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Speaker 2: Yesterday, I'm coming out of the ocean, get back to
Speaker 2: my little group of people. Buddy looks up and says,
Speaker 2: Biden's out. They're like, oh boy, here we go.
Speaker 3: I have a better one for you. Yes, we were
Speaker 3: at the Bloomberg event at the Botanical Gardens and you
Speaker 3: could just see like all the media people were like
Speaker 3: on their phones and my daughter's like, Mommy, don't worry
Speaker 3: about it. It's Sunday. And I'm like that, I don't know.
Speaker 2: We're all working now, so the real question is and
Speaker 2: we're all just trying to start to figure out what
Speaker 2: could all this mean. Fortunately, we have a person that
Speaker 2: we pay to do this, Nathan Dean. He's a senior
Speaker 2: policy analyst at Bloomberg Intelligence.
Speaker 4: He's in DC.
Speaker 2: He's really good.
Speaker 5: Nathan.
Speaker 2: And what's in your sourcing and the people you talk
Speaker 2: to down in DC? What's the feeling today about what
Speaker 2: happened to the Democratic ticket over the last twenty four hours.
Speaker 6: Well, I mean, look, there's been a lot of pressure
Speaker 6: on President Biden over the last couple of weeks to
Speaker 6: drop out, and you know, I think this just culminated
Speaker 6: with this effort that you know, Vice President Kamala Harris
Speaker 6: has filled that void. Now, look, she's not the nominee.
Speaker 6: You know, that doesn't happen until either there's a virtual
Speaker 6: roll call or to the convention. But we've seen so
Speaker 6: many endorsements over the last few hours, and you know,
Speaker 6: just so forth that you know, we're presuming that she
Speaker 6: is the nominee in our research, in our notes, and
Speaker 6: so we put out actually a big note on the
Speaker 6: terminal this morning talking about what would life be like
Speaker 6: under a Harris presidency. And it's a lot of status
Speaker 6: quo for banks, evs, big tech and so forth like that.
Speaker 4: The one caveat is on taxes.
Speaker 6: We've often said that this election is rally the two
Speaker 6: major things about this election are tariffs and taxes, and
Speaker 6: Kamala Harris's record in her tax you know, aspect of
Speaker 6: it has been a little bit more you know, i'd
Speaker 6: say progressive than what President Biden has said, but ultimately
Speaker 6: we viewed President.
Speaker 4: Or as Kamala Harris.
Speaker 6: I'm sorry, we viewed President Biden as moving more towards
Speaker 6: Kamala Harris's policies when he became president, rather than Kamala
Speaker 6: Harris moving towards Biden's policies. So a lot of this
Speaker 6: if she becomes president will be status quo.
Speaker 3: Oh that's really interesting. So I was going to ask,
Speaker 3: where is Vice President Harris farther left than President Biden?
Speaker 3: Where is that biggest daylight?
Speaker 6: So the one thing that we actually hung down on
Speaker 6: was her record as Attorney General, And you know, just
Speaker 6: indicative of one of her actions is she joined about
Speaker 6: forty seven other states, including the District of Columbia, on
Speaker 6: a twenty five billion dollar settlement on home foreclosure practices.
Speaker 6: And a lot of her campaign speeches when she was
Speaker 6: running president in twenty twenty was talking about how she
Speaker 6: took on big banks. Now, you know, to us, that
Speaker 6: means there's a lot more consumer protection coming in the cards,
Speaker 6: whether it's the Consumer for Financial Protection Bureau, or whether
Speaker 6: it comes through acts of Congress, or maybe it's even
Speaker 6: executive orders like continuing President Biden DoD debt relief pans.
Speaker 6: But I think there's going to be a lot of
Speaker 6: focus on this idea of load to middle income consumers,
Speaker 6: protections against big corporations, and a lot more in terms
Speaker 6: of disclosures and so forth like that. Now, is this
Speaker 6: a material impact on big tech or on the big banks.
Speaker 4: Probably not.
Speaker 6: A lot of it has to get pass through Congress,
Speaker 6: but ultimately it's certainly a headline risk that I would
Speaker 6: keep in mind for those sectors in particular, is just
Speaker 6: to keep in mind, you know that if she were
Speaker 6: to focus on this, and specifically it was just pick
Speaker 6: on anti trust, If she were to focus on anti trust,
Speaker 6: there's a lot of you know, intense scrutiny, more scrutiny
Speaker 6: than she could put there than a Biden administration could.
Speaker 2: All Right, a lot of my M and A banker
Speaker 2: buddies are wondering what would a Harris administration mean for antitrust?
Speaker 2: Because Biden's been nobody into the M and A world.
Speaker 2: What's the is a feeling status quo there as well?
Speaker 6: You know, this is one of those situations where I think,
Speaker 6: whoever wins as president's probably not going to be helpful
Speaker 6: to your M and A banker buddies. Because on one
Speaker 6: hand you have the continuation of the Biden presidency with
Speaker 6: Lena Khan at the FTC and taking a very skeptical,
Speaker 6: skeptical look at mergers. I mean just in the financial
Speaker 6: space alone. You know, some of these merger reviews go
Speaker 6: over a year, if not longer, and you know we
Speaker 6: saw it certainly with the TD Financial merger. They pulled
Speaker 6: out as a result of this. But then on the
Speaker 6: flip side, you have Senator Advance and President Trump. And
Speaker 6: remember this idea of economic popularism is ramped through that.
Speaker 6: You know that RNC agenda at the moment. So you know,
Speaker 6: Senator Vance even came down to a Bloomberg event here
Speaker 6: in Washington and called Lena Kahan, the FTC chairwoman Biden's
Speaker 6: best picked and insinuated that President Biden would even probably
Speaker 6: are President Trump should even keep around. Now, I don't
Speaker 6: think this is going to happen, but for unfortunately Paul,
Speaker 6: for your M and A banker buddies, I don't think
Speaker 6: any other way this gets around, whether it's Harris or Trump,
Speaker 6: it's going to be a very skeptical world for anti
Speaker 6: trust in M and A.
Speaker 3: So Paul's talking to his ma buddies. I'm thinking about
Speaker 3: my energy buddies, because one area where it feels like
Speaker 3: President President Harris could be farther left, of course his energy.
Speaker 3: I was telling Paul earlier that she's been kind of
Speaker 3: anti fracking, she's been anti offshore. California is notoriously not
Speaker 3: loving any fossil fuels. How much of that do you
Speaker 3: think we have to really start considering.
Speaker 4: I think it's important to consider it.
Speaker 6: In fact, our colleague Rob Barnett just put out a
Speaker 6: note about forty minutes ago talking about this in the
Speaker 6: importance it has on the renewable sector. So, you know,
Speaker 6: a Senator sorry, I was going to say Senator Harris.
Speaker 6: Vice President Harris, you know, certainly has pursued a clean
Speaker 6: energy agenda. And one of the things we see in
Speaker 6: you know, her presidency is a boosting of the Inflation
Speaker 6: Reduction Act. I don't want to say going back to
Speaker 6: the build back better three point zero, you know, some
Speaker 6: of the ideas that were floating around. She'll have her
Speaker 6: own ideas here, but this idea of the Inflation Reduction
Speaker 6: Act needs to be protected and enhanced. So if you're
Speaker 6: in the renewable sector or solar sector, it certainly could
Speaker 6: be a boon idea if you know, Vice President Harris wins,
Speaker 6: but I would also just recommend it, or you know,
Speaker 6: I would also just offer this that A lot of
Speaker 6: it also depends on who takes up Congress, because if
Speaker 6: Vice President Harris wins and the Republicans take one, if
Speaker 6: not two members chambers of the House, then a lot
Speaker 6: of those initiatives are going to be scaled down and
Speaker 6: actually dramatically lowered and so forth like that.
Speaker 2: All right, we know Elon Musk is a big supporter
Speaker 2: of Trump, but it sounds like, what's what would a
Speaker 2: democratic Harris administration mean for the Elon muscle of the
Speaker 2: world and the evs.
Speaker 6: So, you know, for the EV side, I think it's
Speaker 6: actually a continuation of the Inflation Reduction Act tax credit,
Speaker 6: if not an enhancement of that. You know, Look, tax
Speaker 6: reform is going to have to happen next year no
Speaker 6: matter what, because the Trump era tax cuts for individuals
Speaker 6: expires at the tail end of twenty twenty five. And
Speaker 6: whether it's Vice President Harris or a President Trump, neither
Speaker 6: of them are going to want to increase taxes for
Speaker 6: low and middle and income you know, Americans.
Speaker 4: So for the EV's of the world.
Speaker 6: I would say, under a Harris presidency, you'll certainly have
Speaker 6: protection from that tax credit in the IRA, You potentially
Speaker 6: could have an enhancement of that. You certainly will have
Speaker 6: regulatory policies.
Speaker 4: Trying to boost EV usage and so forth like that.
Speaker 6: Comparing it against the President Trump presidency, where you know,
Speaker 6: he said that he doesn't like electric vehicles. Obviously he
Speaker 6: has Elon Musk whispering in his ear and providing forty
Speaker 6: five million dollars a month in PAC funding. But ultimately
Speaker 6: I think the Republicans you probably would see a scaling
Speaker 6: back of those tax credits, maybe you know, just additional
Speaker 6: you know, restrictions on EV's and so forth like that.
Speaker 6: But you know, with the Trump presidency, we'll have to
Speaker 6: see if he wins and also if the Elon Musk
Speaker 6: is whispering in his ear in come January and February taxes.
Speaker 2: If former President Trump were to get a second term,
Speaker 2: is there any consensus in Washington given the makeup of Congress.
Speaker 2: I guess we have to see how Congress shakes out.
Speaker 2: But what, if anything could Trump administration get done on taxes?
Speaker 6: Yeah, So, you know, the way I think about the
Speaker 6: tax debate with my colleague Andrew Silverman is really print
Speaker 6: some timing.
Speaker 4: So the first thing you'll note is the election.
Speaker 6: If the Republicans take the House and the Senate and
Speaker 6: the Presidency, then they have this opportunity for reconciliation. This
Speaker 6: is how they got the Trump era tax cuts through
Speaker 6: in twenty seventeen. It allows them to actually move forth
Speaker 6: and enhance or you know, essentially conduct reform, and they
Speaker 6: can bypass the Democrats. So if the Republicans win the
Speaker 6: House of the Senate and the Presidency, then this President
Speaker 6: Trump's idea of lowering corporate tax rates is certainly in
Speaker 6: the carts.
Speaker 4: Now. I have seen statements from House Republicans saying.
Speaker 6: Maybe we don't want to do that so much, but
Speaker 6: I do think that this would be President Trump driving this. Now,
Speaker 6: if you get more of a gridlock Congress, well, then
Speaker 6: the power of Congress, the power of Congress is going
Speaker 6: to come out and the House in ways and means committee,
Speaker 6: whoever controls it, is certainly going to want to play
Speaker 6: here and tell the Presidency this is what we think.
Speaker 4: And so if you get a.
Speaker 6: Gridlock Congress, a lot of the tax reform or tax
Speaker 6: relief ideas that are out there are going to be
Speaker 6: scaled down or narrowed, but with one objective not to
Speaker 6: increase the individual tax relief or tax cuts.
Speaker 4: For that individual.
Speaker 6: If you get President Harris, you may see tax increases
Speaker 6: for individuals who make greater than four hundred thousand dollars,
Speaker 6: but I think most individuals in the United States at
Speaker 6: the end of twenty twenty five probably won't have their
Speaker 6: taxes altered all that much.
Speaker 3: Literally, my head hurts from all the different possibilities. I
Speaker 3: do not know how you do this, naythan on a
Speaker 3: daily base of all the individ sectors. Okay, before I
Speaker 3: let you go, now what like now are you paying
Speaker 3: attention for what is most on your radar? Now as
Speaker 3: you go talk to clients, so you.
Speaker 6: Know, the most important thing for us is obviously say,
Speaker 6: you know, does Kamala Harris become the vice president or
Speaker 6: presidential nominee.
Speaker 4: I think she will.
Speaker 6: Just remember the Democrats have to have a virtual roll
Speaker 6: call to get their person on the ballot for the
Speaker 6: state of Ohio. I would anticipate that starting in August.
Speaker 6: First next thing would be, you know, Kamala Harris's vice
Speaker 6: presidential pick. We're cautioning clients. Look, she has plenty of time.
Speaker 6: She's going to do this in a way that it's
Speaker 6: politically advantageous to her, and she doesn't have to name
Speaker 6: somebody until the convention in Chicago in mid to late August.
Speaker 6: So you know, those are the probably the two most
Speaker 6: important things. But also just remember, on the flip side,
Speaker 6: the tariff argument for President Trump is real, and it's
Speaker 6: certainly a risk that I think investors should pay attention to.
Speaker 3: All Right, Nathan, thank you so much. We appreciate you
Speaker 3: really really great stuff. Nathan Dean Bloomberg Intelligence Senior Policy Research.
Speaker 3: I cannot recommend his research enough because it can go
Speaker 3: into all the different sectors as well as kind of
Speaker 3: game out the different possibilities and where we kind of
Speaker 3: go up from here.
Speaker 2: So I guess that virtual role call thing or the
Speaker 2: virtual that's a key date, right.
Speaker 3: Yeah, apparently that happens between August first and August seventh.
Speaker 3: That's what I was reading about yesterday, And I'm just
Speaker 3: my mind is also spinning as to what winds up
Speaker 3: going to the courts in terms of where the money
Speaker 3: is accessed and who was able to get control of
Speaker 3: all that fundraising money also in terms of getting the
Speaker 3: ticket on the ballot in all the states.
Speaker 7: I don't know.
Speaker 2: I feel like these snap elections that the UK and
Speaker 2: your holds, it just gets it done really quickly.
Speaker 3: You know what I like about the UK is that
Speaker 3: you're not allowed to campaign for a long period of time.
Speaker 3: You have like very strict campaign today.
Speaker 2: How about the signs on the lawn thing? Is there
Speaker 2: any rules on that? Guess that's a big issue for
Speaker 2: us at in suburbia.
Speaker 3: I don't think you can do that. I mean, I'm
Speaker 3: kind of making that up, but I mean they have
Speaker 3: some strong restrictions. Anyway.
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Speaker 3: Let's continue the conversation of what President Biden dropping out
Speaker 3: of the presidential race for twenty twenty four means. Wendy Schiller,
Speaker 3: professor at Brown University and interim director of the Watson Institute,
Speaker 3: is standing by. She joins us from Providence Rhode Island. Professor,
Speaker 3: I have so many questions, but one basic one is
Speaker 3: will whoever becomes the next presidential nominee and VP make
Speaker 3: it on all the ballots in all the states? Is
Speaker 3: that a foregone conclusion.
Speaker 5: No, Alex, it's a great question, and good morning to you,
Speaker 5: to Paul, because Republicans are already gearing up to try
Speaker 5: to block access to these ballots in particular states. Now,
Speaker 5: some of the largest states we have maylen blue, like California,
Speaker 5: New York, Illinois, and you know they're democratic. Legislators will
Speaker 5: take care of this. But the Freme Court a long
Speaker 5: time ago your two thousand rules that parties essentially have
Speaker 5: control over their own nominating processes, that even though states
Speaker 5: controlled ballot access, parties can really do whatever they need
Speaker 5: to do to change primaries or nominate people. So it's
Speaker 5: I think it's going to be a tough call if
Speaker 5: it actually got all the way up to the Supreme
Speaker 5: Court and exped out of review for them to go
Speaker 5: back on that and all of a sudden say that
Speaker 5: state legislators can actually determine what political parties do. So
Speaker 5: this is going to be the legal wrangling Republicans have
Speaker 5: to decide whether it's worth it to spend the money
Speaker 5: on this, given that the likelihood of prevailing and enough
Speaker 5: states to make a difference right now doesn't look all
Speaker 5: that great.
Speaker 2: All right, Wendy. We are all in uncharted territory here
Speaker 2: in terms of this process, the campaign here for the Democrats.
Speaker 2: Can you leg out how it might plug out? Ie?
Speaker 2: When will the Democratic Party decide whether they are fully
Speaker 2: behind Vice President Harris or they may open it up
Speaker 2: to a grit wider competition. How does that work? Do
Speaker 2: you think?
Speaker 5: Well, you know, a long time ago, or even twenty
Speaker 5: years ago, it was a hierarchy that ran the Democratic Party,
Speaker 5: but just doesn't exist anymore, mostly due to the fact
Speaker 5: that the donor class is now independent of party leaders.
Speaker 5: People can give as much money independent of a party,
Speaker 5: so it really is weakened centralizing forces in the party.
Speaker 5: You can have a Trump campaign and Trump himself centralizes
Speaker 5: the party, but otherwise systematically very difficult to do. I
Speaker 5: think you've got some loan voices, particularly President Obama formed
Speaker 5: President Obama's loud voice sort of saying wait a minute,
Speaker 5: but a lot of the people who are in an
Speaker 5: elected office right now around the States are now gearing
Speaker 5: towards Harris, and delegates themselves who are already pledged to
Speaker 5: Biden they're saying at the convention they'll vote for Harris.
Speaker 5: So I think they'll be somewhat of an organic kind
Speaker 5: of organization of a party at the state level. And
Speaker 5: the more elected leaders, especially those running for House and Senate,
Speaker 5: saying they're buying Harris really pushes the party at the
Speaker 5: convention towards Harris. But they want to stay open to
Speaker 5: voices and engage people who have felt disengaged by Biden's refusal.
Speaker 3: To step aside planned tightrope to be walked. To be sure, now,
Speaker 3: before we get to the DNC, there's apparently this virtual
Speaker 3: role called vote between August first and August seventh. What
Speaker 3: is that and if there isn't a consensus behind Harris
Speaker 3: at that point, what happens?
Speaker 5: Well, Alex, this was really pushed by Ohio, the state
Speaker 5: of Ohio that said, you know, you're not going to
Speaker 5: meet our deadline. We're not putting Biden on the ballot
Speaker 5: for president. So they you know, they tried to fix it.
Speaker 5: Mike Dewayne, Republican governors tried to fix it, but nonetheless
Speaker 5: they're up against a very tight deadline that state set
Speaker 5: for determining the ballot. So I think that is the problem,
Speaker 5: and I think this is going to be where Harris
Speaker 5: and whoever she appoints to run her campaign has to
Speaker 5: really literally get on the phone with state party chairs
Speaker 5: who typically know most of the delegates, and the DNC
Speaker 5: has the list of all those names, and you've got
Speaker 5: to get surrogates and yourself to be on the phone
Speaker 5: literally or virtually and talking to people saying, vote for
Speaker 5: me on the first ballot. It's possible she doesn't win
Speaker 5: the nomination on the first ballot, but if it looks
Speaker 5: quite likely and she's almost there, you can see that
Speaker 5: how depending on the second ballot. So it's unclear who
Speaker 5: steps forward to be an alternative. You know who's really
Speaker 5: going to launch a challenge against her? And let's not
Speaker 5: forget core constituency for the Democratic Party, black voters, particularly
Speaker 5: in swing states, and suburban female voters, and you know
Speaker 5: who else fits the bill other than Kamala Harris. And
Speaker 5: that's what the people who don't want to launch support
Speaker 5: for her now have to say to themselves if they
Speaker 5: want to really be viable going against Donald Trump and
Speaker 5: dat events.
Speaker 2: Are you surprised that we've not heard an endorsement from
Speaker 2: President Obama?
Speaker 5: You know, the generous interpretation I like to say is
Speaker 5: that you know, he liked to make sure that disaffected
Speaker 5: voices we saw almost what one hundred thousand uncommitted or
Speaker 5: something in Michigan for Biden in the primary, that those
Speaker 5: voices feel that they're being heard in the platform, and
Speaker 5: who the VP pick might be, I think he's what
Speaker 5: he's trying to do is make sure that people feel engaged.
Speaker 5: And if it just looks like the elites in Washington
Speaker 5: picked Kama Harris, which is not what's happening right now.
Speaker 5: The elites in Washington are not doing that. It's the
Speaker 5: great roots in state level that are doing that. But
Speaker 5: if that's what it looks like, he's worried. I think
Speaker 5: that people won't feel as consulted as he needs them
Speaker 5: to be. If he's a Democrat and he wants to
Speaker 5: make sure he is a Democrat, wants to make sure
Speaker 5: to elect Kamala Harris. But it increasingly looks right now
Speaker 5: that he is out of step with where the party
Speaker 5: is moving quite quickly publicly to support and rally around Harris.
Speaker 3: But that would make sense of why not only Obama,
Speaker 3: but PELUSI is also not setting mum on all of this.
Speaker 3: Before we let you go, we know you got a
Speaker 3: heart out in just about a minute. What kind of
Speaker 3: lawsuits do you think we're going to see to prevent
Speaker 3: whatever ticket we do have for the Democrats lack of
Speaker 3: access to the campaign funds. What do you think is
Speaker 3: going to play out there?
Speaker 5: I mean, I think Republicans will launch every and any
Speaker 5: lawsuit that they can to gum up the system, make
Speaker 5: Democrats spend money to defend what they're doing, even transferring
Speaker 5: the money. It was a Biden Harris ticket, there shouldn't
Speaker 5: be any issue there. They're going to do a lot
Speaker 5: of that because mechanically on the ground, the Democrats are
Speaker 5: much better organized with their infrastructure then the Republicans that
Speaker 5: have relied on the Trump sort of charisma to get
Speaker 5: people out the door. So whatever they can do to
Speaker 5: com it up, they will, and that could hurt some
Speaker 5: of the states. But in terms of re engaging the party,
Speaker 5: it seems as if the Democrats see an opportunity to
Speaker 5: get back on the road, be viable and generate the
Speaker 5: kind of enthusiasm that they've been unable to generate for
Speaker 5: the last six months.
Speaker 3: Wendy, thank you so much. We very much appreciate you.
Speaker 3: When you Schiller, Professor, Brown University and interim Director of
Speaker 3: the Watston Institute.
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Speaker 3: This is Bloomberg Intelligence Radio. We bring you all the
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Speaker 3: And we also tap our resource is outside of Bloomberg Intelligence.
Speaker 3: And for now we go to Christopher Smart. He's a
Speaker 3: managing partner at Ubroth Capital sorry Aubroath Group, and former
Speaker 3: Special Assistant to the President for International economics and he
Speaker 3: joins us from Boston, Massachusetts. Christopher is great to get
Speaker 3: your perspective. So we looked at last week as the
Speaker 3: Trump trade. At least some people did right. Steeper curve
Speaker 3: bid into crypto tech was selling off. You had to
Speaker 3: move into small caps. Is that trade now said to
Speaker 3: reverse with the change on the ticket from the Democratic Party.
Speaker 8: I would say it looks like it might be getting
Speaker 8: a little bit push of pushback this morning and maybe
Speaker 8: over the next couple of days. But I would side
Speaker 8: with that clip you just played from Jim Bianco that
Speaker 8: the Trump trade, as it has been pushed out or
Speaker 8: talked about over the last week or so has probably
Speaker 8: been overblown. A lot of the moves you've seen in
Speaker 8: the market, whether it's the yields curve, the Heald curve steepening,
Speaker 8: the move in the dollar, the move in the equity markets,
Speaker 8: I think even without any of this background noise from
Speaker 8: the political world, it's not really background noise, it's very
Speaker 8: important noise. But had we not had any of that,
Speaker 8: the fundamentals of interest rates being cut, maybe some disappointing earnings,
Speaker 8: maybe a little hiccup over at CrowdStrike, that does a
Speaker 8: lot more to explain the recent dynamics that we've seen
Speaker 8: in the markets, and maybe other than the bitcoin price,
Speaker 8: there really are very few pure plays on the election outcome.
Speaker 2: Right now, Hey, Chris, before we get the president Biden
Speaker 2: stepping back here, what did you take away from the
Speaker 2: Republican Convention last week.
Speaker 8: Well, my takeaway is this is not the Republican Party
Speaker 8: that I grew up with or that maybe most of
Speaker 8: us have come to know over the last twenty thirty
Speaker 8: forty years since President Reagan. This is a party that
Speaker 8: has very much shifted its focus towards tariffs over free trade,
Speaker 8: towards workers over big corporations, and towards pulling back. Frankly,
Speaker 8: a lot of our or international commitments abroad are now
Speaker 8: under question, whether it's in Europe, whether it's defending Taiwan.
Speaker 8: The Republican Party wants to put more money into defense,
Speaker 8: but it's not clear really when and how it intends
Speaker 8: to use that in some of these key hotspots around
Speaker 8: the world. So I think it's a big shift in
Speaker 8: the debate, and no matter who wins the election in
Speaker 8: the fall, that debate is shifted to new sets of
Speaker 8: questions that the candidates will be will.
Speaker 3: Be arguing, which kind of brings us to the broader
Speaker 3: economic landscape, like this is a very different economy than
Speaker 3: we saw back in twenty sixteen when President Trump was
Speaker 3: elected the first time, Right, I mean, we're sort of
Speaker 3: at the end cycle of the economic cycle. You have
Speaker 3: fed funds rates are high. Yes they'll be cut, but
Speaker 3: they're still relatively high. The deficit is so much larger,
Speaker 3: and the massive amount of stimulus that we've had. What
Speaker 3: does this wind up meaning on an economic front to
Speaker 3: whomever is in the White House.
Speaker 8: Well, and it's interesting that the Republican Party and indeed,
Speaker 8: you know some extent the Democratic Party are bringing the
Speaker 8: same proposals to the table that they brought us four
Speaker 8: years ago. So I think that or eight years ago.
Speaker 8: So I think that says something about where our political
Speaker 8: leaders are taking us. But having said that, I think
Speaker 8: the real issue is, as you point out, that there
Speaker 8: isn't a lot of room for maneuver whoever wins this election.
Speaker 8: You know, President Trump, at least in one interview last
Speaker 8: week with Business Week, started walking back or talking a
Speaker 8: little bit about how big tax cuts might be more
Speaker 8: difficult this time around. And I think regardless of who
Speaker 8: wins the White House, the deficit next year is more
Speaker 8: or less going to.
Speaker 2: Be the same.
Speaker 8: There's not a lot of app there's not a lot
Speaker 8: of appetite to cut either spending or to raise taxes significantly.
Speaker 8: So I think that's again why the market right now
Speaker 8: now is not reacting too much to the potential election
Speaker 8: outcome as much as it's reacting to the current macro news,
Speaker 8: the prospect of inflation coming down, rate cuts next year,
Speaker 8: and earnings that have been weaker this time around, but
Speaker 8: certainly not anything that would signal that we're headed into
Speaker 8: a big recession.
Speaker 2: So, Chris Rhy, you mentioned that debt deficits in the
Speaker 2: national debt. Those have been issues that have been with
Speaker 2: us for decades. When when does the market care? When
Speaker 2: do politicians care?
Speaker 8: You know, you've stumped me there, that guy. I wish
Speaker 8: I had a great answer for you. I mean, politicians
Speaker 8: will care when markets care. You know, when when when
Speaker 8: the interest rate starts really biting and hurting and crowding
Speaker 8: out a lot of other spending priorities, then politicians will
Speaker 8: care markets. It's really not clear because the US, you know,
Speaker 8: for all of its drama, for all of its debt,
Speaker 8: for all of its deficit laxness or weakness, and approaching
Speaker 8: the deficit, for all of that, it remains the largest,
Speaker 8: most creative, most innovative economy in the world, and the
Speaker 8: most likely to grow in any given year, you know, cycles,
Speaker 8: notwithstanding so you know, this is still your best bet
Speaker 8: for putting money to work. And certainly these days, when
Speaker 8: a riskless bet gets you four and a half percent,
Speaker 8: you know, why would you go howling out into unknown
Speaker 8: and risk your risk your.
Speaker 3: Shores When we take a look at and I appreciate
Speaker 3: that you're saying that the markets doesn't really mean anything
Speaker 3: when it comes to the candidates right now, But are
Speaker 3: there where are the areas that have the biggest binary reactions,
Speaker 3: Like I'm thinking of crypto, I'm thinking of energy when
Speaker 3: it comes to Harris Trump debate.
Speaker 8: No, I think within the stock market there are clearly
Speaker 8: some plays that are reflective of some of this. So
Speaker 8: as you say, defense, crypto, energy, to some extent, bank stocks,
Speaker 8: but the way the way of Republicans were talking about
Speaker 8: Wall Street bankers last week, I'm not sure that that's
Speaker 8: a clean play from from my perspective. So I think
Speaker 8: there are clear there are there are and then and
Speaker 8: then on the flip side, you know, maybe clean energy stocks,
Speaker 8: clean energy companies get fewer subsidies, less attention from the government,
Speaker 8: and so that's where you would sort of see things
Speaker 8: playing out one way or the other. But again, I
Speaker 8: think at the macro level. I'll go back to what
Speaker 8: I said before, the fundamentals of interest rates and inflation
Speaker 8: or what's driving things all.
Speaker 2: Right, Christopher, thank you so much. We really appreciate it.
Speaker 2: Christopher Smart. He's a managing partner to our Growth Group
Speaker 2: and a former Special Assistant to the President for International economics.
Speaker 2: Joining us from this little town up there. They have
Speaker 2: a baseball team. I think it's Red Sox up there
Speaker 2: in Boston.
Speaker 1: So we appreciate that you're listening to the Bloomberg Intelligence Podcast.
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Speaker 2: What a lot of folks are trying to do today
Speaker 2: in the aftermath of President Biden pulling out, is trying
Speaker 2: to get a sense of, you know, the other differences
Speaker 2: or to what extent are the differences between President Biden
Speaker 2: and Vice President Harris's key policy issues and positions. So
Speaker 2: one of the folks we're really concerned are one of
Speaker 2: the areas a lot of folks are concerned about his taxes.
Speaker 2: Andrew Silverman, senior policy analyst for Bloomberg Intelligence. He looks
Speaker 2: at this tax stuff. He joins us here on our
Speaker 2: Bloomberg Interactive Broker studio. So we got Nathan Dean for
Speaker 2: all the crazy policy stuff don on Washington. We got
Speaker 2: Andrew Silverman, who looks at the taxes because that is
Speaker 2: a huge issue here. Andrew, thanks so much for joining us.
Speaker 2: What do we know about Vice President Harris's thoughts about
Speaker 2: taxes and how that may differ from President Biden?
Speaker 5: Right?
Speaker 7: So I think at least initially, there's a sense that
Speaker 7: Kambala is excuse me, is Joe Biden two point out,
Speaker 7: and that she's just taking over his tax policies where
Speaker 7: he left off. But I think it's important to note
Speaker 7: two things. First that when vice presidents become president, they
Speaker 7: tend to have much different tax policies than their predecessor.
Speaker 7: For example, Lyndon Johnson enacted one of the largest tax
Speaker 7: increases in US history during his presidency, but Kennedy had
Speaker 7: cut taxes drastically, and Reagan famously cut taxes twice from
Speaker 7: seventy percent that was the top tax rate in nineteen
Speaker 7: eighty two, seventy percent he cut it all the way
Speaker 7: down to twenty eight percent. And then when George H. W.
Speaker 7: Bush became president, if you remember, he said, read my lips,
Speaker 7: no new taxes, and then he enacted a tax increase.
Speaker 7: So and you know, people change. Obviously, the Nixon of
Speaker 7: nineteen sixty had different tax policies in the Nixon of
Speaker 7: nineteen sixty eight, but when Kamalo was in the Senate,
Speaker 7: she was significantly to the left of Biden. Certainly in
Speaker 7: the Senate, she proposed a refundable tax credit for home
Speaker 7: rental payments. She wondered if provide systems the tax assistance
Speaker 7: to low income tax payers small businesses as well in
Speaker 7: lower income communities. She proposed an excess profits tax on
Speaker 7: pharmaceutical companies, a banking tax. And I'd also note that
Speaker 7: the two Senators with whom she sponsored bills most frequently
Speaker 7: were Elizabeth Warren and Bernie Sanders.
Speaker 3: So for a lot of votes, that feels like enough said.
Speaker 3: But at the same time, a lot of companies are
Speaker 3: going to be investing in the US through programs like
Speaker 3: the Chips Act or the Infrastructure Act or the IRA.
Speaker 3: Wouldn't high taxes like mess that up? Like wouldn't that
Speaker 3: counter and be encounterintuitive then to them actually spending money?
Speaker 4: Right?
Speaker 7: And you know, I think a lot of the way
Speaker 7: that the tax policy will progress after the election is
Speaker 7: going to be dictated by who wins in Congress. So certainly,
Speaker 7: you know, Congress is not going to repeal the Inflation
Speaker 7: Reduction Act if we have a majority Democratic House. They're
Speaker 7: not going to let the Tax Cuts and Jobs Act
Speaker 7: fade out at the end of twenty twenty five if
Speaker 7: we have majority Republicans and the Senate in the House.
Speaker 7: So you know, if we have a President Trump next
Speaker 7: year in twenty twenty five, but we have you know,
Speaker 7: Democrats in the in the House and Republicans you know,
Speaker 7: in control of the Senate, chances are we're going to
Speaker 7: have pretty much the same tax policy that we have
Speaker 7: today because we're going to have gridlock certainly, And and
Speaker 7: Harrison is Harrison as well, you know, if she's if
Speaker 7: she's president, but we have just you know, Democrats barely
Speaker 7: in control of the House and maybe even Republicans in
Speaker 7: control of the Senate. She's even if she wanted to
Speaker 7: raise taxes on corporations, that's not something she'd be able
Speaker 7: to do.
Speaker 2: How about on the other side of the aisle. What
Speaker 2: did we learn from the Republican convention last week about
Speaker 2: what President Trump and the Republicans might try to do
Speaker 2: from a tax policy. Again, in mister Trump's first term,
Speaker 2: big tax cut was enacted. How about if you were
Speaker 2: to have a second term.
Speaker 7: Well, I you know, again, to depends on what kind
Speaker 7: of cotails he has if he wins. But certainly I
Speaker 7: think priority number one, absolutely without a doubt, is that
Speaker 7: Tax Cuts and Jobs Act. If he has enough of
Speaker 7: a majority, he would like to make it permanent. If
Speaker 7: he doesn't have enough of a majority, he'd like to
Speaker 7: at least extend it. And if he doesn't even have that,
Speaker 7: he'd like to extend certain portions of the Tax Cuts
Speaker 7: and Jobs Act. I think number one on that list
Speaker 7: would be corporate expensing, permanent expensing. So and I've even
Speaker 7: heard some Republicans say that if they can get capital
Speaker 7: expensing made permanent, that they would even be willing to
Speaker 7: increase the corporate tax rate.
Speaker 3: Well, that's interesting. We are keeping our eye on what's
Speaker 3: happing at the White House in the South lawne Remember
Speaker 3: that a VP Kamala Harris is going to be delivering
Speaker 3: some remarks. They're celebrating the National Collegiate Athletic Association Championships teams.
Speaker 3: We are currently looking at the teams coming out in
Speaker 3: the individuals. We will bring a part of that to
Speaker 3: you live. Hey, Andrew, when you're looking at what's next,
Speaker 3: what are some key words phrases like what are you
Speaker 3: going to be king in on to like help you
Speaker 3: guide and sort of where we should be looking at
Speaker 3: in terms of direction? Yeah, I mean I certainly, as
Speaker 3: in like, if there's a VP pick potentially for Kamala
Speaker 3: Harris that is more moderate or more left or like,
Speaker 3: what are the key things?
Speaker 8: Oh?
Speaker 7: Yeah, absolutely, I think her VP pick is going to
Speaker 7: indicate which direction she's going. And if she picks somebody,
Speaker 7: you know, as progressive as she was in the Senate,
Speaker 7: certainly that's going to that's going to indicate that she
Speaker 7: wants to move a little bit leftward. But if she
Speaker 7: picks somebody more moderate, then certainly she would tack back
Speaker 7: to the positions of Biden.
Speaker 2: All Right, We're looking right now at this south long
Speaker 2: of the White House, and I believe Vice President Kamala
Speaker 2: Harris is walking towards the stage with a group of
Speaker 2: other folks and a get in the backdrop are all
Speaker 2: many of the athletes who won titles in twenty twenty three,
Speaker 2: in twenty twenty four. So keeping an eye on that.
Speaker 2: So when the Vice President does take a podium and delivererates,
Speaker 2: marks will certainly dip into that.
Speaker 3: We will bring that to live Andrew. Okay, what else
Speaker 3: are you looking at? So you were looking at VP pick,
Speaker 3: We're obviously looking at taxes. What else is on your radar?
Speaker 7: So so I'm writing a note right now actually on JD. Vance.
Speaker 7: And I think just as the Vice President is being
Speaker 7: mischaracterized in terms of what her tax policies might be,
Speaker 7: I think that Jadvance's tax policies are being mischaracterized. I
Speaker 7: think for to a great extent, he's being portrayed as
Speaker 7: an arch conservative, but he's very much a populist. And
Speaker 7: a great example of that is him co sponsoring a
Speaker 7: bill with Sheldon Whitehouse on corporate acquisitions and mergers, saying
Speaker 7: that corporations that earn enough profits would be barred from
Speaker 7: being able to do tax free acquisitions. So, I mean,
Speaker 7: that's an extraordinarily progressive position for tax purposes, and you
Speaker 7: know he's totally on board.
Speaker 1: For that.
Speaker 7: He wants to tax college endowments and use that to
Speaker 7: find Yeah, and you said to fund non college training programs.
Speaker 7: So so you know, not exactly a conservative tax policy
Speaker 7: he wants to He wouldn't join the rest of the
Speaker 7: conservatives in trying to get rid of a gun tax.
Speaker 7: He actually only wants to repeal a portion of that
Speaker 7: gun tax.
Speaker 2: So all right, attention too, So we appreciate that. Andrew Silverman,
Speaker 2: Senior Policy anlyst for Bloomberg Intelligence, really looking at the
Speaker 2: tax implications of different administrations.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 2: A little bit of it, YEA, a little bit of
Speaker 2: unwinding of that Trump trade a little bit. Perhaps we'll
Speaker 2: have to see how that plays out. Brian Jacobson, he
Speaker 2: joined a series of Chief economist for Annex Wealth Management,
Speaker 2: joins us from Brookfield, Wisconsin via zoom.
Speaker 4: Brian love to.
Speaker 2: Get just from your perspective, like from an economic perspective,
Speaker 2: has anything changed or if at all, over the past
Speaker 2: twenty four to thirty six hours with the change in
Speaker 2: the Democratic Party in terms of this upcoming.
Speaker 9: Election, Yeah, thanks for having me. I think that it
Speaker 9: really has changed quite a bit as far as just
Speaker 9: the probabilities of the different outcomes. If you look at
Speaker 9: some of the prediction markets, you know, Trump's probability of
Speaker 9: winning the election went from about sixty five to sixty
Speaker 9: six percent down to sixty percent. And still you know,
Speaker 9: I guess better than even odds that he's going to win,
Speaker 9: but that has come down, and so now it's a
Speaker 9: matter of what is the policy environment likely going to
Speaker 9: be for the next four years?
Speaker 4: A little bit more.
Speaker 9: Uncertain here at annex, we think that it's still quite
Speaker 9: likely that we do see some sort of extension of
Speaker 9: those Trump era tax cuts. Really, what's kind of on
Speaker 9: the chopping block, perhaps if Harris wins, is that the
Speaker 9: tax cuts for those making four hundred thousand dollars or more.
Speaker 9: And then also as far as what's going on with
Speaker 9: the corporate tax rate, there's a state tax issues as well,
Speaker 9: and then the regulatory environment, we're seeing a bit of
Speaker 9: the reversal of that rotation towards small caps and value,
Speaker 9: but we think that this might be an opportunity to
Speaker 9: continue to add to those types of positions, not necessarily
Speaker 9: based upon the election outcome, but more based upon just
Speaker 9: that's where in the market we think there's a little
Speaker 9: bit more value to be had.
Speaker 3: So based on that, I wonder, though, if the curve
Speaker 3: is the one where we're really going to wind up
Speaker 3: seeing more of the action based on whether it's a
Speaker 3: President Harris or a President Trump. And this is even
Speaker 3: assuming that Vice President Harris is the nomine because it
Speaker 3: feels like the steeper curve is what we're going to get,
Speaker 3: but the why we're getting it steeper maybe different depending
Speaker 3: on who's in the White House.
Speaker 9: That's absolutely right, and I think it's actually a little
Speaker 9: bit maybe wrong to think that either one cares that
Speaker 9: much about the debt or deficit, mainly because that's not
Speaker 9: really part of their platforms. It really seems like it's
Speaker 9: about revenues as far as you know, with Trump wanting
Speaker 9: to increase revenues through tax cuts and more growth, perhaps
Speaker 9: Harris or whoever's on the Democrats side, to increase revenue
Speaker 9: through taxing those making four hundred thousand dollars or more
Speaker 9: year corporate taxes, And really what seems to be lacking
Speaker 9: is a discussion around what the government can actually control,
Speaker 9: which is the spending side of things. Right, revenue is
Speaker 9: really driven by economic activity, which isn't completely under the
Speaker 9: government's control. So I think that in either scenario, the
Speaker 9: moves in the yield curve are just as uncertain.
Speaker 2: So, Brian, given what we know about the politics, which
Speaker 2: is a lot of things are unknown here, what's your
Speaker 2: economic call here? How do you think this economy is
Speaker 2: faring and how do you think the next six or
Speaker 2: twelve months are looking for this US economy.
Speaker 9: I think things are looking pretty good. You know, on
Speaker 9: our Investment committee we discuss about all the incoming data
Speaker 9: that we get from Bloomberg, and it really does look
Speaker 9: like we had a decent recovery with manufacturing and retail
Speaker 9: sales over the last two months. We have to see
Speaker 9: if there's a little bit of carry through. We do
Speaker 9: know that lower end consumers are feeling the pinch. They're
Speaker 9: beginning to be a little bit more prudent as far
Speaker 9: as instead of the yolo you only live once attitude
Speaker 9: towards spending they're becoming a little bit more price sensitive,
Speaker 9: but we think that there's enough economic momentum to keep
Speaker 9: the consumer plowing things forward here, and we think the
Speaker 9: recession risk is fairly low. A lot does hinge on
Speaker 9: whether or not the FED will cut rates in time
Speaker 9: or not, and for us that does mean a September ratecut.
Speaker 9: We think the data will dictate that they can cut,
Speaker 9: and so if they end up not, then we'll have
Speaker 9: to revise our estimates.
Speaker 3: So based on that, do you like small caps here?
Speaker 9: Yeah, we do. We've actually been overweight small caps and
Speaker 9: mid caps more on the quality side, so we prefer
Speaker 9: those that are more profitable because as you probably know,
Speaker 9: forty percent of small caps aren't profitable, so we prefer
Speaker 9: sort of having that profitability along with that valuation lens.
Speaker 9: That has led us towards small and mid caps. But
Speaker 9: then also like industrials, energy, and we're warming up to financials.
Speaker 9: It's an area that we've been very underweight for a
Speaker 9: long time, and that's an area where if we get
Speaker 9: the credit conditions continuing as they are as opposed to deteriorating,
Speaker 9: we think financials could stand to benefit from this.
Speaker 2: What do you guys make about these concentration risk Brian,
Speaker 2: in the marketplace that we've seen in these magnificent seven,
Speaker 2: How concerning is that to you? Do you fade that,
Speaker 2: you try to find value outside of that? How do
Speaker 2: you guys deal with that?
Speaker 9: Yeah, we've been really focused on concentration risk for a while,
Speaker 9: and to an extent, it's led us to underweight those
Speaker 9: names just because we don't necessarily want to put all
Speaker 9: of our or most of our eggs in that one
Speaker 9: particular basket, especially when that basket isn't particularly diverse in
Speaker 9: terms of sector exposures or thematic exposures. And we think
Speaker 9: that this is a period of time in which that
Speaker 9: rotation trade can come back in it broadens out. A
Speaker 9: lot is going to hinge on the fundamentals. We do
Speaker 9: need to see that improvement in the small cap and
Speaker 9: mid cap earnings. They have gone through periods of recession
Speaker 9: earnings recessions over the last three years. It's almost like
Speaker 9: they kind of get above water and then they have
Speaker 9: a quarter on quarter decline in earnings once again. So
Speaker 9: we do want to see a little bit more traction.
Speaker 9: But a lot of those companies have right sized for
Speaker 9: economic slowing, not an economic stop, but we're economic slowing,
Speaker 9: and so we think that they can actually move higher.
Speaker 9: Have those fundamentals support those valuations to actually have a
Speaker 9: pretty decent end of the year and twenty twenty five
Speaker 9: and beyond.
Speaker 3: What's weird though, is that the reason why the FED
Speaker 3: is going to cut is because the economy is slowing,
Speaker 3: which in theory shouldn't that be bad for small caps?
Speaker 3: But where's the nuance there that I'm clearly missing.
Speaker 9: No, you're absolutely right. Historically the FED has cut mainly
Speaker 9: because they held rates too high for too long and
Speaker 9: they were late to respond to economic slowing. Now there's
Speaker 9: a difference in going from great growth to good growth
Speaker 9: as opposed to going from good growth to horrible growth, right,
Speaker 9: and so we went from great growth in twenty twenty
Speaker 9: three to more sustainable and that will be the key
Speaker 9: thing is whether or not we do tip into a recession.
Speaker 9: So if the FED is cutting because the inflation data
Speaker 9: allows them to, as opposed to the growth data telling
Speaker 9: them that they have to, I think that's going to
Speaker 9: make all the difference in the world. It also will
Speaker 9: make a huge difference in say the fixed income space,
Speaker 9: with credit spreads how tight they are.
Speaker 8: We can have those.
Speaker 9: Spreads widen, but mainly because not that corporate yields are
Speaker 9: moving higher, but treasure yields are moving lower.
Speaker 2: What do you need to see out of earnings here?
Speaker 2: What do you think the market needs to see out
Speaker 2: of earnings here? Brian? Do we need to have a
Speaker 2: big beat to continue to support this market?
Speaker 9: You know, I don't think we need to see a
Speaker 9: big beat. I think it really is about they just
Speaker 9: need to have a more pleasant tune or attitude towards
Speaker 9: the future. It's more about the guidance that they give.
Speaker 9: You know, last week we saw asml TSMC report, those
Speaker 9: fundamentals were fine, but then people had to reassess what
Speaker 9: that outlook looked like when it was announced that the
Speaker 9: US government was going to crack down on the ability
Speaker 9: to export that technology to China, or with Candidate Trump's
Speaker 9: comments about the relationship between the US and Taiwan. So
Speaker 9: it's really more about that longer term future. It's not
Speaker 9: about what have you done for me lately with the
Speaker 9: earnings numbers, But it's more about that guidance. Are there
Speaker 9: signs that the new orders are gaining to pick up,
Speaker 9: are they actually going to be able to meet in
Speaker 9: some areas what seemed like perhaps unrealistically lofty growth expectations
Speaker 9: in the tech area. That's why we prefer more MidCap
Speaker 9: and small cap tech just seems like those growth expectations
Speaker 9: are a little bit more modest and there's less risk
Speaker 9: with some sort of negative guidance going forward.
Speaker 3: Just one more point on that, when you talk about
Speaker 3: small caps and mid caps, is it value or is
Speaker 3: it growth? Within those areas.
Speaker 9: You know, we've been overweight small cap more on the
Speaker 9: value side of things. On the growth side, you do
Speaker 9: tend to get it more dominated by like biotech and
Speaker 9: some of the areas where it might be a little
Speaker 9: bit more speculative.
Speaker 4: We do believe.
Speaker 9: Firmly in balance having the exposure there, but in terms
Speaker 9: of if you put on that profitability filter, that would
Speaker 9: lead you more towards the value side of things. But
Speaker 9: you don't necessarily want to only look at that profitability.
Speaker 9: You also want to incorporate other dimensions of quality, like
Speaker 9: the leverage that those companies have. Now, I guess that
Speaker 9: is one of the dangers is if you are in
Speaker 9: let's say small MidCap quality where they have pristine balance sheets,
Speaker 9: then you don't necessarily get these rip roar and runs
Speaker 9: higher in the stock price when it looks like the
Speaker 9: FED is getting closer to cutting, because that then tends
Speaker 9: to favor those areas that have more of the highly
Speaker 9: levered balance sheets. But when we're constructing portfolios looking more
Speaker 9: for that longer term holding, putting those two together, the profitability, valuation,
Speaker 9: reasonable leverage, it does tend to move us a little
Speaker 9: bit more towards the value side as opposed to the
Speaker 9: growth side of the spectrum.
Speaker 3: All right, we really appreciate it, Brian, Thank you so much.
Speaker 3: Brian Jacobson to me chief economists and NEX Wealth Management,
Speaker 3: a really great perspective. Joining us from Wisconsin.
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