WEBVTT - Traders Look to Earnings as Trade Uncertainty Continues 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 --> 0:00:27.080 us live on YouTube. 0:00:27.160 --> 0:00:29.760 We always like to start the day and start the 0:00:29.840 --> 0:00:34.080 week with someone with broad perspective. Right now joining us 0:00:34.280 --> 0:00:37.080 is Robert Kaplan. We're thrilled that he could join us today. 0:00:37.440 --> 0:00:41.160 Forever associated with his Goldman Sachs, but his public service 0:00:41.240 --> 0:00:44.680 noted to the nation is the president of the federserv 0:00:44.760 --> 0:00:48.519 Bank of Dallas, and just a really broad view of 0:00:48.680 --> 0:00:53.640 where we are. Thrilled Roberts, you would begin our Monday 0:00:53.760 --> 0:00:57.520 with us, where are we right now? In a broad sense? 0:00:58.240 --> 0:01:03.200 Can our institutions serve vibe this onslaught of uncertainty? 0:01:04.800 --> 0:01:10.520 They can survive, But we've got a number of weeks 0:01:11.000 --> 0:01:15.520 more to go to get through this fog. And in particular, 0:01:16.400 --> 0:01:19.160 you know, there's two or three big changes going on. 0:01:20.080 --> 0:01:24.000 There's the government spending cuts, there's the changes in immigration 0:01:24.160 --> 0:01:27.040 policy which are having even a bigger effect than are 0:01:27.080 --> 0:01:27.880 being discussed. 0:01:28.640 --> 0:01:34.040 And on tariffs. The thing that we're just not sure about. 0:01:34.440 --> 0:01:39.080 Is the Trump administration intending to negotiate tariffs down to zero, 0:01:39.760 --> 0:01:44.040 ten percent, twenty percent. I noticed over the weekend they 0:01:44.080 --> 0:01:47.240 said that they want to settle out at twenty to 0:01:47.240 --> 0:01:51.520 fifty percent. And those are dramatically different outcomes. 0:01:52.200 --> 0:01:56.160 Your charm, Robert Kaplan among You know, the people think 0:01:56.200 --> 0:02:00.400 that everybody within the Caplan school comes from six zip 0:02:00.440 --> 0:02:03.440 codes somewhere in the vicinity of Boston or New York 0:02:03.520 --> 0:02:07.400 or Washington. You are a brethren of Kansas, out of 0:02:07.440 --> 0:02:10.639 the University of Kansas. This makes you different. You understand 0:02:10.720 --> 0:02:14.399 the span of America. I'm looking at a statistic where 0:02:14.520 --> 0:02:18.680 Kansas has two point three billion worth of products in 0:02:18.840 --> 0:02:23.080 aerospace to the rest of the world. How it threat 0:02:23.440 --> 0:02:26.880 is Kansas from this upset in Washington. 0:02:27.440 --> 0:02:31.280 Well, it is threatened, and it's got a lot of farmers, 0:02:31.440 --> 0:02:36.160 big agricultural economy, and our farmers rely very heavily on 0:02:36.240 --> 0:02:40.280 foreign markets China for an example, And so there's a 0:02:40.320 --> 0:02:42.080 lot of concern in Kansas. 0:02:42.320 --> 0:02:44.200 And also there are a lot of. 0:02:44.160 --> 0:02:49.520 Small businesses and bigger businesses I'm seeing are having They 0:02:49.520 --> 0:02:52.320 don't love the uncertainty, but they have a lot of 0:02:52.400 --> 0:02:56.960 levers to manage small businesses are telling me that they're 0:02:57.000 --> 0:03:01.240 at risk if this goes on for a number of 0:03:01.280 --> 0:03:03.400 more months. There are many of them are thinking that 0:03:03.440 --> 0:03:05.040 they won't stay in business. 0:03:05.240 --> 0:03:07.680 Paul, over the weekend buried in the advis I know 0:03:07.760 --> 0:03:10.800 you weren't paying attention. At least it wasn't paying attention. 0:03:11.440 --> 0:03:17.080 China canceled twelve thousand metric tons of United States porkshipmits. 0:03:17.240 --> 0:03:18.640 Oh that's a lot of bacon. 0:03:18.840 --> 0:03:20.440 That's a lot of bacon there, and I think we're 0:03:20.480 --> 0:03:22.800 going to see more of that, Robert. When you have 0:03:23.080 --> 0:03:27.040 discussions with your clients, Robert, with your bankers at Goldman Sachs, 0:03:28.160 --> 0:03:32.600 is discussion about a recession is coming or whether it's coming, 0:03:32.639 --> 0:03:35.160 and whether we can get through this. What's the real 0:03:35.280 --> 0:03:38.560 economic fallout that you're hearing from your clients and bankers. 0:03:39.440 --> 0:03:43.520 I think people see that in certain sectors there's already slowing, 0:03:43.920 --> 0:03:48.720 so travel leisure, there's less tourism that we know, Shipping 0:03:49.000 --> 0:03:51.560 we know is weak, and you were talking about earlier 0:03:51.920 --> 0:03:55.560 and in other parts the sentiment is very negative, but 0:03:55.600 --> 0:03:58.480 we don't see a severe decline. I think most people 0:03:58.520 --> 0:04:01.800 I talked to are expected further slowing. 0:04:03.160 --> 0:04:05.280 It's not a fade to complete. 0:04:05.920 --> 0:04:09.320 But I think they're worried that there's been pre ordering 0:04:09.600 --> 0:04:14.560 it's artificially bolster GDP recently, and that there's a little 0:04:14.600 --> 0:04:18.760 bit of a cliff coming and a more substantial decline 0:04:18.800 --> 0:04:22.880 in growth. But they don't know, but they're preparing for 0:04:22.960 --> 0:04:24.760 a more severe slowing. 0:04:24.960 --> 0:04:26.880 In that regard. Robert, what do you think that the 0:04:26.880 --> 0:04:29.320 Federal Reserve can do should do? 0:04:31.360 --> 0:04:34.360 I think they should be making. 0:04:34.240 --> 0:04:37.200 Clear, as I think Jpal did a couple of weeks ago, 0:04:37.640 --> 0:04:41.040 that they're still very focused on fighting inflation. You don't 0:04:41.200 --> 0:04:46.240 want inflation expectations to get de anchored unanchored here, and 0:04:46.240 --> 0:04:49.320 that's what he was trying to do. And in the otherwise, 0:04:49.680 --> 0:04:53.400 don't make predictions. Don't talk about June or not June 0:04:53.800 --> 0:04:55.960 because they don't know. We don't even know what the 0:04:56.000 --> 0:05:00.599 tariff policies are. Ultimately, keep your options open, and don't 0:05:00.640 --> 0:05:03.400 try to be a prognosticator, be a risk manager. 0:05:03.600 --> 0:05:05.839 Formerly with the Dallas Fed and now at Globin Sex, 0:05:05.960 --> 0:05:08.520 Robert keppan with us to start as strong this morning 0:05:08.880 --> 0:05:12.440 and this extended conversation. I mean, I guess we could 0:05:12.480 --> 0:05:15.560 try it out, Robert Kepp. When the Fisher equation the 0:05:15.680 --> 0:05:19.680 Fisher hypothesis rather of central bank theory. But it does 0:05:19.760 --> 0:05:24.200 come down to lagging or x post or after the fact. 0:05:24.520 --> 0:05:27.400 I mean, that's the only fallback the central bank has. 0:05:27.800 --> 0:05:31.960 They have to wait and see the labor market crack 0:05:32.520 --> 0:05:34.200 before they act, right. 0:05:34.960 --> 0:05:37.599 Well, they need to see more evidence in the hard 0:05:37.680 --> 0:05:42.440 data of slowing. And also they don't know and we 0:05:42.560 --> 0:05:49.000 don't know this cost shock we're about to get how. 0:05:48.839 --> 0:05:50.400 Inflation areas are going to be. 0:05:52.040 --> 0:05:57.640 The irony is, up until January twentieth, goods were disinflating globally. 0:05:57.680 --> 0:06:02.000 There's a lot of global overcapacity for manufacturing, and the 0:06:02.160 --> 0:06:05.680 service sector was where the inflation issue is. Now it's changing, 0:06:05.960 --> 0:06:08.719 and so the Fed's going to have to see more evidence. 0:06:09.279 --> 0:06:12.520 And in fairness to them, it's hard to make policy 0:06:12.920 --> 0:06:15.599 forecasts or judgments when you don't know yet what the 0:06:15.640 --> 0:06:16.880 policies are, and they don't. 0:06:16.960 --> 0:06:19.400 I mean, Paul, should we do a chart on Bloomberg Radio? 0:06:19.760 --> 0:06:20.440 Now that works? 0:06:20.520 --> 0:06:23.039 I think a chart works with Robert Captain And you 0:06:23.080 --> 0:06:25.160 know where I'm going with this, Robert Kaplan. I'm going 0:06:25.160 --> 0:06:28.400 to the ten year real yield. We are in between 0:06:28.480 --> 0:06:32.760 e within the dispersion folks and the answer is at 0:06:32.760 --> 0:06:37.320 one point nine nine percent, Paul, it really begins to 0:06:37.400 --> 0:06:42.239 show this economic slow down down at one point eight zero. 0:06:42.640 --> 0:06:46.960 So we're we are distant from that identifying. 0:06:46.040 --> 0:06:49.480 Of a slowing Yeah, we're certainly seeing a GDP forecast 0:06:49.480 --> 0:06:51.760 on Wall Street coming down, Robert. When you talk to 0:06:51.800 --> 0:06:55.800 your corporate clients at Goldman Sachs, what are they doing 0:06:55.839 --> 0:06:58.159 about some of their longer term plans, whether it's long 0:06:58.279 --> 0:07:02.279 term capbecks, whether it's m are they hitting the pause 0:07:02.320 --> 0:07:04.320 button or are they trying to move forward? 0:07:05.760 --> 0:07:10.360 They're mainly hitting the pause button. They're not canceling plans, 0:07:10.400 --> 0:07:13.160 but they're pausing them. And the other thing they're doing 0:07:13.280 --> 0:07:17.680 is and again, these tariffs have come very abruptly. So 0:07:17.720 --> 0:07:20.240 many CEOs have told me, listen, if I had six 0:07:20.280 --> 0:07:23.360 to twelve months, I couldn't sell, I wouldn't solve. 0:07:23.120 --> 0:07:24.800 This, but I could make moves. 0:07:25.200 --> 0:07:29.040 But this is happening now, and so they're re looking 0:07:29.080 --> 0:07:32.680 at their plans for supply chains and logistics. And on 0:07:32.760 --> 0:07:37.080 the investing side, we are seeing people who started the 0:07:37.160 --> 0:07:41.760 year wanting to overallocate to the dollar are now saying, yeah, 0:07:41.840 --> 0:07:42.600 maybe we're. 0:07:42.480 --> 0:07:43.800 Overallocated to the dollar. 0:07:43.800 --> 0:07:46.360 They're gone they've done a one eighty and they're starting 0:07:46.400 --> 0:07:49.800 to look at broader alternatives away. 0:07:49.520 --> 0:07:50.200 From the dollar. 0:07:51.160 --> 0:07:53.160 That doesn't mean that that's what they're going to be 0:07:53.200 --> 0:07:57.480 doing six months from now. But there again, they're concerned, 0:07:58.320 --> 0:08:01.400 and it's more than tariffs. That they don't understand the 0:08:01.560 --> 0:08:05.400 US economy and US institutional framework as well as they 0:08:05.440 --> 0:08:08.000 thought they did, and that's giving them some pause. 0:08:09.680 --> 0:08:11.880 Should we go to the Dallas FED with Robert Captain? 0:08:12.240 --> 0:08:15.720 I think we can do that, Robert Kaplan. As you know, 0:08:15.880 --> 0:08:19.680 each FED has its own characteristics, its own past. The 0:08:19.760 --> 0:08:23.760 Robert McTeer Robert Kaplan pass of the Dallas FED, but 0:08:23.880 --> 0:08:27.240 it's on the border as well. Not speaking for the 0:08:27.320 --> 0:08:29.280 Dallas FED, I want to make clear that mister doctor 0:08:29.320 --> 0:08:32.200 Kaplan doesn't do that, folks, But Robert Kaplan to be 0:08:32.320 --> 0:08:37.720 clear here, how do you perceive our tension with Mexico 0:08:38.640 --> 0:08:41.760 as you look at all the research of your Dallas FED. 0:08:42.600 --> 0:08:48.400 Yeah, so, Texas, as you note, is the largest exporting 0:08:48.480 --> 0:08:54.040 state in the country. The relationship between Texas and Mexico 0:08:54.800 --> 0:08:58.880 in terms of logistics and supply chain arrangements as well 0:08:58.920 --> 0:09:01.240 as people by the way from Mexico coming across the 0:09:01.280 --> 0:09:06.760 border at a shop in Texas, that those relationships are essential. 0:09:07.240 --> 0:09:11.520 And this is why for many companies domicile not just 0:09:11.559 --> 0:09:15.040 in Texas but in the country. The being able to 0:09:15.200 --> 0:09:18.240 send goods back and forth across the border with Mexico 0:09:18.320 --> 0:09:22.760 as well as Canada has been essential to domiciling in 0:09:22.920 --> 0:09:25.760 Texas and in the United States and making sure we're 0:09:25.760 --> 0:09:28.719 globally competitive. And people don't realize that if you want 0:09:28.760 --> 0:09:31.600 to encourage reshoring to the US and you want to 0:09:31.679 --> 0:09:35.040 take share from Asia, you would want to preserve those 0:09:35.160 --> 0:09:37.079 logistics and the chain arrangements. 0:09:37.120 --> 0:09:41.480 So, with all your experience, Robert Kaplan, how does the 0:09:41.800 --> 0:09:45.360 how do the people around the president, including a Secretary Treasury, 0:09:46.040 --> 0:09:50.120 allow him to save face and walk back from his 0:09:50.320 --> 0:09:52.319 mckinleyite tariffs. 0:09:53.679 --> 0:09:59.200 So I think the nub of the issue right now 0:09:59.320 --> 0:10:04.800 is it's unclear how much costs savings we're getting out 0:10:04.800 --> 0:10:08.920 of doge okay, and I think that's part of this discussion. 0:10:09.440 --> 0:10:13.760 And I think they're still a little bit wetted that 0:10:13.800 --> 0:10:15.880 we're going to get the offset, We're going to get 0:10:16.000 --> 0:10:20.640 revenue from tariffs, and that'll help us in the de leveraging, 0:10:20.640 --> 0:10:24.160 it'll help us justify bigger tax cut, and I think 0:10:24.200 --> 0:10:27.160 all the studies I've looked at have shown that every 0:10:27.200 --> 0:10:29.520 dollar of tariff revenue you get, you give it back 0:10:30.040 --> 0:10:31.360 a portion of it. 0:10:31.360 --> 0:10:34.240 In terms of lower growth and damaging groups. 0:10:34.280 --> 0:10:38.480 But that's the key to I think why they're clinging 0:10:39.040 --> 0:10:43.880 to these tariff tariffs at higher levels, not at zero, 0:10:44.320 --> 0:10:48.120 and I think they may be better served letting go 0:10:48.480 --> 0:10:50.280 a little bit on that concept. 0:10:50.400 --> 0:10:53.240 In the zeitgeist this morning, Paul Sweeney is a bar shirt. 0:10:53.240 --> 0:10:56.600 I'm going to give credit to the Tax Foundation showing 0:10:56.640 --> 0:11:02.280 the tencen see revenue build from tariffs versus the ginormous 0:11:02.400 --> 0:11:07.760 revenue that comes in from income taxes. Right, it's a 0:11:07.800 --> 0:11:08.840 sobering charge. 0:11:08.840 --> 0:11:12.160 It is Robert as former president of the Dallas FED, 0:11:12.200 --> 0:11:16.680 you have an appreciation for immigration, legal and illegal, being 0:11:16.720 --> 0:11:20.080 in that part of the country here, What do you 0:11:20.200 --> 0:11:24.160 believe the impact of this reduction of illegal immigration coming 0:11:24.200 --> 0:11:28.360 across the border will due to the US labor market, 0:11:28.400 --> 0:11:30.640 because I'm not sure really folks are clear on how 0:11:30.640 --> 0:11:31.359 that works. 0:11:32.240 --> 0:11:35.880 So of the one of the things I would say, 0:11:35.920 --> 0:11:38.839 over the last four years and during the Trump administration, 0:11:39.480 --> 0:11:43.319 we had in excess of a million workers a year 0:11:43.360 --> 0:11:47.800 immigrants who came in and joined the workforce. It appears 0:11:47.840 --> 0:11:50.960 now this year that could be in the low hundreds 0:11:51.000 --> 0:11:53.640 of thousands. We can't tell yet. So that's going to 0:11:53.800 --> 0:11:58.280 slow workforce growth. That slows GDP, it tightens the workforce. 0:11:58.640 --> 0:12:01.720 But the bigger thing going on that I would call out, 0:12:02.040 --> 0:12:05.520 there are millions of undocumented immigrants in this country in 0:12:05.559 --> 0:12:09.480 the workforce who are unsure of their status. And I'm 0:12:09.520 --> 0:12:12.360 hearing from their employers that some number of them are 0:12:12.400 --> 0:12:15.960 not coming into work and they're certainly not shopping and 0:12:16.040 --> 0:12:19.840 because they're concerned. And so that is making the labor force, 0:12:20.080 --> 0:12:24.080 at least in the service sector tighter, and it will 0:12:24.240 --> 0:12:28.360 slow GDP growth, and it's probably affecting consumer spending. 0:12:28.760 --> 0:12:31.240 Robert Kaplan, generous of you to be with us this morning. 0:12:31.720 --> 0:12:34.280 Vice Chairman Goldin Sex, thank you so much, and again 0:12:34.640 --> 0:12:36.600 his public service at the Dallas FED. 0:12:42.960 --> 0:12:46.520 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:12:46.600 --> 0:12:49.760 weekday afternoons from seven to ten am Eastern Listen on 0:12:49.840 --> 0:12:53.520 Applecarplay and Android Auto with the Bloomberg Business app, or 0:12:53.640 --> 0:12:55.559 watch us live on YouTube. 0:12:55.200 --> 0:12:59.040 With a shocking statistic. Sephanie Roth joins us right now, 0:12:59.280 --> 0:13:04.000 you say, may second, the April report is where the 0:13:04.080 --> 0:13:08.120 job economy breaks and we only get ninety thousand non 0:13:08.160 --> 0:13:09.000 farm payrolls. 0:13:09.160 --> 0:13:11.960 Yeah, I'm surprised how below consensus we are for this print. 0:13:12.520 --> 0:13:16.360 Combination of seasonal factors, the weather, the early jobs print, 0:13:16.400 --> 0:13:18.280 and then on top of that all the tariff uncertainty. 0:13:18.600 --> 0:13:19.960 We're meaningfully below consent. 0:13:20.040 --> 0:13:23.480 Is where are they to cut to the chase? I mean, folks, 0:13:23.480 --> 0:13:27.360 this is really important. Where's everybody wrong? Who thinks it's 0:13:27.440 --> 0:13:30.840 June or July where the Stephanie Roth number kicks in. 0:13:31.400 --> 0:13:33.720 Yeah, and I think we're going to get a bigger 0:13:33.800 --> 0:13:35.719 job's headwind in the next couple of months, but it 0:13:35.760 --> 0:13:39.520 should probably start to leak in to this print. There's 0:13:39.559 --> 0:13:41.560 a ton of uncertainty. It's hard to know whether you 0:13:41.559 --> 0:13:43.439 should hire or not. It's hard to know whether you 0:13:43.440 --> 0:13:45.360 should invest. And then on top of that you do 0:13:45.400 --> 0:13:47.680 have some funky things about this print that put additional 0:13:47.679 --> 0:13:48.439 downward pressure. 0:13:49.000 --> 0:13:51.520 Stephanie. So we think about some of the economic uncertainties 0:13:51.600 --> 0:13:56.080 that may result from higher tariffs. For you, is it 0:13:56.120 --> 0:13:58.640 more growth or inflation? Where do you think we're going 0:13:58.720 --> 0:14:00.160 to see it? 0:14:00.320 --> 0:14:02.160 I think we'll start so I think we'll see from 0:14:02.160 --> 0:14:04.960 a growth perspective, we'll see it in the jobs prints, 0:14:05.240 --> 0:14:07.839 and then from an inflation perspective, we'll probably we probably 0:14:07.880 --> 0:14:11.240 won't see it until say the June print, So things 0:14:11.400 --> 0:14:14.120 like pre tariff sales, a lot of the inventory is 0:14:14.160 --> 0:14:16.720 going to get worked down, and then companies are going 0:14:16.760 --> 0:14:19.320 to start to raise prices once the new inventory feeds in. 0:14:19.560 --> 0:14:21.400 But by the way, they haven't really been importing that 0:14:21.480 --> 0:14:24.640 much from China because terif rates are well over one 0:14:24.680 --> 0:14:27.400 hundred and forty one hundred and forty percent, which is 0:14:27.440 --> 0:14:28.280 on the well end. 0:14:28.240 --> 0:14:30.480 Of the Lafrica Paul I should mention last month was 0:14:30.520 --> 0:14:34.040 two hundred and twenty eight thousand non farm payrolls the survey. 0:14:34.080 --> 0:14:36.880 I didn't realize how way down it is. It's wicked down. 0:14:36.920 --> 0:14:40.960 Good Morning Boston. One hundred and thirty thousand, and Stephanie 0:14:41.240 --> 0:14:45.360 Roth in Wolf Research, is it ninety thousand zero? I 0:14:45.440 --> 0:14:45.760 like that. 0:14:45.960 --> 0:14:48.800 So, Stephanie, what how do you think this economy is 0:14:48.800 --> 0:14:50.240 going to play to you? Are you guys calling for 0:14:50.280 --> 0:14:51.840 a recession over Wolf Research? 0:14:52.280 --> 0:14:54.520 No, I have point six percent GDP for this. 0:14:54.520 --> 0:14:55.600 Year point six percent. 0:14:56.160 --> 0:14:59.640 We have a couple of weeks until we start to 0:14:59.680 --> 0:15:02.560 sort of reached the point of no return. So if 0:15:02.800 --> 0:15:05.440 Trump and Facts reduces the China teriff rate, which I 0:15:05.440 --> 0:15:07.440 think there is a decent chance of that, then we 0:15:07.480 --> 0:15:08.920 can actually get out of this. We end up with 0:15:09.160 --> 0:15:13.160 a sluggish year with the economy can hold up. If 0:15:13.160 --> 0:15:15.040 we're sitting here in August and the tariffs are still 0:15:15.040 --> 0:15:17.040 well over one hundred percent on China, then yeah, I 0:15:17.040 --> 0:15:18.680 think we are in a different situation. But I just 0:15:18.720 --> 0:15:22.760 don't think the administration has that pain tolerance to really 0:15:22.760 --> 0:15:25.720 deal with companies doing significant layoffs. He cares less about 0:15:25.720 --> 0:15:28.240 the stock market, clearly, but once we start to really 0:15:28.280 --> 0:15:30.560 hear from companies, which has started to happen last week, 0:15:31.000 --> 0:15:33.480 he's very likely to roll back the terriffs. 0:15:33.520 --> 0:15:37.680 On ninety thousand jobs, what's a vector of your unemployment rate? 0:15:37.800 --> 0:15:40.240 You're getting onto a five percent unemployment rate. 0:15:40.680 --> 0:15:43.440 So we have well, we have a rising up to 0:15:43.440 --> 0:15:45.240 four point five percent by the end of this year. 0:15:45.280 --> 0:15:46.920 The thing that we haven't really talked about yet when 0:15:46.920 --> 0:15:48.680 it comes to labor market is we also have a 0:15:48.800 --> 0:15:52.560 significant reduction. From an integration perspective, there's going to be 0:15:53.160 --> 0:15:56.040 conflicting forces on the unemployment rate where you have the 0:15:56.720 --> 0:16:00.000 slowdown in the economy, putting upward pressure on the unemployment rate. 0:16:00.360 --> 0:16:03.840 Yet a lot of jobs supply reducing because of immigration, 0:16:04.000 --> 0:16:06.440 putting downward pressure. So that's why the unemployment rate is 0:16:06.440 --> 0:16:08.640 not going to rise as much in our forecast versus 0:16:08.640 --> 0:16:09.760 what it would otherwise be the case. 0:16:09.880 --> 0:16:12.400 See how she did that, That's just something she took 0:16:12.480 --> 0:16:15.160 labor economics, and she's the one in the front row 0:16:15.200 --> 0:16:17.280 I hated because she nailed it. 0:16:17.480 --> 0:16:19.040 I'm going to back row read in the New York Times. 0:16:19.080 --> 0:16:20.080 So that was my market. 0:16:20.320 --> 0:16:24.520 How I did it doing a cross or puzzle? And 0:16:24.640 --> 0:16:27.680 so the question then is the Federal Reserve. Is there 0:16:27.720 --> 0:16:29.720 a role here for the Federal Reserve to kind of 0:16:29.840 --> 0:16:32.440 ease some of the pressure that may be coming into 0:16:32.440 --> 0:16:33.240 the US economy. 0:16:33.320 --> 0:16:36.000 No, No, that is not going to happen. The Fed 0:16:36.080 --> 0:16:37.520 is not going to be influenced by some of this 0:16:37.560 --> 0:16:39.520 political noise. Okay, they are going to wait until the 0:16:39.560 --> 0:16:42.560 unemployment rate starts to rise, jobs are significantly below one 0:16:42.600 --> 0:16:45.800 hundred thousand before they can actually significantly easier. Inflation is 0:16:45.800 --> 0:16:48.280 going to be well above their target, their target by 0:16:48.320 --> 0:16:50.360 at least a percentage point. We're gonna have three ish 0:16:50.400 --> 0:16:52.960 percent inflation this year. There's no way they can ease 0:16:53.240 --> 0:16:55.520 unless they start to see actual weakness in the economy. 0:16:55.560 --> 0:16:58.480 So it's likely that would happen in call it September 0:16:58.520 --> 0:17:00.720 of this year, not much before that. 0:17:01.800 --> 0:17:04.440 How's the consumer doing? I mean I heard a Secretary 0:17:04.480 --> 0:17:07.280 bestent over the weekend saying, yeah, I know the forecast 0:17:07.320 --> 0:17:09.320 are coming down. I know there's concern out there. I 0:17:09.359 --> 0:17:11.760 know the survey data, whether it's you miss or others 0:17:12.040 --> 0:17:15.520 are citing concerns. But he he was saying that this 0:17:15.560 --> 0:17:19.239 weekend that the consumer is still spending. Consumer's okay, and 0:17:19.280 --> 0:17:22.040 that's seventy percent of the US economy. Said, don't worry 0:17:22.080 --> 0:17:22.440 so much. 0:17:22.680 --> 0:17:23.920 How do you view the consumer? 0:17:24.160 --> 0:17:27.560 I think that's right. Today the consumer is fine, they're 0:17:27.600 --> 0:17:30.960 still employed. Prices haven't really risen. Yeah, when you ask 0:17:31.000 --> 0:17:33.560 look at consumer sentiment measures, they're down because the consumers 0:17:33.720 --> 0:17:36.719 realize what's coming in the next couple of months, but 0:17:37.000 --> 0:17:39.120 as of now, they haven't really felt it yet. Once 0:17:39.160 --> 0:17:41.600 they start to see the numbers like we just talked 0:17:41.600 --> 0:17:44.359 about with some of those companies raising prices significantly, once 0:17:44.480 --> 0:17:47.520 shelves start to become there, that's when it could become 0:17:48.000 --> 0:17:50.240 a lot different. And by the way, when job markets 0:17:50.240 --> 0:17:51.919 start to slow down a lot. That's when the consumer 0:17:51.960 --> 0:17:53.760 is very much likely to pull when when you. 0:17:53.680 --> 0:17:56.719 Say this came up this weekend, when someone fancy like 0:17:56.800 --> 0:18:00.840 you says and shelves become beare yes, we look at 0:18:00.880 --> 0:18:04.640 that as like Eastern Europe or Russia fifty years ago. 0:18:05.280 --> 0:18:08.639 What does quote shelves become bear look like? 0:18:09.160 --> 0:18:12.679 Oh, COVID's that's the most recent example, and it's going 0:18:12.720 --> 0:18:14.879 to be a similar type of thing if we don't 0:18:15.160 --> 0:18:17.840 change the tariffs pretty significantly. Tarifreates on China to come 0:18:17.880 --> 0:18:20.760 down all in below fifty percent. If they're sitting much 0:18:20.760 --> 0:18:23.320 above fifty percent, it doesn't make sense. I mean China 0:18:23.359 --> 0:18:25.679 five zero, correct, China five zero, all in. 0:18:25.680 --> 0:18:30.760 Under ten percent? What number under ten percent is a 0:18:30.840 --> 0:18:35.159 trigger point where we calm down. So I haven't seen that. 0:18:35.560 --> 0:18:37.920 So we need to see the China tariffs come down 0:18:38.200 --> 0:18:40.600 to something that's below the fifty percent. Also, that has 0:18:40.640 --> 0:18:42.760 to include the fentannel tariffs too. That's just twenty percent. 0:18:43.160 --> 0:18:46.320 So the number that we got, the reciprocal tariffs that 0:18:46.359 --> 0:18:47.919 we got in April second have to come back to that. 0:18:47.920 --> 0:18:51.000 Thirty four percent is kind of a place that wouldn't 0:18:51.080 --> 0:18:53.560 be okay. And then on the rest of the countries. 0:18:53.600 --> 0:18:55.760 We have to just stay at this ten percent or 0:18:55.840 --> 0:18:57.040 lower or lower. 0:18:57.119 --> 0:19:02.200 I'm studying Paul the or lower okay phrase, and I 0:19:02.680 --> 0:19:06.080 to me, it's almost back to three percent, but you're 0:19:06.119 --> 0:19:08.760 the expert. Or lower is nine percent. 0:19:09.800 --> 0:19:12.120 If we're a ten percent on the rest of the countries. 0:19:12.280 --> 0:19:13.800 And by the way, if we have some sort of 0:19:13.800 --> 0:19:15.960 deal with Canada Mexico, then we're in an okay place. 0:19:16.160 --> 0:19:18.440 Not great, but okay. I don't think we need to 0:19:18.440 --> 0:19:21.560 return back to three percent necessarily, but we cannot stay 0:19:21.600 --> 0:19:24.560 with China particular, is just a really big problem for 0:19:24.600 --> 0:19:26.479 this economy. If we say the rest of ten percent, 0:19:26.720 --> 0:19:27.800 the common can manage that. 0:19:28.119 --> 0:19:30.960 Paul from New Jersey wants to know if we modeled 0:19:31.000 --> 0:19:35.160 in the market reaction to a ninety thousand non farm payroll. 0:19:35.359 --> 0:19:37.360 Yeah, I think it would probably be a negative one, 0:19:37.440 --> 0:19:39.920 just given how optimistic the forecasts are for this month, 0:19:39.920 --> 0:19:41.600 which is truly surprising to me. 0:19:42.000 --> 0:19:43.480 I totally agree with that. 0:19:44.320 --> 0:19:46.560 This is great, so Tom, I thought my vest but 0:19:46.760 --> 0:19:49.040 last year, so I think I now have a trade 0:19:49.080 --> 0:19:53.560 deficit with Italy. I'm not that worried about it, that's okay. 0:19:53.440 --> 0:19:56.240 Yeah, but I made up for with a beverage of 0:19:56.320 --> 0:19:58.920 my choice. I got the tab on the seventh floor 0:19:58.960 --> 0:20:01.000 of the Hassler and said, well, that made up for 0:20:01.160 --> 0:20:07.360 Paul's Thank you, Stephanie Roth, brilliant, Thank you, really really brilliant. 0:20:07.359 --> 0:20:09.159 With Wolf Research, I can't say nothing. 0:20:09.560 --> 0:20:13.480 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:20:13.520 --> 0:20:16.560 starting at seven am Eastern on Apple Corplay and Android 0:20:16.560 --> 0:20:19.600 Auto with the Bloomberg Business app. You can also listen 0:20:19.680 --> 0:20:22.920 live on Amazon Alexa from our flagship New York station, 0:20:23.480 --> 0:20:26.359 Just say Alexa Play Bloomberg eleven thirty. 0:20:26.200 --> 0:20:29.320 Joining us now. She never has Keena Henrietta Trece Co 0:20:29.400 --> 0:20:33.160 foundered Veda Partners. Henrietta, The people like you in Washington 0:20:33.200 --> 0:20:37.119 this morning are going to read found four hundred thousand 0:20:37.200 --> 0:20:41.600 Biblical words from Ashley Parker and Michael Scherer published in 0:20:41.640 --> 0:20:44.440 The Atlantic today. The rest of us just look at 0:20:44.440 --> 0:20:48.840 the polls and the President is losing color. The character 0:20:49.400 --> 0:20:53.560 of the polls and the impact on Republicans over the weekend. 0:20:54.800 --> 0:20:57.119 Yeah, I mean, I think this is just starting to 0:20:57.160 --> 0:21:00.560 emerge as an area that Republican members can't afford to ignore. 0:21:01.280 --> 0:21:03.080 One of the things that happens when members are out 0:21:03.080 --> 0:21:05.840 of session is they get an opportunity to just avoid 0:21:05.840 --> 0:21:08.920 the press, avoid any bad news, and stay away from 0:21:08.960 --> 0:21:11.359 the topics that are happening in the White House. And 0:21:11.440 --> 0:21:13.639 as soon as they return to Congress, they're going to 0:21:13.640 --> 0:21:18.440 be confronted by these numbers because they're so sharply changed 0:21:18.600 --> 0:21:21.840 from just a couple months ago. The generic Democrat is 0:21:21.920 --> 0:21:26.560 now a net six point swing ahead of Republicans from 0:21:26.560 --> 0:21:29.880 where they were in November. So that is a material issue. 0:21:30.480 --> 0:21:34.240 We have to look at about thirty nine right Republican 0:21:34.320 --> 0:21:37.560 seats that are open now and potentially gettable, and that's 0:21:37.640 --> 0:21:39.080 that's where they're going to be spending their time. 0:21:39.200 --> 0:21:43.800 Billy House Venerable at Bloomberg New Yorker's boo and jeer 0:21:44.040 --> 0:21:50.040 Republicans Lawlor It's circus like town hall. That's the future 0:21:50.080 --> 0:21:51.520 of the GOP, isn't it. 0:21:52.520 --> 0:21:55.040 I mean, that was pretty incredible. I actually posted this 0:21:55.080 --> 0:21:58.439 on Instagram account talking about coming on here this morning. 0:21:58.760 --> 0:22:03.200 There's like a fifteen bullet point rule list for Mike 0:22:03.280 --> 0:22:08.080