WEBVTT - Bloomberg Surveillance TV: April 2, 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 am 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 --> 0:00:37.080 Bloomberg Terminal and the Bloomberg Business App. Joining us now 0:00:37.159 --> 0:00:39.920 the former senior Trum Trade advisor Kelly. I'm Shaw Kelly, 0:00:40.000 --> 0:00:42.320 and welcome back to the program. The Press Secretary says 0:00:42.400 --> 0:00:44.920 it will work. Our question is what will work? What 0:00:45.120 --> 0:00:46.640 is the ultimate objective? 0:00:47.680 --> 0:00:50.599 Well, good morning, as I'm saying to most of my clients, 0:00:50.680 --> 0:00:52.040 Happy Liberation. 0:00:51.680 --> 0:00:54.800 Day to those who observe, the truth is, we don't know. 0:00:54.840 --> 0:00:57.000 When I heard your last guest say that he has 0:00:57.040 --> 0:00:59.319 said I don't know seventeen times, and I think that's 0:00:59.360 --> 0:01:01.520 where most advisors are at the moment. 0:01:01.920 --> 0:01:03.880 It could be a number of actions. It could be 0:01:03.920 --> 0:01:04.800 anything from. 0:01:04.920 --> 0:01:08.560 Reciprocal tariffs where a series of countries have a number 0:01:08.800 --> 0:01:12.080 that's assigned to them that represents their tariff and non 0:01:12.120 --> 0:01:15.720 tariff barriers. It could be a global sweeping tariff, or 0:01:15.720 --> 0:01:17.480 it could be some mix in between. 0:01:18.080 --> 0:01:20.960 Kellyan, what is the goal of these tariffs? What is 0:01:21.000 --> 0:01:22.840 the president leaning on at the moment? Because we heard 0:01:22.840 --> 0:01:24.960 that they're supposed to be revenue raisers, and at the 0:01:25.000 --> 0:01:27.240 same time, in the next breath, we hear people from 0:01:27.240 --> 0:01:30.120 thedministration say that he wants to cut deals with some 0:01:30.240 --> 0:01:31.080 trading partners. 0:01:32.440 --> 0:01:32.720 Yeah. 0:01:32.959 --> 0:01:37.160 From my perspective, I think the president has two primary objectives. 0:01:37.319 --> 0:01:41.080 So first is to address the long standing trade deficit, 0:01:41.440 --> 0:01:44.400 that trillion dollar trade deficit that the United States has 0:01:44.480 --> 0:01:47.800 with a number of countries around the world and predominantly 0:01:47.800 --> 0:01:52.400 coupled in about fifteen economies. The second goal is really 0:01:52.440 --> 0:01:55.120 about just this uneven playing field. And when I was 0:01:55.160 --> 0:01:57.400 in the first Trump administration, I heard him talk about 0:01:57.400 --> 0:01:59.200 this all the time, the fact that it was just 0:01:59.240 --> 0:02:02.880 fundamentally unfair that other countries had higher tariffs than the 0:02:03.000 --> 0:02:05.520 United States, And so I think he's looking to level 0:02:05.560 --> 0:02:09.040 the playing field. Now he does talk about revenue as well, 0:02:09.120 --> 0:02:11.800 but to my mind, that really is a secondary concern 0:02:12.200 --> 0:02:14.959 and I think he's really going after the brass ring, 0:02:15.040 --> 0:02:17.960 which is to remake the global trading system and to 0:02:18.120 --> 0:02:22.160 rebalance it in a way that more accurately reflects US interests. 0:02:22.360 --> 0:02:24.720 If that's the goal, and having worked for him and 0:02:24.960 --> 0:02:28.040 being a trade expert, what do you think is the 0:02:28.080 --> 0:02:30.600 appropriate prescription we might get from the President today? 0:02:32.120 --> 0:02:35.040 Yeah, I think that the President is likely and again 0:02:35.040 --> 0:02:37.880 I heavily caveat this with nothing is final until the 0:02:37.880 --> 0:02:41.080 President says it, so I think he is likely to 0:02:41.360 --> 0:02:44.480 target those countries that are the worst defenders in terms 0:02:44.520 --> 0:02:47.400 of tariff and non tariff barriers. We may see a 0:02:47.440 --> 0:02:51.000 more global measure applied to the rest of the economy, 0:02:51.280 --> 0:02:52.880 but I think he's going to be focused on those 0:02:52.919 --> 0:02:54.200 handful of countries. 0:02:54.639 --> 0:02:57.600 And to my mind, this kicks off a negotiation. This 0:02:57.720 --> 0:02:58.400 is not the end. 0:02:58.480 --> 0:03:00.600 This is not the certainty that I know a number 0:03:00.600 --> 0:03:03.160 of businesses and the markets are looking for. I think 0:03:03.240 --> 0:03:05.680 this gives other countries an opportunity to come to the 0:03:05.680 --> 0:03:08.560 table and say, look, we hear your concerns. We will 0:03:08.600 --> 0:03:11.239 cut some of these barriers too, and that the United 0:03:11.240 --> 0:03:13.960 States and those trading partners on a bilateral basis would 0:03:14.000 --> 0:03:16.519 begin to reciprocally lower their barriers. 0:03:17.000 --> 0:03:18.720 Kelly. And one of the questions I got asked on 0:03:18.840 --> 0:03:22.000 Locked outside the US is how many rounds this is 0:03:22.040 --> 0:03:24.840 going to be? And at what point do we know 0:03:24.919 --> 0:03:28.679 that whatever we offer sticks? How should we answer those 0:03:28.680 --> 0:03:29.399 two questions? 0:03:30.280 --> 0:03:32.960 Yeah, I mean, one of the features of President Trump's 0:03:32.960 --> 0:03:37.040 negotiating strategy and his style is ambiguity, and it is 0:03:37.240 --> 0:03:39.680 very rare to get that kind of certainty. 0:03:40.160 --> 0:03:41.640 But what we did see play out. 0:03:41.560 --> 0:03:43.920 During Trump one were a number of deals that were 0:03:43.960 --> 0:03:48.520 cut and inked, including the NAFTA renegotiation which became the USMCA. 0:03:48.880 --> 0:03:51.680 We saw the Coorus agreement renegotiated. There was a deal 0:03:51.720 --> 0:03:54.760 with Japan, there was a deal with China. So I 0:03:54.840 --> 0:03:57.680 do think that there is precedent for having that certainty 0:03:57.720 --> 0:04:01.000 at the end of what will be a rocky negotiateation period. 0:04:01.320 --> 0:04:02.360 But I do think we're. 0:04:02.160 --> 0:04:04.280 Looking at the next several months to next couple of 0:04:04.360 --> 0:04:06.920 years with some of those trading partners before we actually 0:04:06.920 --> 0:04:07.320 get there. 0:04:07.440 --> 0:04:07.680 Kelly. 0:04:07.800 --> 0:04:10.360 And this raises execution risk, and people have talked about 0:04:10.360 --> 0:04:15.320 this repeatedly that confidence among CEOs CFOs consumers has been 0:04:15.320 --> 0:04:18.160 falling off a cliff amid the uncertainty that may be 0:04:18.279 --> 0:04:20.839 a feature and may be prolonged over the next months 0:04:20.880 --> 0:04:24.159 and years. How concerned are you about this execution risk. 0:04:25.200 --> 0:04:25.479 Yeah. 0:04:25.680 --> 0:04:28.080 I think two things are happening at the same time, 0:04:28.160 --> 0:04:30.800 and they're really in opposition to one another. On the 0:04:30.839 --> 0:04:33.520 one hand, the President is looking to reshape the global 0:04:33.560 --> 0:04:36.800 trading system, which requires breaking a lot of glass. 0:04:36.520 --> 0:04:38.200 And not giving his bottom line. 0:04:38.720 --> 0:04:41.240 On the other hand, he's trying to attract investment from 0:04:41.320 --> 0:04:43.320 businesses around the world, and. 0:04:43.279 --> 0:04:46.760 Those two goals really require different strategies. 0:04:46.800 --> 0:04:49.359 So the administration is trying to land the plane on 0:04:49.560 --> 0:04:53.760 both I think in terms of execution, and the administration 0:04:53.839 --> 0:04:56.080 has an uphill battle. They're trying to do something that's 0:04:56.120 --> 0:04:59.600 never been done before. They're also trying to message this 0:04:59.680 --> 0:05:02.320 to the American people, and I think that whatever President 0:05:02.320 --> 0:05:04.480 Trump says at four pm today will be one of 0:05:04.520 --> 0:05:08.520 the most consequential speeches of his presidency because he's effectively 0:05:08.560 --> 0:05:11.200 going to ask the American people for a long leash 0:05:11.360 --> 0:05:13.800 to allow him to negotiate some of these deals and 0:05:13.839 --> 0:05:16.480 fix some of these systemic issues. So we'll have to 0:05:16.520 --> 0:05:17.640 see how this plays out. 0:05:17.880 --> 0:05:19.880 The Press Secretary said that some of these tarifs will 0:05:19.880 --> 0:05:23.800 be effective immediately. So do you expect tariffs using AEPA 0:05:24.000 --> 0:05:26.320 or Section three three eight to come out today and 0:05:26.360 --> 0:05:27.760 begin tomorrow? 0:05:28.920 --> 0:05:29.160 Yeah. 0:05:29.400 --> 0:05:31.760 I think there are three types of legal authorities the 0:05:31.800 --> 0:05:36.040 president can use to impose tariffs effectively immediately. So AIPA 0:05:36.160 --> 0:05:38.400 is one. Section three three eight of the Trade Act 0:05:38.440 --> 0:05:41.119 of nineteen thirty is another. And then there's also Section 0:05:41.200 --> 0:05:43.760 one twenty two of the Trade Act of nineteen seventy four, 0:05:43.800 --> 0:05:46.560 which is about balance of payments. So he'll certainly have 0:05:46.640 --> 0:05:50.080 to rely on one of those. I don't know which 0:05:50.080 --> 0:05:52.680 one the President is going to use. I tend to 0:05:52.720 --> 0:05:55.200 think it might be IEPA, but any one of those 0:05:55.200 --> 0:05:58.159 authorities would give him the ability to impose tariffs right away. 0:05:58.640 --> 0:05:58.880 Now. 0:05:58.920 --> 0:06:01.159 I will be looking to see what the executive order 0:06:01.240 --> 0:06:04.760 actually says and whether by immediately that means exactly at 0:06:04.800 --> 0:06:08.280 twelve oh one on April third, or whether there are 0:06:08.360 --> 0:06:10.960 a couple of days to give importers some grace or 0:06:10.960 --> 0:06:13.760 even a ship on the water exception, which is what 0:06:13.800 --> 0:06:15.040 we saw on the fentanyl terraffs. 0:06:15.080 --> 0:06:17.200 I just placed the announcement comes after the close now 0:06:17.400 --> 0:06:19.359 and not the original three pm. The Secretary best and 0:06:19.360 --> 0:06:22.040 guardedans towards Kelly. I appreciate your time as always the 0:06:22.160 --> 0:06:34.480 former senior Trump trade advice at Kelly, I'm shure Binky 0:06:34.560 --> 0:06:38.040 Shadow at Deutsche Bank, writing a credible relents on trade 0:06:38.040 --> 0:06:41.839 policy is necessary for upside risk to materialized. The clock 0:06:42.400 --> 0:06:45.160 is ticking. Binky joined this now for more binking of monitor. 0:06:45.520 --> 0:06:48.440 Good morning's at seven k year end your head. 0:06:48.480 --> 0:06:49.280 It's a long ways. 0:06:49.440 --> 0:06:53.280 I agree, I great, just love to But if you're 0:06:53.279 --> 0:06:54.400 still at seven, play. 0:06:54.279 --> 0:06:58.520 The record that you know I am not bullish near term. 0:06:58.680 --> 0:07:04.320 We expect basically this year end that's nine months out, 0:07:04.440 --> 0:07:07.000 it's three quarters out. If you think about you know 0:07:07.160 --> 0:07:09.960 what happens if we have sort of a mild recession, 0:07:10.080 --> 0:07:12.880 let's say second and the third quarter. You know, the 0:07:13.040 --> 0:07:16.440 tried and tested equities playbook would tell you that equity's 0:07:16.440 --> 0:07:18.640 bottom in the middle of the recession. So that would 0:07:18.680 --> 0:07:22.200 be June first, recoup all of their losses. 0:07:22.280 --> 0:07:24.360 And that means at the point you're kidding me, but. 0:07:26.520 --> 0:07:29.360 You think this year we could have a recession and 0:07:29.520 --> 0:07:30.720 still end the year at seven K. 0:07:31.080 --> 0:07:32.559 I do believe. 0:07:32.640 --> 0:07:35.440 So if it's a mild recession, that's actually what typical 0:07:35.520 --> 0:07:38.760 playbook would tell you. So where I would say, you know, 0:07:39.000 --> 0:07:43.360 the pushback in your tone is really, I mean, we're 0:07:43.440 --> 0:07:45.720 just going to happen two quarter recession. We're going to 0:07:45.760 --> 0:07:46.560 have a recession. 0:07:49.080 --> 0:07:52.240 Somebody who comes out has a seven thousand price target 0:07:52.240 --> 0:07:55.440 at a time when everyone's downgrading it below fifty five hundred, 0:07:55.720 --> 0:07:57.480 and you say, well, I'm not bullish. 0:07:57.600 --> 0:07:59.160 You know, well, everybody else will look at it. 0:07:59.120 --> 0:08:01.559 And say you're pretty bull So we already had fifty 0:08:01.600 --> 0:08:04.080 six hundred. So we're going to stay here for nine months. 0:08:05.320 --> 0:08:07.160 The equity market is not good at staying in the 0:08:07.240 --> 0:08:07.960 same place, though. 0:08:08.280 --> 0:08:11.240 I would point out that in Trade War one point oh, 0:08:11.720 --> 0:08:15.080 the equity market went nowhere and neither up nor down 0:08:15.800 --> 0:08:21.320 huge moves, but nowhere for eighteen months actually, so we 0:08:21.440 --> 0:08:25.000 are very well aware of that period, and it does 0:08:25.120 --> 0:08:26.560 play into how we think about things. 0:08:26.760 --> 0:08:29.120 Is this predicated on the idea that some of the 0:08:29.240 --> 0:08:32.720 soft data is not going to be predictive of hard data, 0:08:33.000 --> 0:08:35.760 and that potentially you get some resolution in the near term, 0:08:36.160 --> 0:08:39.760 some clarity on policy, and potentially a federal reserve that 0:08:39.920 --> 0:08:40.360 helps out. 0:08:41.040 --> 0:08:42.000 I would say not quite. 0:08:42.520 --> 0:08:48.040 What I would say is, actually there's two distinct sources 0:08:48.240 --> 0:08:52.920 of basically soft data. I would say, the low consumer 0:08:53.040 --> 0:08:57.440 confidence is not necessarily very predictive for what consumers spending 0:08:57.600 --> 0:08:59.000 and the business cycle is going to do. 0:08:59.760 --> 0:09:01.640 But consumer confidence is. 0:09:02.000 --> 0:09:08.400 Extremely important for presidential job approval ratings. And after an 0:09:08.440 --> 0:09:11.959 initial honeymoon period, you know, job approval ratings tend to 0:09:12.040 --> 0:09:14.800 go down to consumer confidence. And you know, the way 0:09:14.880 --> 0:09:18.760 I would just note or remind is consumer confidence is 0:09:18.800 --> 0:09:22.520 exactly where it was when President Biden left, and so 0:09:22.880 --> 0:09:25.480 there's a lot of room for us to go down, 0:09:25.640 --> 0:09:29.880 and we would go down on bad growth news, bad inflation. 0:09:29.640 --> 0:09:31.520 News, political developments. 0:09:32.120 --> 0:09:34.840 Now, I would say the other part of the soft data, 0:09:34.880 --> 0:09:39.079 which is CEO confidence, is extremely important driver off the 0:09:39.280 --> 0:09:44.160 actual hard corporate data and indicative off it. Now we 0:09:44.440 --> 0:09:47.199 you know, CEO confidence is Tier two data, so we 0:09:47.240 --> 0:09:49.400 don't have very regular reporting and the like. But there 0:09:49.440 --> 0:09:51.960 are some measures that are basically fallen off a cliff 0:09:51.960 --> 0:09:54.240 from me, and we are now below twenty twenty two 0:09:54.360 --> 0:09:59.000 levels on the CEO magazine. We are European Financial Crisis 0:09:59.080 --> 0:10:04.640 twenty twelve levels. Whether that, you know, translates to a 0:10:04.840 --> 0:10:08.280 good and comprehensive measure of CEO confidence remains to be seen. 0:10:08.360 --> 0:10:11.400 The measures all generally move, you know, together, so there's 0:10:11.440 --> 0:10:14.480 every reason to believe it. Maybe not the extent and degree, 0:10:14.640 --> 0:10:17.000 but you know, I think the biggest risk here is 0:10:17.160 --> 0:10:20.440 corporates go right back into the bunker, and once they 0:10:20.520 --> 0:10:22.240 go back into the bunker, they don't come. 0:10:22.160 --> 0:10:22.960 Out very quickly. 0:10:23.160 --> 0:10:25.920 So what policies in Washington do you need to see 0:10:26.000 --> 0:10:27.240 to get to your year end target? 0:10:29.760 --> 0:10:33.280 You know that that basically the tariffs are you know, 0:10:33.559 --> 0:10:38.160 in negotiation, a relent, just as happened in Trade War one. 0:10:38.240 --> 0:10:40.200 Point out any they gets wrapped up in nine months. 0:10:42.360 --> 0:10:45.160 I think you know, if there is a relent or 0:10:45.400 --> 0:10:49.520 rationality if you want to call it, that, you know 0:10:49.600 --> 0:10:50.120 we could get. 0:10:50.040 --> 0:10:50.880 There pretty quickly. 0:10:51.240 --> 0:10:53.280 So so Binga, I want to take it away from 0:10:53.360 --> 0:10:55.520 your seven thousand target and. 0:10:55.720 --> 0:10:58.920 Also Forcember thirty first at four pm. Yes, yes, yes. 0:11:00.160 --> 0:11:03.120 Over the last quarter, the S and P has underperformed 0:11:03.800 --> 0:11:06.760 zero stocks as hundred by seventeen percentage. 0:11:06.240 --> 0:11:08.199 Ones, which is remarkable. 0:11:08.920 --> 0:11:11.719 Some people think this is just the beginning that we 0:11:11.800 --> 0:11:13.920 are going to have a normalization of valuations over the 0:11:13.920 --> 0:11:16.520 next few quarters. Some of it think it's overdone. 0:11:16.960 --> 0:11:17.679 Where are you on this? 0:11:19.240 --> 0:11:22.480 We think it's got a long ways to go basically, 0:11:23.280 --> 0:11:26.880 and really the issue is where the Europe can grow. 0:11:27.160 --> 0:11:29.959 We have again the cross currents that we've been talking about. 0:11:30.080 --> 0:11:32.719 We have the tariffs, you know, as the negative. But 0:11:32.960 --> 0:11:34.400 you know, if I look at ur at our, I 0:11:34.480 --> 0:11:36.760 mean it's sitting right at one O eight, which is 0:11:36.840 --> 0:11:38.400 a very reasonable place to sit. 0:11:38.559 --> 0:11:39.800 So if you. 0:11:39.920 --> 0:11:43.040 Believe growth starts to pick up, and I would say 0:11:43.120 --> 0:11:46.160 the ingredients for growth to pick up in Europe were 0:11:46.280 --> 0:11:50.319 already basically there before all of the German developments. 0:11:50.360 --> 0:11:52.200 So the German developments, you know. 0:11:52.880 --> 0:11:55.840 Are another positive and another reason to believe that growth 0:11:55.960 --> 0:11:58.400 will come. And if growth comes, we will get the 0:11:58.440 --> 0:11:59.040 earnings and. 0:11:59.160 --> 0:12:01.360 That's all the basic Isn't that a problem for you? 0:12:01.480 --> 0:12:04.199 SMP seven thousand? Isn't that a problem that some of 0:12:04.240 --> 0:12:08.240 the oxygen now gets sucked out by Europe flows are 0:12:08.320 --> 0:12:10.840 no longer persistently to the US, The US no longer 0:12:10.920 --> 0:12:14.800 sucks up global capital and you lose a critical technical 0:12:15.240 --> 0:12:19.360 that has supported your your abolishness about the SP Isn't 0:12:19.360 --> 0:12:19.960 that an issue for. 0:12:20.000 --> 0:12:22.560 You at the margin? Yes? 0:12:22.720 --> 0:12:25.440 But I mean you know right now, what I would 0:12:25.440 --> 0:12:27.480 do is I would be overweight Europe, which is what 0:12:27.640 --> 0:12:29.839 we are, and I would also overweight the US. I 0:12:29.880 --> 0:12:33.280 mean remember that we're already down, you know, around eight percent, 0:12:34.480 --> 0:12:37.200 So it is looking better. And if you look at 0:12:37.280 --> 0:12:40.360 relative performance tends to form in a channel. We have 0:12:40.520 --> 0:12:44.360 just moved from the US relative to stock six hundred. 0:12:44.840 --> 0:12:47.079 We were at the tippy top. We are now exactly 0:12:47.160 --> 0:12:48.719 the middle. That's why I say, you know, we're just 0:12:48.720 --> 0:12:49.040 about it. 0:12:49.080 --> 0:12:51.160 What are you underway there? So you're overweighting everything? What 0:12:51.200 --> 0:12:52.199 are you just looking at it? 0:12:52.480 --> 0:12:54.199 That was about the S and P relative to the 0:12:54.240 --> 0:12:57.559 stock six hundred in local currencies, we are right in 0:12:57.600 --> 0:13:00.360 the middle of the channel. So there is more room 0:13:00.440 --> 0:13:03.440 for the US to underperform without really changing the trend. 0:13:04.800 --> 0:13:08.280 And so what has happened so far the seventeen point 0:13:08.360 --> 0:13:11.280 that that's half of in the middle of the channel, 0:13:11.400 --> 0:13:14.680 so it can continue without basically upsetting the channel. 0:13:14.960 --> 0:13:18.319 But for the channel to continue or for the channel. 0:13:18.080 --> 0:13:21.040 To break, you know, it's really about whether European earnings 0:13:21.040 --> 0:13:21.600 start to grow. 0:13:22.040 --> 0:13:23.600 For as long as I've known you, for a long 0:13:23.600 --> 0:13:25.520 long time, you've been bullish and right, and I've been 0:13:25.520 --> 0:13:27.880 skeptical and wrong. But this is the most bearish seven 0:13:27.960 --> 0:13:29.160 K conversation. 0:13:30.280 --> 0:13:32.760 In my life. I'm glad you didn't ask me what 0:13:32.920 --> 0:13:36.959 my twenty twenty six target is so I don't have one. 0:13:37.040 --> 0:13:40.920 So wors is the seven K in the United States? 0:13:42.280 --> 0:13:44.760 Look, the economy is still in good shape. We are 0:13:44.880 --> 0:13:47.559 closer to the edge. The risks have grown, There's no 0:13:47.760 --> 0:13:52.319 question about it, and there's no obvious large, big imbalances 0:13:52.480 --> 0:13:53.960 outside the US government, I. 0:13:53.920 --> 0:13:58.240 Would say, and so it's all very possible. 0:13:58.480 --> 0:14:00.959 But yes, we are getting close to the edge and 0:14:01.040 --> 0:14:02.960 the risks have gone up a lot. 0:14:03.200 --> 0:14:04.600 So what would make you t embarish? 0:14:07.679 --> 0:14:08.960 No relent on trade? 0:14:10.880 --> 0:14:13.439 You know, trade policy continues the way that it is, 0:14:14.600 --> 0:14:17.960 and you know, just general lack of clarity and policy. 0:14:18.040 --> 0:14:19.760 So what I'm saying is if. 0:14:19.720 --> 0:14:22.000 Policy stepped out of the way, the equity. 0:14:21.720 --> 0:14:24.680 Market and the economy would be just fine. It is 0:14:24.800 --> 0:14:26.920 policy that is the big negative right now. 0:14:27.120 --> 0:14:27.440 Is there a. 0:14:27.440 --> 0:14:30.120 Statute of limitations where there needs to be some clarity 0:14:30.520 --> 0:14:33.560 before which the damage becomes more entrenched and you have 0:14:33.680 --> 0:14:34.720 to start to model it out. 0:14:34.920 --> 0:14:36.720 That's exactly right, Yeah, is it? 0:14:36.800 --> 0:14:38.280 What is that statute of limitations? 0:14:38.800 --> 0:14:41.960 That statute of limitations is once you know, we get 0:14:42.040 --> 0:14:46.200 to a point in this slowing that potentially nonlinearities start 0:14:46.280 --> 0:14:48.880 to kick in. I mean, if you look at late 0:14:48.960 --> 0:14:51.640 market in the US, it's a pretty delicate balance. I mean, 0:14:51.680 --> 0:14:54.640 it's been very, very steady, so I'm not sure delicate 0:14:54.760 --> 0:14:57.600 is the right word, but it is delicate behaviorally. 0:14:58.160 --> 0:15:01.240 It's just been stuck there for quite a while. 0:15:01.680 --> 0:15:04.920 In terms of hiring rates and firing rates both are 0:15:04.920 --> 0:15:07.880 at very very level, so it is kind of stuck. 0:15:08.120 --> 0:15:09.120 Thank you, you're a good sport. 0:15:09.160 --> 0:15:10.920 It's going to hear from minute as always as the 0:15:11.000 --> 0:15:12.720 catch and over this they get you out of there 0:15:12.800 --> 0:15:25.120 at Deutsche Bank. Seth Carpenter of Morgan Stanley, writing, our 0:15:25.200 --> 0:15:27.920 base case remains that the focus of US tarras will 0:15:27.920 --> 0:15:30.760 be on China, but if trade tensions escalate beyond our 0:15:30.840 --> 0:15:34.680 base case, the dragon corporate confidence on Capex and the 0:15:34.760 --> 0:15:36.880 business cycle will intensify. 0:15:37.280 --> 0:15:37.520 Seth. 0:15:37.600 --> 0:15:39.360 John just now for more, Seth, welcome to the program. 0:15:39.440 --> 0:15:41.680 It's been too long, my friend. Let's talk about later 0:15:41.960 --> 0:15:44.160 a four pm Eastern time. And I think, more importantly 0:15:44.200 --> 0:15:46.240 for a lot of people in this market, how is 0:15:46.280 --> 0:15:48.720 the Federal Reserve going to navigate this moment? 0:15:49.960 --> 0:15:52.800 It's great, great set of questions, Jonathan, and this, I 0:15:52.800 --> 0:15:55.480 think the set of questions that just about everyone in 0:15:55.600 --> 0:15:58.440 Marcus is asking. First the uncertainty here is huge. We've 0:15:58.480 --> 0:16:01.440 heard some more commentary of the way else where. They're 0:16:01.480 --> 0:16:04.920 clearly still resetting what they're going to do with tariffs, 0:16:04.920 --> 0:16:07.680 and so I think even inside the administration there's some uncertainty. 0:16:07.720 --> 0:16:11.160 Yet the FED is left in this truly difficult circumstance 0:16:11.240 --> 0:16:15.520 where tariffs very clearly seem to push up price levels, 0:16:15.600 --> 0:16:19.120 which should boost inflation, as reported in the CPI all 0:16:19.160 --> 0:16:22.240 the regular data. My base case, as is the FEDS, 0:16:22.280 --> 0:16:24.800 is that that inflationary boost is going to be temporary 0:16:25.000 --> 0:16:27.720 and should fade over time. But should I don't think 0:16:27.760 --> 0:16:29.640 it's going to be good enough for the Federal Reserve. 0:16:29.680 --> 0:16:32.720 I think will be very hard for them to say, Wow, 0:16:32.800 --> 0:16:35.520 this inflation will go away. I know because of my 0:16:35.720 --> 0:16:38.080 models that growth is going to take a big hit 0:16:38.560 --> 0:16:41.400 in two quarters or maybe into next year. So let 0:16:41.480 --> 0:16:44.160 me cut interest rates now despite inflation heading back up 0:16:44.280 --> 0:16:46.320 towards three percent. I just don't see them doing that, 0:16:46.480 --> 0:16:49.040 and so I think they're going to have to wait 0:16:49.240 --> 0:16:51.920 once we see inflation from tariffs start to kick in. 0:16:52.040 --> 0:16:55.200 They're going to wait on the sidelines with policy in 0:16:55.280 --> 0:16:58.800 their minds in restrictive territory and see how the tariffs 0:16:58.880 --> 0:17:01.000 play out through the ECCONO. They're going to believe they'll 0:17:01.000 --> 0:17:04.040 be temporary on inflation. They're going to want that confirmed 0:17:04.080 --> 0:17:06.240 in the data. They're going to believe that it will 0:17:06.280 --> 0:17:09.000 cause the economy to slow down. But until they start 0:17:09.040 --> 0:17:10.920 to see it in the hard data, and make no 0:17:11.040 --> 0:17:13.159 mistake about it, the market has got the right answer 0:17:13.240 --> 0:17:15.760 here about a slowdown, But I think for the wrong reasons. 0:17:15.800 --> 0:17:18.800 There's not a ton of hard data yet that reveal 0:17:18.880 --> 0:17:20.920 the slowdown. I think all of that is still in 0:17:20.960 --> 0:17:21.359 the offering. 0:17:21.560 --> 0:17:23.360 So it sounds like you don't really see a FED 0:17:23.480 --> 0:17:27.040 put in the offing to try to really give a 0:17:27.119 --> 0:17:30.560 boost to both economic growth and confidence in markets, which 0:17:30.640 --> 0:17:33.840 raises the question about a policy put on the other side, 0:17:34.240 --> 0:17:36.440 what is currently being priced in. We were just talking 0:17:36.480 --> 0:17:39.040 with Mohammadalarian who is here, and he said that he 0:17:39.160 --> 0:17:41.159 sees it as a fifty to fifty percent chance of 0:17:41.200 --> 0:17:45.240 a Reagan Thatcher reording of an international trade versus Jimmy 0:17:45.320 --> 0:17:48.919 Carter on steroids. Market's currently pricing in about eighty twenty. 0:17:49.280 --> 0:17:49.920 What do you see? 0:17:51.240 --> 0:17:53.000 I mean, I think it's I think it's very hard. 0:17:53.560 --> 0:17:56.680 When I talk to clients investors around the world, there 0:17:56.720 --> 0:17:59.359 are as many views there as there are investors that 0:17:59.480 --> 0:18:01.000 you talk to, and so I think you can see 0:18:01.000 --> 0:18:05.520 the same acid pricing reflecting multiple different narratives. I think 0:18:05.560 --> 0:18:07.600 people just don't know, and so I don't think you 0:18:07.680 --> 0:18:10.040 can take anything for granted from massive pricing right now. 0:18:10.119 --> 0:18:12.159 I think it remains to be seen. I think the 0:18:12.320 --> 0:18:16.280 escalation scenario where the US imposes some tariffs and then 0:18:16.560 --> 0:18:21.520 other governments imposer retaliatory tariffs and then we escalate from there, 0:18:21.640 --> 0:18:25.360 that really is a potential massive shift. And I don't think, 0:18:25.640 --> 0:18:28.000 as some people have said, it's just a question of 0:18:28.119 --> 0:18:31.359 near term pain versus longer term gain. I think if 0:18:31.359 --> 0:18:34.840 you get that escalation scenario, then you're just talking about 0:18:35.040 --> 0:18:38.639 fundamentally less productive economies around the world. It's not a 0:18:38.760 --> 0:18:40.919 zero sum game. It could actually be a net loss 0:18:41.160 --> 0:18:42.240 for the whole global order. 0:18:42.720 --> 0:18:44.000 So let me put you on the spot. 0:18:44.040 --> 0:18:47.560 If I may on Sunday, one of your competitors came 0:18:47.640 --> 0:18:51.440 out and they'll had three elements to their new forecast 0:18:51.680 --> 0:18:54.720 one pc inflation from three to three and a half 0:18:54.800 --> 0:18:59.480 percent for the year two fourth quarter on fourth quarter growth. 0:18:59.440 --> 0:19:00.480 Down to one percent. 0:19:01.960 --> 0:19:02.120 Three. 0:19:03.320 --> 0:19:07.640 The FED cuts not twice, but three times this year. 0:19:08.040 --> 0:19:08.720 What do you agree with? 0:19:08.880 --> 0:19:10.640 What do you disagree with on those three elements? 0:19:11.800 --> 0:19:13.679 Yeah, so I think the main thing I would disagree 0:19:13.720 --> 0:19:15.919 with a bit is the timing. So we've got one 0:19:16.000 --> 0:19:19.040 and a half percent as a baseline growth rate, but boy, 0:19:19.320 --> 0:19:22.480 lots of room for downside there. And that's a pretty 0:19:22.560 --> 0:19:26.480 conservative assumption on things like where tariffs go and how 0:19:26.600 --> 0:19:29.520