1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hortern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,880 Speaker 2: Terminal and the Bloomberg Business App. John Parvan of Blackrock writing, 10 00:00:37,960 --> 00:00:40,360 Speaker 2: we now see even more course to stay risk on 11 00:00:40,800 --> 00:00:43,720 Speaker 2: and overweight US stocks. John joins us now for more. Joan, 12 00:00:43,760 --> 00:00:46,639 Speaker 2: good morning, Good morning. Just explain yourself, sir, why. 13 00:00:46,960 --> 00:00:48,360 Speaker 3: I mean it was done at the end of the day. 14 00:00:49,120 --> 00:00:51,839 Speaker 3: You know, a huge amount of uncertainty. Of course, we've 15 00:00:51,880 --> 00:00:54,320 Speaker 3: been going through that this year. We don't think there's 16 00:00:54,360 --> 00:00:58,120 Speaker 3: much insight insight in saying that anymore. It's really about 17 00:00:58,160 --> 00:00:59,920 Speaker 3: how you get a handle on this, and I guess 18 00:01:00,120 --> 00:01:02,840 Speaker 3: strong conviction is that you know, when you look over 19 00:01:02,880 --> 00:01:06,360 Speaker 3: the near term, we have more certainty about the outlook 20 00:01:06,440 --> 00:01:08,560 Speaker 3: than we would have over the next few years. That's 21 00:01:08,560 --> 00:01:11,360 Speaker 3: the very unusual environment we are in right now and 22 00:01:11,440 --> 00:01:14,000 Speaker 3: over the near term. The world cannot change very quickly, 23 00:01:14,800 --> 00:01:17,560 Speaker 3: so there'll be you know, noise, there will be headlines, 24 00:01:17,600 --> 00:01:20,400 Speaker 3: there will be attempt to do stuff, but you know, 25 00:01:20,440 --> 00:01:21,520 Speaker 3: there are immutable. 26 00:01:21,160 --> 00:01:24,080 Speaker 4: Laws at play and that's going to shape the outcome. 27 00:01:24,120 --> 00:01:28,120 Speaker 3: So we tend to, you know, over overall be you know, 28 00:01:28,200 --> 00:01:31,800 Speaker 3: pro us assets and at the same time, like try 29 00:01:31,840 --> 00:01:33,559 Speaker 3: to fade the extremes that you're going to see coming 30 00:01:34,040 --> 00:01:34,520 Speaker 3: both ways. 31 00:01:34,720 --> 00:01:36,600 Speaker 2: There is a distinction that when you say overall be 32 00:01:36,680 --> 00:01:40,520 Speaker 2: pro us sets between stocks and bonds, what is the difference. 33 00:01:40,959 --> 00:01:43,800 Speaker 3: Well, the difference is that like we like equities and 34 00:01:43,880 --> 00:01:46,800 Speaker 3: bonds I think are are more tricky in this environment, 35 00:01:46,920 --> 00:01:50,240 Speaker 3: and so US equities. We think there's like powerful mega 36 00:01:50,280 --> 00:01:51,400 Speaker 3: forces that are at play. 37 00:01:51,680 --> 00:01:52,760 Speaker 4: AI is a big team. 38 00:01:52,760 --> 00:01:55,640 Speaker 3: We continue to believe in that that supersedes I guess 39 00:01:55,680 --> 00:01:58,720 Speaker 3: the near term trained noise and so on. But when 40 00:01:58,760 --> 00:02:01,360 Speaker 3: it comes to the bond and fixed income a bit. 41 00:02:01,440 --> 00:02:04,400 Speaker 3: But but government modesl in particular, well, we have a 42 00:02:04,440 --> 00:02:06,680 Speaker 3: lot of things that play that are for us pointing 43 00:02:06,680 --> 00:02:10,680 Speaker 3: towards higher yields, higher long term meals term premium that 44 00:02:10,720 --> 00:02:13,079 Speaker 3: needs to reappear, and so we remain on the way, 45 00:02:13,560 --> 00:02:15,560 Speaker 3: you know, US treasuries as a result. 46 00:02:15,760 --> 00:02:18,600 Speaker 1: Is this a US story or is this a global story? 47 00:02:18,760 --> 00:02:21,720 Speaker 1: At a time when I believe that you prefer European 48 00:02:21,760 --> 00:02:24,280 Speaker 1: bonds even though there's still issuing a lot of debt 49 00:02:24,320 --> 00:02:26,160 Speaker 1: and facing some of the same kinds. 50 00:02:25,880 --> 00:02:29,240 Speaker 3: Of issues, it is a US story to the extent 51 00:02:29,280 --> 00:02:31,760 Speaker 3: that we think that's where the reprising is. 52 00:02:31,800 --> 00:02:34,440 Speaker 4: The is the more more serious. 53 00:02:35,240 --> 00:02:39,079 Speaker 3: It's also related to the greater uncertainty we have around 54 00:02:39,160 --> 00:02:44,200 Speaker 3: the FED outlook, the inflation outlook, the debt, the debt picture, 55 00:02:44,240 --> 00:02:47,240 Speaker 3: whereas in Europe, I mean, you know, inflation is on 56 00:02:47,280 --> 00:02:49,680 Speaker 3: the way down. You can tell a very credible story 57 00:02:49,680 --> 00:02:52,840 Speaker 3: for inflation will surprise on the downside. The CB has 58 00:02:52,840 --> 00:02:56,160 Speaker 3: more room to cut even from here, so that leads to, 59 00:02:56,440 --> 00:02:59,000 Speaker 3: you know, more support for Europe and bounds. 60 00:02:59,040 --> 00:03:03,640 Speaker 1: But so way US equities underway US government bonds while 61 00:03:03,639 --> 00:03:08,200 Speaker 1: you're overweight European government bonds, maybe underway European equities. I'm 62 00:03:08,240 --> 00:03:11,000 Speaker 1: just wondering if you could give us a sense of 63 00:03:11,040 --> 00:03:13,240 Speaker 1: the last time, just to sort of frame this out, 64 00:03:13,480 --> 00:03:17,760 Speaker 1: that you are less exposed to US treasuries, particularly on 65 00:03:17,800 --> 00:03:20,919 Speaker 1: the longer duration versus European ones. What was the last 66 00:03:20,960 --> 00:03:23,560 Speaker 1: time you had this dynamic in black Rocks portfolio. 67 00:03:23,840 --> 00:03:28,880 Speaker 3: Well, we've been for the last few years constantly underway 68 00:03:29,040 --> 00:03:31,560 Speaker 3: US treasuries, so we've been of the view that inflation 69 00:03:31,800 --> 00:03:34,840 Speaker 3: was a structural phenomenon this environment, that rates will need 70 00:03:34,880 --> 00:03:37,760 Speaker 3: to adjust. There's a fiscal story that is not the 71 00:03:37,800 --> 00:03:40,440 Speaker 3: new thing of this year. There's been a deficit story 72 00:03:40,480 --> 00:03:43,680 Speaker 3: post pandemic that was putting pressure on yels. So that 73 00:03:43,760 --> 00:03:46,000 Speaker 3: story has been with us for a few years now. 74 00:03:46,080 --> 00:03:48,000 Speaker 3: That has been one of the strongest convictions we've been 75 00:03:48,040 --> 00:03:51,720 Speaker 3: having throughout those that time. And there's been new layers 76 00:03:51,800 --> 00:03:54,960 Speaker 3: now added to this, which which you know, it's unusual 77 00:03:55,040 --> 00:03:58,600 Speaker 3: to say we've been structurally underweight US treasuries for so long, Right, 78 00:03:58,600 --> 00:04:01,120 Speaker 3: it would have been tactically moving around that, but that's 79 00:04:01,120 --> 00:04:03,160 Speaker 3: really like a lasting story for us. 80 00:04:03,200 --> 00:04:05,480 Speaker 5: When it comes to these new layers. You're probably mentioning 81 00:04:05,520 --> 00:04:07,520 Speaker 5: at least thinking about the one big beautiful bill. Why 82 00:04:07,560 --> 00:04:09,440 Speaker 5: didn't we see more pushback from the bond market. 83 00:04:10,520 --> 00:04:12,920 Speaker 3: Well, I think I think there is a lot of 84 00:04:13,400 --> 00:04:15,760 Speaker 3: structural demand still for US treasury. 85 00:04:15,840 --> 00:04:19,520 Speaker 4: So the reason why we're on the waight is not 86 00:04:20,360 --> 00:04:21,479 Speaker 4: a bigger. 87 00:04:21,200 --> 00:04:25,440 Speaker 3: Sensational story around US exceptionalism being questioned, or it's not 88 00:04:25,520 --> 00:04:28,719 Speaker 3: about US Treasury is not playing their safe asset role 89 00:04:28,760 --> 00:04:30,479 Speaker 3: as much as they had in the past, so we're 90 00:04:30,520 --> 00:04:33,600 Speaker 3: not questioning the fundamental structure of the and there is 91 00:04:33,600 --> 00:04:36,359 Speaker 3: a there's gonna be a need, a structural demand for this. 92 00:04:36,440 --> 00:04:40,279 Speaker 3: So I think I think the markets are adjusting. There's 93 00:04:40,320 --> 00:04:42,880 Speaker 3: no panic so far, and uh, but it's on the 94 00:04:43,000 --> 00:04:46,719 Speaker 3: drifting up. I think there's room for digesting some. 95 00:04:46,560 --> 00:04:49,240 Speaker 4: Of the of the big beautiful bill that. 96 00:04:49,240 --> 00:04:51,440 Speaker 3: Came through, and then there's a lot of question now 97 00:04:51,480 --> 00:04:54,520 Speaker 3: on how it's gonna come next. And so you know, 98 00:04:54,680 --> 00:04:56,360 Speaker 3: I think I think it's gonna be up. Yield is 99 00:04:56,360 --> 00:04:58,800 Speaker 3: gonna go up. There's it's gonna be absorb over time 100 00:04:58,800 --> 00:04:59,960 Speaker 3: towards with with higher yield. 101 00:05:00,120 --> 00:05:01,920 Speaker 5: You're saying this at a time when the president's talking 102 00:05:01,920 --> 00:05:05,360 Speaker 5: about sending out more letters where tariff rates look very 103 00:05:05,360 --> 00:05:07,440 Speaker 5: similar to what happened on Liberation Day. Do you think 104 00:05:07,520 --> 00:05:11,440 Speaker 5: the Trump has primed the market to basically absorb his 105 00:05:11,520 --> 00:05:12,560 Speaker 5: aggressive policies. 106 00:05:13,680 --> 00:05:14,719 Speaker 3: Well, I don't know if I don't know if the 107 00:05:14,720 --> 00:05:17,560 Speaker 3: President has prime the market in any way, but I 108 00:05:17,640 --> 00:05:22,080 Speaker 3: think I think we have more conviction ourselves since April second, 109 00:05:22,080 --> 00:05:24,800 Speaker 3: in April nine that what I talked about before, the 110 00:05:25,040 --> 00:05:28,720 Speaker 3: immutable laws cannot change quickly in the near term, and 111 00:05:29,480 --> 00:05:31,200 Speaker 3: one part of it is the bond market. To you, 112 00:05:31,240 --> 00:05:34,960 Speaker 3: to actually connect to the previous discussion, the US realies 113 00:05:35,200 --> 00:05:37,919 Speaker 3: on you know, foreign funding for for that that that 114 00:05:37,960 --> 00:05:41,559 Speaker 3: we're talking about. That's maybe something that we would wish 115 00:05:41,640 --> 00:05:44,400 Speaker 3: to be different, but that's the starting point that cannot 116 00:05:44,440 --> 00:05:47,400 Speaker 3: change overnight, and I think that's going to limit the 117 00:05:47,440 --> 00:05:49,440 Speaker 3: maximulus approach that you can expect to see. 118 00:05:49,480 --> 00:05:50,920 Speaker 4: And we've seen that on April ninth. 119 00:05:51,920 --> 00:05:53,960 Speaker 3: To us, it was the bond market that really like 120 00:05:54,279 --> 00:05:57,560 Speaker 3: provided the discipline at that point, and we've seen it. 121 00:05:57,600 --> 00:05:59,760 Speaker 3: So I guess that'd give us more conviction that going 122 00:05:59,800 --> 00:06:02,719 Speaker 3: forward that's going to still be a constraint for the 123 00:06:02,720 --> 00:06:03,520 Speaker 3: time being at least. 124 00:06:03,520 --> 00:06:05,680 Speaker 2: That's an interesting thing to think about. Do you still 125 00:06:05,680 --> 00:06:08,040 Speaker 2: believe that any potential self and treasuries will be self 126 00:06:08,080 --> 00:06:09,679 Speaker 2: limiting because of that very fact? 127 00:06:09,880 --> 00:06:10,320 Speaker 4: I think so. 128 00:06:10,400 --> 00:06:14,440 Speaker 3: I think I don't think the US can sustain a 129 00:06:14,520 --> 00:06:17,359 Speaker 3: massively higher yield, even though we are underweight and we 130 00:06:17,360 --> 00:06:19,080 Speaker 3: think gilds are going to go up. It has to 131 00:06:19,120 --> 00:06:22,520 Speaker 3: happen in a fairly gradual manner. And if there's any 132 00:06:22,600 --> 00:06:25,680 Speaker 3: sign that this is like a very quick resetting. And 133 00:06:25,760 --> 00:06:27,880 Speaker 3: we're in a world where like we have five percent 134 00:06:28,040 --> 00:06:30,880 Speaker 3: ten years yield quickly on a sustained basis the whole 135 00:06:30,880 --> 00:06:33,919 Speaker 3: budget ever at medic that is already pretty challenge, I 136 00:06:33,920 --> 00:06:34,800 Speaker 3: think is out of the wind. 137 00:06:34,880 --> 00:06:37,640 Speaker 2: So five percent is like a ceiling for you, Well, 138 00:06:37,680 --> 00:06:38,160 Speaker 2: I think I. 139 00:06:38,120 --> 00:06:40,839 Speaker 3: Think when we if we're sustainably in a five percent world, 140 00:06:40,880 --> 00:06:42,920 Speaker 3: I think that changes the picture quite a bit. 141 00:06:42,960 --> 00:06:43,960 Speaker 4: I don't think it's a ceiling. 142 00:06:44,000 --> 00:06:47,160 Speaker 3: I mean will depend on other what the growth outlook 143 00:06:47,279 --> 00:06:50,000 Speaker 3: is and and so on. So I don't think there's 144 00:06:50,000 --> 00:06:52,640 Speaker 3: a hard ceiling. But it's a different world. If we 145 00:06:52,680 --> 00:06:55,240 Speaker 3: are like adjusting to five percent sustained. 146 00:06:54,880 --> 00:06:56,320 Speaker 2: We can I ask you, then, why is it so 147 00:06:56,440 --> 00:06:59,600 Speaker 2: different given us only sixty basis points away? Why is 148 00:06:59,640 --> 00:07:01,240 Speaker 2: sixty access points some important? 149 00:07:01,279 --> 00:07:03,680 Speaker 3: I think it's it's not so much as sixty basis points, 150 00:07:03,680 --> 00:07:06,520 Speaker 3: but like this is now the kind of the norm 151 00:07:06,720 --> 00:07:08,560 Speaker 3: five percent that we expect to see over the next 152 00:07:08,600 --> 00:07:11,480 Speaker 3: few years. That is a different world than were at 153 00:07:11,480 --> 00:07:15,800 Speaker 3: four point four. It might bounce back and up, So 154 00:07:15,840 --> 00:07:17,200 Speaker 3: that's more to sustained aspect. 155 00:07:17,280 --> 00:07:19,320 Speaker 2: Even the team have been pretty consistent about this. Now 156 00:07:19,320 --> 00:07:21,000 Speaker 2: for a number of years at a time when a 157 00:07:21,040 --> 00:07:22,800 Speaker 2: lot of people have started to price in rate cuts 158 00:07:22,800 --> 00:07:24,680 Speaker 2: back away than price them in. Again, you've been very 159 00:07:24,720 --> 00:07:28,200 Speaker 2: consistent about this. There are structural reasons to expect inflation 160 00:07:28,280 --> 00:07:31,160 Speaker 2: to remain higher, and you think bond yields remain elevated. 161 00:07:31,280 --> 00:07:33,840 Speaker 2: How convinced the clients of that story right now when 162 00:07:33,880 --> 00:07:34,360 Speaker 2: you tell it? 163 00:07:35,360 --> 00:07:40,640 Speaker 3: Well, I think, well, I find that we're very convinced 164 00:07:40,920 --> 00:07:44,080 Speaker 3: about this story, and I think you know, there's different 165 00:07:44,120 --> 00:07:46,480 Speaker 3: views out there, but I think it's less now. We 166 00:07:46,560 --> 00:07:48,840 Speaker 3: have less pushback than we would have had maybe you 167 00:07:48,880 --> 00:07:51,200 Speaker 3: know when we started to order that view in twenty 168 00:07:51,240 --> 00:07:52,960 Speaker 3: twenty two and so on. So I think this has 169 00:07:53,040 --> 00:07:57,520 Speaker 3: become in some ways more consensus, so less push back, 170 00:07:57,560 --> 00:07:59,240 Speaker 3: I guess in that sense. But yeah, no, I think 171 00:08:00,000 --> 00:08:03,240 Speaker 3: I think that's not an easy. 172 00:08:03,080 --> 00:08:03,560 Speaker 4: Hard to sell. 173 00:08:03,680 --> 00:08:05,800 Speaker 2: Yues John, to appreciate your time. I here so much 174 00:08:05,880 --> 00:08:18,160 Speaker 2: jump up on the of Black Croub with a S 175 00:08:18,360 --> 00:08:21,440 Speaker 2: in New York at Mills franm and James Etkimonic morning. 176 00:08:21,680 --> 00:08:24,280 Speaker 2: It is July ninth, and we have limited clarity how 177 00:08:24,360 --> 00:08:26,760 Speaker 2: much additional clarity will we have on August one. 178 00:08:27,200 --> 00:08:29,280 Speaker 6: We'll have more clarity. I don't think we'll have a 179 00:08:29,280 --> 00:08:31,200 Speaker 6: lot of the details. I think the whole goal this 180 00:08:31,320 --> 00:08:33,880 Speaker 6: year is to get as many MoU signed as possible, 181 00:08:34,000 --> 00:08:35,840 Speaker 6: because I think what President Trump really wants to do 182 00:08:35,880 --> 00:08:37,320 Speaker 6: is say I got a trade deal with one hundred 183 00:08:37,320 --> 00:08:40,040 Speaker 6: and twelve countries. They're going to buy trillions of dollars 184 00:08:40,040 --> 00:08:42,600 Speaker 6: worth of goods, even more trillions of dollars worth of 185 00:08:42,600 --> 00:08:44,640 Speaker 6: market access, and we're going to work out all the 186 00:08:44,679 --> 00:08:47,240 Speaker 6: details later. And I think that one of the good 187 00:08:47,280 --> 00:08:51,000 Speaker 6: things about having this little extra time is what you 188 00:08:51,160 --> 00:08:53,440 Speaker 6: need to do to get one of those MOUs is 189 00:08:53,559 --> 00:08:57,240 Speaker 6: not all that complex. If you can work it out later, 190 00:08:57,800 --> 00:08:59,839 Speaker 6: that's fine. And that's where I think the market is 191 00:08:59,880 --> 00:09:02,280 Speaker 6: okay as long as we have this extra time sign 192 00:09:02,400 --> 00:09:04,720 Speaker 6: the deal. And when you look at the letters that 193 00:09:04,720 --> 00:09:07,640 Speaker 6: are going out, the new rates are not that much 194 00:09:07,720 --> 00:09:10,400 Speaker 6: worse or sometimes even a little bit better than April second, 195 00:09:10,520 --> 00:09:11,840 Speaker 6: So we're okay. 196 00:09:12,000 --> 00:09:14,680 Speaker 5: The new rates are basically April second. It's basically Liberation 197 00:09:14,760 --> 00:09:17,160 Speaker 5: Day part two. But in this letter, Trump does say 198 00:09:17,280 --> 00:09:19,920 Speaker 5: that perhaps you could consider adjustment to this letter if 199 00:09:19,960 --> 00:09:22,559 Speaker 5: you decide to come to the table, we may reconsider. 200 00:09:22,920 --> 00:09:26,120 Speaker 5: But then yesterday he said it's August first. These are 201 00:09:26,120 --> 00:09:28,600 Speaker 5: the rates we're not going to be adjusting. Which Trump 202 00:09:28,640 --> 00:09:30,440 Speaker 5: do you believe the next Trump? 203 00:09:30,679 --> 00:09:33,800 Speaker 6: I mean it's I mean, there is the only constant 204 00:09:33,840 --> 00:09:36,600 Speaker 6: here has change. I mean, so I don't necessarily think 205 00:09:36,640 --> 00:09:39,240 Speaker 6: that August first is necessarily a hard and true date. 206 00:09:39,280 --> 00:09:41,280 Speaker 6: I don't necessarily think these rates are hard and true. 207 00:09:41,559 --> 00:09:43,920 Speaker 6: I do think that there is going to be three 208 00:09:43,920 --> 00:09:46,760 Speaker 6: buckets here. Bucket number one, new revenue. We have a 209 00:09:46,880 --> 00:09:50,720 Speaker 6: huge new tax bill that is costing trillions of dollars, 210 00:09:50,720 --> 00:09:52,360 Speaker 6: the most expensive bill in the history of the country. 211 00:09:52,720 --> 00:09:55,800 Speaker 6: He needs that revenue. Bucket number two protect national security. 212 00:09:55,840 --> 00:09:58,160 Speaker 6: Those are the sectorial terrors. If we are at war 213 00:09:58,160 --> 00:09:59,719 Speaker 6: with China, what do we need to make here in 214 00:09:59,720 --> 00:10:02,800 Speaker 6: the En States? And Bucket number three has always been 215 00:10:02,920 --> 00:10:05,480 Speaker 6: can we use the force of the US economy to 216 00:10:05,600 --> 00:10:09,120 Speaker 6: force policy change elsewhere? That piece is always going to 217 00:10:09,160 --> 00:10:11,480 Speaker 6: be the hardest part, and that's what all these negotiations 218 00:10:11,480 --> 00:10:11,800 Speaker 6: are about. 219 00:10:11,800 --> 00:10:15,520 Speaker 5: Amory, So who gets a deal today or tomorrow? I'm 220 00:10:15,520 --> 00:10:18,320 Speaker 5: thinking of three In particular, Japan was supposed to but 221 00:10:18,360 --> 00:10:20,800 Speaker 5: they got the same second rate. India, I was getting 222 00:10:20,800 --> 00:10:22,800 Speaker 5: tons of text messages yesterday saying it was imminent. I 223 00:10:22,840 --> 00:10:24,880 Speaker 5: still see no language on it in the European Union, 224 00:10:24,880 --> 00:10:27,640 Speaker 5: which seems to capitulate on a ten percent across the 225 00:10:27,640 --> 00:10:28,240 Speaker 5: board tariff. 226 00:10:28,320 --> 00:10:28,520 Speaker 4: Yeah. 227 00:10:28,520 --> 00:10:31,000 Speaker 6: I think the most likely is India than Japan, and 228 00:10:31,040 --> 00:10:33,640 Speaker 6: I think the least likely is the EU. I think 229 00:10:33,640 --> 00:10:35,560 Speaker 6: one of the issues with the EU is the United 230 00:10:35,600 --> 00:10:37,920 Speaker 6: States is asking Europe to make a decision. Are you 231 00:10:37,960 --> 00:10:40,280 Speaker 6: with the United States or are you with China? And 232 00:10:40,320 --> 00:10:42,839 Speaker 6: there are competing interests. You look at certain countries and 233 00:10:42,840 --> 00:10:45,000 Speaker 6: they're like, absolutely the United States. A lot of that 234 00:10:45,080 --> 00:10:47,960 Speaker 6: economy is tied to US. Others have more exports going 235 00:10:48,000 --> 00:10:52,040 Speaker 6: into China because they are a block with disparate interest 236 00:10:52,280 --> 00:10:54,199 Speaker 6: I think that's going to be very hard to get 237 00:10:54,240 --> 00:10:57,600 Speaker 6: anything on the tape by April first. But I do 238 00:10:57,640 --> 00:11:01,360 Speaker 6: think that Japan, India, Usustralia, a large part of the 239 00:11:01,400 --> 00:11:04,400 Speaker 6: GDP globally, can get a deal by August first. 240 00:11:04,520 --> 00:11:06,880 Speaker 1: Don't want to get into psychoanalysis here. What is it 241 00:11:06,880 --> 00:11:09,719 Speaker 1: though about letters? Because it's always a letter? Why does 242 00:11:09,760 --> 00:11:11,840 Speaker 1: everybody get a letter? And what is the importance of 243 00:11:11,880 --> 00:11:16,280 Speaker 1: this versus just a verbal warning maybe a presidential tweet? 244 00:11:16,640 --> 00:11:19,040 Speaker 5: You know, what is it about a physical. 245 00:11:18,640 --> 00:11:21,600 Speaker 1: Letter getting sent out that it has some import for 246 00:11:21,679 --> 00:11:22,320 Speaker 1: President Trump? 247 00:11:22,440 --> 00:11:24,520 Speaker 6: Yeah, I think it shows action. I think it shows 248 00:11:24,559 --> 00:11:26,760 Speaker 6: the kind of the ability to kind of flesh it 249 00:11:26,760 --> 00:11:29,559 Speaker 6: out a little bit more. You know, these letters, if 250 00:11:29,559 --> 00:11:32,200 Speaker 6: you read them, they're basically the same, and they are 251 00:11:32,679 --> 00:11:36,920 Speaker 6: very clearly dictated exactly by him and probably edited by him, 252 00:11:36,920 --> 00:11:40,120 Speaker 6: because it's like you see Trump's voice in these letters. 253 00:11:40,480 --> 00:11:42,640 Speaker 6: I do think that there has been a concern by 254 00:11:42,679 --> 00:11:45,480 Speaker 6: President Trump that the taco trade is out there and 255 00:11:45,520 --> 00:11:48,400 Speaker 6: that he always caves. So he wants to show and 256 00:11:48,480 --> 00:11:51,080 Speaker 6: project the strength that if you don't come to the table, 257 00:11:51,400 --> 00:11:54,520 Speaker 6: this is what you get. I think the biggest questions 258 00:11:54,520 --> 00:11:57,480 Speaker 6: from the you know, social media posts in these letters 259 00:11:57,640 --> 00:11:58,640 Speaker 6: are some of the details. 260 00:11:58,640 --> 00:11:59,720 Speaker 4: What does it mean. 261 00:11:59,520 --> 00:12:02,920 Speaker 6: That you'll have higher tariffs if there's transhipment. We do 262 00:12:03,000 --> 00:12:05,839 Speaker 6: not have a structure in place to deal with kind 263 00:12:05,880 --> 00:12:08,800 Speaker 6: of how that country of origin would be different. That's 264 00:12:08,840 --> 00:12:10,679 Speaker 6: why I think the details here are going to take 265 00:12:10,679 --> 00:12:13,240 Speaker 6: a long time. But he wants to say, here are 266 00:12:13,320 --> 00:12:16,880 Speaker 6: the general parameters. This is what I want. You come 267 00:12:16,920 --> 00:12:18,599 Speaker 6: to the table, you tell me what you're going to 268 00:12:18,679 --> 00:12:18,920 Speaker 6: give me. 269 00:12:19,000 --> 00:12:21,400 Speaker 1: I'm taking, not its parenting No, it's because I plan 270 00:12:21,520 --> 00:12:23,680 Speaker 1: on sending letters to the household and we do have 271 00:12:23,679 --> 00:12:26,400 Speaker 1: a complaint box already. I am wondering going forward whether 272 00:12:26,440 --> 00:12:28,920 Speaker 1: the reaction or non reaction that we're seeing in markets 273 00:12:28,960 --> 00:12:30,880 Speaker 1: is sort of emboldening him to send some more letters 274 00:12:31,120 --> 00:12:32,680 Speaker 1: and to raise those rates up even higher. 275 00:12:32,840 --> 00:12:33,000 Speaker 4: Yeah. 276 00:12:33,040 --> 00:12:35,000 Speaker 6: I think that's one of the big questions from clients 277 00:12:35,080 --> 00:12:38,880 Speaker 6: yesterday at Raymond James is that after April second, what 278 00:12:39,040 --> 00:12:41,520 Speaker 6: got him to pause these on April ninth was the 279 00:12:41,520 --> 00:12:44,920 Speaker 6: market reaction. And we've had these conversations so many times. 280 00:12:45,080 --> 00:12:47,440 Speaker 6: What caused Congress in the past to raise the debt 281 00:12:47,440 --> 00:12:49,920 Speaker 6: limit is the market reaction? And so are you in 282 00:12:50,000 --> 00:12:52,640 Speaker 6: this dangerous place that if there is no market reaction 283 00:12:53,160 --> 00:12:56,000 Speaker 6: then you can get even more aggressive, And at what 284 00:12:56,200 --> 00:12:59,120 Speaker 6: point is a mistake made. I don't think we're close 285 00:12:59,160 --> 00:13:01,280 Speaker 6: to that, but I do think there's always a threat 286 00:13:01,360 --> 00:13:04,360 Speaker 6: that if you need the market to correct and you 287 00:13:04,400 --> 00:13:07,199 Speaker 6: don't get it, then you get more bold. The biggest 288 00:13:07,320 --> 00:13:09,640 Speaker 6: change I've seen so far in this market is early 289 00:13:09,679 --> 00:13:13,160 Speaker 6: on in administrations, they mostly focus on process. Later on 290 00:13:13,280 --> 00:13:15,720 Speaker 6: they focus on outcomes. Right now, this is a market 291 00:13:15,880 --> 00:13:17,840 Speaker 6: that is saying, all right, the process might be changing, 292 00:13:17,880 --> 00:13:20,440 Speaker 6: but the outcome is not likely to change. The only 293 00:13:20,440 --> 00:13:22,200 Speaker 6: way we get a market reaction if they think the 294 00:13:22,240 --> 00:13:25,400 Speaker 6: outcome is actually going to materially worse than what they 295 00:13:25,440 --> 00:13:26,200 Speaker 6: actually expected. 296 00:13:26,200 --> 00:13:28,480 Speaker 5: What would a mistake be How do you characterize that? 297 00:13:28,559 --> 00:13:30,600 Speaker 6: Yeah, I think a mistake would be actually going to 298 00:13:30,720 --> 00:13:33,520 Speaker 6: fifty percent with the EU in that sticking on for 299 00:13:33,559 --> 00:13:35,400 Speaker 6: a period of time. When I was in Europe two 300 00:13:35,440 --> 00:13:38,319 Speaker 6: weeks ago speaking with investors at Raymond James, there is 301 00:13:38,360 --> 00:13:40,520 Speaker 6: a real concern about the weakness of the dollar and 302 00:13:40,679 --> 00:13:43,960 Speaker 6: exports getting more expensive coming from Europe into the United States, 303 00:13:44,520 --> 00:13:47,160 Speaker 6: and then you have tariffs on top of that that 304 00:13:47,200 --> 00:13:50,559 Speaker 6: could be a recession. Does that kind of have unintended 305 00:13:50,559 --> 00:13:53,959 Speaker 6: consequences we talk about, you know, looking at yields here 306 00:13:53,960 --> 00:13:56,800 Speaker 6: in the United States, we saw after April second, the 307 00:13:56,840 --> 00:14:00,559 Speaker 6: thirty year go above five percent. Does the thirty year 308 00:14:01,080 --> 00:14:04,320 Speaker 6: in the ten year start spiking as we start issuing 309 00:14:04,400 --> 00:14:06,920 Speaker 6: debt over the next couple months to refill the Treasury 310 00:14:06,960 --> 00:14:09,440 Speaker 6: General account, and does he put pressure on the Fed 311 00:14:09,720 --> 00:14:11,839 Speaker 6: to build that out and then there is a bond 312 00:14:11,880 --> 00:14:14,720 Speaker 6: market reaction. Those are the things that I think are 313 00:14:14,760 --> 00:14:17,400 Speaker 6: the biggest debates for the second half of this year 314 00:14:17,480 --> 00:14:18,280 Speaker 6: is kind of the rate. 315 00:14:18,160 --> 00:14:20,320 Speaker 2: Path that last point the federalist of what are you 316 00:14:20,400 --> 00:14:21,680 Speaker 2: ton of clients about the FED rice? 317 00:14:22,240 --> 00:14:24,440 Speaker 6: So I think that I know that there is news 318 00:14:24,440 --> 00:14:27,120 Speaker 6: out this morning that Hassard and warsh are considered to 319 00:14:27,160 --> 00:14:30,240 Speaker 6: be the front runners. I'd put Waller in Bessent into 320 00:14:30,280 --> 00:14:33,280 Speaker 6: that camp as well. I think Donald Trump loves people 321 00:14:33,320 --> 00:14:35,760 Speaker 6: to compete for the job. What I'm watching to see 322 00:14:35,800 --> 00:14:38,360 Speaker 6: is does Michael Barr step down as one of the 323 00:14:38,400 --> 00:14:41,440 Speaker 6: FED governors now that he's no longer by seer for supervision. 324 00:14:41,960 --> 00:14:45,680 Speaker 6: If he does, Hassard or worsh is probably going to 325 00:14:45,680 --> 00:14:49,760 Speaker 6: get that seat. Coogler another governor her term expires in January, 326 00:14:49,960 --> 00:14:53,160 Speaker 6: that is probably the second seat. And then all four 327 00:14:53,200 --> 00:14:56,240 Speaker 6: compete to see who can be the Fed cheer come 328 00:14:56,280 --> 00:14:59,080 Speaker 6: the May expiration of Powell seat and who is going 329 00:14:59,120 --> 00:15:01,240 Speaker 6: to be the most ubish, who's going to be the 330 00:15:01,280 --> 00:15:04,280 Speaker 6: most supportive of his agenda gets it. It's a perfect 331 00:15:04,320 --> 00:15:07,240 Speaker 6: scenario for Trump to have another game of Apprentice, but 332 00:15:07,320 --> 00:15:08,400 Speaker 6: this time for Fetcher. 333 00:15:08,440 --> 00:15:12,320 Speaker 2: Oh Gamath thrines equally as Bruitsald that situation, some names 334 00:15:12,320 --> 00:15:14,160 Speaker 2: are more credible than others. Let's put it that way. 335 00:15:14,280 --> 00:15:16,400 Speaker 5: Yeah, or Bachelor. I mean, who gets a rose? 336 00:15:16,480 --> 00:15:16,600 Speaker 6: Right? 337 00:15:16,640 --> 00:15:18,520 Speaker 1: I mean, we could put this on a whole host 338 00:15:18,560 --> 00:15:21,720 Speaker 1: of different shows. This does raise a question about how 339 00:15:21,760 --> 00:15:23,480 Speaker 1: much the market's going to be voting to your point, 340 00:15:23,680 --> 00:15:25,360 Speaker 1: you know who they're going to vote off the Island? 341 00:15:25,880 --> 00:15:29,160 Speaker 5: Love Island? Maybe another one. Yesterday when the President was 342 00:15:29,240 --> 00:15:31,680 Speaker 5: once again saying that j Powell is terrible, he then 343 00:15:31,720 --> 00:15:33,920 Speaker 5: looked over to Scott Best and said, I like you better. 344 00:15:34,200 --> 00:15:36,720 Speaker 5: And that made me think, oh, maybe Besson is back 345 00:15:36,720 --> 00:15:38,320 Speaker 5: in this race, and it's not just the Kevins. 346 00:15:38,440 --> 00:15:40,200 Speaker 2: Can you mention Theisconsin Love Islands? I was just going 347 00:15:40,240 --> 00:15:40,760 Speaker 2: to say, this is. 348 00:15:40,680 --> 00:15:42,600 Speaker 1: Like you mentioned this will I mean, I mean it 349 00:15:42,640 --> 00:15:45,240 Speaker 1: just feels, you know, like you know, playing for the 350 00:15:45,320 --> 00:15:47,280 Speaker 1: love and you only get love if you. 351 00:15:47,240 --> 00:15:49,640 Speaker 5: Say what I want, and that's sort of a toxic relationship. 352 00:15:49,720 --> 00:15:50,680 Speaker 5: You watched Love Island. 353 00:15:50,800 --> 00:15:53,200 Speaker 2: Want to know more about the complaint books? Save that 354 00:15:53,240 --> 00:15:53,800 Speaker 2: for another time. 355 00:15:53,920 --> 00:15:56,040 Speaker 1: It's true, it comes out once a week, Okay. 356 00:15:55,920 --> 00:16:08,200 Speaker 2: At Mosen Raymon Jenks that thank you seek joining us 357 00:16:08,200 --> 00:16:11,320 Speaker 2: Matt to discuss the film of Trump tried advisay on 358 00:16:11,360 --> 00:16:12,880 Speaker 2: good to see you, Good to see you. I'm sure 359 00:16:12,880 --> 00:16:14,920 Speaker 2: you've been up whole night. What's the advisor clods. 360 00:16:15,720 --> 00:16:18,000 Speaker 7: My advice to clients is to take the day off, 361 00:16:18,200 --> 00:16:20,720 Speaker 7: see how this plays out, and then come back in 362 00:16:20,760 --> 00:16:22,920 Speaker 7: two days and a week and see what the teriff 363 00:16:22,960 --> 00:16:26,320 Speaker 7: landscape looks like. Because right now this is the endgame 364 00:16:26,520 --> 00:16:30,160 Speaker 7: of a massive, massive negotiation, and there's just as mixed 365 00:16:30,200 --> 00:16:32,440 Speaker 7: substance as there is theater. So if you're making real 366 00:16:32,480 --> 00:16:35,200 Speaker 7: business decisions, you're best just taking a beat and waiting 367 00:16:35,240 --> 00:16:36,480 Speaker 7: it out and see where things land. 368 00:16:36,600 --> 00:16:39,120 Speaker 5: Having worked for Trump, is this the final moment where 369 00:16:39,160 --> 00:16:43,440 Speaker 5: he's trying to extract the most concessions from all these countries? 370 00:16:44,160 --> 00:16:46,240 Speaker 7: I think that there is a lot of that in 371 00:16:46,280 --> 00:16:48,880 Speaker 7: this And what's so challenging about watching Trump from the 372 00:16:48,920 --> 00:16:52,240 Speaker 7: outside and what makes him such an interesting negotiator is 373 00:16:52,280 --> 00:16:55,200 Speaker 7: that there's just as much mix of substance as tactics, 374 00:16:55,280 --> 00:16:57,560 Speaker 7: and so trying to understand the forest or the trees 375 00:16:57,600 --> 00:16:59,640 Speaker 7: can be very difficult. But I do think this is 376 00:16:59,680 --> 00:17:02,600 Speaker 7: the end game, and I think he's trying to say, Okay, 377 00:17:02,720 --> 00:17:05,600 Speaker 7: country X, country Y, You've given me this deal, but 378 00:17:05,720 --> 00:17:08,400 Speaker 7: are you really going to give me more? And that's 379 00:17:08,440 --> 00:17:10,120 Speaker 7: what he's trying to get. Who was the White House 380 00:17:10,160 --> 00:17:12,720 Speaker 7: most focused on right now? In terms of the foreign 381 00:17:12,800 --> 00:17:16,240 Speaker 7: trading partners. So they've talked about these eighteen countries. We've 382 00:17:16,240 --> 00:17:19,760 Speaker 7: heard anywhere from eighteen to thirty important trading partners. I 383 00:17:19,760 --> 00:17:22,880 Speaker 7: think those are the ones that the administration's really focused 384 00:17:22,880 --> 00:17:24,080 Speaker 7: on trying to land a deal with. 385 00:17:24,359 --> 00:17:26,360 Speaker 1: You think this is the end game, so that we're 386 00:17:26,359 --> 00:17:28,600 Speaker 1: going to get some clarity on August first? Is that 387 00:17:28,640 --> 00:17:32,080 Speaker 1: what you're telling clients that essentially this isn't just a deadline, 388 00:17:32,119 --> 00:17:34,000 Speaker 1: it's going to be moved to September fourth, and then 389 00:17:34,080 --> 00:17:36,040 Speaker 1: the October first, and then on and on. 390 00:17:36,520 --> 00:17:39,919 Speaker 7: Well both right, So at the same time as we 391 00:17:40,040 --> 00:17:42,720 Speaker 7: do have this August first deadline in the President doubled 392 00:17:42,720 --> 00:17:44,919 Speaker 7: down yesterday on true Social and said no, this is 393 00:17:44,920 --> 00:17:47,879 Speaker 7: a firm deadline. They have also said that if you 394 00:17:47,880 --> 00:17:50,160 Speaker 7: don't like your terif rates six months a year, two 395 00:17:50,200 --> 00:17:52,000 Speaker 7: years from now, you can come back and try to 396 00:17:52,040 --> 00:17:55,200 Speaker 7: lower that through negotiations. So I think we'll certainly see 397 00:17:55,240 --> 00:17:57,879 Speaker 7: more certainty, and I'm actual actually hopeful that we do 398 00:17:58,240 --> 00:18:01,240 Speaker 7: well in advance of August first, because has Customs needs 399 00:18:01,280 --> 00:18:04,320 Speaker 7: time to adjust the HTS give importers notice of what 400 00:18:04,359 --> 00:18:06,560 Speaker 7: those tarif rates are, and that process alone can take 401 00:18:06,560 --> 00:18:07,359 Speaker 7: a couple of weeks. 402 00:18:07,440 --> 00:18:10,280 Speaker 1: I just wonder how much some of this leverage is 403 00:18:10,320 --> 00:18:15,520 Speaker 1: getting lost in the increasingly extreme rates, the increasingly extreme tactics. 404 00:18:15,960 --> 00:18:19,800 Speaker 1: Does that actually end up bearing less fruit after using 405 00:18:19,840 --> 00:18:22,040 Speaker 1: it many times? And that's sort of the question that 406 00:18:22,359 --> 00:18:24,760 Speaker 1: you see in markets is a lot of people shrug 407 00:18:24,840 --> 00:18:26,639 Speaker 1: this off, and frankly, some of the rhetoric that we're 408 00:18:26,680 --> 00:18:29,000 Speaker 1: hearing from the trading partners saying the same thing. 409 00:18:30,000 --> 00:18:33,720 Speaker 7: Well, I think I'm hearing different things from trading partners anywhere, 410 00:18:33,720 --> 00:18:36,520 Speaker 7: from sheer panic to blase in terms of some of 411 00:18:36,520 --> 00:18:39,040 Speaker 7: these tariff rates that have been announced. But what I 412 00:18:39,040 --> 00:18:42,360 Speaker 7: would say is this is very typical of President Trump's 413 00:18:42,359 --> 00:18:44,080 Speaker 7: approach to negotiations. 414 00:18:44,119 --> 00:18:46,000 Speaker 5: And I do think that tariffs will go up. 415 00:18:46,280 --> 00:18:48,640 Speaker 7: The question for me is by how much and with 416 00:18:48,680 --> 00:18:51,640 Speaker 7: respect to what trading partner? And so you know, whether 417 00:18:51,720 --> 00:18:53,320 Speaker 7: this is the boy who cried wolf? I don't think 418 00:18:53,320 --> 00:18:55,000 Speaker 7: so at all. I do think that the terif rates 419 00:18:55,040 --> 00:18:56,399 Speaker 7: are going to go up, But are they going to 420 00:18:56,400 --> 00:18:58,560 Speaker 7: go up to thirty six percent on Indonesia? Are they 421 00:18:58,600 --> 00:19:00,280 Speaker 7: going to go up to forty percent on me? Are 422 00:19:00,760 --> 00:19:02,560 Speaker 7: maybe not? Let's see where things land. 423 00:19:02,640 --> 00:19:04,840 Speaker 5: What I'm hearing from you is that his tactics are 424 00:19:04,840 --> 00:19:07,600 Speaker 5: actually working on the other side of the negotiating table. 425 00:19:07,640 --> 00:19:08,639 Speaker 5: Would you say that's correct. 426 00:19:08,920 --> 00:19:11,760 Speaker 7: Yeah, Having talked to a number of trading partners, there 427 00:19:11,880 --> 00:19:13,680 Speaker 7: is a bit of let's pick up the phone, find 428 00:19:13,720 --> 00:19:15,439 Speaker 7: out what's going on, and see how we can de 429 00:19:15,640 --> 00:19:17,240 Speaker 7: escalate this happening. 430 00:19:17,040 --> 00:19:19,520 Speaker 5: Now when he comes out and announce something, maybe for India, 431 00:19:19,560 --> 00:19:22,199 Speaker 5: because he said he basically signaled that yesterday I had 432 00:19:22,240 --> 00:19:24,159 Speaker 5: heard that this was imminent. Is it going to be 433 00:19:24,160 --> 00:19:27,000 Speaker 5: a framework like he announced with the United Kingdom or 434 00:19:27,040 --> 00:19:28,760 Speaker 5: we get more substance in details to it. 435 00:19:29,040 --> 00:19:31,080 Speaker 7: So India is a bit different than some of the 436 00:19:31,119 --> 00:19:34,359 Speaker 7: other negotiations that are happening. This is more like a 437 00:19:34,400 --> 00:19:37,119 Speaker 7: broader trade agreement. So I expect the deal with India 438 00:19:37,160 --> 00:19:41,000 Speaker 7: to be about a subset of issues versus these reciprocal deals. 439 00:19:41,000 --> 00:19:43,000 Speaker 7: I do think will look more like frameworks with the 440 00:19:43,040 --> 00:19:46,000 Speaker 7: substance of those provisions and the details to be negotiated 441 00:19:46,119 --> 00:19:46,760 Speaker 7: moving forward. 442 00:19:47,000 --> 00:19:48,879 Speaker 2: Just one point one dimension of this I think we 443 00:19:48,880 --> 00:19:52,399 Speaker 2: will find really interesting is transhipping. How much progress have 444 00:19:52,440 --> 00:19:54,919 Speaker 2: they actually made so far to stop the flow of 445 00:19:54,960 --> 00:19:57,280 Speaker 2: trade going from China through other countries and inst the 446 00:19:57,400 --> 00:19:58,000 Speaker 2: United States? 447 00:19:58,359 --> 00:20:00,640 Speaker 7: Well, this is an active debate and wash right now, 448 00:20:00,680 --> 00:20:03,320 Speaker 7: what does that word transshipment mean? Does that really mean 449 00:20:03,440 --> 00:20:06,479 Speaker 7: ships that are going from China to a third country 450 00:20:06,520 --> 00:20:08,960 Speaker 7: like Vietnam and then to the United States or is 451 00:20:09,000 --> 00:20:11,439 Speaker 7: it a reference to this concept of a rule of origin, 452 00:20:11,840 --> 00:20:14,480 Speaker 7: meaning if you've got Chinese content in that supply chain, 453 00:20:14,480 --> 00:20:17,040 Speaker 7: you're going to be paying that forty percent that higher tariff. 454 00:20:17,400 --> 00:20:20,399 Speaker 7: And if that's the case, Vietnam's between a rock and 455 00:20:20,440 --> 00:20:22,840 Speaker 7: a hard place, as are many of these countries because 456 00:20:22,960 --> 00:20:25,679 Speaker 7: China does not like that idea or that provision. So 457 00:20:25,720 --> 00:20:27,919 Speaker 7: we'll have to see what the administration means by that 458 00:20:28,000 --> 00:20:29,160 Speaker 7: when we see the actual text. 459 00:20:29,160 --> 00:20:31,399 Speaker 2: Outside of Vietnam, what are the countries you're tracking on 460 00:20:31,440 --> 00:20:32,480 Speaker 2: that issue? 461 00:20:32,880 --> 00:20:35,320 Speaker 7: So the President has had the transhipment issue in every 462 00:20:35,359 --> 00:20:38,000 Speaker 7: single letter that he sent out, so Japan and Korea 463 00:20:38,040 --> 00:20:40,000 Speaker 7: have it. I think this means a lot for Southeast 464 00:20:40,000 --> 00:20:43,159 Speaker 7: Asia because so many companies move supply chains after the 465 00:20:43,200 --> 00:20:45,600 Speaker 7: original three oh one tariffs and Trump one point zero, 466 00:20:45,680 --> 00:20:47,200 Speaker 7: so this could really hit them. 467 00:20:47,480 --> 00:20:49,160 Speaker 2: Kelly, I appreciate it's going to see you in person 468 00:20:49,200 --> 00:20:51,320 Speaker 2: so here in New York. Thank you. The former senior 469 00:20:51,320 --> 00:21:04,240 Speaker 2: Trump Trade dediser, Kenny I'm Shaw that's citizen five PERCENTDA 470 00:21:04,320 --> 00:21:06,680 Speaker 2: with this to say, investors might be done with tariffs, 471 00:21:06,880 --> 00:21:10,120 Speaker 2: but we doubt Trump's tariff agenda is done with investors. 472 00:21:10,200 --> 00:21:12,480 Speaker 2: Nancy joins us now for more. Nancy, good Mornic, good morning. 473 00:21:12,760 --> 00:21:14,879 Speaker 2: What is guiding you at the moment? What convinces you 474 00:21:14,960 --> 00:21:15,119 Speaker 2: of that? 475 00:21:16,000 --> 00:21:19,120 Speaker 8: Well, to be sure, this administration wants higher tariffs. They've 476 00:21:19,119 --> 00:21:21,520 Speaker 8: already put in higher tariffs, and they're going to and 477 00:21:21,560 --> 00:21:24,200 Speaker 8: they're going to stick. We've accepted the fact that tarriffs 478 00:21:24,240 --> 00:21:28,119 Speaker 8: are here, are here to stay. Why we do need 479 00:21:28,200 --> 00:21:32,800 Speaker 8: a freer trade backdrop, and too, I think misguided this 480 00:21:32,920 --> 00:21:36,320 Speaker 8: administration thinks this is positive for the United States. I'm 481 00:21:36,359 --> 00:21:40,040 Speaker 8: a free market economist. Terriffs are a bad idea. Nonetheless, 482 00:21:40,160 --> 00:21:42,680 Speaker 8: I have to accept that they are indeed in the 483 00:21:42,920 --> 00:21:45,000 Speaker 8: indeed here, and they're going to be a negative impact 484 00:21:45,080 --> 00:21:48,560 Speaker 8: on the economy. It's a regressive tax on consumers. Lower 485 00:21:48,640 --> 00:21:50,600 Speaker 8: end consumers are going to get hit more because of 486 00:21:50,680 --> 00:21:53,359 Speaker 8: these higher because of these higher prices, and saying for 487 00:21:53,440 --> 00:21:56,399 Speaker 8: small medium sized businesses. Larger businesses might be able to 488 00:21:56,480 --> 00:21:59,560 Speaker 8: plow through this, but the smaller medium sized part of 489 00:21:59,560 --> 00:22:00,280 Speaker 8: the econom. 490 00:22:00,119 --> 00:22:01,960 Speaker 5: We are going to get squeezed. From these higher prices. 491 00:22:02,160 --> 00:22:04,399 Speaker 1: When you take the politics out of it, is this 492 00:22:04,560 --> 00:22:08,600 Speaker 1: more inflationary or more of a slowing growth type of 493 00:22:09,280 --> 00:22:10,800 Speaker 1: ramification from the teriffs? 494 00:22:10,840 --> 00:22:13,679 Speaker 8: Well, in near term, it's a tax, it's a hit. 495 00:22:14,160 --> 00:22:16,320 Speaker 8: It's a hit on the economy. Whether or not it 496 00:22:16,440 --> 00:22:20,680 Speaker 8: turns into sustained inflation depends upon what both monetary and 497 00:22:20,800 --> 00:22:23,840 Speaker 8: fiscal policy do. I would worry about the FED stepping 498 00:22:23,920 --> 00:22:26,600 Speaker 8: in and easing cutting rates to aggressively here, because that 499 00:22:26,640 --> 00:22:29,720 Speaker 8: would just increase the odds that these price levels indeed stick. 500 00:22:30,160 --> 00:22:32,280 Speaker 8: When you've seen tariffs before, when we had some back 501 00:22:32,320 --> 00:22:35,000 Speaker 8: in twenty eighteen, it was a price shot. You saw 502 00:22:35,000 --> 00:22:39,399 Speaker 8: it in furniture, household appliances. You initially had that increase 503 00:22:39,440 --> 00:22:41,399 Speaker 8: in price, but then you had to decline in demand, 504 00:22:41,640 --> 00:22:45,000 Speaker 8: and that eventually led to a lower lower prices actually 505 00:22:45,080 --> 00:22:49,919 Speaker 8: for household appliances and furniture. So it depends how sustainable 506 00:22:49,960 --> 00:22:52,120 Speaker 8: these are on what the Fed, on what the Fed does. 507 00:22:52,240 --> 00:22:54,160 Speaker 1: I want to just hone in on something that you said, 508 00:22:54,359 --> 00:22:56,440 Speaker 1: if the FED cuts, you think that that would lead 509 00:22:56,520 --> 00:22:59,800 Speaker 1: to more protracted price increases and more sort of entrenched 510 00:22:59,840 --> 00:23:02,639 Speaker 1: in inflation. What gives you the confidence to say that 511 00:23:02,760 --> 00:23:04,800 Speaker 1: at a time where we're seeing on the margins some 512 00:23:04,960 --> 00:23:08,960 Speaker 1: slowing and consumer spending and certainly deterioration and consumer confidence. 513 00:23:08,560 --> 00:23:10,479 Speaker 8: Well as we saw and this is no nowhere near 514 00:23:10,520 --> 00:23:12,440 Speaker 8: as extreme as we saw during the COVID crisis. You 515 00:23:12,520 --> 00:23:16,440 Speaker 8: can have a temporary shift down in demand, but inflation 516 00:23:16,600 --> 00:23:18,840 Speaker 8: is a function of what the Federal Reserve does, monetary 517 00:23:18,840 --> 00:23:19,920 Speaker 8: and fiscal policy does. 518 00:23:20,240 --> 00:23:21,600 Speaker 5: So even though you have that shift. 519 00:23:21,440 --> 00:23:24,520 Speaker 8: Down in demand in twenty and twenty twenty, because both 520 00:23:24,560 --> 00:23:29,760 Speaker 8: monetary fiscal policy so aggressively, you then had price levels 521 00:23:29,800 --> 00:23:32,920 Speaker 8: stayed elevated with that supply chain disruption, and then you 522 00:23:33,040 --> 00:23:35,960 Speaker 8: have the inflation in twenty one into twenty two. So 523 00:23:36,119 --> 00:23:39,080 Speaker 8: near term, yes, we are having to shift down, shift 524 00:23:39,160 --> 00:23:42,760 Speaker 8: down in demand, which could lead to lower prices, say 525 00:23:43,160 --> 00:23:45,080 Speaker 8: later this year, next year. But if the Fed were 526 00:23:45,119 --> 00:23:48,520 Speaker 8: to cut rates too aggressively, then I would again be 527 00:23:48,640 --> 00:23:51,920 Speaker 8: worried about inflation in twenty twenty six. And I thought 528 00:23:51,960 --> 00:23:53,560 Speaker 8: your point on the bond market here is going to 529 00:23:53,600 --> 00:23:57,280 Speaker 8: be really important. The Fed cut rates last year one 530 00:23:57,359 --> 00:24:00,040 Speaker 8: hundred basis points. Everyone seems to forget about that. I 531 00:24:00,080 --> 00:24:02,600 Speaker 8: got raised one hundred basis points in the fourth in 532 00:24:02,680 --> 00:24:04,520 Speaker 8: the in the fall of last year, what did bond 533 00:24:04,560 --> 00:24:04,960 Speaker 8: deals do? 534 00:24:05,280 --> 00:24:06,840 Speaker 5: They rose one hundred basis points. 535 00:24:06,880 --> 00:24:08,920 Speaker 8: So the FED control is a short end of the curve, 536 00:24:09,200 --> 00:24:11,840 Speaker 8: and I think some of the administration understands that, but 537 00:24:11,880 --> 00:24:13,439 Speaker 8: they have to be careful of the long end. 538 00:24:13,760 --> 00:24:13,879 Speaker 1: Well. 539 00:24:13,920 --> 00:24:16,720 Speaker 5: The FED have enough information to cut by September, given 540 00:24:16,760 --> 00:24:19,000 Speaker 5: the fact, especially that the tariff deadline has been pushed 541 00:24:19,040 --> 00:24:20,200 Speaker 5: out August. First. 542 00:24:20,440 --> 00:24:23,920 Speaker 8: I worry about that because we saw the employment report 543 00:24:24,040 --> 00:24:27,000 Speaker 8: on the surface looked healthy. Underneath the hood, it was 544 00:24:27,040 --> 00:24:29,480 Speaker 8: actually a week employment report, but on the. 545 00:24:29,480 --> 00:24:30,840 Speaker 5: Surface it looked healthy. 546 00:24:30,960 --> 00:24:32,480 Speaker 8: I would have thought it would have been easier for 547 00:24:32,520 --> 00:24:34,400 Speaker 8: the FED actually to have cut rates here in July, 548 00:24:34,880 --> 00:24:37,879 Speaker 8: where you really still have tame inflation and signs of 549 00:24:37,920 --> 00:24:42,040 Speaker 8: an economic slowdown. I worry by September you could have 550 00:24:42,520 --> 00:24:45,480 Speaker 8: maybe clearer signs of a week a weaker economy, but 551 00:24:45,640 --> 00:24:50,080 Speaker 8: stickier inflation. I am hearing from from retailers that they're 552 00:24:50,080 --> 00:24:54,880 Speaker 8: done with inventories pre co the pre tiff increase in inventories. 553 00:24:54,920 --> 00:24:56,480 Speaker 5: They're they're they're fading now. 554 00:24:56,560 --> 00:24:59,240 Speaker 8: They are going to be selling these higher price products 555 00:24:59,760 --> 00:25:01,920 Speaker 8: in the third in the third quarter related to the 556 00:25:02,000 --> 00:25:02,760 Speaker 8: tariff increases. 557 00:25:02,760 --> 00:25:05,080 Speaker 5: So I worry about September. But a cycle or one 558 00:25:05,160 --> 00:25:05,960 Speaker 5: price adjustment. 559 00:25:07,000 --> 00:25:09,480 Speaker 8: Again, for right now, it's a one price shift up 560 00:25:09,520 --> 00:25:13,359 Speaker 8: in price as we saw in twenty eighteen, But we 561 00:25:13,440 --> 00:25:14,360 Speaker 8: don't have the conclusion. 562 00:25:14,440 --> 00:25:16,280 Speaker 5: It depends upon how aggressive the Fed is. 563 00:25:16,520 --> 00:25:18,480 Speaker 2: When you say your word about September, are you worried 564 00:25:18,480 --> 00:25:20,880 Speaker 2: about the price side of things or you worried about 565 00:25:20,920 --> 00:25:22,760 Speaker 2: what could happen to the labor market if they have 566 00:25:22,840 --> 00:25:24,479 Speaker 2: to absorb some of this on margin. 567 00:25:24,760 --> 00:25:28,399 Speaker 8: Well, I think you're going to increasingly hear stagflation as 568 00:25:28,480 --> 00:25:31,600 Speaker 8: you go through the third quarter, because already you're seeing 569 00:25:31,640 --> 00:25:35,200 Speaker 8: consumer spending stalling out. Already again under the hood, the 570 00:25:35,400 --> 00:25:38,280 Speaker 8: labor market is deteriorating on Apluyment claims are probably the 571 00:25:38,359 --> 00:25:41,920 Speaker 8: easiest number to show that, clean the number to show that. 572 00:25:42,280 --> 00:25:44,360 Speaker 8: So I worry that as you go through the third quarter, 573 00:25:44,440 --> 00:25:44,920 Speaker 8: the Fed. 574 00:25:44,800 --> 00:25:46,000 Speaker 5: Is going to have to really balance it. 575 00:25:46,080 --> 00:25:49,159 Speaker 8: On one hand, you will have a weaker economy GDP 576 00:25:49,320 --> 00:25:51,600 Speaker 8: growth we have less than one percent in the third 577 00:25:51,880 --> 00:25:54,600 Speaker 8: third quarter, probably a higher unemployment rate, But then the 578 00:25:54,640 --> 00:25:58,720 Speaker 8: inflation data could be also more more sticky, and you're 579 00:25:58,800 --> 00:26:02,480 Speaker 8: seeing it in the shelter was a good it was 580 00:26:02,520 --> 00:26:04,800 Speaker 8: a headwind to inflation in the second quarter. Is that 581 00:26:04,880 --> 00:26:07,919 Speaker 8: going to continue into the third quarter as these tariffs 582 00:26:08,400 --> 00:26:09,960 Speaker 8: make their way through into the data. 583 00:26:10,040 --> 00:26:11,440 Speaker 2: And that says, you know, there's a range of views 584 00:26:11,440 --> 00:26:15,040 Speaker 2: that a federal reserve, the CEPHECA is incredibly divided. One view, 585 00:26:15,240 --> 00:26:17,080 Speaker 2: I think is quite important at the moment. It's Governor 586 00:26:17,160 --> 00:26:19,880 Speaker 2: Wallace view, and Governor Waller is making, I think incredible 587 00:26:19,960 --> 00:26:22,359 Speaker 2: argument to say you should look through the inflation re 588 00:26:22,400 --> 00:26:25,760 Speaker 2: effects potentially of tariffs maybe think about reducing interest rates. 589 00:26:25,800 --> 00:26:27,200 Speaker 2: Do you find that particularly compelling? 590 00:26:28,400 --> 00:26:29,560 Speaker 5: I don't one. 591 00:26:29,720 --> 00:26:32,040 Speaker 8: I think if you look through the tariffs in aggregate, 592 00:26:32,119 --> 00:26:34,960 Speaker 8: the economy actually is on a healthier footing. This is 593 00:26:35,000 --> 00:26:38,800 Speaker 8: a soft patch volatility created from the uncertainty and the 594 00:26:38,840 --> 00:26:41,880 Speaker 8: tariff and the price and the price increases. As I've 595 00:26:42,080 --> 00:26:45,440 Speaker 8: said before, and I focus a lot on capital spending, 596 00:26:46,920 --> 00:26:51,359 Speaker 8: you have incremental physical stimulus for twenty twenty six, importantly 597 00:26:51,440 --> 00:26:56,119 Speaker 8: for capital spending, which has boosted potential GDP growth already. 598 00:26:56,800 --> 00:26:59,600 Speaker 8: You don't need a lower interest rate environment. As some 599 00:26:59,720 --> 00:27:02,600 Speaker 8: of your you've reported this morning, there's a lot of 600 00:27:02,680 --> 00:27:05,000 Speaker 8: liquidity in the market, says why does this m and 601 00:27:05,080 --> 00:27:08,960 Speaker 8: A cycle is picking is picking up, and I would 602 00:27:09,119 --> 00:27:12,840 Speaker 8: I would be leary and cutting rates to aggressively. One 603 00:27:12,960 --> 00:27:16,760 Speaker 8: of the economy is healthy with stronger potential GDP growth. 604 00:27:16,840 --> 00:27:18,800 Speaker 8: We have basically a four percent on a plumber rate 605 00:27:18,880 --> 00:27:20,560 Speaker 8: cyclicle is going to go up a little bit. But 606 00:27:20,680 --> 00:27:23,760 Speaker 8: we don't need lower interest rates. This is not two 607 00:27:23,800 --> 00:27:26,159 Speaker 8: thousand and eight nine. It's not a COVID crisis. I 608 00:27:26,240 --> 00:27:27,480 Speaker 8: think rates should stay. 609 00:27:27,320 --> 00:27:27,719 Speaker 5: Where they are. 610 00:27:27,920 --> 00:27:30,280 Speaker 1: So, John, I was thinking as Nancy was talking, if 611 00:27:30,320 --> 00:27:34,320 Speaker 1: you wanted to explains tagflation, there is one economist, Donald Trump, 612 00:27:34,320 --> 00:27:36,560 Speaker 1: who really put it perfectly when he said just a 613 00:27:36,600 --> 00:27:39,359 Speaker 1: few months ago, you know, maybe you need just two dollars. 614 00:27:39,400 --> 00:27:41,560 Speaker 1: It costs a little bit more rather than thirty. And 615 00:27:41,800 --> 00:27:43,240 Speaker 1: maybe that's what we're seeing trickle. 616 00:27:42,960 --> 00:27:44,800 Speaker 2: Out to the economy, is that the young companies Mike 617 00:27:44,840 --> 00:27:45,080 Speaker 2: can know. 618 00:27:45,440 --> 00:27:47,080 Speaker 5: I don't know if he really wants to go back 619 00:27:47,160 --> 00:27:47,919 Speaker 5: quite the same thing. 620 00:27:48,280 --> 00:27:48,639 Speaker 4: Maybe not. 621 00:27:48,920 --> 00:27:51,280 Speaker 1: I do wonder though about where the inflation comes from. 622 00:27:51,680 --> 00:27:55,080 Speaker 1: If you do see consumers not as strong of a position. 623 00:27:55,160 --> 00:27:57,200 Speaker 1: You pointed to the labor market and the weakening that 624 00:27:57,240 --> 00:28:00,640 Speaker 1: we're seeing in certain certainly the private payrolls report, Where 625 00:28:00,760 --> 00:28:03,120 Speaker 1: is it going to come from in terms of fueling 626 00:28:03,320 --> 00:28:06,280 Speaker 1: the ongoing ability to absorb the price increases? 627 00:28:07,160 --> 00:28:10,000 Speaker 8: So it will have to come from stronger corporate profits. 628 00:28:10,040 --> 00:28:12,600 Speaker 8: I mean, because if you have a stronger corporate profit backdrop, 629 00:28:12,640 --> 00:28:14,760 Speaker 8: then you'll get a stronger labor market. You'll get bigger 630 00:28:14,800 --> 00:28:18,800 Speaker 8: wage increases, and so near term profits are under pressure. 631 00:28:18,800 --> 00:28:21,920 Speaker 8: Two Q earnings are probably going to decline, not your year, 632 00:28:21,920 --> 00:28:26,320 Speaker 8: but sequentially, which is why you have this weaker labor market. 633 00:28:26,440 --> 00:28:29,840 Speaker 8: So you need this soft patch to end, which we 634 00:28:29,960 --> 00:28:33,040 Speaker 8: think can end on its own without lower rates in 635 00:28:33,640 --> 00:28:37,600 Speaker 8: twenty twenty six because of this incremental physical and importantly 636 00:28:37,640 --> 00:28:41,080 Speaker 8: because of the capital spending cycle, and so the investment 637 00:28:41,160 --> 00:28:46,320 Speaker 8: cycle fuels productivity, productivity fuels profitability, and that then that 638 00:28:46,560 --> 00:28:49,080 Speaker 8: is how you get a stronger job a job, a 639 00:28:49,200 --> 00:28:49,640 Speaker 8: job market. 640 00:28:49,840 --> 00:28:51,360 Speaker 2: Na, Si, we'll have You're right, It's good to see 641 00:28:51,400 --> 00:28:53,120 Speaker 2: you nice, Thanks for your time, Thanks for dropping by, 642 00:28:53,160 --> 00:28:55,840 Speaker 2: Thanks for your time, Nanci Azad of Pipersanba. 643 00:28:56,640 --> 00:28:57,200 Speaker 4: This is the. 644 00:28:57,240 --> 00:29:01,440 Speaker 2: Bloomberg Sevenans podcast, bringing you the invest in markets, economics, 645 00:29:01,520 --> 00:29:04,440 Speaker 2: and geopolitics. You can watch the show live on Bloomberg 646 00:29:04,480 --> 00:29:07,640 Speaker 2: TV weekday mornings from six am to nine am Eastern. 647 00:29:07,960 --> 00:29:11,280 Speaker 2: Subscribe to the podcast on Apple, Spotify or anywhere else 648 00:29:11,320 --> 00:29:13,960 Speaker 2: you listen, and as always on the Bloomberg Terminal and 649 00:29:14,040 --> 00:29:15,240 Speaker 2: the Bloomberg Business app.