WEBVTT - Tariffs Ripple Through Markets 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:26.960 us live on YouTube. 0:00:27.080 --> 0:00:32.440 Joining us now from JP Morgan is Monica Descenzo. Thrilled 0:00:32.479 --> 0:00:36.479 that she could be with us today with private bank. 0:00:36.680 --> 0:00:39.560 But I've got to go to your ute. You came 0:00:39.600 --> 0:00:42.960 out of Georgetown, yes, and we talked just there about 0:00:43.000 --> 0:00:47.280 digital and I'm living digital every day with a team 0:00:47.600 --> 0:00:52.879 on YouTube. You covered at JP Morgan the digital nascent 0:00:53.080 --> 0:00:57.440 experience of the New York Times. Did you ever think 0:00:57.760 --> 0:01:00.840 the New York Times? I remember arguing with people and 0:01:01.080 --> 0:01:03.360 in bars with a beverage of my choice in my hand, 0:01:03.880 --> 0:01:06.160 that they would succeed at this and they could get 0:01:06.200 --> 0:01:09.440 to two million. People said, no way. Did you see 0:01:09.680 --> 0:01:11.800 the digital success of the Times coming? 0:01:12.040 --> 0:01:12.560 It's funny. 0:01:12.720 --> 0:01:14.840 I was relatively young when I was doing this, and 0:01:14.880 --> 0:01:16.880 so you would you could argue that I would have 0:01:16.920 --> 0:01:20.000 been more forward thinking digital. I actually never thought the print. 0:01:19.840 --> 0:01:20.440 Would go away. 0:01:20.440 --> 0:01:23.040 I just thought people would always still enjoy having a 0:01:23.080 --> 0:01:24.920 print subscription I think the New York Times did a 0:01:24.920 --> 0:01:28.200 great job putting up that paywall and figuring out how 0:01:28.200 --> 0:01:30.800 to monetize the digital subscriptions. And I still subscribe to 0:01:30.840 --> 0:01:31.280 both print. 0:01:31.400 --> 0:01:33.880 It's amazing, I mean out to eleven million. 0:01:34.000 --> 0:01:36.800 Yeah, no, it's you know, it's hardly the failing New York. 0:01:36.640 --> 0:01:38.880 Times as the president. And JP Morgan is way out 0:01:38.880 --> 0:01:40.920 front of this with your it was a really your 0:01:41.000 --> 0:01:42.600 II and all that. 0:01:42.680 --> 0:01:44.240 Do you use to pay for content? 0:01:44.360 --> 0:01:44.480 Right? 0:01:44.520 --> 0:01:45.639 That's the bottom line sell. 0:01:45.600 --> 0:01:49.520 Side analysis of JP Morgan private make with high net worth, 0:01:49.880 --> 0:01:54.320 with with with family offices. Is there still a place 0:01:54.360 --> 0:01:55.800 there for what you used to do? Oh? 0:01:55.960 --> 0:01:58.360 Absolutely, I mean, you know, there's there's a ton of 0:01:58.400 --> 0:02:00.920 value in people who are experts in their sectors. And 0:02:01.080 --> 0:02:03.240 the challenge in my seat is the clients I work 0:02:03.280 --> 0:02:06.640 with can invest anywhere, so they're not beholden to one sector, 0:02:07.360 --> 0:02:09.040 what one small part of a US market or a 0:02:09.120 --> 0:02:09.760 national market. 0:02:09.840 --> 0:02:10.600 So we need to. 0:02:10.600 --> 0:02:13.240 Look across all research and make a decision based on 0:02:13.280 --> 0:02:15.640 your goals, what's the best way to reach those goals. 0:02:15.639 --> 0:02:17.480 And it could be a media company, it could be 0:02:17.480 --> 0:02:19.640 an industrial company, it could be healthcare. So that's what 0:02:19.680 --> 0:02:21.720 makes it fun. But We rely on JP Morgan's research, 0:02:21.760 --> 0:02:23.760 which is amazing, as well as others across the streation. 0:02:23.760 --> 0:02:26.800 Sure your clients can invest anywhere, are they doing it? 0:02:26.840 --> 0:02:29.920 I mean amidst the whirl of headlines that we're dealing with. 0:02:29.919 --> 0:02:32.399 I imagine there is some adjita among them as well, 0:02:32.440 --> 0:02:34.880 wondering if if this is the time the time to 0:02:34.960 --> 0:02:36.920 do it. What are you telling them just about this 0:02:37.040 --> 0:02:39.720 environment and how they can maybe grow their appetite for 0:02:40.000 --> 0:02:41.040 taking some risk right now. 0:02:41.200 --> 0:02:43.280 I think agitas is the right word, one that I 0:02:43.320 --> 0:02:46.320 grew up using in my family. You know, it's hard 0:02:46.440 --> 0:02:48.560 because I think people are still scarred by twenty two 0:02:48.720 --> 0:02:51.079 when equity is revolatile and fixing come is violatile, and 0:02:51.160 --> 0:02:53.600 so trying to convince people that in today's world you 0:02:53.639 --> 0:02:56.520 actually have so many choices across asset classes. It to me, 0:02:56.960 --> 0:02:58.560 as an investor who can go anywhere, this is like 0:02:58.600 --> 0:02:59.600 an amazing environment. 0:03:00.120 --> 0:03:01.639 I look at equities US equities. 0:03:01.720 --> 0:03:03.239 I don't think you're going to get more than maybe 0:03:03.280 --> 0:03:05.840 high single digit returns this year, So suddenly fixed income 0:03:05.880 --> 0:03:09.920 looks more interesting. Ways to monetize volatility and commodities looks interesting. 0:03:09.919 --> 0:03:11.680 There's a lot of ways to get to that most 0:03:11.720 --> 0:03:13.919 of my clients want to get seven eight percent annualized 0:03:14.040 --> 0:03:14.920 to meet their goals. 0:03:15.040 --> 0:03:16.720 There's a lot of ways to get there. Right now. 0:03:17.240 --> 0:03:20.560 It's not all equities anymore. The temptation for many is 0:03:20.880 --> 0:03:23.120 they go to what worked? Do they just want to 0:03:23.160 --> 0:03:24.960 keep owning tech? Do they want to go to private equity? 0:03:25.000 --> 0:03:26.120 And so we're trying to remind them to be a 0:03:26.120 --> 0:03:28.040 little bit more balanced and get out of cash. 0:03:28.280 --> 0:03:30.160 What is the moment to get out of cash? What 0:03:30.200 --> 0:03:32.960 do you tell them about when's the time to move? 0:03:33.320 --> 0:03:35.600 I mean for most people it was yesterday or a 0:03:35.600 --> 0:03:38.680 month ago, because you're missing like, yes, cash makes you 0:03:38.720 --> 0:03:41.080 feel good, But most clients I work with still have 0:03:41.320 --> 0:03:43.520 too high of an allocation of cash, and so trying 0:03:43.560 --> 0:03:45.200 to remind them what that drag looks like. And we 0:03:45.280 --> 0:03:47.240 do a lot of analytics showing them if you stay 0:03:47.280 --> 0:03:49.600 at twenty percent cash the next ten years, this is 0:03:49.600 --> 0:03:51.680 what this looks like. Whereas if you go into equities, 0:03:51.840 --> 0:03:54.200 even with the volatility, you may see the outcome is 0:03:54.240 --> 0:03:57.520 significantly better. The highs are higher, the lows are higher. 0:03:58.360 --> 0:04:01.720 Is it just simply the they're looking at four point 0:04:01.760 --> 0:04:03.640 eight percent or whatever they yield is right now? 0:04:04.040 --> 0:04:06.520 Coming off for a long period when when rates were 0:04:06.560 --> 0:04:08.400 so low, it's suddenly they're like, oh, five percent. Like 0:04:08.400 --> 0:04:10.080 if I can make five percent risk free, that's great. 0:04:10.320 --> 0:04:12.640 The problem is you have inflation now, so it's it's 0:04:12.640 --> 0:04:14.000 a little bit different than than it was a few 0:04:14.080 --> 0:04:16.719 years ago. So that's the big challenge. And then of 0:04:16.760 --> 0:04:19.160 course the headlines we're seeing every day that you guys 0:04:19.200 --> 0:04:21.440 are talking about that stresses people out, and so you 0:04:21.440 --> 0:04:23.400 have to remind them it's all about having a plan, 0:04:23.920 --> 0:04:24.880 executing on that plan. 0:04:25.080 --> 0:04:27.359 Not that you know, last night's dinner was a complete 0:04:27.400 --> 0:04:31.400 disaster at home. Holy Mac seventeen year old stomping out 0:04:31.440 --> 0:04:34.440 of the room, Good morning, after thought, How do you 0:04:34.680 --> 0:04:40.520 handle generational arguments in a family office? Please? John? Are 0:04:40.520 --> 0:04:42.760 you taking notes over there? Yeah? 0:04:42.800 --> 0:04:47.160 I think you know you guys should hire like therapist, Yeah, 0:04:47.240 --> 0:04:47.680 to come in. 0:04:47.960 --> 0:04:51.760 We actually do have behavioral exponents work. 0:04:51.600 --> 0:04:54.039 With we're both trying to get for some time now. 0:04:53.920 --> 0:04:55.440 As well as our your strategy team. 0:04:55.480 --> 0:04:57.880 That's what they do, people like Gabriello Santos, that's what 0:04:57.920 --> 0:04:58.080 you do. 0:04:58.960 --> 0:05:01.040 Ends I joke of my job is sort of as 0:05:01.040 --> 0:05:01.520 a therapist. 0:05:01.680 --> 0:05:04.080 How do you do? How do you tell you got 0:05:04.200 --> 0:05:06.880 three kids and a big pot of money. How do 0:05:06.920 --> 0:05:09.359 you say to the one at the F one races 0:05:09.400 --> 0:05:12.360 and Monaco shut up and listen to us. 0:05:12.440 --> 0:05:14.599 Well, first of I don't say that, you know. 0:05:14.640 --> 0:05:19.840 I mean the struggle is helping the next generation recognize 0:05:19.880 --> 0:05:22.000 why why and how their parents view things, what their 0:05:22.040 --> 0:05:24.720 perspective is. But then again, it all comes back to goals, right, 0:05:24.760 --> 0:05:26.560 The parents' goals is different than the kids goals. And 0:05:26.600 --> 0:05:29.000 so what we try to do is it's a crude 0:05:29.040 --> 0:05:31.120 term it say, bucketing. So okay, parents, you're trying to 0:05:31.160 --> 0:05:32.640 do this because you're use this money over the next 0:05:32.640 --> 0:05:34.320 ten years. Your kids are going to use this money 0:05:34.320 --> 0:05:36.400 over the next forty years. They can take more risks, 0:05:36.400 --> 0:05:38.160 they can be a little bit more intrepid. Then you 0:05:38.240 --> 0:05:40.320 might be comfortable being And that's where again, what's the 0:05:40.360 --> 0:05:42.599 right amount of cash for a sixty year old versus 0:05:42.640 --> 0:05:43.200 a twenty year old. 0:05:43.200 --> 0:05:45.640 It's very different. So we've spent a lot of time. 0:05:45.640 --> 0:05:50.120 I catch for the twenty year old is eight hundred dollars. 0:05:50.279 --> 0:05:53.000 And if they go I gotta go to steamboat, you go, Okay, 0:05:53.040 --> 0:05:54.760 twelve hundred that's it. 0:05:55.120 --> 0:05:57.080 And it's you have to keep in mind too, these 0:05:57.160 --> 0:06:00.680 kids that age, they've never don't remember a bigger recession right, 0:06:00.760 --> 0:06:02.280 or more volatile market. And so part of it too 0:06:02.360 --> 0:06:04.320 is educating them on like what happened in two thousand 0:06:04.320 --> 0:06:06.239 and eight and like what that could mean for assets 0:06:06.240 --> 0:06:08.480 and how you think again about investing over the long 0:06:08.560 --> 0:06:09.520 term and sticking with us. 0:06:09.520 --> 0:06:10.839 This is where I want to go, because what what 0:06:10.880 --> 0:06:13.280 do you say about normalcy? What is normal? 0:06:14.240 --> 0:06:16.080 I would argue the last you know, ten years was 0:06:16.120 --> 0:06:18.359 not normal, right, we weren't in a normal rate environment. 0:06:18.360 --> 0:06:20.679 And you know, I see it both with younger clients. 0:06:20.720 --> 0:06:22.880 I work with younger people on my team, like reminding 0:06:22.920 --> 0:06:25.640 them of what volatility is really like and what a 0:06:25.640 --> 0:06:28.480 recession feels like, because while we had a recession in COVID, 0:06:28.640 --> 0:06:31.080 you snap back so quickly, it wasn't really like a 0:06:31.080 --> 0:06:32.520 recession that we've all lived through. 0:06:33.000 --> 0:06:37.880 I have encyclopedic knowledge of every loss I've ever made, 0:06:38.000 --> 0:06:39.640 and I learned fairly early on. 0:06:39.760 --> 0:06:41.120 So multiple encyclopedic. 0:06:41.200 --> 0:06:43.279 So it just keep feelings like the World Book when 0:06:43.279 --> 0:06:46.480 you were kids, and the yes volume is very thick. Now, 0:06:46.560 --> 0:06:51.599 how do you teach family offices and family members to 0:06:51.760 --> 0:06:54.400 win from a loss? How do you sit them down 0:06:54.440 --> 0:06:56.640 and say, you know, we went into it and I'm 0:06:56.640 --> 0:07:00.920 picking on Intel and da da da da did work out? 0:07:02.080 --> 0:07:05.200 How do you teach the lessons of a loss? 0:07:05.760 --> 0:07:08.320 This is actually where I think the family office infrastructure 0:07:08.320 --> 0:07:10.200 can be helpful, because you want someone who's a little 0:07:10.200 --> 0:07:12.720 bit dispassionate, separate from the family. Because the family, they've 0:07:12.720 --> 0:07:14.240 made the money, they worked really hard for it. It's the 0:07:14.320 --> 0:07:17.240 losses they feel it more, whereas their professional team can 0:07:18.040 --> 0:07:20.040 be a little bit less emotional about it. And so 0:07:20.360 --> 0:07:22.760 I work with both parts of the team to help 0:07:22.760 --> 0:07:24.840 the family get comfortable, but also help the family office 0:07:25.000 --> 0:07:27.200 create a plan and stick to that plan. How do 0:07:27.240 --> 0:07:30.200 you handle a loss? Risk management? So again, we're not 0:07:30.200 --> 0:07:31.480 going to get everything right. We're not going to get 0:07:31.480 --> 0:07:33.280 a lot of things right. But if you know when 0:07:33.280 --> 0:07:35.520 to pull the ripcord and step aside and then wait 0:07:35.560 --> 0:07:37.760 and go back in, that's the best way you handle 0:07:37.760 --> 0:07:39.160 losses because we're all going to have them. It just 0:07:39.560 --> 0:07:41.120 you don't want to get married to positions. You want 0:07:41.120 --> 0:07:43.160 to get married to trades and just have some sort 0:07:43.160 --> 0:07:46.360 of institutionalized process. For me, it's most of my clients, Hey, 0:07:46.480 --> 0:07:48.640 down ten percent, we re under it. Do we really 0:07:48.680 --> 0:07:50.240 like this if we do, you got to buy more. 0:07:50.360 --> 0:07:52.080 If you're not willing to buy more down ten, then 0:07:52.120 --> 0:07:53.480 what are you doing in that trade? 0:07:53.600 --> 0:07:55.400 On the long list of things, you have to pay 0:07:55.440 --> 0:07:59.160 attention to risks that you're looking at, what's near the top. 0:07:59.200 --> 0:08:03.200 So today we'll have J. Powell opining before the Congress, 0:08:03.480 --> 0:08:06.200 maybe trying not to fine on too much before the Congress. 0:08:06.360 --> 0:08:09.280 We have these tariffs announcements, retributive tariffs. What are you 0:08:09.280 --> 0:08:11.400 most worried about? What has the most kind of determinism 0:08:11.440 --> 0:08:12.760 for your outlook right now? 0:08:13.160 --> 0:08:16.400 I mean, if we're talking about equity outlook, Clearly valuations 0:08:16.400 --> 0:08:18.960 are high, and so our investor is going to be 0:08:19.000 --> 0:08:22.120 willing to pay twenty north of twenty times for US 0:08:22.160 --> 0:08:25.160 companies in a world where there's so much volatility in 0:08:25.160 --> 0:08:27.320 the headlines and where we don't know where the FED 0:08:27.400 --> 0:08:30.360 is going, and people are worried about inflationary risks. So 0:08:30.440 --> 0:08:33.480 for me in US equities, certainly the valuation risk. Actually, 0:08:33.520 --> 0:08:35.520 earnings look pretty good. We're in earning season. The numbers 0:08:35.520 --> 0:08:37.960 are good, but I don't know that we can maintain 0:08:37.960 --> 0:08:40.000 that high multiple, and so that's the risk on our side. 0:08:40.000 --> 0:08:41.920 If you look at our bare case, we're assuming you 0:08:41.960 --> 0:08:44.160 could see multiple contraction. That's how you get south of 0:08:44.200 --> 0:08:46.959 five thousand. Again, I think that's low probability, but that's 0:08:47.040 --> 0:08:47.560 the risk to that. 0:08:47.720 --> 0:08:50.880 Are people really in twenty percent cash? Yeah? 0:08:51.440 --> 0:08:53.600 Now again it's for people. 0:08:53.679 --> 0:08:53.920 It all. 0:08:54.640 --> 0:08:56.720 There's value in something that makes you feel good, like 0:08:56.840 --> 0:08:58.720 that helps you sleep at night. Okay, but again I 0:08:58.720 --> 0:08:59.719 got to put the numbers behind it. 0:08:59.760 --> 0:09:01.839 And you what that dragged us to your portfolio? It's 0:09:01.880 --> 0:09:02.400 it's not good. 0:09:02.480 --> 0:09:04.520 Do you have a gold vault under the new building? 0:09:04.559 --> 0:09:06.920 I mean gold's popping three thousand and now? Is there 0:09:07.320 --> 0:09:11.440 the Descenzo Lord Norman has built a gold vault gold? 0:09:12.160 --> 0:09:15.280 I don't percently have a gold vault gold right now. 0:09:15.440 --> 0:09:17.439 We've been talking about gold for a couple of years now. 0:09:17.520 --> 0:09:20.079 I was up twenty twenty eight percent or so last year. 0:09:20.320 --> 0:09:23.440 I think it's really after twenty eight percent run hard 0:09:23.440 --> 0:09:26.760 to go long out right. That said, I have clients 0:09:26.760 --> 0:09:29.200 who don't have very high allocations. What we've been doing, 0:09:29.520 --> 0:09:31.679 there's interesting skew and gold. People are still trying to 0:09:31.720 --> 0:09:34.360 buy calls to buy upside. So if you own gold 0:09:34.360 --> 0:09:36.120 out right right here, you want to buy some, you 0:09:36.160 --> 0:09:39.079 can coller that position cashless. The most you can lose 0:09:39.120 --> 0:09:40.960 in the year is five percent. The most you can 0:09:41.000 --> 0:09:44.720 gain is thirteen percent. That's an interesting. 0:09:44.120 --> 0:09:46.239 Family office is in collars. 0:09:46.320 --> 0:09:50.040 Yeah, your gold, call your gold your goal because by 0:09:50.040 --> 0:09:51.720 the way, if you make thirteen percent gold, that's more 0:09:51.760 --> 0:09:53.160 than I think you're going to make an use equities 0:09:53.160 --> 0:09:53.600 and that's gold. 0:09:54.000 --> 0:09:58.480 Great. Have you ever broken a phone? Have you plan 0:09:59.120 --> 0:10:00.079 I phone? 0:10:00.200 --> 0:10:03.160 I am I'm Italian, I have a hot temper, so yes. 0:10:03.440 --> 0:10:05.320 Yes, okay, thank you. Now we got to the Dirk 0:10:05.520 --> 0:10:08.760 Modica descenzo. Thank you, thanks you so much. Really appreciate it. 0:10:09.000 --> 0:10:12.800 Head of breaking telephones, JP Morgan really in particularly those 0:10:12.800 --> 0:10:16.480 comments on the heritage of JP Morgan coverage of our 0:10:16.520 --> 0:10:17.880 media business years ago. 0:10:23.320 --> 0:10:26.920 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:10:26.960 --> 0:10:30.160 weekday afternoons from seven to ten am Eastern Listen on 0:10:30.200 --> 0:10:33.880 Applecarplay and Android Auto with the Bloomberg Business app, or 0:10:34.040 --> 0:10:35.520 watch us live on YouTube. 0:10:35.720 --> 0:10:39.960 I have been remiss, remiss, remiss. We really ignored the 0:10:40.000 --> 0:10:43.400 bond market because it's a sleep, which means ratear up. 0:10:43.800 --> 0:10:46.400 We are thrilled at Megan Robson is whether she's US 0:10:46.440 --> 0:10:50.280 Credit Strategy b MP Perry ba I mean, there's a 0:10:50.360 --> 0:10:52.640 certain you know, I go back to your brown economics 0:10:52.640 --> 0:10:54.720 with Bill Poole and all that, there's a certain point 0:10:54.760 --> 0:10:59.400 where you link in economics and politics into your bond call. 0:10:59.600 --> 0:11:02.600 Do you have to change b MP perry back credits 0:11:02.640 --> 0:11:05.440 strategy with all that's going on in Washington. 0:11:05.840 --> 0:11:08.920 A lot of cross currents right now. But for credit, 0:11:09.040 --> 0:11:14.000 surprisingly the two factors that have driven markets are actually 0:11:14.080 --> 0:11:18.480 outside of politics. So supply demand very well in balance, 0:11:18.960 --> 0:11:22.480 and credit quality also very well in balance. So I 0:11:22.520 --> 0:11:25.880 think there is this expectation that some of these headlines 0:11:26.120 --> 0:11:28.880 related to tariffs should start to drive credit spreads, but 0:11:28.960 --> 0:11:30.720 so far we've seen the opposite. 0:11:30.800 --> 0:11:33.520 So spreads haven't reversed. 0:11:33.640 --> 0:11:34.680 They're still spreads. 0:11:34.840 --> 0:11:36.600 If you look at me put it in English, they 0:11:36.720 --> 0:11:38.440 price to perfection, if. 0:11:38.480 --> 0:11:41.440 If I think that's that's fair to say, definitely pricing 0:11:41.440 --> 0:11:45.920 in the credits soft landing. Since the election, IG credit 0:11:45.960 --> 0:11:49.319 spreads have been within seven basis point range, so very 0:11:49.400 --> 0:11:53.160 narrow range. Meanwhile, you've seen the interest rate markets ten 0:11:53.240 --> 0:11:55.960 year treasury, a lot of volatility around that, and of 0:11:56.000 --> 0:11:57.520 course you look at it, I go. 0:11:57.600 --> 0:11:59.559 To translate that, please, I'm waiting for. 0:11:59.520 --> 0:12:03.760 That whole faith and credit US ten year yield and 0:12:03.880 --> 0:12:08.640 a corporate quality ten year yield is point zero seven 0:12:08.760 --> 0:12:10.600 percent higher yield. 0:12:11.200 --> 0:12:16.240 So the absolute spread now is closer to eighty basis points, 0:12:16.760 --> 0:12:20.280 but the range within it's traded so it's bounced between 0:12:20.600 --> 0:12:24.440 seventy four and eighty one roughly. So that very narrow 0:12:24.520 --> 0:12:27.600 range that we've traded within, or the band we've traded in, 0:12:27.679 --> 0:12:30.600 has been extremely tight, and I think it speaks to 0:12:31.200 --> 0:12:35.199 the strength of the technicals, supply demand being very well 0:12:35.200 --> 0:12:38.280 in balance. And then of course the credit cycle. We're 0:12:38.280 --> 0:12:42.000 not seeing signs of excesses. Things like corporate leverage has 0:12:42.080 --> 0:12:44.800 been very stable. We actually saw it move lower last year, 0:12:44.840 --> 0:12:48.200 and interest coverage has come down but near the long 0:12:48.320 --> 0:12:51.960 term median, So I think that's contributed to the stability 0:12:52.000 --> 0:12:52.959 that we've seen. 0:12:53.120 --> 0:12:54.839 To borrow a phrase from Tom, how does a pro 0:12:55.080 --> 0:12:58.480 like you navigate all these announcements from the President when 0:12:58.480 --> 0:13:00.480 it comes to tariffs, be they the piece is that 0:13:00.520 --> 0:13:02.960 he's going to do something or assign some executive order 0:13:03.640 --> 0:13:06.120 or the executive orders themselves indicating there's going to be 0:13:06.160 --> 0:13:10.040 a study or new tariffs in thirty days time, how 0:13:10.040 --> 0:13:12.040 do you sort of forecast out what those headwinds might 0:13:12.080 --> 0:13:13.120 be if in fact we see them. 0:13:13.320 --> 0:13:16.800 So we're not expecting headlines to drive the market at 0:13:16.800 --> 0:13:19.160 a top down level, but there are a lot of 0:13:19.160 --> 0:13:24.320 sector implications, so we've really tried to zero in and 0:13:24.360 --> 0:13:28.000 focus on which sectors might be more or less exposed 0:13:28.080 --> 0:13:31.240 in the market. So looking at supply chains, looking at 0:13:31.520 --> 0:13:36.959 direct revenue exposure abroad, if you saw tip for tat tariffs, 0:13:37.080 --> 0:13:42.240 our starting points for sort of identifying those vulnerabilities. So 0:13:42.960 --> 0:13:47.120 we have as an example, for example, autos investment grade 0:13:47.120 --> 0:13:51.240 auto sector very intertwined with Canada and Mexico. In our 0:13:51.280 --> 0:13:54.319 base case, we're not expecting tariffs on Canada and Mexico 0:13:54.400 --> 0:13:56.960 to actually pan out, but if they do, that's a 0:13:57.000 --> 0:13:59.600 sector that would be much more exposed. 0:13:59.360 --> 0:14:01.760 Well as just as a side I looked at the chart, 0:14:01.800 --> 0:14:06.840 I can't remember from who. Overnight aluminum is basically Canada. 0:14:07.240 --> 0:14:09.520 I mean, it's a little bit of China, but everybody's 0:14:09.520 --> 0:14:12.360 got like an alphabet super countries like South Korea. South 0:14:12.440 --> 0:14:15.720 Korea is teen Swedens, I mean Canada. When we do 0:14:15.760 --> 0:14:18.960 aluminum tariffs, we're doing Canadian tariffs, thank you. 0:14:19.640 --> 0:14:22.280 And there's a lot of there's a lot of issuers 0:14:22.280 --> 0:14:25.640 in the US credit indices that are actually based in 0:14:25.720 --> 0:14:29.480 Canada are domiciled in Canada, so of course those issuers 0:14:29.520 --> 0:14:32.320 are much more vulnerable if we see tariffs heat up. 0:14:32.480 --> 0:14:35.680 I think another area building products. So in the high 0:14:35.720 --> 0:14:39.640 yield market, this is a sort of trifecta of policy 0:14:39.720 --> 0:14:42.560 risk because you have higher mortgage rates, which is already 0:14:42.600 --> 0:14:46.480 weighed on the sector. You have potential immigration issues, so 0:14:46.600 --> 0:14:50.240 a lot of the building sector is exposed to undocumented labor. 0:14:50.360 --> 0:14:54.760 And then also some exposure to tariffs as well if 0:14:54.800 --> 0:14:57.080 we see things like a tariffs on steel. So that's 0:14:57.120 --> 0:14:59.720 another place that we would avoid. And then if you 0:14:59.720 --> 0:15:01.800 think of about sort of hiding out, think about the 0:15:01.800 --> 0:15:05.680 services sector, So healthcare much lower exposure. We're overweight investment 0:15:05.720 --> 0:15:09.320 great healthcare. In the high yield market, we like cruise lines, 0:15:09.440 --> 0:15:12.840 so sector where you're exposed more to the high end 0:15:12.840 --> 0:15:15.760 consumer and services versus goods. 0:15:16.040 --> 0:15:17.440 I want to ask you to react to something that 0:15:17.480 --> 0:15:19.600 we heard last week when our colleague Silimo's and sat 0:15:19.600 --> 0:15:21.520 down with Scott Bess and the new Corenitury secretary. She 0:15:21.520 --> 0:15:24.120 asked about how he's thinking about what the FED is 0:15:24.160 --> 0:15:26.240 doing or isn't doing, and he said the thing that 0:15:26.240 --> 0:15:29.120 he's paying the most attention to is the tenure. What 0:15:29.160 --> 0:15:30.600 do you make of that? What should we make of 0:15:30.640 --> 0:15:32.600 the fact that he's kind of giving that premacy. That's 0:15:32.600 --> 0:15:34.640 the thing that he's mostly focusing on. 0:15:35.040 --> 0:15:39.640 So I think that the administration is not going to 0:15:39.680 --> 0:15:42.000 be able to adjust the FED funds rate like though 0:15:42.040 --> 0:15:44.480 you might want to, although it might want to, And 0:15:44.560 --> 0:15:48.640 so they do in in some way have control over 0:15:48.680 --> 0:15:50.560 the ten year if you think about the term premium, 0:15:50.560 --> 0:15:54.720 if you think about fiscal deficits and so if they 0:15:54.720 --> 0:15:58.080 are able to sort of reduce the fiscal deficit, that 0:15:58.120 --> 0:16:00.320 could bring down the ten year a bit. And if 0:16:00.320 --> 0:16:04.240 you think about the constituency, they care about their mortgage rate. 0:16:04.320 --> 0:16:07.160 If you can bring down the tenure, that is a 0:16:07.200 --> 0:16:11.040 gift to the constituency and would probably be a very 0:16:11.040 --> 0:16:12.640 popular popular item. 0:16:12.680 --> 0:16:15.720 So, based on this conversation, you're taking off the summer. 0:16:17.560 --> 0:16:20.080 We'll see it's range both. 0:16:20.200 --> 0:16:23.000 I mean, it's cool if there's a real stability to 0:16:23.040 --> 0:16:23.720 its way. 0:16:23.840 --> 0:16:26.840 Yeah, No, there's a definite carry element. We like the 0:16:27.000 --> 0:16:30.040 triple big where you can get a lot of carry, 0:16:30.040 --> 0:16:32.000 and then the leverage loan market. If the FED does 0:16:32.040 --> 0:16:35.040 stay on hold, it's an attractive carry profile. 0:16:35.160 --> 0:16:37.560 Mean thank you Megan Robinson with this BMP prairi about 0:16:37.600 --> 0:16:40.360 it ahead of US credit strategy. 0:16:40.760 --> 0:16:44.680 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:16:44.720 --> 0:16:47.720 starting at seven am Eastern on Apple Corplay and Android 0:16:47.760 --> 0:16:50.800 Auto with the Bloomberg Business app. You can also listen 0:16:50.880 --> 0:16:54.120 live on Amazon Alexa from our flagship New York station, 0:16:54.680 --> 0:16:57.360 Just say Alexa Play Bloomberg eleven thirty. 0:16:57.640 --> 0:17:00.640 We are honored to bring you today someone who grew 0:17:00.720 --> 0:17:05.280 up in the shadow of KMOX in Saint Louis. One 0:17:05.320 --> 0:17:08.920 of my high points was being interviewed by KMOX with 0:17:09.080 --> 0:17:11.800 a plaque Abraham Lincoln on the wall. This is where 0:17:11.840 --> 0:17:14.680 Abe did whatever he did. He came to New York 0:17:14.720 --> 0:17:16.919 and has made a good go of it, and it 0:17:16.960 --> 0:17:20.359 could be a four hour interview today David Gura with 0:17:20.480 --> 0:17:21.119 mister Lander. 0:17:21.440 --> 0:17:23.600 Brad Lander. Great to see you and definitely want to 0:17:23.600 --> 0:17:25.600 talk about your campaign and your platform. But I have 0:17:25.600 --> 0:17:26.919 to start with the news of the day, and that 0:17:27.080 --> 0:17:29.880 is this memo that came to light The Times first 0:17:29.920 --> 0:17:32.600 reported last night from the Justice Department to the US 0:17:32.640 --> 0:17:35.360 Attorney's Office in New York, instructing that office to drop 0:17:35.400 --> 0:17:38.640 the charges against the current mayor, Eric Adams. I wonder 0:17:38.640 --> 0:17:41.679 what you make of that directive. Obviously you have an 0:17:41.680 --> 0:17:44.200 acting US attorney now he's in a very difficult position 0:17:44.720 --> 0:17:47.480 whether to take that advice and alienate probably the entire 0:17:47.520 --> 0:17:50.560 staff within that office, or go along with it. I 0:17:50.560 --> 0:17:53.000 guess under the expectation that whoever succeeds her, be that 0:17:53.119 --> 0:17:55.560 Jay Clayton or someone else, is likely to put a 0:17:55.600 --> 0:17:57.680 rubber stamp on it. What do you make of the news? 0:17:57.720 --> 0:17:59.080 What does it tell you about the case that this 0:17:59.119 --> 0:18:00.280 office is built against mayor? 0:18:00.600 --> 0:18:04.160 What an outrageous miscarriage of justice. The Southern District has 0:18:04.200 --> 0:18:08.480 a tremendous history for doing corruption prosecution, and this says, no, 0:18:08.840 --> 0:18:11.840 we want you to do corruption instead. They had a 0:18:11.880 --> 0:18:14.199 strong case. They're not even saying the evidence in the 0:18:14.240 --> 0:18:17.160 case isn't strong. You know, they know he took illegal 0:18:17.160 --> 0:18:21.240 campaign contributions, corrupted the building's department, but they just want 0:18:21.280 --> 0:18:24.280