for those who weren't around in the eighties, we
Speaker 5: were what does that mean?
Speaker 4: The volatility was fantastic. I mean you you know, you
Speaker 4: have to remember this is pre euro so you had
Speaker 4: well every country had their own currency, and there were
Speaker 4: days where you could see the German mark move ten
Speaker 4: big figures up, ten big figures down, then five or
Speaker 4: six up again, back and forth, like I mean, you
Speaker 4: could see a thirty big figure day in one day,
Speaker 4: back and forth. I was trading cable during the eighties
Speaker 4: after Maggie announced her reelection and Sterley went from this
Speaker 4: very sleepy currency to moving three, four, five big figures
Speaker 4: in a day. And to put that in perspective, just
Speaker 4: a one million pound position on five big figures is
Speaker 4: a fifty thousand dollar chain and l so when you're
Speaker 4: trading fifty to one hundred million pounds, you can imagine
Speaker 4: that if you get that wrong, you could give a
Speaker 4: bank away in a heartbeat. So you know, we haven't
Speaker 4: seen anything like that until literally this week, and I'm tired.
Speaker 3: Well it's only Wednesday, Vince. You got a couple more
Speaker 3: days to go here, hey, Gina Martin Adams said, a
Speaker 3: move such as this concerns her, whether it's to the
Speaker 3: upside or whether it is to the downside. This doesn't
Speaker 3: make her any less concerned about the direction of the
Speaker 3: US economy, about what earnings we're going to get as
Speaker 3: companies start to report. We heard from Delta earlier today,
Speaker 3: the company suspending its guidance for the year as a
Speaker 3: result of concerns over tariffs in the economy. We're going
Speaker 3: to hear from JP Morgan on Friday, among other banks.
Speaker 3: Are you concerned about a move higher like this?
Speaker 6: No?
Speaker 4: I And I'm sure what Gina was referring to whose
Speaker 4: analysis is brilliant by the way that the difference between
Speaker 4: Main Street and Wall Street. I mean, this is just
Speaker 4: Wall Street. Main Street is it needs to react in
Speaker 4: a completely different way to this, what the tariffs really
Speaker 4: mean to them, what it's going to mean for earnings.
Speaker 4: Move down or move up in the stock market doesn't
Speaker 4: necessarily change the scope of what it does. If you're
Speaker 4: the CEO or CFL of a company trying to source
Speaker 4: trade and look at what your cost price analysis is
Speaker 4: going to be going forward, and again, obviously earnings are
Speaker 4: a big picture. I think it's going to be interesting
Speaker 4: is to see what sentiment indicators look like on Friday,
Speaker 4: and of course we've got inflation in terms of CPI
Speaker 4: PPI coming up in the next couple of days as well.
Speaker 4: I wouldn't worry so much about the stock market. This
Speaker 4: is just a lot of you know, a lot of
Speaker 4: back and forth on headlines. It is completely separate from
Speaker 4: what the real economy is going to be doing. I
Speaker 4: was encouraged though by Besson's comment earlier this morning where
Speaker 4: he said he was going to take sort of front
Speaker 4: and center of the trade negotiations, and that seemed to
Speaker 4: put both Naviro and but Nick on the backbench, which
Speaker 4: I think that was the real encouragement I think for
Speaker 4: investors in that sort of the sound mind, the sound
Speaker 4: voice coming from Washington is going to speak. And then
Speaker 4: later today basically saying he was going to try to
Speaker 4: get an alliance together if you will try to make
Speaker 4: individual trade agreements with all different allies and then form
Speaker 4: a consortium of sorts against China, which really would put
Speaker 4: China in a box if you were able to do that,
Speaker 4: because that would be a really really strong negotiating power.
Speaker 4: You're not just talking about sort of NATO or Canada
Speaker 4: and Mexico you're talking about Latin America, you're talking about Japan,
Speaker 4: talking about Asia, Europe a whole lot. Now facing China
Speaker 4: and saying this is where we stand. We're tired of,
Speaker 4: you know, patent infringement, We're tired of the non monetary
Speaker 4: tariff situation. We're standing up to you. Now, what are
Speaker 4: you going to do? And if you don't capitulate, we're
Speaker 4: all just going to play nice with each other. And
Speaker 4: that's going to put China, I think in an extraordinarily
Speaker 4: difficult situation. I know what ended was saying about, it's
Speaker 4: not an all one way street, but I think I
Speaker 4: think in this particular trade war, if Beuston pulls off
Speaker 4: what he's trying to do, it puts China in an
Speaker 4: incredibly difficult situation and one they can't win.
Speaker 5: You know, yeah, exactly. And I keep thinking of the
Speaker 5: interview that Shanelli had with Boas Weinstein and the whole
Speaker 5: idea of the one thing that's difficult is that President
Speaker 5: Trump presumably will be in the White House for four
Speaker 5: years in total, and that the uncertainty genie is out
Speaker 5: of the bottle and we have seen that this is
Speaker 5: a president and I think it's fair to say this
Speaker 5: is truthful, is that he can change his mind on
Speaker 5: things and that level of uncertainty and it's ramped up
Speaker 5: more than maybe we saw in the first administration, and
Speaker 5: there are not the guardrails necessarily. I know you talk
Speaker 5: about the Treasury Secretary, but it's taken a while I
Speaker 5: feel like for maybe a potential guardrail to come forward.
Speaker 5: So I just wonder, you know, Vince, traders like volatility,
Speaker 5: but CEOs don't, right, and can consumers don't. They need
Speaker 5: things to be certain at this point to make decisions
Speaker 5: and to spend money. So I am just curious that
Speaker 5: this trade we could see another sell off tomorrow. I mean,
Speaker 5: are there any guarantees at this point?
Speaker 4: No, I don't think there are any guarantees whatsoever. And
Speaker 4: I think you make a really really good point. Corporation
Speaker 4: ceo CFOs do not like this. Consumers certainly don't like this.
Speaker 4: I think what you're going to see is probably a
Speaker 4: little pulled back in investment, particularly capex from corporations, particularly
Speaker 4: the larger corporations. You're going to see mid sized small
Speaker 4: businesses be very very cautious about how they spend money.
Speaker 4: One of the big things that you know, I ran
Speaker 4: a small business, and one of the key things about
Speaker 4: running a small business is cash flow. And the last
Speaker 4: thing you want to do is put yourself in a situation.
Speaker 4: You know, it's a difficult situation. You want to spend
Speaker 4: money on inventory anticipating you know, price increases, but at
Speaker 4: the same time you need to preserve cash flow because
Speaker 4: you could buy all this inventory and then nobody comes
Speaker 4: into by it from you, correct just they're worried about
Speaker 4: the future. And so now you're stuck with shelves that
Speaker 4: are full of lower price items, but still nobody wants them. So,
Speaker 4: you know, for a smaller business, it's a really really
Speaker 4: tough situation. You know, for mid sized businesses as well.
Speaker 4: You know, the big, big companies, you know, Pepsicos of
Speaker 4: the World and such. You know, they can withstand this
Speaker 4: for a while, Apples of the world. They've got the
Speaker 4: balance sheet to to eat that inventory for quite a
Speaker 4: long time. But other businesses do not, and that is
Speaker 4: probably going to weigh on both sentiment spending and the economy.
Speaker 4: We're still looking at We're still looking at first quarter
Speaker 4: growth pen from the Atlanta GDP at minus two point
Speaker 4: four percent.
Speaker 5: Right down, but not as bad as it was, but
Speaker 5: still down.
Speaker 4: It does have it from two point eight to two
Speaker 4: point FOURY, you're absolutely right, but we did.
Speaker 5: We just have a headline crossing Goldman Sachs rescinding its
Speaker 5: recession call after this move by the President on tariffs.
Speaker 5: I feel like it's like bing bing bing, you know,
Speaker 5: ricochet rabbit, Like you are just seeing people who just
Speaker 5: see I know who that is, Google it everybody, No,
Speaker 5: but it's just right, like, so that's that's the world
Speaker 5: we live in, right, and so that's a difficult environment.
Speaker 4: It's totally I mean, Goldman made this call literally before
Speaker 4: the announcement, so they couldn't have found it any worse.
Speaker 4: I mean, not that you know, it was their fault.
Speaker 4: And so of course they're coming pulling it back now
Speaker 4: and it goes. It speaks exactly to what you say
Speaker 4: as to how businesses are trying to find their way
Speaker 4: in this world and they're constantly changing their mind. And
Speaker 4: when you have that uncertainty, if you're running a business,
Speaker 4: you're going to basically say, full stop, we're not investing,
Speaker 4: we're not hiring, we're not we're not moving forward with
Speaker 4: plans at the moment. Let's shelve everything. We're going to
Speaker 4: keep looking at the situation. We're going to wait and
Speaker 4: see and then more likely they're not. They're going to
Speaker 4: wait and see for things to really develop before they
Speaker 4: step in. You don't want to step in on day one,
Speaker 4: thinking again, maybe somebody changes their mind. You're going to
Speaker 4: want to see this developed. I think in the long run,
Speaker 4: this will develop positively. I think that you know, China
Speaker 4: will eventually Trump is going to need to look for
Speaker 4: a way to give President she Away a face saving
Speaker 4: way out, to give him an opportunity to come to
Speaker 4: the table to have this conversation. If that happens, I
Speaker 4: think you can just you know, wipe all of this away.
Speaker 4: Starting from you know, the beginning, things are going to
Speaker 4: move positive. I think you'll see a lot freer trade,
Speaker 4: a different form of globalization, if you will.
Speaker 3: Vince to the point that Carol just brought up this
Speaker 3: headline crossing that says Goldman Sachs rescinds its recession call
Speaker 3: after the Trump tariff pause. I'm confused about what fundamentally
Speaker 3: changes here, because as we heard from the Treasury Secretary,
Speaker 3: as we saw in that post from the President, this
Speaker 3: is a ninety day pause on countries that are not
Speaker 3: retaliating right now, this doesn't seem like a fundamental shift
Speaker 3: in the way the president is thinking about tariffs. Why
Speaker 3: does the recession risk rem then, at least according to Goldman.
Speaker 4: Yeah, but if you think about the countries that are retaliating,
Speaker 4: it's really just the European Union, Canada and China.
Speaker 3: Those are big trading partners.
Speaker 4: Yeah no, but Canada, Canada is in a different situation.
Speaker 4: Cartney's running for reelection, so you expect him to talk tough.
Speaker 4: One would assume he is the the the front runner
Speaker 4: at this point. He is the odds on a favorite.
Speaker 4: Will he change his tune after he is elected? I
Speaker 4: think he will. I think he's going to look to
Speaker 4: do something something positive for Canada, and that's going to
Speaker 4: be Yeah. You know, listen, we're allies. Let's let's let's
Speaker 4: cut this out. You know, where we're enemies, we're allies.
Speaker 4: Let's let's put this aside and let's figure out what
Speaker 4: our differences are similar to what Shine Maam is doing
Speaker 4: in Mexico.
Speaker 3: Right, Yeah, that's a good viewing.
Speaker 4: It's definitely. I think the EU is definitely going to
Speaker 4: come around again because they're not in great shape right now.
Speaker 3: There was a question shouted at the Treasury Secretary as
Speaker 3: he was walking away, what about the EU? What about
Speaker 3: the EU? Because they have retaliated. So we'll expect to
Speaker 3: hear maybe something on that and we will bring it
Speaker 3: to you when we do get an answer. Vince, thank
Speaker 3: you for jumping in today. Vince SIGMREALI. He's a global
Speaker 3: macro strategist.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
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Speaker 3: Let's drive to the clothes with a brand Shooty, Chief
Speaker 3: investment officer at Northwestern Mutual Wealth Management. The firm has
Speaker 3: more than three hundred billion dollars in assets under management.
Speaker 3: The division that Brent oversees has about ninety billion dollars
Speaker 3: in AUM. He joins us from Milwaukee. We got to
Speaker 3: start with just today's trade and what we're seeing. Superlatives abound. Brent,
Speaker 3: is this the environment people should be buying?
Speaker 4: Well?
Speaker 6: I think if your time arising is longer term, I
Speaker 6: think usually any day is a good opportunity to buy.
Speaker 6: I think in the near term, I still think there's
Speaker 6: tremendous volatility still out there. I don't think we've learned
Speaker 6: too much new We have a reprieve, but certain we
Speaker 6: still have ninety days of uncertainty. As you and your
Speaker 6: previous guests were talking about, and during that time period,
Speaker 6: I think anything's on the table, and so to me,
Speaker 6: you still want to make sure that you're careful. You
Speaker 6: want to make sure that you're at your allocation and
Speaker 6: not overweight, and that you're prepared in case the market
Speaker 6: does go down again, that you will stay through to
Speaker 6: the other side to get to the higher returns that
Speaker 6: are somewhere off in the future.
Speaker 3: When you say prepared, when you say prepared, do you
Speaker 3: just mean like, have the stomach for it to stay
Speaker 3: the course? Is that what you mean?
Speaker 6: Yeah, stay the course and have the stomach for it. Look,
Speaker 6: I think unfortunately a lot of investors are still concentrated.
Speaker 6: I see it when I travel around the country. They
Speaker 6: only want to own US large cap stocks, and they
Speaker 6: want to own a narrow swath of the US large
Speaker 6: cap stocks. To me, the trend has changed, the environment
Speaker 6: has changed, whether or not the tariffs go through. I
Speaker 6: think some form of them still do. The tariffs are
Speaker 6: still something that I think the President has an affinity
Speaker 6: for and believes are the right thing to do. I
Speaker 6: don't think he really is in love with trade altogether.
Speaker 6: He just decided today that the market damage was probably
Speaker 6: more than he wanted in the near term, and so
Speaker 6: therefore pulled them back. I want people to diversify every
Speaker 6: economic cycle. Whether or not this cause of the recession
Speaker 6: or not will find out, but every cycle has new leadership.
Speaker 6: And to me, the S and P five hundred is
Speaker 6: still trading at twenty times, even though it's off its
Speaker 6: highs by quite a bit. Twenty times forward earnings, there
Speaker 6: are opportunities other places that are trading at thirteen or
Speaker 6: fourteen times, where I think there are better opportunities for
Speaker 6: those people willing to think intermediate to longer term, which
Speaker 6: is what you're supposed to do when you buy equities.
Speaker 5: All right, So you're saying, Brent at this point that
Speaker 5: the S and P five hundred is still overpriced over values, and.
Speaker 6: That's where I think, Yeah, no one cares about No
Speaker 6: one cares about valuation on the upside. But when people
Speaker 6: like me start thinking about when they're going to dip
Speaker 6: their toe in or potentially buy more OVERVOT stocks. On
Speaker 6: the downside, they start doing valuation exercises because that's marginal safety.
Speaker 6: And to me, that's where I think people need to
Speaker 6: think about the next side of this. You know, if
Speaker 6: it's up, up, and a way, then we truly have
Speaker 6: those areas of the market that are cheaper that I
Speaker 6: would expect to do better if it's not some other
Speaker 6: those other parts of the market have evaluation you know,
Speaker 6: floor to them, And so that's where I I just
Speaker 6: want people to diversify because no one knows exactly how
Speaker 6: that's going to play out, and today the anadote for
Speaker 6: that is diversification, not concentration, all.
Speaker 5: Right, So that's where I want to go to because
Speaker 5: I'm curious if no one knows where this is going
Speaker 5: to play out, and if it might be another ninety
Speaker 5: days before we really know maybe what the next sequence is,
Speaker 5: you know, uncertainty continues to rain. You said, trade has changed,
Speaker 5: environment has changed. So what is exactly diversification in this environment?
Speaker 5: How do you see it? What's the equity fixed income mix,
Speaker 5: what's the US versus global mix? What is the do
Speaker 5: I just kind of throw it in some kind of
Speaker 5: cash like investment. What do you do here? We are
Speaker 5: like over the last three days, you got beaten up.
Speaker 5: If you had a lot of equity exposure, just got
Speaker 5: a bounce. Do we sell at the end of this
Speaker 5: and put it into something safer for I don't know,
Speaker 5: six months, twelve months, who knows?
Speaker 6: Hopefully today shows you that you shouldn't put anything into cash,
Speaker 6: and cash only whens in so many different circumstances, not many, actually,
Speaker 6: And that's where if you put your assets in one
Speaker 6: asset class such as cash, you're telling me that you
Speaker 6: know exactly what's going to happen. And I'm telling you,
Speaker 6: after doing this for thirty years, I don't, and I
Speaker 6: don't especially know with what's happening today, given the back
Speaker 6: and forth that can occur and these huge swings that
Speaker 6: can occur. Look, we've been cautious for a little while.
Speaker 6: We're towards the end of an economic cycle. The market
Speaker 6: is fully valued and there is the tariff uncertainty out
Speaker 6: there that's more of the near term. That doesn't mean
Speaker 6: that you abandon your equity ratio and what's in your
Speaker 6: financial plan, but that means you're at your target are
Speaker 6: just a bit below and you're cautious about what could happen,
Speaker 6: and you're ready to hold through whatever occurs. On the
Speaker 6: other side of this, I think of valuation becoming much
Speaker 6: much more important once again in the future, and I
Speaker 6: think about a three, five, seven, ten year time holding
Speaker 6: period where valuation does matter, and that's where I think
Speaker 6: there's opportunities in people that have in parts of the
Speaker 6: market that people have decided to move out of because
Speaker 6: they haven't done well for the prior a few years.
Speaker 6: That's where I think their opportunity is going forward. And
Speaker 6: if you're not diversified, hopefully today is a wake up
Speaker 6: call that it's time to do so.
Speaker 3: So are you know thinking about this from the perspective
Speaker 3: of valuations, which you just mentioned, If people are thinking
Speaker 3: about dipping their toes back in, what is a valuation
Speaker 3: that you would want to see on the S and
Speaker 3: P five hundreds, It's say, okay, now's the time.
Speaker 6: It's not twenty times for darrings that expected to go
Speaker 6: ten days.
Speaker 3: Is it eighteen?
Speaker 6: I think perhaps it's somewhere lower than eighteen, maybe sixteen,
Speaker 6: maybe fifteen, depending on if we have a recession or
Speaker 6: now that's certainly important, but maybe eighteen's more reasonable, and
Speaker 6: if you do the math on that with the earnings,
Speaker 6: you're a lower number than what you are today. That's
Speaker 6: not to say that you should be selling that. It's
Speaker 6: just saying that there are better opportunities than things like
Speaker 6: small midcaps, which I know are economically sensitive and so
Speaker 6: does everyone else. They traded thirteen to fourteen times earnings.
Speaker 6: That's historically more normal, and that gives them more of
Speaker 6: a margin of safety, and that gives them more opportunity
Speaker 6: for upside when valuation matters in the longer term.
Speaker 3: Yeah, it's okay, Okay, that makes sense. Okay, from the
Speaker 3: perspective of if we drill down a little bit beyond
Speaker 3: in disease and sort of regionally. You said that you
Speaker 3: still go around the world and you hear people want
Speaker 3: to buy megacap us companies. Do you see that changing
Speaker 3: at all in the near term. There's a lot of
Speaker 3: questions right now about this idea of US exceptionalism.
Speaker 6: If history is any guide, look historically and tell me
Speaker 6: how long one trend has lasted. Has it lasted forever?
Speaker 6: I think back to the late nineteen ninety nine period,
Speaker 6: which is exactly what this reminds me of, and that
Speaker 6: was a period of American exceptionalism. That was a period
Speaker 6: when everyone only wanted to own large cap, mega tech
Speaker 6: tech stocks and then they were essentially didn't make a
Speaker 6: new high for seventeen years, while every other part that
Speaker 6: they didn't want to own did make new highs. And
Speaker 6: so no one theme has dominated forever. I think the
Speaker 6: backdrop has changed. The backdrop of the prior three or
Speaker 6: four or five years has been American exceptionalism driven by
Speaker 6: a lot of debt, which is a bipartisan thing. Now
Speaker 6: you're seeing places like Europe where they're waking up to
Speaker 6: the reality that they have to spend money on defense
Speaker 6: and infrastructure. Places like Germany haven't issued a lot of debt,
Speaker 6: and so I think you're seeing a definite trend change.
Speaker 6: And it's not to say that those companies in the
Speaker 6: US are companies that you should have known. I just
Speaker 6: want people to admit they don't know what's going on
Speaker 6: to happen and not concentrate, because when you concentrate, you
Speaker 6: have to make difficult decisions like do you sell something
Speaker 6: now or do you think that one part of the
Speaker 6: market is what's going to be going forward, and no
Speaker 6: one knows that answer, Bret.
Speaker 5: What I really keep thinking about is what are the
Speaker 5: long term implications for investors, for the world at large,
Speaker 5: for trade at large. Maybe we don't have clarity on
Speaker 5: that too. But are you assuming that on the other
Speaker 5: side things are changed dramatically and that means the growth
Speaker 5: outlook for US companies has changed, the growth for the
Speaker 5: US economy has changed. I'm just curious if you can
Speaker 5: go that far out here.
Speaker 6: I think the administration, the president most likely once a
Speaker 6: currency that's lower. I think that's a tailwind towards international stocks.
Speaker 6: I mentioned Europe spending more money, possibly in other parts
Speaker 6: of the world spending more money, which is something that
Speaker 6: they probably need to do on defense. Anyway, I think
Speaker 6: about perhaps even more domestic US. Does that benefit small caps?
Speaker 6: What about deregulation going forward? Certainly there are different things
Speaker 6: that happen during every economic cycle. They're probably similar and
Speaker 6: how play out, But I think the backdrop for the
Speaker 6: next one had shifted, and that's where I think there
Speaker 6: are other opportunities. Plus, if you think about the opposite
Speaker 6: side of our trade deficit, that is a financial account
Speaker 6: surplus where foreigners have put a lot of money into
Speaker 6: our markets. Does that lower our raise our cost to
Speaker 6: capital in the future, Do they buy less of our treasuries?
Speaker 6: Which I think was a question people were asking earlier
Speaker 6: today as the bond market kind of blew out, Was
Speaker 6: that because foreigners were becoming less interested? And so I
Speaker 6: think there are lots of trend changes that occur no
Speaker 6: matter what happens in the next few weeks and days,
Speaker 6: and that's where I think there's opportunities on the other
Speaker 6: side for parts of the market that have been left
Speaker 6: behind for the prior two or three years. And every
Speaker 6: cycle ends this way. I take you back to the
Speaker 6: late eighties, people only wanted to own Japan. I take
Speaker 6: you back to the late nineteen ninety nine time period.
Speaker 6: People only wanted to own tech. They didn't want to
Speaker 6: own international, they didn't want to own the Eurozone, they
Speaker 6: didn't want to own commodities. Then we got to two
Speaker 6: thousand and seven, two thousand and eight, people were certain
Speaker 6: that China was going to drive US forward, and that
Speaker 6: commodities were the asset class they all should own, and
Speaker 6: that the US was the dirtiest shirt or whatever the
Speaker 6: commentary was back then. And then things have changed. Once again,
Speaker 6: the future will be different in the past. At least
Speaker 6: that's what history has shown me.
Speaker 5: Okay, So one thing that we've been asking some of
Speaker 5: our guests, I mean, are we getting to a point
Speaker 5: where when we think about the future, as you said,
Speaker 5: people only wanted to own Japan or some different things.
Speaker 5: Do we get to a point where a lot of
Speaker 5: global investors don't want to own the United States that
Speaker 5: it's uninvestable.
Speaker 6: I don't know about that. I mean, I think perhaps
Speaker 6: there's some sort of pullback from that from the treasure
Speaker 6: perspective or somewhere else. But right now, we still are
Speaker 6: the deepest, most liquid markets, and we do have companies
Speaker 6: that do an incredible job of creating profits. That's something
Speaker 6: that's likely not to change. And so I don't think
Speaker 6: people are going to pull back dramatically from the US.
Speaker 6: But certainly right now there is a heavy allocation to
Speaker 6: US across the world. There's probably just a little bit
Speaker 6: of room for that to be taken back to a
Speaker 6: touch and put towards other places that may be a
Speaker 6: better at least in the near term place going forward.
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Speaker 5: All right, we have a guest in studio we want
Speaker 5: to bring in and talk a little bit more about
Speaker 5: the market's Danielle di Martino, Booth, CEO and chief Strategies
Speaker 5: at Quill Intelligence, former advisor to the President of the
Speaker 5: Dallas Fed here in our Bloomberg Interactive Broker's studio, a
Speaker 5: little bit out of breath, just trying to keep up.
Speaker 5: How are you and what are you thinking about the
Speaker 5: news today and what fundamentally has changed, if anything, in
Speaker 5: terms of the market.
Speaker 7: Fundamentally is a great big word, and I'm not so
Speaker 7: sure that the bond market has the answer to that question.
Speaker 7: The stock market seems like it's it's already given you
Speaker 7: an answer. But we're still up on the benchmark ten
Speaker 7: year yield. You know, we're about four basis points on
Speaker 7: the day it crossed over the four fifty line. In
Speaker 7: overnight trading. We're seeing continued unwind of the basis trade
Speaker 7: obviously in overnight trading. I'm not gonna I'm not going
Speaker 7: to stop watching the markets at the Asian open.
Speaker 5: I'll probably still.
Speaker 7: Wake up in the mole and I to see how
Speaker 7: the bond market is faring. But we have no idea
Speaker 7: if this is the art of the deal or the
Speaker 7: art of playground fighting, and China is going to come
Speaker 7: back with yet more retaliatory.
Speaker 5: Measures of their own. We don't know.
Speaker 7: This is just going to keep ramping up.
Speaker 3: So I want to get to China in a second.
Speaker 3: But before we get there, you brought up the bond
Speaker 3: market and the equity market.
Speaker 5: Hm.
Speaker 3: Who's right in your view?
Speaker 5: Gosh?
Speaker 7: I mean, you know, look, we're coming into earning season, right,
Speaker 7: Delta was obviously battening down the hatches as the first example.
Speaker 7: Do we really think that with banks tightening lending standards? Right?
Speaker 7: The dallasht To Reserve release a survey just a few
Speaker 7: days ago that said that loan demanded already declined, lending
Speaker 7: standards had already tightened prior to April to second, So
Speaker 7: are bank's going to pull back on any plans that
Speaker 7: they had due to this uncertainty because of one announcement?
Speaker 7: And I think we'll learn a lot more from Corporate America.
Speaker 5: Yeah, that's what they're saying.
Speaker 3: We hear that from Gina Marnadams. I mean we've heard
Speaker 3: that from everyone, like, okay, earnings are starting, yes right now?
Speaker 3: Heard from Delta Today Friday, we'll hear from some of
Speaker 3: the big banks, including JP, Morgan Chase. What do you
Speaker 3: want to hear from these companies? Like, what is the
Speaker 3: question that you need to have answered?
Speaker 7: I want to know if they're comfortable with where their
Speaker 7: margins are going forward, or if they feel that they're
Speaker 7: going to have to continue to preemptively cut costs and
Speaker 7: continue to push through as we saw today with the
Speaker 7: newly found group that I can't even think of the
Speaker 7: name that now owns JP, J C. Penny and Brooks Brothers.
Speaker 7: They just pushed through a nine percent layoff announcement today.
Speaker 7: I want to know if the margins are protected enough
Speaker 7: or if they're going to continue to react by continuing
Speaker 7: to cut costs. You know, we've seen we've seen corporate
Speaker 7: bankruptcies up twenty percent this year through March. That has
Speaker 7: nothing to do with this tariff terror as I like
Speaker 7: to call it.
Speaker 5: You're talking about Catalyst brands.
Speaker 7: I'm talking about Catalyst brand. Yes, that came across the
Speaker 7: terminal this afternoon.
Speaker 5: You know, I'm thinking you go back and you put
Speaker 5: out a new report from Queer Qi Research in the morning,
Speaker 5: and is it a case of do you say things
Speaker 5: have changed, you know, dramatically, or do you say, hey
Speaker 5: folks again, Right, there's worries in the bond market, like
Speaker 5: this is something that necessarily has not changed, right.
Speaker 7: And you know, we had the probability of a FED
Speaker 7: rate cut in May. Came off quite a bit to day,
Speaker 7: but there's still.
Speaker 5: A lot of FED speakers are saying differently. They're still
Speaker 5: on inflation watch.
Speaker 7: They are still on inflation watch, but I can guarantify
Speaker 7: it they've been on liquidity watch for the last seventy
Speaker 7: two hours. Because remember above all else, above both the
Speaker 7: inflation and employment mandate. They are the lender of last resort, right,
Speaker 7: And I think that it has been the moves in
Speaker 7: the bond market, the moves in bond market volatility, the
Speaker 7: moves in investment grade spreads and highield spreads. These are
Speaker 7: the things that really are going to spook the FED.
Speaker 7: And they have to start paying attention to their employment mandate.
Speaker 5: Do you buy? And I have to find my notes
Speaker 5: here scrolling. Sorry, it's been one of those days where
Speaker 5: you have to kind of scroll your script back and forth.
Speaker 5: US Treasury Secretary Scott Bessett earlier downplay the recent sell
Speaker 5: off in US treasuries. He attributed it to a normal
Speaker 5: deleveraging process in the bond market. Is that what we
Speaker 5: were seeing was a normal deleveraging process in the bond market.
Speaker 5: He's someone who very much understands the financial markets. How
Speaker 5: do you see you also understand the financial markets and
Speaker 5: have seen a fair amount of cycles, right, was that
Speaker 5: a normal deleveraging process?
Speaker 7: Well, when you've got the owner of seven hundred and
Speaker 7: sixty billion dollars over the US treasuries under attack, I
Speaker 7: eat China. The answer is I don't know, and I
Speaker 7: don't think he can know either, So it really the
Speaker 7: jury's out again. Just because it's only theoretically China in
Speaker 7: the crosshers, that does not take away the fact that tariffs.
Speaker 5: Remain in place.
Speaker 7: We still have a ten percent tariff exactly, and we
Speaker 7: still don't know what the ripple effects are going to
Speaker 7: be across the rest of Asia and other large holders
Speaker 7: of our treasuries and how this is going to play
Speaker 7: out in the bond market.
Speaker 5: You know what it's what's terrifying. Is I feel like
Speaker 5: for years we have had conversations. I've certainly had conversations
Speaker 5: with my husband, but it's like, what if all of
Speaker 5: us then China says we're not going to buy your treasuries,
Speaker 5: or what if not like Japan or Japan?
Speaker 4: Right?
Speaker 5: And I don't I'm not going to say that's exactly
Speaker 5: what's happening, but.
Speaker 7: It feels like there's a lot of but there is
Speaker 7: some of this happening, right there is there's some of
Speaker 7: it happening. And right now the United States treasury market
Speaker 7: is not being treated as its old safe haven self,
Speaker 7: and it's supposedly the world's risk free asset.
Speaker 5: Rule of law safe haven, all of those trustworthy, right.
Speaker 7: And you know, I had somebody in my Bloomberg chat
Speaker 7: room today come out and say, if it was me
Speaker 7: and I was a credit rating agency, I would still
Speaker 7: downgrade this sovereign daddy, the United States because of this
Speaker 7: crazy behavior, because it is so unsettling, it's so meant
Speaker 7: so much uncertainty. You know, even in the hard data,
Speaker 7: as far as the Federal Reserve is concerned, going forward,
Speaker 7: we haven't even seen a sintilla of evidence of the
Speaker 7: eighty thousand people who took the buyout from the federal
Speaker 7: government and or all of the layoffs and closures that
Speaker 7: have that have followed this, and we still have a
Speaker 7: household we still have an impaired household balance sheet on
Speaker 7: top of all of that.
Speaker 3: Where does that show up? You cited data right there,
Speaker 3: But where are we going to start to see cracks form?
Speaker 3: It sounds like you're a little concerned.
Speaker 7: I'm definitely concerned. Were not only up twenty percent year
Speaker 7: over year with corporate bankruptcies, we're up fifteen percent year
Speaker 7: over year with household bankruptcies. So we're starting to see
Speaker 7: that unravel as well.
Speaker 5: I don't think that.
Speaker 7: Earlier today, Jamie Diamond said that he expected increased defaults
Speaker 7: going forward, and magically they disappeared with the wave of
Speaker 7: one announcement. It doesn't work that way when credit markets
Speaker 7: begin to come unglued and we have not seen, you know,
Speaker 7: the insurance to protect against a default in investment grade.
Speaker 7: It came down quite a bit today, but it certainly
Speaker 7: didn't rally like the stock market. So we have to
Speaker 7: be going cognizant of this massive leveraging up across corporate America,
Speaker 7: across household balance sheets. The New York Fed told US
Speaker 7: nine point seven million student loan bars or at risk
Speaker 7: of having their FI go scores fall. There are a
Speaker 7: lot of things going on right now, A miss again
Speaker 7: continued cost cutting in corporate America. I continue to go
Speaker 7: back to that because it is their obligation, it's their
Speaker 7: obligation to shareholders, or it's their obligation to their family
Speaker 7: if they run a dry cleaning company, to make sure
Speaker 7: that they shore up their margins and stay in business.
Speaker 5: Everybody's looking at their balance sheets right now, absolutely right
Speaker 5: and rightly so exactly so, Danielle, do you then see that, Okay,
Speaker 5: ninety day pause, ninety day extension. As you said, there's
Speaker 5: still ten percent tariffs out there, But so are we
Speaker 5: in limbo potentially for another ninety days unless something else
Speaker 5: comes up.
Speaker 7: So I think we're in relief, and then I think
Speaker 7: that that relief is going to dissipate fairly quickly when
Speaker 7: we realize how much we still don't know. We don't
Speaker 7: I mean, you still hear Treasure Secretary Vessent talking tough
Speaker 7: about Canada. We don't know what's going to happen in Mexico.
Speaker 7: But by everything we're seeing from those two countries, pmis
Speaker 7: they're in recession, right, So our neighbor to the north
Speaker 7: and our neighbor to the south are both in recession.
Speaker 7: I'm from the great State of Texas. If Mexico's in recession,
Speaker 7: Texas is in recession, I guarantee you, because we're the
Speaker 7: biggest exporting state and there's a ton of uncertainty that
Speaker 7: continues to weigh on, especially the auto sector, but also lumber.
Speaker 7: We need Canada's heavy sweet crude because our refineries don't
Speaker 7: refine what we pull out of the ground, so we
Speaker 7: need for that trade to continue, and we need resolution
Speaker 7: closer to home first, I would say, so, if.
Speaker 3: You were advising folks in the White House right now
Speaker 3: on economic policy, how would you advise them?
Speaker 7: I would say to stop saying that this is all negotiations,
Speaker 7: because if it's negotiations, it's certainly not how negotiations are
Speaker 7: done among adults. We have to recognize who our economic
Speaker 7: allies are and we need to forge relationships going for
Speaker 7: If China is the sworn enemy, so be it. But
Speaker 7: why should there necessarily need to be collateral damage in
Speaker 7: the form of the layoffs that we saw them out
Speaker 7: of Canada last week, Why we harm thy neighbor. No,
Speaker 7: I don't think that's how it's done. I think that
Speaker 7: we need to have a little bit I'm going to
Speaker 7: say this out loud, a little bit more bessent and
Speaker 7: a little bit less Navarro.
Speaker 5: Is that likely? Do you think based on what we got?
Speaker 6: Oh?
Speaker 7: I do think Besson has a more of President Trump's ear.
Speaker 7: He does because I think Besson's besons initial wanting to
Speaker 7: take a slower approach, wanting to have more caret less stick,
Speaker 7: wanting to provide in numerous interviews that he did prior
Speaker 7: to being confirmed, saying we need to give American corporations time.
Speaker 7: If we want for them to re sure, we need
Speaker 7: to give them time. And for Heaven's sake, we can't
Speaker 7: beat them over the head for friend shoring because it's
Speaker 7: what they were told to do. So you can't invest
Speaker 7: billions of dollars in Mexican auto plants and then be
Speaker 7: told that that's sorry, write it off, it's a sunk cost.
Speaker 7: It doesn't work that way.
Speaker 5: It's interesting because I think I'm trying to remember who
Speaker 5: we who said that to us? Was it Maybe it
Speaker 5: was Josh Wing Grove who said that I think best
Speaker 5: Into and Lutnik were in the Oval office or in
Speaker 5: the room when the President put out that social media
Speaker 5: post talking about the ninety day pause. All right, so
Speaker 5: walk us through. I don't know the next couple of days,
Speaker 5: like how are you thinking about Lot's radar?
Speaker 7: And I'm back to being data dependent, I really am
Speaker 7: what data right now? Is the US economic weekly jobless
Speaker 7: claims and you know what, not the CPI but the PPI.
Speaker 7: I want to know how much input costs are rising
Speaker 7: and therefore how much margins are at risk, because either
Speaker 7: you pass those higher costs through or you are post
Speaker 7: serial and you're closing two plants down, which was announced
Speaker 7: earlier today, because Americans are only going You can't squeeze
Speaker 7: blood from rock if their budget is their budget and
Speaker 7: their income is their income. You know, this is why
Speaker 7: you know we found out just a few weeks ago
Speaker 7: that seventeen percent of existing home sales in twenty twenty
Speaker 7: four were to multi generational households, right, because people are
Speaker 7: doing what they can to live within budgets, even if
Speaker 7: it's trading down to a generic brand and you can
Speaker 7: no longer buy that post box that you'd prefer to
Speaker 7: buy life is light. We have to live within our budgets, I.
Speaker 3: Think, you know, and we're going to be talking about
Speaker 3: China in a second. I said we'd come back to China. Yeah,
Speaker 3: after we talked with you a little bit. I think
Speaker 3: that's still for a lot of investors and for a
Speaker 3: lot of observers, the big question.
Speaker 7: Mark, well, it certainly is. I mean, you know, quietly
Speaker 7: we announced that they were a currency manipulator. They might
Speaker 7: or might not have challenges with trying to prevent flight
Speaker 7: out of the country.
Speaker 3: So I'll ask you the same question I asked Joe
Speaker 3: Wisenthal earlier, which is what's the off ramp or the
Speaker 3: de escalation for China? Because every day it just seems
Speaker 3: like more tit for tat, more retaliatory tariffs, and more
Speaker 3: tariffs being imposted.
Speaker 5: It's a dangerous game of chicken, right, it really is.
Speaker 7: And my grandmother Di Martino from Connecticut, may she rest
Speaker 7: in peace, would say that you were dealing with two calabress,
Speaker 7: two men with very thick heads and huge egos. And
Speaker 7: that's why again my greatest concern, why I'll be watching Asia,
Speaker 7: why I'll be watching you know, the offshore you won
Speaker 7: was up about a half percentage point before this announcement
Speaker 7: closed down. I'll be watching that pig set. I'll be
Speaker 7: watching to see if we're going to have a continued escalation,
Speaker 7: because you know what, the last time we escalated, they
Speaker 7: went right back at us.
Speaker 5: What do you make of when the President says China
Speaker 5: doesn't know how to go about it, China wants to
Speaker 5: make a deal, it doesn't know how to go about it.
Speaker 7: Great, So you you you basically stick a fork in
Speaker 7: the eye of somebody who doesn't want to lose face.
Speaker 5: I mean, what do you mean, Well, it's all about
Speaker 5: losing face. Okay?
Speaker 7: So and and by the way, so was.
Speaker 5: Retaliation by China losing? Was it that that was keeping face?
Speaker 5: But but for China?
Speaker 2: Yes?
Speaker 5: But do you think the president was surprised by that?
Speaker 5: I mean, I know, we're just kind of or do
Speaker 5: you think he expected it in terms of this game
Speaker 5: back and forth.
Speaker 7: I certainly don't think you should have been surprised by it.
Speaker 7: But then we rereramped it up today now it's one
Speaker 7: hundred and twenty five percent. At some point, regardless of
Speaker 7: what happens with China's neighbors, if you take the Chinese
Speaker 7: economy down to its knees. It will affect its neighbors'
Speaker 7: economies as well.
Speaker 5: Wh okay, we're going to get into the Chinese economy
Speaker 5: in just a moment. Thank you so much, such a pleasure.
Speaker 5: Danielle Di Martino, Booth, CEO and chief strategists of Qi Research,
Speaker 5: QI Research, Right Research, Qui Research, former advisor, as we
Speaker 5: mentioned earlier too, to the President of the Dallas Fed.
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