WEBVTT - Markets React to Tariffs and Labor Concerns 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.440 --> 0:00:32.920 Kelsey Beryl she joins us today from JP Morgan asset management. Tariffs. 0:00:33.440 --> 0:00:36.839 Everybody's worried about substituting. I'm going to substitute for my 0:00:37.240 --> 0:00:41.280 overpriced tomatoes from Mexico, I would suggest, and I'm seeing 0:00:41.280 --> 0:00:46.279 it percolating that far more. Here is the income effect 0:00:47.120 --> 0:00:51.720 of tariffs slowing economy, damp and wage growth. And that 0:00:52.320 --> 0:00:56.040 what do bonds do? Bill's notes and bonds given a 0:00:56.200 --> 0:00:59.640 slowing income effect, a dampened income. 0:00:59.280 --> 0:01:01.959 Effect, right, So, I mean, the data that we've been 0:01:02.000 --> 0:01:06.280 seeing suggests that the US economy is moderating, and maybe 0:01:06.319 --> 0:01:09.640 even slowing a little bit more aggressively than the term moderating. 0:01:09.680 --> 0:01:12.080 So if I look at real consumption spending over the 0:01:12.160 --> 0:01:15.160 first six months of the year, it's annualized negative for 0:01:15.200 --> 0:01:16.680 the first time since twenty ten. 0:01:17.160 --> 0:01:19.000 Is that price up yield down? 0:01:19.520 --> 0:01:20.200 I would say, so? 0:01:20.319 --> 0:01:22.120 I mean, I think that is the reaction in the 0:01:22.120 --> 0:01:25.520 bond market that you're seeing, which is that yields have 0:01:25.640 --> 0:01:29.160 been somewhat range bound this year. But you know, when 0:01:29.240 --> 0:01:32.040 data does come in weaker than expected, like the payrolls 0:01:32.080 --> 0:01:35.679 report we got on Friday, you see an aggressive move 0:01:35.800 --> 0:01:39.200 lower in yields. And that's been a function of this low, higher, 0:01:39.360 --> 0:01:42.480 low fire labor market the way that we've been describing it, 0:01:42.520 --> 0:01:45.880 which is not necessarily that companies are laying people off, 0:01:45.920 --> 0:01:49.320 but they are having them work less hours, and they 0:01:49.320 --> 0:01:53.240 are holding off on investment plans until they get more certainty. 0:01:53.280 --> 0:01:56.440 And I think the question is going forward, we do 0:01:56.520 --> 0:02:00.280 have a bit more clarity on the future outlook. We 0:02:00.360 --> 0:02:02.960 have the one big beautiful Bell Act. We also have 0:02:03.080 --> 0:02:05.880 some sense of tariffs, right, they're not going away. 0:02:06.160 --> 0:02:07.160 Maybe the average. 0:02:06.880 --> 0:02:09.040 Effective tariff rate is going to end up being around 0:02:09.040 --> 0:02:12.399 fifteen percent, between fifteen and twenty percent. Yeah, it's not great, 0:02:12.400 --> 0:02:14.720 but at least we know what it is. The question 0:02:14.919 --> 0:02:18.960 is do you see a reacceleration in some of this 0:02:19.080 --> 0:02:23.320 activity now that things are slightly more stable, or is 0:02:23.360 --> 0:02:26.000 there actually more damage to come from the tariffs. 0:02:26.040 --> 0:02:28.079 And we've been complacent because. 0:02:27.800 --> 0:02:31.880 It's just a very or longer lag than people anticipated 0:02:32.240 --> 0:02:37.000 between higher costs and slower demand and the impact on 0:02:37.040 --> 0:02:37.680 the economy. 0:02:38.320 --> 0:02:40.080 You're right, I mean, I think some of the earnings 0:02:40.480 --> 0:02:43.560 outlooks we've seen from some of these companies are there's 0:02:43.639 --> 0:02:46.640 still cautiously optimistic, but that I think that's kind of 0:02:46.639 --> 0:02:48.560 a win. I mean, because you don't really know what 0:02:48.600 --> 0:02:50.800 a fifteen to twenty percent tariff's going to do to 0:02:50.840 --> 0:02:52.160 your bound sheet. 0:02:53.200 --> 0:02:54.680 So do we take credit risk out there? 0:02:54.720 --> 0:02:56.880 Are you guys sensing that it's time to take some 0:02:56.919 --> 0:02:59.079 credit risk or taking credit risk is okay? 0:02:59.240 --> 0:03:01.359 Yeah, I mean we have been taking credit risk. 0:03:01.520 --> 0:03:04.480 We have been stress testing all of the companies that 0:03:04.520 --> 0:03:08.360 we own, assessing how they would handle ten percent tariffs 0:03:08.360 --> 0:03:11.160 twenty percent tariffs, and the credit analysts have all come 0:03:11.200 --> 0:03:14.120 back to us and they've said, you know, it's. 0:03:13.919 --> 0:03:16.160 Not great for earnings, it's not great for revenue. 0:03:16.200 --> 0:03:19.640 We're projecting a slowdown, but we're not projecting our earnings 0:03:19.680 --> 0:03:23.200 or revenue turn negative, and we're not projecting that this 0:03:23.400 --> 0:03:26.440 is necessarily going to cause a recession. And I will say, 0:03:26.480 --> 0:03:29.960 at the same time, expectations have been lowered, and so 0:03:30.280 --> 0:03:32.400 when Q two earnings have come out, it's been a 0:03:32.440 --> 0:03:37.880 clear beat and now we're refocusing from the negative impacts 0:03:37.880 --> 0:03:41.560 of tariffs to the potential positive impacts associated with one 0:03:41.560 --> 0:03:42.360 big beautiful bill. 0:03:42.440 --> 0:03:44.800 So a lot more companies are talking about. 0:03:45.080 --> 0:03:50.600 Upgrading free cash flow estimates because of expensing of R 0:03:50.640 --> 0:03:54.800 and D or interest deductibility, or lower emission standards for 0:03:54.880 --> 0:03:55.640 auto companies. 0:03:56.320 --> 0:03:58.480 So, I mean, I guess one of the questions here is, 0:03:58.560 --> 0:04:02.080 I'm how does that balance out because kind of maybe 0:04:02.120 --> 0:04:05.480 the dampening effects of terrorists, but maybe the pro. 0:04:05.320 --> 0:04:09.080 Growth effects of some of this one big beautiful bill 0:04:09.120 --> 0:04:09.760 that you mentioned. 0:04:10.360 --> 0:04:13.440 So net is you look at the twenty twenty six 0:04:14.320 --> 0:04:15.880 kind of how's how's the outlook out there for you? 0:04:16.080 --> 0:04:18.680 Yeah, I mean, net net, our base case has been 0:04:18.920 --> 0:04:23.440 subtrend growth, and I think that our confidence around that 0:04:23.600 --> 0:04:26.000 sub trend base case has grown. 0:04:26.120 --> 0:04:28.240 Because of a lot of these offsets. 0:04:28.400 --> 0:04:28.599 Yep. 0:04:28.680 --> 0:04:30.800 You know, you have the tariffs, but you have the 0:04:30.839 --> 0:04:31.800 one big beautiful bill. 0:04:32.160 --> 0:04:34.720 You know, you also think about the concerns earlier in 0:04:34.760 --> 0:04:36.960 the year with the deficits, right, there was a lot 0:04:37.000 --> 0:04:42.160 of concerns about expanding deficits. Now we have the trajectory 0:04:42.360 --> 0:04:46.440 for debt growth based on the new tax legislation, but 0:04:46.560 --> 0:04:48.320 we also know that we have a lot of tariff 0:04:48.360 --> 0:04:49.120 revenue coming in. 0:04:49.240 --> 0:04:51.360 So what have we gotten and fixed incomes so far 0:04:51.400 --> 0:04:51.800 this year? 0:04:52.880 --> 0:04:57.400 Well, stimulus maybe, but it's a it's a carry environment, 0:04:57.839 --> 0:05:01.359 so one where we started with high all in yields 0:05:01.360 --> 0:05:04.320 within fixed income at the start of the year, and 0:05:04.560 --> 0:05:07.479 with yield range of bound and spreads range bound. I 0:05:07.520 --> 0:05:09.760 look at returns you're to date on the USAG four 0:05:09.760 --> 0:05:14.200 point seven percent. That's essentially that carry environment that we 0:05:14.200 --> 0:05:15.799 were kind of expecting. 0:05:15.320 --> 0:05:17.640 When we went into hit your twelve months forward view 0:05:17.680 --> 0:05:20.120 on IG paper, Then can you make six to seven 0:05:20.200 --> 0:05:21.880 percent in fixed income? 0:05:22.000 --> 0:05:26.159 It will obviously depend how much risk free rates fall 0:05:26.240 --> 0:05:29.400 and how much spreads narrow from here, But even if 0:05:29.400 --> 0:05:32.400 we just stay range bound, you can expect the twelve 0:05:32.440 --> 0:05:35.719 month board return on your investment grade portfolio to look 0:05:35.760 --> 0:05:37.080 similar to your starting yield. 0:05:37.200 --> 0:05:39.479 I'm so glad I don't have a real job with 0:05:39.600 --> 0:05:44.320 a real job Kelsey burrowchip a real job. This morning, 0:05:44.360 --> 0:05:46.960 I just kicked the cross curds that my head's spinning. 0:05:47.040 --> 0:05:56.480 Folks, you're listening to the Bloomberg Surveillance podcast. Catch us 0:05:56.520 --> 0:05:59.839 live weekday afternoons from seven to ten am Eastern Listen 0:06:00.040 --> 0:06:03.159 on Apple, Karplay and Android Otto with the Bloomberg Business 0:06:03.279 --> 0:06:05.359 up or watch us live on YouTube. 0:06:05.680 --> 0:06:09.839 John stolf he's with Oppenheimer and Company. He is the 0:06:09.880 --> 0:06:12.400 one who said you have courage stay in the market 0:06:12.960 --> 0:06:16.560 in October two times ago, three times ago, four times ago, 0:06:17.000 --> 0:06:20.040 April passed. Paul, I just framed it out. You can 0:06:20.080 --> 0:06:23.320 do this on the Bloomberg terminal. Thank you, mister Secunda. 0:06:24.040 --> 0:06:28.640 And it's simple. The Stolfus call from here is up 0:06:28.680 --> 0:06:32.720 eleven point seven percent out one year, and that gets 0:06:32.720 --> 0:06:36.440 you out to seventy one hundred. So I interpolated. That's 0:06:36.440 --> 0:06:39.360 all we do that for John, I interpolated down forty 0:06:39.400 --> 0:06:43.040 seven thousand plus on that. It's a double digit lift, 0:06:43.520 --> 0:06:47.120 but not too double digity. You're seventy one hundred. People 0:06:47.200 --> 0:06:50.160 think you're nuts. Explain why you're not nuts. 0:06:50.360 --> 0:06:51.720 Well, thanks Tom. 0:06:51.760 --> 0:06:55.839 It always great to be on Bloomberg Radio Surveillance with 0:06:55.960 --> 0:06:56.240 you and. 0:06:56.880 --> 0:07:00.479 Paul and Lisa. I just want to say that where 0:07:00.480 --> 0:07:03.120 we are, the fundamentals look good. You know, it's in 0:07:03.160 --> 0:07:06.360 spite of everything. It would appear that when you think about. 0:07:06.160 --> 0:07:10.480 It, it's almost about it's about seventeen eighteen years ago 0:07:10.560 --> 0:07:16.640 since the financial crisis, and corporations aided by technology significantly, 0:07:17.160 --> 0:07:20.800 as well as the Federal Reserve, the ben bernanking legacy 0:07:20.840 --> 0:07:22.920 as we call it, have been able to manage a 0:07:22.920 --> 0:07:28.360 lot of situations, including so far this tariff regime as 0:07:28.400 --> 0:07:29.080 it comes in. 0:07:29.440 --> 0:07:32.600 But the bear people, the guys that say stolefus is nuts, 0:07:33.040 --> 0:07:36.120 They're going to say, Okay, it's great, but at some 0:07:36.320 --> 0:07:39.840 point it ends, and we have a correction done ten percent, 0:07:39.880 --> 0:07:42.960 a bear market down eighteen percent, or a normal collapse 0:07:43.000 --> 0:07:46.000 down thirty five percent. Where is that emotion out there? 0:07:46.160 --> 0:07:48.120 Well, that's a good question, you know. 0:07:48.440 --> 0:07:51.560 I think what it is is that bearishness always exists. 0:07:51.600 --> 0:07:53.400 There's a lot of people who feel that the Fed 0:07:53.440 --> 0:07:57.280 has maintained rates too high, their benchmark rate too high 0:07:57.480 --> 0:07:59.800 for too long. On the other hand, you know, when 0:07:59.840 --> 0:08:02.280 we look at it, what we say is they raised 0:08:02.320 --> 0:08:05.560 eleven times and they paused I think about fourteen or 0:08:05.600 --> 0:08:09.680 fifteen times now and no recession, so remarkably sensitive to 0:08:09.720 --> 0:08:13.960 their dual mandate, which is accessionally essentially giving us what 0:08:14.040 --> 0:08:17.360 we would have to say is an economic growth at 0:08:17.360 --> 0:08:22.560 a sustainable pace without untoward levels of inflation, with also 0:08:22.720 --> 0:08:24.400 not disrupting the job market. 0:08:24.400 --> 0:08:26.880 Although we're seeing jobs slow, but you. 0:08:26.840 --> 0:08:29.680 Know, Tom, it just looks like it's it really is 0:08:29.720 --> 0:08:31.120 a mid cycle. 0:08:30.840 --> 0:08:33.640 Extension by monetary. 0:08:33.160 --> 0:08:36.440 Policy that makes you know when you look at the 0:08:36.480 --> 0:08:40.400 economic cycle, it's as wide as the Amazon, not the 0:08:40.520 --> 0:08:44.160 outfit that delivers the boxes to your home, but rather 0:08:44.720 --> 0:08:47.040 the Amazon river. And this has been going on for 0:08:47.120 --> 0:08:47.760 quite a while. 0:08:47.840 --> 0:08:52.000 And this is the underestimation of American productivity an American. 0:08:52.120 --> 0:08:54.240 And we saw a nice pick up there today. 0:08:54.880 --> 0:08:58.080 You've got AI that appears to be and what we 0:08:58.120 --> 0:09:00.679 would say is a watershed period in terms. 0:09:00.520 --> 0:09:03.000 Of two enthusiastic for the showing. 0:09:03.679 --> 0:09:05.640 John, reading through your notes, something jumped out of me. 0:09:05.880 --> 0:09:08.240 Sometimes it seems to us that quite a few folks 0:09:08.320 --> 0:09:11.640 probably don't know what the best performing SMP five sector 0:09:11.720 --> 0:09:14.360 is year to date. I happen to know because I 0:09:14.360 --> 0:09:15.840 have a Bloomberg terminine front. 0:09:15.679 --> 0:09:17.360 Me no industrials. 0:09:18.080 --> 0:09:19.480 What does that tell you about this market? 0:09:19.600 --> 0:09:19.720 Oh? 0:09:19.800 --> 0:09:20.760 What it tells us is. 0:09:21.120 --> 0:09:24.400 That you've got you've got a broadening in the rally, 0:09:24.440 --> 0:09:28.000 which we began to look at and expect last year. 0:09:28.040 --> 0:09:30.200 In the fourth quarter and even earlier in that we 0:09:30.200 --> 0:09:31.719 were saying this rally is broadening. 0:09:32.320 --> 0:09:33.760 A lot of denial about that. 0:09:33.840 --> 0:09:36.600 Everyone, Oh it's just bag seven and it's just ooh, 0:09:36.600 --> 0:09:39.199 it's just so narrow. But you've got if you look 0:09:39.240 --> 0:09:42.240 at it on a year to date, industrials is up 0:09:42.360 --> 0:09:43.559 fourteen point. 0:09:43.280 --> 0:09:46.200 Four percent, outperforming the benchmark. That's up seven. 0:09:46.280 --> 0:09:49.640 The underlying bench Wroin goes up seven point eight, communications 0:09:49.720 --> 0:09:53.680 services up thirteen point nine, info Tech up thirteen point 0:09:53.720 --> 0:09:54.480 seven eight. 0:09:54.559 --> 0:09:57.640 And then utilities up twelve point eight. That's a defensive. 0:09:58.000 --> 0:10:00.920 After that, you've got financials really quite a bit of 0:10:00.920 --> 0:10:03.040 a value sector seven point three. 0:10:03.200 --> 0:10:05.960 Materials my gosh, five point it. 0:10:06.120 --> 0:10:10.840 Really this is Staples up five percent, real estate limpied 0:10:10.840 --> 0:10:12.480 along up one point five seven. 0:10:12.960 --> 0:10:13.880 Energy's negative. 0:10:13.880 --> 0:10:17.560 Consumer discretionary is down nearly two percent, health tears down 0:10:17.640 --> 0:10:21.040 five But those are understandable at least at this point. 0:10:21.080 --> 0:10:26.560 With yet we think consumer discretionary is improving in performance considerably. 0:10:26.600 --> 0:10:28.840 I mean, you look at this, you also think, has 0:10:28.880 --> 0:10:32.680 this been a dramatic overbought kind of rally? And we 0:10:32.760 --> 0:10:36.600 will say from the low of April eighth of this year, 0:10:37.000 --> 0:10:41.080 you know, info tech is up fifty over fifty percent 0:10:41.120 --> 0:10:44.400 as a sector, Communication services up thirty three point six, 0:10:44.600 --> 0:10:48.840 but industrials up twenty nine point five four and consumer 0:10:48.880 --> 0:10:51.559 discretionary up twenty seven. I won't belabor going. 0:10:51.400 --> 0:10:54.640 Through all of these, but my point is that looks wild. 0:10:54.720 --> 0:10:58.800 But then take it from the February nineteenth peak and 0:10:58.880 --> 0:11:02.000 the S and p's own up three point twenty seven percent, 0:11:02.720 --> 0:11:06.880 infotech's up eleven, and change industrials up eight point seven again. 0:11:07.040 --> 0:11:10.560 Second best performed utilities, third best performing ZECHERP six. 0:11:11.160 --> 0:11:11.720 So what we. 0:11:11.640 --> 0:11:14.720 Say is you're beginning to see this broadening in the rally. 0:11:15.640 --> 0:11:19.040 Small and mids are still pretty brutally traded. On a 0:11:19.080 --> 0:11:23.320 given day when the traders are just getting taking some profits, 0:11:23.360 --> 0:11:26.000 and large caps if things, if if the news flow 0:11:26.080 --> 0:11:28.800 isn't worrying, they go into smalls and mids and bid 0:11:28.800 --> 0:11:30.800 them up a little bit. We think that requires the 0:11:30.840 --> 0:11:34.240 FED cut, and we think that's that's more likely than 0:11:34.320 --> 0:11:37.559 not in September as a result of those jobs numbers 0:11:38.040 --> 0:11:40.920 and Powell has talked about for a long time the 0:11:40.960 --> 0:11:44.679 importance of the dual mandate and the sensitivity towards that 0:11:45.080 --> 0:11:47.559 dual mandate would tell us, you know, probably about a 0:11:47.640 --> 0:11:50.319 twenty five BIPs, maybe even a fifty BIPs. 0:11:50.480 --> 0:11:53.680 Got what have you seen from corporate American terms of 0:11:53.720 --> 0:11:54.760 earnings so far this. 0:11:54.760 --> 0:11:57.600 Squad gosh when it comes to Ernie's I was just 0:11:57.920 --> 0:12:00.079 I was just looking at the EA page and I 0:12:00.120 --> 0:12:02.920 think it's up nearly twelve percent earnings growth. 0:12:03.240 --> 0:12:06.000 You've got three sectors that are double digit. 0:12:07.600 --> 0:12:13.199 Returns. That's off the top of my head. That's tech, communications, services. 0:12:12.679 --> 0:12:13.640 And financials. 0:12:13.960 --> 0:12:17.040 You've only got one negative, and I think that's a 0:12:17.080 --> 0:12:20.400 negative double digit earnings growth. I think that's energy and 0:12:20.760 --> 0:12:25.160 effectively You've got eight positive earnings growth, three negative. 0:12:25.960 --> 0:12:27.760 This is remarkably healthy. 0:12:27.800 --> 0:12:29.520 But we really think a lot of it has to 0:12:29.559 --> 0:12:33.800 do like Jimi Hendrix used to say, are you experienced. Indeed, 0:12:34.360 --> 0:12:39.720 managements of corporations and the US consumer are more experienced 0:12:39.760 --> 0:12:44.320 to dealing with waters that need attention to navigate and 0:12:44.559 --> 0:12:46.440 have the tools through technology. 0:12:46.559 --> 0:12:49.600 Just think of the communications. I've been to this business right. 0:12:49.440 --> 0:12:52.559 Since nineteen eighty three, So I remember when there wasn't 0:12:53.240 --> 0:12:57.679 a Bloomberg, when there wasn't a Bloomberg News, there wasn't 0:12:58.360 --> 0:13:01.440 all these different we have day people know, let. 0:13:01.280 --> 0:13:04.280 Me reintroduce John Stolphus with US. He has an acclaimed 0:13:04.360 --> 0:13:08.080 bullmarket call. He has nailed what we've seen over the 0:13:08.120 --> 0:13:11.000 last number of years. He's with the venerable Oppenheimer and 0:13:11.080 --> 0:13:15.360 Company's chief investment strategists. You mentioned James Hendrix and all 0:13:15.400 --> 0:13:19.120 of this. Were we better off when we were in 0:13:19.160 --> 0:13:21.800 the office looking at the back section of the Wall 0:13:21.840 --> 0:13:27.080 Street Journal in earnings's revenue, net income shares, and when 0:13:27.080 --> 0:13:29.680 you went to get a cup of senka or post 0:13:29.760 --> 0:13:33.640 him or escafe, you risk tripping over the value line 0:13:33.679 --> 0:13:36.760 on the floor. Were we better back then in terms 0:13:36.760 --> 0:13:40.360 of having the knowledge and conviction to stay in the market. 0:13:40.600 --> 0:13:43.240 I don't think so. And in fact, the change that 0:13:43.280 --> 0:13:44.360 we have seen very. 0:13:44.240 --> 0:13:48.920 Much, especially amongst private investors, is private investors used to 0:13:48.920 --> 0:13:52.080 get into the bullmarket usually after it was up. This 0:13:52.160 --> 0:13:56.440 is just anecdotal ratecall, but probably ten or fifteen percent. 0:13:56.520 --> 0:13:59.160 Everybody's talking about it. If you don't own stocks. 0:13:58.880 --> 0:14:03.440 One day, okay. Let the bottom line is everybody's managing 0:14:03.440 --> 0:14:06.319 their own retirement, got it? And that's the sea change here. 0:14:06.440 --> 0:14:09.080 I think that's what it is. It's serious investing by 0:14:09.120 --> 0:14:10.040 the private investor. 0:14:10.120 --> 0:14:12.559 It doesn't mean they still don't have plays that they do, 0:14:12.640 --> 0:14:15.200 whether it's a you know, the mag seven or God 0:14:15.240 --> 0:14:19.360 helps the memes, But when you look at it, it 0:14:19.440 --> 0:14:23.240 is it adds support to this bull market in that 0:14:23.320 --> 0:14:26.840 you've got intermediate and long term investors who are looking 0:14:26.880 --> 0:14:29.880 for the babies that get get tossed out with the 0:14:29.920 --> 0:14:34.040 bathwater on pullbacks rather than buying dips blindly. 0:14:34.840 --> 0:14:37.680 And they're in it for the longer haul because multi. 0:14:37.440 --> 0:14:40.840 Generations now from from the boomers all the way to 0:14:40.880 --> 0:14:42.880 the newer younger generations, have. 0:14:42.880 --> 0:14:46.640 A realization that social security. 0:14:46.200 --> 0:14:51.080 Is not likely to give anywhere near the retirement percentage 0:14:51.120 --> 0:14:55.440 of income, and as it once did for their great grandparents, 0:14:55.480 --> 0:14:59.440 their grandparents, and certainly for their and for their parents, 0:14:59.440 --> 0:15:02.240 and so people need to provide for themselves, and the 0:15:02.480 --> 0:15:04.000 market offers an opportunity. 0:15:04.520 --> 0:15:07.120 John Tom has his focus on the VIX and right 0:15:07.160 --> 0:15:10.400 now it's pretty quiescent around sixteen times. But boy, this 0:15:10.520 --> 0:15:12.480 year's been anything but. In the s and P five 0:15:12.520 --> 0:15:15.640 hundred with it twenty percent declined there in April with 0:15:15.680 --> 0:15:18.560 the terroriffs, but then boy, nearly a thirty percent rebound 0:15:18.600 --> 0:15:20.720 off that low, all in seven months. 0:15:21.560 --> 0:15:23.280 We don't see that very often, do we No? 0:15:23.440 --> 0:15:25.680 And I think once again, I think that is the 0:15:26.080 --> 0:15:30.280 It is the ability of the market to discount data 0:15:30.360 --> 0:15:35.320 that crosses the proverbial transom on any given day, whether 0:15:35.360 --> 0:15:39.360 it's it's economic data, whether it has to do with 0:15:39.600 --> 0:15:42.880 a report related to the management of a corporation, or 0:15:42.960 --> 0:15:48.360 policy change or considerations upont all this stuff happens relatively fast. 0:15:48.800 --> 0:15:50.320 And if you look at the if you look at 0:15:50.360 --> 0:15:53.280 the chart, it just looks like whenever the VIX gets 0:15:53.320 --> 0:15:56.600 too sleepy, you know, you get your you become vulnerable 0:15:56.640 --> 0:15:59.640 to see a bit of a spike somewhere along the line. 0:16:00.160 --> 0:16:04.440 But the reality is the spikes have been lower of 0:16:04.560 --> 0:16:09.960 late the pattern. I'm not a technical strategist and a 0:16:10.040 --> 0:16:13.320 fundamental strategist, but we look at the vics because when 0:16:13.320 --> 0:16:16.320 it gets too sleepy, get ready, you know, and then 0:16:16.400 --> 0:16:20.280 be prepared to instead of running for the hills based 0:16:20.280 --> 0:16:23.560 on the fundamentals, look for good quality stocks and cassis. 0:16:23.920 --> 0:16:26.000 To do with MAG seven now, I mean it, I 0:16:26.040 --> 0:16:28.520 own MAG seven. I don't want to sell it. What 0:16:28.560 --> 0:16:33.040 does John stolf To say, I don't own them? Should I? 0:16:33.040 --> 0:16:35.360 I mean, what do you do with MEG seven for 0:16:35.440 --> 0:16:37.520 the flavors of regret out there? 0:16:37.560 --> 0:16:40.240 Now? Well, we do say we think you do need 0:16:40.280 --> 0:16:43.600 to own them because we think they are an intermediate 0:16:43.640 --> 0:16:47.000 to longer term story because of the deeply embedded nature 0:16:47.000 --> 0:16:50.440 of technology in the lives of both consumers and business. 0:16:51.400 --> 0:16:53.600 But it also means if you look at just our 0:16:53.640 --> 0:16:55.680 little box that we put every week at our piece, 0:16:55.680 --> 0:16:57.480 where we look at the S and P five hundred, 0:16:58.040 --> 0:17:02.080 we don't rate our sectors either overweight or underweight, but 0:17:02.120 --> 0:17:08.520 we rate them outperform, market perform or a below or 0:17:08.960 --> 0:17:15.000 you know, underperformed. Rather at when we look at technology itself, 0:17:16.359 --> 0:17:19.600 what we say on infotech, it's about thirty percent waiting 0:17:19.640 --> 0:17:22.840 I think in the benchmark, so we say twenty five percent. 0:17:23.280 --> 0:17:26.520 As a conversation point. For an advisor and their client, 0:17:26.840 --> 0:17:29.080 they may want much less, they may have more. It 0:17:29.080 --> 0:17:30.960 depends upon their tolerance to risk. 0:17:31.280 --> 0:17:34.840 One thing you mentioned the economist James Hendrix. Yes, okay, 0:17:35.040 --> 0:17:37.240 I don't think people know his history that this guy 0:17:37.320 --> 0:17:40.880 came up with foundational blues. I mean everybody knows what's 0:17:40.920 --> 0:17:44.120 stock and all that, but he came up foundational blues. 0:17:44.560 --> 0:17:47.800 Literally he was the opening band as a kid for 0:17:47.880 --> 0:17:51.600 the Isisley Brothers a million years ago. I mean the 0:17:51.640 --> 0:17:52.960 blues foundation. 0:17:52.720 --> 0:17:56.160 Was something oh spectacular. And when you consider his not 0:17:56.200 --> 0:17:59.320 only his lead guitar playing, but the comping the. 0:17:59.320 --> 0:18:01.399 Cops O Rich, I mean it was. 0:18:01.480 --> 0:18:04.080 It was like very very central to what would be 0:18:04.119 --> 0:18:05.800 the Memphis kind of sound. 0:18:06.200 --> 0:18:07.520 He was part of that. 0:18:07.680 --> 0:18:12.120 I mean the cross you know, whether you consider James 0:18:12.119 --> 0:18:14.480 Burton or Jimmy Hendricks. 0:18:15.960 --> 0:18:18.800 The comping just fabulous, just fabulous. 0:18:19.440 --> 0:18:24.120 It's great. Is that enough? Guitar, John John Stolphus, thank 0:18:24.160 --> 0:18:27.480 you so much. Congratulations and really one of the great calls. 0:18:27.520 --> 0:18:30.720 I pull it in with Ralph and Kompora ed Yardnny 0:18:30.760 --> 0:18:34.359 has been brilliant. Out of Bullmark, it's been. Bolski's been okay. 0:18:34.960 --> 0:18:37.080 I mean I don't sun no, he's you know he 0:18:37.200 --> 0:18:39.680 likes the Vikings well you know it's an asterisk, but okay, 0:18:39.680 --> 0:18:42.160 he's been okay, and John storph has killed it. App 0:18:42.200 --> 0:18:42.840 go as well. 0:18:43.160 --> 0:18:47.040 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:18:47.080 --> 0:18:50.080 starting at seven am Eastern on Apple Corplay and Android 0:18:50.119 --> 0:18:53.160 Auto with the Bloomberg Business app. You can also listen 0:18:53.240 --> 0:18:56.520 live on Amazon Alexa from our flagship New York station, 0:18:57.040 --> 0:18:59.720 Just say Alexa Play Bloomberg eleven thirty. 0:19:00.119 --> 0:19:03.160 This is the conversation of the day for people worried 0:19:03.160 --> 0:19:07.399 about Transatlantic confidence. Mark doubting is with Blue Bay Asset 0:19:07.520 --> 0:19:11.400 Management in the heart of COVID. They did an agreement 0:19:11.480 --> 0:19:14.879 with the Royal Bank of Canada. It is OURBC Blue 0:19:14.880 --> 0:19:18.960 Bay asset Management. He has been a student of our 0:19:19.000 --> 0:19:23.920 greater opinion, our economics, our finance, our investment around credit 0:19:24.400 --> 0:19:28.120 for decades. Mark, what's the level of confidence in the 0:19:28.160 --> 0:19:32.919 city this morning that we can get beyond this tariff? 0:19:33.800 --> 0:19:37.920 This tariff Thursday? What's the confidence level forward? 0:19:39.480 --> 0:19:42.280 So I'd say that we're actually in a reasonable position 0:19:42.320 --> 0:19:46.240 at the moment stateside, when we look towards the coming 0:19:46.320 --> 0:19:49.800 year in twenty twenty six, I think in this respect 0:19:50.520 --> 0:19:53.560 that there's a real sense that into the year ahead 0:19:53.960 --> 0:19:58.800 we're probably going to see lower taxes, lower rates, less regulation, 0:19:59.359 --> 0:20:02.640 and that's speaks to a better outcome for. 0:20:02.760 --> 0:20:06.000 The coming year. Albeit in the short term. 0:20:06.160 --> 0:20:07.960 We think that in the short term there could be 0:20:08.040 --> 0:20:10.680 some softness in data, as we saw with the payrolls 0:20:10.760 --> 0:20:14.879 numbers last week, as some of these sort of tariffs 0:20:15.200 --> 0:20:18.840 and the past uncertainty impacts the data in the second 0:20:18.920 --> 0:20:21.360 half of the year. So short term i'd say things 0:20:21.440 --> 0:20:24.080 look a bit bumpy. Further out, it looks a lot better. 0:20:24.840 --> 0:20:26.960 Right by and large, I'd say that markets are looking 0:20:27.000 --> 0:20:28.080 pretty pretty cheerful. 0:20:28.359 --> 0:20:31.520 Yeah, part to the observation you had that all of 0:20:31.560 --> 0:20:34.919 a sudden, August has a certain pace to it for 0:20:35.080 --> 0:20:35.840 New York. 0:20:35.800 --> 0:20:37.679 M and A sure, and we're starting to see some 0:20:37.720 --> 0:20:40.840 animal spirits a little bit, and also in the IPO market. So, Mark, 0:20:41.119 --> 0:20:44.280 as you think about it, how are you surprised that 0:20:44.400 --> 0:20:48.200 despite all the tariff headwinds, crosswinds, I'm not sure kind 0:20:48.200 --> 0:20:50.200 of whip they are depending on what country you are, 0:20:51.400 --> 0:20:54.960 that markets are performing relatively well here servely with the 0:20:54.960 --> 0:20:57.200 stock markets hitting all time highs here. 0:20:58.480 --> 0:20:58.680 Yeah. 0:20:58.720 --> 0:21:00.960 Well, I think in terms of the US stop market, 0:21:01.000 --> 0:21:04.040 it comes back to earnings and earnings growth have been solid, 0:21:04.080 --> 0:21:04.479 hasn't it. 0:21:04.520 --> 0:21:06.640 I mean, it's looking pretty good. 0:21:07.080 --> 0:21:10.960 And from that perspective, it also feels like all through 0:21:11.000 --> 0:21:13.880 the year the stock market has been climbing a wall 0:21:13.920 --> 0:21:16.960 of worry. I think some of the fears that were 0:21:17.000 --> 0:21:21.320