WEBVTT - Bond Bulls Emerge as Risk-Off Sentiment Builds 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 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 --> 0:00:30.560 I'm cue here. Ian Lincoln publishes BM on Capitol Americans. 0:00:30.600 --> 0:00:33.800 We're double barrel, yeah, Ian Lnoln Publishing, and Dan Scully 0:00:34.120 --> 0:00:36.400 just darkened the door. Lets me get better than this. 0:00:36.560 --> 0:00:39.280 Let me quote exactly for Global Wall Street. Mister Lincoln, 0:00:39.720 --> 0:00:42.600 with this backdrop, we struggle with the notion of wanting 0:00:42.640 --> 0:00:46.880 to aggressively fade the rally. That's price up, yield down. 0:00:47.560 --> 0:00:50.480 Don't go against that. On the other hand, is three 0:00:50.640 --> 0:00:54.800 handle tens approach the four point zero zero to four 0:00:54.840 --> 0:00:58.280 point zero two percent zone will be difficult to breach 0:00:58.400 --> 0:01:02.760 solely based on sentiment in from the holiday weekend. Ian Lincoln, 0:01:02.800 --> 0:01:06.440 there moments ago, we are so advantaged that Dan Skelly's 0:01:06.480 --> 0:01:10.080 here off of that statement from Bank of Montreal. Mister 0:01:10.120 --> 0:01:13.759 Skelley is with Morgan Stanley Wealth Management. Is it a 0:01:13.800 --> 0:01:16.840 new bond regime. I'm looking at the Bloomberg and it's 0:01:16.880 --> 0:01:19.880 saying there's a trend in place. Do you buy it? 0:01:20.480 --> 0:01:22.920 Good morning, Tom. It does feel like people are risk 0:01:23.000 --> 0:01:26.319 off at the moment. Obviously, you've got this on the 0:01:26.360 --> 0:01:28.680 one hand, dissonance in the fact that people want to 0:01:28.680 --> 0:01:32.880 play global reflation, small caps international, and on the other 0:01:32.959 --> 0:01:36.000 hand you're seeing just bondyields lower in terms of I 0:01:36.040 --> 0:01:39.839 think further fears of further concern around the AI trade 0:01:39.880 --> 0:01:40.440 within the US. 0:01:40.440 --> 0:01:44.080 We're linking the AI trade dynamics over to price up, 0:01:44.200 --> 0:01:44.759 yield down. 0:01:45.040 --> 0:01:47.240 You can't do it with the economic data, whether it 0:01:47.319 --> 0:01:50.680 be the surprise index at multi month highs, whether it 0:01:50.760 --> 0:01:52.920 be the jobs data as of the last week or two. 0:01:53.160 --> 0:01:55.440 So you can't link it that way, Dan, I. 0:01:55.440 --> 0:01:59.360 Mean, nobody does tech research better than the Morgan Stanley complex. 0:01:59.360 --> 0:02:01.200 You guys have been leading on that for decades. Here, 0:02:01.440 --> 0:02:03.560 what do you guys make of this fade? 0:02:03.640 --> 0:02:06.520 Software just broadly defined, I mean, software is a story 0:02:06.520 --> 0:02:08.280 that just works for everybody all the time. 0:02:08.520 --> 0:02:10.480 Now it's really under some risk here. 0:02:10.360 --> 0:02:12.920 Sure, and thank you, Paul, appreciate that that kudos, so 0:02:13.200 --> 0:02:15.440 number one. I think it's one of these many examples 0:02:15.440 --> 0:02:17.800 of dissonance at the moment. On the one hand, the 0:02:17.840 --> 0:02:20.760 market is fearful over AI spending on the other hand 0:02:20.760 --> 0:02:21.720 of the market saying. 0:02:21.520 --> 0:02:23.480 Software is going to be disrupted. So I can't. 0:02:23.280 --> 0:02:28.440 Explain that one in terms of efficacy versus disruption. And look, 0:02:28.480 --> 0:02:30.640 I would say not all software, not to be that 0:02:31.080 --> 0:02:34.240 completely out of consensus, but not all software is created equal. 0:02:34.280 --> 0:02:37.120 When I look at the varying types of software. Some 0:02:37.200 --> 0:02:39.040 of these companies are actually. 0:02:38.760 --> 0:02:41.799 Partnered with the AI model makers today. 0:02:41.880 --> 0:02:44.480 You know, it's funny we were talking about software and 0:02:44.639 --> 0:02:47.200 just tech research and think Mary Meeker. 0:02:47.440 --> 0:02:48.960 She was in the news again this weekend. 0:02:48.960 --> 0:02:51.480 Mary Meeker, she won the AT and T Pebble Beach 0:02:51.560 --> 0:02:54.359 pro am No Way, Way. 0:02:54.919 --> 0:02:55.880 Go Way. 0:02:56.120 --> 0:02:58.280 What does she do hand or power I don't know, 0:02:58.720 --> 0:02:59.960 Hardoin I saw that. 0:03:00.360 --> 0:03:04.200 Remember power Point to sit there in a bar Alexis, 0:03:04.240 --> 0:03:07.160 you'd sit at a bar in midtime Manhattan, right with 0:03:07.280 --> 0:03:12.080 the beverages of your choice, beverages. It'd be what Dan, 0:03:12.120 --> 0:03:15.280 It'd be sixty four pages. And the problem with Mary, 0:03:15.440 --> 0:03:16.760 every page had vailue. 0:03:16.840 --> 0:03:18.200 Yep, yep, that was a problem. 0:03:18.200 --> 0:03:20.160 You know it was sixty four was the intro? 0:03:20.720 --> 0:03:23.560 Yes, yes, exactly. So what are we doing here? 0:03:25.480 --> 0:03:30.040 Broady defined with equities here twenty twenty five, excellent returns 0:03:30.080 --> 0:03:32.360 in the US, even better returns outside of the US. 0:03:32.480 --> 0:03:34.280 What's the set up here for twenty twenty six? 0:03:34.400 --> 0:03:36.520 So number one, we're saying to stick with the international 0:03:36.560 --> 0:03:39.320 trade right, So on the one hand, whereas the AI 0:03:39.640 --> 0:03:44.560 centric optimism has now seeded to concern that's obviously benefiting 0:03:44.640 --> 0:03:48.440 international number one. Number Two, you've got policy and fiscal 0:03:48.480 --> 0:03:52.640 tailwinds helping Japan, helping Latin America, helping arguably Europe in 0:03:52.640 --> 0:03:56.320 some degree with this defense spending in a revamping of 0:03:56.400 --> 0:03:57.920 the military industrial complex. 0:03:57.960 --> 0:03:58.200 There. 0:03:58.680 --> 0:04:02.280 Number two, we're telling folks don't abandon the large cap 0:04:02.360 --> 0:04:05.240 quality adopters in the US. I think the biggest dissonance 0:04:05.560 --> 0:04:08.480 I've observed over the last month, and we've known software 0:04:08.560 --> 0:04:10.200 is going to be disrupted for the last two years, 0:04:10.240 --> 0:04:13.640 so that's not the big surprise. It's that every other 0:04:13.800 --> 0:04:17.080 sector of the market has seemingly been taken out to 0:04:17.080 --> 0:04:19.920 the disruption. Woodshed and a lot of these, by the way, 0:04:19.920 --> 0:04:23.280 were the names that were the biggest adopters of AI previously. 0:04:23.560 --> 0:04:24.560 That's the big dissonance. 0:04:25.160 --> 0:04:28.279 Earnings were, you know, three quarters the way through earnings. 0:04:28.320 --> 0:04:29.320 It seems pretty. 0:04:29.080 --> 0:04:32.719 Solid out there as earning's been solid enough for this market. 0:04:32.800 --> 0:04:33.760 Not at the moment. 0:04:33.880 --> 0:04:37.000 Yeah, I think the market is losing sight of We 0:04:37.040 --> 0:04:41.120 talked about the macroeconomic data earlier pretty solid and above itself, 0:04:41.400 --> 0:04:43.679 and earnings is broadening out. I think the key trend 0:04:43.720 --> 0:04:46.040 at the moment is that you're seeing Russell three thousand 0:04:46.600 --> 0:04:50.520 median earnings growth of around eleven percent, and that's up 0:04:50.520 --> 0:04:52.600 from call it, low single digits the last year or so. 0:04:52.800 --> 0:04:54.640 I mean, I look at the Google bond deal the 0:04:54.680 --> 0:04:57.440 other day, Lisa Shell loaded the boat for Morgan Staly 0:04:57.520 --> 0:05:01.400 one hundred year British piece. But I'm sitting there this week, 0:05:01.440 --> 0:05:04.760 You're going, Okay, Microsoft's in the tank, down a couple 0:05:04.839 --> 0:05:08.039 dollars this morning as well. It's closed at four oh one, 0:05:08.040 --> 0:05:12.640 it's trading three ninety nine. Okay, Dan Skelly fine, But 0:05:12.920 --> 0:05:19.000 can't they and others in one Bloomberg headline change the 0:05:19.120 --> 0:05:22.359 zeitgeist by saying we're going to do a ginormous bond 0:05:22.400 --> 0:05:26.680 deal off Dan Skelly's desk it Morgan Stanley, Well. 0:05:26.520 --> 0:05:29.760 We'd welcome that, welcome the partnership, no doubt. Listen. 0:05:29.839 --> 0:05:32.080 I think when you look at the majority of AI 0:05:32.279 --> 0:05:35.719 spend it's still being funded from cash flow. On the margin, 0:05:35.800 --> 0:05:38.160 there is leverage coming into the system. But tom, as 0:05:38.200 --> 0:05:40.440 you know, many of the Max seven balance sheets are 0:05:40.440 --> 0:05:41.599 net cash balance sheet. 0:05:42.080 --> 0:05:44.440 They could afford to take on some leverage. 0:05:44.440 --> 0:05:46.040 Am I right that they could do one? What do 0:05:46.120 --> 0:05:48.160 your tech people say? Can they do one? Trunch? 0:05:48.480 --> 0:05:48.680 Two? 0:05:48.760 --> 0:05:52.440 Trunch? Thirty billionaire, twenty billionaire? Sixteen point five? 0:05:52.520 --> 0:05:54.760 Demand is off the charts, as you know, and so 0:05:55.200 --> 0:05:55.680 you know, we. 0:05:55.600 --> 0:05:57.039 Think there's some nuts pot. 0:05:57.200 --> 0:05:58.000 No, I'm with you. 0:05:58.480 --> 0:06:00.320 We think there's some room to take on on some 0:06:00.520 --> 0:06:02.200 leverage here. But look, at the end of the day, 0:06:02.560 --> 0:06:06.680 we think the market is efficiently and probably rightfully taking 0:06:06.720 --> 0:06:09.400 a pause on MAG seven at the moment, and the 0:06:09.480 --> 0:06:13.080 SMP because we've had this massive spending ramp up, we 0:06:13.160 --> 0:06:16.080 have alternatives for the first time in a decade, We 0:06:16.120 --> 0:06:18.880 have other markets with momentum. And we all know what 0:06:19.120 --> 0:06:21.600 momentum as a factor has meant for equities over the 0:06:21.720 --> 0:06:24.320 last several years. It has truly taken the baton from 0:06:24.400 --> 0:06:27.280 valuation and so at the moment, momentum matters. 0:06:27.880 --> 0:06:31.680 So does that lean outside of the US versus US here? 0:06:31.720 --> 0:06:34.280 Because I mean, when you look at the Europeans markets, 0:06:34.279 --> 0:06:36.120 they've both traded at a discount to those because they 0:06:36.120 --> 0:06:37.599 don't have that tech exposure that we have. 0:06:38.080 --> 0:06:39.840 Is that now the time for them to shine as 0:06:39.839 --> 0:06:40.600 they did last year. 0:06:40.680 --> 0:06:44.080 Yeah, it's a fabulous point, Paul. And number one, that's true, 0:06:44.120 --> 0:06:47.200 it's the absence of a negative at the moment. Number two, 0:06:47.279 --> 0:06:50.120 it's real fundamental catalyst. So whether it be defense we 0:06:50.160 --> 0:06:53.720 talked about in a post Ukraine recovery effort, we might 0:06:53.720 --> 0:06:57.559 see a Marshall Plan type equivalent rebuilding infrastructure out there. 0:06:58.080 --> 0:07:00.839 And number three, when I look at fiscal policy, right, 0:07:01.240 --> 0:07:04.280 we've talked a lot about the US fiscal and political situation. 0:07:04.640 --> 0:07:07.160 Look at what's going on with Japan post the elections. 0:07:07.320 --> 0:07:08.760 We now have a super majority. 0:07:08.960 --> 0:07:11.680 I point out Microsoft there out thirty five years on 0:07:11.720 --> 0:07:15.880 their longest piece. I mean, I'm sorry, Margot Stanley needs 0:07:15.920 --> 0:07:19.000 to bring a one hundred year Microsoft Sure they get 0:07:19.160 --> 0:07:20.640 six point xx per se. 0:07:20.640 --> 0:07:21.760 I know what they're doing over there. 0:07:22.000 --> 0:07:24.200 So let's just squeeze one more question. And here, Dan 0:07:24.280 --> 0:07:28.280 Skelley to all the people listening across this nation watching 0:07:28.360 --> 0:07:32.559 on YouTube, do you quote unquote go to cash here? 0:07:33.240 --> 0:07:37.080 We would not, Tom, We would say stay invested. Right, 0:07:37.400 --> 0:07:40.640 We've been telling folks to be diversified, right, and we've 0:07:40.680 --> 0:07:41.200 said this. 0:07:41.080 --> 0:07:41.760 For over a year. 0:07:41.800 --> 0:07:45.280 And initially a year ago I commented Max seven would 0:07:45.280 --> 0:07:48.160 go from this monolith everything up together to more of 0:07:48.200 --> 0:07:51.480 a peloton where there's more dispersion within the MAC seven. 0:07:51.720 --> 0:07:54.720 That's played out, and roughly six to nine months ago 0:07:54.720 --> 0:07:57.640 we started thinking about broadening out, whether that be value 0:07:57.680 --> 0:08:00.920 trades within the US or whether that be internationally. So 0:08:01.000 --> 0:08:03.480 we think there's enough opportunities at the moment not to 0:08:03.480 --> 0:08:04.040 go to the cat. 0:08:04.200 --> 0:08:06.800 I thought you were talking for you and me that 0:08:07.240 --> 0:08:10.080 it was a peloton trade because we were broadening out. 0:08:10.480 --> 0:08:14.440 We get a three day weekend report from Surveillance Peloton 0:08:14.560 --> 0:08:18.160 corresponding Paul Sweeney, how many times are you on the 0:08:18.200 --> 0:08:19.520 beast this weekend? 0:08:19.640 --> 0:08:23.880 Multiple times on the bike and the treadmill, both full service. 0:08:24.000 --> 0:08:25.640 This is getting in the beachway right? 0:08:25.680 --> 0:08:28.400 Oh yeah, absolutely, yeah, very good. It's just you know, 0:08:28.440 --> 0:08:29.520 we're there, We're there. 0:08:29.560 --> 0:08:34.640 I don't know, it's it's Skelly. Thank you so much. 0:08:34.720 --> 0:08:37.960 Really important comments there from Morgan Steia had to market 0:08:37.960 --> 0:08:43.440 research and strategy Morgan Stanley Wealth Management. Stay with us. 0:08:43.679 --> 0:08:47.040 More from Bloomberg Surveillance coming up after. 0:08:46.720 --> 0:08:57.439 This you're listening to the Bloomberg Surveillance Podcast. Catch US 0:08:57.480 --> 0:09:00.960 Live weekday afternoons from seven to ten am. Listen on 0:09:01.040 --> 0:09:04.680 Applecarplay and Android Auto with the Bloomberg Business app, or 0:09:04.840 --> 0:09:06.360 watch US live on YouTube. 0:09:06.520 --> 0:09:09.199 We start strawing this morning over Schmedia joins us with 0:09:09.280 --> 0:09:14.520 Wrenberg Bank Just fabulous on the Transatlantic tensions of the moment, Holgar, 0:09:14.679 --> 0:09:20.600 do you see a global disinflation? Is China messed up 0:09:20.720 --> 0:09:27.199 enough where they export price stability or price decline, which 0:09:27.280 --> 0:09:29.080 means BUN prices. 0:09:28.760 --> 0:09:33.200 Up yields down well on its own. This is exactly 0:09:33.200 --> 0:09:34.880 what China is, of course doing. 0:09:35.040 --> 0:09:38.800 It's dumping the results of its industrial over capacities on 0:09:38.920 --> 0:09:40.119 global markets. 0:09:40.520 --> 0:09:43.160 But there are other forces pointing the other way. 0:09:43.559 --> 0:09:47.359 Of course, the US tariffs are not yet fully reflected 0:09:47.440 --> 0:09:49.079 in US consumer prices. 0:09:49.120 --> 0:09:52.760 There is some further upward pressure on US consumer prices 0:09:52.760 --> 0:09:56.400 to come. Also, many raw materials are telling a very 0:09:56.400 --> 0:10:00.480 different story, namely that global inflation pressures will stay a 0:10:00.480 --> 0:10:04.320 little elevated or could rise over time and longer term 0:10:04.440 --> 0:10:09.360 simply labor shortages on both sides of the Atlantic, and 0:10:09.600 --> 0:10:13.439 also longer term in China, labor shortages will probably mean, 0:10:13.559 --> 0:10:17.800 in the end a rebound in wage pressures, perhaps not immediately, 0:10:17.880 --> 0:10:21.120 but say next year and thereafter. So I would not 0:10:21.280 --> 0:10:23.520 bet too much on global disinflation. 0:10:24.720 --> 0:10:25.040 Oger. 0:10:25.080 --> 0:10:28.400 Here in the US we have a lot of economic data. 0:10:28.440 --> 0:10:30.960 Last week we received in terms of inflation data, labor 0:10:31.000 --> 0:10:31.640 market data. 0:10:32.080 --> 0:10:33.800 The data suggests that maybe. 0:10:33.520 --> 0:10:36.440 The FED can sit idly by and let's say, economy 0:10:36.880 --> 0:10:39.400 hero along, what do you think this United States, for 0:10:39.480 --> 0:10:40.280 the Reserve. 0:10:40.120 --> 0:10:40.800 Should be doing. 0:10:42.400 --> 0:10:45.040 That's exactly what the FED should be doing. There is 0:10:45.080 --> 0:10:48.160 no reason in the US to cut rates further. Rates 0:10:48.200 --> 0:10:52.120 are already fairly low, especially against the backdrop of a 0:10:52.320 --> 0:10:57.000 very expoundary fiscal policy. The US economy is clearly still 0:10:57.040 --> 0:10:59.480 expanding above its trend rate, which in our of you 0:10:59.640 --> 0:11:02.080 is now one point five percent the trend rate. But 0:11:02.160 --> 0:11:06.000 the current pace of growth is above two percent, and well, yes, 0:11:06.200 --> 0:11:10.080 the labor market does not require further central bank help 0:11:10.200 --> 0:11:13.240 for the time being, so the FED should stay put. 0:11:13.559 --> 0:11:16.360 Our call remains that when the new FED chair comes 0:11:16.400 --> 0:11:19.240 into an office, the committee may grant him one twenty 0:11:19.240 --> 0:11:23.480 five basis point rate cut, but thereafter probably vans it 0:11:23.559 --> 0:11:25.000 for the FED. In terms of cuts. 0:11:25.040 --> 0:11:27.199 You're the first one to overtly mention that, I mean, 0:11:27.240 --> 0:11:29.880 this is a huge deal. Do you think, within your 0:11:29.960 --> 0:11:32.760 reading of central bank history that when a new guy 0:11:32.880 --> 0:11:36.120 shows up, what do you call it in golf? Is 0:11:36.120 --> 0:11:36.920 it like a mulligan? 0:11:37.000 --> 0:11:37.320 Is that ye? 0:11:38.520 --> 0:11:42.960 Preskice book chairman wors get a mulligan, Holger Schmieding, Well, 0:11:43.200 --> 0:11:44.520 that's that's possible. 0:11:44.720 --> 0:11:47.600 By that the time he comes in, we may see 0:11:47.679 --> 0:11:50.160 that the labor market is not quite as strong as 0:11:50.160 --> 0:11:53.400 it was in the January data. You can always argue 0:11:53.440 --> 0:11:56.240 sort of about twenty five basis points yes or no. 0:11:56.960 --> 0:11:59.719 So to bet on in our view, one further rate 0:11:59.760 --> 0:12:02.400 cut to come under the new president makes sense. A 0:12:02.400 --> 0:12:04.960 boy betting on more rate cuts to come in the US, 0:12:05.040 --> 0:12:07.360 as many in the market are doing, in our view, 0:12:07.480 --> 0:12:11.480 is overdone done. Simply, the US economy does not need 0:12:11.520 --> 0:12:15.000 a rate cut, and longer term, while the US economy 0:12:15.120 --> 0:12:19.800 will likely lose momentum next year, longer term inflationary pressure 0:12:19.920 --> 0:12:24.319 stemming from basically a lack of labor, including the immigration clampdown, 0:12:24.640 --> 0:12:26.880 should then see to it that there is no further 0:12:26.920 --> 0:12:27.920 reason for a cut. 0:12:28.760 --> 0:12:29.080 Holger. 0:12:29.720 --> 0:12:32.360 Almost a year ago, we in response to the tariff 0:12:32.720 --> 0:12:36.360 issues we saw European economy step up and really talk 0:12:36.440 --> 0:12:42.040 about spending more on infrastructure, spending more on defense. 0:12:42.520 --> 0:12:46.600 Have we actually seen those funds be committed. 0:12:48.240 --> 0:12:51.200 Well, you use the right word. We are seeing those 0:12:51.280 --> 0:12:54.720 funds being committed. That is, we've seen a major search, 0:12:54.800 --> 0:12:59.439 for instance, in German industrial orders late last year, huge 0:12:59.480 --> 0:13:03.640 search related largely to defense, similar things and to some 0:13:03.840 --> 0:13:05.800 extent to infrastructure spending. 0:13:06.160 --> 0:13:08.240 We are seeing it in orders. We are not you're 0:13:08.280 --> 0:13:11.920 really seeing it yet in production. It takes time for 0:13:12.040 --> 0:13:15.720 companies to ramp up production, but the orders are coming 0:13:15.760 --> 0:13:18.840 in and on a much smaller scale. Even countries such 0:13:18.880 --> 0:13:22.840 as Italy, France and the UK are trying to raise 0:13:22.920 --> 0:13:27.360 their defense spending somewhat. Yes, there is a fiscal stimulus coming. 0:13:28.120 --> 0:13:30.640 How do you frame euro holgersh meeting? I mean it 0:13:30.720 --> 0:13:33.480 gets away from your you know, I mean, I get 0:13:33.480 --> 0:13:37.400 that Beerenberg Bank's acutely aware of the euro but against 0:13:37.400 --> 0:13:40.520 the dollar. Are we in for some boldness here of 0:13:40.640 --> 0:13:41.400 euro movement? 0:13:43.200 --> 0:13:46.160 Well, probably not much in the near term. We have 0:13:46.440 --> 0:13:50.760 serious geopolitic attendance, which tend to be a bit dollar positive. 0:13:51.240 --> 0:13:54.480 We also do not expect the FAT to deliver as 0:13:54.600 --> 0:13:58.080 much as many rate cuts as others in the market think, 0:13:58.240 --> 0:14:01.680 so that's a bit of dollar positive. Having set all that, 0:14:01.800 --> 0:14:06.040 the European economy last year surprised a little to the upside, 0:14:06.360 --> 0:14:09.160 and there is come again for the European economy this 0:14:09.280 --> 0:14:11.560 year to do a little better than last year, not 0:14:11.640 --> 0:14:15.079 extremely well, but a little better. Also, there is this 0:14:15.360 --> 0:14:18.679 long run erosion of global trust in the US, it's 0:14:18.800 --> 0:14:22.800 institutions and its currency, as we see with this switch 0:14:22.880 --> 0:14:27.480 of some emerging market central banks out of dollar assets 0:14:27.520 --> 0:14:31.479 into gold. So longer run, I think the dollar remains 0:14:31.560 --> 0:14:32.400 on the way down. 0:14:32.560 --> 0:14:35.000 I mean, this is if we're gonna hold her about 0:14:35.000 --> 0:14:38.640 the Swiss franc, the ft Holger right up the Swiss franc. 0:14:38.720 --> 0:14:41.360 I think that once but twice this weekend. I'm looking 0:14:41.400 --> 0:14:45.680 at the two church EuroSwiss and also dollars Swissy and 0:14:45.880 --> 0:14:49.280 the bottom line years there's some huge Swiss strength. What 0:14:49.320 --> 0:14:52.040 does that signal to our American audience. 0:14:53.080 --> 0:14:57.120 Well, that signals a bit of a move to safe havens, 0:14:57.320 --> 0:15:00.560 and Switzerland is a safe haven seen as very safe, 0:15:00.600 --> 0:15:03.280 but it's very very small, a bit like goat. A 0:15:03.360 --> 0:15:06.920 small move into safe havens makes a huge difference to gold, 0:15:07.080 --> 0:15:09.760 makes a huge difference to the Swiss Frau, but much 0:15:09.840 --> 0:15:13.040 less of a difference. Say to the US dollar Halger. 0:15:12.760 --> 0:15:15.000 Thank you so much. Hugers schmeeting with us with Wareenberg 0:15:15.040 --> 0:15:20.280 a brief stay with us. More from Bloomberg Surveillance coming 0:15:20.360 --> 0:15:21.360 up after this. 0:15:28.600 --> 0:15:32.200 You're listening to the Bloomberg Surveillance podcast. Catch US live 0:15:32.280 --> 0:15:35.400 weekday afternoons from seven to ten am Eastern Listen on 0:15:35.520 --> 0:15:38.920 Apple Karplay and Android Otto with the Bloomberg Business app, 0:15:39.080 --> 0:15:41.000 or watch US live on YouTube. 0:15:41.440 --> 0:15:45.200 Blimmy Caretrel joins US now managing director, head a public 0:15:45.360 --> 0:15:52.760 policy at Pimco. My basic take, Libby, is everything's rushed. 0:15:53.200 --> 0:15:56.920 Like in February. We're living what would be a normal 0:15:57.040 --> 0:15:59.760 may or June before an election year. Am I right 0:15:59.800 --> 0:16:01.400 out that? 0:16:01.400 --> 0:16:01.800 That is right? 0:16:01.880 --> 0:16:02.080 Yeah? 0:16:02.080 --> 0:16:02.800 Good morning Tom. 0:16:02.880 --> 0:16:07.360 Yeah, I mean you're absolutely right. This year is compressed 0:16:07.480 --> 0:16:09.960 just because of course the midterm elections. I think both 0:16:10.000 --> 0:16:12.040 the House and the Senate leaders are going to be 0:16:12.080 --> 0:16:15.520 eager for their members to go back to their districts 0:16:15.560 --> 0:16:19.560 and states to campaign in advance of November. So our 0:16:19.600 --> 0:16:24.560 expectation is in many ways this Congress probably will likely 0:16:25.080 --> 0:16:29.560 come to kind of its end, you know, near July. Now, 0:16:29.600 --> 0:16:31.920 of course they'll be back in session in September to 0:16:31.960 --> 0:16:35.160 fund the government, hopefully fund the government once again for 0:16:35.240 --> 0:16:38.240 a fiscal year twenty twenty seven. But outside of that, 0:16:38.400 --> 0:16:41.440 we're not really expecting much legislation, you know, beyond the 0:16:41.960 --> 0:16:43.600 August or the summer recess. 0:16:44.440 --> 0:16:46.720 Libby in one of your recent notes in your Washington 0:16:46.800 --> 0:16:51.760 Watch note you have entitled was twenty twenty five peak Trump? 0:16:51.840 --> 0:16:54.000 What do you mean by that? Yeah? 0:16:54.040 --> 0:16:57.920 So, in many ways, this is pretty consistent with other 0:16:58.080 --> 0:17:03.600 presidential cycles. The first year of an administration, particularly when 0:17:03.600 --> 0:17:07.320 the party in the White House controls both chambers of Congress, 0:17:07.840 --> 0:17:11.960 does see its sort of peak presidential power. Congress is 0:17:12.800 --> 0:17:16.480 usually gives a wide berth to their president to sort 0:17:16.480 --> 0:17:19.600 of do what they want to do. The courts in 0:17:19.640 --> 0:17:21.720 this case of Trump, have been sort of slow to 0:17:21.760 --> 0:17:25.560 catch up. So in twenty twenty five, like twenty twenty 0:17:25.600 --> 0:17:28.199 one was for Biden, for President Biden, like in some 0:17:28.240 --> 0:17:31.960 ways two thousand and nine was for President Obama, we 0:17:32.080 --> 0:17:35.439 do believe that twenty twenty five was peak Trump in 0:17:35.520 --> 0:17:38.639 that it was sort of his apex of presidential power. 0:17:38.960 --> 0:17:41.919 Twenty twenty six and we've already seen some signs of 0:17:41.960 --> 0:17:44.119 this at the end of twenty twenty five, in the 0:17:44.160 --> 0:17:48.240 beginning of this year, we think the constraints of both 0:17:48.240 --> 0:17:52.760 the Congress and the courts will bind this President Mortigan. 0:17:53.000 --> 0:17:56.800 This is less of something sort of specific to President Trump, 0:17:57.160 --> 0:18:01.480 and it's much more indicative of the general political cycle, 0:18:01.880 --> 0:18:04.920 where you know, members of Congress in particular start pivoting 0:18:04.960 --> 0:18:08.520 to their own survival and pivot to midterms, and as 0:18:08.520 --> 0:18:12.200 a result, you know, start pushing back on on their president, 0:18:12.280 --> 0:18:14.439 even when it's the president of their own party. 0:18:14.680 --> 0:18:18.040 Is the Senate at risk? I mean, can the Democrats 0:18:18.080 --> 0:18:18.680 win the Senate? 0:18:18.720 --> 0:18:21.960 From where you sit, Livy, You know, I think if 0:18:21.960 --> 0:18:24.720 you had asked me several months ago, I would have 0:18:24.760 --> 0:18:29.040 said absolutely not. Now I still it's still not our 0:18:29.040 --> 0:18:33.400 base case. We still think that the GOP will control 0:18:33.440 --> 0:18:37.320 the Senate. But there are some primaries that are going 0:18:37.359 --> 0:18:40.520 to be quite important. Texas in particular on March third. 0:18:40.840 --> 0:18:43.639 You know, who wins that on the Republican and Democratic 0:18:43.760 --> 0:18:47.000 side I think will be you know, we'll sort of 0:18:47.040 --> 0:18:50.360 tell whether that state is actually in play. But as 0:18:50.400 --> 0:18:54.360 you know, Tom, right now, Republicans control the Senate by 0:18:54.400 --> 0:18:58.360 four seats. Not only would Democrats have to defend seats 0:18:58.359 --> 0:19:01.480 in Georgia and Michigan. Those are seats that they have 0:19:01.600 --> 0:19:03.760 right now that of course Trump won in those states, 0:19:04.000 --> 0:19:06.960 but they would have to win four of six, you know, 0:19:07.080 --> 0:19:12.240 pretty reddish pinkish states, including North Carolina and Maine, but 0:19:12.320 --> 0:19:16.240 also Ohio, Texas, Iowa, Alaska. You know, again, they would 0:19:16.240 --> 0:19:17.960 have to have a perfect night. I think to take 0:19:18.000 --> 0:19:20.120 back the House they would have to have a soso night, 0:19:20.440 --> 0:19:22.200 but in order to take back the Senate, they would 0:19:22.240 --> 0:19:23.239 have to have a perfect night. 0:19:24.119 --> 0:19:27.159 So Lebby, you mentioned the courts here, I guess we're 0:19:27.359 --> 0:19:32.080 still waiting on Supreme Courts ruling on tariffs A. Are 0:19:32.080 --> 0:19:34.560 you surprised that it's taken this long? And does that 0:19:35.000 --> 0:19:38.480 tip your the hand to maybe how they may vote here? 0:19:39.840 --> 0:19:41.840 Yeah, I'm gonna I'm going to defer to to the 0:19:41.880 --> 0:19:45.000 sort of the court experts, which I am not one of. 0:19:45.119 --> 0:19:47.720 Ian I think, you know, according to those experts, though 0:19:47.760 --> 0:19:52.640 this timing doesn't seem you know, all that suspicious or 0:19:52.840 --> 0:19:55.480 or all that much of a tell. I do think 0:19:55.520 --> 0:19:59.800 that that Roberts is likely trying to, if you know, 0:20:00.080 --> 0:20:03.280 if this verdict does go against the White House, probably 0:20:03.320 --> 0:20:05.879 trying to get as much of a majority on that 0:20:06.000 --> 0:20:10.960 opinion as possible, so that may justify the delay or 0:20:11.000 --> 0:20:13.560 what have your explained the delay. I think the bottom 0:20:13.600 --> 0:20:16.320 line here for markets and what we're telling our clients 0:20:16.400 --> 0:20:18.600 is that even if the even if the court does 0:20:18.720 --> 0:20:21.280 rule against the White House, and again just based on 0:20:21.320 --> 0:20:23.600 the oral arguments, it looks like at least in some 0:20:23.680 --> 0:20:27.000 form or fashion, they may But this White House still 0:20:27.040 --> 0:20:30.359 has many other tools that Congress has given them. Maybe 0:20:30.359 --> 0:20:33.159 not AIPA, which is the law that's you know in 0:20:33.240 --> 0:20:36.239 jeopardy here, but section one twenty two, section three ZHO 0:20:36.240 --> 0:20:39.600 one sort of this number soup of provisions. They can 0:20:39.680 --> 0:20:41.520 still impose their their tariff agenda. 0:20:41.680 --> 0:20:44.080 Let me talked to Peter Navarro last week and he 0:20:44.200 --> 0:20:46.800 was spirited to say the least be saying, mister doctor 0:20:46.880 --> 0:20:52.000 Navarro for his appearance, and I got him upset talking 0:20:52.040 --> 0:20:56.879 about how McKinley, late in his term before his tragic assassination, 0:20:57.840 --> 0:21:01.080 made what was called the buffalo pivot. Are we in 0:21:01.119 --> 0:21:05.280 a slow motion buffalo pivot right now? Is a president 0:21:05.440 --> 0:21:09.240 brings down tariffs? Yeah? 0:21:09.280 --> 0:21:13.159