WEBVTT - China Trade Curbs, Trump Interview 0:00:02.920 --> 0:00:07.280 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.960 --> 0:00:13.840 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:13.920 --> 0:00:17.320 weekdays at ten am Eastern on Applecarplay and Android Auto 0:00:17.360 --> 0:00:20.279 with the Bloomberg Business App. Listen on demand wherever you 0:00:20.360 --> 0:00:24.040 get your podcasts, or watch us live on YouTube. 0:00:25.000 --> 0:00:27.560 The SMP is down by over one percent. A big 0:00:27.600 --> 0:00:31.040 part of this was the Bloomberg report overnight that we 0:00:31.080 --> 0:00:35.280 could potentially see severe trade restrictions if companies like Tokyo 0:00:35.320 --> 0:00:39.760 Electron and ASML continue to give China access to advance 0:00:39.800 --> 0:00:43.400 to semiconductor technology, and that whole situation. 0:00:43.000 --> 0:00:44.560 Is weighing on the chip stocks. 0:00:44.600 --> 0:00:48.640 And the current Bloomberg Global Economy reporter is joining us, 0:00:48.840 --> 0:00:51.720 and can you walk us through the potential what the 0:00:51.720 --> 0:00:53.600 Biden administration is thinking about. 0:00:54.720 --> 0:00:57.680 So it's a pretty draconian next step. Essentially, what the 0:00:57.680 --> 0:01:01.200 administration talking about is making use all of something calledly 0:01:01.320 --> 0:01:04.840 foreign Direct Product Rule, and in essence that means that 0:01:04.880 --> 0:01:07.720 gives the US leverage over any kind of technology that 0:01:07.880 --> 0:01:11.880 includes any kind of US input or material or technology 0:01:11.880 --> 0:01:14.720 in any way. So it would be a big next 0:01:14.720 --> 0:01:16.200 step if the word to go around this route and 0:01:16.240 --> 0:01:19.200 try and put the clampers down on ASML and on 0:01:19.280 --> 0:01:22.920 Tokyo Electron, Like you mentioned. Now, the thing about this 0:01:23.040 --> 0:01:26.000 is it raises questions in two ways. It's delicate dance 0:01:26.080 --> 0:01:28.080 for the US in terms of how it approaches this 0:01:28.160 --> 0:01:31.360 with allies. Could be diplomatic tension between both Japan and 0:01:31.400 --> 0:01:34.280 the Netherlands. Companies in the middle of this already say 0:01:34.280 --> 0:01:36.840 that they've been hit hard enough. And then on the 0:01:36.840 --> 0:01:39.000 other side, it raises the questions about, well, just how 0:01:39.080 --> 0:01:41.440 effective have the US policies been Because it was back 0:01:41.480 --> 0:01:44.560 towards late twenty twenty two when the US announces sweeping 0:01:44.600 --> 0:01:48.360 measures on chip technology export restrictions to China. Back then 0:01:48.880 --> 0:01:50.600 it was expected to be a big deal and will. 0:01:50.640 --> 0:01:53.919 Clearly it's not necessarily having the impact that they wanted. 0:01:53.960 --> 0:01:57.760 So it's a potential major set, but raised lots of 0:01:57.840 --> 0:01:59.800 questions about where policy is going. 0:02:00.080 --> 0:02:02.880 The same time, realistically, what do you hear from I 0:02:02.880 --> 0:02:07.240 guess the industry about the ability to continue or to 0:02:07.280 --> 0:02:10.359 try to really make a change in where chips come from, 0:02:10.440 --> 0:02:14.000 how they're manufactured, the trade flows on shoring friends shoring, 0:02:14.760 --> 0:02:15.839 How realistic is that? 0:02:17.240 --> 0:02:20.120 Well, we know there is some shifting or production manufacturing 0:02:20.120 --> 0:02:22.720 going on of not just a chip chain, but other 0:02:22.760 --> 0:02:24.639 production chains as well. We know, of course that the 0:02:24.639 --> 0:02:27.160 big subsidies that the US have Roulette has attracted a 0:02:27.200 --> 0:02:30.000 lot of investment in the semi conductor space, So things 0:02:30.040 --> 0:02:32.720 are moving around, but there's still a lot of reliance, 0:02:32.760 --> 0:02:35.440 as you say, on some key, key kind of nodes 0:02:35.480 --> 0:02:38.720 in that and key companies like ASML and like in 0:02:38.760 --> 0:02:41.400 Taiwan and the like. But the other sort of feeling 0:02:41.560 --> 0:02:45.760 I think among the macroeconomic side of this is that 0:02:46.160 --> 0:02:48.480 people are kind of on pause now with investment and 0:02:48.960 --> 0:02:52.239 spending plans until see where the US election goes in 0:02:52.280 --> 0:02:53.799 a few months. So, you know, the one hand, it 0:02:53.800 --> 0:02:58.200 could either be broadly speaking, continuity with current administration, or 0:02:58.200 --> 0:02:59.839 if it's a chaine of administration, it could be quite 0:02:59.840 --> 0:03:02.320 a different approach, maybe even more hokish. That's what all 0:03:02.320 --> 0:03:05.000 the signals are, That's what our own interviewed former President 0:03:05.000 --> 0:03:07.720 Trump signals. So there's a lot open the air here, 0:03:07.720 --> 0:03:11.400 and I think this kind of potentially big step of 0:03:11.480 --> 0:03:13.840 the administration so late in the political cycle, I think 0:03:13.960 --> 0:03:16.919 is giving people poses just ask questions about where is 0:03:17.040 --> 0:03:20.359 US policies Ward Shawna going in the near to medium term. 0:03:21.000 --> 0:03:22.840 I mean, of course, It's always hard to understand the 0:03:22.840 --> 0:03:25.960 stock reaction with these kind of headlines because political hedging 0:03:26.200 --> 0:03:28.560 has not really worked, and also you have some of 0:03:28.600 --> 0:03:30.760 these stocks that have had a huge run up anyway, 0:03:30.840 --> 0:03:33.400 so we have to sort of take that with a. 0:03:33.360 --> 0:03:34.120 Grain of salt. 0:03:34.400 --> 0:03:38.040 Do we understand though, what more trade restrictions will do 0:03:38.240 --> 0:03:41.520 to the global economy? I know the President Trump's team 0:03:42.040 --> 0:03:43.840 says that it's okay because we'll have lower taxes and 0:03:43.840 --> 0:03:45.720 more consumption, and it's going to be the other countries and 0:03:45.720 --> 0:03:48.120 companies that will pay for it, not the United States. 0:03:49.560 --> 0:03:51.920 What do you think? What's your research tell you? 0:03:52.480 --> 0:03:54.200 I think people are starting to focus on this now, 0:03:54.280 --> 0:03:55.880 alex in the way that they were during the last 0:03:55.880 --> 0:03:58.640 few weeks. The political cycle in the US has changed 0:03:58.680 --> 0:04:00.800 a lot, and I think both in the US and 0:04:00.840 --> 0:04:03.040 globally now people are saying, if there is a change 0:04:03.040 --> 0:04:05.760 of administration, what would it mean for the trade and 0:04:05.880 --> 0:04:09.680 flow of goods and capital and services. Obviously US China 0:04:09.800 --> 0:04:12.360 is a center of it. It's red hot, but it's 0:04:12.400 --> 0:04:16.000 not just US China. Former President Trump is talking about putting, 0:04:16.080 --> 0:04:19.960 you know, raising tariffs and driving hard bargains with all 0:04:20.000 --> 0:04:22.839 trading partners who have a deficit with the US, So 0:04:22.880 --> 0:04:27.720 it's it's just cementing this idea of heading for deeper protectionism, 0:04:27.960 --> 0:04:31.400 maybe deeper mercantilism, certainly less kind of cooperation on the 0:04:31.400 --> 0:04:33.920 world stage. And then how does that flow through the 0:04:33.960 --> 0:04:36.920 prices and people at home consumers. It probably means more 0:04:36.960 --> 0:04:39.839 expensive productions are more more expensive goods to buy, and 0:04:39.839 --> 0:04:42.760 that's the whole inflationary story. So I think there's a 0:04:42.760 --> 0:04:44.880 lot of uncertainty about where this is all going, but 0:04:45.160 --> 0:04:47.200 at the same time, people now are starting to focus 0:04:47.279 --> 0:04:49.080 hard on it in case of there is a change 0:04:49.120 --> 0:04:51.120 of administration in a few months in the US. 0:04:51.600 --> 0:04:54.560 Certainly having an impact on the market, that is for sure. 0:04:55.279 --> 0:04:55.720 End of current. 0:04:55.760 --> 0:04:57.280 Thank you so much for joining us in the current. 0:04:57.320 --> 0:04:59.839 Is a global economy reporter for Bloomberg News, joining us 0:04:59.880 --> 0:05:03.040 from Washington, DC. And as you mentioned, Alex, really having 0:05:03.040 --> 0:05:04.840 an impact on the market. The S and P off 0:05:04.839 --> 0:05:08.599 one percent, but the NASDAK off two point three percent, 0:05:08.640 --> 0:05:10.480 so that's where you're seeing it. I saw the van 0:05:10.800 --> 0:05:15.599 k Etf Semiconductor ETF fun lost about four percent of 0:05:15.640 --> 0:05:18.120 its value today, so kind of across the board. But 0:05:18.120 --> 0:05:19.960 as you mentioned, Alex, we're coming off of those all 0:05:20.000 --> 0:05:22.919 time highs. So this market was certainly looking for a 0:05:22.920 --> 0:05:25.200 little bit of a reason to pull back, and I 0:05:25.200 --> 0:05:28.120 think a little bit of political policy uncertainty that's kind 0:05:28.120 --> 0:05:30.160 of crypt into the market that would be the thing. 0:05:30.200 --> 0:05:30.360 Here. 0:05:31.880 --> 0:05:35.799 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:35.839 --> 0:05:39.360 weekdays at ten am Eastern on applecar Play and Android 0:05:39.400 --> 0:05:42.200 Auto with the Bloomberg Business App. You can also listen 0:05:42.320 --> 0:05:45.400 live on Amazon Alexa from our flagship New York station 0:05:45.760 --> 0:05:48.800 Just Say Alexa, playing Bloomberg eleven thirty. 0:05:50.160 --> 0:05:53.200 So Alex Deeal alongside paulse we need. This is Bloomberg 0:05:53.200 --> 0:05:55.600 Intelligence Radio. We bring you all the top news and business, 0:05:55.600 --> 0:05:58.760 economics and finance and sometimes in politics with our lens 0:05:58.800 --> 0:06:01.440 of our Bloomberg Intelligence folks. They cover two thousand companies 0:06:01.440 --> 0:06:04.719 in one hundred and thirty industries worldwide. It was the 0:06:04.800 --> 0:06:08.480 business Week piece that has now been heard around the world. 0:06:09.120 --> 0:06:13.119 It was an incredible front page on what Trump would 0:06:13.120 --> 0:06:16.159 do with taxes, teariff, the Fed, and more. It's a 0:06:16.200 --> 0:06:18.479 real deep dive into trumpanomics in a way that I 0:06:18.560 --> 0:06:23.080 have not seen yet. It's actionable, it feels realistic, and 0:06:23.120 --> 0:06:25.640 it's really boiled down. So we can really get a 0:06:25.720 --> 0:06:28.800 grasp on what a Trump two point zero and trumpanomics 0:06:28.839 --> 0:06:31.000 actually means. And we can thank Bradstone, the editor of 0:06:31.000 --> 0:06:34.280 BusinessWeek for Bloomberg to kind of put all this together 0:06:34.320 --> 0:06:37.560 for us. He joins us now from San Francisco to California. 0:06:37.640 --> 0:06:40.559 Brad I found this to be an extremely helpful piece 0:06:40.640 --> 0:06:43.440 because if you listen or you read excerpts from interviews 0:06:43.440 --> 0:06:47.200 with Trump, it's very difficult to get to concrete ideas. 0:06:47.240 --> 0:06:49.360 And you guys did an amazing job of doing that. 0:06:49.880 --> 0:06:50.680 How hard was it? 0:06:52.440 --> 0:06:55.640 Yeah, thank you, alex Well. I mean, look, he wanted 0:06:55.640 --> 0:06:59.520 to talk. We'd actually put queries out to both campaigns. 0:06:59.560 --> 0:07:03.400 We heard first from from former President Trump. You know, 0:07:03.520 --> 0:07:06.760 this is Business Week, so our mandate is business obviously, 0:07:06.880 --> 0:07:10.720 economics the world order, and we went there to interrogate 0:07:10.800 --> 0:07:14.480 him about an economic plan that many economists think is 0:07:14.560 --> 0:07:18.760 a bit contradictory. I mean, President Trump talks about lowering inflation. 0:07:19.560 --> 0:07:26.800 The agenda is, you know, higher tariffs, less immigration, you know, 0:07:26.840 --> 0:07:31.160 which which potentially raises wages. He talks a lot about 0:07:31.200 --> 0:07:34.040 lowering interest rates and then bringing members of the business 0:07:34.080 --> 0:07:36.880 community into his administration. So this is a topic he 0:07:36.920 --> 0:07:39.320 wanted to talk about. To put it in context, we 0:07:39.400 --> 0:07:42.400 talked to him two days before the first presidential debate 0:07:42.440 --> 0:07:46.120 and about two weeks before the assassination attempt. But even then, 0:07:46.200 --> 0:07:48.679 I think, you know, he is writing what he believes, 0:07:48.680 --> 0:07:51.320 at least and his campaign believes, is a heightened sense 0:07:51.360 --> 0:07:52.360 of momentum. 0:07:53.320 --> 0:07:55.800 So Brad, that's there's a lot of areas here in 0:07:55.800 --> 0:07:58.360 the terms of economics to explore. Talk about taxes. How 0:07:58.360 --> 0:08:00.840 does he feel about taxes these days? He certainly had 0:08:00.840 --> 0:08:04.720 some big tax legislation in his first term, that's right. 0:08:04.600 --> 0:08:08.160 And one part of his plan is to extend the 0:08:08.200 --> 0:08:11.720 Trump tax cuts. Another part, which he told us, was 0:08:11.760 --> 0:08:14.320 to lower the corporate tax rate. He told the Business 0:08:14.400 --> 0:08:16.360 roundtable that he wanted to bring it down to twenty 0:08:16.360 --> 0:08:19.040 percent from twenty one percent, if for no other reason 0:08:19.080 --> 0:08:22.880 that he likes big, large numbers. But then he said 0:08:22.920 --> 0:08:24.960 he would even get it down to fifteen percent if 0:08:24.960 --> 0:08:27.800 he could. You know, the challenge here, of course, is 0:08:28.640 --> 0:08:32.720 you know that there's no they don't delineate any way 0:08:32.760 --> 0:08:34.960 to pay for this, to make the numbers partial out 0:08:34.960 --> 0:08:37.640 and do anything other than raise the federal deficit. And 0:08:38.000 --> 0:08:40.400 there's real there is really I think a paucity of 0:08:40.960 --> 0:08:44.280 specifics here, which is one reason why proxies have kind 0:08:44.280 --> 0:08:47.240 of tried to fill the void with things like Project 0:08:47.720 --> 0:08:51.360 twenty twenty five, which then Trump really distanced himself from. 0:08:51.720 --> 0:08:54.120 But you know, I think, I think, you know, with 0:08:54.120 --> 0:08:54.800 the broad. 0:08:54.559 --> 0:08:57.800 Brushstrokes we got is Trump wants to lower taxes and 0:08:57.880 --> 0:08:59.160 extend his tax cuts. 0:09:00.080 --> 0:09:04.160 I also felt was very interesting is the myriad of views. 0:09:03.960 --> 0:09:05.480 In relation to the tech industry. 0:09:05.880 --> 0:09:08.360 So in the one hand of Klawer Tax's ya tech industry, 0:09:08.600 --> 0:09:11.319 he seems to embrace crypto clearly. 0:09:11.440 --> 0:09:11.880 With JD. 0:09:12.000 --> 0:09:15.400 Vans, there's sort of an embrace of vcs, but big 0:09:15.440 --> 0:09:18.880 tech is very complicated, and how did you parse through that? 0:09:20.679 --> 0:09:23.679 There's some contradictions here, Alex. I mean, the first is, 0:09:24.720 --> 0:09:28.320 you know, he's he's he's obviously very pro American business, 0:09:28.640 --> 0:09:32.120 and yet he's he's turned on TikTok and believes that 0:09:32.200 --> 0:09:36.520 banning TikTok would only empower Mark Zuckerberg and Facebook. The 0:09:36.559 --> 0:09:38.720 second thing is, you know, in the in the first term, 0:09:39.040 --> 0:09:42.199 he talked a lot about cryptocurrency. 0:09:41.440 --> 0:09:43.120 And how it might engender fraud. 0:09:43.960 --> 0:09:47.439 He wasn't wrong about that, obviously, but now he's flipped 0:09:47.440 --> 0:09:50.240 on that as well. The bottom line here and the 0:09:50.240 --> 0:09:53.080 way I interpreted, is that for Trump it's all about 0:09:53.160 --> 0:09:54.599 personal relationships. 0:09:54.840 --> 0:09:55.960 And he went and talked. 0:09:55.720 --> 0:09:57.720 A lot about Tim Cook and how smart he thought 0:09:57.760 --> 0:10:00.440 Tim Cook was, in large part because Tim Cook went 0:10:00.480 --> 0:10:02.880 to the White House to ask for relief from the 0:10:02.880 --> 0:10:05.280 first set of tariffs. You know, he likes it when 0:10:05.320 --> 0:10:08.680 people come and you know, pay their respects or at 0:10:08.760 --> 0:10:12.200 least visibly look to be on what he considers to 0:10:12.200 --> 0:10:14.800 be Team Trump. And so, you know, in terms of 0:10:14.840 --> 0:10:18.320 Crypto and a lot of people in that community are 0:10:18.320 --> 0:10:21.080 now pro Trump, and you know, in terms of TikTok 0:10:21.080 --> 0:10:23.840 where he's very popular on TikTok, and of course jeff 0:10:23.920 --> 0:10:26.160 yass one of the backers of Byte Dance as a 0:10:26.160 --> 0:10:29.520 Trump supporter. You can kind of see why these contradictions 0:10:29.520 --> 0:10:32.360 are sort of bundled into his views on technology. 0:10:33.520 --> 0:10:36.120 Tariffs, certainly, it seems to be the topic, at least 0:10:36.120 --> 0:10:38.280 in the trading today. We've had both sides of the 0:10:38.320 --> 0:10:41.720 aisle talking about tariffs and tough tariff talk. 0:10:42.800 --> 0:10:44.440 Mister Trump used tariffs. 0:10:44.120 --> 0:10:48.679 Quite you know, liberally liberally in the first term words. 0:10:48.840 --> 0:10:50.600 How's you think about tariffs these days? 0:10:50.880 --> 0:10:53.520 It's interesting, Paul, you know, I have not spent much 0:10:53.520 --> 0:10:57.760 time thinking about President William McKinley, the twenty fifth president. 0:10:58.520 --> 0:11:01.800 He's from my he was from my former state of Ohio, 0:11:02.120 --> 0:11:05.120 and Trump brought him up repeatedly because you know, here's 0:11:05.120 --> 0:11:08.640 this nineteenth century president who, before the age of a 0:11:08.679 --> 0:11:13.080 federal income tax, was raising the raising tariffs and bringing 0:11:13.080 --> 0:11:13.480 in money. 0:11:13.520 --> 0:11:17.040 And he said that McKinley is overlooked. Who knows what 0:11:17.120 --> 0:11:18.040 book club. 0:11:18.120 --> 0:11:21.760 He's part of, but clearly they've been reading histories and 0:11:21.880 --> 0:11:25.240 he wants to raise tariffs. He thinks tariffs are underrated. 0:11:25.280 --> 0:11:28.280 He's talking about a ten percent across the board tariff. 0:11:28.480 --> 0:11:31.920 He's talking about raising the tariff on Chinese goods to 0:11:32.120 --> 0:11:33.920 sixteen percent or even one hundred percent. 0:11:34.480 --> 0:11:37.439 And you know, he says they're a great negotiating ployee. 0:11:38.080 --> 0:11:40.760 You know, he tried that in the first term, and 0:11:40.840 --> 0:11:43.840 obviously then you know, a lot of US companies, particularly 0:11:43.920 --> 0:11:47.040 tech companies, complained, and they did. They were quite generous 0:11:47.040 --> 0:11:51.240 in their carve outs. But this is a big part 0:11:51.320 --> 0:11:54.800 of Trumpanomics. And most economists think that companies don't pay 0:11:54.800 --> 0:11:57.520 those tariffs, they turn around and pass them to customers 0:11:57.520 --> 0:12:00.320 in the form of higher prices. So there. We pressed 0:12:00.360 --> 0:12:02.199 him on it, and I think there are some unresolved 0:12:02.200 --> 0:12:03.760 contradictions and tensions there. 0:12:04.000 --> 0:12:06.760 What's also interesting, I was reading a JP Morgan note 0:12:06.800 --> 0:12:10.640 about commodities and what the Trump administration would do to commodities. 0:12:11.040 --> 0:12:14.080 Obviously that's my beat, but what they made the point 0:12:14.160 --> 0:12:16.960 is it really depends on the sequencing. So if you 0:12:17.000 --> 0:12:20.280 go to corporate taxes first, tariffs come later. Like the 0:12:20.320 --> 0:12:23.480 sequencing of how all of this works will really depend 0:12:23.520 --> 0:12:26.040 then on what the market reaction is. Did you get 0:12:26.080 --> 0:12:27.000 any sense of that. 0:12:28.760 --> 0:12:31.080 In terms of how we would do it. I didn't, 0:12:31.240 --> 0:12:33.000 But I mean, one thing. 0:12:32.880 --> 0:12:38.559 That impressed us, or is impressed upon us, is that 0:12:39.679 --> 0:12:43.840 in twenty sixteen, you know, he was unprepared to win, 0:12:44.240 --> 0:12:48.280 and he surrounded himself with people, maybe a bit impulsively, 0:12:48.400 --> 0:12:50.400 and he says that he would do it differently this time, 0:12:50.400 --> 0:12:53.920 that he knows who's loyal and who's not, and he's experienced, 0:12:53.920 --> 0:12:56.680 and he knows everybody this time, and it just seemed 0:12:56.679 --> 0:12:59.120 to us that they were you know, that he is 0:12:59.200 --> 0:13:01.679 prepared to move quickly in what order I don't know, 0:13:02.000 --> 0:13:06.560 but particularly if he controls both houses in Congress, that 0:13:06.640 --> 0:13:09.520 they have an agenda that they're pretty much willing to 0:13:09.600 --> 0:13:10.079 implement that. 0:13:10.200 --> 0:13:16.400 Blitz Creed Speed Jamie Diamond as Secretary of Treasury thirty 0:13:16.440 --> 0:13:17.360 seconds spread. 0:13:17.600 --> 0:13:21.920 Yeah yeah, what did he call him an overrated globalist once? 0:13:22.240 --> 0:13:24.360 Look, he's courting the business community. 0:13:24.720 --> 0:13:27.200 I you know, who knows if Diamond would do that, 0:13:27.240 --> 0:13:31.920 particularly considering how former members of Trump's administration often ended 0:13:32.000 --> 0:13:35.880 up being treated somewhat badly or breaking with him. But yeah, 0:13:35.960 --> 0:13:39.080 I mean, I think Trump wants to go and it's 0:13:39.160 --> 0:13:41.560 very important to him that business leaders like him. I 0:13:41.559 --> 0:13:43.920 mean that comes through in the interview, and so he's 0:13:43.960 --> 0:13:45.360 doing it, but to court them as well. 0:13:45.920 --> 0:13:48.480 Brad, thank you so much. Really, it was a great piece. 0:13:48.559 --> 0:13:51.160 It was so helpful and it helps to bring perspective 0:13:51.160 --> 0:13:53.880 then to market reactions as well. Bradstone, he is editor 0:13:54.120 --> 0:13:56.480 of Bloomberg Business Week. So usually I have a routine. 0:13:56.960 --> 0:13:58.480 I have a routine on the way in, I'm like 0:13:58.480 --> 0:14:00.280 when I'm reading and how fast I have to it 0:14:00.320 --> 0:14:00.840 to get rid in? 0:14:00.960 --> 0:14:03.880 And this article just messed up everything it does. 0:14:03.920 --> 0:14:06.800 And the New Business Week gets a monthly now keeping 0:14:06.800 --> 0:14:09.240 the Business Week name because it's got some brand value 0:14:09.240 --> 0:14:09.760 and it's cool. 0:14:11.080 --> 0:14:13.160 It is like thick, yeah yeah. 0:14:13.160 --> 0:14:16.320 Yeah, And The first cover was Arnault talking about luxury. 0:14:16.800 --> 0:14:19.560 The second issue Trump. So they're killing it here, so 0:14:19.960 --> 0:14:20.960 twelve times a year. 0:14:21.080 --> 0:14:23.080 Yeah, So definitely check it out. Guys, It's definitely worth it. 0:14:23.080 --> 0:14:24.880 If you're interested in anything Trump related. 0:14:26.240 --> 0:14:30.120 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:14:30.200 --> 0:14:33.000 weekdays at ten am Eastern on fo CarPlay and then 0:14:33.040 --> 0:14:35.960 Broid Auto with the Bloomberg Business App. Listen on demand 0:14:35.960 --> 0:14:40.320 wherever you get your podcasts, or watch us live on YouTube. 0:14:41.720 --> 0:14:43.800 Joining us now for the market take is Sarah Ponzik, 0:14:43.880 --> 0:14:47.200 a financial advisor at UBS Private Wealth Management, and she's 0:14:47.240 --> 0:14:50.240 joining us from Local Rich in Florida. Sarah, it's so 0:14:50.520 --> 0:14:53.280 fun to chat with you. So I understand we're seeing 0:14:53.280 --> 0:14:55.120 a decline the NASDAK. I understand the S and P 0:14:55.240 --> 0:14:57.120 is selling off. I also see that small caps are 0:14:57.160 --> 0:15:00.840 still holding their own here. Is this real about Trump? 0:15:00.920 --> 0:15:03.480 Is this really about trade restrictions? Or is this the 0:15:03.560 --> 0:15:04.640 continued rotation? 0:15:05.840 --> 0:15:08.040 Well, Alex, really quickly, I can tell you it's todder 0:15:08.280 --> 0:15:09.800 here than it is in New York right now, So 0:15:10.120 --> 0:15:14.840 whenever you sticking where you're at. But as for the rotation, look, yes, 0:15:14.960 --> 0:15:17.440 we've seen some political headlines come out. Yes, we are 0:15:17.480 --> 0:15:19.720 seeing semiconductors still off and we're seeing. 0:15:19.480 --> 0:15:20.520 Another tech fell off. 0:15:20.800 --> 0:15:24.080 But to your question, no, I don't think it's solely 0:15:24.640 --> 0:15:27.640 about headlines that you know, came out over the last 0:15:27.640 --> 0:15:28.720 twenty four hours. 0:15:28.800 --> 0:15:30.120 Rather, what we're seeing. 0:15:30.200 --> 0:15:34.560 Is a continuation of this rotation that really caught steam. 0:15:34.680 --> 0:15:37.960 And really we saw fuel added to the fire last 0:15:38.040 --> 0:15:41.480 week after CPI surprised to the downside for the third 0:15:41.520 --> 0:15:44.320 string month. So we're seeing, you know, this changing of 0:15:44.360 --> 0:15:46.600 the guards within the markets. 0:15:46.640 --> 0:15:47.960 There's been talk. 0:15:47.840 --> 0:15:50.440 For a while how long can the magnificent seven or 0:15:50.520 --> 0:15:54.400 large cap tech or semiconductors continue to fuel the way higher? 0:15:54.720 --> 0:15:57.560 And it seems like last week we did see not 0:15:57.680 --> 0:15:59.160 only a bend but a break with. 0:15:59.160 --> 0:16:00.800 A really swi lift rotation. 0:16:00.880 --> 0:16:02.320 I mean, you just look at small caps over the 0:16:02.400 --> 0:16:06.920 last five days of twelve percent. Meanwhile the Nazac's flack 0:16:07.120 --> 0:16:10.000 that just shows you the rotation, you know, right there 0:16:10.040 --> 0:16:12.600 and then so now the question becomes, all right, well 0:16:12.760 --> 0:16:13.960 is this going to continue? 0:16:14.480 --> 0:16:16.560 So what is the thought here, Shrek, because I think 0:16:16.600 --> 0:16:18.720 you know, one of the concerns I'm sure you hear 0:16:18.760 --> 0:16:21.920 from your clients is that how healthy can it be 0:16:21.960 --> 0:16:25.360 for this stock? Market to be anchored by six seven 0:16:25.520 --> 0:16:27.880 eight names in terms of the performance a year to date, 0:16:27.920 --> 0:16:30.440 that doesn't sound like a healthy market. 0:16:30.520 --> 0:16:31.800 How much of a risk is that for you? 0:16:33.000 --> 0:16:34.800 Right, We do hear that question all the time. 0:16:34.840 --> 0:16:37.640 And to give you an idea of just you know, 0:16:37.800 --> 0:16:41.000 how consolidated the rally has been. If you look at 0:16:41.000 --> 0:16:44.080 the amount of companies that have outperformed the S and 0:16:44.120 --> 0:16:46.680 P five hundred year to date on an individual basis, 0:16:46.920 --> 0:16:49.320 it's only twenty four percent, So not even a quarter 0:16:49.440 --> 0:16:52.920 of companies within the index are outperforming the index, which 0:16:53.120 --> 0:16:56.520 just shows you how important a few companies have been 0:16:57.000 --> 0:17:00.520 so really dragging the games higher. Now, is it a Yes, 0:17:00.560 --> 0:17:03.520 there's always concern over narrowness in the markets. 0:17:03.560 --> 0:17:05.600 But at the same time, when we think about why 0:17:05.640 --> 0:17:06.879 there has been this narrowness in. 0:17:06.880 --> 0:17:10.440 The markets, it's because these you know, large cap tech 0:17:10.480 --> 0:17:14.760 companies have been or become the epitome of quality. You know, 0:17:14.800 --> 0:17:19.040 investors have been flocking to quality names with high earnings 0:17:19.080 --> 0:17:22.080 growth over the past year and a half, let's say, 0:17:22.440 --> 0:17:24.640 and that's what's driven this. 0:17:24.760 --> 0:17:25.800 Narrowness in the market. 0:17:25.880 --> 0:17:28.200 So it hasn't been too large of a concern for 0:17:28.680 --> 0:17:32.040 us in particular, and we actually are still most preferred 0:17:32.040 --> 0:17:35.200 on technology, and we still think technology companies have a 0:17:35.320 --> 0:17:37.040 very important place in a portfolio. 0:17:37.240 --> 0:17:38.879 But yes, seeing a broadening. 0:17:38.560 --> 0:17:42.000 Out, seeing small taps perform, seeing some cypical areas of 0:17:42.040 --> 0:17:45.920 the market, like industrials start to catch up and perform 0:17:45.960 --> 0:17:49.440 better as well, that's definitely a well taken sign. 0:17:49.640 --> 0:17:51.800 We are glad to see the broadening. 0:17:51.480 --> 0:17:54.359 Of the markets, and it's very possible that what you 0:17:54.400 --> 0:17:57.480 could see then is this you know, internal rotation of 0:17:57.560 --> 0:17:58.080 the markets. 0:17:58.119 --> 0:18:00.199 We're sure we might see tech pull back of it. 0:18:00.280 --> 0:18:03.239 That's only natural and healthy given the fact that look 0:18:03.280 --> 0:18:06.359 look at semiconductors for example, this year, semi conductors are 0:18:06.440 --> 0:18:08.760 up about thirty and twenty twenty four alone and up 0:18:08.920 --> 0:18:11.000 for fifty percent over the last year. 0:18:11.520 --> 0:18:13.360 So it would be healthy for us to. 0:18:13.320 --> 0:18:16.600 See a rotation in the markets, see the old guards 0:18:16.600 --> 0:18:18.919 start to you know, hold back a little bit. But 0:18:19.000 --> 0:18:21.280 as possible, we could see the market continue, you know, 0:18:21.400 --> 0:18:21.960 if you look. 0:18:21.800 --> 0:18:24.560 At the index level, continue to at least move sideways 0:18:24.640 --> 0:18:25.679 or move higher from here. 0:18:25.880 --> 0:18:27.720 If we see other areas of the market that have 0:18:27.840 --> 0:18:30.119 underperformed start to outperform. 0:18:29.600 --> 0:18:31.879 Going forwards, Yeah, that was kind of my question. 0:18:31.960 --> 0:18:34.160 It's like is it a cell tech by small caps, 0:18:34.160 --> 0:18:35.639 which is sort of the narrative that we were starting 0:18:35.680 --> 0:18:39.400 to see yesterday. And if we get some impulse where 0:18:39.440 --> 0:18:42.359 small caps can't sustain this move that we've seen in 0:18:42.400 --> 0:18:45.560 the last five trading days, m tech still sells off, 0:18:45.640 --> 0:18:47.480 and it feels like we're in for a different, u 0:18:47.920 --> 0:18:50.800 different kind of sell off right right. 0:18:50.880 --> 0:18:52.960 And when we think about this rotation that we're seeing, 0:18:53.000 --> 0:18:56.600 there's really four factors that we feel as though need 0:18:56.800 --> 0:18:59.760 to happen in order for this rotation to continue in 0:18:59.800 --> 0:19:02.440 a healthy way for the market to continue to prove hire. 0:19:02.760 --> 0:19:05.160 And what those four factors are are, you know, One, 0:19:05.200 --> 0:19:09.400 inflation needs to be contained, which for the CPI data 0:19:09.440 --> 0:19:12.760 we got last week, looks like as possible to The 0:19:12.760 --> 0:19:15.840 Federal Reserve needs to start cutting rates. You know, we've 0:19:15.880 --> 0:19:17.880 been talking about it for a long time now, but 0:19:17.920 --> 0:19:19.720 we are as close as we have ever been, and 0:19:19.760 --> 0:19:22.600 we're finally seeing the whites of the eyes potentially of 0:19:22.720 --> 0:19:24.840 interest rate cuts and the market's fully pricing and a 0:19:24.880 --> 0:19:25.679 cut starting. 0:19:25.400 --> 0:19:28.600 In September and to this year and continuing into next year. 0:19:29.119 --> 0:19:32.840