WEBVTT - Bloomberg Surveillance TV: April 15, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.280 Bloomberg Terminal and the Bloomberg Business App. Premier. JP Morkan 0:00:37.320 --> 0:00:40.360 Asset Management joins us now for more precomonic. You followed 0:00:40.400 --> 0:00:42.400 that exchange. What did you make of the explanation coming 0:00:42.400 --> 0:00:43.520 from the Treasury secretary. 0:00:43.880 --> 0:00:46.400 I think the Treasury secretary is doing what a Treasury 0:00:46.440 --> 0:00:49.200 secretary should do, be a cheerleader for the treasury market. 0:00:49.360 --> 0:00:51.600 But you know, I do think he made very valid 0:00:51.640 --> 0:00:52.199 points that. 0:00:52.840 --> 0:00:55.600 Now, what we saw last week, the last few weeks 0:00:55.640 --> 0:00:59.800 massive our shock. You're seeing three sigma six sigma moves 0:01:00.280 --> 0:01:04.320 across assets. You're seeing correlations breakdown. Remember that equity dollar 0:01:04.360 --> 0:01:08.320 correlation that broke down, And so I think investors had 0:01:08.319 --> 0:01:12.120 to delever de risk were they margin calls. So I 0:01:12.120 --> 0:01:14.800 think there was a lot of technical factors that drove 0:01:14.880 --> 0:01:15.840 that treasury sell off. 0:01:16.920 --> 0:01:19.160 In the background, though there is this concern there's. 0:01:19.040 --> 0:01:21.000 Eight trillion of treasure is held by the rest of 0:01:21.040 --> 0:01:24.360 the world, you know, it's the endgame, zero trade deficits. 0:01:24.400 --> 0:01:27.560 I don't think that's the endgame, but concern around foreign 0:01:27.640 --> 0:01:29.840 demand for treasuries may be selling. 0:01:29.840 --> 0:01:31.160 I think that played into that. 0:01:31.280 --> 0:01:34.200 Fear certainly played into the market as well as if 0:01:34.200 --> 0:01:37.000 we're going to get five trillion more deficits because of 0:01:37.040 --> 0:01:39.240 what the House and the Senator talking about. 0:01:39.560 --> 0:01:42.160 I think that just became this perfect storm. 0:01:42.319 --> 0:01:46.000 But I would take a step back and look at fundamentals. Ultimately, 0:01:46.080 --> 0:01:48.080 the treasure market is driven by fundamentals. 0:01:48.240 --> 0:01:49.320 Fundamentals of the hard. 0:01:49.200 --> 0:01:51.640 Data has been strong, but we've just had this massive 0:01:51.640 --> 0:01:55.000 shock to the economy. I think the soft data is 0:01:55.080 --> 0:01:57.160 telling you that the hard data is likely to weaken. 0:01:57.400 --> 0:01:59.960 So I do think treasures are a goodbye. We had 0:02:00.120 --> 0:02:02.600 peak hard to say, but we're getting there. 0:02:02.680 --> 0:02:04.760 Well, you're getting too. The ultimate test what would happen 0:02:04.800 --> 0:02:06.840 if the data weakened would be by treasuries or not 0:02:07.040 --> 0:02:09.160 with the rest of the world allocate capital to the 0:02:09.240 --> 0:02:12.679 United States, which is important. What concerned people last week 0:02:12.760 --> 0:02:15.160 wasn't just a sell off in treasuries, it was what 0:02:15.240 --> 0:02:17.959 was happening elsewhere in other asset classes. Now, we've seen 0:02:18.000 --> 0:02:21.080 moments like this one before where you see forced selling 0:02:21.080 --> 0:02:24.880 a treasuries, big unwineser trades, companies had funds in trouble. 0:02:25.520 --> 0:02:28.920 That's not unique. What was interesting was the persistent dollar 0:02:28.960 --> 0:02:32.480 weakness alongside that, reinforcing the notion that maybe it was 0:02:32.480 --> 0:02:35.160 something else. Perhaps it's not, but that's what unnerved people 0:02:35.440 --> 0:02:37.520 in the past week. How would you reconcile what was 0:02:37.520 --> 0:02:38.120 going on there? 0:02:38.680 --> 0:02:40.840 So I would say that the dollar, I mean, has 0:02:40.919 --> 0:02:44.720 been a highly owned asset right for the last few years. 0:02:44.840 --> 0:02:45.000 Now. 0:02:45.040 --> 0:02:47.880 I think there's structural components to that US exceptionalism. 0:02:48.200 --> 0:02:49.280 Look at where growth is. 0:02:49.520 --> 0:02:54.200 It is US companies profit margins are high, and I 0:02:54.240 --> 0:02:57.320 think right after the election there was this idea of reacceleration, 0:02:57.480 --> 0:03:00.280 so the dollar got some more of a boost there. Plus, 0:03:00.280 --> 0:03:03.000 it was supposed to hedge equity risk. It's supposed to 0:03:03.000 --> 0:03:06.080 hedge risk asses, which is so I think the dollar, 0:03:06.160 --> 0:03:09.320 the structural value in the dollar might still be there. 0:03:09.360 --> 0:03:10.520 Maybe we overdid it. 0:03:10.720 --> 0:03:14.079 In our view, the dollar does still looks overvalued, so I. 0:03:14.000 --> 0:03:16.520 Think that that's correcting. And then you had this. 0:03:16.520 --> 0:03:19.200 Treasury market that was overwhelmed. I think with all of 0:03:19.240 --> 0:03:21.560 the selling. I mean there were a lot of supposedly 0:03:21.680 --> 0:03:26.640 uncorrelated trades. Swap spreads is a supplementary leverage ratio trade, 0:03:27.480 --> 0:03:31.359 German bone treasury or the you know that spread was 0:03:31.400 --> 0:03:33.480 supposed to be about German fiscal stimulus. 0:03:33.600 --> 0:03:34.680 You had an unwind. 0:03:35.320 --> 0:03:38.040 Whether people got a tap on the shoulder, you know, 0:03:38.040 --> 0:03:40.480 whether they're just trying to d risk, whether it's margin calls. 0:03:40.560 --> 0:03:41.760 I think that overwhelms. 0:03:41.840 --> 0:03:45.320 You did have these two forces coming together. But you know, 0:03:45.400 --> 0:03:49.160 it's unnerving when you see correlations break, when you see 0:03:49.200 --> 0:03:51.840 this em market like market moves. 0:03:52.240 --> 0:03:54.560 I think that's what reduced conviction levels. 0:03:54.560 --> 0:03:57.680 And we're seeing headlines every day, So I think uncertainty 0:03:57.760 --> 0:03:59.840 is high, not just for the economy but for investors. 0:03:59.880 --> 0:04:02.000 And and I think that's why you didn't see all this. 0:04:02.080 --> 0:04:05.280 Buying from domestic investors who might be concerned about the economy. 0:04:05.280 --> 0:04:07.520 How much comfort do you get from the potential response function, 0:04:07.600 --> 0:04:09.520 not just from the Federal Reserve but also the Treasury 0:04:09.520 --> 0:04:12.720 Department with a Treasure Secretary scut Pasen saying that they 0:04:12.720 --> 0:04:14.480 could buy back off the run treasuries. 0:04:15.000 --> 0:04:17.479 So I think from market functioning point of view, I 0:04:17.480 --> 0:04:20.480 think though that buy back operation is useful. The Treasury 0:04:20.560 --> 0:04:23.760 launched it because the dealer balance sheet, you know, has 0:04:23.800 --> 0:04:25.839 been constrained as the treasure market's grown. 0:04:26.120 --> 0:04:27.640 Can they help market dysfunction? 0:04:27.839 --> 0:04:30.800 Yes, can they help? They still have to issue a 0:04:30.839 --> 0:04:33.000 lot of debt. So I think we're going to be 0:04:33.040 --> 0:04:35.720 watching beyond all the tariff news, We're going to be 0:04:35.720 --> 0:04:37.679 watching what's happening on the tax front. 0:04:38.080 --> 0:04:40.280 You know, are we going to get those spending. 0:04:39.960 --> 0:04:43.240 Cuts that were sort of promised by Speaker Johnson. If 0:04:43.279 --> 0:04:45.400 you don't get those spending cuts, the market has to 0:04:45.560 --> 0:04:48.680 then grapple with a lot more deficit, and maybe that 0:04:49.040 --> 0:04:51.919 end point of how low rates can go in a 0:04:51.960 --> 0:04:54.560 recession or in a slowdown is going to be higher 0:04:54.600 --> 0:04:55.400 because we've got all. 0:04:55.360 --> 0:04:56.400 This fiscal stimulus. 0:04:56.839 --> 0:04:59.960 I'm a little bit more comforted by the Fed response function, 0:05:00.120 --> 0:05:04.240 and I think Governor Waller yesterday was crystal clear two scenarios. 0:05:04.240 --> 0:05:06.000 I mean as clear as. 0:05:05.800 --> 0:05:09.320 He could be given that the the you know, there's 0:05:09.360 --> 0:05:11.600 a lot of uncertainty, but just telling us how they 0:05:11.640 --> 0:05:14.360 think came out tariffs, and he talked about good news 0:05:14.400 --> 0:05:17.120 cuts and bad news cuts, showing you that asymmetry. 0:05:17.120 --> 0:05:18.920 Okay, but here's the issue, and this is something that 0:05:18.960 --> 0:05:21.279 I haven't heard anybody address. If they were to cut 0:05:21.360 --> 0:05:24.560 rates in response to potential weakness that hasn't shown up 0:05:25.040 --> 0:05:28.359 enough yet in the data, wouldn't the long end just 0:05:28.720 --> 0:05:30.360 yield searge price drop? 0:05:31.200 --> 0:05:33.279 And you could argue maybe some of that happened last 0:05:33.360 --> 0:05:36.080 year when the Fed cut rates from five and a half, 0:05:36.200 --> 0:05:38.200 you have that long end selling off, But I would say, 0:05:38.200 --> 0:05:40.200 look at what was happening to hard data at that point, 0:05:40.640 --> 0:05:44.760 it was actually looking okay. Remember we were concerned August September, 0:05:44.760 --> 0:05:47.200 we were concerned about the labor market. It's stabilized, and 0:05:47.200 --> 0:05:49.680 that's why the long end set sold off. I think 0:05:49.800 --> 0:05:51.719 to your point, yes, the Fed has to be concerned. 0:05:51.720 --> 0:05:54.919 Will they let inflation expectations those tips break evens that 0:05:54.920 --> 0:05:57.760 have been declining? Does that reverse? Which is why they're 0:05:57.800 --> 0:06:00.279 not They can't be preemptive. I think that's what they're 0:06:00.279 --> 0:06:03.720 telling us. They're trying to explain their reaction function so 0:06:03.760 --> 0:06:06.800 that that first really bad hard data, and maybe it's 0:06:06.839 --> 0:06:10.080 the labor market. I don't know, Maybe it's hiring, maybe 0:06:10.120 --> 0:06:12.760 it's retail sales. We're going to be looking not so 0:06:12.839 --> 0:06:14.800 much as there's this frontloading of demand. We're going to 0:06:14.800 --> 0:06:17.680 be looking at discretion spending. If I am going out 0:06:17.680 --> 0:06:19.599 to buy more because I think prices are going to 0:06:19.600 --> 0:06:21.000 go up, do I cut back. 0:06:20.839 --> 0:06:24.520 On other things? And you know? So we're trying to understand. 0:06:24.200 --> 0:06:26.920 How the consumers responding, how corporate's responding. Are they just 0:06:26.920 --> 0:06:30.240 not hiring or are they actually trying to protect margins 0:06:30.240 --> 0:06:33.479 and laying off as that data worsens. I think then 0:06:33.560 --> 0:06:38.480 the FED response doesn't unanchor inflation expectations. It actually helps 0:06:38.480 --> 0:06:41.560 stabilize it because those inflation expectations will create when the 0:06:41.640 --> 0:06:44.520 data weakens, and then the FED can say, no, we 0:06:44.600 --> 0:06:46.280 got your back, but I think you have to first 0:06:46.320 --> 0:06:46.640 see it. 0:06:46.560 --> 0:06:47.000 In the data. 0:06:47.160 --> 0:06:50.440 This is the communication dilembra, the feder reserve feedshaed Japow 0:06:50.520 --> 0:06:53.440 con come run talking like Governor Ballercamp. First and foremost 0:06:53.440 --> 0:06:56.200 you have to pledge to anchor inflation expectations to prayers point. 0:06:56.640 --> 0:06:58.080 Then if you get the hit to growth and inflation 0:06:58.160 --> 0:07:00.200 expectations roll over, you can lean into the d you're 0:07:00.200 --> 0:07:02.839 going to kint interest rates. They can shape the events 0:07:02.839 --> 0:07:05.240 they anticipate, and that's the big issue for them. You 0:07:05.240 --> 0:07:08.520 put out an outlook and it can influence inflation expectations 0:07:08.560 --> 0:07:11.160 even off themselves. To your point, if Chairman Powell comes 0:07:11.200 --> 0:07:12.840 out and start speaking like Governor Walla, what do you 0:07:12.840 --> 0:07:15.000 think is going to happen? Some people would argue exactly 0:07:15.040 --> 0:07:17.720 what you think is going to happen. Maybe inflation expectations 0:07:17.760 --> 0:07:19.520 start to creep higher because we start to have arguments 0:07:19.560 --> 0:07:22.800 around this table. Oh, they don't care about inflation expectations. 0:07:22.920 --> 0:07:23.920 That's the dilemma they're in. 0:07:24.040 --> 0:07:25.720 And this is the reason why markets don't believe that 0:07:25.760 --> 0:07:27.440 they won't step in when there is a problem in 0:07:27.520 --> 0:07:29.240 the data. And that's the reason why you have the 0:07:29.400 --> 0:07:32.480 likes of Andrew hollend horriz orver at City Group reaffirming 0:07:32.520 --> 0:07:34.440 his belief in one hundred and twenty five faces points 0:07:34.440 --> 0:07:35.280 of free cuades this year. 0:07:35.320 --> 0:07:37.160 I'll leave Preer out of this debate because you won't 0:07:37.160 --> 0:07:39.120 want to wait in. But this is the advantage you 0:07:39.160 --> 0:07:41.800 have being a governor and not the FED share. The 0:07:41.840 --> 0:07:44.520 governor can create some distance between himself and the rest 0:07:44.520 --> 0:07:47.000 of the committee. If say, he wanted to become the 0:07:47.040 --> 0:07:49.520 next FED share potentially in the next year or so. 0:07:49.520 --> 0:07:51.720 So you know, do we trust that or do we 0:07:51.800 --> 0:07:53.000 trust fed? Shair Powell? 0:07:53.360 --> 0:07:55.160 You know, this is the little Imma prayer. It is 0:07:55.160 --> 0:07:57.160 good to see it. I'm sure you're welcome being left 0:07:57.160 --> 0:08:09.280 out of that primers er, JP Morgan, Thank you. Terry Hanks, 0:08:09.280 --> 0:08:11.760 a Pangea policy joins us now for more, Terry, welcome 0:08:11.800 --> 0:08:13.640 to the program. The administration I think has done a 0:08:13.720 --> 0:08:15.800 very good job. I think President Trump's done a good 0:08:15.840 --> 0:08:18.240 job of articulating the problem for a number of years. 0:08:18.280 --> 0:08:21.160 Now come back decades, the remedy to the problem and 0:08:21.240 --> 0:08:23.560 the execution of that remedy. What's your reaction to that 0:08:23.840 --> 0:08:24.880 over the past few weeks. 0:08:25.840 --> 0:08:31.920 Well, it's been scattershot, John Frankly and good morning, both 0:08:32.000 --> 0:08:36.000 on strategy and execution. But you know, if there's a 0:08:36.040 --> 0:08:39.240 consistency in the Trump presidencies, I think what you can 0:08:39.280 --> 0:08:42.360 see is that what he tends to do is kind 0:08:42.400 --> 0:08:48.959 of go big, bold, clear, motivational, and then start embroidering 0:08:49.000 --> 0:08:54.080 off the exceptions and the like. And that's certainly the pattern. Now, 0:08:54.320 --> 0:08:56.800 you know, it's you know, I want to be very 0:08:56.800 --> 0:08:59.319 clear about the direction we're moving in in terms of, 0:08:59.360 --> 0:09:02.520 you know, what we're manufacturing, where we're manufacturing, and how 0:09:02.559 --> 0:09:05.080 we're doing it. But then, uh, you know, we're going 0:09:05.160 --> 0:09:09.160 to wait to have the industries come back and separate 0:09:09.200 --> 0:09:11.440 the week from the chaff on what's legitimate and what's not. 0:09:11.679 --> 0:09:16.200 So it is a difficult process for everybody. I understand that, 0:09:16.520 --> 0:09:20.360 and at a very difficult process. And at the same time, uh, 0:09:20.559 --> 0:09:21.440 that's how they operate. 0:09:22.040 --> 0:09:23.800 John has asked this question many times. Who are they 0:09:23.840 --> 0:09:27.640 negotiating with? And yes, they're negotiating with themselves inside the cabinet, 0:09:27.640 --> 0:09:31.079 they're negotiating with companies, they're negotiating with countries, and then 0:09:31.080 --> 0:09:31.959 negotiating with. 0:09:31.920 --> 0:09:32.640 A market terry. 0:09:32.679 --> 0:09:34.959 How does that complicate understanding exactly how to get to 0:09:35.000 --> 0:09:36.680 the goals that they ultimately have laid out. 0:09:37.800 --> 0:09:40.040 I think what they end up doing is they prioritize 0:09:40.600 --> 0:09:45.680 those overlap but they're not they're not completely congruent. You know, 0:09:45.720 --> 0:09:48.320 you you you negotiate as best you can with the 0:09:48.320 --> 0:09:52.640 individual countries involved, and again push push forward bilaterals. Uh, 0:09:52.920 --> 0:09:56.240 you know, get your get your best results, move on, 0:09:56.640 --> 0:10:01.360 get some future, get some future promise as well, move 0:10:01.400 --> 0:10:05.920 on the cabinet understands that at the end of the day, 0:10:05.960 --> 0:10:09.200 the president's the decision maker, and so they fold in 0:10:09.280 --> 0:10:14.160 around and as to the rest. You know, these companies 0:10:14.200 --> 0:10:17.440 buy and large that we're talking about today are big 0:10:17.480 --> 0:10:22.000 companies that have, among other things, pretty sophisticated lobbying operations 0:10:21.360 --> 0:10:23.760 and they're fully engaged as well. 0:10:23.840 --> 0:10:28.840 So, yeah, last night Emrie talking to treasure Secretary Scotts 0:10:29.200 --> 0:10:31.400 Scott Bestont had a message. He wanted to talk about 0:10:31.400 --> 0:10:33.600 the three legged stool of policy, and the tariffs are 0:10:33.600 --> 0:10:36.400 one wing of that, one leg of that, and then 0:10:36.440 --> 0:10:39.200 you had deregulation, and then you had some of the 0:10:39.240 --> 0:10:42.520 tax relief and what was getting passed through Congress. Those 0:10:42.559 --> 0:10:45.120 other two legs of the stool have been caused called 0:10:45.120 --> 0:10:48.160 into question recently in terms of how big they can 0:10:48.200 --> 0:10:50.680 be and how much they can offset. Some of the 0:10:50.720 --> 0:10:53.360 concerns over the tariffs. You have a sense of how 0:10:53.360 --> 0:10:55.199 that's going well. 0:10:55.400 --> 0:10:58.160 I have tax cuts at eighty percent likely to happen 0:10:58.800 --> 0:11:02.200 in the fourth quarter of calendar twenty twenty five, and 0:11:02.240 --> 0:11:05.600 I think there's a rising possibility that it happens sooner. 0:11:05.880 --> 0:11:11.240 It's not for nothing that Trump picks July fourth is 0:11:11.280 --> 0:11:16.000 the day on the next direction on tariffs, and they'd 0:11:16.080 --> 0:11:18.320 very much like to goose Congress as fast as they 0:11:18.360 --> 0:11:21.480 possibly can to get the tax cuts in place for 0:11:21.559 --> 0:11:25.520 the third quarter as well. So you know, but I'm 0:11:25.559 --> 0:11:28.600 optimistic that the Congress gets this done. There's an awful 0:11:28.600 --> 0:11:32.679 lot of alignment on that. As to the numbers, what 0:11:32.720 --> 0:11:34.680 the Senate and the House are talking about is something 0:11:34.720 --> 0:11:37.480 on the order of five trillion tax cuts over ten years, 0:11:38.520 --> 0:11:43.200 without a lot of offsetting, without a lot of pay 0:11:43.240 --> 0:11:45.760 for offsets. And the reason for that is they've chosen, 0:11:45.800 --> 0:11:50.240 as I've been talking about for a while, this current 0:11:50.280 --> 0:11:52.720 policy baseline that allows them. 0:11:52.520 --> 0:11:52.960 To do that. 0:11:53.200 --> 0:11:56.840 So you know, what you're going to see is a 0:11:57.000 --> 0:11:59.880 very big tax cut number coming through, I think, and 0:12:00.960 --> 0:12:05.559 and I think that probably balances or more of the 0:12:06.160 --> 0:12:07.400 tariff shocks Terry. 0:12:07.440 --> 0:12:09.720 You think they go beyond extending existing law. 0:12:11.440 --> 0:12:13.600 I think they do in some respects, in part because 0:12:13.679 --> 0:12:17.480 they in part because you know, that's what Trump's wanted. 0:12:17.520 --> 0:12:20.200 You know, these these tax on tips and you know, 0:12:20.240 --> 0:12:22.680 the salt business, all kinds of things they need to do. 0:12:22.720 --> 0:12:25.160 In order to get votes and get a signature into 0:12:25.240 --> 0:12:27.920 law number one, number two, they're gonna have to change 0:12:27.960 --> 0:12:30.760 the tax code for a variety of things, including providing 0:12:31.120 --> 0:12:37.120 additional incentives for reshoring and on shoring manufacturing. So I'd 0:12:37.160 --> 0:12:37.800 look for all that. 0:12:38.280 --> 0:12:40.680 Terry Hanks, appreciate the input. Thank you, sir, Terry Hanes 0:12:40.679 --> 0:12:52.400 of Panjier Policy. It's kind of it's Ken leyar a 0:12:52.480 --> 0:12:54.760 CFIRA about that. Ken welcome to the program. What have 0:12:54.880 --> 0:12:58.320 we learned about credit quality in America in this banking season? 0:12:59.360 --> 0:13:02.200 So I think what Brian moynihan is going to speak 0:13:02.240 --> 0:13:05.240 about is comfort zones, which is really main street, the 0:13:05.280 --> 0:13:08.599 consumer and small business. And what we saw in the 0:13:09.120 --> 0:13:13.760 release today is that credit risk committees make decisions on 0:13:14.200 --> 0:13:19.400 the current environment, not the forward environment. So that's credit Again. 0:13:19.640 --> 0:13:24.439 The results are more in terms of the high volatility. 0:13:24.760 --> 0:13:28.840 The benefit for trading bank stocks never get rewarded in 0:13:28.960 --> 0:13:32.600 terms of multiple expansions for trading profits. But it shores 0:13:32.720 --> 0:13:35.360 up the full year. Second quarter is going to be choppy, 0:13:36.120 --> 0:13:39.760 you know. It's really kind of like the beginning of 0:13:39.800 --> 0:13:43.520 COVID where analysts like myself looked to the second half 0:13:43.559 --> 0:13:46.040 of this year, is it V shape or U shape. 0:13:46.120 --> 0:13:49.480 We're optimistic, we think the capital markets are going to 0:13:49.480 --> 0:13:51.600 be open, but it's going to be the second half 0:13:51.640 --> 0:13:54.800 of this year, and what we're seeing is institutions and 0:13:54.880 --> 0:13:59.520 fund managers realign their portfolios, and that's good for equity trading. 0:14:00.120 --> 0:14:01.839 A V shape will be a U shape, or we'll 0:14:01.920 --> 0:14:03.360 just be a straight line because I don't see a 0:14:03.400 --> 0:14:05.440 dip right now. I mean talking about the fact that 0:14:05.440 --> 0:14:08.640 you're getting healthy credit quality pretty much across the board. 0:14:08.679 --> 0:14:10.599 That's the message from Bank of America, P and C, 0:14:11.120 --> 0:14:13.679 a smaller but the biggest regional bank came out earlier 0:14:13.760 --> 0:14:16.640 this morning talking the same kind of tone that Frankly, 0:14:16.679 --> 0:14:19.560 provisions for credit losses came in lighter than expected. Does 0:14:19.600 --> 0:14:22.600 this make you more excited for the forward look for banks? 0:14:23.120 --> 0:14:25.400 I don't think the story is credit here, it's way 0:14:25.440 --> 0:14:28.680 too early. It's really what happens in the capital markets 0:14:29.160 --> 0:14:34.360 and what is confidence for CEOs for capital raising. So again, 0:14:34.480 --> 0:14:36.240 the second half of this year, if it's going to 0:14:36.240 --> 0:14:39.840 be stronger, it's not the worries about credit. It's really 0:14:39.880 --> 0:14:43.280 going to be what happens in the capital markets. Clearly, 0:14:44.200 --> 0:14:47.640 if there's going to be any severe recession, then it's 0:14:47.680 --> 0:14:50.480 game off and then we can start talking with red 0:14:50.560 --> 0:14:54.480 lights for credits. CFURA. We look at every metric of 0:14:54.520 --> 0:14:59.280 every bank on delinquencies, lon loss provisions and reserve build 0:14:59.600 --> 0:15:00.800 or reserve or reverse. 0:15:01.080 --> 0:15:03.760 We're just not there yet going forward. 0:15:03.840 --> 0:15:06.480 Can you still get optimistic about the banks if M 0:15:06.480 --> 0:15:09.800 and A doesn't revive, but you do have credit quality 0:15:09.840 --> 0:15:11.920 that hangs in there, and you have yields that are 0:15:12.000 --> 0:15:13.040 higher than previously. 0:15:14.000 --> 0:15:18.200 So the large banks are formidable. They have, as Jamie says, 0:15:18.320 --> 0:15:23.280 fortress balance sheets. They are formidable in their industry. And 0:15:23.680 --> 0:15:27.960 we have never seen in equity market outperform without financials 0:15:27.960 --> 0:15:32.200 and banks coming along for the ride. We're overweighted in financials, 0:15:32.400 --> 0:15:34.680 we would say to you from two thousand and seven 0:15:34.760 --> 0:15:37.720 versus twenty twenty five. When you look at the top 0:15:37.920 --> 0:15:41.520 ten constituents of the financial sector, banks being a big 0:15:41.560 --> 0:15:44.360 part of it, they're a little less cyclical, they're more stable, 0:15:44.640 --> 0:15:48.240 and companies like Goldman Sachs with David Solomon talks about 0:15:49.280 --> 0:15:53.720 moving to more durable, recurring fee revenue, whether it be 0:15:53.800 --> 0:15:57.120 an asset or wealth management, or more principal investments in 0:15:57.240 --> 0:16:00.480 areas like alternatives. So the banks are very different than 0:16:00.480 --> 0:16:02.920 when we had this discussion back in two thousand and 0:16:02.960 --> 0:16:06.040 seven or eight, And again they're not the problem. So 0:16:06.400 --> 0:16:10.480 again we'll see what Scott Besson says in the market 0:16:10.480 --> 0:16:11.720 and advises the president. 0:16:11.920 --> 0:16:14.720 Again, there's a difference between existential risk and a recession, though, 0:16:15.160 --> 0:16:17.360 do you really think they perform well in an economic downturn? 0:16:19.640 --> 0:16:24.320 I'm sorry, I think when you look at the economic outlook, 0:16:24.520 --> 0:16:28.320 you know again Goldman, Yes, they noted that they're now 0:16:28.400 --> 0:16:31.360 still positive, but it was above two percent zero point 0:16:31.400 --> 0:16:35.040 five percent. There's also the question on duration and also 0:16:35.240 --> 0:16:38.760 just a technical definition of recession versus a recession that 0:16:38.880 --> 0:16:42.520 hurts the consumer, and President Trump will pay attention to that. 0:16:42.880 --> 0:16:45.440 Ken appreciate the update. Thank you, sir, Ken Leon of 0:16:45.520 --> 0:16:58.960 Cfon Ray joining ustand the Republican Governor of Virginia, Glenn 0:16:58.960 --> 0:16:59.960 young kiin Comy young Kin good. 0:17:00.480 --> 0:17:01.920 Great to be with you. Thanks for having me. It's 0:17:01.920 --> 0:17:03.880 super to be back in studio with you. So I 0:17:03.960 --> 0:17:05.240 just appreciate you making time. 0:17:05.080 --> 0:17:07.040 For well, thanks to drop him by. Let's talk about 0:17:07.040 --> 0:17:09.320 how exposed you might be to this tariff PUS. You've 0:17:09.320 --> 0:17:12.280 got some very launch aerospace and defense companies in the state. 0:17:12.640 --> 0:17:15.119 How are you helping those companies and individuals that might 0:17:15.160 --> 0:17:17.800 be affected by some of this In the meantime, John, 0:17:17.840 --> 0:17:18.320 I think we have. 0:17:18.280 --> 0:17:22.080 To step back first and put the current moment in 0:17:22.160 --> 0:17:27.080 the tariff evolution in context. From while he was running 0:17:27.080 --> 0:17:29.199 all the way up until today, President Trump has been 0:17:29.240 --> 0:17:32.520 really consistent on the elements of his economic plan. First, 0:17:32.560 --> 0:17:36.760 he's going to use tariffs to reset trade balances and 0:17:37.119 --> 0:17:39.159 decades of bad deals. He's talked about. You've heard these 0:17:39.160 --> 0:17:41.600 words out of his mouth over and over again. Second 0:17:41.600 --> 0:17:44.199 of all, he's going to make sure that manufacturing is 0:17:44.240 --> 0:17:47.680 reshored and that we reinflate or reinvigorate the hollowed out 0:17:47.760 --> 0:17:52.080 middle class. Third, we're going to re establish fiscal responsibility 0:17:52.080 --> 0:17:55.360 in Washington. Fourth, we're going to re establish energy dominance, 0:17:55.400 --> 0:17:58.440 and finally, through deregulation, we're going to make it even 0:17:58.520 --> 0:18:01.359 better to do business in America. And those elements are 0:18:01.440 --> 0:18:04.800 all in motion at the same time. The trade moment 0:18:04.920 --> 0:18:07.679 for us, in the tariff moment for US is also 0:18:08.200 --> 0:18:12.120 this ninety day pause, which is giving the opportunity for deals, 0:18:12.320 --> 0:18:16.440 and every Cabinet member has repeated there's seventy five countries 0:18:16.480 --> 0:18:19.040 in motion right now, and I would expect that there 0:18:19.080 --> 0:18:22.200 will be some significant trade deals struck. I do think 0:18:22.280 --> 0:18:25.439 that there will be a level of ongoing tariffs and 0:18:25.520 --> 0:18:27.520 the ten percent number wasn't one picked out of a 0:18:27.560 --> 0:18:31.720 hats and they call that the base tariff. But I'm 0:18:31.720 --> 0:18:34.560 a governor watching, but I do expect that there will 0:18:34.560 --> 0:18:37.399 be deals cut and those deals importantly will be with 0:18:37.480 --> 0:18:40.840 some of our largest trading partners, India and Japan and Korea. 0:18:40.920 --> 0:18:43.879 And so this is what's going to happen over the 0:18:43.920 --> 0:18:47.640 next many many months, and most importantly, I think that 0:18:47.760 --> 0:18:51.520 will bring some confidence to the market that this reset, 0:18:51.560 --> 0:18:54.440 which has to happen and disruption is part of a reset, 0:18:54.760 --> 0:18:58.800 will will open up long term opportunity. Now Virginia, Virginia, 0:18:58.880 --> 0:19:02.080 we're going to We're seeing that long term opportunity every day, 0:19:02.119 --> 0:19:05.600 and that's through our economic development pipeline. We've had an 0:19:05.640 --> 0:19:09.920 incredibly robust three years. We've had record investment or commitments 0:19:09.960 --> 0:19:13.240 from businesses expanding in Virginia one hundred billion dollars in 0:19:13.280 --> 0:19:16.240 three years, by far the largest amount. In that time period. 0:19:16.440 --> 0:19:19.040 We've seen record job growth. Virginia went from bottom third 0:19:19.040 --> 0:19:21.880 in job growth to top three five ten every year 0:19:21.920 --> 0:19:25.320 in job growth, and that has allowed us to run 0:19:25.320 --> 0:19:28.960 surplus after surplus after surplus. The net of that is 0:19:29.000 --> 0:19:31.359 that we have open jobs in Virginia two hundred and 0:19:31.400 --> 0:19:34.520 fifty thousand open jobs for folks to take. But on 0:19:34.600 --> 0:19:37.800 top of that, our economic development pipeline has been as 0:19:37.880 --> 0:19:41.360 full as it's ever been and we're seeing businesses, international 0:19:41.400 --> 0:19:43.760 companies want to come to the United States. We're viewed 0:19:43.800 --> 0:19:45.680 as the top state in America for business and they 0:19:45.680 --> 0:19:48.200 want to come to Virginia. And so that's a really 0:19:48.240 --> 0:19:51.880 good foundation for us as there is a period of disruption, 0:19:52.320 --> 0:19:54.240 but I think there's a long term opportunity and I 0:19:54.240 --> 0:19:55.320 think Virginia will really do. 0:19:55.280 --> 0:19:57.440 Well link seal command the long term opportunity. In the 0:19:57.480 --> 0:19:59.600 full of policy platform, you just want to keep it 0:19:59.640 --> 0:20:03.040 on Trent just for a moment. On trade, the methodology 0:20:03.040 --> 0:20:04.879 it does feel like was pulled from a hamp in 0:20:04.920 --> 0:20:07.560 the last few weeks, and the criticism we hear around 0:20:07.600 --> 0:20:10.920 this table quite a lot. They will acknowledge the problem, 0:20:11.080 --> 0:20:13.399 and they will acknowledge that the President has articulated that 0:20:13.440 --> 0:20:16.480 consistently and well over the period of decades, not just 0:20:16.520 --> 0:20:19.840