WEBVTT - Bloomberg Surveillance TV: September 3rd, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.239 Terminal and the Bloomberg Business app. NACI is our The 0:00:37.280 --> 0:00:40.440 chief global economist, Piper Sandler, is bracing for a soft 0:00:40.440 --> 0:00:43.000 employment report on Friday. She joins us now for more. Nancy, 0:00:43.040 --> 0:00:45.960 Good morning, Good morning. What's a soft employment report on Friday? 0:00:46.040 --> 0:00:48.760 Well, we're assuming about eighty thousand. That's maybe a little 0:00:48.760 --> 0:00:52.239 bit more than consensus, but as of now, eighty is 0:00:52.240 --> 0:00:56.720 our best aty good these days, Probably eighty is better 0:00:56.760 --> 0:00:59.840 than something closer to zero, to be sure. But it 0:00:59.880 --> 0:01:02.240 is a very very clear shift down, and you see 0:01:02.240 --> 0:01:03.360 it in a lot of data. 0:01:03.440 --> 0:01:04.520 Companies aren't hiring. 0:01:04.600 --> 0:01:07.919 You see that in continuing claims, they're not firing aggressively. 0:01:08.480 --> 0:01:12.280 Initial claims are still relatively are still relatively low. Your 0:01:12.280 --> 0:01:14.480 point earlier on the quit rate, the quick rate is 0:01:14.480 --> 0:01:19.039 coming down. People are reluctant to leave. And just ask consumers, 0:01:19.080 --> 0:01:21.920 I mean the Conference boards survey of is it hard 0:01:21.959 --> 0:01:23.520 to get a job or is it easy to get 0:01:23.520 --> 0:01:26.200 a job as a metric, I've used my entire career 0:01:26.280 --> 0:01:29.479 and consumers say it is hard to get a job. 0:01:29.560 --> 0:01:32.200 So there's clearly been a shift down in the labor market. 0:01:32.440 --> 0:01:35.319 Why companies are trying to protect their profit margins is. 0:01:35.280 --> 0:01:39.240 Eighty thousand and even worse number because of the downward revisions. 0:01:39.240 --> 0:01:42.600 To Mike's point that the longer you wait, the more 0:01:42.680 --> 0:01:44.640 unclear the data is in the short run, but longer 0:01:44.720 --> 0:01:46.520 term you do get just as clear of a look 0:01:46.720 --> 0:01:47.920 in terms of responses. 0:01:48.200 --> 0:01:51.320 So the household employment data, which comes out with the 0:01:51.400 --> 0:01:56.320 unemployment rate, actually historically at turning points is better than payroll. 0:01:56.680 --> 0:01:59.320 I've studied this again my entire career was first written 0:01:59.320 --> 0:02:03.520 about in the nineteen seventies. Unlike payroll, the household employment 0:02:03.600 --> 0:02:06.840 data aren't revised. There's once a year population adjustment, but 0:02:06.880 --> 0:02:09.400 you can smooth that out. There's been no growth in 0:02:09.440 --> 0:02:13.120 the household employment survey for the past twelve months. 0:02:13.320 --> 0:02:13.920 And then on. 0:02:14.160 --> 0:02:17.680 Next Tuesday, you're going to see the QCEW, the quarterly 0:02:17.760 --> 0:02:21.560 Census of Employment in wages, and that's going to likely 0:02:21.639 --> 0:02:25.079 show a very sharp reduction in payroll from March of 0:02:25.160 --> 0:02:27.360 twenty five back over the past year of about at 0:02:27.440 --> 0:02:30.320 least eight hundred thousand. That is, payroll is going to 0:02:30.320 --> 0:02:33.440 start to look more like the household data. Consumers, No, 0:02:33.560 --> 0:02:36.280 it's a week job market. They're cutting back on highly 0:02:36.320 --> 0:02:39.960 cyclical stuff, both on the good side and on the 0:02:40.000 --> 0:02:44.799 service side. So the idea that you're getting new news 0:02:44.840 --> 0:02:46.120 from the payroll report to me. 0:02:48.080 --> 0:02:49.280 Is a little misleading. 0:02:49.280 --> 0:02:52.239 Consumers have already reacted to this week employment backdrop. 0:02:52.800 --> 0:02:55.160 When does this term become a problem because it's not 0:02:55.200 --> 0:02:57.760 a downturn, it's not a downturn yet and it doesn't 0:02:57.760 --> 0:03:00.400 seem to be heading toward any kind of recession. But 0:03:00.520 --> 0:03:03.600 this low higher low fire dynamic has continued and people 0:03:03.600 --> 0:03:06.560 don't feel very good. But companies are doing just fine, 0:03:06.560 --> 0:03:08.519 as we see in the earning So when does this 0:03:08.600 --> 0:03:10.040 become a problem. 0:03:10.440 --> 0:03:14.480 That's so important that companies are doing well in this environment. 0:03:14.520 --> 0:03:16.079 Before you see you can see an upturn in the 0:03:16.160 --> 0:03:18.920 job market, companies have to make money. That's been a 0:03:18.960 --> 0:03:22.200 beauty of the US economy over the past decades that 0:03:22.320 --> 0:03:25.000 companies are allowed to stop hiring and or in some 0:03:25.040 --> 0:03:28.600 cases fire people so they can rebuild their profitability, and 0:03:28.639 --> 0:03:30.920 that thing gives them the ability to hire people. So 0:03:31.240 --> 0:03:33.960 I think some of the most bullish news for employment 0:03:34.040 --> 0:03:36.320 in twenty six is the fact that two q s 0:03:36.360 --> 0:03:38.960 AP earnings came in double what they were supposed to 0:03:39.320 --> 0:03:42.720 have been and hit a record and hit a record high. 0:03:43.000 --> 0:03:45.760 Prior to every upturn in employment growth, you first need 0:03:45.800 --> 0:03:49.040 an upturn in earnings and profits, and we're seeing it. 0:03:49.080 --> 0:03:50.880 So kudos to American companies. 0:03:51.160 --> 0:03:53.080 Is that what your full coasting now? A rebound and 0:03:53.160 --> 0:03:54.120 economic activity? 0:03:54.240 --> 0:03:56.240 We are this year you're one one and a half percent, 0:03:57.400 --> 0:04:02.080 but you're already seeing capital spending turn up. Individual companies 0:04:02.360 --> 0:04:03.840 are seeing it. You saw it in the new order 0:04:03.920 --> 0:04:06.920 data yesterday. Why is that happening? Well, One, the Fed 0:04:07.160 --> 0:04:09.520 cut rates one hundred basis points a year ago, and 0:04:09.600 --> 0:04:11.280 it takes about a year for that to work through 0:04:11.280 --> 0:04:14.920 the system. Second, you do have this full capex appreciation, 0:04:15.040 --> 0:04:19.359 which is the most significant capital spending booster shot since 0:04:19.400 --> 0:04:22.400 Reagan in the early early eighties. 0:04:22.520 --> 0:04:24.000 You're seeing it in company data. 0:04:24.160 --> 0:04:27.320 So we have three percent GDP growth next year, and 0:04:27.800 --> 0:04:29.920 we don't think three is a new two. We think 0:04:30.160 --> 0:04:32.760 next year inflation does shift back down to two percent. 0:04:33.080 --> 0:04:37.400 You'll lap the tariff increases, and you'll also see further 0:04:37.440 --> 0:04:39.680 acceleration and productivity slowing unit. 0:04:39.760 --> 0:04:40.719 That's a great setup. 0:04:40.760 --> 0:04:43.919 You're looking for three percent GDP, two percent inflation, where's 0:04:43.920 --> 0:04:44.839 the FED and all of that. 0:04:45.360 --> 0:04:47.880 We don't need an aggressive FED in this cycle. I 0:04:47.920 --> 0:04:50.600 get one that would make me worry about inflation. In 0:04:50.640 --> 0:04:53.799 the back half of twenty six, you have stronger potential 0:04:53.800 --> 0:04:55.720 GDP growth, which is about two and a half two 0:04:55.760 --> 0:04:58.279 two and a half percent. FED funds are pretty much 0:04:58.279 --> 0:05:01.359 in line with that. Nominal GDP growth of about five 0:05:01.880 --> 0:05:03.719 FED ones are a little bit lower than that. The 0:05:03.760 --> 0:05:07.200 problems of the seventies happened because the FED would shove 0:05:07.279 --> 0:05:10.640 rates down way below nominal growth, creating a boom and 0:05:10.640 --> 0:05:11.960 then eventual bust cycle. 0:05:12.000 --> 0:05:14.400 And so we think maybe one cut. 0:05:15.800 --> 0:05:18.640 Would be healthy, but more than that, I would then 0:05:18.680 --> 0:05:20.080 start to worry about inflation. 0:05:20.120 --> 0:05:21.039 Okay, let's take a bait. 0:05:21.200 --> 0:05:25.160 Nancy new fetchare comes along, huge selection process and they're 0:05:25.200 --> 0:05:27.200 going to deliver one cut in twenty twenty six. 0:05:28.760 --> 0:05:31.080 Again, if the economy is help if you go back 0:05:31.120 --> 0:05:32.800 and look at the nineties, which is where we think 0:05:32.839 --> 0:05:35.200 there are echoes of the nineties, The tech tech obviously 0:05:35.200 --> 0:05:39.200 strength in the nineteen nineties, a green span ninety five, 0:05:39.240 --> 0:05:42.320 I believe, cut rates just once and you had three 0:05:42.360 --> 0:05:43.680 and a half percent GDP. 0:05:43.440 --> 0:05:44.680 Growth with inflation slowing. 0:05:44.720 --> 0:05:47.360 You didn't need a lower interest rate in environment because 0:05:47.400 --> 0:05:51.520 you had healthy potential GDP growth, stronger productivity growth, and 0:05:51.760 --> 0:05:54.280 strong very strong corporate profits. And those are the things 0:05:54.320 --> 0:05:58.480 that were driving growth, not lower interest rates. Again, that 0:05:58.520 --> 0:06:02.520 creates problems like another house rice bubble and or boom 0:06:02.520 --> 0:06:05.560 and nominal GDP growth, which then opens the door to inflation. 0:06:06.040 --> 0:06:09.440 How has artificial intelligence changed the nature of that rebound 0:06:09.640 --> 0:06:11.680 given the fact that this isn't necessarily going to be 0:06:11.760 --> 0:06:15.479 a job full recovery that can be equally distributed to 0:06:16.160 --> 0:06:18.520 a lot of different people in different sectors. 0:06:18.920 --> 0:06:21.440 So under the hood, there's always creative destruction in the 0:06:21.520 --> 0:06:23.240 employment and the employment data. 0:06:23.360 --> 0:06:24.480 Just look at the retail data. 0:06:24.480 --> 0:06:27.560 When Amazon came on in the nineteen nineties, you decimated 0:06:28.560 --> 0:06:33.240 retail employment in certain sectors. Online online touched sectors in particular, 0:06:33.400 --> 0:06:35.599 but at the end of the day, overall retail employment rose, 0:06:36.040 --> 0:06:38.919 and so creative destruction within the job market has gone on, 0:06:39.160 --> 0:06:41.400 not just back in the early nineteen hundreds, but even 0:06:41.440 --> 0:06:44.719 over the past ten twenty years. Tech employment has not 0:06:44.800 --> 0:06:47.599 been a driver of the employment cycle. So I view 0:06:47.640 --> 0:06:52.240 AI as more of a productivity enhancing, profit boosting mechanism 0:06:52.320 --> 0:06:55.919 that actually is going to create more jobs because companies 0:06:55.920 --> 0:06:57.480 are going to have stronger earnings. 0:06:57.520 --> 0:06:59.400 You're using it and you love the page book. 0:07:00.080 --> 0:07:03.280 Le's what you're doing that you think actually how it 0:07:03.320 --> 0:07:04.360 affects your job? 0:07:04.560 --> 0:07:09.200 Well for us, my colleagues are are very talented and 0:07:10.120 --> 0:07:15.040 using CHATBT five you can actually write code for the 0:07:15.440 --> 0:07:18.240 page book and get a sense of what what what 0:07:18.280 --> 0:07:21.360 the direction of the economy is from from AI. So 0:07:22.200 --> 0:07:25.400 I'm a product of technological innovation. I started with a typewriter. 0:07:25.440 --> 0:07:27.520 Obviously that I went to a computer, et cetera. I'll stop, 0:07:27.560 --> 0:07:30.640 but a technological innovation in this industry is not new. 0:07:31.200 --> 0:07:34.600 It just improves our ability to do but hopefully not 0:07:34.680 --> 0:07:37.080 always a better a better economic analyst. 0:07:38.120 --> 0:07:41.560 Stay with us. Multiple IMPERG surveillance coming up after this. 0:07:50.840 --> 0:07:53.360 Marc Abana, the head of US Right Strategy Bank for 0:07:53.360 --> 0:07:55.400 America Global Research is with us around a table for 0:07:55.480 --> 0:07:57.160 more mark and morning, good morning. It's going to see 0:07:57.200 --> 0:07:59.600 you like a lot's change, what's changed for you? 0:07:59.680 --> 0:08:02.520 So we think that investors should really be focused on 0:08:02.560 --> 0:08:05.920 where the cutting trough in this cycle is. That's still 0:08:05.960 --> 0:08:09.520 around three percent. The FED thinks three percent is neutral. 0:08:09.560 --> 0:08:11.720 The market seems to believe that that's credible and that 0:08:11.720 --> 0:08:15.280 the FED will head there increasingly. At least for our 0:08:15.560 --> 0:08:18.240 rate strategy team, we see three percent as almost a 0:08:18.280 --> 0:08:22.480 cutting ceiling. They're going to at least cut to there, 0:08:22.680 --> 0:08:25.480 we think, and we think that the market is not 0:08:25.760 --> 0:08:30.200 fully appreciating the potential range of outcomes below three percent 0:08:30.480 --> 0:08:32.000 that the FED could take us to. 0:08:32.960 --> 0:08:35.120 And that range of outcomes. 0:08:34.760 --> 0:08:38.600 We think exists because you do have a moderating labor market, 0:08:38.679 --> 0:08:41.120 you do have inflation that is expected to peak around 0:08:41.160 --> 0:08:43.880 the end of this year or first half of next year. 0:08:44.320 --> 0:08:46.120 But we also think that you're going to have a 0:08:46.120 --> 0:08:48.640 composition of individuals at the FED that are going to 0:08:48.679 --> 0:08:52.679 be targeting potentially different objectives than the current FED is. 0:08:53.000 --> 0:08:55.560 And specifically, what I mean by that is, think about, 0:08:55.600 --> 0:08:58.480 let's say, how the FED judges the natural rate of unemployment. 0:08:58.760 --> 0:09:00.720 The FED thinks that in the long run this level 0:09:00.760 --> 0:09:03.120 is four point two percent. They don't know that for sure, 0:09:03.160 --> 0:09:06.800 but that's their estimate. What's to stop a new composition 0:09:06.800 --> 0:09:09.439 of FED officials from targeting and potential three and a 0:09:09.480 --> 0:09:13.600 half percent or sub four percent type of natural rate 0:09:13.640 --> 0:09:17.640 of unemployment? And we think that you're going to increasingly 0:09:17.679 --> 0:09:20.959 hear these types of arguments from individuals that are being 0:09:20.960 --> 0:09:24.200 considered to adopt leadership positions at the FED. I'll certainly 0:09:24.200 --> 0:09:28.360 be listening for that on Thursday with Myron's testimony, because 0:09:28.400 --> 0:09:30.880 we have heard from other, let's say FED share contenders 0:09:31.080 --> 0:09:34.080 that they're open to this idea. And if the FED 0:09:34.120 --> 0:09:37.560 does indeed adopt that type of approach, that opens up 0:09:37.559 --> 0:09:39.840 the range of outcomes for where the funds rate can 0:09:39.880 --> 0:09:42.439 go well below three percent. We think you want to 0:09:42.440 --> 0:09:45.440 be received five year ois to benefit from that. It 0:09:45.480 --> 0:09:47.880 also means that you should be expecting that longer run 0:09:47.880 --> 0:09:52.240 inflation expectations move up because they are still very well anchored. 0:09:52.240 --> 0:09:54.800 We agree with the Fed's assessment on that. We think 0:09:54.840 --> 0:09:56.679 that they can be moving up. We think that the 0:09:56.679 --> 0:09:58.920 inflation curve can be steepening, and we think that the 0:09:58.920 --> 0:10:02.840 nominal curve should also be steepening in that type of environment. Finally, 0:10:02.880 --> 0:10:05.600 we like being short thirty year asset swamp spreads because 0:10:05.600 --> 0:10:09.880 we do worry about some of this supply demand dynamic 0:10:10.040 --> 0:10:12.320 at the back end of the rates curve. If the 0:10:12.360 --> 0:10:16.199 Fed is let's say, cutting to rates lower than what 0:10:16.280 --> 0:10:20.000 many of us would think are justified by fundamentals today. 0:10:20.559 --> 0:10:22.080 Who's going to buy the bond? 0:10:22.559 --> 0:10:25.360 If you're worried about upside inflation risks and the deficit 0:10:25.400 --> 0:10:29.280 is still not improving materially. Who's going to take down 0:10:29.320 --> 0:10:31.719 all that long duration treasury supply? So we think you 0:10:31.760 --> 0:10:33.240 want to be positioned for them. We like being short 0:10:33.240 --> 0:10:34.960 thirty r asset swap spreads to do so. 0:10:34.960 --> 0:10:37.200 So as you talk, I'm thinking, I'm going to hide 0:10:37.240 --> 0:10:39.880 in gold. I'm going to hide in the most pro 0:10:39.880 --> 0:10:43.160 growth stocks because essentially they're going to juice everything. I mean, essentially, 0:10:43.480 --> 0:10:47.880 isn't what you're saying really positive for stocks, really positive 0:10:47.920 --> 0:10:50.880 for gold, terrible for the dollar, and don't even touch 0:10:50.920 --> 0:10:53.720 that thirty year bond? Yes? Yes, yes, yes, okay, So 0:10:53.760 --> 0:10:55.840 that's basically what you're looking for right now, and. 0:10:56.960 --> 0:11:01.319 We just think that again, you can focus on fundamentals 0:11:01.920 --> 0:11:04.760 and fundamentals and our economists, and kudos to them, are 0:11:04.800 --> 0:11:07.800 still very much rooted in that they're thinking, this is 0:11:07.840 --> 0:11:10.040 an economy that's not headed into a recession, where you've 0:11:10.080 --> 0:11:13.599 got stagflationary risks, where inflation is going to be a 0:11:13.640 --> 0:11:15.600 three percent or higher by the end of the year, 0:11:16.240 --> 0:11:18.160 and where the FED is running the risk of a 0:11:18.200 --> 0:11:22.320 policy mistake by cutting later this year, if that's indeed 0:11:22.360 --> 0:11:25.240 what they do. And so they're thinking, why would the 0:11:25.240 --> 0:11:28.160 FED be doing this? And I understand that from a 0:11:28.160 --> 0:11:33.160 fundamental perspective, but we've all seen the headlines. We've all 0:11:33.200 --> 0:11:36.280 seen at least or we've heard some of the approaches 0:11:36.360 --> 0:11:40.520 that individuals were being nominated or considered for FED leadership 0:11:40.520 --> 0:11:44.200 positions are espousing, and all of those, at least me 0:11:44.240 --> 0:11:46.560 as a rate strategist, say, why are they going to 0:11:46.559 --> 0:11:47.160 stop at three? 0:11:47.760 --> 0:11:48.640 Why would they do that? 0:11:48.720 --> 0:11:50.760 Waller is just saying, no, we're going to cut to neutral, 0:11:51.000 --> 0:11:52.400 or I think we should be heading to neutral, and 0:11:52.400 --> 0:11:53.880 I think neutral is three percent, But he'll be the 0:11:53.880 --> 0:11:55.560 first to tell you that he doesn't know where neutral is. 0:11:56.440 --> 0:11:58.800 And then once you start to contemplate some of these 0:11:58.840 --> 0:12:03.120 other arguments, we suspect about lower natural rate of unemployment 0:12:03.200 --> 0:12:08.840 and really strong GDP and deficit financing levels, which is 0:12:08.880 --> 0:12:11.040 not in the FEDS mandate, but certainly you hear that 0:12:11.080 --> 0:12:15.120 line of argument from administration officials. Once that creeps into 0:12:15.160 --> 0:12:17.959 the dialogue, then why would they be stopping at three? 0:12:18.280 --> 0:12:21.000 So we just think again that the distribution of rate 0:12:21.080 --> 0:12:24.640 outcomes is much greater to the downside than what the 0:12:24.679 --> 0:12:28.280 market is currently pricing, not necessarily due to fundamentals, but 0:12:28.400 --> 0:12:31.280 due to a shift in the approach for how the 0:12:31.280 --> 0:12:33.559 FED will likely be thinking about setting monetary policy. 0:12:33.559 --> 0:12:34.760 You know, I give you a lot of credit for 0:12:35.160 --> 0:12:38.000 trying to force people to think out sign a conventional framework, 0:12:38.200 --> 0:12:40.240 because I think that what we could say next year 0:12:40.320 --> 0:12:41.559 could be very unconventional. 0:12:41.960 --> 0:12:44.960 The idea of targeting something sub four point two percent 0:12:45.040 --> 0:12:49.120 on the jobs market and ignoring the inflation possibility. I'm 0:12:49.120 --> 0:12:51.120 just thinking, I mean, I understand why people are pro 0:12:51.240 --> 0:12:53.719 risk in that environment, because why wouldn't you be pro 0:12:53.840 --> 0:12:56.000 risk at a time where they're trying to juice growth 0:12:56.000 --> 0:12:58.120 at the expense potentially of inflation. 0:12:58.640 --> 0:12:59.320 I done it round. 0:12:59.559 --> 0:13:01.960 I do think against the clock fifteen twenty seconds. 0:13:02.080 --> 0:13:05.400 Okay, so what stops this? We think two things stop this. 0:13:05.520 --> 0:13:08.280 Number one popular discontent with show inflation the voter. 0:13:08.520 --> 0:13:09.960 But I don't know about you. 0:13:10.000 --> 0:13:12.280 I would imagine that it takes above three percent inflation 0:13:12.440 --> 0:13:14.480 to really bring it, you know, individuals out to the 0:13:14.480 --> 0:13:16.559 ballot box on this issue five or two loss of 0:13:16.600 --> 0:13:18.679 control on the back end, and you're going to be 0:13:18.679 --> 0:13:21.240 looking at best in cutting auction sizes in that event 0:13:21.440 --> 0:13:23.120 or potentially defit using the balance sheet. 0:13:24.080 --> 0:13:37.079 Stay with us multplemperg Savannan's coming up after this, whether 0:13:37.120 --> 0:13:39.960 sayre at New York, let me Cantrell, Pimcoke, letb me Gimonic, 0:13:40.000 --> 0:13:42.720 good morning, September seventeenth. Will she be there? 0:13:44.280 --> 0:13:47.080 Will Lisa Cook be there? I mean we think so, 0:13:47.760 --> 0:13:50.760 we expect so. I mean think obviously this is how 0:13:50.760 --> 0:13:54.360 the court will adjudicate. This is sort of any one's question. 0:13:54.440 --> 0:13:58.199 But assuming that the Court has not sort of definitively 0:13:58.240 --> 0:14:01.920 decided whether this is fraud, we believe that she will 0:14:02.160 --> 0:14:05.040 most likely be there. I think a bigger question in 0:14:05.080 --> 0:14:08.880 some ways is will the Council of Economic Advisors Chairman 0:14:09.080 --> 0:14:12.480 Myron be there? He, of course is going to be 0:14:12.600 --> 0:14:16.400 sitting for sitting for his Senate confirmation hearing, tomorrow. We 0:14:16.440 --> 0:14:19.800 think that is quite aggressive. So Lisa Cook Pop most 0:14:19.920 --> 0:14:22.880 likely will be there again sort of barring any sort 0:14:22.920 --> 0:14:27.600 of core developments, but Chairman Myron probably will not be there. 0:14:27.800 --> 0:14:30.320 How much is it going to be a contentious fight 0:14:30.480 --> 0:14:34.160 with Stephen Myron in those hearings tomorrow versus just paving. 0:14:33.880 --> 0:14:35.560 The way come on down? Yeah? 0:14:35.600 --> 0:14:37.440 Well, I think we've talked about this before. Me The 0:14:37.480 --> 0:14:42.200 Senate confirmation process is not necessarily perfunctory. I think the 0:14:42.240 --> 0:14:45.360 market sort of just assumes that whomever the President any 0:14:45.400 --> 0:14:48.800 president nominates, they'll likely get confirmed. And I think for 0:14:49.440 --> 0:14:53.520 in most cases that is true, but for this particular position, 0:14:53.720 --> 0:14:57.600 in this particular context, we do think that any sort 0:14:57.600 --> 0:15:02.200 of phedenominee is going to be question by Democrats, of course, 0:15:02.800 --> 0:15:05.880 but also by Republicans. And remember that the first step 0:15:05.920 --> 0:15:09.320 towards Senate confirmation is through the Setate Banking Committee. And 0:15:09.480 --> 0:15:11.080 you know that again might just sort of seem like 0:15:11.120 --> 0:15:13.520 a bunch of kind of mumboed process mumbo jumbo, but 0:15:13.760 --> 0:15:17.640 it's actually very important because assuming no Democrats vote for 0:15:18.840 --> 0:15:22.120 Chairman Myron for Fred Governor, that means that he cannot 0:15:22.160 --> 0:15:24.840 lose even one Republican vote, in order to advance to 0:15:25.040 --> 0:15:25.880 the full Senate floor. 0:15:25.960 --> 0:15:26.880 So this so. 0:15:26.880 --> 0:15:30.160 Tomorrow will be very very important. We do expect that 0:15:30.200 --> 0:15:32.880 he will get confirmed, but again probably not in this 0:15:33.040 --> 0:15:36.200 very accelerated time frame, meaning that he'll probably the earliest 0:15:36.200 --> 0:15:38.880 he'll be seated for that film is probably October. 0:15:38.920 --> 0:15:40.840 The controversy over the FED has sucked up a lot 0:15:40.840 --> 0:15:42.760 of oxygen in a lot of time, and I wonder 0:15:42.800 --> 0:15:44.040 how much we ought to. 0:15:44.000 --> 0:15:46.080 Be putting to the idea that we could be facing. 0:15:45.880 --> 0:15:47.600 A government shutdown in a couple of days and I 0:15:47.640 --> 0:15:49.560 will say for a couple of weeks. And I say 0:15:49.600 --> 0:15:52.360 this at a time where globally we're talking about government dysfunction, 0:15:52.480 --> 0:15:54.240 how much it could be affecting some of the fiscal 0:15:54.280 --> 0:15:57.280 worries and markets. Are you expecting us to actually shut 0:15:57.320 --> 0:15:59.080 down again? I mean, is this actually a worry that 0:15:59.120 --> 0:15:59.920 we have to focus on. 0:16:00.040 --> 0:16:02.760 Well, I think that the market is predesensitized because there 0:16:02.800 --> 0:16:06.840 have been so many headfakes around government shutdowns, around debt 0:16:06.880 --> 0:16:10.479 ceiling fights, and so I think it's sort of understandable 0:16:10.560 --> 0:16:13.840 that the markets sort of a inre to even this discussion. 0:16:14.240 --> 0:16:16.920 But we do think the risk for a shutdown is 0:16:17.080 --> 0:16:20.440 higher this time around than it has been in probably 0:16:20.480 --> 0:16:24.440 several years, and that's because just the friction between the 0:16:24.480 --> 0:16:28.760 Republicans and the Democrats, the requirement. Remember that in order 0:16:28.800 --> 0:16:32.400 to fund the government, we need at least sixty votes 0:16:32.760 --> 0:16:36.440 in the Senate. That by definition will require some democratic 0:16:36.480 --> 0:16:37.720 cooperation in the Senate. 0:16:37.920 --> 0:16:38.840 You may even need. 0:16:38.800 --> 0:16:41.840 Democratic cooperation in the House as well, And just given 0:16:41.920 --> 0:16:47.040 that lack of comity, that friction maybe an understatement. I 0:16:47.080 --> 0:16:51.160 do think that the Democrats may very well be willing 0:16:51.320 --> 0:16:53.880 to take the political risk and shut down the government. 0:16:53.960 --> 0:16:56.960 Now what we've seen from an economic perspective, it doesn't 0:16:57.000 --> 0:17:00.680 really matter unless it is a prolonged shutdown. But again, 0:17:00.720 --> 0:17:04.160 I don't think the risk of that is necessarily zero 0:17:04.760 --> 0:17:07.200 just given some of these sort of political dynamics. 0:17:07.320 --> 0:17:08.880 The issue we've been talking about in the last twenty 0:17:08.880 --> 0:17:10.439 four hours is very much close to home for you. 0:17:10.480 --> 0:17:12.879 It's in the bomb market for the team over at PIMCO. 0:17:13.119 --> 0:17:15.119 What's been amazing for Lisa, me and others on this 0:17:15.200 --> 0:17:17.520 program is to see tariffs go from something that was 0:17:17.560 --> 0:17:20.400 bombed negative in April to bomb positive as we kick 0:17:20.400 --> 0:17:22.560 off September. How are you going to take thinking about 0:17:22.600 --> 0:17:22.920 that now? 0:17:23.040 --> 0:17:23.240 Yeah? 0:17:23.280 --> 0:17:25.720 Well, I think actually in all of these these things 0:17:25.720 --> 0:17:27.560 that we just were talking about too, I mean, from 0:17:27.600 --> 0:17:30.240 our perspective, really lead to what we've seen in the 0:17:30.240 --> 0:17:33.320 bomb market, which is a curve steepening kind of bias, 0:17:33.840 --> 0:17:36.480 and that is something that we've had, we've been positioned 0:17:36.520 --> 0:17:39.639 for that really since the beginning of this year. Clearly 0:17:39.680 --> 0:17:41.639 there might be even more room to run on this 0:17:41.840 --> 0:17:45.400 in terms of the concerns around FED independence, the concerns 0:17:45.440 --> 0:17:48.720 around inflation, the concerns about a government shutdown. We think 0:17:48.720 --> 0:17:53.280 that all reinforces lisa steepening bias. But yeah, I mean 0:17:53.280 --> 0:17:55.320 I think you know, you know, again, this is the 0:17:56.160 --> 0:17:57.800 kind of where we think, this is sort of our 0:17:57.800 --> 0:18:01.120 sweet spot in terms of being active managers being able 0:18:01.119 --> 0:18:03.520 to find some value in the bond market. But again, 0:18:03.600 --> 0:18:05.560 all of these things that we speak up in terms 0:18:05.560 --> 0:18:08.720 of Washington really do reinforce this idea of a bond steepening. 0:18:08.840 --> 0:18:11.560 How much revenue are they rising through terrists at the moment. 0:18:11.800 --> 0:18:13.520 Well, there, I mean a lot. 0:18:14.160 --> 0:18:16.800 I mean, it's you know, to date, it's around for 0:18:16.840 --> 0:18:20.639 fiscal years around one hundred and fifty billion dollars. So 0:18:20.680 --> 0:18:24.000 there is of course a question of whether the government 0:18:24.000 --> 0:18:26.639 would have to return that money. I think that is 0:18:26.680 --> 0:18:30.560 an open question, you know. Our view here is that 0:18:30.720 --> 0:18:32.760 this sort of this this legal process that you all 0:18:32.760 --> 0:18:35.840 have been talking about, will play itself out, will likely 0:18:35.840 --> 0:18:38.960 go to the Supreme Court if that is adjudicated on 0:18:39.000 --> 0:18:41.119 a sort of a normal timeframe. That means that we 0:18:41.160 --> 0:18:43.159 could we may not see a ruling until actually a 0:18:43.240 --> 0:18:45.760 June of twenty twenty six. So the up sort of 0:18:45.800 --> 0:18:47.800 the upshot for the market here is, even though there's 0:18:47.800 --> 0:18:50.200 a lot of noise back and forth around these tariffs, 0:18:50.520 --> 0:18:53.479 our expectation is that they stay on at least in 0:18:53.560 --> 0:18:57.280 some form or fashion for the first forestable future. And then, 0:18:57.320 --> 0:18:59.639 of course, as we've talked about John before, the President 0:18:59.680 --> 0:19:02.119 has a lot of other tools. So if the Supreme 0:19:02.119 --> 0:19:05.199 Court decides in an expedated fashion that he cannot do this, 0:19:05.680 --> 0:19:08.000 we think that he will put tariffs on using some 0:19:08.080 --> 0:19:09.160 of these other lovers that. 0:19:09.119 --> 0:19:11.360 He has stay with us. 0:19:11.680 --> 0:19:23.840 More Bloomberg surveillance coming up after this. Let's turn to 0:19:23.880 --> 0:19:26.639 the consumer. Kay McShane, a US retail analyst that Golment 0:19:26.680 --> 0:19:29.520 Sachs writing this, we have seen growing concerns around the 0:19:29.560 --> 0:19:32.879 health of the US consumer. However, we expect a combination 0:19:33.200 --> 0:19:36.440 of job growth, easing interest rates, and more benign essential 0:19:36.480 --> 0:19:40.560 spending to translate into resilient spending power. Kate joined us 0:19:40.600 --> 0:19:42.560 now for more. Kate, welcome to the program. Let's just 0:19:42.560 --> 0:19:45.480 build on your routelook. We've seen a market start to 0:19:45.520 --> 0:19:48.080 believe in a pickup in this economy. Are you hearing 0:19:48.119 --> 0:19:50.359 the same thing from the companies you follow? 0:19:53.920 --> 0:19:55.240 I think we are. 0:19:55.400 --> 0:19:57.640 I think there is some hesitation going into the back 0:19:57.680 --> 0:20:00.240 half of the year in terms of what with the 0:20:00.320 --> 0:20:02.680 higher prices we could see as a result of tyriffs 0:20:02.720 --> 0:20:03.920