Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: There will still be volatility.
Speaker 3: We're in this deep fog, pull over the side of
Speaker 3: the road and blinkers on kind of unservedia.
Speaker 1: This is Bloomberg Surveillance with Jonathan Ferrell, Lisa Bromowitz, and
Speaker 1: Anne Marie Hordern.
Speaker 4: The second Dow of Bloomberg Surveilance starts right now, and
Speaker 4: we start with some scores. Equity futures on the S
Speaker 4: and P five hundred negative by nine tenths of one
Speaker 4: percent on the Nasdaq. The NASDAK looks like this, the
Speaker 4: NASTAG one hundred down by one point two five, the
Speaker 4: Russell down by one point two. In the bond market
Speaker 4: two year, ten year, thirty year, we receive a bid
Speaker 4: yields down by six basis points at the front end,
Speaker 4: down by five on tens, down by five on thirty.
Speaker 4: So your week ahead is absolutely stacked full of economic data,
Speaker 4: including payrolls on Friday and an address from fetchad Jpowell
Speaker 4: going into the weekend. But before we get there, it's
Speaker 4: all about Wednesday, Liberation Day. It's April second.
Speaker 5: It's April second, and it feels like the has shifted.
Speaker 5: What we've heard from the President last week was that
Speaker 5: he's willing to be lenient, He's willing to be flexible.
Speaker 5: The reporting now seems they're going back to what he's
Speaker 5: been speaking about for months on the campaign trail, honestly
Speaker 5: for decades when it comes to tariffs, a universal tariff.
Speaker 5: Now the big question is is Wednesday the start of
Speaker 5: a negotiation when it comes to US and they're trading partners.
Speaker 4: Does Trump come.
Speaker 5: In with a very maximalist approach or is this going
Speaker 5: to be the new trader rules of the road for
Speaker 5: this administration going forward.
Speaker 4: We've all got a wake up to what's actually happening,
Speaker 4: and what's happening as more tariffs repeatedly over the last
Speaker 4: few months. So what's happening on Wall Street? More revisions?
Speaker 4: This from Goldman Sachs. So David Couston is now at
Speaker 4: fifty seven hundred year end, started the year at sixty five,
Speaker 4: dropped that to sixty two on a month ago. Fifty
Speaker 4: seven hundred is the year end Downlook. Then you've got
Speaker 4: Jan Hansis and the team at Goldman Sachs looking for
Speaker 4: the stagflation remix that's getting everyone's attention. Three point five
Speaker 4: percent on psee just one percent on GDP.
Speaker 5: And what's driving a lot of that is the fact
Speaker 5: that for the second time this month, Goldman Saxe raised
Speaker 5: where they expect the tariff barriers to go, So they
Speaker 5: are expecting higher walls to go up when it comes
Speaker 5: to this administration. It's not just Also on Wall Street,
Speaker 5: Jonathan over the weekend, CBS polling a majority of Americans
Speaker 5: are saying they want this president to bring inflation down,
Speaker 5: costs down of goods and services, and focus less on teriffs.
Speaker 4: A few reports over the weekend, the Washington Post saying
Speaker 4: that the president wants to go big. It's pushing the
Speaker 4: team to go large. Politico reporting that no one in
Speaker 4: the administration knows what the president is going to do
Speaker 4: in two days time.
Speaker 5: Well, Kevin Hasset, his NEC director, had this to say,
Speaker 5: I'm Fox News. I can't give you any forward guidance
Speaker 5: on what's going to happen this week. The President has
Speaker 5: got a heck of a lot of analysis before him,
Speaker 5: and he's going to make the right choice. I'm sure
Speaker 5: now is that the President has made a decision that
Speaker 5: I'm not fully on board with, or is that we
Speaker 5: actually don't know what the president is going to decide.
Speaker 5: There is a key report coming out tomorrow. A question
Speaker 5: that I'm talking to a lot of folks about Washington
Speaker 5: is whether or not the report is going to mad public.
Speaker 5: When Trump came into office, he told his trade representative
Speaker 5: he wants a full announce on well, how the US
Speaker 5: is dealing with other trade partners when it comes to trade,
Speaker 5: devisits reciprocity, everything under the sun. That report goes in
Speaker 5: front of the President tomorrow, and then I think he'll
Speaker 5: make his final decision.
Speaker 4: Not many people want to be long going into that event.
Speaker 4: Space to the move we're seeing this morning, We're down
Speaker 4: by nine tenths of one percent on the S and
Speaker 4: P coming up this soum. Mike Wilson of Morgan Stanley
Speaker 4: with stocks on a three day slide, Hendrod of Trays
Speaker 4: of Vada Partners as the world prepares for Liberation Day,
Speaker 4: and vic Ram Malholter of Mazoo and why AI data
Speaker 4: center concerns may be overblown. We begin this sound with
Speaker 4: stock softer as trade uncertainty hangs over markets. Mike Wilson
Speaker 4: of Morgan Stanley, writing this week's reciprocal tariff announcement, it's
Speaker 4: likely a stepping stone for further negotiations as opposed to
Speaker 4: a clearing event. Mike joins us now for more. Mike,
Speaker 4: good morning, Good morning, Joane. Why is that distinction important?
Speaker 3: Well, I think that you know, everybody's looking for like
Speaker 3: a final piece here. This is gonna this is going
Speaker 3: to take time, you know, and not unlike a lot
Speaker 3: of the other policies that have come out this year,
Speaker 3: like this is this is what we kind of signed
Speaker 3: up for, right think to what so far what the
Speaker 3: President has done has really been surprising. All of the
Speaker 3: policy changes so far have been growth negative, and that
Speaker 3: you know, we've ad likened this to a new CEO
Speaker 3: coming in, right they have.
Speaker 2: They're one a restructure to company.
Speaker 3: They're restructuring the company, they're going to kitchen sink it,
Speaker 3: and then they're going to try to make you know,
Speaker 3: their plan work for next year. So this is a
Speaker 3: this is going to take some time, and you know,
Speaker 3: this level that we're at now is critical from a
Speaker 3: market standpoint, not so much from the administration standpoint.
Speaker 2: I think that's also something of knowledge.
Speaker 5: It's also very on brand for Trump to take a
Speaker 5: maximalist approach in the very beginning. But how messy. Could
Speaker 5: it be if he comes in with this maximalist, aggressive
Speaker 5: approach and then we have retaliation from trading partners.
Speaker 3: Well, like, it's the NAFTA and so like you know,
Speaker 3: it's the best alternative to a negotiating agreement and the
Speaker 3: batna and that is that is classic negotiating tactic. You
Speaker 3: you come in way over here to the right with
Speaker 3: the hope of kind of settling in the middle.
Speaker 2: So I don't think that's unusual either.
Speaker 3: The response from trade partners is that means engaging, okay.
Speaker 3: So that's that's how you get people to engage in
Speaker 3: your discussion. You come out with a big splash. They
Speaker 3: have to come to the table and negotiations begin. We're
Speaker 3: not even at the table yet, okay. So that's why
Speaker 3: this is going to be very uncertain for a period
Speaker 3: of time.
Speaker 5: I think some countries think that they are at the
Speaker 5: table because they sent a few representatives here in the
Speaker 5: past few weeks. But I agree with you, it really
Speaker 5: hasn't started. So what do you do if you're an investor, Well.
Speaker 3: You've done what we've sort of done, is you avoid
Speaker 3: areas that are going to be most effective consumer discretionary
Speaker 3: goods and that area has been hit the hardest. So
Speaker 3: maybe that's getting a little bit extreme. I would say,
Speaker 3: you know, defensively position high quality.
Speaker 2: That's been our core portfolio.
Speaker 3: Now we've made some trading calls lately that would have
Speaker 3: gone against that. Some of those works, some of those
Speaker 3: didn't work. But I think at this point you want
Speaker 3: to be up the quality courage, want to be in
Speaker 3: businesses that can kind of mitigate some of these concerns.
Speaker 3: You have pricing power, you have the ability to kind
Speaker 3: of move production around, you can take inventory on to
Speaker 3: kind of buffer this for sixty or ninety days, which
Speaker 3: you've seen all those mitigation strategies, something we work wrote
Speaker 3: about in our note today. So those are the kind
Speaker 3: of companies we want to own in this period of time.
Speaker 3: I do believe there will be a clearing event at
Speaker 3: some point this year, but we're not there yet.
Speaker 4: Some of the changes you have made the art work,
Speaker 4: and let's talk about them. International NEX this morning down
Speaker 4: two percent, nie K overnight down four percent. International starting
Speaker 4: to turn subtle change from where we were over the
Speaker 4: last month or so. What's changing?
Speaker 3: Well, that's right, and so last week's note we kind
Speaker 3: of made the call that US probably does better than
Speaker 3: these other regions because at the end of the day,
Speaker 3: those reasons you mentioned are most sensitive to global trade,
Speaker 3: particularly Japan. So the fact that was down four percent,
Speaker 3: I think is another sign that hey, actually in the
Speaker 3: market now is laser focused on this terror for trade
Speaker 3: issue as opposed to some of the other issues that
Speaker 3: it's been kind of worrying about here. So that relative value,
Speaker 3: if you will, looks still looks good to us. It
Speaker 3: may happen in a downtape, okay, which is also somebody
Speaker 3: to consider, because the US is still the highest quality
Speaker 3: market in the world, and a uncertain world, high quality
Speaker 3: will outperform.
Speaker 4: But you think that's European long sort of built up
Speaker 4: over the past few months, there might be in trouble here.
Speaker 2: I think that's right.
Speaker 3: I think there's a little extension in our European strategy
Speaker 3: team is in the same page. I mean, there are
Speaker 3: some good things going on in Europe that haven't been
Speaker 3: happening for decades potentially, But boy, that's gonna take that's
Speaker 3: gonna take even longer than this, you know, sort of
Speaker 3: tariff negotiation you're talking about, you know, country spending more
Speaker 3: money on fiscal deregulation. I mean, this is a multi
Speaker 3: year transition in the stock market. You know, some cases
Speaker 3: are fifteen to twenty percent.
Speaker 5: So besides Ryan Mattel or any other industrial military company
Speaker 5: in Europe, do you like anything there?
Speaker 3: Well, I mean, I think the financials have been still
Speaker 3: a place to think about that have a potential structural
Speaker 3: change or benefit in that regard, I think things that
Speaker 3: have levered to the consumer. But once again, these are
Speaker 3: these kind of got extended, you know, and from my standpoint,
Speaker 3: I think there's better value now in the US and
Speaker 3: some of these areas.
Speaker 4: I'm sure you saw the new numbers coming out at
Speaker 4: Goldman Saxon, the same new full costs from Yon Hatsias.
Speaker 4: If we can just throw them up on the screen.
Speaker 4: One percent on GDP, three point five percent on PCEA,
Speaker 4: that's a stackflation remix. What are your time in clients
Speaker 4: that we're asking you about how we would tried stackflation
Speaker 4: in America?
Speaker 3: We're not quite in the stagflation camp. We're more in
Speaker 3: the camp that you know, expectations are probably not where
Speaker 3: reality is, which is that growth is worse than people
Speaker 3: thought and inflation is a bit stickier. And that's how
Speaker 3: we came into this year, so we don't we don't
Speaker 3: mess around with our year end targets, but we have
Speaker 3: been messing around with our short term targets. So we're
Speaker 3: in that fifty five hundred to I would say, fifty
Speaker 3: eight to fifty nine. Now we've kind of chopped off
Speaker 3: the upper end of that for the first half.
Speaker 2: Of this year.
Speaker 3: I'm not willing to throw in the towel yet completely
Speaker 3: on the full year because, as we've been saying, the
Speaker 3: good stuff of you know, the policy changes that we
Speaker 3: expect could start to feed into the equity markets by
Speaker 3: year end. Could we pushed that timing out, you know,
Speaker 3: three six months?
Speaker 2: Sure?
Speaker 3: But you know, right now we're still in that fifty
Speaker 3: five hundred to sixty one hundred range with the probably
Speaker 3: a truncated upper band. And now if you get universal terrafs,
Speaker 3: which is something that we talked about in this morning's note,
Speaker 3: then that lower half, that lower end of the band
Speaker 3: maybe comes down.
Speaker 2: So we're you know, we if we.
Speaker 3: Break down this week and universal terrrifs for the reason,
Speaker 3: we could see something even lower than fifty five hundred
Speaker 3: in the short term.
Speaker 4: Can we talk about the rebalancing you're expecting though, the
Speaker 4: ultimate vision of this administration and why you still believe
Speaker 4: the more complete policy mix is still bullish.
Speaker 2: Yeah, I think, well, I think it's constructive.
Speaker 3: I'm not sure it's wildly bullish, because you know, valuations
Speaker 3: were probably the biggest constraint coming in. I think it's
Speaker 3: bullish for a lot of parts of the market that
Speaker 3: have underperformed for the last three or four years. I mean,
Speaker 3: you know, our vision, or I think the administration's vision
Speaker 3: quite frankly, it's very simple. They want to affect a
Speaker 3: slowdown in government. They want to kind of liberate the
Speaker 3: private economy through things like deregulation, keeping tax rates lower.
Speaker 3: Maybe tariffs are part of that storyline. Fine, and that
Speaker 3: transition from kind of public government allocation of resources to
Speaker 3: private enterprise allocation of resources actually at least start broadening
Speaker 3: out something that's been absent really for the last two
Speaker 3: or three or something. You know, we've talked about here
Speaker 3: many times, this crowding out feature of the government crowding
Speaker 3: out small businesses, crowding out the average consumer. And look,
Speaker 3: I think they've been crystal clear in their in their
Speaker 3: and sort of their messaging. It's not going to be
Speaker 3: fun for a period of time. Okay, it's we have
Speaker 3: to sort of detox. As the Secretary Treasury mentioned, you
Speaker 3: know that there's going to be an adjustment period, as
Speaker 3: a president has said.
Speaker 2: So it's been crystal clear what they've been.
Speaker 5: Doing the whole Eat your vegetables, then get a dessert.
Speaker 5: When it comes to dessert, we're only talking about current
Speaker 5: policy extension. How exciting is that for the market if
Speaker 5: you're just talking about extension of TCJA. When it comes
Speaker 5: to tax cuts and not actual additional tax cuts.
Speaker 2: Well, that's okay.
Speaker 3: So what you're talking about is fiscal stimulus, and that's
Speaker 3: what we have to detox from. So we don't need
Speaker 3: more fiscal stimulus. We need less fiscal stimulus. We need
Speaker 3: the private enterprise of America doing organic growth.
Speaker 5: If taxes are going up on sales goods, don't need
Speaker 5: more tax cuts for individual Well.
Speaker 3: That's the idea, is that we're going to keep taxes lower,
Speaker 3: maybe lower than further if tariff's a bring in revenue,
Speaker 3: and b there's a negotiating.
Speaker 2: Ploy so we'll see.
Speaker 3: I mean, this is going to be very messy, and
Speaker 3: this is not going to be easy transition.
Speaker 2: But John asks, what is.
Speaker 3: The bullet story, you know, over the next twelve months,
Speaker 3: I think it's that, and it's going to be a
Speaker 3: lot of uncertainty, but I still think that is the plan.
Speaker 2: I still think what I so far is a is a.
Speaker 3: Direction in that in that manner, and and looks stock
Speaker 3: operators and financial market operators just gonna have to deal
Speaker 3: with this adjustment. And that's that's what's the that's the
Speaker 3: consternation right now.
Speaker 4: My Trump put versus FED put, who blinks first? And why?
Speaker 3: Well, I mean I've taken the view that's probably the
Speaker 3: FED because growth is deteriorating further here now. In other words,
Speaker 3: I think that the concern around terrors on what that's
Speaker 3: doing to inflation is it kind of gave the FED
Speaker 3: excuse to take a break. Let's not let's not forget
Speaker 3: the FED kind of hundred basis points last fall really
Speaker 3: in the absence of any you know, labor issues. So
Speaker 3: the question is, you know, we're digesting that. Also, the
Speaker 3: back end of the bomb market rates went up during
Speaker 3: that period, So I think the terrorfs provide a nice
Speaker 3: excuse for the FED to take a pause here. But
Speaker 3: I have no doubt that if we saw a major
Speaker 3: deterioration in the labor market, the Fed would act. And
Speaker 3: I don't think the President is in a hurry to
Speaker 3: blink because as we were discussing kind of off camera,
Speaker 3: I mean, they have to do things quickly here, and
Speaker 3: they've said that, like we got to We've got to
Speaker 3: do as much as we can the first six months
Speaker 3: for a couple of reasons. A we don't want to
Speaker 3: get dragged back into the quicksand okay of you know,
Speaker 3: the policy making. And secondarily, you know, the midterms come
Speaker 3: up in two years. You know, your last guest was
Speaker 3: just talking about some of the political ramifications. I think
Speaker 3: that's not a concern now, but it probably becomes more
Speaker 3: of a concern later this year.
Speaker 5: But when it looks at the political ramifications, you are
Speaker 5: seeing it come up not just consumer sentiment, but also polls.
Speaker 5: People are still concerned about the cost of goods now,
Speaker 5: and they're concerned about tariffs. Adding to that, what is
Speaker 5: going to regulate Trump If it's not the politics.
Speaker 3: I think, look, he's he's really trying to follow his agenda.
Speaker 3: He's trying to check the boxes on the things that
Speaker 3: he promised he would do for the American people. And
Speaker 3: a lot of those things are market unfriendly. I mean,
Speaker 3: that's what we're really discussing here. Is he market Is
Speaker 3: he worried about the market? Is he worried about his
Speaker 3: agenda and doing those things. I think he's more worried
Speaker 3: about his agenda. And that was a big adjustment period.
Speaker 3: I think in January February were talking about this, and
Speaker 3: I think people were a little complacent in this idea
Speaker 3: that he was going to be so market's focused, and
Speaker 3: to me, that was that's really when the stock market
Speaker 3: in the US started to have problems, is when first
Speaker 3: the Treasury Secretary said it and then the President basically
Speaker 3: supported that view. And that's the big adjustment thing for
Speaker 3: the markets. Okay, not not the economy, not jobs, not confidence,
Speaker 3: but the markets. And the problem is we're such a
Speaker 3: financialized economy now that the market's hard to the economy, and
Speaker 3: that's really weighing on consumer sentiment.
Speaker 4: My credit. See you, I remember that morning very early
Speaker 4: on this year and you came in and you said,
Speaker 4: he's not talking about the market. He's not talking about
Speaker 4: the market, and he's continued to ignore the stump market.
Speaker 4: The focus that we've had is main Street of a
Speaker 4: wolf Street, and that has a shift and a second
Speaker 4: term right ative to the first time.
Speaker 5: That's the term I was going to use Main Street
Speaker 5: of a Wall Street, because it's the term the Treasury
Speaker 5: secretary he has used time and time again. He sat
Speaker 5: in a room at the Economic Club of New York
Speaker 5: just a few weeks ago and said, Wall Street has
Speaker 5: done very well.
Speaker 4: I was one of you.
Speaker 5: Our focus is squarely on mainstream and making sure everyday
Speaker 5: Americans are doing better, which means bringing jobs back to
Speaker 5: the US heartland.
Speaker 2: Yeah. I want to add something here.
Speaker 3: I think that I think people weren't aware of Trump's
Speaker 3: first term. We had a massive slack in the economy.
Speaker 3: We were coming off a period of secular stagnation. So
Speaker 3: you know, reflationary policy, right, which is what Trump came
Speaker 3: in with the first time, made a lot of sense
Speaker 3: and we were very bullish on that at the time.
Speaker 3: This time around, we came in with no slack. We
Speaker 3: have a negative output gap. Okay, So it's just a
Speaker 3: very different setup. Even if they wanted to be pro growth,
Speaker 3: they really can't, which is why I think they're focused
Speaker 3: on the bond market back in Yells as opposed to
Speaker 3: the stock market and to me. That fits neatly with
Speaker 3: the setup that we had, had nothing to do with
Speaker 3: the election.
Speaker 2: That's just a setup that we're in.
Speaker 4: Mike Clinic has always got to catch up. Appreciate it.
Speaker 4: Mike Wilson, that of Mark and Stanley