WEBVTT - Invesco’s Hooper: Tech Is Attractive Despite Headwinds 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.919 at Bloomberg dot com. Well, US equity indices are very 0:00:23.920 --> 0:00:27.120 close to reattaining the all time high levels as global 0:00:27.160 --> 0:00:30.040 trade tensions received, at least temporarily. To get a sense 0:00:30.040 --> 0:00:31.760 of where we move to next or we go to 0:00:31.920 --> 0:00:35.080 next with the markets, we welcome Christina Hooper. Christina is 0:00:35.159 --> 0:00:38.400 chief Global market strategist for invest Goo. She joins us 0:00:38.440 --> 0:00:41.280 live from the Phoenix Convention Center at the b n 0:00:41.400 --> 0:00:44.920 Y Melon Pershing Insight Conference. Christina, thanks so much for 0:00:45.000 --> 0:00:49.199 being with us. It really does appear that certainly one 0:00:49.240 --> 0:00:53.640 of the main drivers for investors sentiment is trade. Is 0:00:53.680 --> 0:00:57.480 that your sense absolutely and what I would say, more 0:00:57.520 --> 0:01:03.320 specifically economic policy on certainty created by the current tariff 0:01:03.360 --> 0:01:06.840 situation and the threats of more tariffs. So right now 0:01:06.840 --> 0:01:11.160 we're looking at markets that are broadly expecting rate cuts 0:01:11.160 --> 0:01:14.520 that I put that in plural. Before the end of 0:01:14.560 --> 0:01:17.319 this year, PIMCO came out and so that there could 0:01:17.319 --> 0:01:21.440 be a fifty basis point rate cut in July if 0:01:21.480 --> 0:01:24.800 economic conditions deteriorate. Do you agree with that assessment. I 0:01:24.840 --> 0:01:28.440 think that is extremely unlikely. I think the FED wants 0:01:28.480 --> 0:01:31.959 to certainly be very careful and thoughtful about any rate 0:01:31.959 --> 0:01:34.600 cuts it makes, and so what we're more likely to 0:01:34.680 --> 0:01:40.399 see is communication around standing ready to ease. But I 0:01:40.440 --> 0:01:42.960 would be very, very surprised to see a fifty basis 0:01:42.959 --> 0:01:46.760 point rate cut in one fell swoop. So I guess Christina, 0:01:46.800 --> 0:01:48.680 one of the things that Lisa and I discussed back 0:01:48.720 --> 0:01:52.000 and forth is you know, what does or what do 0:01:52.120 --> 0:01:55.560 multiple rate cuts tell us? Does it really suggest that 0:01:55.600 --> 0:02:00.640 this economy perhaps is weaker than maybe the markets are discounting? Well, 0:02:00.680 --> 0:02:03.120 it really all depends on how the FED frames this, 0:02:03.320 --> 0:02:06.240 because keep in mind, we've heard a lot of chatter 0:02:06.480 --> 0:02:10.400 from FED members over the last several months around inflation 0:02:10.480 --> 0:02:13.520 targeting and the idea that we could potentially see the 0:02:13.560 --> 0:02:17.200 FED changing its inflation target raising it so to speak. 0:02:17.639 --> 0:02:20.480 Um that would mean that essentially the FED could cut 0:02:20.600 --> 0:02:23.920 rates without any changing economic conditions and it would be 0:02:23.960 --> 0:02:29.359 a really easy way to ease without causing alarm. So 0:02:29.480 --> 0:02:32.560 if the Fed does not cut rates, what happens to 0:02:32.600 --> 0:02:36.239 equity markets? If the Fed does not cut rates, It's 0:02:36.280 --> 0:02:39.120 all about the language. It's all about what we see 0:02:39.160 --> 0:02:43.240 in the announcement. If they take out the patient language, 0:02:43.360 --> 0:02:46.280 I think that will matter a lot to markets and 0:02:46.720 --> 0:02:49.880 won't cause any kind of sell off because I don't 0:02:49.919 --> 0:02:52.360 know if we're going to see any rate cut in June. 0:02:52.440 --> 0:02:54.680 But it's all about the language and perhaps what we 0:02:54.720 --> 0:02:56.679 see in the dot plot. But I mean, for example, 0:02:56.919 --> 0:03:00.480 because right now markets, if you look at FED funds 0:03:00.480 --> 0:03:03.040 futures contracts, they are except pricing in two and a 0:03:03.080 --> 0:03:06.920 half rate cuts by December. Let's say the Federal Reserve 0:03:07.240 --> 0:03:10.160 signals or just doesn't cut rates at all, or cuts 0:03:10.240 --> 0:03:12.520 rates once. I mean, does that does that's for a 0:03:12.560 --> 0:03:15.919 big sell off. It all depends on how this plays out, right, 0:03:15.960 --> 0:03:19.720 because we can see FED funds futures change quite rapidly, 0:03:20.040 --> 0:03:22.520 and so expectations might change by the end of the year. 0:03:22.520 --> 0:03:26.519 But let's assume in that scenario that Fed funds expectations 0:03:26.560 --> 0:03:29.840 remain the same um FED funds futures remain the same 0:03:30.040 --> 0:03:32.320 in that kind of kind of environment, we would likely 0:03:32.360 --> 0:03:36.760 see disappointment in markets, at least temporarily. So, Christina, one 0:03:36.800 --> 0:03:39.000 thing that I guess that Lisa and I are hearing 0:03:39.000 --> 0:03:41.760 more and more from economists and from strategists that that 0:03:41.880 --> 0:03:45.120 appear on our show is the you know, the expectation 0:03:45.200 --> 0:03:49.000 that maybe mid quite likely to see a recession. Is 0:03:49.040 --> 0:03:52.920 that something you think is reasonable? Well, we're certainly following 0:03:52.920 --> 0:03:55.920 it closely, but from our perspective where we stand today, 0:03:55.960 --> 0:03:59.600 we don't think, um that a recession is the base 0:03:59.640 --> 0:04:03.200 case for now. A lot can happen between now and then, 0:04:03.480 --> 0:04:06.760 and some of it is certainly dependent upon UH trade 0:04:06.800 --> 0:04:09.760 policy and where that goes. But it seems as though 0:04:10.040 --> 0:04:14.480 major central banks stand ready to provide accommodation. We've already 0:04:14.520 --> 0:04:17.680 seen financial conditions ease in just the last few weeks, 0:04:17.960 --> 0:04:20.560 and I would suggest that this is going to be 0:04:20.600 --> 0:04:24.120 an environment where once again UH central banks step in 0:04:24.160 --> 0:04:26.919 and save the day. UH. We could certainly see a 0:04:26.960 --> 0:04:30.160 deceleration in growth, but at this stage it seems unlikely 0:04:30.240 --> 0:04:33.600 that we actually see a recession by mid Christina, are 0:04:33.600 --> 0:04:36.520 you seeing your clients making big allocation shifts at this point? 0:04:37.279 --> 0:04:41.200 We are not, um clients understand, and what we stress 0:04:41.360 --> 0:04:44.600 is taking that long term perspective. Now, that doesn't mean 0:04:44.640 --> 0:04:48.680 there aren't small tactical shifts, and I certainly think that 0:04:48.760 --> 0:04:52.360 what we're likely to see going forward is continued to 0:04:52.480 --> 0:04:56.200 focus on a growth tilt within US equities, and I'm 0:04:56.200 --> 0:04:59.520 hoping that will also see something of a tilt towards 0:04:59.560 --> 0:05:03.440 more income producing asset classes, given that we're likely to 0:05:03.440 --> 0:05:05.600 be in a lower for longer environment. We're talking high 0:05:05.600 --> 0:05:09.000 old bonds, well, not necessarily high yeld bonds specifically, but 0:05:09.160 --> 0:05:12.120 an array of higher yielding asset classes that would include 0:05:12.279 --> 0:05:16.440 high yield bonds, um munis, including higher yielding munis, but 0:05:16.680 --> 0:05:21.200 also convertible bonds as well as dividend paying stocks. Sometimes 0:05:21.200 --> 0:05:23.320 they get overlooked, and I think many of them have 0:05:23.440 --> 0:05:26.800 been overlooked in the recent rally. So, Christina, we are 0:05:26.839 --> 0:05:29.880 more than ten years into this economic cycle. So as 0:05:29.920 --> 0:05:33.559 you think about where you're allocating money in the equity markets, 0:05:33.600 --> 0:05:36.479 are there certain sectors that, just given where we are 0:05:36.520 --> 0:05:39.960 in the cycle, appeal more to you than some others. Well, 0:05:40.000 --> 0:05:45.080 we see this cycle continuing, although of course decelerating, and 0:05:45.160 --> 0:05:49.800 so that would suggest uh and overweighting towards the growth 0:05:49.880 --> 0:05:52.560 style in this kind of environment, and so I would 0:05:52.600 --> 0:05:56.719 favor technology and to a certain extent, healthcare names as 0:05:56.760 --> 0:05:59.240 being quite attractive. Now. Of course, that doesn't mean there 0:05:59.279 --> 0:06:03.200 aren't headwind for those sectors. In particular, tech is likely 0:06:03.240 --> 0:06:06.359 to face more regulation. But this is more of um uh, 0:06:06.400 --> 0:06:10.600 you know, two year to three year outlook, um, And 0:06:10.880 --> 0:06:13.480 right now tech looks attractive despite some of the head 0:06:13.480 --> 0:06:16.040 winds we could see. So I just I'm curious, given 0:06:16.040 --> 0:06:19.120 the fact that you're bullish on risk assets over the 0:06:19.160 --> 0:06:22.440 near to long term or certainly the even the near term, 0:06:22.560 --> 0:06:25.080 do you think that treasury yields are too low? Tenure 0:06:25.160 --> 0:06:28.400 yields right now two point one per cent, and if so, 0:06:28.440 --> 0:06:31.840 how much could they rise? Well, treasury yields UM are 0:06:31.920 --> 0:06:35.599 definitely low relative to where they have been, but that 0:06:35.640 --> 0:06:37.920 doesn't mean that that's going to change. And what it 0:06:38.000 --> 0:06:41.279 does mean, though, is that it makes equities look more attractive. 0:06:41.320 --> 0:06:44.240 It makes dividend paying stocks look more attractive. So I 0:06:44.279 --> 0:06:47.680 think we could continue in this situation for a while, UM, 0:06:47.720 --> 0:06:51.280 because I think the bond market is accurately reflecting the 0:06:51.320 --> 0:06:53.719 fear in the market that we're not seeing being reflected 0:06:53.720 --> 0:06:57.960 in stocks. Christina has the global trade tensions. I guess 0:06:58.000 --> 0:07:00.880 the escalation of some trade tensions is that caused you 0:07:00.880 --> 0:07:03.320 guys to rethink maybe your allocation to emerging markets. Is 0:07:03.360 --> 0:07:05.760 it just too risky to to maybe be a little 0:07:05.760 --> 0:07:09.240 bit too aggressive there. Well, what it's encouraging us to 0:07:09.320 --> 0:07:12.040 do and what we've what we've been advocating for some 0:07:12.080 --> 0:07:15.320 times to be very discerning and emerging markets. There's no 0:07:15.400 --> 0:07:19.000 reason to change your overall waiting to emerging markets, but 0:07:19.040 --> 0:07:22.720 it's important to be selective within emerging markets, focusing on 0:07:22.800 --> 0:07:26.440 those areas that are actually benefiting UM from what's going 0:07:26.520 --> 0:07:30.440 on in in uh the larger macro environment, including trade wars, 0:07:30.640 --> 0:07:34.040 as well as the FED turning more accommodative. UH. So 0:07:34.120 --> 0:07:37.240 I would favor in general Asia e M in this environment. 0:07:37.840 --> 0:07:40.560 Christina Hooper, thank you so much as always for being 0:07:40.600 --> 0:07:43.240 with us. We love getting your insights. Christina Hooper is 0:07:43.320 --> 0:07:46.280 chief Global Market Strategistic invest Go, which overseas nearly a 0:07:46.320 --> 0:08:06.119 trillion dollars. Facebook uncovered emails that may indicate the chief 0:08:06.160 --> 0:08:12.240 executive officer Mark Zuckeenberg. Zuckenberg knew of quote questionable privacy practices. 0:08:12.480 --> 0:08:16.960 That comes as scrutiny continues to mount with respect to 0:08:17.080 --> 0:08:20.600 big tech and their privacy as well as just UH 0:08:20.720 --> 0:08:24.440 their size issues, their dominance of different markets. This is 0:08:24.480 --> 0:08:27.240 definitely one of the focuses here at the b n 0:08:27.400 --> 0:08:31.280 Y Mel and Pershing Insight Conference, especially given the fact 0:08:31.920 --> 0:08:35.640 that big tech has accounted for a good proportion of 0:08:35.679 --> 0:08:38.920 the incredible rally that we've seen in US equities over 0:08:38.920 --> 0:08:42.520 the past few years. Joining me here on site, Phil Orlando, 0:08:42.800 --> 0:08:45.880 chief equity market strategist and head of Client portfolio Management 0:08:45.880 --> 0:08:50.960 that Federated Investors overseeing about five billion dollars in assets. 0:08:51.120 --> 0:08:54.880 You are going to be on a panel delayed gratification? 0:08:55.480 --> 0:08:58.600 Are we going to see delayed gratification for all of 0:08:58.640 --> 0:09:03.160 the naysayers of big tech? How much do these rising 0:09:03.720 --> 0:09:07.880 issues of regulation around big tech cloud your view or 0:09:07.960 --> 0:09:11.400 affect your view when it comes to how to allocate 0:09:11.440 --> 0:09:14.360 two tech shares? I think we could have some chopped 0:09:14.440 --> 0:09:17.480 this summer, and certainly this technology issue that has just 0:09:17.559 --> 0:09:20.959 popped up on the wires could certainly contribute to that. 0:09:21.080 --> 0:09:24.880 You look at UH sort of the political environment that's 0:09:24.920 --> 0:09:27.160 going on in Washington right now. You're hearing a lot 0:09:27.200 --> 0:09:30.680 of populism in terms of technology is getting too big. 0:09:30.720 --> 0:09:33.960 It's unregulated. We need to break them up, put some 0:09:34.040 --> 0:09:37.360 more laws in place. UH. And then you think about 0:09:37.400 --> 0:09:40.040 the fact that we've got the democratic primaries coming up, 0:09:40.080 --> 0:09:41.960 I think the right at the end of this month, 0:09:42.880 --> 0:09:46.719 I'm absolutely positive this will be a topic of discussion 0:09:47.000 --> 0:09:49.040 in terms of the Q and A with the candidates 0:09:49.080 --> 0:09:54.360 and the and the moderators. So the the noise, the fewer, 0:09:54.679 --> 0:09:57.840 the headline risk associated with this issue is likely to 0:09:57.880 --> 0:10:01.560 get bigger rather than smaller over the next couple of months. 0:10:01.760 --> 0:10:04.520 Our view is maybe the you know, the market UH 0:10:04.840 --> 0:10:07.880 could could have some chop over the over the summer months, 0:10:07.880 --> 0:10:10.800 and and you know, the technology issue could certainly be 0:10:10.920 --> 0:10:14.280 one of the issues that contributes to that chop. So, Phil, 0:10:14.360 --> 0:10:17.000 one of the things that's clearly been UH, you know, 0:10:17.080 --> 0:10:20.679 impacting markets over the last several months is trade concerns, 0:10:20.720 --> 0:10:23.760 first with China UH and then with Mexico, and of 0:10:23.800 --> 0:10:27.920 course the Mexico trade issues very tightly tied to immigration 0:10:28.480 --> 0:10:30.640 UH and how that should evolve. I know you recently 0:10:30.640 --> 0:10:33.800 put out a note on how you think UH immigration 0:10:34.280 --> 0:10:37.360 UM rules should be amended. Give us your thoughts on that. 0:10:38.400 --> 0:10:41.040 So the immigration issue is has been a hot button 0:10:41.040 --> 0:10:43.320 issue for me for a couple of years now. And 0:10:43.320 --> 0:10:46.360 and uh, the note that I just put out this week, 0:10:46.800 --> 0:10:49.440 uh looks at a couple of the big macro issues. 0:10:49.480 --> 0:10:51.920 On the one hand, you just got the Jolts report 0:10:51.920 --> 0:10:54.400 on Monday, the JULTU reports pretty good, seven and a 0:10:54.400 --> 0:10:57.880 half million new jobs. We've got more new jobs that 0:10:57.920 --> 0:11:00.320 we're creating in this country then we've got them ployed 0:11:00.320 --> 0:11:02.960 people on the sidelines that could possibly fill them, all right, 0:11:03.320 --> 0:11:05.800 So that's a good thing and a bad thing. On 0:11:05.840 --> 0:11:10.080 the other hand, our for our organic fertility in this 0:11:10.200 --> 0:11:14.079 country is at a cyclical trough. Are are women are 0:11:14.200 --> 0:11:18.079 only having an average of one point seven children per woman? 0:11:18.200 --> 0:11:21.400 That that's half of what the rate of fertility was 0:11:21.440 --> 0:11:23.600 when I was born in the fifties. I love the 0:11:23.600 --> 0:11:27.320 clinical terms for this, the organic fertility rates people having 0:11:27.360 --> 0:11:30.480 babies go on. Yeah, And and we understand what's going on. 0:11:30.559 --> 0:11:33.199 Women are focused more in their careers and their education, 0:11:33.360 --> 0:11:35.280 and and with a trillion and a half dollars of 0:11:35.320 --> 0:11:37.680 student loan dead couples, I think are making a conscious 0:11:37.720 --> 0:11:41.040 decision to have smaller families rather than larger families. It's expensive. 0:11:43.240 --> 0:11:45.640 I know, my kids, my youngest as a junior at 0:11:45.679 --> 0:11:51.680 Penn State right now. So I'm well, exactly exactly. So, 0:11:51.679 --> 0:11:55.360 So the point is that that we're we're producing less kids, 0:11:56.000 --> 0:11:58.920 and yet the labor market is strong enough that we 0:11:59.000 --> 0:12:01.560 need more workers. The solution, the way to bridge that 0:12:01.600 --> 0:12:05.360 gap is have an intelligent immigration policy, and and intelligence 0:12:05.400 --> 0:12:07.560 is sort of the key word here. That is an 0:12:07.600 --> 0:12:11.720 oxymoron when when referring to our leaders in Washington right now, 0:12:11.920 --> 0:12:13.400 they can't get out of their way. There's like the 0:12:13.440 --> 0:12:17.520 Keystone Cops trying to solve what should be a slam 0:12:17.559 --> 0:12:20.679 dunk issue in terms of making sure that we've got 0:12:20.800 --> 0:12:23.920 enough qualified workers coming in from from outside of the 0:12:23.920 --> 0:12:26.040 country in order to fill these jobs. So I think 0:12:26.040 --> 0:12:29.200 it's a legitimate question. It's one that that's been bothering me. 0:12:29.280 --> 0:12:31.360 I I so much so that I probably read about 0:12:31.360 --> 0:12:33.640 it every six months, you know. So it uh and 0:12:33.679 --> 0:12:37.080 so I wrote about it this week. So aside from 0:12:37.200 --> 0:12:39.640 fertility issues, and this is actually a very important one. 0:12:39.640 --> 0:12:40.880 I don't mean to diminish it. I mean it's one 0:12:40.920 --> 0:12:42.920 of the major drivers that people point to in Japan 0:12:42.960 --> 0:12:46.400 and why that abum. But I want to shift to 0:12:46.600 --> 0:12:50.079 one other area that's stagnant, and that is a US inflation. 0:12:50.200 --> 0:12:52.160 It does not appear to be going up, and we 0:12:52.240 --> 0:12:55.760 are seeing up markets price in increasingly. The Federal Reserve 0:12:56.040 --> 0:13:00.160 will cut rates next week and certainly thereafter. Do you 0:13:00.240 --> 0:13:03.920 think that's the right call? Inflation is benign? There's no question. 0:13:04.000 --> 0:13:07.480 The core Personal Consumption Expenditure Index, which is the FEDS 0:13:08.200 --> 0:13:11.120 preferred measure of inflation, is sitting at one point six 0:13:11.160 --> 0:13:13.760 percent as of the latest reading. Then we got a 0:13:13.760 --> 0:13:16.840 CPI number this morning. I think the core PC, the 0:13:16.920 --> 0:13:19.440 core c p I year a year, came down two 0:13:19.440 --> 0:13:22.360 percent even, Is that right, Lisa, Yeah, so it was 0:13:22.840 --> 0:13:25.719 core I'll look it up. I think it was two percent. Now, 0:13:25.720 --> 0:13:28.319 the spread the relationship between the PC and the CPI 0:13:28.400 --> 0:13:32.160 tends to be about a half percent. So that's consistent 0:13:31.320 --> 0:13:35.319 with Okay, that's consistent with the one point six pc 0:13:35.440 --> 0:13:39.040 numbers we are now. The market, I think, has built 0:13:39.120 --> 0:13:41.840 up in its mind that that inflation is too low 0:13:41.920 --> 0:13:43.400 and that the Fed is going to ride to the 0:13:43.440 --> 0:13:46.240 rescue at next week's f O m C meeting and 0:13:46.280 --> 0:13:49.560 start a rate cutting cycle. We disagree with that, and 0:13:49.600 --> 0:13:52.480 I think if, if, if we're right, that the Fed 0:13:52.640 --> 0:13:55.280 is not going to start cutting rates next week. That 0:13:55.400 --> 0:13:58.080 could represent some disappointment for the market, because the market 0:13:58.120 --> 0:14:00.800 has rallied pretty strongly here over the a couple of weeks. 0:14:00.960 --> 0:14:02.800 And there are a couple of issues. So issue number 0:14:02.800 --> 0:14:05.240 one is that inflation. I don't think it's a problem. 0:14:05.240 --> 0:14:08.000 I think it's benign, but I don't think we're risking 0:14:08.120 --> 0:14:12.080 a deflation or disinflationary sort of the environment. Point number two, 0:14:12.120 --> 0:14:15.640 We've got the G twenty meeting coming up in Osaka, Japan, 0:14:15.720 --> 0:14:17.480 at the end of the month. That's a very important 0:14:17.520 --> 0:14:20.880 meeting because we're expecting that she and Trump are gonna 0:14:20.920 --> 0:14:24.360 get together, uh and and you know, shake hands and 0:14:24.360 --> 0:14:26.800 and have a nice conversation, much like they did in 0:14:26.840 --> 0:14:29.560 Buenos Aires last year. And what that will do is 0:14:29.600 --> 0:14:33.960 not create a deal, but allow the the the beginning 0:14:34.120 --> 0:14:37.160 of a series of conversations between our minions and their 0:14:37.200 --> 0:14:40.760 minions too. I think get a trade deal back on track, 0:14:41.360 --> 0:14:44.400 let's say by Thanksgiving. Uh. And then the third issue 0:14:44.560 --> 0:14:46.680 is that that I wrote about this last week. The 0:14:47.160 --> 0:14:50.000 job's number we saw last Friday was terrible, and everyone's 0:14:50.000 --> 0:14:52.240 freaking out that we're going into recession. And I don't 0:14:52.240 --> 0:14:54.400 think that's the case. I think we had a bad number. 0:14:54.640 --> 0:14:56.240 I think it's an aberrant number, and I think the 0:14:56.280 --> 0:14:59.640 FED would be prudent to wait for another job's report 0:14:59.760 --> 0:15:04.440 or who before they they change policy dramatically. So my 0:15:04.520 --> 0:15:07.680 best guess is a cut from the FED, maybe at 0:15:07.680 --> 0:15:11.000 the July thirty one meeting at the earliest, and I 0:15:11.040 --> 0:15:13.560 think the market may be disappointed next week. What FED 0:15:13.640 --> 0:15:17.400 should do next week is take the dot off the 0:15:17.440 --> 0:15:20.840 board and then give us some happy talk about needing 0:15:20.840 --> 0:15:22.680 to come in, wanting to come in if they need 0:15:22.680 --> 0:15:25.440 to later in the cycle. Very good, Phil Orlando, Thank 0:15:25.480 --> 0:15:27.760 you so much for joining us. Phil Orlando, chief equity 0:15:27.800 --> 0:15:48.800 market strategist ahead of client portfolio management from Federated Investors. Well, 0:15:48.840 --> 0:15:52.280 the prospect of the U s slapping tariffs on Mexican 0:15:52.320 --> 0:15:55.080 goods is off the table for now, but it does 0:15:55.080 --> 0:15:59.720 appear that President Trump's patients with Mexico hinges on what 0:16:00.040 --> 0:16:03.520 may be an undeliverable promise, and that is to reduce 0:16:03.600 --> 0:16:06.760 some of the stream of immigration UH that the US 0:16:06.840 --> 0:16:09.920 is seeing at its southern border. Here to explain more 0:16:10.000 --> 0:16:12.400 about this is Josh wind Grove, a White House reporter 0:16:12.480 --> 0:16:15.560 joining us from Washington, d C. Josh, can you give 0:16:15.640 --> 0:16:18.640 us a sense of how much President Trump is sort 0:16:18.680 --> 0:16:21.720 of watching the flow of migration at the border in 0:16:21.800 --> 0:16:23.840 order to gauge whether or not to ramp up the 0:16:23.920 --> 0:16:27.520 rhetoric here with Mexico. I mean, he he has indicated 0:16:27.600 --> 0:16:29.920 that it is all about that, and that if those 0:16:30.040 --> 0:16:32.680 numbers don't go down it was a hundred and thirty 0:16:32.760 --> 0:16:36.280 three thousand apprehensions in May at the US Mexico border, 0:16:36.720 --> 0:16:39.480 then he's going to reserve the right to essentially do more, 0:16:39.880 --> 0:16:45.760 including maybe unsuspend those tariff threats. And we seem primed 0:16:46.160 --> 0:16:48.040 to kind of come to a head on it again, 0:16:48.120 --> 0:16:49.600 because of course there's a lot of reasons that the 0:16:49.680 --> 0:16:52.720 number is so high, and even those close to the 0:16:52.720 --> 0:16:55.920 presidents say that it's not there's no way that Mexico 0:16:56.000 --> 0:16:59.160 can do it on its own. Is a mix of factors, 0:16:59.160 --> 0:17:02.880 and Trump supporters would say that does include the need 0:17:02.920 --> 0:17:06.400 for changes in Congress. Refugee advocates would say it also 0:17:06.440 --> 0:17:10.800 includes addressing the root causes of the unrest in Central 0:17:10.840 --> 0:17:13.280 America that's sending these migrants on the road in the 0:17:13.359 --> 0:17:17.560 first place. So, Josh, is there any expectation that the 0:17:17.640 --> 0:17:20.800 plans that Mexico has initiated in terms of sending troops 0:17:20.800 --> 0:17:25.040 to its southern border. Can meaningfully have an effect. Yeah, 0:17:25.080 --> 0:17:27.440 I think most people think it would meaningful have an effect. 0:17:27.520 --> 0:17:31.199 I spoke yesterday with Barack Obama's former ambassador to Mexico, 0:17:31.240 --> 0:17:34.720 who thought it was a good framework. You know, everyone thinks, 0:17:34.720 --> 0:17:36.920 I think that this might be a good step. It's 0:17:36.920 --> 0:17:40.320 a question more of is it enough to really cut 0:17:40.359 --> 0:17:42.919 down that number? A hundred thirty three thousand is more 0:17:42.960 --> 0:17:46.320 than triple the same month a year ago. And I 0:17:46.320 --> 0:17:48.679 guess time will tell. One wrinkle on this though, is 0:17:48.680 --> 0:17:52.080 these numbers normally fall in the summertime. It's hot. People 0:17:52.119 --> 0:17:54.399 don't want to be, you know, walking a long distance 0:17:54.400 --> 0:17:57.320 in the United States as much. So if we do 0:17:57.400 --> 0:17:59.960 see those numbers drop, it could simply be be because 0:18:00.000 --> 0:18:03.040 as a seasonality. And then the question is, does take 0:18:03.080 --> 0:18:04.800 credit for that and you know, call his plan to 0:18:04.840 --> 0:18:07.600 win and move on? Uh? And even if he does 0:18:07.640 --> 0:18:10.560 do that, when they start rising again traditionally in the fall, 0:18:10.680 --> 0:18:13.440 as one would expect, does he get angry? Does he 0:18:13.520 --> 0:18:16.639 call it Mexicogan and say you're not doing enough? So, Josh, 0:18:16.680 --> 0:18:18.800 the reason why markets are so focused on that, and 0:18:18.800 --> 0:18:21.439 that's certainly one of the questions here at the b 0:18:21.560 --> 0:18:24.280 N Y Melon Pershing's inside conference point N team, where 0:18:24.320 --> 0:18:27.320 we are in Phoenix. The reason why people are focused 0:18:27.320 --> 0:18:30.320 on this is because US trade with Mexico is so 0:18:30.440 --> 0:18:34.560 fundamental to certain industries, in particularly the auto industry. I'm 0:18:34.640 --> 0:18:37.879 just wondering how companies can even make plans right now. 0:18:37.920 --> 0:18:41.240 I mean, basically, given that this all kind of hinges 0:18:41.480 --> 0:18:44.920 on a flow of migration here, what are the prospects 0:18:45.119 --> 0:18:47.119 for the U. S m c A to get past 0:18:47.400 --> 0:18:49.920 and some sort of longer lasting deal to give people 0:18:49.960 --> 0:18:52.480 conviction at this point? Yeah, I mean you raise a 0:18:52.520 --> 0:18:54.479 great point. Let me try to do with one point one. 0:18:54.760 --> 0:18:57.560 The scale of this is really difficult to overstate. Aside 0:18:57.560 --> 0:18:59.679 from China, the US buys more goods from Mexico than 0:18:59.720 --> 0:19:02.520 any the country. A five percent tariff across the board 0:19:02.520 --> 0:19:04.600 would affect a ton of stuff, and it would also 0:19:04.600 --> 0:19:06.480 affect a ton of stuff that crosses the border a 0:19:06.520 --> 0:19:09.160 bunch of times, like an auto production as you mentioned, 0:19:09.359 --> 0:19:11.840 So that tariff could compound pretty quickly in some of 0:19:11.840 --> 0:19:14.080 these companies to get into the weeds a bit a bit. 0:19:14.280 --> 0:19:16.280 Don't even have systems set up like the way they 0:19:16.280 --> 0:19:19.960 collect tariffs as his own you know, the whole gauntlet 0:19:20.000 --> 0:19:22.040 to run, you can imagine. And so if you've never 0:19:22.119 --> 0:19:24.000 been paying any you you you don't even know where 0:19:24.000 --> 0:19:28.399 to begin. So the potential headache for exporters, importers the 0:19:28.440 --> 0:19:32.280 economy is difficult to overstate. On the other side of 0:19:32.480 --> 0:19:35.439 the President simply likes tariffs. He believes that they are 0:19:35.480 --> 0:19:38.600 both an effective tool in negotiation and he believes that 0:19:38.640 --> 0:19:41.359 they're an effective thing generally. So I don't think you 0:19:41.359 --> 0:19:43.879 would ever rule out the chance that he would do it. 0:19:44.000 --> 0:19:46.400 He does want that U. S m C a trade deal. 0:19:46.680 --> 0:19:49.119 A lot of analysts think it's very difficult to imagine 0:19:49.400 --> 0:19:52.359 the Mexican government ratifying that deal. Is they still have 0:19:52.440 --> 0:19:54.560 to do. Of course, Congress also needs to ratify it 0:19:54.880 --> 0:19:57.960 if those tariffs are in place, So maybe we'll see 0:19:57.960 --> 0:20:00.280 if Congress can move on in the summer. So, Josh, 0:20:00.280 --> 0:20:03.880 you mentioned that hundred thirty thousand number of crossings recently. 0:20:04.000 --> 0:20:08.760 Is there a number that the Trump administration would find acceptable? Um, 0:20:08.840 --> 0:20:11.120 is there something we should be looking for? Well, yeah, 0:20:11.119 --> 0:20:12.919 it's a good question. I mean, they were we were 0:20:12.920 --> 0:20:15.040 down sort of the fifty thousand range just at the 0:20:15.040 --> 0:20:16.840 beginning of the year. I think if they got it 0:20:16.840 --> 0:20:19.280 back there, they'd be happy to claim victory. It's also 0:20:19.359 --> 0:20:21.640 noteworthy to say that this isn't the highest it's ever been. 0:20:22.240 --> 0:20:25.480 Diane fine Scene, a Democrat from California's noted this in 0:20:25.520 --> 0:20:28.960 a hearing yesterday. Was around one point six million coming 0:20:28.960 --> 0:20:32.280 around across the border annually, uh in and around two 0:20:32.400 --> 0:20:34.960 thousand Right now, we're on pace or nine hundred thousand, 0:20:35.000 --> 0:20:37.399 maybe a million, so a high number, higher than in 0:20:37.440 --> 0:20:40.800 recent years, much higher than in recent years, still fairly 0:20:40.960 --> 0:20:43.879 well below the highs that the US has scene in 0:20:44.040 --> 0:20:47.840 the past. So I guess that I'm wondering what are 0:20:47.840 --> 0:20:51.200 we looking for going forward in terms of some kind 0:20:51.200 --> 0:20:54.680 of guidance of the progress being made here. I think 0:20:54.720 --> 0:20:58.399 all I should be in July on that June number. 0:20:59.000 --> 0:21:02.879 Uh The US releases CDP releases annual or sort of 0:21:02.880 --> 0:21:07.159 monthly excuse me, monthly numbers of apprehensions at the border. 0:21:07.240 --> 0:21:10.160 If that June number is, you know, fair a bit 0:21:10.200 --> 0:21:13.560 lower than one thirties three, that's probably a good sign. 0:21:13.720 --> 0:21:16.719 If it is higher than, you know, I think all 0:21:16.800 --> 0:21:18.920 eyes will be on the President to react. And if 0:21:18.960 --> 0:21:20.480 it is lower and we get through a summer and 0:21:20.640 --> 0:21:23.320 we don't hear much about this again, investors might want 0:21:23.320 --> 0:21:26.160 to look again back and if that number starts rising 0:21:26.160 --> 0:21:28.680 in the fall, Traditionally, as I said, fall the weather 0:21:28.680 --> 0:21:31.960 gets a little more reasonable people, those numbers tend to 0:21:32.080 --> 0:21:35.640 rise again. Regardless of these measures, those numbers could rise again, 0:21:35.680 --> 0:21:37.280 in which case we could be back to square one. 0:21:37.840 --> 0:21:40.080 Josh Wyn Grove, thank you so much. Josh wyn Grove 0:21:40.240 --> 0:21:44.040 is a White House reporter for Bloomberg News, reporting from Washington, 0:21:44.160 --> 0:22:02.199 d C. It is going to reach more than a 0:22:02.280 --> 0:22:04.960 hundred and five degrees where we are, which is the 0:22:04.960 --> 0:22:08.120 Phoenix Convention Center at b and Y Melon Pershing Insights 0:22:08.160 --> 0:22:12.879 Conference for nineteen and one. Area of focus is the 0:22:12.880 --> 0:22:15.560 ongoing debate man versus machine, at least that's how it's 0:22:15.560 --> 0:22:17.919 been cast, the rise of E t f S, the 0:22:18.080 --> 0:22:22.440