WEBVTT - Markets Look Ahead to Fed Decision and Jobs 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.960 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.080 us live on YouTube. 0:00:27.400 --> 0:00:31.080 This is a really timely conversation Nisha Poultel. We get 0:00:31.080 --> 0:00:34.800 a huge response when she's on with Parametric. I'm thrilled 0:00:34.840 --> 0:00:37.080 that she could join us here on taking advantage of 0:00:37.120 --> 0:00:37.920 text rebounds. 0:00:38.280 --> 0:00:43.560 Not one, but two people in the last week have pounded. 0:00:43.120 --> 0:00:46.800 The table on your world. They're saying, basically, it's never 0:00:46.840 --> 0:00:49.440 been like this. Yeah, has it never been like this 0:00:49.640 --> 0:00:50.640 in the muni bond. 0:00:50.520 --> 0:00:53.239 World in the long end of the curve. So if 0:00:53.240 --> 0:00:57.160 you look at twenty year high quality triple A bond yields, 0:00:57.840 --> 0:01:02.240 we have not seen these yields system atinably this high 0:01:02.880 --> 0:01:06.480 in the past, I would say fifteen fifteen years or so. So, 0:01:06.959 --> 0:01:09.600 and here's the thing. As we talk about New York City, 0:01:10.640 --> 0:01:14.600 you do see, you know, headline stories around New York City, 0:01:14.600 --> 0:01:17.800 possibly credit. We can certainly discuss the budget bill and 0:01:18.880 --> 0:01:22.280 federal funding cuts to issuers, but my main line here 0:01:22.319 --> 0:01:25.520 is not much has changed from a credit quality perspective, right, 0:01:25.520 --> 0:01:27.360 so you're still looking at a very high quality acid 0:01:27.360 --> 0:01:31.399 class that purely based on technicals. A lot of issuance 0:01:31.400 --> 0:01:33.840 in a short period of time, not as much demand 0:01:34.240 --> 0:01:38.480 has really created this imbalance, and long ENDMUNI yields are 0:01:38.560 --> 0:01:43.479 up anywhere from eighty to ninety basis points year to date. 0:01:43.560 --> 0:01:46.559 So you're looking at tax equivalent yields for New York, 0:01:47.360 --> 0:01:51.280 you know, for New York residents anywhere around eight and 0:01:51.360 --> 0:01:54.360 a half to nine percent north of that in that 0:01:54.440 --> 0:01:57.040 long end of the curve. Right, these are bonds finite maturity. 0:01:57.880 --> 0:02:00.000 Give us an example of one of those bonds. 0:02:00.160 --> 0:02:02.800 Is it the New York Mets bond of two thousand 0:02:03.240 --> 0:02:03.720 fifty ten. 0:02:03.840 --> 0:02:06.840 No, I mean you're looking at New York City waters, right, 0:02:07.200 --> 0:02:10.040 very high quality issuer, New York City geos, New York 0:02:10.080 --> 0:02:16.680 City TFAs. These are just your large issuers that you're 0:02:16.760 --> 0:02:19.360 getting these types of yields for. And this is on 0:02:19.400 --> 0:02:22.000 a national basis as well. So again what we've seen 0:02:22.400 --> 0:02:25.600 is as you've had this big, beautiful bill proposal. Do 0:02:25.639 --> 0:02:28.080 you remember earlier this year a lot of talk around 0:02:28.600 --> 0:02:31.960 possibly removing the tax exemption or selective young mini bonds. 0:02:32.000 --> 0:02:34.280 I mean everything was on the table. So if you're 0:02:34.320 --> 0:02:36.560 an issuer and you're looking to issue death this year 0:02:36.560 --> 0:02:38.320 in the municipal bond market, a lot of that was 0:02:38.320 --> 0:02:40.800 pulled forward, right, you're like, let me just issue in 0:02:40.800 --> 0:02:43.920 the market now. Now, from a demand perspective, you really 0:02:43.919 --> 0:02:47.200 haven't seen a lot of inflows into the market. And 0:02:47.520 --> 0:02:50.880 that's really been the case for fixed income. It's been 0:02:51.000 --> 0:02:53.320 a little bit of a tough year, right, Choppy yields 0:02:53.880 --> 0:02:56.919 and investors don't want to take on a lot of durations. 0:02:56.919 --> 0:02:58.880 So if you see the ten year maturity and in 0:02:59.520 --> 0:03:01.520 that part of the curve has been very well supported. 0:03:02.000 --> 0:03:06.519 But most high tax market individuals, that say retail investors, 0:03:07.320 --> 0:03:09.880 are a little fearful of investing further out. So when 0:03:09.919 --> 0:03:12.440 you don't have that natural support and you have so 0:03:12.560 --> 0:03:15.959 much demand, this is what's created that imbalance. So we're 0:03:16.000 --> 0:03:19.360 seeing this as just a tremendous opportunity. And when you 0:03:19.440 --> 0:03:22.280 talk about those types of yields, right, I mean, compare 0:03:22.320 --> 0:03:24.440 this to any other asset class that you're looking at 0:03:24.440 --> 0:03:28.280 out there with this credit quality, it's you know, it's 0:03:28.360 --> 0:03:30.919 time to like in simply put, exactly, yes. 0:03:30.960 --> 0:03:33.440 The best performance I'm looking at my go function on 0:03:33.440 --> 0:03:36.600 the Bloomberg terminal. The best performance in fixed income has 0:03:36.640 --> 0:03:40.119 been US corporate high yield. Yes, that kind of surprised 0:03:40.160 --> 0:03:42.200 me a little bit. Yeah, what do you see in 0:03:42.240 --> 0:03:43.120 a high yield market? 0:03:43.320 --> 0:03:47.000 Yeah, I mean, look, spreads have remained incredibly tight, and 0:03:47.080 --> 0:03:48.800 a lot of this is based upon the fact that 0:03:48.880 --> 0:03:51.160 and I think a lot of your guests here have 0:03:51.240 --> 0:03:53.680 spoken about the resiliency of the economy, right, I mean, 0:03:53.680 --> 0:03:56.360 we just haven't seen any cracks in the economic data. 0:03:56.480 --> 0:03:59.320 Yet we're expecting the FED to stay on hold. And 0:03:59.400 --> 0:04:02.480 so you seen again a technical story there as well. 0:04:02.560 --> 0:04:06.000 You know, just an an incredible amount of demand which 0:04:06.000 --> 0:04:09.080 has caused spreads to remain tight. And now if you're 0:04:09.120 --> 0:04:11.480 on I in you look at what your broad union 0:04:11.520 --> 0:04:15.120 next has done. Yep, I mean it's underperformed everything else. 0:04:15.560 --> 0:04:18.240 If we have a debt and a deficit, we're debating 0:04:18.240 --> 0:04:20.640 whether mister Besson's going to give us more t bills 0:04:20.680 --> 0:04:23.280 and imaginable like back to biblical times. 0:04:23.040 --> 0:04:27.599 Yes or whatever. The phrase I use as an amateur. 0:04:27.240 --> 0:04:31.599 Is crowding out. Is the federal government full faith and credit. 0:04:32.320 --> 0:04:34.560 There's so much stuff because of the debt and the 0:04:34.600 --> 0:04:37.880 deficit that they're crowding out Niche Patel's world. 0:04:39.600 --> 0:04:41.919 Look, this is going to have an impact on yields, 0:04:41.960 --> 0:04:43.680 There's no doubt about it. So you know, I'm not 0:04:43.720 --> 0:04:46.080 here to say that we're going to have your long 0:04:46.200 --> 0:04:49.120 end yields, you know, fall tremendously here. I think the 0:04:49.160 --> 0:04:52.320 debts and deficit story is going to keep yels relatively 0:04:52.320 --> 0:04:56.920 elevated have a seper yel curve. But I think in short, 0:04:56.960 --> 0:05:00.719 when you talk about additional debt issuance that happens on 0:05:00.760 --> 0:05:03.200 the curve is a big part of this story. Right, 0:05:03.240 --> 0:05:06.080 We're talking about a lot of t bill issuance. So 0:05:06.120 --> 0:05:08.560 if you take a look at that in terms of 0:05:08.600 --> 0:05:10.760 the impact of the market, and you take a look 0:05:10.760 --> 0:05:12.760 at the assets that are seeing in money market funds, 0:05:12.800 --> 0:05:14.760 I mean, this is a story where you could see 0:05:14.760 --> 0:05:16.960 that easily being absorbed in the market. So does it 0:05:17.040 --> 0:05:21.400 relates to Munis? You know, you're seeing certainly some impact 0:05:21.400 --> 0:05:23.440 in terms of what treasure yields have done on Muni's 0:05:24.200 --> 0:05:27.560 but even more to a wider effect in the long 0:05:27.640 --> 0:05:29.440 and which is what's presenting this opportunity. 0:05:29.640 --> 0:05:31.840 What do you expect are fed to do for the 0:05:31.880 --> 0:05:33.520 remainder of the year. I mean, I guess if I 0:05:33.560 --> 0:05:35.159 look at the WRP function on. 0:05:35.160 --> 0:05:37.440 The bloomer, maybe two two cuts. 0:05:37.520 --> 0:05:38.960 Yeah, is that kind of where you think it's going 0:05:39.000 --> 0:05:39.159 to be. 0:05:39.240 --> 0:05:40.599 Is that where they should be? 0:05:41.240 --> 0:05:41.480 Yeah? 0:05:41.520 --> 0:05:44.200 I mean, look, I think I think two cuts are 0:05:44.200 --> 0:05:48.039 still plausible. And I I'm thinking, look, we can be 0:05:48.080 --> 0:05:50.720 in a scenario of where we were end of twenty three. 0:05:51.400 --> 0:05:53.640 So end of twenty three we had a sharp rally, 0:05:53.800 --> 0:05:57.520 at the end of the year, we had softening economic data, 0:05:57.600 --> 0:06:00.400 we had a FED pivot, and so look, no one's 0:06:00.440 --> 0:06:04.520 expecting the FED to do anything tomorrow, but the main 0:06:04.560 --> 0:06:07.599 story being we haven't given it enough time, right, we 0:06:07.720 --> 0:06:09.919 haven't maybe given it enough time for any of the 0:06:09.960 --> 0:06:13.080 cracks that possibly show up. So if you do start 0:06:13.080 --> 0:06:16.320 seeing any softening in the labor market Friday, I will 0:06:16.320 --> 0:06:18.760 say it again as you've been saying today, big day, 0:06:18.960 --> 0:06:22.920 big big jobs number, but solo the one the month after, 0:06:22.960 --> 0:06:25.880 and so the one a month after that. So I 0:06:25.920 --> 0:06:28.360 think the FED could be in a place by fall, 0:06:28.600 --> 0:06:32.160 late fall to start cutting. And I think that narrative 0:06:32.480 --> 0:06:35.719 could be you know, one cut talking about it could 0:06:35.720 --> 0:06:39.279 be that pivot that could possibly send send yels you know, 0:06:39.320 --> 0:06:41.159 certainly a little bit lower than where we are today, 0:06:41.160 --> 0:06:41.920 no doubt about it. 0:06:42.560 --> 0:06:43.400 Is there a demand? 0:06:43.480 --> 0:06:46.280 I mean, if I got a seven percent netclean, eight 0:06:46.320 --> 0:06:49.360 percent clean, nine percent triple, is it. 0:06:49.320 --> 0:06:50.920 Four poll tax free in New York? 0:06:51.160 --> 0:06:51.480 I don't know. 0:06:51.600 --> 0:06:54.560 I don't even know. But is there a demand you 0:06:54.560 --> 0:06:56.920 know within the street? Is it retailed demand? 0:06:57.000 --> 0:06:59.720 There is? There is, So we have started to see 0:06:59.720 --> 0:07:02.640 demand and pick up. I would say, I don't want 0:07:02.680 --> 0:07:06.560 to say very substantially, but we're starting to see you know, 0:07:06.600 --> 0:07:09.760 certainly investors picking their heads up and thinking, look, I 0:07:09.760 --> 0:07:12.880 can lock in this type of yield. You know, you 0:07:12.920 --> 0:07:15.480 can hold it to maturity, right, you can let it 0:07:15.600 --> 0:07:19.280 roll down again. Beautiful, beautiful thing about bonds. There's a 0:07:19.280 --> 0:07:22.560 finite maturity outside of credit issue, which is what a 0:07:22.560 --> 0:07:27.160 professional manager is paid to do. This is a tremendous opportunity. 0:07:27.240 --> 0:07:30.760 So I think, as we again go into the fall, 0:07:30.880 --> 0:07:33.600 possibly with the narrative that look, the FED could start cutting, 0:07:34.040 --> 0:07:35.440 how do I lock in yields? 0:07:35.680 --> 0:07:35.880 Right? 0:07:36.280 --> 0:07:38.440 And the last thing I'll kind of say here is 0:07:38.480 --> 0:07:41.400 like for fixing come investors, it's been a frustrating few years. 0:07:41.440 --> 0:07:44.240 I mean, as you all know, we are now sitting 0:07:44.240 --> 0:07:46.680 at yields where if you have a starting yield a 0:07:46.800 --> 0:07:49.080 four or five percent, this is going to be a 0:07:49.120 --> 0:07:53.320 big driver forward performance, right, So that's also the that's 0:07:53.360 --> 0:07:56.440 also the huge catalyst here on top of that, you 0:07:56.520 --> 0:08:00.600 have a pretty high cushion. Should rates move even further 0:08:00.720 --> 0:08:04.800 from here, so you can you know whether one hundred 0:08:04.880 --> 0:08:10.600 basis point move in many cases before you're even flash exactly. 0:08:11.200 --> 0:08:13.520 Thank you so much, Parametric. 0:08:20.600 --> 0:08:24.160 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:08:24.240 --> 0:08:27.239 weekday afternoons from seven to ten a m. Eastern Listen 0:08:27.320 --> 0:08:30.880 on Applecarplay and Android Auto with the Bloomberg Business app, 0:08:31.040 --> 0:08:32.800 or watch us live on YouTube. 0:08:33.160 --> 0:08:36.400 Neil Dota is an optimist and maybe on this day, 0:08:36.440 --> 0:08:38.839 this is the best day in history to speak to 0:08:38.920 --> 0:08:44.120 Neil Doda of Renaissance Macro about the optimism of this nation. 0:08:44.280 --> 0:08:44.960 Neil, you've been. 0:08:44.880 --> 0:08:49.120 Writing on the tariff dynamic and how they are changeable 0:08:49.240 --> 0:08:49.880 as well. 0:08:50.240 --> 0:08:54.000 How will tariffs change our listeners our viewers? 0:08:56.120 --> 0:08:59.040 Well, Hi, Tom, how are you you know to me? 0:08:59.400 --> 0:09:02.360 The way I'm looking at tariffs as really it's it's 0:09:02.360 --> 0:09:06.720 a rotation of growth, right, I mean, over time we 0:09:06.760 --> 0:09:13.320 should see more activity going into our manufacturing sector, but 0:09:13.400 --> 0:09:15.400 that will come at the expense of other sectors of 0:09:15.440 --> 0:09:18.679 the economy. So you know, to me, it's it's not 0:09:18.840 --> 0:09:21.760 so much good or bad. I'm just looking at it, 0:09:21.960 --> 0:09:23.920 you know from the you know from my seat, which 0:09:23.960 --> 0:09:27.400 is it's rotating growth into some industries and away from 0:09:27.400 --> 0:09:31.040 other industries. So as an investor you should probably proceed accordingly. 0:09:31.120 --> 0:09:33.480 But you know, tariffs are going to be meant to 0:09:33.600 --> 0:09:37.400 are meant at some level to boost manufacturing activity. I 0:09:37.440 --> 0:09:40.479 think you know that will show up for for producers, 0:09:40.520 --> 0:09:42.200 and that will and then that will come at the 0:09:42.280 --> 0:09:46.760 expense of consumption. You remember, tariffs are a consumption tax 0:09:47.480 --> 0:09:50.559 and inefficient consumption tax, but a consumption tax. 0:09:50.760 --> 0:09:55.400 And Paul and Neal's note he talked to it's a 0:09:55.480 --> 0:09:58.480 VAT I mean basically it's you know him VAT tax 0:09:58.520 --> 0:09:59.960 as well that they use in Europe. 0:10:00.160 --> 0:10:03.400 So Neil, I mean, is this net net Can we 0:10:03.480 --> 0:10:07.120 at this stage meets too early say whether this is 0:10:07.160 --> 0:10:09.800 going to be a net positive a net negative for 0:10:09.840 --> 0:10:12.920 this economy because this is an economy that's based upon 0:10:13.000 --> 0:10:14.720 seventy percent consumption. 0:10:17.120 --> 0:10:19.800 Well, I mean, I think, I mean, most if you 0:10:19.840 --> 0:10:22.800 look at most models of the economy sort of workhorse 0:10:22.880 --> 0:10:26.000 macro models. They'll say that it's net negative that there's 0:10:26.040 --> 0:10:30.840 a persistent loss of output over a longer term period. 0:10:32.520 --> 0:10:34.640 But this is all I mean. But this is also 0:10:34.800 --> 0:10:37.800 sort of I guess, to some extent what people voted for. 0:10:37.880 --> 0:10:41.360 I mean, you know, they want more growth source domestically, 0:10:41.360 --> 0:10:45.160 and tariffs are one way to achieve that goal. But 0:10:45.280 --> 0:10:47.160 what I was trying to get at with what I 0:10:47.200 --> 0:10:49.560 wrote is, you know, all I'm saying is this. If 0:10:49.880 --> 0:10:52.480 you had told me that the effective tariff raid based 0:10:52.480 --> 0:10:56.240 on how much customs was collecting would be close to 0:10:56.520 --> 0:10:59.040 you know, let's say, ten to fifteen percent by the summer, 0:11:00.080 --> 0:11:03.840 you wouldn't really see other nations retaliate, stocks would be 0:11:03.880 --> 0:11:09.040 at records, and inflation would generally be coming in better 0:11:09.080 --> 0:11:14.200 than expected. I probably wouldn't have believed you, but that's 0:11:14.559 --> 0:11:17.080 that's kind of what's happened now. That doesn't mean that 0:11:17.080 --> 0:11:19.000 we're out of the woods. I mean, you know, as 0:11:19.040 --> 0:11:22.320 you know, I'm still cautious on the economic outlook, but 0:11:23.520 --> 0:11:25.960 I mean that it is what it is, right. I mean, 0:11:26.000 --> 0:11:29.480 if you had told someone that even though the effective 0:11:29.520 --> 0:11:34.560 tariff right has gone up over ten percentage points, that 0:11:34.600 --> 0:11:37.880 stocks would still be at records. I don't think most 0:11:37.920 --> 0:11:40.440 people would have believed you, but that's exactly what's happened. 0:11:40.480 --> 0:11:45.160 It's almost as if the uncertainty around the tariffs going 0:11:45.200 --> 0:11:49.679 away is more important than the tariffs themselves. 0:11:49.400 --> 0:11:52.160 Right, Neil dunna with us here with Ren McNeil, I'm 0:11:52.160 --> 0:11:54.960 gonna throw the eight thirty data. You know, I know 0:11:55.040 --> 0:11:56.920 you haven't had time to digest it. I'm just going 0:11:56.960 --> 0:12:01.120 to give broad strokes here, folks. The advance goods trade 0:12:01.120 --> 0:12:06.120 balance was not worser. The survey was negative ninety eight 0:12:06.720 --> 0:12:10.160 and it came into a much better negative eighty six. 0:12:11.120 --> 0:12:15.439 The advanced goods imports cratered. 0:12:15.640 --> 0:12:20.439 That's the economic word that Neil Dudda would use. We 0:12:20.520 --> 0:12:25.880 saw month over months plunge of I guess stuff coming 0:12:25.960 --> 0:12:27.720 into the country. 0:12:27.840 --> 0:12:31.560 Neil, in a general statement, help us with that. Do 0:12:31.600 --> 0:12:34.760 you have a clue what the three months moving averages 0:12:34.840 --> 0:12:36.760 of our trade dynamics? 0:12:38.120 --> 0:12:39.560 I mean, I haven't looked at that yet. 0:12:39.559 --> 0:12:39.839 Tom. 0:12:39.880 --> 0:12:43.000 I mean, it's interesting you just gave me some eight 0:12:43.000 --> 0:12:45.079 thirty numbers. But what I will say is, look, I mean, 0:12:45.080 --> 0:12:48.840 in business economic economics, I tend to tune out what 0:12:48.960 --> 0:12:51.200 goes on with the trade deficit and inventories. I know 0:12:51.240 --> 0:12:53.720 that's kind of surprising to hear, but ultimately what you 0:12:53.760 --> 0:12:58.880 want to look at is domestic demand. Obviously, the fact 0:12:58.920 --> 0:13:01.599 that in ports or decline, I mean, that's going to 0:13:01.640 --> 0:13:05.440 show up somewhere else. You know, maybe it means less 0:13:05.440 --> 0:13:10.240 inventory stocking, maybe it means less consumption. But ultimately the 0:13:10.280 --> 0:13:14.000 decline in imports, right, you know, we'll show up in 0:13:14.040 --> 0:13:17.120 some other area of GDP. You know, the fact that 0:13:17.200 --> 0:13:22.280 exports continue to weaken, you know, suggest that you know, 0:13:22.320 --> 0:13:25.760 the trade war might be having consequences for our you know, 0:13:25.840 --> 0:13:31.440 major trading partners, uh And is sapping growth over there, 0:13:31.559 --> 0:13:34.000 which means that if they're not growing as robustly as 0:13:34.000 --> 0:13:35.920 they had been, we can't export as much to them. 0:13:36.640 --> 0:13:41.160 So is a general statement, let's pick on Europe, we 0:13:41.160 --> 0:13:42.600 could pick on any other region. 0:13:43.280 --> 0:13:47.559 If Europe is slower, do we become slower. 0:13:49.800 --> 0:13:51.320 All else equal? Probably? 0:13:51.400 --> 0:13:53.199 Yes, Neil. 0:13:53.600 --> 0:13:56.400 When you think about these tariffs, is it a one 0:13:56.640 --> 0:13:59.959 time kind of jolt to prices or is it something 0:14:00.360 --> 0:14:02.360 and that we can lap and it won't we can 0:14:02.400 --> 0:14:04.760 put in our rear view mirrors. It's something different, something 0:14:04.800 --> 0:14:08.559 more longer term. 0:14:08.840 --> 0:14:11.360 Well, I mean i think it's I think it's a 0:14:11.360 --> 0:14:14.600 one time shock to the price level. I don't think 0:14:14.640 --> 0:14:18.560 it necessarily increases inflation, which is a general increase in 0:14:18.600 --> 0:14:21.080 the level of prices across the economy. I mean, what 0:14:21.120 --> 0:14:25.800 we've seen so far with tariffs is goods prices have 0:14:25.880 --> 0:14:29.080 gone up, as you'd expect for things like, you know, furniture, 0:14:29.600 --> 0:14:34.400 household furnishings, tools, you know, garden equipment, things like that, 0:14:35.080 --> 0:14:37.960 But prices for services have kept going down because the 0:14:38.000 --> 0:14:41.640 nominal anchor hasn't changed. I mean, John Cochrane University of 0:14:41.680 --> 0:14:45.400 Chicago has talked about this really well. I mean, basically, 0:14:45.440 --> 0:14:48.200 if you don't change the nominal anchor, tariffs represent a 0:14:48.280 --> 0:14:50.920 relative shifting of prices, it doesn't increase. 0:14:50.560 --> 0:14:51.960 The general level of prices. 0:14:52.000 --> 0:14:54.240 And that's what we're seeing right Like, so the fact 0:14:54.240 --> 0:14:57.960 that nominal income has generally been slow in households don't 0:14:57.960 --> 0:15:02.040 have the capacity to absorb higher rices across the economy. 0:15:02.080 --> 0:15:05.560 So if if goods producers are absorbing some of the 0:15:05.600 --> 0:15:07.840 cost which they are and passing on some of the 0:15:07.880 --> 0:15:10.960 cost of the consumer, people start paying more for goods, 0:15:11.440 --> 0:15:14.480 that means they have less money to spend elsewhere, and 0:15:14.520 --> 0:15:18.880 that ultimately forces the prices for those other areas down. 0:15:19.000 --> 0:15:21.320 It doesn't mean that it's good. It doesn't mean that 0:15:21.320 --> 0:15:24.040 it's a good thing. But that's kind of where I'm 0:15:24.080 --> 0:15:27.160 at right now. It's ultimately about the nominal and the 0:15:27.240 --> 0:15:29.560 fact that you know, Governor Waller, as you know, has 0:15:29.600 --> 0:15:32.960 been talking about this quite a bit, and that's why 0:15:33.000 --> 0:15:36.840 you're not seeing overall inflation rates celerate despite teriffs. 0:15:36.920 --> 0:15:39.680 Neil, thank you the brilliant note. Brilliant note. I can't 0:15:39.720 --> 0:15:41.520 say enough about what he says. They're folks of a 0:15:41.560 --> 0:15:48.320 disinflationary tendency of China, of Europe, and potentially of America. 0:15:48.720 --> 0:15:52.640 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:15:52.640 --> 0:15:55.680 starting at seven am Eastern on Apple Corplay and Android 0:15:55.680 --> 0:15:58.720 Auto with the Bloomberg Business App. You can also listen 0:15:58.800 --> 0:16:02.080 live on Amazon Alec from our flagship New York station, 0:16:02.640 --> 0:16:05.280 Just say Alexa Play Bloomberg eleven thirty. 0:16:05.520 --> 0:16:09.200 We have the absolute perfect guests this morning to give 0:16:09.200 --> 0:16:12.920 you perspective across the nation on the geography of this 0:16:12.960 --> 0:16:16.320 horrific event. We all talk to Peter Scheer here about 0:16:16.360 --> 0:16:19.200 the market, about all the news flow, and of course 0:16:19.240 --> 0:16:22.240 a bull market with futures. Frankly, this morning up eighteen 0:16:22.640 --> 0:16:25.000 the vis Paul Under fifteen, I didn't notice that. 0:16:25.240 --> 0:16:28.000 Yeah, I think it's a bull market and part of that. 0:16:28.120 --> 0:16:28.840 Peter Sheer. 0:16:28.960 --> 0:16:31.480 I was with someone from the Midwest this week and 0:16:31.520 --> 0:16:34.440 a family member, and I was trying to explain the 0:16:34.480 --> 0:16:38.720 resurgent New York and I was standing outside the glory 0:16:39.000 --> 0:16:42.080 of the new Waldorf Astoria. As you look from the 0:16:42.120 --> 0:16:47.440 Waldorf up Park Avenue to Blackstone, the Rudent Building and 0:16:47.720 --> 0:16:52.359 north up to fifty ninth Street, it is Finance America, 0:16:52.400 --> 0:16:52.800 isn't it. 0:16:53.400 --> 0:16:55.600 Yeah, And it's a little bit scary what happened. I 0:16:55.680 --> 0:16:57.640 was very scary, and I think we're all going to 0:16:57.680 --> 0:17:00.000 wind up trying to rethink how security should be working. 0:17:00.120 --> 0:17:03.320 What we do. It's you know, tragic and offer. 0:17:03.120 --> 0:17:06.520 This commitment that we've seen to these blocks. Citadel is there. 0:17:07.200 --> 0:17:11.720 We have Blackstone with their long term lease commitment across 0:17:11.760 --> 0:17:15.200 the street, the absolute miracle of what Jamie Diamond did 0:17:15.200 --> 0:17:18.960 at JP Morgan explain to our national audience why Wall 0:17:19.000 --> 0:17:24.639 Street's choosing to be midtown versus the stereotype of downtown. 0:17:24.920 --> 0:17:26.159 You know, I think it probably comes down to the 0:17:26.200 --> 0:17:27.600 commute for many people whether. 0:17:27.400 --> 0:17:30.040 You're coming in central stations there and. 0:17:30.000 --> 0:17:32.440 It's getting easier and easier to come into Penn station. 0:17:32.640 --> 0:17:34.200 So I think you want to be in this area. 0:17:34.240 --> 0:17:36.720 We'll have more coverage. Miles Miller will be with us here. 0:17:36.800 --> 0:17:41.560 He is on Park Avenue this morning. Peter, this bull 0:17:41.640 --> 0:17:43.000 market on Friday. 0:17:43.080 --> 0:17:46.879 We're distant from Friday after earnings reports coming out, we 0:17:46.960 --> 0:17:50.919 get a rationalization by the Bears. How did the bears 0:17:50.960 --> 0:17:51.960 get this market wrong? 0:17:52.560 --> 0:17:53.760 You know, I think there's been a few things. 0:17:53.800 --> 0:17:56.120 One is, I do think people have been missing how 0:17:56.160 --> 0:17:58.400 powerful this you know, national production. 0:17:58.119 --> 0:17:59.640 For national security element is. 0:17:59.840 --> 0:18:01.680 We've been talking about it for a while, and it 0:18:01.760 --> 0:18:04.840 started I think when the Department Defense invested four hundred 0:18:04.840 --> 0:18:09.400 million in MP two weeks ago and got billion dollars 0:18:09.440 --> 0:18:12.800 of debt for them. When Treasury Secretary Besant was on 0:18:12.920 --> 0:18:15.600 with Anne Marie last Tuesday, he almost said those exactly 0:18:15.600 --> 0:18:18.240 where it's national production for national security. And then President 0:18:18.240 --> 0:18:20.439 Trump later in the week went on talking about the 0:18:20.480 --> 0:18:23.000 importance of AI and data centers and that we are 0:18:23.040 --> 0:18:25.560 going to get defeat regulations to make sure that we 0:18:25.640 --> 0:18:28.880 get enough electricity to those data centers. So I think 0:18:28.960 --> 0:18:31.160 that's been an uplift to this. I think the trade 0:18:31.240 --> 0:18:33.840 deal noise is more just noise. I think it's actually 0:18:33.840 --> 0:18:35.560 weighing on the market. I think people are a little 0:18:35.600 --> 0:18:37.800 bit nervous, and I think the tariff impacts will be 0:18:37.840 --> 0:18:39.920 felt over the time. But for me, it's really been 0:18:39.960 --> 0:18:43.600 this resurgence of let's build things, let's build the infrastructure. 0:18:43.760 --> 0:18:44.640 And it does tie in. 0:18:44.680 --> 0:18:47.720 Very nicely with the big beautiful bill, with the accelerated depreciation. 0:18:47.800 --> 0:18:49.600 I think if we can just jumpstart some of these 0:18:49.680 --> 0:18:53.080 national production for national security, whether it's in chips, AI, 0:18:53.320 --> 0:18:57.359 data centers, rarest, critical minerals, pharma. 0:18:57.440 --> 0:18:58.600 That gets the economy going. 0:18:58.600 --> 0:19:00.640 I think that's why you've seen Also, it's and very 0:19:00.640 --> 0:19:03.159 few sectors that have really been driving this market, and 0:19:03.200 --> 0:19:05.040 the small capsits are still kind of lagging. 0:19:05.119 --> 0:19:07.040 Yeah, exactly. So I mean, I mean we're right smack 0:19:07.040 --> 0:19:09.320 in the middle of earnings. Peter, what have you learned 0:19:09.320 --> 0:19:11.400 so far in earnings? What do you expect to hear 0:19:11.760 --> 0:19:12.840 from the earning seriesce? 0:19:12.840 --> 0:19:15.159 You know, I think the biggest thing I've learned so 0:19:15.200 --> 0:19:16.800 far is if you say you're spending a lot of 0:19:16.800 --> 0:19:18.160 money on AI and chips, your. 0:19:18.040 --> 0:19:18.760 Stock goes up. 0:19:18.840 --> 0:19:21.760 So I think We're still in that mode that everyone 0:19:21.800 --> 0:19:24.280 is still very focused on the growth in AI, the 0:19:24.320 --> 0:19:26.840 growth and data centers and companies that are spending on 0:19:26.880 --> 0:19:28.360 it and helping grow that benefit. 0:19:28.440 --> 0:19:30.480 So that's not going to stop. I don't think anytime soon, 0:19:31.040 --> 0:19:31.280 is there. 0:19:32.359 --> 0:19:34.680 I mean, we're sitting here twenty two times earnings. I 0:19:34.720 --> 0:19:35.280 mean when do we? 0:19:36.640 --> 0:19:38.880 I guess valuations have not been. 0:19:38.800 --> 0:19:41.439 A problem for this market for the longest time. Is 0:19:41.440 --> 0:19:42.200 that still the case? 0:19:42.240 --> 0:19:42.399 Do we? 0:19:42.800 --> 0:19:44.400 How do we think about valuation this market? 0:19:44.480 --> 0:19:47.480 I'm not comfortable paying twenty two times twenty three times earnings. 0:19:47.560 --> 0:19:48.720 You know, I'm with you, And that's why I've been 0:19:48.800 --> 0:19:51.200 looking at the things that I think really have the upside. 0:19:51.240 --> 0:19:53.280 Are things that are still trading a little bit cheap 0:19:53.320 --> 0:19:57.000 that can benefit from this real you know, logistics, the 0:19:57.040 --> 0:19:59.640 industrial base kind of growing that I feel there's still 0:19:59.720 --> 0:20:00.679 value there. 0:20:01.359 --> 0:20:01.679 Got it? 0:20:01.760 --> 0:20:04.959 And so I guess the question is what do we 0:20:05.000 --> 0:20:07.760 need to see from earnings here? Do we need earnings 0:20:07.920 --> 0:20:09.399 growth to accelerate from here to. 0:20:09.400 --> 0:20:10.320 Support this market? 0:20:10.560 --> 0:20:12.120 Or if earning stay right where we are, we don't 0:20:12.160 --> 0:20:14.320 have any disappointments, that's good enough. 0:20:14.400 --> 0:20:14.600 You know. 0:20:15.000 --> 0:20:16.520 I think again, it's going to come down to those 0:20:16.560 --> 0:20:18.159