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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: There will still be volatility.

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Speaker 3: We're in this deep fog, pull over the side of

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Speaker 3: the road and blinkers on kind of unservedia.

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Speaker 1: This is Bloomberg Surveillance with Jonathan Ferrell, Lisa Bromowitz, and

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Speaker 1: Anne Marie Hordern.

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Speaker 4: The second Dow of Bloomberg Surveilance starts right now, and

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Speaker 4: we start with some scores. Equity futures on the S

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Speaker 4: and P five hundred negative by nine tenths of one

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Speaker 4: percent on the Nasdaq. The NASDAK looks like this, the

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Speaker 4: NASTAG one hundred down by one point two five, the

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Speaker 4: Russell down by one point two. In the bond market

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Speaker 4: two year, ten year, thirty year, we receive a bid

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Speaker 4: yields down by six basis points at the front end,

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Speaker 4: down by five on tens, down by five on thirty.

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Speaker 4: So your week ahead is absolutely stacked full of economic data,

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Speaker 4: including payrolls on Friday and an address from fetchad Jpowell

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Speaker 4: going into the weekend. But before we get there, it's

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Speaker 4: all about Wednesday, Liberation Day. It's April second.

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Speaker 5: It's April second, and it feels like the has shifted.

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Speaker 5: What we've heard from the President last week was that

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Speaker 5: he's willing to be lenient, He's willing to be flexible.

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Speaker 5: The reporting now seems they're going back to what he's

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Speaker 5: been speaking about for months on the campaign trail, honestly

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Speaker 5: for decades when it comes to tariffs, a universal tariff.

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Speaker 5: Now the big question is is Wednesday the start of

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Speaker 5: a negotiation when it comes to US and they're trading partners.

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Speaker 4: Does Trump come.

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Speaker 5: In with a very maximalist approach or is this going

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Speaker 5: to be the new trader rules of the road for

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Speaker 5: this administration going forward.

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Speaker 4: We've all got a wake up to what's actually happening,

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Speaker 4: and what's happening as more tariffs repeatedly over the last

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Speaker 4: few months. So what's happening on Wall Street? More revisions?

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Speaker 4: This from Goldman Sachs. So David Couston is now at

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Speaker 4: fifty seven hundred year end, started the year at sixty five,

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Speaker 4: dropped that to sixty two on a month ago. Fifty

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Speaker 4: seven hundred is the year end Downlook. Then you've got

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Speaker 4: Jan Hansis and the team at Goldman Sachs looking for

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Speaker 4: the stagflation remix that's getting everyone's attention. Three point five

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Speaker 4: percent on psee just one percent on GDP.

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Speaker 5: And what's driving a lot of that is the fact

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Speaker 5: that for the second time this month, Goldman Saxe raised

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Speaker 5: where they expect the tariff barriers to go, So they

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Speaker 5: are expecting higher walls to go up when it comes

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Speaker 5: to this administration. It's not just Also on Wall Street,

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Speaker 5: Jonathan over the weekend, CBS polling a majority of Americans

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Speaker 5: are saying they want this president to bring inflation down,

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Speaker 5: costs down of goods and services, and focus less on teriffs.

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Speaker 4: A few reports over the weekend, the Washington Post saying

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Speaker 4: that the president wants to go big. It's pushing the

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Speaker 4: team to go large. Politico reporting that no one in

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Speaker 4: the administration knows what the president is going to do

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Speaker 4: in two days time.

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Speaker 5: Well, Kevin Hasset, his NEC director, had this to say,

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Speaker 5: I'm Fox News. I can't give you any forward guidance

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Speaker 5: on what's going to happen this week. The President has

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Speaker 5: got a heck of a lot of analysis before him,

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Speaker 5: and he's going to make the right choice. I'm sure

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Speaker 5: now is that the President has made a decision that

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Speaker 5: I'm not fully on board with, or is that we

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Speaker 5: actually don't know what the president is going to decide.

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Speaker 5: There is a key report coming out tomorrow. A question

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Speaker 5: that I'm talking to a lot of folks about Washington

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Speaker 5: is whether or not the report is going to mad public.

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Speaker 5: When Trump came into office, he told his trade representative

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Speaker 5: he wants a full announce on well, how the US

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Speaker 5: is dealing with other trade partners when it comes to trade,

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Speaker 5: devisits reciprocity, everything under the sun. That report goes in

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Speaker 5: front of the President tomorrow, and then I think he'll

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Speaker 5: make his final decision.

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Speaker 4: Not many people want to be long going into that event.

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Speaker 4: Space to the move we're seeing this morning, We're down

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Speaker 4: by nine tenths of one percent on the S and

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Speaker 4: P coming up this soum. Mike Wilson of Morgan Stanley

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Speaker 4: with stocks on a three day slide, Hendrod of Trays

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Speaker 4: of Vada Partners as the world prepares for Liberation Day,

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Speaker 4: and vic Ram Malholter of Mazoo and why AI data

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Speaker 4: center concerns may be overblown. We begin this sound with

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Speaker 4: stock softer as trade uncertainty hangs over markets. Mike Wilson

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Speaker 4: of Morgan Stanley, writing this week's reciprocal tariff announcement, it's

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Speaker 4: likely a stepping stone for further negotiations as opposed to

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Speaker 4: a clearing event. Mike joins us now for more. Mike,

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Speaker 4: good morning, Good morning, Joane. Why is that distinction important?

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Speaker 3: Well, I think that you know, everybody's looking for like

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Speaker 3: a final piece here. This is gonna this is going

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Speaker 3: to take time, you know, and not unlike a lot

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Speaker 3: of the other policies that have come out this year,

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Speaker 3: like this is this is what we kind of signed

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Speaker 3: up for, right think to what so far what the

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Speaker 3: President has done has really been surprising. All of the

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Speaker 3: policy changes so far have been growth negative, and that

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Speaker 3: you know, we've ad likened this to a new CEO

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Speaker 3: coming in, right they have.

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Speaker 2: They're one a restructure to company.

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Speaker 3: They're restructuring the company, they're going to kitchen sink it,

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Speaker 3: and then they're going to try to make you know,

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Speaker 3: their plan work for next year. So this is a

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Speaker 3: this is going to take some time, and you know,

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Speaker 3: this level that we're at now is critical from a

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Speaker 3: market standpoint, not so much from the administration standpoint.

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Speaker 2: I think that's also something of knowledge.

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Speaker 5: It's also very on brand for Trump to take a

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Speaker 5: maximalist approach in the very beginning. But how messy. Could

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Speaker 5: it be if he comes in with this maximalist, aggressive

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Speaker 5: approach and then we have retaliation from trading partners.

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Speaker 3: Well, like, it's the NAFTA and so like you know,

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Speaker 3: it's the best alternative to a negotiating agreement and the

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Speaker 3: batna and that is that is classic negotiating tactic. You

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Speaker 3: you come in way over here to the right with

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Speaker 3: the hope of kind of settling in the middle.

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Speaker 2: So I don't think that's unusual either.

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Speaker 3: The response from trade partners is that means engaging, okay.

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Speaker 3: So that's that's how you get people to engage in

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Speaker 3: your discussion. You come out with a big splash. They

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Speaker 3: have to come to the table and negotiations begin. We're

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Speaker 3: not even at the table yet, okay. So that's why

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Speaker 3: this is going to be very uncertain for a period

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Speaker 3: of time.

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Speaker 5: I think some countries think that they are at the

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Speaker 5: table because they sent a few representatives here in the

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Speaker 5: past few weeks. But I agree with you, it really

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Speaker 5: hasn't started. So what do you do if you're an investor, Well.

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Speaker 3: You've done what we've sort of done, is you avoid

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Speaker 3: areas that are going to be most effective consumer discretionary

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Speaker 3: goods and that area has been hit the hardest. So

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Speaker 3: maybe that's getting a little bit extreme. I would say,

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Speaker 3: you know, defensively position high quality.

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Speaker 2: That's been our core portfolio.

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Speaker 3: Now we've made some trading calls lately that would have

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Speaker 3: gone against that. Some of those works, some of those

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Speaker 3: didn't work. But I think at this point you want

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Speaker 3: to be up the quality courage, want to be in

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Speaker 3: businesses that can kind of mitigate some of these concerns.

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Speaker 3: You have pricing power, you have the ability to kind

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Speaker 3: of move production around, you can take inventory on to

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Speaker 3: kind of buffer this for sixty or ninety days, which

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Speaker 3: you've seen all those mitigation strategies, something we work wrote

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Speaker 3: about in our note today. So those are the kind

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Speaker 3: of companies we want to own in this period of time.

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Speaker 3: I do believe there will be a clearing event at

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Speaker 3: some point this year, but we're not there yet.

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Speaker 4: Some of the changes you have made the art work,

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Speaker 4: and let's talk about them. International NEX this morning down

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Speaker 4: two percent, nie K overnight down four percent. International starting

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Speaker 4: to turn subtle change from where we were over the

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Speaker 4: last month or so. What's changing?

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Speaker 3: Well, that's right, and so last week's note we kind

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Speaker 3: of made the call that US probably does better than

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Speaker 3: these other regions because at the end of the day,

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Speaker 3: those reasons you mentioned are most sensitive to global trade,

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Speaker 3: particularly Japan. So the fact that was down four percent,

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Speaker 3: I think is another sign that hey, actually in the

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Speaker 3: market now is laser focused on this terror for trade

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Speaker 3: issue as opposed to some of the other issues that

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Speaker 3: it's been kind of worrying about here. So that relative value,

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Speaker 3: if you will, looks still looks good to us. It

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Speaker 3: may happen in a downtape, okay, which is also somebody

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Speaker 3: to consider, because the US is still the highest quality

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Speaker 3: market in the world, and a uncertain world, high quality

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Speaker 3: will outperform.

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Speaker 4: But you think that's European long sort of built up

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Speaker 4: over the past few months, there might be in trouble here.

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Speaker 2: I think that's right.

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Speaker 3: I think there's a little extension in our European strategy

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Speaker 3: team is in the same page. I mean, there are

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Speaker 3: some good things going on in Europe that haven't been

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Speaker 3: happening for decades potentially, But boy, that's gonna take that's

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Speaker 3: gonna take even longer than this, you know, sort of

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Speaker 3: tariff negotiation you're talking about, you know, country spending more

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Speaker 3: money on fiscal deregulation. I mean, this is a multi

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Speaker 3: year transition in the stock market. You know, some cases

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Speaker 3: are fifteen to twenty percent.

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Speaker 5: So besides Ryan Mattel or any other industrial military company

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Speaker 5: in Europe, do you like anything there?

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Speaker 3: Well, I mean, I think the financials have been still

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Speaker 3: a place to think about that have a potential structural

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Speaker 3: change or benefit in that regard, I think things that

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Speaker 3: have levered to the consumer. But once again, these are

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Speaker 3: these kind of got extended, you know, and from my standpoint,

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Speaker 3: I think there's better value now in the US and

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Speaker 3: some of these areas.

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Speaker 4: I'm sure you saw the new numbers coming out at

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Speaker 4: Goldman Saxon, the same new full costs from Yon Hatsias.

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Speaker 4: If we can just throw them up on the screen.

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Speaker 4: One percent on GDP, three point five percent on PCEA,

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Speaker 4: that's a stackflation remix. What are your time in clients

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Speaker 4: that we're asking you about how we would tried stackflation

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Speaker 4: in America?

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Speaker 3: We're not quite in the stagflation camp. We're more in

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Speaker 3: the camp that you know, expectations are probably not where

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Speaker 3: reality is, which is that growth is worse than people

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Speaker 3: thought and inflation is a bit stickier. And that's how

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Speaker 3: we came into this year, so we don't we don't

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Speaker 3: mess around with our year end targets, but we have

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Speaker 3: been messing around with our short term targets. So we're

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Speaker 3: in that fifty five hundred to I would say, fifty

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Speaker 3: eight to fifty nine. Now we've kind of chopped off

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Speaker 3: the upper end of that for the first half.

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Speaker 2: Of this year.

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Speaker 3: I'm not willing to throw in the towel yet completely

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Speaker 3: on the full year because, as we've been saying, the

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Speaker 3: good stuff of you know, the policy changes that we

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Speaker 3: expect could start to feed into the equity markets by

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Speaker 3: year end. Could we pushed that timing out, you know,

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Speaker 3: three six months?

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Speaker 2: Sure?

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Speaker 3: But you know, right now we're still in that fifty

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Speaker 3: five hundred to sixty one hundred range with the probably

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Speaker 3: a truncated upper band. And now if you get universal terrafs,

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Speaker 3: which is something that we talked about in this morning's note,

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Speaker 3: then that lower half, that lower end of the band

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Speaker 3: maybe comes down.

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Speaker 2: So we're you know, we if we.

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Speaker 3: Break down this week and universal terrrifs for the reason,

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Speaker 3: we could see something even lower than fifty five hundred

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Speaker 3: in the short term.

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Speaker 4: Can we talk about the rebalancing you're expecting though, the

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Speaker 4: ultimate vision of this administration and why you still believe

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Speaker 4: the more complete policy mix is still bullish.

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Speaker 2: Yeah, I think, well, I think it's constructive.

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Speaker 3: I'm not sure it's wildly bullish, because you know, valuations

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Speaker 3: were probably the biggest constraint coming in. I think it's

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Speaker 3: bullish for a lot of parts of the market that

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Speaker 3: have underperformed for the last three or four years. I mean,

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Speaker 3: you know, our vision, or I think the administration's vision

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Speaker 3: quite frankly, it's very simple. They want to affect a

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Speaker 3: slowdown in government. They want to kind of liberate the

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Speaker 3: private economy through things like deregulation, keeping tax rates lower.

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Speaker 3: Maybe tariffs are part of that storyline. Fine, and that

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Speaker 3: transition from kind of public government allocation of resources to

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Speaker 3: private enterprise allocation of resources actually at least start broadening

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Speaker 3: out something that's been absent really for the last two

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Speaker 3: or three or something. You know, we've talked about here

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Speaker 3: many times, this crowding out feature of the government crowding

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Speaker 3: out small businesses, crowding out the average consumer. And look,

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Speaker 3: I think they've been crystal clear in their in their

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Speaker 3: and sort of their messaging. It's not going to be

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Speaker 3: fun for a period of time. Okay, it's we have

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Speaker 3: to sort of detox. As the Secretary Treasury mentioned, you

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Speaker 3: know that there's going to be an adjustment period, as

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Speaker 3: a president has said.

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Speaker 2: So it's been crystal clear what they've been.

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Speaker 5: Doing the whole Eat your vegetables, then get a dessert.

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Speaker 5: When it comes to dessert, we're only talking about current

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Speaker 5: policy extension. How exciting is that for the market if

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Speaker 5: you're just talking about extension of TCJA. When it comes

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Speaker 5: to tax cuts and not actual additional tax cuts.

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Speaker 2: Well, that's okay.

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Speaker 3: So what you're talking about is fiscal stimulus, and that's

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Speaker 3: what we have to detox from. So we don't need

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Speaker 3: more fiscal stimulus. We need less fiscal stimulus. We need

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Speaker 3: the private enterprise of America doing organic growth.

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Speaker 5: If taxes are going up on sales goods, don't need

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Speaker 5: more tax cuts for individual Well.

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Speaker 3: That's the idea, is that we're going to keep taxes lower,

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Speaker 3: maybe lower than further if tariff's a bring in revenue,

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Speaker 3: and b there's a negotiating.

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Speaker 2: Ploy so we'll see.

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Speaker 3: I mean, this is going to be very messy, and

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Speaker 3: this is not going to be easy transition.

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Speaker 2: But John asks, what is.

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Speaker 3: The bullet story, you know, over the next twelve months,

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Speaker 3: I think it's that, and it's going to be a

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Speaker 3: lot of uncertainty, but I still think that is the plan.

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Speaker 2: I still think what I so far is a is a.

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Speaker 3: Direction in that in that manner, and and looks stock

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Speaker 3: operators and financial market operators just gonna have to deal

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Speaker 3: with this adjustment. And that's that's what's the that's the

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Speaker 3: consternation right now.

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Speaker 4: My Trump put versus FED put, who blinks first? And why?

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Speaker 3: Well, I mean I've taken the view that's probably the

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Speaker 3: FED because growth is deteriorating further here now. In other words,

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Speaker 3: I think that the concern around terrors on what that's

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Speaker 3: doing to inflation is it kind of gave the FED

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Speaker 3: excuse to take a break. Let's not let's not forget

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Speaker 3: the FED kind of hundred basis points last fall really

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Speaker 3: in the absence of any you know, labor issues. So

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Speaker 3: the question is, you know, we're digesting that. Also, the

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Speaker 3: back end of the bomb market rates went up during

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Speaker 3: that period, So I think the terrorfs provide a nice

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Speaker 3: excuse for the FED to take a pause here. But

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Speaker 3: I have no doubt that if we saw a major

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Speaker 3: deterioration in the labor market, the Fed would act. And

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Speaker 3: I don't think the President is in a hurry to

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Speaker 3: blink because as we were discussing kind of off camera,

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Speaker 3: I mean, they have to do things quickly here, and

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Speaker 3: they've said that, like we got to We've got to

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Speaker 3: do as much as we can the first six months

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Speaker 3: for a couple of reasons. A we don't want to

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Speaker 3: get dragged back into the quicksand okay of you know,

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Speaker 3: the policy making. And secondarily, you know, the midterms come

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Speaker 3: up in two years. You know, your last guest was

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Speaker 3: just talking about some of the political ramifications. I think

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Speaker 3: that's not a concern now, but it probably becomes more

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Speaker 3: of a concern later this year.

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Speaker 5: But when it looks at the political ramifications, you are

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Speaker 5: seeing it come up not just consumer sentiment, but also polls.

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Speaker 5: People are still concerned about the cost of goods now,

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Speaker 5: and they're concerned about tariffs. Adding to that, what is

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Speaker 5: going to regulate Trump If it's not the politics.

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Speaker 3: I think, look, he's he's really trying to follow his agenda.

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Speaker 3: He's trying to check the boxes on the things that

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Speaker 3: he promised he would do for the American people. And

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Speaker 3: a lot of those things are market unfriendly. I mean,

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Speaker 3: that's what we're really discussing here. Is he market Is

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Speaker 3: he worried about the market? Is he worried about his

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Speaker 3: agenda and doing those things. I think he's more worried

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Speaker 3: about his agenda. And that was a big adjustment period.

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Speaker 3: I think in January February were talking about this, and

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Speaker 3: I think people were a little complacent in this idea

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Speaker 3: that he was going to be so market's focused, and

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Speaker 3: to me, that was that's really when the stock market

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Speaker 3: in the US started to have problems, is when first

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Speaker 3: the Treasury Secretary said it and then the President basically

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Speaker 3: supported that view. And that's the big adjustment thing for

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Speaker 3: the markets. Okay, not not the economy, not jobs, not confidence,

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Speaker 3: but the markets. And the problem is we're such a

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Speaker 3: financialized economy now that the market's hard to the economy, and

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Speaker 3: that's really weighing on consumer sentiment.

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Speaker 4: My credit. See you, I remember that morning very early

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Speaker 4: on this year and you came in and you said,

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Speaker 4: he's not talking about the market. He's not talking about

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Speaker 4: the market, and he's continued to ignore the stump market.

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Speaker 4: The focus that we've had is main Street of a

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Speaker 4: wolf Street, and that has a shift and a second

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Speaker 4: term right ative to the first time.

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Speaker 5: That's the term I was going to use Main Street

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Speaker 5: of a Wall Street, because it's the term the Treasury

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Speaker 5: secretary he has used time and time again. He sat

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Speaker 5: in a room at the Economic Club of New York

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Speaker 5: just a few weeks ago and said, Wall Street has

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Speaker 5: done very well.

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Speaker 4: I was one of you.

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Speaker 5: Our focus is squarely on mainstream and making sure everyday

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Speaker 5: Americans are doing better, which means bringing jobs back to

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Speaker 5: the US heartland.

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Speaker 2: Yeah. I want to add something here.

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Speaker 3: I think that I think people weren't aware of Trump's

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Speaker 3: first term. We had a massive slack in the economy.

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Speaker 3: We were coming off a period of secular stagnation. So

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Speaker 3: you know, reflationary policy, right, which is what Trump came

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Speaker 3: in with the first time, made a lot of sense

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Speaker 3: and we were very bullish on that at the time.

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Speaker 3: This time around, we came in with no slack. We

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Speaker 3: have a negative output gap. Okay, So it's just a

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Speaker 3: very different setup. Even if they wanted to be pro growth,

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Speaker 3: they really can't, which is why I think they're focused

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Speaker 3: on the bond market back in Yells as opposed to

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Speaker 3: the stock market and to me. That fits neatly with

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Speaker 3: the setup that we had, had nothing to do with

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Speaker 3: the election.

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Speaker 2: That's just a setup that we're in.

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Speaker 4: Mike Clinic has always got to catch up. Appreciate it.

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Speaker 4: Mike Wilson, that of Mark and Stanley