WEBVTT - Bloomberg Surveillance TV: July 17th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:36.839 Bloomberg Terminal and the Bloomberg Business app. Fulston Slock of 0:00:36.880 --> 0:00:41.440 Apollo writing a trade war is a stagflation shark, Torson 0:00:41.479 --> 0:00:44.080 Slock to understand for more. Torston good Morning Monday morning, 0:00:44.200 --> 0:00:46.400 is firing the FED chair a stagflation shark. 0:00:47.400 --> 0:00:50.960 Well, so, a stagflation shark is by definition that inflation 0:00:51.040 --> 0:00:52.920 will go up and GDP growth will go down. But 0:00:52.960 --> 0:00:55.280 if you fire the fiture, as we saw yesterday, the 0:00:55.320 --> 0:00:57.680 dollar will likely go down, and at the same time 0:00:57.720 --> 0:00:59.400 long race will be going up, and the dollar going 0:00:59.400 --> 0:01:02.400 down is certainly inflationary. But rates going up is of 0:01:02.440 --> 0:01:05.000 course holding back growth. So firing the FT chair will 0:01:05.000 --> 0:01:07.200 probably mainly mean a decline in the dollar and an 0:01:07.240 --> 0:01:08.080 increase in long rates. 0:01:08.120 --> 0:01:10.360 Let's talk about the snack versus the FLA shed. Do 0:01:10.400 --> 0:01:12.160 you expect to see that flation for very long? 0:01:12.840 --> 0:01:14.080 Well, so so far. 0:01:14.120 --> 0:01:15.720 There's a number of here from c members when they 0:01:15.760 --> 0:01:18.640 talk about this, that they discuss what is the persistence 0:01:18.760 --> 0:01:21.280 of the stackflation shug in other words, when tariffs start 0:01:21.319 --> 0:01:23.600 to be more visible in the data. And I absolutely 0:01:23.600 --> 0:01:25.640 believe the data we just got this week it is 0:01:25.800 --> 0:01:27.800 the case that we're now seeing lift off in inflation 0:01:27.880 --> 0:01:30.560 in goods. Because we are seeing goods inflation, which makes 0:01:30.640 --> 0:01:33.200 up forty percent of the CPI basket, seeing on a 0:01:33.280 --> 0:01:37.280 number of different categories tools, toys, apparel, furniture, we've seen 0:01:37.319 --> 0:01:39.840 a fairly decent rise. And if we begin to see 0:01:39.840 --> 0:01:42.160 that lift off now over the next several months, then 0:01:42.200 --> 0:01:44.759 the risk is, of course that this becomes the more persistent. 0:01:45.080 --> 0:01:47.320 And Beth Hammock from the Cleveland Fed has said that 0:01:47.400 --> 0:01:50.640 in her district, companies that are exposed to tariffs have 0:01:50.720 --> 0:01:53.520 been raising prices, but even companies that are not exposed 0:01:53.520 --> 0:01:56.880 to tariffs have for competitive reasons, also been raising prices 0:01:56.920 --> 0:01:59.000 because hey, if others are doing it, we can also 0:01:59.040 --> 0:02:01.200 do it. So the fear it is that this does 0:02:01.240 --> 0:02:04.080 become more persistent and more sticky. So that's why it's 0:02:04.080 --> 0:02:05.760 so difficult for the FED to go out and the 0:02:05.760 --> 0:02:07.760 clear victory and say, oh, this is just temporary. They 0:02:07.800 --> 0:02:10.079 need to wait to see the peak, and we have 0:02:10.160 --> 0:02:12.640 really only at the takeoff stage, so we have not 0:02:12.720 --> 0:02:15.160 seen the peak. The consensus expect that later this year, 0:02:15.360 --> 0:02:18.320 by probably in November or December. But the bottom line is, 0:02:18.720 --> 0:02:20.880 before we could see that peak in site, it is 0:02:20.880 --> 0:02:23.520 not clear that the FED will say that now we're 0:02:23.520 --> 0:02:24.760 going to cut rates more meaningful. 0:02:24.800 --> 0:02:27.000 How do we explain what's handling with services prices? 0:02:27.400 --> 0:02:29.320 Well, so, of course, when something has a weight of 0:02:29.320 --> 0:02:31.320 forty percent and we know very well that that's now 0:02:31.360 --> 0:02:33.480 going up, of course the issue is, well, what about 0:02:33.480 --> 0:02:35.760 the sixty percent? Is that also going up? The sixty 0:02:35.800 --> 0:02:38.560 percent consists to a last degree also of wages and 0:02:38.600 --> 0:02:41.160 what we know from deportations. Of course, at a run 0:02:41.240 --> 0:02:43.880 rate around a million people in twenty twenty five, that 0:02:44.000 --> 0:02:46.280 means that wage inflation would likely begin to go up 0:02:46.320 --> 0:02:49.320 in the areas where unauthorized immigrants are working, for example, 0:02:49.360 --> 0:02:53.160 in agriculture, construction, leisure, and hospitality. So the fear you 0:02:53.160 --> 0:02:55.160 can have is that it's not only goods inflation coming 0:02:55.160 --> 0:02:58.360 from tariffs. Is also the upside risk to services inflation 0:02:58.400 --> 0:03:02.400 coming from wages, especially because of deportations potentially beginning to 0:03:02.400 --> 0:03:04.000 play a more significant role Turstan. 0:03:04.120 --> 0:03:06.520 Is the consumer able to absorb this well? 0:03:06.560 --> 0:03:09.080 On the retail sales data today, It's quite interesting because 0:03:09.160 --> 0:03:11.200 the low in consumer has been in trouble for quite 0:03:11.200 --> 0:03:14.040 some time, because we've seen all the loan the linguaities 0:03:14.080 --> 0:03:16.160 go up. We've seen credit card the linguagies go up. 0:03:16.240 --> 0:03:18.960 That's mainly because low income householes generally have more debt 0:03:19.200 --> 0:03:21.520 that generally have lower FICO scores. And when you have 0:03:21.560 --> 0:03:23.840 more debt and the FED race race in twenty twenty two, 0:03:24.080 --> 0:03:26.240 that means the low income houses are having hired debt 0:03:26.240 --> 0:03:28.840 interest payments. So therefore, low income houses have been in 0:03:28.840 --> 0:03:31.640 trouble for some time now. High income houses have been 0:03:31.639 --> 0:03:34.000 in good shape because stock markets are home prizer up. 0:03:34.160 --> 0:03:36.040 If you own fixed income, the cash flow you get 0:03:36.040 --> 0:03:38.960 from private credit, public credit, that's been very very strong. 0:03:39.200 --> 0:03:41.400 But the middle income households are now facing the news 0:03:41.400 --> 0:03:44.960 shock that student loan payments restarted after the monitorium or 0:03:44.960 --> 0:03:47.280 the pause on paying back your student no ended here 0:03:47.320 --> 0:03:49.640 in May, So that means that the rating burrows are 0:03:49.640 --> 0:03:51.920 now being told if I'm not paying my student loan, 0:03:51.960 --> 0:03:53.920 and that means that we are, unfortunately for the consumer 0:03:53.960 --> 0:03:56.320 outlook and therefore for retail sales here at eight thirty 0:03:56.440 --> 0:03:58.480 seeing the risk that is not only low in consumers 0:03:58.640 --> 0:04:01.760 that are now facing headwinds, is also the middle income consumers. 0:04:01.760 --> 0:04:04.240 And there's about eleven million people who are not paying 0:04:04.280 --> 0:04:05.880 their student loan on time at the moment out of 0:04:05.920 --> 0:04:07.960 forty five million people who have a student loan. So 0:04:07.960 --> 0:04:10.320 that means where that twenty five percent delinquity rates on 0:04:10.360 --> 0:04:13.080 student loans. This is at risk of implying that credit 0:04:13.160 --> 0:04:13.800 scods are going. 0:04:13.720 --> 0:04:14.320 To go down. 0:04:14.440 --> 0:04:16.560 According to the New York Fed Lab's This Streek blog post, 0:04:16.600 --> 0:04:18.479 it could be as much as seventy five points on 0:04:18.520 --> 0:04:21.039 your FICO scale, So people who have a credit score 0:04:21.080 --> 0:04:23.640 of seven twenty five goes down to six fifty. That 0:04:23.720 --> 0:04:26.320 means that middle income households at risk of seeing not 0:04:26.440 --> 0:04:29.039 an ability to borrow to buy a car, house watch, 0:04:29.040 --> 0:04:32.200 a dryer, iPhone. So therefore the risk to consumption is 0:04:32.240 --> 0:04:34.719 that it's going to broaden out the headwinds not only 0:04:34.800 --> 0:04:36.040 to low end but also. 0:04:35.839 --> 0:04:38.280 To middle income when you look at tariffs as a headwind. 0:04:38.279 --> 0:04:40.760 If the President is about to potentially settle on ten 0:04:40.800 --> 0:04:42.760 to fifteen percent across the board for one hundred and 0:04:42.760 --> 0:04:45.000 fifty countries, while it's an active negotiations with some of 0:04:45.000 --> 0:04:47.640 the biggest trading partners, is that enough for the FED 0:04:48.040 --> 0:04:50.200 to then start to model out what that could mean 0:04:50.520 --> 0:04:54.040 and cut rates. What's the timeline between getting the final 0:04:54.080 --> 0:04:56.560 tariff rates and the FED being willing to cut That. 0:04:56.560 --> 0:04:59.359 Is really important because they excuse my picture, pick is 0:04:59.360 --> 0:05:01.320 coming through the pie here in terms of terrorists and 0:05:01.320 --> 0:05:03.840 what it means our company is going to raise prices 0:05:03.839 --> 0:05:06.360 for consumers and that's the way we pay for tariffs. 0:05:06.480 --> 0:05:08.599 All our company is going to take it in earnings. 0:05:08.800 --> 0:05:11.159 So there are various simulations from the Yeald Budget lab 0:05:11.200 --> 0:05:13.880 the pen One budget Model, the Tax Foundation. We try 0:05:13.920 --> 0:05:16.520 to look at what are the implications of different levels 0:05:16.560 --> 0:05:19.760 of the effective arid seriff rate, and those show indeed 0:05:19.800 --> 0:05:21.279 that it does take time. So the FAI will not 0:05:21.279 --> 0:05:23.640 have clarity on this issue, maybe not even this year, 0:05:23.920 --> 0:05:26.800 which is exactly WHYMC members are so reluctant to come 0:05:26.880 --> 0:05:29.200 up with the answers how do we even quantify what 0:05:29.240 --> 0:05:31.240 the impact is? And the final point in your world is, 0:05:31.279 --> 0:05:33.760 of course, also what about the hearings for the IPA 0:05:33.880 --> 0:05:36.680 on July thirty first, that's now several weeks away. With 0:05:36.800 --> 0:05:38.400 that all deemed that there is a risk that this 0:05:38.480 --> 0:05:41.160 could all turn out to be not legal, what does 0:05:41.200 --> 0:05:43.400 that then mean for the August one deadline? So in 0:05:43.440 --> 0:05:45.680 the near term, the FED is certainly going into the 0:05:45.720 --> 0:05:49.040 July meeting in my view, thinking we cannot just even 0:05:49.080 --> 0:05:52.919 signal that there is any rate catch coming because we 0:05:53.040 --> 0:05:57.000 just don't know yet the persistence, the magnitude, and therefore overall, 0:05:57.040 --> 0:05:58.840 what are the implications of tariffs at this point? 0:05:58.880 --> 0:06:01.160 Can I just stay with that word for how many 0:06:01.200 --> 0:06:03.480 people make up that word way? And how many people 0:06:03.560 --> 0:06:05.680 Joria hand up and say, you know what, actually we 0:06:05.680 --> 0:06:07.320 should cut and we should count this month. 0:06:07.400 --> 0:06:07.599 Yeah. 0:06:07.960 --> 0:06:10.039 Of course, both Chris Waller and Miki Bowman have been 0:06:10.080 --> 0:06:13.279 turning more towards talking about cuts but potentially being something 0:06:13.279 --> 0:06:15.400 that should be likely. But the answer is to your question, 0:06:15.400 --> 0:06:17.720 at least the vast majority of comedia at this point 0:06:18.080 --> 0:06:20.120 is certainly at least in the reading. If you need 0:06:20.160 --> 0:06:22.640 to look at the dot plot weighing towards saying, well, 0:06:22.680 --> 0:06:24.159 there is probably a good argument for waiting. 0:06:24.279 --> 0:06:28.200 Median dot Steele projects implies two cuts, Morgan Stanley, no cuts, 0:06:28.200 --> 0:06:30.719 Bank for America, no cuts for twenty twenty five. What's 0:06:30.720 --> 0:06:33.240 your base case given what we know? Now, what's your basically? 0:06:33.240 --> 0:06:35.400 We have one cut in December. But I do think 0:06:35.400 --> 0:06:37.960 that the market is way way too eager to price 0:06:38.040 --> 0:06:40.400 in cuts. Again, the risks are and not only we 0:06:40.440 --> 0:06:42.800 talk about tariffs as upward pressure on inflation, we also 0:06:42.839 --> 0:06:46.320 talk about immigration restrictions and deportations as upward pressure inflation. 0:06:46.600 --> 0:06:48.679 But let's also not forget that if you take purpose, 0:06:48.680 --> 0:06:50.760 the FETs model of the ER's economy, and you ask 0:06:50.839 --> 0:06:53.240 the question, what does the fat itself think is the 0:06:53.240 --> 0:06:56.280 implication of a ten percent depreciation in the trade weighted dollar, 0:06:56.560 --> 0:06:59.160 and the answer out of purpose is that inflation will 0:06:59.160 --> 0:07:00.800 go up over the next four call us by zero 0:07:00.800 --> 0:07:02.960 point three. So now we certainly don't only have the 0:07:03.040 --> 0:07:05.560 uncertainty about terrrists putting up by pressure on inflation. We 0:07:05.640 --> 0:07:08.520 also have immigration restrictions putting up by pressure inflation. And 0:07:08.560 --> 0:07:11.760 then we also have that depreciating dollar for the last 0:07:11.800 --> 0:07:14.040 six months is also putting up by pressure on inflation, 0:07:14.240 --> 0:07:16.760 So all that argues for rates higher for longer, and 0:07:16.760 --> 0:07:18.120 on top of that, in the long end, we're also 0:07:18.200 --> 0:07:20.600 fiscal issues putting up by pressure on inflation. So the 0:07:20.600 --> 0:07:23.280 whole Yel curve is likely to stay elevated for a 0:07:23.360 --> 0:07:25.840 much more extended period than what the market is appreciating. 0:07:25.920 --> 0:07:28.760 The Federal Reserve is projecting transit three. It's just implied 0:07:28.760 --> 0:07:31.800 by the forecasts core PC for twenty five three point one, 0:07:31.920 --> 0:07:34.520 twenty six two point four, then down to two point 0:07:34.560 --> 0:07:35.280 one and twenty seven. 0:07:35.280 --> 0:07:37.480 That's the glide path. Do you project transits? Well? 0:07:37.560 --> 0:07:40.120 That is also if I type ECFC go on Bloomberg, 0:07:40.120 --> 0:07:42.600 I see exactly that profile where inflation will peak at 0:07:42.600 --> 0:07:44.880 three point three by Q four this year, and then 0:07:44.920 --> 0:07:47.160 it will begin to come down. But noteworthy is it 0:07:47.200 --> 0:07:49.760 including in the Fed forecast that we will only buy 0:07:49.840 --> 0:07:51.920 then of next year have inflation is still at two 0:07:51.960 --> 0:07:54.760 and a half. That's still way above the FETs two 0:07:54.760 --> 0:07:57.400 percent target. So you could begin to argue if you 0:07:57.480 --> 0:08:00.480 begin to cut rates when inflation is two point eight nine, 0:08:00.600 --> 0:08:02.840 or if we get basic the situation where inflation sets 0:08:02.840 --> 0:08:04.920 out to about more sticky. The risk is of course 0:08:04.920 --> 0:08:07.920 that they will be cutting prematurely. And that's what literally 0:08:07.960 --> 0:08:11.320 every airform cemener worries about, namely, did we cut too 0:08:11.360 --> 0:08:14.040 quickly and are we therefore then creating more boom in 0:08:14.040 --> 0:08:16.560 the economy, including with the one big beautiful bill lifting 0:08:16.600 --> 0:08:19.320 GDP next year, we could have a fairly strong economy 0:08:19.360 --> 0:08:21.840 going into twenty twenty six, and with that backdroup, it 0:08:21.880 --> 0:08:24.360 becomes very difficult to argue that you should see a 0:08:24.400 --> 0:08:25.320 lot of FED cuts next year. 0:08:25.360 --> 0:08:27.400 Do you think the one hundred basis points of cuts 0:08:27.480 --> 0:08:29.200 in the run up to the election was premature? 0:08:29.880 --> 0:08:32.640 Well, of course at this point that we had only 0:08:32.640 --> 0:08:34.520 all got to talk about our star as we have 0:08:34.600 --> 0:08:36.760 done now for a long long time. And this was 0:08:36.760 --> 0:08:39.600 the strong, strong argument at the time that monetary polsy 0:08:39.679 --> 0:08:42.760 was restrictive, that even still in the footnotes of aform 0:08:42.800 --> 0:08:45.880 CE member speeches talks about well, monastery pols is still 0:08:45.880 --> 0:08:48.880 today restrictive. But if you look at it that way, well, 0:08:48.920 --> 0:08:51.760 if monetary pols is so restrictive, why is the economic 0:08:51.800 --> 0:08:54.040 data and still doing so well? So that suggests that 0:08:54.120 --> 0:08:57.960 maybe this whole discussion has interestingly enough completely faded into 0:08:58.000 --> 0:08:59.840 the backseat of the car. We're no longer talk about 0:08:59.840 --> 0:09:02.240 our star and restrictive now we are so eager instead 0:09:02.280 --> 0:09:04.640 to talk about the inflation or impulse coming from in 0:09:04.640 --> 0:09:07.080 particular teriffs, but also the dollar going down. So I 0:09:07.120 --> 0:09:10.000 think that the debate around why are we at these 0:09:10.080 --> 0:09:12.200 levels of interest rates and where should we be? That 0:09:12.280 --> 0:09:14.840 debate seems to be almost yesterday's debates. So that's why 0:09:14.880 --> 0:09:17.040 I take a lot of the impulse and the discussions 0:09:17.040 --> 0:09:19.240 on there from seeing now is all about what's coming 0:09:19.280 --> 0:09:21.040 ahead of us, and what we know is coming ahead 0:09:21.080 --> 0:09:23.040 of us is exactly what the forecast from the Fed 0:09:23.120 --> 0:09:26.440 is saying amy higher inflation. J Pile said himself, we 0:09:26.520 --> 0:09:29.240 expect a meaningful increase in inflation over the coming months. 0:09:29.240 --> 0:09:32.160 That's a very strong statement from the Fetchure. So I 0:09:32.200 --> 0:09:34.600 think that we should in market take that very seriously 0:09:34.760 --> 0:09:37.000 when the Feture is taking a lot of credibility on 0:09:37.080 --> 0:09:39.960 saying we expect a meaningful increase in inflation over the 0:09:39.960 --> 0:09:40.440 coming months. 0:09:40.520 --> 0:09:42.560 Tustan, it's going to say, as always, thank you, sir, 0:09:42.600 --> 0:09:55.160 Tolston Snock that of Apollo. Jim Demarth, Bank for America 0:09:55.200 --> 0:09:58.600 writing volatility is whipsord global markets. That's been good for 0:09:58.640 --> 0:10:02.000 the markets. Businesses Bank of America. Jim joins a snaff 0:10:02.000 --> 0:10:03.360 of more. Jim, good morning, good morning. 0:10:03.440 --> 0:10:04.640 It's going to see you. Great to see you. 0:10:04.640 --> 0:10:07.680 It's going to catch out masses of volatility. Yes, you 0:10:07.720 --> 0:10:09.800 can have the good kind and the bad kind. Why 0:10:09.920 --> 0:10:11.000 was this the good kind? 0:10:12.559 --> 0:10:15.680 You know, the we'd like to think about everything in 0:10:15.720 --> 0:10:18.800 terms of channels. You know, when there are channels of 0:10:18.880 --> 0:10:22.920 price action, channels of volatility, those tend to be better 0:10:22.960 --> 0:10:26.880 opportunities for investors to put money to work. You know, 0:10:26.960 --> 0:10:29.360 if we were sitting here ten years ago, the bigger 0:10:29.400 --> 0:10:32.760 conversation was financial repression, right, and if you look at 0:10:32.800 --> 0:10:36.840 realized volatility in both the equity markets and in the 0:10:37.400 --> 0:10:43.040 rates markets, let's focus on the US, those that realize 0:10:43.120 --> 0:10:46.920 volatility is considerably higher than where we were then. And 0:10:46.960 --> 0:10:49.480 you see a lot of investors, you know, macro strategies 0:10:49.480 --> 0:10:51.920 are becoming much more popular today than they were ten 0:10:52.000 --> 0:10:56.000 years ago, when it was just difficult with suppressed volatility 0:10:56.360 --> 0:10:57.600 to deliver alpha. 0:10:58.120 --> 0:11:00.840 And so I think, you know, volatilities here. 0:11:00.920 --> 0:11:01.360 We're in a. 0:11:01.280 --> 0:11:04.439 Different you know, political and economic environment than we were 0:11:04.480 --> 0:11:07.760 ten years ago. So you know, my my suggestion, will 0:11:07.800 --> 0:11:09.880 we get used to to a higher degree of volatility. 0:11:09.880 --> 0:11:12.079 Do you think this is an ongoing feature of this regime. 0:11:13.040 --> 0:11:16.840 I think just where we are in the economic cycle, 0:11:16.840 --> 0:11:20.000 I mean, things are just very different. Right We're going 0:11:20.080 --> 0:11:24.360 to have increased uh, you know, there's increased pending happening 0:11:24.360 --> 0:11:30.040 in infrastructure, in technology, in defense. We've got high levels 0:11:30.040 --> 0:11:32.600 of debt in the developed world. That becomes you know, 0:11:32.679 --> 0:11:36.400 more topical depending on what other actions are taking place. 0:11:36.400 --> 0:11:38.679 Our headlines are hitting during you know, during a given day, 0:11:38.720 --> 0:11:40.679 a lot of focus on Japan, you know, for the 0:11:40.760 --> 0:11:42.400 last month to month and a half. You know, in 0:11:42.440 --> 0:11:44.760 April we were talking more about the US markets and 0:11:44.800 --> 0:11:47.560 concerns about you know, a failed treasury auction, which I 0:11:47.559 --> 0:11:50.560 think was extreme, you know, to say the least. But 0:11:51.080 --> 0:11:54.719 you know, in the end, some of these larger structural 0:11:54.800 --> 0:11:58.280 issues remain, and I think we'll go through periods of Yes, 0:11:58.280 --> 0:12:01.520 there's obviously concern about out you know, fed independence and 0:12:01.840 --> 0:12:04.760 what could happen there, you know, and I think you've 0:12:04.760 --> 0:12:06.640 had pretty much everybody on the show talk about it 0:12:06.679 --> 0:12:09.360 for the last the last you know, twenty four hours, 0:12:09.400 --> 0:12:12.760 Please get the last twenty four hours. Fed independence is good. 0:12:13.800 --> 0:12:16.040 I'll leave it that. If it starts to be threatened. 0:12:16.120 --> 0:12:16.679 What does it mean. 0:12:17.760 --> 0:12:20.840 I think people are going to I think people are 0:12:20.840 --> 0:12:22.400 going to wait to see what happens. I don't think 0:12:22.400 --> 0:12:25.880 anybody is going to be uh is going to exit 0:12:25.920 --> 0:12:28.880 the markets on concerns that that that is a certainty. 0:12:29.200 --> 0:12:31.960 I think with many things that have transpired over the 0:12:32.000 --> 0:12:35.600 last ninety days, there's a there's a test period. You know, 0:12:35.679 --> 0:12:39.840 theories are tested in the markets, markets respond, that information 0:12:40.000 --> 0:12:42.440 is filtered back into the decisioning process, and we're going 0:12:42.480 --> 0:12:44.920 to continue, you know, we're going to continue on that path. 0:12:44.960 --> 0:12:46.440 But I do think, you know, when. 0:12:46.360 --> 0:12:51.719 You think about the sovereign debt levels in developed you 0:12:51.760 --> 0:12:55.560 know economies across the across the globe, that is a 0:12:55.600 --> 0:12:57.880 real concern. It's going to you know, it's going to 0:12:57.960 --> 0:13:00.360 keep popping its head up or rearing its head until 0:13:00.440 --> 0:13:02.120 you know, there's some resolution. There was a lot more 0:13:02.160 --> 0:13:05.840 talk about it until the bill was passed. Now it's 0:13:05.880 --> 0:13:07.719 again a focus on Japan, and I'm sure there'll be 0:13:07.760 --> 0:13:10.360 talks about you know, other countries in Western Europe and 0:13:11.360 --> 0:13:13.040 you know, and in the UK as we as we 0:13:13.080 --> 0:13:16.680 continue on that path. So now I think betting against 0:13:16.720 --> 0:13:20.720 volatility is not a good strategy for the near and midterm. 0:13:20.160 --> 0:13:22.600 When it comes to volatility right now, what makes this 0:13:22.720 --> 0:13:25.360 environment potentially different or I guess you can mirror it 0:13:25.440 --> 0:13:27.960 to Trump one point. Oh, is it's politics and policy 0:13:28.040 --> 0:13:29.880 that is driving this in financial market? 0:13:30.000 --> 0:13:30.200 Yes? 0:13:30.720 --> 0:13:33.520 And again I think that's why it's a materially different 0:13:34.760 --> 0:13:37.760 environment than we had, you know, post a financial crisis 0:13:37.840 --> 0:13:42.120 up through COVID. While we had different administrations, the policy 0:13:42.240 --> 0:13:47.920 path was still pretty consistent regardless of democratic or Republican administrations, 0:13:48.120 --> 0:13:50.840 and the FED policy was very consistent. And you know, 0:13:50.880 --> 0:13:52.559 it was q E for a large part of it, 0:13:52.600 --> 0:13:56.760 and that was a you know, repression in volatility, and 0:13:56.920 --> 0:13:58.840 that environment is no longer here. 0:13:58.880 --> 0:14:00.760 What's the number one question client to ask you? 0:14:02.640 --> 0:14:06.560 Wow, that's a that's a really great question. I think 0:14:06.640 --> 0:14:12.600 the biggest focus remains on whether we're getting cuts this year, 0:14:12.880 --> 0:14:15.079 you know or not. And there's some pretty strong views 0:14:15.120 --> 0:14:18.120 on on either side, you know, And that's really a 0:14:18.120 --> 0:14:20.000 bigger question on what do we think inflation looks like 0:14:20.040 --> 0:14:22.640 as a transitory you know, or is it going to 0:14:22.880 --> 0:14:27.080 s remain at a higher elevated rate. I would say 0:14:27.080 --> 0:14:28.640 the second largest question, if you get out of the 0:14:28.640 --> 0:14:31.440 bond markets for a second, is you know, the AI 0:14:32.040 --> 0:14:34.080 investment period. 0:14:33.680 --> 0:14:35.320 That we're in today, is it a bubble? 0:14:35.440 --> 0:14:37.520 Is it a high correlation to what we saw you 0:14:37.520 --> 0:14:40.120 know in the late nineties going into two thousand and 0:14:40.240 --> 0:14:42.640 you know there's stories written on that that every day. 0:14:42.720 --> 0:14:45.760 I think what's very clear is that the investment is 0:14:45.800 --> 0:14:50.600 going to continue for the for the near to medium term, 0:14:50.640 --> 0:14:56.720 whether it's a result of corporations or sovereign uh sovereign 0:14:56.880 --> 0:15:00.640 you know, governments being focused on uh AI being critical 0:15:00.720 --> 0:15:04.000 to economic growth and safety, and so you see that 0:15:04.160 --> 0:15:05.480 regardless all around the world. 0:15:05.680 --> 0:15:07.080 You know, governments are. 0:15:06.920 --> 0:15:10.600 Making it one of their top mandates to be to 0:15:11.000 --> 0:15:11.680 be a leader in. 0:15:12.120 --> 0:15:15.160 AI drive an equity markets in a massive way, basically 0:15:15.160 --> 0:15:17.080 at all time high still on the s and P 0:15:17.200 --> 0:15:19.720 five hundred very close, and credit spreads a super time. 0:15:20.120 --> 0:15:22.480 How it spreads up very very tight. Do you see 0:15:22.480 --> 0:15:25.160 that as justified or a sign of complacency? There is 0:15:25.160 --> 0:15:27.240 a manner another banking beliefs that maybe it's a sign 0:15:27.280 --> 0:15:29.720 of complacency. Don't have to name it today, want your 0:15:29.760 --> 0:15:30.320 opinion on that. 0:15:31.040 --> 0:15:33.640 Yeah, I mean we go through periods of you know, 0:15:33.680 --> 0:15:36.160 when the market's down, nobody wants to buy and everybody 0:15:36.160 --> 0:15:38.280 gives fifteen reasons why it's going to go lower, and 0:15:38.320 --> 0:15:40.520 it goes up, and then people give you reasons why 0:15:40.640 --> 0:15:42.160 it's not going to go you know, it's not going 0:15:42.240 --> 0:15:45.440 to go any higher. I think the markets in general 0:15:45.520 --> 0:15:48.760 and people were you know, as humans, we have a 0:15:48.760 --> 0:15:50.520 certain degree of fear in US and we're worried about 0:15:50.560 --> 0:15:52.520 what could happen and what could be life threatening, and 0:15:52.560 --> 0:15:56.120 that's just human psychology, and post a financial crisis, we 0:15:56.160 --> 0:15:57.800 look at it and say, Okay, we know what are 0:15:57.800 --> 0:16:01.000 we missing. I think a lot of what the issues 0:16:01.360 --> 0:16:05.440 are that could result in a repricing in assets across 0:16:05.480 --> 0:16:08.200 the markets, they're all out there. The question is are 0:16:08.200 --> 0:16:11.160 the markets reflecting that in their current price? To me, 0:16:11.240 --> 0:16:13.560 that's really the question that you always have. And you know, 0:16:13.600 --> 0:16:15.520 the debate is today. You could sit with people today 0:16:15.520 --> 0:16:18.040 and they'll tell you that, you know, the real level 0:16:18.040 --> 0:16:20.280 of rates in the US market and the long end 0:16:20.440 --> 0:16:23.880 is too high based on what their expectations are. 0:16:24.040 --> 0:16:24.240 You know. 0:16:24.280 --> 0:16:27.120 The converse of that is people saying that we're concerned 0:16:27.120 --> 0:16:28.640 about long term debt because. 0:16:28.360 --> 0:16:31.560 Of structural budget deficits. You know. Flip it over to 0:16:31.600 --> 0:16:32.400 the equity markets. 0:16:32.440 --> 0:16:35.200 There's many people that are excited in saying AI is real, 0:16:35.280 --> 0:16:35.680 it's going. 0:16:35.560 --> 0:16:37.640 To drive productivity. We're going to see a. 0:16:37.560 --> 0:16:42.200 Boost in earnings across you know, across industries and across sectors. 0:16:42.600 --> 0:16:44.360 And then there are others that say, wow, you know, 0:16:44.720 --> 0:16:46.920 this is just another bubble and we've seen this, We've 0:16:46.920 --> 0:16:50.600 seen this play through. It's a good opportunity for us. 0:16:50.640 --> 0:16:52.480 We have a lot of clients that are thinking about 0:16:52.560 --> 0:16:57.280 things differently, and obviously, you know, our strength is intermediating risk, 0:16:57.880 --> 0:17:00.840 lending to them as they pursue these opportunities, and that's 0:17:00.840 --> 0:17:02.600 what we're that's what done. 0:17:02.600 --> 0:17:04.159 What I sense from you is that now there is 0:17:04.200 --> 0:17:07.760 a bus to act. In early April, it felt like 0:17:07.800 --> 0:17:10.840 a lot of people were just paralyzed by the bank drop. Yes, 0:17:10.960 --> 0:17:13.520 where's the buyas to act coming from? Are they just 0:17:13.640 --> 0:17:16.720 moving on from this policy story in Washington or have 0:17:16.720 --> 0:17:19.640 they got the clarity they want at least enough clarity 0:17:19.760 --> 0:17:20.479 to just move on. 0:17:20.840 --> 0:17:23.040 I think the first that's a really great question, and 0:17:23.080 --> 0:17:25.320 I think it's difficult to answer, but I would answer 0:17:25.320 --> 0:17:28.320 it this way. You know, you start with framing what 0:17:28.480 --> 0:17:31.760 are the extremes that could happen, and then getting comfort 0:17:31.800 --> 0:17:34.639 within that. And I think at the time when the 0:17:34.680 --> 0:17:37.000 tariffs were announced, the concerns were, how you know, this 0:17:37.080 --> 0:17:41.640 could be a material negative impact on global GDP okay, 0:17:41.760 --> 0:17:44.960 and that was reverberating. And at the same time, we 0:17:45.040 --> 0:17:48.720 just happened to have treasury auctions, you know, within a 0:17:48.760 --> 0:17:49.320 week's time. 0:17:49.920 --> 0:17:51.080 And then so you had this. 0:17:52.560 --> 0:17:55.520 Period of disruption in the equity markets, uncertainty. You get 0:17:55.520 --> 0:17:58.040 to the bond markets, we're having large auctions. Someone starts 0:17:58.080 --> 0:18:02.199 to focus on and proliferated in the market. What the 0:18:02.240 --> 0:18:06.480