Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordernt. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
Speaker 2: live on Bloomberg Television weekday mornings from six to nine
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app. We begin this out
Speaker 2: with stocks hovering near fresh records on the S and
Speaker 2: P five hundred. COO Group CEO David Balin joined us
Speaker 2: now for more. David Goodmonic, Murriy, pleasure to be congratulations
Speaker 2: on the new seat and we can talk about what
Speaker 2: the company is going to be doing in the not
Speaker 2: too distant future. But I want to take the temperature
Speaker 2: of this market with you. What are your thoughts about
Speaker 2: where we are, where we have been, and where we
Speaker 2: go it.
Speaker 3: Yeah, I mean it's pretty obvious that you've got a
Speaker 3: humanmentum bond situation. You've got out an earning growth situation.
Speaker 3: Earning a broadening situation. I think there are areas of
Speaker 3: the market where you're seeing even more of that internationally.
Speaker 3: You know, seventy percent of international markets last year outperformed
Speaker 3: in the US. US investors virtually exposed to those markets, right,
Speaker 3: lack of diversification in their portfolio. So I like the
Speaker 3: momentum of the market. I like where it's going, but
Speaker 3: I think there are lots of areas where people need
Speaker 3: to go, whether it's in pharmaceuticals, whether it's in energy,
Speaker 3: whether it's at MLPs where there's simply no real action
Speaker 3: on the part of investors. It's all about tech, all
Speaker 3: about big deals all the time. And I think, you know,
Speaker 3: I think the good news is we believe that will continue,
Speaker 3: but we also think that it indicates growing risk in portfolios.
Speaker 2: We let's go to the international story. So I'm with you,
Speaker 2: and we've seen that spreads away from a bigger way
Speaker 2: to start the year. Is it just a different flavor
Speaker 2: of the same story though, just tech tech elsewhere?
Speaker 3: In part that's true, but remember that it's really an
Speaker 3: earning story, right. It's where you're going to see you know,
Speaker 3: lower valuations at higher growth rates internationally, right, And you
Speaker 3: can see that in Japan, you could see that in India, right,
Speaker 3: and you can see it even in pockets of Europe
Speaker 3: and in Germany right as a result of the changes
Speaker 3: of the geopolitics. So you could play all of those things.
Speaker 3: But if you're an investor, you want to own that
Speaker 3: growth at a price if you can, and you can't
Speaker 3: find it at a cheap price in America anymore at all.
Speaker 1: Just to take what you're saying a step further, are
Speaker 1: you saying that anyone who invests completely in the US
Speaker 1: or more heavily in the US is exposed to a
Speaker 1: concentration risk that is historic and potentially really problematic.
Speaker 3: That is the number one thing that we're talking with
Speaker 3: clients about today is the fact that if a client
Speaker 3: has multiple advisors, right, and they're all besting on the
Speaker 3: same thing, and they don't rebalance portfolios, And that is
Speaker 3: the number one observation that we've seen in our data
Speaker 3: this past year, is that everyone is letting these trades ride.
Speaker 3: So you have one of the riskiest stock sectors, right, semiconductors,
Speaker 3: large compan right in Vidiot right leading the company leading
Speaker 3: the stock market, I mean, and it is in a
Speaker 3: highly volatile marketplace, and so we don't think there's a
Speaker 3: problem this year, fair enough. But the question is if
Speaker 3: a person's got you know, that type of concentration, where
Speaker 3: should they move that money and win? Right? And that
Speaker 3: is a twenty twenty six movement as far as we're concerned.
Speaker 1: So you think it's international, is it international equities? Is
Speaker 1: it in the commodity space? I mean, where exactly do
Speaker 1: you see actual diversification against something that's really global?
Speaker 3: So you can actually do that through dividend shares in
Speaker 3: Europe and specific sectors. Right, you can do it in
Speaker 3: pharmaceuticals here in the US and internationally, you could do
Speaker 3: it in tech in Asia in certain areas right in
Speaker 3: terms of what is where AIS can to influence consumer
Speaker 3: markets and consumer brands. So there's lots of places where
Speaker 3: you get the growth story, but you also get diversification
Speaker 3: as the industry. Everything that we're doing is focused on
Speaker 3: where earnings are going in those places, so it's lower evaluations,
Speaker 3: higher earnings growth rates non US. We're now about twenty
Speaker 3: percent non US in terms of our portfolios, which we
Speaker 3: can do because we're not limited to where we were
Speaker 3: when I was working a large bank.
Speaker 4: You also say treat cash as an asset class. Yes,
Speaker 4: how much should people be allocating?
Speaker 3: So two facts that I don't think people know. The
Speaker 3: average family right has more than nine percent of their
Speaker 3: portfolio and cash and has had it there for basically
Speaker 3: five to ten years, saying they'll be opportunistic, and they
Speaker 3: never are. The average cash yield to that family is
Speaker 3: two point seven percent. They could be earning four percent
Speaker 3: of treasuries. They could be earning five percent if they
Speaker 3: have a blended portfolio. And one of the reasons why
Speaker 3: that's true is that they have their cash in fifteen
Speaker 3: different accounts, none of it's aggregated, and it's not managed.
Speaker 3: So why is that the case. It's largely because it's
Speaker 3: a little bit everywhere, and so that's an enormous opportunity.
Speaker 3: If you have nine percent of your portfolio and you
Speaker 3: can make an extra one hundred and fifty basis points
Speaker 3: at it, right, you should be doing that. And these
Speaker 3: are the observations that we're now able to see because
Speaker 3: when you look across all of the accounts that the
Speaker 3: family as, you can actually just see how it is
Speaker 3: that they are really undermanaging certain assets. And that's why
Speaker 3: we call cashes an asset class, because it's a large
Speaker 3: portion of the portfolio and it's largely undermanaged.
Speaker 2: You'll land the foundations for broad a conversation about what
Speaker 2: you're doing now, how much extra insight do you have
Speaker 2: now versus what you had previously, And would you go
Speaker 2: as far as saying that this industry is letting some
Speaker 2: of those families down.
Speaker 3: I would actually go far as to say that I
Speaker 3: really didn't think that a year ago, right. But it's
Speaker 3: not only it's a structural issue, because if they can't
Speaker 3: see the assets, theoretically they can't comment on them. But
Speaker 3: what's really interesting to me is that the industry is
Speaker 3: charging an enormous amount in fees for the advice that
Speaker 3: they get. So the average family is probably paying one
Speaker 3: point four percent if you add up the cost of
Speaker 3: the funds they own and the cost of their advice, right,
Speaker 3: which in a fifteen percent a year is nine percent
Speaker 3: of what they actually made right, And yet they're basically
Speaker 3: index oriented. They're getting all of this exposure without getting diversification,
Speaker 3: and they're getting not very good yields on their cash.
Speaker 3: So I would just say that they're not getting the
Speaker 3: implementation of the advice that they should about you're following
Speaker 3: the basic rules of finance, which is diversification and meaning it.
Speaker 3: And that's what I would say, Yes.
Speaker 1: That's true at a time when there's so much focus
Speaker 1: on wealth management at big banks. Why do you think
Speaker 1: this is? Is it just groupthink or is it that
Speaker 1: there are certain incentives to be invested in certain areas.
Speaker 3: I just simply think that the industry is going under
Speaker 3: an amount of consolidation right now. You know RAA roll
Speaker 3: ups banks basically buying other wealth management institutions, consolidation and
Speaker 3: asset management. It's an extremely profitable time for the industry, right,
Speaker 3: so there's no real reason to take a look at
Speaker 3: the very nature of its fee structure given all of that, right,
Speaker 3: if you think about it right, clients can get I'll
Speaker 3: give you an example. If you take in our asset
Speaker 3: allocation and you actually look at the cost of the
Speaker 3: funds that we use, it's eighteen basis points to actually
Speaker 3: buy all of the atfs in the United States that
Speaker 3: we like, with extraordinary specificity as to what individual sectors
Speaker 3: you want to get exposure to. If you want to
Speaker 3: get exposure to ETFs in MLPs right now, which we're doing,
Speaker 3: or in pharma right, or in biotechnology you can literally
Speaker 3: buy those at very inexpensive things, so you can assemble
Speaker 3: a portfolio that way, or you can pay for active
Speaker 3: management at sixty or seventy basis points and not get
Speaker 3: any benefit from it.
Speaker 1: Right.
Speaker 3: Well, the industry is largely stuck on the way that
Speaker 3: it's done it. It has no incentive to change.
Speaker 2: Just before you go, it's a wealth bracket in particular
Speaker 2: that you think is vulnerable to some of the issues
Speaker 2: you just explained.
Speaker 3: Yes, it's a very wide bracket. But if a family
Speaker 3: has ten to five hundred million dollars, they're using multiple
Speaker 3: and they're using multiple advisors, which is a huge amount
Speaker 3: of wealth and extraordinary.
Speaker 5: Right.
Speaker 3: But if they've got ten to five hundred million dollars, right,
Speaker 3: and they're using multiple advisors, the probability that they're beating
Speaker 3: the market so that they actually have their money adequately
Speaker 3: and diversified and investor is extremely low.
Speaker 2: What happens five hundred and now they tend.
Speaker 3: To get more advice by having an individual inside the
Speaker 3: family who is actually coordinating the professional activities. And interesting
Speaker 3: is they actually have goals and an ips that they're
Speaker 3: following and are being checked on. It's when they don't
Speaker 3: have that and they're relying on multiple providers that they
Speaker 3: end up not having a sense of direction.
Speaker 2: Stay with us. Mult Bloomberg Surveillance coming up after this.
Speaker 2: John Builton of JP Morgan Asset Management, writing, given our
Speaker 2: expectation of a moderate pickup in the pace of growth
Speaker 2: in twenty six, we see potential for positive equity returns.
Speaker 2: John joined us now for Mott, JUHNK and Monich. Morning,
Speaker 2: it's going to see you. We've been flattered, We've been
Speaker 2: blessed by some really really decent double digit gains on
Speaker 2: the S and P five hundred. Is there more to come?
Speaker 6: Well, I think if you believe that the economy is
Speaker 6: in a decent place, you believe we're going to get
Speaker 6: fiscal stimulus coming through this year. We see unemployment behaving
Speaker 6: itself per your earlier comments just now. If we see
Speaker 6: the impact which is always delayed, of the FED cuts
Speaker 6: coming through and actually supporting the economy, which we think
Speaker 6: they will, then if you look back through history, nine
Speaker 6: times out of ten in a year with no recession,
Speaker 6: and we're not calling for a recession, we think the
Speaker 6: odds are pretty low. Then the SMP delivers positive total returns.
Speaker 6: So sure, if you want to bet against stocks, go crazy,
Speaker 6: but the odds are not your way.
Speaker 2: Skater, where the puck is going? Where do I want
Speaker 2: to be now? Already to take advantage to some of this, well,
Speaker 2: we think that what.
Speaker 6: We're going to be seeing this year is, you know
Speaker 6: a little bit more in terms of the continuation from
Speaker 6: some of the themes last year, things like that gradual
Speaker 6: weakening of the dollar, which is going to flatter some
Speaker 6: of the international markets. Of course, if we look at
Speaker 6: what happened with Europe with the US, you know, the
Speaker 6: indices in terms of their returns in local currency, we're
Speaker 6: not too dissimilar. But you've got a big boost as
Speaker 6: a US dollar investor if you were beginning to be
Speaker 6: a bit more adventurous and look outside. We've obviously got
Speaker 6: that Ai trade which continues. We think it's important in
Speaker 6: the US, but remember it's a concentrated piece of the market.
Speaker 6: People want to be able to find a different way
Speaker 6: to invest. Asia looks pretty good there, you know, some
Speaker 6: of the impact in terms of the investments that have
Speaker 6: been made in the last few years start to bear fruit.
Speaker 6: Does it broaden out across the economy. I think that's
Speaker 6: the sort of themes that folks are looking for this year,
Speaker 6: trying to put a few more eggs in a few
Speaker 6: different baskets.
Speaker 1: I was going to ask, how adventurous do you want
Speaker 1: to get Vamsung or Venezuela bonds?
Speaker 2: I think we.
Speaker 5: Okay, there's a few things there, aren't there. I mean,
Speaker 5: one of the other things which I think is supportive
Speaker 5: of the economy generally is is this emphasis on oil
Speaker 5: prices coming down. Right, So anything which is freeing up
Speaker 5: supply potentially being a bit of a sort of downward
Speaker 5: pressure on oil prices ultimately good for the consumer.
Speaker 6: That's ultimately good in the US. It's supportive globally as well,
Speaker 6: of course, but that's going to be something which matters
Speaker 6: a great deal, you know, just having another year of
Speaker 6: the economy being a global a going concern globally, I
Speaker 6: think that's really important for confidence, which in the US,
Speaker 6: if we look at consumer confidence, it's been hit pretty hard. Actually,
Speaker 6: if you look at where the stock market is versus
Speaker 6: where consumer sentiment is, you know, there's a big dichotomy there,
Speaker 6: and it's even worse in Europe.
Speaker 1: It's really a difficult narrative to get my head around.
Speaker 1: Pretty much the entirety of this year is going to
Speaker 1: be difficult thing to get my head around. But I
Speaker 1: am wondering. People say the commodity costs are going down
Speaker 1: because oil prices are going down, and then we look
Speaker 1: in copper, that we look at lithium, then we look
Speaker 1: at some of the other inputs at all time highs
Speaker 1: continuing to skyrocket at golden et cetera. So some of
Speaker 1: the other inputs that we're going to be using increasingly
Speaker 1: electricity costs. So how do you square this idea of
Speaker 1: the disinflation from oil prices and frankly the inflation from
Speaker 1: the rest of the commodity sector, which a lot of
Speaker 1: people are betting will continue.
Speaker 6: Well, I think you put it into the chain. It
Speaker 6: works in that the push up in commodities prices is
Speaker 6: a symptom of the investment that's being made. And the
Speaker 6: investments that are being made at the moment are in
Speaker 6: building productive capacity. It's in electrification, which will ultimately bring
Speaker 6: down costs. It's also in data centers, which is a
Speaker 6: huge part of the AI sort of infrastructure build out.
Speaker 6: We're going through a massive building phase at the moment,
Speaker 6: a phase where we're building productive capacity, and we know
Speaker 6: that the biggest driver of total factor productivity over the
Speaker 6: long run is the investment made in those productive assets.
Speaker 6: That's what we're seeing today. Yes, of course there's going
Speaker 6: to be tightless in places. I mean, the swing demand
Speaker 6: today for copper is not China as it always was
Speaker 6: for many, many years. It's much more what's going on
Speaker 6: in terms of electric vehicles, it's what's going on in
Speaker 6: terms of data center. So it's a symptom I believe
Speaker 6: of a bigger theme, which is this big investment phase
Speaker 6: that we're seeing right now.
Speaker 4: You say that you're becoming more constructive on Europe, specifically Germany.
Speaker 4: This made in Germany. How that possible when China has
Speaker 4: been decimating their industrial base.
Speaker 6: Well, I think we've got a few things. I mean,
Speaker 6: this is not new news. Chinese competition in Europe has
Speaker 6: been a big deal for the European Union for some time.
Speaker 6: There's been a lot of talk about concerns over product dumping,
Speaker 6: that sort of thing, But what's been happening beneath the
Speaker 6: surface is that you've gone through a couple of years
Speaker 6: of German industrial production really being on its knees, very
Speaker 6: little inward investment, very little infrastructure investment. And really what
Speaker 6: we saw last year was the opening up with the
Speaker 6: fiscal taps very rapidly followed by opening up of capex taps.
Speaker 6: Now European savings rates for households currently see it at
Speaker 6: fifteen point three percent. That's the highest level outside of
Speaker 6: the pandemic. You've got the biggest consumer block in the
Speaker 6: world not spending this year, We've got incomes now rising
Speaker 6: above the pace of inflation. Start to turn that back on.
Speaker 5: And I'm not.
Speaker 6: Suggesting European consumers suddenly become US consumer like, but just
Speaker 6: at the margin that can give a big boost. And
Speaker 6: although the pmis earlier this week were a little bit
Speaker 6: softer than expected, they're still coming in in line with
Speaker 6: a one point six percent GDP growth rate, which is
Speaker 6: half as much again as the growth rate in the
Speaker 6: first half of last year.
Speaker 4: Do you think the German fiscal impulse translates to the
Speaker 4: rest of continental Europe.
Speaker 6: Not necessarily, because this is the issue with Europe. But
Speaker 6: what holds it back in many regards is not everyone
Speaker 6: has the same fiscal space. But make no mistake, I
Speaker 6: mean the Germany still remained the biggest block within Eurozone,
Speaker 6: and it really is the heartland of industrial production within
Speaker 6: the Eurozone. So really sort of getting that piece right
Speaker 6: to sit alongside some of the strength we've seen in
Speaker 6: Spain other parts of the periphery and offset some of
Speaker 6: the concerns in France. That's a big deal in terms
Speaker 6: of taking it from a continent that many folks had forgotten,
Speaker 6: that still managed to do in dollar terms thirty percent
Speaker 6: on its equity index last year, and all of a
Speaker 6: sudden it can come out and surprise people.
Speaker 2: John, Can we finish on a simple but I think
Speaker 2: highly consequential question, which is what are the indicators I
Speaker 2: should track this year and what should ignore? We've got
Speaker 2: ADP in about six minutes time, we got payrolls on Friday.
Speaker 2: If I tracked those and just said, you know what,
Speaker 2: based on that data point, I'm going to be long
Speaker 2: or short this equity market, I'd've got things very wrong
Speaker 2: in the last twelve months. What should ignore? What should
Speaker 2: I pay attention to?
Speaker 6: Well, I think you know, if only there was one
Speaker 6: indicator we could all watch, I mean, you know, then
Speaker 6: frankly I'd be out of a job.
Speaker 2: So can to help you more?
Speaker 6: What I think matters most of all is the fundamentals.
Speaker 6: It's what a company's doing. Are they able to translate
Speaker 6: this massive investment flow into earnings. Remember, with the labor market,
Speaker 6: we've gone through seismic change last year. We've gone from
Speaker 6: a huge oversupply, a lot of excess capacity coming into
Speaker 6: the labor market that's now gone. So we've gone through
Speaker 6: that sort of right sizing, if you like. In the
Speaker 6: labor market. It's a much lower level of payrolls needed
Speaker 6: to keep track with trend GDP growth. It's in the
Speaker 6: fifty to sixty thousand range, not in the two hundred
Speaker 6: thousand ranges it was. She's talking smaller numbers. But at
Speaker 6: the end of the day, America's superpower is its corporate sector.
Speaker 6: If its corporate sector is building profits and it's creating
Speaker 6: a positive return on the massive investment that's coming through,
Speaker 6: then that's a reason to be constructive.
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this.
Speaker 2: So here's the latest this morning. President Donald Trump pushing
Speaker 2: House Republicans to own the healthcare issue ahead of the
Speaker 2: midterms as voters show they are more concerned with affordability
Speaker 2: than foreign affairs. Jonathan samri If Bloomberg Government joins us
Speaker 2: now from Washington for more, Jonathan, that's at the top
Speaker 2: of the agenda for Americans in this country. How are
Speaker 2: they going to speak to that, What are they going
Speaker 2: to do in the year ahead.
Speaker 7: That's the really big question. One of the challenges for
Speaker 7: Looks is that they haven't laid out a clear affordability agenda.
Speaker 7: You know, the President is talking about trying to lower
Speaker 7: gas prices. He's made this kind of targeted pitch on healthcare,
Speaker 7: but these days are going to be really hard to
Speaker 7: make to happen quickly. Right now, there are millions of
Speaker 7: Americans who are paying higher premiums through the Affordable Care
Speaker 7: Act because some subsidies expired under Republicans watch this past year,
Speaker 7: and so it's a major challenge. And they have a
Speaker 7: very narrow majority in the House, so it's going to
Speaker 7: be hard to get any major legislation passed this year.
Speaker 2: Jonathan. We talked about the pitch that's going to come
Speaker 2: from Republicans. It's going to be the tax refunds and
Speaker 2: hopefully the economy picks up coming into the middle of
Speaker 2: the year. What's the pitch from the Democrats. What are
Speaker 2: they offering up gun into midterms, so.
Speaker 7: They yet to lay out their own affirmative agenda, which
Speaker 7: is a big challenge for them. It's something they've really
Speaker 7: struggled with during the Trump years. Right now, they're basically
Speaker 7: saying Trump promised you that he was going to lower prices,
Speaker 7: lower inflation, and that his focus has been elsewhere, that
Speaker 7: his focus has been on Venezuela, on immigration, on all
Speaker 7: these other things, and not on not on lowering prices
Speaker 7: the way he promised. As far as an affirmative democratic agenda,
Speaker 7: we're still honestly waiting for that outside of the healthcare space.
Speaker 2: Jonathan, Samawick, Downe and Washington. Jonathan, thank you. I appreciate
Speaker 2: you making some time for us this morning to build
Speaker 2: on this conversation. Henrita Trice A Vita Pounce joined usnapamore, Henriette,
Speaker 2: So happy new year and a welcome to the program,
Speaker 2: A warm welcome. What's it a company agenda? Do you
Speaker 2: think for Republicans what's achievable in the months ahead?
Speaker 8: Well, with a one seat majority, you have almost nothing
Speaker 8: that's achievable. And that's the state of play for Speaker
Speaker 8: Johnson right now. So, when President Trump spoke to the
Speaker 8: Conference yesterday. He laid out a whole host of things
Speaker 8: that Republicans would like to see, But the bottom line
Speaker 8: is this is where an understanding and being a legislative
Speaker 8: wonk is really helpful. You just don't have the votes,
Speaker 8: so talking about reorganizing healthcare is not an option. The
Speaker 8: best that they could do is extend the ACA subsidies
Speaker 8: that expired at the end of the last year. Twenty
Speaker 8: four million people, some people paying one thousand dollars more
Speaker 8: at ACU subsidies. That's going to be the bulk of it.
Speaker 8: And the real news from that event yesterday was around
Speaker 8: the High Amendment, which is related to abortion. We're on
Speaker 8: the same old issues we've been focused on for sixteen years,
Speaker 8: so expecting radical change on the healthcare front is just unrealistic.
Speaker 2: Henry.
Speaker 4: Is their appetite within the Republican Conference to expand those
Speaker 4: healthcare subsidies.
Speaker 8: I think there's appetite to extend, definitely, not to expand.
Speaker 8: So they put wage requirements on their duration requirements on
Speaker 8: there wouldn't be open ended. The duration is anywhere between
Speaker 8: six months to three years. There's even a five year bill,
Speaker 8: but expansion is not on the table, and so that's
Speaker 8: that's one of the best that they can help for
Speaker 8: going into this.
Speaker 4: So does this mean we will not have a government
Speaker 4: shut down at the end of the month.
Speaker 8: I don't think we're going to shut it down. I
Speaker 8: think Democrats feel like they proved their point. They got
Speaker 8: the narrative in the United States around the voting demographics
Speaker 8: to focus on affordability, and as y'all were just pointing out,
Speaker 8: they don't need a proactive agenda in their view, they
Speaker 8: just have to keep the conversation on affordability and housing
Speaker 8: in particular. And so that's where Schumer and Hakeem Jeffrey
Speaker 8: are going to focus the narrative as they go out
Speaker 8: into the campaign trail. And you know, obviously the President
Speaker 8: is very concerned as he has been throughout all of
Speaker 8: last year with maintaining control of the House, but now
Speaker 8: even the Senate is slightly at play for the Democratic conference,
Speaker 8: and that issue of affordability is paramount. As you were
Speaker 8: just pointing out.
Speaker 4: Well, the President yesterday said this quote, I wish you
Speaker 4: could explain to me what the hell's going on with
Speaker 4: the mind of the public, Henrietta when it comes to
Speaker 4: the president and has pitched the American people when it
Speaker 4: comes to affordability. He has gotten gas prices lower, but
Speaker 4: grocery prices are higher. He has stopped the inflow of
Speaker 4: immigration at the border, something he pitched the American people.
Speaker 4: But at the same time, right now he's taking a
Speaker 4: very aggressive foreign policy posture. Is this something Americans want
Speaker 4: to sign up for when it comes to the midterm elections?
Speaker 8: Such an exceptional statement to seize on the president's commentary
Speaker 8: shows that there is, you know, honestly kind of gas
Speaker 8: lighting going on within the White House. And I would
Speaker 8: start with the tariffs. The tariffs are widely understood by
Speaker 8: the American public. Everybody watched the news on Liberation Day,
Speaker 8: and every small business that's importing anything, whether it's a
Speaker 8: children's toy or refrigerator, is focused on what happens next,
Speaker 8: what happens at the Supreme Court? Do I need to
Speaker 8: pay this harmonized tiff schedule number? What's my tire freate?
Speaker 8: Every single person in the United States is concerned about tariffs,
Speaker 8: and they do not like them. This is a rare
Speaker 8: example where Trump is out of sixty forty sometimes even
Speaker 8: seventy thirty deficit with the American public. He likes the tariffs.
Speaker 8: America does not. And so when he says, you know
Speaker 8: what's going on, it's the tariffs. The foreign policy thing
Speaker 8: is actually very consistent with what we've seen from Americans
Speaker 8: for generations now. They just do not care. Four percent
Speaker 8: of Americans think that the drug trade in Latin America
Speaker 8: is worth prioritizing. They just don't care. Bring the prices down,
Speaker 8: nothing else matters.
Speaker 1: Henriya, What does that mean in terms of if the
Speaker 1: Supreme Court does strike down tariffs and the AEPA Act,
Speaker 1: whether the President will be willing to go forward on
Speaker 1: a cocktail of additional tariffs and put them on given
Speaker 1: that they are so unpopular.
Speaker 8: There's a disparate view in DC. If you are a
Speaker 8: trade policy person, you are looking at the tariff laws
Speaker 8: and the code and say, what can I do? Can
Speaker 8: I migrate to a balance of payments authority and collect
Speaker 8: fifteen percent tires for the next one hundred and fifty days.
Speaker 8: Sure you can totally do that. That is reasonable to
Speaker 8: physically do, But think about it from the perspective of
Speaker 8: the manufacturing base or any importer or business or American voter.
Speaker 8: You now have to go through liberation day all over again.
Speaker 8: You have to figure out what tariff schedule you're exposed to,
Speaker 8: what the rate's going to be, how long it's going
Speaker 8: to be there for, whether it will come back if
Speaker 8: they use three three eight that's never been used before
Speaker 8: in history. We're going to go through this whole rigmarole
Speaker 8: where it goes to the Court of International Trade, the
Speaker 8: Court of Appeals, and the Supreme Court all over again.
Speaker 8: So it's that uncertainty, which was the buzzword of all
Speaker 8: a twenty twenty five, that will come rushing back. And
Speaker 8: my view is the president has to take that to consideration,
Speaker 8: especially now that we're eleven months away from a midterm
Speaker 8: election cycle where Republicans are about to get slacked with
Speaker 8: a D plus four generic ballot situation.
Speaker 2: Henrysy did we just finish on one thing? Just take
Speaker 2: a step back. Why is everyone in Washington so bad
Speaker 2: at handling this issue. We torched the Biden administration quite
Speaker 2: rightly when they were talking about prices. Inflation was heading
Speaker 2: towards double digits, and they were like, there's nothing to
Speaker 2: see here. Everything's fine, it's a great economy. It certainly
Speaker 2: wasn't for many people. Unfortunately for the president. He now
Speaker 2: owns the issue. He's the president of the United States,
Speaker 2: and the Republicans control Congress, they own the issue too.
Speaker 2: Why are we seeing successive governments perform so poorly on
Speaker 2: such a key issue for the American public.
Speaker 8: I think the inflation memory bank is really strong. We're
Speaker 8: still in the mindset of the post pandemic era. Is
Speaker 8: that sort of what the data suggests. I would point
Speaker 8: out the idea that you can't follow the University of
Speaker 8: Michigan consumer pricing and our consumer sentiment index anymore. It's
Speaker 8: because now all of your views of the economy are
Speaker 8: shaped by your power. So if you like Trump, you
Speaker 8: think the economy is great. If you don't like Trump,
Speaker 8: you don't like the economy. And now we have this
Speaker 8: mix up between understanding your own personal finances, the state
Speaker 8: of US economy, and whether you like the person in charge.
Speaker 8: It's just a polarized United States economy and it's seeped
Speaker 8: into everything.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
Speaker 2: in markets, economics, angio politics. You can watch the show
Speaker 2: live on Bloomberg TV weekday mornings from six am to
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify,
Speaker 2: or anywhere else you listen, and as always, on the
Speaker 2: Bloomberg terminal and the Bloomberg Business app.