Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: Terminal and the Bloomberg Business App. Jim Bianco of Bianco
Speaker 2: Research is watching ten year bonyields and writes the following.
Speaker 2: If rates are steady, then ten year bonields should continue
Speaker 2: sideways before heading above five percent, and the curve will steepen.
Speaker 2: Jim joins us now for more. Jim Bianco, I want
Speaker 2: to go to a quote from Michael Hartner Bank for
Speaker 2: America and get your thoughts on this take this morning,
Speaker 2: we say hot three percent USCPI January is a blessing
Speaker 2: in disguise for both bonds and starks. Michael and the
Speaker 2: team go on to say rising inflation means Trump must
Speaker 2: go small, not big. On terraff and immigration in the
Speaker 2: coming months to avoid fanning a second wave of inflation. Jim,
Speaker 2: would you agree with that sake, No.
Speaker 3: I would not. I mean, we all know the phrases.
Speaker 3: You're supposed to take Trump seriously, but not literally. And
Speaker 3: that's what I think we've seen in the market in
Speaker 3: the last twenty four hours. They're torturing themselves to basically,
Speaker 3: you know, micro read what Trump has said, but take
Speaker 3: them seriously. He intends on doing tariffs, and we are
Speaker 3: going to get tariffs, and they're going to come. And
Speaker 3: as much as we want to try and talk ourselves
Speaker 3: out of it, they are coming later this year. And
Speaker 3: I might add markets get things wrong all the time.
Speaker 3: It convinced itself in January twenty twenty COVID wasn't going
Speaker 3: to be anything, and it was.
Speaker 4: It convinced itself in August.
Speaker 3: Of twenty twenty that, you know, the young carry trade
Speaker 3: unwined was the biggest deal we've ever seen, and it wasn't.
Speaker 3: So it gets things wrong a lot. And take Trump seriously.
Speaker 2: Aside, Jim, With that in mind, as you look at
Speaker 2: bonds and stocks, and you look at stocks, clothes to
Speaker 2: old time highs and bond yields near the low end
Speaker 2: of the range for the year so far.
Speaker 3: What do you think is more vulnerable, Oh, I think
Speaker 3: the bond market is probably more vulnerable at this point.
Speaker 3: The hot CPI number, I think is still a tell
Speaker 3: that the at least at a minimum, the road to
Speaker 3: two percent is now. You know, we've been talking about
Speaker 3: the last mile for two years, and we're probably going
Speaker 3: to have to talk about it for another two years
Speaker 3: before we get there to two percent.
Speaker 4: That we've got sticky inflation.
Speaker 3: And if we've got sticky inflation, the Fed is probably
Speaker 3: going to be done raising cutting rates, if not maybe
Speaker 3: one more this year, although I think they might be
Speaker 3: done for the year, meaning that the funds rate is
Speaker 3: still going to end the year with a four handle
Speaker 3: on it, even with one more cut. And if the
Speaker 3: yield curve continues to steep in and we see some
Speaker 3: kind of normalization of the curve, which we've been seeing
Speaker 3: for the last several months, that means that you could
Speaker 3: be pushing the tenure yield above five percent sometime later
Speaker 3: this year.
Speaker 4: And I still think that that's in the cards.
Speaker 1: Jim, when you take a step back, it feels like
Speaker 1: it's a little bit of a numbing and ironment. There
Speaker 1: is so much noise you have. On one hand, about
Speaker 1: three days ago, we were talking about that inflationary risk,
Speaker 1: and you would have had a lot of compatriots talking
Speaker 1: about five percent treasure yields. At the same time, you
Speaker 1: got inflation data that looked bad on the surface, but
Speaker 1: people got enough comfort from the individual details to say, actually,
Speaker 1: this means that disinflation is intact. How do you strip
Speaker 1: out the noise and have conviction about inflation call and
Speaker 1: the possibility of expectations getting truly unmoored.
Speaker 3: Well, I think if you look at the way that
Speaker 3: the markets have been trading, and if you say start
Speaker 3: with the stock market, the S ANDP is at the
Speaker 3: higher end of a range.
Speaker 4: It's been since two weeks after the election.
Speaker 3: It's been trading in about a fifty eight hundred to
Speaker 3: sixty one hundred range for like I said, over two months,
Speaker 3: and it's just at the top end of the range.
Speaker 3: And the same thing has been happening with the bond
Speaker 3: market too. On November fifteenth, we're four to fifty, we're
Speaker 3: four fifty three. We ended the year at four fifty six.
Speaker 3: So there's a lot of noise and the markets move
Speaker 3: around a lot. Yesterday was a big individual day in
Speaker 3: the stock market, but the trend is still sideway, and
Speaker 3: that says that that's still a market that is has
Speaker 3: little convictioners unsure of where to go next. So it
Speaker 3: sees all the news and it's not really reacting to
Speaker 3: it other than having big days here or there, but
Speaker 3: moving sideways.
Speaker 4: And I think ultimately it's going to give a way too.
Speaker 3: There's going to be terrifts, there's going to be a
Speaker 3: little bit more inflation, and interest rates are going to
Speaker 3: go higher.
Speaker 1: Jim, when you talk about the inflationary impulse, are you
Speaker 1: really attributing that to policy or do you see something
Speaker 1: in the internals of the data that a lot of
Speaker 1: people are just dismissing as highlighting some sort of pressure
Speaker 1: that everyone is closing their eyes to.
Speaker 4: No, I see something in the data.
Speaker 3: Every time we have a financial crisis or recession, and
Speaker 3: we had both in twenty twenty, the economy changes. Change
Speaker 3: is not worse, it's not dystopian. The big change that
Speaker 3: happened in the economy coming out of twenty twenty.
Speaker 4: Was remote work.
Speaker 3: Over a quarter of the country is now doing remote work,
Speaker 3: and we know what Jamie Diamond's attitude about that is
Speaker 3: from a couple of days ago.
Speaker 4: He doesn't like it at all.
Speaker 3: It is here, it is not going away, and that
Speaker 3: is a fundamental change not only to the.
Speaker 4: Way we work, but also to the way we live
Speaker 4: our lives.
Speaker 3: And I think that that is building excess pressures on
Speaker 3: prices and leaving us with higher inflation, not eight ten
Speaker 3: or Zimbabwe inflation, but more like three to four percent inflation.
Speaker 4: And core CPI just finished it's forty fifth month in
Speaker 4: a row above.
Speaker 3: Three percent, So we've been seeing that kind of pressure,
Speaker 3: although we continue to try and tell ourselves that no
Speaker 3: we're going to go back to two percent. That you
Speaker 3: know we're going to return, as Jpal says, to a
Speaker 3: pre pandemic environment, the cycle changed.
Speaker 4: We're in a different cycle right now.
Speaker 5: Jim, I just love to quickly get your thoughts before
Speaker 5: we end on what you actually think is going on
Speaker 5: with tariffs, because you say the market should be taking
Speaker 5: Trump seriously and they didn't. But he didn't actually sign
Speaker 5: anything formidable yesterday. It's an investigation into these countries. There
Speaker 5: was not a single tar iff placed yesterday. And my
Speaker 5: read is he's a negotiating mode to get some sort
Speaker 5: of concessions, especially out of the European Union. Would you
Speaker 5: not agree with that?
Speaker 4: Yeah.
Speaker 3: I think tariffs are leverage, and I think they are
Speaker 3: big leverage. And I think that when it comes to
Speaker 3: negotiating with our partners, whether it's Canada, Mexico or the
Speaker 3: European Union, Trump holds more cards than they do, and
Speaker 3: I think that these tariffs are a threat and he
Speaker 3: wants something else. Now, in the case of Europe, I
Speaker 3: think what he wants is he wants more security arrangements.
Speaker 3: He wants them to spend five percent of their budget
Speaker 3: on a defense and he even said yesterday he wants them,
Speaker 3: when they're spending five percent of their budget on defense,
Speaker 3: to buy.
Speaker 4: More stuff from defense makers in the United States.
Speaker 3: So I think that all of this is more leverage
Speaker 3: than an external revenue service to raise revenues. I think
Speaker 3: he wants some of that too, but I think it's
Speaker 3: really about negotiating and we need to understand that that's
Speaker 3: what he's trying to do.
Speaker 2: Hi, Jim Grid's kickoff this morning with you. I am
Speaker 2: freciate it. Jim Pianco at Biancout Research Pit, a chair
Speaker 2: of Academy Securities, saying maybe we need to squeeze some shorts.
Speaker 2: But I suspect we're going to see tariff related headlines
Speaker 2: to spook the market as early as the next week.
Speaker 2: Pet Joined, just now for more, Pete, good morning, it's
Speaker 2: good morning. Yeah, what happened yesterday? Should we start there?
Speaker 6: Yeah?
Speaker 7: I feel like it wasn't really Donald Trump speaking. I
Speaker 7: feel like he got sucked into his advised advisors to
Speaker 7: come up with this very mellow message. Right, if you
Speaker 7: think about Trumpets, We're gonna take over Greenland.
Speaker 6: Canada should be the fifty first state.
Speaker 7: Right, there's no nuances about well, Quebec doesn't like Ontario.
Speaker 7: He's always very aggressive, even on the initial set of tariff.
Speaker 7: So I feel like the rest of the world's kind
Speaker 7: of like, Okay, what was really said? And I do
Speaker 7: think tariffs resonates with people, trade protection resonates with people.
Speaker 7: I'm not even sure that resonates. So I feel that
Speaker 7: sometime next week he's going to be like, no one's
Speaker 7: taking this seriously.
Speaker 6: I'm not going to listen to my advisors.
Speaker 7: I'm going to go back to being myself and I'm
Speaker 7: going to send a clear message.
Speaker 2: I'd love to have Potin back in the G seven.
Speaker 2: Russia should be sitting at the table that was restrained
Speaker 2: version of the president yesterday.
Speaker 6: So that was an interesting one.
Speaker 7: I think it's again you go back and why Russia
Speaker 7: was brought into the G seven or G eight at
Speaker 7: the time was Okay, maybe if they work with us,
Speaker 7: you'll move forward. I think it's a little bit incorrect
Speaker 7: right now because there should be some sort of punishment
Speaker 7: for the invasion, and certainly this is going to send Europe,
Speaker 7: you know, in a tizzy. Right Europe's not gonna be
Speaker 7: comfortable with us at all. Europe's not comfortable with any
Speaker 7: form of peace right now, let alone bringing him back.
Speaker 7: So again, I think there's all this friction, and I
Speaker 7: think people have.
Speaker 6: Been very when we jump in.
Speaker 2: Europe's not comfortable with any kind of peace right now.
Speaker 2: Can you translate that, because that just sends shocking too people.
Speaker 2: What does that mean?
Speaker 7: I think Europe, much more than US, is very worried
Speaker 7: about If you give Putin an inch, you've given them
Speaker 7: a mile, and that's any sort of a core that
Speaker 7: gives Putin time to you know, take his win, consolidate,
Speaker 7: leads him coming back for more than two years down
Speaker 7: the road. That's I think very prevalent within Europe. It's
Speaker 7: a thought that's much more concerning to them, and they
Speaker 7: are sitting there much closer to the front lines, so
Speaker 7: I think their view of a piece is very different
Speaker 7: than ours, which.
Speaker 1: Is the reason why a lot of the commentary that
Speaker 1: we hear out of the Earth Union as well as
Speaker 1: analysts in the United States is this doesn't really move
Speaker 1: the needle further towards some sort of peace agreement that
Speaker 1: is viable and long lasting. You have a lot of
Speaker 1: generals ed at your firm at Academy Securities. Do they
Speaker 1: agree or do they think that actually having conversations is
Speaker 1: a really solid step, just like the market seems to imply.
Speaker 7: So we think there is going to be a deal
Speaker 7: done this year. I think whether Europe likes it or not,
Speaker 7: it's going to happen. We think that the Russian frozen
Speaker 7: dollar reserves are going to play a big part of that.
Speaker 7: So that's going to be the carot and stick right Pudin.
Speaker 7: We could try and fight you and keep all these
Speaker 7: dollar reserves, or we can give you some back and
Speaker 7: if you make peace Ukraine, you get a bunch of
Speaker 7: dollar reserves to give up some land and do the rebuilding.
Speaker 6: So I think that's a big part of it.
Speaker 7: There'll be some sort of vague path for China or
Speaker 7: sorry for Ukraine to head towards NATO that Pudin probably
Speaker 7: won't believe in, and there's a chance, right if you.
Speaker 6: Pull people together. I think most of our generals.
Speaker 7: Again, I think one of the more interesting questions we've
Speaker 7: been asked periods, what would you do most as a
Speaker 7: general to ensure peace for the US?
Speaker 6: US like fund the State Department. More so, I think.
Speaker 7: Talking and engaging with countries, that's a way to pull
Speaker 7: it together. So I don't know that there's an obvious
Speaker 7: lasting piece, but if you stop the war, you get
Speaker 7: people talking, there's that potential.
Speaker 1: Markets are sniffing this out, and there's a question of
Speaker 1: how much that is giving sort of a turbo charged
Speaker 1: effect to some of the optimism that we heard a
Speaker 1: couple months ago about the euro Maybe things have gotten
Speaker 1: so bad they can't get any worse.
Speaker 6: Do you lean into that?
Speaker 1: And it's not just with Europe but also with China
Speaker 1: that if there is discussion and there is some semblance
Speaker 1: of deal making, then maybe that could actually reignite some
Speaker 1: of the growth in the rest of the world, not
Speaker 1: just the US.
Speaker 6: So at the start of the year we are very adamant.
Speaker 7: We call the geopolitical opportunities and risk, and I think
Speaker 7: everyone talks about geopolitical risks.
Speaker 6: We felt there'd be some sort.
Speaker 7: Of resolution this year in Ukraine, Russia, there'd be some
Speaker 7: sort of resolution with Iran Israel. Those are going to
Speaker 7: be very positive for those regions. I think Germany can
Speaker 7: Actually this might help Germany out of the slump, especially
Speaker 7: if Ukraine's given these dollar reserves to rebuild. Poland I
Speaker 7: think is going to be a huge beneficiary of this.
Speaker 7: I think in the next few years you're going to
Speaker 7: see Poland's importance grow more and more. And even when
Speaker 7: Vance talks about pulling troops out of Germany, at least
Speaker 7: in the past Trump administration, it was pulling troops out
Speaker 7: of Germany and putting them in the Baltics, putting them
Speaker 7: in Poland for two reasons. One closer to Russia, so
Speaker 7: more important, and two this goes back to Trump. Having
Speaker 7: a US military base in your country provides huge economic
Speaker 7: benefits to that country. Right, the military spends money, the
Speaker 7: people there spend money. So if Germany's not spending their
Speaker 7: three percent, let's give it to the Baltics who are
Speaker 7: spending their three percent. Let's give it to Poland, who's
Speaker 7: done a lot. So I think there's going to be
Speaker 7: a lot of you know, thought about this and it's
Speaker 7: not simplistic.
Speaker 1: Do you think that maybe then the long dollar trade
Speaker 1: is crowded because right now what we're seeing is actually
Speaker 1: a push towards the rest of the world. Gets your
Speaker 1: house in order.
Speaker 7: Yes, So I would say right now the portfolio we're
Speaker 7: recommending people is very contrayan. But we still like despite
Speaker 7: all the friction that we see with China, despite China
Speaker 7: as national security threat number one, FXI and k web
Speaker 7: By thinking you're going to continue to do to well,
Speaker 7: they're heavily under owned.
Speaker 6: China's trying to do its own thing.
Speaker 7: Trump seems to back off and then periodically I think
Speaker 7: that could explode higher. I like European stocks, and I
Speaker 7: do like the chip makers in the US, but I
Speaker 7: like the ones that can be domestic chip makers. I
Speaker 7: think you're seeing more and more of this. We've been
Speaker 7: talking about it since day one of Trump. He wants
Speaker 7: a domestic chip industry. We need to be able to
Speaker 7: make chips. That's going to be part of national security.
Speaker 7: I think that's just starting to take off. And we've
Speaker 7: seen some single stock reactions this week that I think
Speaker 7: are just the beginning of what can come.
Speaker 5: Everything you're saying to me, I keep thinking Trump is
Speaker 5: very transactional, this nuance, this idea of pulling troops out
Speaker 5: of Germany, but not to pull them out of Europe,
Speaker 5: but put them in the Baltics. Isn't that what the
Speaker 5: Europeans are Going back to Jonathan's point, Trump yesterday saying
Speaker 5: he liked to see Putin back at the table to
Speaker 5: the G eight. Well, Russia was kicked out because of
Speaker 5: annexation illegal annexation of Crimea. At the same time Germany
Speaker 5: was still willing to build Lord Stream too years later.
Speaker 7: Yeah, and one thing I would say, there's I think
Speaker 7: one thing. Europe's getting a little bit ahead of itself.
Speaker 7: I don't think Russia is coming back to deliver cheap
Speaker 7: gas to Germany anytime soon.
Speaker 6: I think Russia's really moved on.
Speaker 7: They're like, well, China's going to be a better customer,
Speaker 7: India is going to be a better customer. They're both
Speaker 7: going to be buying fossil fuels for fifty year in
Speaker 7: the future. Germany wakes up every day saying we're not
Speaker 7: going to use fossil fuels ever again, and then uses
Speaker 7: fossil fuels. So I don't think you're going to see this,
Speaker 7: you know, return to what it was. That switch has
Speaker 7: been broken. It's not coming back. I think the US
Speaker 7: has a better chance of establishing relationships with this And
Speaker 7: the other thing I think.
Speaker 6: You pointed out earlier is tariffs.
Speaker 7: Trump is going to be carrot and stick with everyone.
Speaker 7: Here's what you get if you behave nicely.
Speaker 6: Here's what you know.
Speaker 7: And that may work, it may backfire. That's going to
Speaker 7: be the big question.
Speaker 5: So right now, what do you think he wants his
Speaker 5: major concessions when it comes to teriffs.
Speaker 7: I think he does want something that allows us manufacturing
Speaker 7: to grow, something that makes it easier to build things here.
Speaker 7: And of all things we look at, I think the
Speaker 7: one he's most committed to and the one where we
Speaker 7: might get subsidies is the chip industry. I think everything
Speaker 7: else would be nice. I think that's a must have.
Speaker 7: And so when you think about must haves, it's the
Speaker 7: chip industry.
Speaker 2: You said, the GI who said it would be the GI.
Speaker 5: You're thinking Canada gets kicked out because they'll be part
Speaker 5: of the fifty first state, so.
Speaker 2: Then it's still the G seven.
Speaker 4: Just stand up in minded.
Speaker 6: I know that's what you're thinking.
Speaker 5: If you said it to me yesterday.
Speaker 2: The pressure was building into these comforts again on Canada yesterday,
Speaker 2: wasn't it.
Speaker 6: What's that all about?
Speaker 3: You know?
Speaker 7: I think again that's why I found what he says
Speaker 7: about Canada, for example, versus what he did on your
Speaker 7: global tariffs so interesting. So if you're Canada in Mexico
Speaker 7: right now or even some extent China, you're still facing
Speaker 7: the first round of tariffs and your fentanyl negotiations. Then
Speaker 7: you got slapped with twenty five percent on aluminum steel,
Speaker 7: and now there's this vague talk about reciprocals and what
Speaker 7: are you even negotiating now? I think his message was
Speaker 7: too muddled yesterday. I think markets took it comfortably because Okay,
Speaker 7: this isn't going anywhere. I think that's where he gets
Speaker 7: disappointed in the next few days, when people don't show
Speaker 7: up to kiss the ring, don't come saying, hey, President Trump,
Speaker 7: what do.
Speaker 6: We need to do?
Speaker 7: And that's when I think he ups the rhetoric because
Speaker 7: he does want people to come to the table. I
Speaker 7: just don't think yesterday's message brings people to the table.
Speaker 2: Right now, the marcut's not taking a seriously, that's for Showupay,
Speaker 2: it's going to say as a wis pit a chair
Speaker 2: that academy, let's get you to I love Oshatagas who
Speaker 2: joins us now, Janet, I think a tough question. What
Speaker 2: do you say to clients at the moment? Who asks you, Jeanette,
Speaker 2: what do you think is going to happen on April first?
Speaker 2: What'd you tell them?
Speaker 6: So?
Speaker 8: I think the one thing that we've noticed is that
Speaker 8: it is important to have a difference between tariffs on
Speaker 8: China and tariffs on the rest of the world. We
Speaker 8: have noticed that Trump has proposed tariffs several times and
Speaker 8: in the beginning for four weeks of his administration, but
Speaker 8: only the tariffs on China the additional ten percent, have
Speaker 8: actually gone into effect. Everything else seems to be up
Speaker 8: for negotiation. So we did have Canada and Mexico already negotiate,
Speaker 8: We had Columbia already negotiate. They're setting up a timeframe
Speaker 8: saying you have basically until April first to start making
Speaker 8: some offers. Obviously, you had Prime Minister Mody coming into
Speaker 8: Washington yesterday. He came ready to offer some things to
Speaker 8: Trump to try to fix that reciprocal trade relationship with
Speaker 8: the US. And also the fact that these tariffs were
Speaker 8: announced while jd. Vance is in Europe for the Munich
Speaker 8: Security Conference is also important to try to say Europe,
Speaker 8: you need to do something to change the relationship with
Speaker 8: the United States.
Speaker 5: Well, Janette, we do have the head of the European
Speaker 5: Parliament Trade Committee saying that they're willing to lower the
Speaker 5: tariff when it comes to autos. What else could Europe
Speaker 5: give the United States in terms of concessions in these negotiations.
Speaker 8: So I think definitely the autos has been a thorn
Speaker 8: in Trump's side for quite some time. So getting that
Speaker 8: rate down from ten percent to closer to two point
Speaker 8: five and matching the US rate would be quite important. Obviously,
Speaker 8: US l G has also been really important during the
Speaker 8: entire Ukraine conflict. I think that Trump is definitely looking
Speaker 8: for Europe to buy and more US LERG and then
Speaker 8: also defense. So I think one of the things that
Speaker 8: plays into Trump talking about lowering US defense spending is
Speaker 8: also having other countries, including India, including Europe, buy more
Speaker 8: US defense products and equipment, and so that I think
Speaker 8: also kind of goes into this piece where they're trying
Speaker 8: to get Europe to pay more for its own defense
Speaker 8: and be less reliant on the United States, but still
Speaker 8: purchase more things from the U States.
Speaker 1: Jane, We've been speculating about some of these proposals for
Speaker 1: a while. What specifically did we learn yesterday from a
Speaker 1: proposal that was really light in details.
Speaker 8: So I think the point is is that this could
Speaker 8: also be One of the things that I thought was
Speaker 8: very interesting is that Trump did say this might be
Speaker 8: somewhat of a replacement for his universal tariff that he
Speaker 8: proposed to do a ten percent tariff on all countries.
Speaker 8: This is a way that they have a new trade
Speaker 8: law that they're using. It's not busy, it's an old
Speaker 8: trade law that hasn't been used, but that's where they're
Speaker 8: looking to actually apply this. But it's saying that this
Speaker 8: is also more of a one on one basis, saying
Speaker 8: that whatever that country's tariff rate on the US is,
Speaker 8: if they lower it, that is an ability to avoid
Speaker 8: the tariffs or to change other non tariff barriers that
Speaker 8: are impeding US trade. So it shows that there's actually
Speaker 8: a lot of room for negotiation for changes to avoid
Speaker 8: these terraffs from going into effect, and also shows that
Speaker 8: it could be done a more one on one basis
Speaker 8: rather than a broad universal tariff. I think Trump is
Speaker 8: really trying to focus on countries with which the US
Speaker 8: has large trade deficits. Those are countries like China, Mexico, Vietnam, Japan,
Speaker 8: South Korea, Thailand. Those are really probably where he's going
Speaker 8: to be focused India as well, actually, but those are
Speaker 8: whereas going to be focused on, and then he can
Speaker 8: kind of move on to other countries. But I think
Speaker 8: that is kind of what we saw is a little
Speaker 8: bit of a change there where you see it could
Speaker 8: be a little bit less broad in the sense of
Speaker 8: going after the entire all imports coming into the United States,
Speaker 8: but also still shows that there is this room for negotiation.
Speaker 1: Just quickly, Marcus are taking this as an idea that
Speaker 1: maybe this president doesn't want tariffs for tariff's sake to
Speaker 1: raise money. Do you think it's fair to discount that
Speaker 1: at this point?
Speaker 8: So I think he does want tariffs for the revenue purposes, obviously,
Speaker 8: the Congress does have to pass a large text bill.
Speaker 8: Congress is not going to legislate on tariffs, but having
Speaker 8: that revenue come into the treasury is certainly something that
Speaker 8: he could point to to say that this is not
Speaker 8: going to cost as much as it has been perceived,
Speaker 8: especially when we're looking at the deficit concerns, particularly coming
Speaker 8: out of the House Conservatives. But I do also think
Speaker 8: that it's not that he wants to necessarily have terariffs
Speaker 8: in place just to have terarifs in place. He wants changes.
Speaker 8: He wants other countries to make changes that are more
Speaker 8: beneficial to the United States, saying repeatedly that he thinks
Speaker 8: that the US has been treated poorly, and I think
Speaker 8: that is more ultimately his goal.
Speaker 2: Jenette appreciate the update. Thank you Janeto as statiguus joining
Speaker 2: us around the time. Well, Lindsay, pix a stainful. A
Speaker 2: whole bunch of headwinds have held bad the consumer consumer
Speaker 2: centima we've seen that be hit in the last month
Speaker 2: or so. Is it hurting spending?
Speaker 9: Well, clearly, I think this number really starts to poke
Speaker 9: some of the holes into the thesis that we see
Speaker 9: this ongoing resilience of the consumer. Now, broadly speaking, we
Speaker 9: continue to see the consumer spend in the marketplace on
Speaker 9: goods and services, but it's that loss of momentum. It's
Speaker 9: that second derivative decline of the consumer slowing the pace
Speaker 9: of still positive expenditures. Now, Lisa, as you pointed out,
Speaker 9: a lot of this weakness is offset by earlier upward
Speaker 9: revisions to prior months. That being said, they're clearly still
Speaker 9: challenges facing the consumer in this environment of higher prices,
Speaker 9: higher borrowing costs, the resumption of student debt payments. There's
Speaker 9: still a lot of challenges facing the average American and
Speaker 9: the average household balance shape.
Speaker 1: I feel like we're whipsawd in terms of a narrative
Speaker 1: every day. One day it's weakness that potentially could be
Speaker 1: the biggest headwind to the market this year. The other
Speaker 1: it could be inflationary in an upwoard growth shock.
Speaker 6: Which is it, well, I think it goes together.
Speaker 9: I think inflation is one of the biggest challenges that
Speaker 9: we're seeing way on consumers at this point. As consumers
Speaker 9: are forced to face this burden of elevated prices as
Speaker 9: they have been for years, that's going to continue to
Speaker 9: erode their ability to spend in the marketplace. Now we've
Speaker 9: seen consumers turn to many of these one off scenarios
Speaker 9: by now pay later turning to credit cards with balances
Speaker 9: over now one point two trillion dollars. But as that
Speaker 9: burden continues to increase, that's going to ameliorate their ability
Speaker 9: to find these additional supplements to continue to spend at
Speaker 9: this pace. So we've gone from double digit spending down
Speaker 9: to eight, down to six. We're now averaging just under
Speaker 9: three percent since the start of twenty twenty three. That's
Speaker 9: still indicative of a solid two percent GDP pace, but
Speaker 9: if we slow further from here, that could start to
Speaker 9: add to the momentum of a stagflation storyline.
Speaker 1: So the pushback that we get from the stagflation fears
Speaker 1: is if you actually look at the data inside of
Speaker 1: some of the inflation metrics, it's not that bad, and
Speaker 1: it's steadily disinflationary, and it really just matters core PCEE,
Speaker 1: which is fine, and everything else is just noise. Do
Speaker 1: you agree.
Speaker 9: I think we've seen a lot of improvement from earlier
Speaker 9: peak levels. I don't want to throw cold water on
Speaker 9: the improvement that we've seen, but we are not in
Speaker 9: a clear disinflationary environment at this point as of last year,
Speaker 9: a lot of noise, a lot of volatility in the metrics,
Speaker 9: and more recently we've seen not just a move sideways,
Speaker 9: but upward acceleration for four consecutive months in the PPI
Speaker 9: and the CPI and some of the core metrics. The
Speaker 9: supercore CPI housing alone double the two percent target. So
Speaker 9: with that acceleration, we expect the PC and the core
Speaker 9: PC to remain closer to two and a half percent,
Speaker 9: which still perpetuates the concern then of choking off upside
Speaker 9: potential for growth.
Speaker 1: We're dominated by headlines about policy changes that could be
Speaker 1: coming down the pike, and we are awaiting a discussion
Speaker 1: from JD. Vance And I'm wondering, from your perspective, how
Speaker 1: quickly some of what's being discussed percolate into the economic
Speaker 1: data and backdrop that you're seeing.
Speaker 9: Well, it can certainly add to the uncertainty in the marketplace.
Speaker 9: It can add to the uncertainty we see in consumer confidence,
Speaker 9: and I think that was in good part behind that
Speaker 9: drop that we saw at the start of the year.
Speaker 9: But in terms of filtering into the actual price data
Speaker 9: that I think will be extended out probably about six
Speaker 9: months or so because businesses have already responded in anticipate
Speaker 9: of those tariffs, of those higher prices, so a lot
Speaker 9: of that inventory build has already been taken into account.
Speaker 9: So we're not going to see that filter into the
Speaker 9: price metrics for some time, but again it will continue
Speaker 9: to cause near term volatility and uncertainty.
Speaker 2: Lindsay, it's great to catch up with you, as always,
Speaker 2: very Lindsaypix of there as Steve Fuller. This is the
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