1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,520 Speaker 2: Terminal and the Bloomberg Business App. Calsie Barrow of JP 10 00:00:37,600 --> 00:00:40,040 Speaker 2: Morgan Asset Management, writing, the biggest risk for the bond 11 00:00:40,040 --> 00:00:43,760 Speaker 2: market is a sustained reacceleration in inflation and wages. The 12 00:00:43,760 --> 00:00:46,600 Speaker 2: results in rat heights being considered a fed onhold is 13 00:00:46,640 --> 00:00:49,560 Speaker 2: still a positive backdro of that supports fixed income. Cassie 14 00:00:49,600 --> 00:00:51,600 Speaker 2: joins us for more. CALSEI, good morning, good to see you. 15 00:00:52,240 --> 00:00:54,320 Speaker 2: What did you take from the Treasury Secretary of comments 16 00:00:54,360 --> 00:00:55,240 Speaker 2: on termin Out of the Dead? 17 00:00:55,520 --> 00:00:59,360 Speaker 3: Yeah, so, I think the bond market was encouraged by 18 00:00:59,680 --> 00:01:02,920 Speaker 3: the mage from Secretary Bessant, which was that it's not 19 00:01:03,080 --> 00:01:05,400 Speaker 3: the time to be terming out the debt which I 20 00:01:05,480 --> 00:01:08,200 Speaker 3: think really makes a lot of sense. Right If you 21 00:01:08,240 --> 00:01:10,760 Speaker 3: look at the yield curve, it's positively sloped. If you 22 00:01:10,800 --> 00:01:13,400 Speaker 3: look at thirty or real yields, they're at the highest 23 00:01:13,480 --> 00:01:14,639 Speaker 3: level in twenty years. 24 00:01:14,680 --> 00:01:17,399 Speaker 4: This is not the time to be terming out the debt, and. 25 00:01:17,319 --> 00:01:20,280 Speaker 3: So the bond market is comforted by the fact that 26 00:01:20,319 --> 00:01:24,080 Speaker 3: there's somebody at the HELM that understands the supply demand 27 00:01:24,200 --> 00:01:28,399 Speaker 3: dynamics and is looking to manage term premium and at 28 00:01:28,480 --> 00:01:32,440 Speaker 3: least not aggravate term premium even further. 29 00:01:32,720 --> 00:01:35,240 Speaker 1: You're concerned about inflation, though, and potentially that means the 30 00:01:35,319 --> 00:01:37,680 Speaker 1: FED is either on hold or might have to weigh 31 00:01:37,720 --> 00:01:38,600 Speaker 1: a hike this year. 32 00:01:39,200 --> 00:01:42,560 Speaker 4: No, so the biggest risk for the bond market is inflation. 33 00:01:42,760 --> 00:01:47,000 Speaker 3: But we actually feel you're fairly comfortable with the inflation backdrop, 34 00:01:47,280 --> 00:01:50,360 Speaker 3: and we do feel like with the FED they are 35 00:01:50,440 --> 00:01:54,120 Speaker 3: still in an easing bias where there are essentially two 36 00:01:54,120 --> 00:01:57,400 Speaker 3: decisions at every meeting, or two options at every meeting. 37 00:01:57,480 --> 00:01:59,240 Speaker 3: One of them is to stay on hold, which is 38 00:01:59,280 --> 00:02:02,040 Speaker 3: where they are right now now. The other is to 39 00:02:02,080 --> 00:02:05,680 Speaker 3: cut rates. And I was hearing in the earlier segments 40 00:02:05,680 --> 00:02:09,360 Speaker 3: a discussion about the labor market monitoring jobless claims. Looking 41 00:02:09,400 --> 00:02:12,160 Speaker 3: at the impact that the layoffs are going to have 42 00:02:12,200 --> 00:02:15,040 Speaker 3: on the broader economy, we still believe that the Fed 43 00:02:15,120 --> 00:02:18,600 Speaker 3: is much more sensitive to labor market weakness than they 44 00:02:18,639 --> 00:02:20,120 Speaker 3: are to labor market strength. 45 00:02:20,400 --> 00:02:22,480 Speaker 4: You get a strong report, the Fed does nothing. 46 00:02:23,080 --> 00:02:26,440 Speaker 3: You get a weak report, the Fed is stepping back 47 00:02:26,480 --> 00:02:28,160 Speaker 3: in to support the economy. 48 00:02:28,440 --> 00:02:31,320 Speaker 4: That's generally an environment. 49 00:02:30,919 --> 00:02:34,640 Speaker 3: Where yields are range found with some risk of moving lower. 50 00:02:34,919 --> 00:02:35,600 Speaker 5: Well to that point. 51 00:02:35,639 --> 00:02:39,200 Speaker 6: Long end bonds they've fallen by about nine basis points 52 00:02:39,240 --> 00:02:41,840 Speaker 6: so far this year. There's this discussion how much of 53 00:02:41,840 --> 00:02:44,280 Speaker 6: it is supply what we heard from Scott Vessant yesterday 54 00:02:44,320 --> 00:02:47,320 Speaker 6: and structural changes that may or may not happen to you. 55 00:02:47,360 --> 00:02:50,440 Speaker 6: What is the bigger driver of that supply or is 56 00:02:50,480 --> 00:02:52,720 Speaker 6: it growth concerns we're starting to see in the long end. 57 00:02:52,919 --> 00:02:56,800 Speaker 3: I think it's primarily growth concerns. I think supply is 58 00:02:56,800 --> 00:03:00,000 Speaker 3: a secondary factor. And the one thing that I would 59 00:03:00,160 --> 00:03:04,640 Speaker 3: highlight is while the Treasury Secretary does have control over 60 00:03:04,720 --> 00:03:07,880 Speaker 3: where we issue on the curve and they're in charge 61 00:03:07,880 --> 00:03:11,000 Speaker 3: of determining what the weighted average maturity of the Treasury 62 00:03:11,120 --> 00:03:15,400 Speaker 3: debt is, they are not the ones ultimately responsible for 63 00:03:15,480 --> 00:03:16,760 Speaker 3: determining how much. 64 00:03:16,600 --> 00:03:18,160 Speaker 4: Debt needs to be issued. 65 00:03:18,639 --> 00:03:21,960 Speaker 3: That's still a function of how much the government takes in. 66 00:03:22,320 --> 00:03:24,160 Speaker 4: So that's how much revenue they get from. 67 00:03:24,160 --> 00:03:27,000 Speaker 3: Tariffs and taxes versus how much they spend. 68 00:03:27,919 --> 00:03:29,800 Speaker 4: That's what the Congress. 69 00:03:29,400 --> 00:03:32,200 Speaker 3: Is debating right now in terms of the reconciliation bills. 70 00:03:32,880 --> 00:03:35,680 Speaker 3: That hole in the end of the day, it is 71 00:03:35,720 --> 00:03:39,880 Speaker 3: not something that the Treasury control, but ultimately is a 72 00:03:39,880 --> 00:03:43,440 Speaker 3: function of what the Congress decides, and so what the 73 00:03:43,480 --> 00:03:46,400 Speaker 3: bond market is ultimately going to be trading off of 74 00:03:46,440 --> 00:03:49,920 Speaker 3: in the long end, is what that growth impulse is 75 00:03:50,120 --> 00:03:54,320 Speaker 3: or is not as it relates to the fiscal trajectory. 76 00:03:55,120 --> 00:03:58,280 Speaker 3: Do we get the tax cuts, the extension of tax cuts, 77 00:03:58,360 --> 00:04:00,640 Speaker 3: is there room for anything else, or is it really 78 00:04:00,720 --> 00:04:04,080 Speaker 3: just status quo? In that case, not a lot of 79 00:04:04,120 --> 00:04:05,560 Speaker 3: impulse coming from fiscal. 80 00:04:05,520 --> 00:04:08,760 Speaker 2: You explained the FED asymmetric reaction function. I want to 81 00:04:08,840 --> 00:04:11,440 Speaker 2: understand how the FED would respond to the following scenario. 82 00:04:11,560 --> 00:04:14,200 Speaker 2: Let's say we've got some weaker economic data lay before 83 00:04:14,240 --> 00:04:16,400 Speaker 2: Stata started to soften a little bit, but they still 84 00:04:16,440 --> 00:04:19,080 Speaker 2: face the prospect of real policy change further down the road. 85 00:04:19,279 --> 00:04:20,880 Speaker 2: I think what we're all trying to gauge in markets 86 00:04:20,960 --> 00:04:24,520 Speaker 2: is whether that asymmetric reaction function would be compromised by 87 00:04:24,520 --> 00:04:27,080 Speaker 2: the prospective policy change further down the road. 88 00:04:27,400 --> 00:04:28,120 Speaker 4: I don't think so. 89 00:04:29,080 --> 00:04:32,240 Speaker 3: I think that they are aware that there's a high 90 00:04:32,360 --> 00:04:37,240 Speaker 3: level uncertainty, but they don't want to hamstring themselves with 91 00:04:37,279 --> 00:04:41,080 Speaker 3: the what ifs, because there's always what ifs. We never 92 00:04:41,240 --> 00:04:45,000 Speaker 3: know what's coming next, and in fact, perhaps we actually 93 00:04:45,040 --> 00:04:47,360 Speaker 3: know a little bit more than we did before as 94 00:04:47,360 --> 00:04:51,679 Speaker 3: it relates to what the Trump administration is trying to achieve. 95 00:04:51,800 --> 00:04:54,560 Speaker 3: So I think they're going to stay very focused on 96 00:04:54,640 --> 00:04:57,320 Speaker 3: the data. They're going to stay focused on the labor market, 97 00:04:57,400 --> 00:05:01,479 Speaker 3: which for now stay is still fit healthy, and then 98 00:05:01,520 --> 00:05:05,120 Speaker 3: on inflation, which you know, I think this year the 99 00:05:05,160 --> 00:05:09,400 Speaker 3: Fed is much more prepared for the January inflation heat. 100 00:05:09,800 --> 00:05:12,440 Speaker 3: The bond market has done a very good job fading 101 00:05:12,480 --> 00:05:13,240 Speaker 3: the extremes. 102 00:05:13,320 --> 00:05:16,120 Speaker 4: Right. So, you had a week retail sales report. 103 00:05:16,560 --> 00:05:18,919 Speaker 3: The market brushed that aside because we know that the 104 00:05:18,960 --> 00:05:21,760 Speaker 3: consumer is fully employed, they're going to keep spending. On 105 00:05:21,800 --> 00:05:24,560 Speaker 3: the other side, we had the strong CPI report. 106 00:05:24,680 --> 00:05:26,839 Speaker 4: They also brush that aside because. 107 00:05:26,560 --> 00:05:29,280 Speaker 3: When we know that January continues to surprise to the 108 00:05:29,360 --> 00:05:31,839 Speaker 3: upside no matter what the economists are trying to do 109 00:05:31,880 --> 00:05:34,479 Speaker 3: to seasonally adjust, it doesn't seem to be working. And 110 00:05:34,520 --> 00:05:37,120 Speaker 3: if you look at PCEE, which is the Fed's preferred measure, 111 00:05:37,720 --> 00:05:40,360 Speaker 3: we're expecting that to fall to two point six percent 112 00:05:40,400 --> 00:05:42,560 Speaker 3: on a year over year basis three and six month 113 00:05:42,600 --> 00:05:43,479 Speaker 3: run rates around two and. 114 00:05:43,440 --> 00:05:45,640 Speaker 4: A half percent. Yeah, it's not two percent, but it's 115 00:05:45,880 --> 00:05:46,560 Speaker 4: pretty close. 116 00:05:46,720 --> 00:05:49,039 Speaker 2: There's a lot of what ifs, that's for sure. Spending cuts, 117 00:05:49,080 --> 00:05:52,239 Speaker 2: tax cuts, March fourth, twenty five percent, to have some Canada, 118 00:05:52,360 --> 00:05:56,279 Speaker 2: Mexico middle of March twenty five percent steel aluminum eight 119 00:05:56,320 --> 00:05:59,120 Speaker 2: Pril twenty five percent AU sized chips and drugs, maybe 120 00:05:59,120 --> 00:06:00,120 Speaker 2: more than twenty. 121 00:05:59,880 --> 00:06:02,800 Speaker 1: Five Fromber allegedly according to the President the other night. 122 00:06:02,920 --> 00:06:07,080 Speaker 1: And also April first, before the April second deadline he set. 123 00:06:07,120 --> 00:06:08,920 Speaker 1: April first is when the team is supposed to come 124 00:06:08,920 --> 00:06:11,400 Speaker 1: together and say, this is where the issues are on 125 00:06:11,480 --> 00:06:13,279 Speaker 1: these countries, on these sectors, and this is what we 126 00:06:13,320 --> 00:06:15,200 Speaker 1: need to do. And at that point I'll have Jamis 127 00:06:15,279 --> 00:06:16,000 Speaker 1: in greer employees. 128 00:06:16,080 --> 00:06:17,880 Speaker 2: And towards the end of March, the Federal Reserve's got 129 00:06:17,880 --> 00:06:19,640 Speaker 2: to put out some forecasts. So good luck to him. 130 00:06:19,760 --> 00:06:21,600 Speaker 2: Calsei is going to see you as always, thanks for 131 00:06:21,640 --> 00:06:24,760 Speaker 2: dropping by Caunsey Barrow there of JP Morgan Asset Management. 132 00:06:34,880 --> 00:06:36,800 Speaker 2: You'll begin this hour stocks looking to close out a 133 00:06:36,839 --> 00:06:39,520 Speaker 2: second straight week of gains. Nadia level of ups writing. 134 00:06:39,760 --> 00:06:42,800 Speaker 2: We remain constructive on the medium term equity outlook, but 135 00:06:42,920 --> 00:06:45,719 Speaker 2: near term the risk reward is less compelling. While we 136 00:06:45,720 --> 00:06:49,640 Speaker 2: are staying invested, we advise hedging strategies and standing ready 137 00:06:49,800 --> 00:06:52,200 Speaker 2: to buy potential dips. Naddia joints US for more Nadia 138 00:06:52,240 --> 00:06:54,080 Speaker 2: go to see it. Good morning. What would lead to 139 00:06:54,120 --> 00:06:55,120 Speaker 2: those potential dips? 140 00:06:55,880 --> 00:06:58,160 Speaker 7: Well, you know, as you've been talking about doing certainty 141 00:06:58,200 --> 00:07:01,680 Speaker 7: around towers, as those dates approved approaches US, we could 142 00:07:01,680 --> 00:07:05,360 Speaker 7: see a pickup in volatility. It has implications for inflation. 143 00:07:05,400 --> 00:07:08,320 Speaker 7: It also has implications for overall economic growth, and so 144 00:07:08,360 --> 00:07:10,320 Speaker 7: I think we're all watching those days. How much of 145 00:07:10,400 --> 00:07:13,120 Speaker 7: that would stick. We do think probably that twenty five 146 00:07:13,160 --> 00:07:15,960 Speaker 7: percent tariffs on aluminum and steel will stick. We saw 147 00:07:16,000 --> 00:07:18,960 Speaker 7: that in the first Trump one point zero to protect 148 00:07:19,040 --> 00:07:22,360 Speaker 7: American steel industry. They are twenty five percent tariff on 149 00:07:22,440 --> 00:07:25,240 Speaker 7: Mexico and Canada. We think that that continues to get 150 00:07:25,280 --> 00:07:27,080 Speaker 7: pushed up. That's likely going to be more. 151 00:07:27,120 --> 00:07:30,760 Speaker 2: Negotiation this way transatlantical time highs, the S and P 152 00:07:30,880 --> 00:07:34,360 Speaker 2: five hundred record high, the DAX in Germany record high. 153 00:07:34,480 --> 00:07:36,120 Speaker 2: When you speak to clients, just shine a light on 154 00:07:36,160 --> 00:07:38,960 Speaker 2: those conversations for us, do they believe any of this happens? 155 00:07:39,440 --> 00:07:39,560 Speaker 5: You know? 156 00:07:39,680 --> 00:07:41,880 Speaker 7: I think that we are a bit surprised that we 157 00:07:41,960 --> 00:07:44,320 Speaker 7: haven't seen an increase in volatility this year. We were 158 00:07:44,360 --> 00:07:47,200 Speaker 7: expecting that as the new administration takes office. But what 159 00:07:47,240 --> 00:07:50,200 Speaker 7: you're seeing is damp volatility at the index LEFTL has 160 00:07:50,240 --> 00:07:51,560 Speaker 7: been damped, and I think people. 161 00:07:51,320 --> 00:07:52,520 Speaker 5: Are surprised by that. 162 00:07:52,640 --> 00:07:54,920 Speaker 7: But when you look onto the hood, there's rotation happening, 163 00:07:55,040 --> 00:07:57,520 Speaker 7: and there's dispersion, and that's what's stamping in volatilely. So 164 00:07:57,560 --> 00:07:59,440 Speaker 7: I do think that we are trying to advise our 165 00:07:59,440 --> 00:08:02,240 Speaker 7: clients to be pay pick up in volatility as we 166 00:08:02,360 --> 00:08:05,240 Speaker 7: enter into March and April. But I also think that 167 00:08:05,360 --> 00:08:08,480 Speaker 7: what clients appreciate is that rotation that's happening, that brought 168 00:08:08,480 --> 00:08:08,920 Speaker 7: in and out. 169 00:08:08,960 --> 00:08:10,640 Speaker 5: You have like nine of the eleven. 170 00:08:10,520 --> 00:08:13,640 Speaker 7: SMP sectors are now performing over fifty percent of the 171 00:08:13,640 --> 00:08:16,000 Speaker 7: index ILL performance. Compare that to the last couple of 172 00:08:16,080 --> 00:08:17,720 Speaker 7: years was like twenty five to thirty percent. 173 00:08:17,840 --> 00:08:18,360 Speaker 5: So I think. 174 00:08:18,240 --> 00:08:22,160 Speaker 7: Clients are starting to appreciate that rotation finally happening. 175 00:08:22,200 --> 00:08:24,400 Speaker 6: Well, part of what happens with that rotation is a 176 00:08:24,440 --> 00:08:27,000 Speaker 6: mag seven that's underperformed. I think it's only up something 177 00:08:27,040 --> 00:08:30,240 Speaker 6: like point zero five percent around there so far this year. 178 00:08:30,600 --> 00:08:31,480 Speaker 2: But what has. 179 00:08:31,360 --> 00:08:34,720 Speaker 6: Outperformed in tech really noticeably is what's happening in China. 180 00:08:34,840 --> 00:08:37,480 Speaker 6: China Tech has been off to the races. It is 181 00:08:37,480 --> 00:08:39,800 Speaker 6: on fire. Hong Kong Tech shares up another six and 182 00:08:39,840 --> 00:08:42,800 Speaker 6: a half percent today after Ali Baba earnings. 183 00:08:43,360 --> 00:08:44,440 Speaker 5: Are the two related? 184 00:08:44,760 --> 00:08:48,120 Speaker 6: Is there some degree which America Tech lagging behind is 185 00:08:48,120 --> 00:08:50,600 Speaker 6: because China is starting to pose a real threat. 186 00:08:51,000 --> 00:08:51,440 Speaker 5: I don't know. 187 00:08:51,520 --> 00:08:53,760 Speaker 7: We don't think that China posts a real threat, but 188 00:08:53,800 --> 00:08:55,960 Speaker 7: we do think that there's an opportunity. We actually have 189 00:08:56,040 --> 00:08:58,440 Speaker 7: had a call on China Internet's stock for some time, 190 00:08:58,480 --> 00:09:00,760 Speaker 7: so it's nice to see you at they start to outperform. 191 00:09:00,880 --> 00:09:03,920 Speaker 7: I think what Deep Seeks showed is that China still 192 00:09:03,960 --> 00:09:06,319 Speaker 7: has an AI industry despite the fact that we've had 193 00:09:06,360 --> 00:09:08,960 Speaker 7: chip restrictions, So we think that there's more upside to go. 194 00:09:09,040 --> 00:09:11,800 Speaker 7: And then when you look at China Internet versus the 195 00:09:11,840 --> 00:09:14,559 Speaker 7: American pairs, evaluation gap is quite wide. You know, you 196 00:09:14,960 --> 00:09:17,840 Speaker 7: have those those stocks training out about fourteen times nearly 197 00:09:18,200 --> 00:09:22,000 Speaker 7: you know, a half half as less as the American peers. 198 00:09:22,080 --> 00:09:24,000 Speaker 7: And also we think that it feels like the government 199 00:09:24,040 --> 00:09:25,679 Speaker 7: is going to be more supportive. We had that Priva 200 00:09:25,679 --> 00:09:29,439 Speaker 7: symposium earlier this week as well, and then you had 201 00:09:29,480 --> 00:09:33,160 Speaker 7: Baba bodydo all had great earnings and the fact that 202 00:09:33,320 --> 00:09:36,080 Speaker 7: Boba is saying that you know, Capex over the next 203 00:09:36,120 --> 00:09:37,960 Speaker 7: three years is going to be more than that of 204 00:09:38,000 --> 00:09:40,679 Speaker 7: the last decade is quite encouraging. And so we think 205 00:09:40,720 --> 00:09:42,640 Speaker 7: that there's a little bit more to go in that trade, 206 00:09:42,679 --> 00:09:44,920 Speaker 7: and I don't think that over the longer term is 207 00:09:44,960 --> 00:09:47,880 Speaker 7: at the expense of US tech. Will see what you 208 00:09:47,920 --> 00:09:50,520 Speaker 7: know the Leader and Video reports next week, but the 209 00:09:50,600 --> 00:09:53,520 Speaker 7: Kapech story that we've heard from those cloud players this 210 00:09:53,600 --> 00:09:56,240 Speaker 7: past earnest season should be a positive for some of 211 00:09:56,280 --> 00:09:58,960 Speaker 7: those semi semiconductions and compute companies. 212 00:09:59,360 --> 00:10:01,679 Speaker 6: Just on that will we're talking about event risk dates 213 00:10:01,720 --> 00:10:05,600 Speaker 6: away from the tariff dates February twenty six in video earnings. 214 00:10:05,640 --> 00:10:07,160 Speaker 5: How big of an event risk is that. 215 00:10:07,640 --> 00:10:11,000 Speaker 7: You know, I think historically you've seen like mix mixed 216 00:10:11,000 --> 00:10:13,800 Speaker 7: trading around in the video. Sometimes you have the stock 217 00:10:13,840 --> 00:10:15,520 Speaker 7: trade up in turn is and then sort of a 218 00:10:15,600 --> 00:10:18,520 Speaker 7: cell of the news and it has become a macro event. 219 00:10:18,800 --> 00:10:20,679 Speaker 7: I don't know how much of a macro event at 220 00:10:20,720 --> 00:10:22,920 Speaker 7: this time it is around because the stock is down 221 00:10:22,960 --> 00:10:24,959 Speaker 7: going into earnest, so you know, there's sort of so 222 00:10:25,160 --> 00:10:27,480 Speaker 7: expectations of volatility around that. 223 00:10:27,559 --> 00:10:28,280 Speaker 5: I think people. 224 00:10:28,040 --> 00:10:29,959 Speaker 7: Are likely going to be more focused on what the 225 00:10:30,000 --> 00:10:33,640 Speaker 7: administration has to say in March and April. In the 226 00:10:33,720 --> 00:10:36,000 Speaker 7: video is no longer so much of a macro event 227 00:10:36,160 --> 00:10:37,640 Speaker 7: as it has been over the last that would say 228 00:10:37,679 --> 00:10:38,240 Speaker 7: year and a half. 229 00:10:38,320 --> 00:10:40,800 Speaker 1: So policies, though, can infect that stock when it comes 230 00:10:40,840 --> 00:10:43,480 Speaker 1: to semi conductors coming out of Taiwan. 231 00:10:43,160 --> 00:10:44,280 Speaker 4: Or export controls. 232 00:10:44,640 --> 00:10:46,920 Speaker 1: How aggressive do you think the Trump administration is going 233 00:10:46,920 --> 00:10:47,120 Speaker 1: to be? 234 00:10:47,240 --> 00:10:49,600 Speaker 7: You know, the fact that he that he met with 235 00:10:49,800 --> 00:10:52,360 Speaker 7: in the CEO of the company, I think is quite positive. 236 00:10:52,600 --> 00:10:54,800 Speaker 7: I do think as President Trump continues to say that 237 00:10:54,880 --> 00:10:57,040 Speaker 7: America needs to continue to innovate, so I think he's 238 00:10:57,080 --> 00:11:00,680 Speaker 7: going to be mindful in terms of not doing anything 239 00:11:00,679 --> 00:11:03,560 Speaker 7: that's so aggressive that it it's it dampens that innovation. 240 00:11:03,960 --> 00:11:06,840 Speaker 7: But at the same time, uh, we wanna protect American 241 00:11:07,080 --> 00:11:09,480 Speaker 7: technology and not have it get in the hands of China. 242 00:11:09,520 --> 00:11:11,000 Speaker 7: We want to be ahead. 243 00:11:10,720 --> 00:11:11,240 Speaker 5: Of of that. 244 00:11:11,440 --> 00:11:13,200 Speaker 7: So we think that on the margin you could see 245 00:11:13,200 --> 00:11:14,920 Speaker 7: some restrictions, but I don't think it's gonna be overly 246 00:11:14,960 --> 00:11:17,440 Speaker 7: aggressive and it's not necessarily gonna be against like a Taiwan. 247 00:11:17,480 --> 00:11:20,120 Speaker 1: We talked about all the risks that this market faces, 248 00:11:20,280 --> 00:11:22,760 Speaker 1: and you're in the medium term, you're constructive. 249 00:11:23,720 --> 00:11:24,719 Speaker 5: At what point do. 250 00:11:24,720 --> 00:11:26,920 Speaker 1: You need to see the good stuff coming out of Washington, 251 00:11:26,960 --> 00:11:29,840 Speaker 1: the tax cuts, the deregulation to get a little. 252 00:11:29,679 --> 00:11:30,559 Speaker 4: Bit more bullish. 253 00:11:30,640 --> 00:11:33,040 Speaker 7: I mean, reality is, we always thought that those tax 254 00:11:33,080 --> 00:11:35,920 Speaker 7: cuts will probably be uh quite minimum and likely in 255 00:11:35,960 --> 00:11:38,120 Speaker 7: the second half of the year. I think what you 256 00:11:38,160 --> 00:11:40,760 Speaker 7: wanna see from the President is not tariffs that are 257 00:11:40,880 --> 00:11:44,920 Speaker 7: overly aggressive. No blanketed tariffs. Right, don't wanna see tariffs 258 00:11:44,960 --> 00:11:46,959 Speaker 7: of Mexico and Canada, cause. 259 00:11:46,760 --> 00:11:47,960 Speaker 2: That would be disruptive. 260 00:11:48,280 --> 00:11:51,439 Speaker 7: You are seeing progress, I think in terms of deregulation, 261 00:11:51,600 --> 00:11:55,280 Speaker 7: we'll see who take the helm in terms of pri advice, 262 00:11:55,280 --> 00:11:57,880 Speaker 7: share of supervision for like the the banks. Yes, this 263 00:11:57,920 --> 00:12:01,320 Speaker 7: past week we see some volatility around financials, just given 264 00:12:01,360 --> 00:12:05,280 Speaker 7: the headlines around the President Trump administration sticking with those 265 00:12:05,559 --> 00:12:09,160 Speaker 7: stricter regulations around m and a of the Biden error. 266 00:12:09,160 --> 00:12:12,120 Speaker 7: But again you know, those are guidelines and the interpretation 267 00:12:12,200 --> 00:12:15,440 Speaker 7: might be totally different than the Biden error. So why 268 00:12:15,520 --> 00:12:18,560 Speaker 7: that those a monkey wrench in the most pollished case 269 00:12:18,640 --> 00:12:21,400 Speaker 7: for the banks. We don't think that is a deal breaker. 270 00:12:21,520 --> 00:12:23,040 Speaker 2: You'd find the weakness and the banks this week. 271 00:12:23,120 --> 00:12:25,000 Speaker 7: We would buy the weakness because there are other things 272 00:12:25,040 --> 00:12:27,360 Speaker 7: at play that we think continue to support banks. Think 273 00:12:27,400 --> 00:12:29,440 Speaker 7: about we have an economy that's still chugging a law, 274 00:12:29,720 --> 00:12:33,440 Speaker 7: we have trading activity that's also doing well, asset and 275 00:12:33,520 --> 00:12:37,400 Speaker 7: wealth management, and then there is that possibility for deregulation. Seacart. 276 00:12:37,640 --> 00:12:40,640 Speaker 7: The the scenarios for this year less harsh than they 277 00:12:40,640 --> 00:12:42,920 Speaker 7: were last year, so we could see capital returns in 278 00:12:42,960 --> 00:12:44,840 Speaker 7: the back half of the year and then the basil 279 00:12:44,880 --> 00:12:48,520 Speaker 7: three end game on pause, right you know, uh yeah. 280 00:12:48,520 --> 00:12:51,360 Speaker 7: Bowman has said that, you know, there needs to be 281 00:12:51,400 --> 00:12:53,800 Speaker 7: a review of those capital requirements, so we could see 282 00:12:53,800 --> 00:12:54,680 Speaker 7: some easier regulation. 283 00:12:54,920 --> 00:12:57,280 Speaker 2: Nadia always going to catch up, getting up down your theories. 284 00:12:57,400 --> 00:13:09,760 Speaker 2: Thank you, Nannia. Level there. Jason Furman, the former chair 285 00:13:09,840 --> 00:13:12,480 Speaker 2: of the Council of Economic Advisors, with some sharp words 286 00:13:12,480 --> 00:13:15,760 Speaker 2: for the previous administration writing in Foreign Affairs, Biden never 287 00:13:15,800 --> 00:13:17,800 Speaker 2: did the hard work of explaining to the public that 288 00:13:18,040 --> 00:13:21,559 Speaker 2: enforcing further limits on trade with China imposed real costs 289 00:13:21,559 --> 00:13:25,320 Speaker 2: on Americans, but the national security gain was worth the 290 00:13:25,360 --> 00:13:28,480 Speaker 2: economic pain. Jason joined us now for more. Jason, imagine 291 00:13:28,480 --> 00:13:30,920 Speaker 2: you didn't write the headline the post neoliberal delusion and 292 00:13:30,960 --> 00:13:34,120 Speaker 2: the tragedy of Bidenomics, but certainly the content got a 293 00:13:34,160 --> 00:13:36,840 Speaker 2: lot of attention as well. What kind of feedback did 294 00:13:36,880 --> 00:13:39,520 Speaker 2: you get from your own party after publishing that? 295 00:13:41,480 --> 00:13:44,880 Speaker 8: You know, I've been pleased by the reaction I've gotten. 296 00:13:45,240 --> 00:13:47,720 Speaker 9: There's certainly some people that have been very negative and 297 00:13:47,840 --> 00:13:51,120 Speaker 9: very critical. I've heard from a lot of Democrats who 298 00:13:51,160 --> 00:13:53,679 Speaker 9: were happy that I wrote it and think we need 299 00:13:53,679 --> 00:13:56,760 Speaker 9: to figure out, you know, a different way for policy 300 00:13:56,840 --> 00:14:01,760 Speaker 9: going forward. And you know, I've also heard from people 301 00:14:01,800 --> 00:14:02,720 Speaker 9: as generate ideas. 302 00:14:02,760 --> 00:14:04,840 Speaker 8: But the one feedback I haven't liked. 303 00:14:04,720 --> 00:14:07,320 Speaker 9: Is there's been people from the Trump administration who have 304 00:14:07,440 --> 00:14:10,600 Speaker 9: leaked all over it without realizing it. It is also 305 00:14:10,679 --> 00:14:14,280 Speaker 9: a description of many of the problems, in some cases 306 00:14:14,360 --> 00:14:16,440 Speaker 9: more severe of their own policies. 307 00:14:16,880 --> 00:14:19,240 Speaker 1: What do you think is the most severe problem in 308 00:14:19,280 --> 00:14:22,520 Speaker 1: your mind of what the Trump administration is offering right now. 309 00:14:23,880 --> 00:14:27,840 Speaker 9: In terms of the economy, Tariffs, especially if we actually 310 00:14:27,880 --> 00:14:31,760 Speaker 9: go ahead with anything on Canada and Mexico, which are 311 00:14:31,800 --> 00:14:35,480 Speaker 9: just so inextricably linked with the way in which America 312 00:14:35,960 --> 00:14:38,720 Speaker 9: makes things. I thought it was refreshing that the Shrogury 313 00:14:38,760 --> 00:14:42,480 Speaker 9: Secretary was effectively admitting that it will actually raise prices. 314 00:14:43,320 --> 00:14:46,640 Speaker 9: I would warn him against using the word transitory for inflation. 315 00:14:46,800 --> 00:14:49,960 Speaker 9: You don't know what gets built into expectations. I don't 316 00:14:49,960 --> 00:14:52,720 Speaker 9: think the Fed could afford to have the inflation rate 317 00:14:52,800 --> 00:14:55,160 Speaker 9: go to three percent for a year or two and say, 318 00:14:55,200 --> 00:14:58,600 Speaker 9: but don't worry, it's just because of the tariffs. We're 319 00:14:58,600 --> 00:15:00,960 Speaker 9: going to keep cutting raids even though inflation is three 320 00:15:01,000 --> 00:15:01,600 Speaker 9: percent now. 321 00:15:01,680 --> 00:15:04,000 Speaker 1: Jason isn't going to be hard for the Democratic Party though, 322 00:15:04,080 --> 00:15:06,800 Speaker 1: to throw stones at this administration when it comes to tariffs. 323 00:15:06,800 --> 00:15:11,239 Speaker 1: When we had such high inflation and the Biden administration 324 00:15:11,520 --> 00:15:14,440 Speaker 1: refused to remove tariffs on places like China. 325 00:15:15,560 --> 00:15:18,360 Speaker 9: Yeah, I wish the Biden administration had removed a lot 326 00:15:18,360 --> 00:15:23,040 Speaker 9: of those tariffs. I wish the Biden's US trade representative 327 00:15:23,400 --> 00:15:26,840 Speaker 9: hadn't said. The idea that tariffs raised prices has been debunked. 328 00:15:28,240 --> 00:15:31,480 Speaker 9: But you know, I don't think what about itism helps 329 00:15:31,520 --> 00:15:36,760 Speaker 9: your economy, And I don't think that you know, if 330 00:15:36,800 --> 00:15:39,080 Speaker 9: tariffs raise inflation by half a point and we end 331 00:15:39,160 --> 00:15:42,040 Speaker 9: up with two point nine percent inflation, and. 332 00:15:42,040 --> 00:15:44,080 Speaker 8: Maybe the Americans aren't really. 333 00:15:43,800 --> 00:15:45,640 Speaker 9: Noticing it quite as much as they did a couple 334 00:15:45,680 --> 00:15:48,400 Speaker 9: of years ago, but the Fed will certainly be noticing it. 335 00:15:48,560 --> 00:15:51,640 Speaker 9: The Fed's not cutting rates in a world with inflation 336 00:15:51,800 --> 00:15:53,880 Speaker 9: like that, and in fact, it might even be raising them. 337 00:15:54,280 --> 00:15:58,280 Speaker 6: Jason, to that point, what happens if a similar mistake 338 00:15:58,480 --> 00:16:00,960 Speaker 6: is made this time around, and by similar mistake, I 339 00:16:00,960 --> 00:16:03,240 Speaker 6: mean this idea that you point out that John started 340 00:16:03,280 --> 00:16:06,320 Speaker 6: us with, that tariffs are being put on and they're 341 00:16:06,360 --> 00:16:09,800 Speaker 6: not necessarily described as something that you need to grit 342 00:16:09,840 --> 00:16:13,280 Speaker 6: through for national security and what's more, something that raises 343 00:16:13,360 --> 00:16:16,880 Speaker 6: revenue and brings down taxes when the reality might end 344 00:16:16,960 --> 00:16:17,920 Speaker 6: up being different on the ground. 345 00:16:19,320 --> 00:16:21,920 Speaker 9: Yeah, I mean, it's a terrible way to raise tax revenue. 346 00:16:22,160 --> 00:16:27,880 Speaker 9: It's highly distortionary. In some cases, it is a national 347 00:16:27,880 --> 00:16:32,320 Speaker 9: security tool. And for example, sanctions on Russia. No one 348 00:16:32,360 --> 00:16:35,240 Speaker 9: ever said America is going to get rich by putting 349 00:16:35,240 --> 00:16:38,320 Speaker 9: sanctions on Russia. We understood that we were paying a 350 00:16:38,360 --> 00:16:41,880 Speaker 9: small economic cost by not doing business in Russia, but 351 00:16:41,960 --> 00:16:44,120 Speaker 9: they're going to pay a disproportionate cost, and I think 352 00:16:44,160 --> 00:16:47,320 Speaker 9: it is if the president uses his leverage well and 353 00:16:47,800 --> 00:16:50,600 Speaker 9: not clear that he is something that would help bring 354 00:16:50,640 --> 00:16:51,400 Speaker 9: them to the table. 355 00:16:51,880 --> 00:16:54,000 Speaker 8: That's basically what tariffs are. 356 00:16:54,040 --> 00:16:56,840 Speaker 9: Like, and where you especially don't want to do them 357 00:16:57,520 --> 00:17:01,000 Speaker 9: is where they're on intermediate in pots that are needed 358 00:17:01,040 --> 00:17:05,040 Speaker 9: for American manufacturing, When they're on things that consumers want, 359 00:17:05,119 --> 00:17:07,720 Speaker 9: when then there are things that are made by our allies, 360 00:17:08,200 --> 00:17:10,600 Speaker 9: when they are things where you could cause trade diversion 361 00:17:11,200 --> 00:17:13,840 Speaker 9: from another country, just lots and lots of the ones 362 00:17:13,840 --> 00:17:17,000 Speaker 9: that they've talked about are just very poorly designed. 363 00:17:17,200 --> 00:17:20,320 Speaker 6: In this scenario though, Jason, we saw last time around 364 00:17:20,520 --> 00:17:24,399 Speaker 6: terrors were something that specifically hurt growth, which is the 365 00:17:24,400 --> 00:17:27,000 Speaker 6: bigger concern this time around. Is it some sort of 366 00:17:27,040 --> 00:17:31,159 Speaker 6: inflationary impulse or is it weakened growth and we can demand. 367 00:17:32,760 --> 00:17:35,520 Speaker 8: In the medium and the long run. It's definitely growth. 368 00:17:35,680 --> 00:17:39,040 Speaker 9: When I teach tariffs in class, we don't focus on 369 00:17:39,080 --> 00:17:43,040 Speaker 9: the inflation aspect of them. We focus on what it 370 00:17:43,119 --> 00:17:48,800 Speaker 9: means for both consumers having you know, worse options to 371 00:17:48,880 --> 00:17:53,000 Speaker 9: buy things and producers who it's effectively putting attacks on 372 00:17:53,080 --> 00:17:56,000 Speaker 9: as well having a harder time I'm selling things in 373 00:17:56,040 --> 00:17:59,680 Speaker 9: the current conjunction. Though we have underlying inflation and around 374 00:18:00,040 --> 00:18:03,000 Speaker 9: and a half percent. If it falls by a few tents, 375 00:18:03,040 --> 00:18:05,479 Speaker 9: we're in great shape. The Fed can resume rate cuts 376 00:18:06,119 --> 00:18:08,680 Speaker 9: if it rises by a few tents. The Fed has 377 00:18:08,720 --> 00:18:11,199 Speaker 9: to call off any rate cuts. And it rises by 378 00:18:11,240 --> 00:18:13,840 Speaker 9: a few tenths more than that, and they're increasing rates again. 379 00:18:14,000 --> 00:18:18,240 Speaker 9: So given where we're poised right now, tariffs are just 380 00:18:18,560 --> 00:18:21,439 Speaker 9: that inflation aspect, and the interaction with the Fed, I 381 00:18:21,440 --> 00:18:22,800 Speaker 9: think really is quite important. 382 00:18:22,960 --> 00:18:25,199 Speaker 2: Jason got forty seconds left. I wanted to squeeze this in. 383 00:18:25,480 --> 00:18:28,159 Speaker 2: Do we have any experience of threats this large, lingering 384 00:18:28,160 --> 00:18:30,560 Speaker 2: for this long with regards to tariffs? Do we start 385 00:18:30,600 --> 00:18:32,680 Speaker 2: to behave as if tariffs aren't just going up? 386 00:18:34,320 --> 00:18:38,200 Speaker 9: Yeah, our record amounts of uncertainty that businesses are facing 387 00:18:38,400 --> 00:18:42,800 Speaker 9: right now, just even threatening tariffs and unthreatening them has 388 00:18:42,800 --> 00:18:46,720 Speaker 9: been studied by economists and it has an effect, and 389 00:18:46,760 --> 00:18:50,280 Speaker 9: that effect is a minus. So it's not something we 390 00:18:50,320 --> 00:18:54,240 Speaker 9: should be playing five dimensional chests with. We should be clear, transparent, 391 00:18:54,640 --> 00:18:55,840 Speaker 9: and ideally limited. 392 00:18:56,040 --> 00:18:58,920 Speaker 2: Jason, I appreciate your time and a publication enjoyed the piece. 393 00:18:58,960 --> 00:19:01,840 Speaker 2: Thank you, sir, Jason. And at the Harvard Kennedy School 394 00:19:11,880 --> 00:19:14,600 Speaker 2: has sent back to the economy Fed official signal the 395 00:19:14,720 --> 00:19:17,919 Speaker 2: rates will remain high for longer with government policies bringing 396 00:19:17,920 --> 00:19:21,280 Speaker 2: inflationary risks. Tiffany Wilding of PIMCO writing, all of these 397 00:19:21,280 --> 00:19:25,120 Speaker 2: policies and negotiations are likely to coincide with some economic 398 00:19:25,119 --> 00:19:28,400 Speaker 2: disruption and market volatility in the near term. How much 399 00:19:28,480 --> 00:19:32,280 Speaker 2: volatility is tolerable is still the key question. Tiffany joined 400 00:19:32,359 --> 00:19:34,240 Speaker 2: us now for more. Tiffany, welcome to the show. And 401 00:19:34,280 --> 00:19:36,600 Speaker 2: in many ways I'll ask him where's the volatility? Because 402 00:19:36,640 --> 00:19:38,720 Speaker 2: equities are close to all time highs on both sides 403 00:19:38,720 --> 00:19:40,639 Speaker 2: of the Atlantic, and some people believe that maybe that 404 00:19:40,720 --> 00:19:42,720 Speaker 2: just leaves the door open for the president to be 405 00:19:42,800 --> 00:19:45,880 Speaker 2: even more aggressive with tariff threats. Of the things on 406 00:19:45,920 --> 00:19:48,640 Speaker 2: the table, what are you and the team actually expecting. 407 00:19:51,359 --> 00:19:52,240 Speaker 5: Yeah, so, you. 408 00:19:52,280 --> 00:19:53,879 Speaker 10: Know, I think there's a lot, clearly a lot of 409 00:19:53,920 --> 00:19:57,600 Speaker 10: uncertainty here because I definitely think inflation, as you mentioned 410 00:19:57,760 --> 00:20:00,600 Speaker 10: in market volatility, will be a constraint to what the 411 00:20:00,760 --> 00:20:05,159 Speaker 10: you know, what the administration honest uh eventually does you know. 412 00:20:05,200 --> 00:20:08,400 Speaker 10: But nevertheless, what they are saying they're trying to do 413 00:20:08,560 --> 00:20:11,879 Speaker 10: is they want to rectify decades of you know, trade 414 00:20:11,920 --> 00:20:15,720 Speaker 10: and balances you know that have you know, treated the 415 00:20:16,080 --> 00:20:18,960 Speaker 10: United States, in particular, the manufacturing sector in the United 416 00:20:18,960 --> 00:20:19,840 Speaker 10: States unfairly. 417 00:20:20,280 --> 00:20:22,240 Speaker 5: You know. In order to rectify those. 418 00:20:22,080 --> 00:20:25,760 Speaker 10: Balances, they have to really get at some structural issues 419 00:20:25,800 --> 00:20:29,800 Speaker 10: within the global economy, within these economies that you know 420 00:20:29,880 --> 00:20:34,480 Speaker 10: run surpluses, you know, like China, Japan, South Korea, in Germany, 421 00:20:34,800 --> 00:20:35,919 Speaker 10: you know, And so these are not going to be 422 00:20:35,920 --> 00:20:38,920 Speaker 10: things that are easily negotiated, you know, and if if 423 00:20:38,920 --> 00:20:41,800 Speaker 10: they are changed, if the trumpetministration is trying to force changes, 424 00:20:42,119 --> 00:20:45,000 Speaker 10: you know, certainly could result in some disruptions. So, you know, 425 00:20:45,200 --> 00:20:47,920 Speaker 10: I think how much disruption is tolerable, you know, is 426 00:20:48,240 --> 00:20:49,679 Speaker 10: kind of the key question here, you know. 427 00:20:49,680 --> 00:20:51,640 Speaker 5: And when we look at market pricing. 428 00:20:51,880 --> 00:20:53,640 Speaker 10: You know, it does look like, you know, a lot 429 00:20:53,680 --> 00:20:56,080 Speaker 10: of you know, a lot of there's a lot of 430 00:20:56,119 --> 00:20:59,480 Speaker 10: sanguine kind of pricing when we look around, you know, 431 00:20:59,480 --> 00:21:03,159 Speaker 10: the markets don't seem to be you know, really reacting. 432 00:21:02,720 --> 00:21:05,080 Speaker 5: You know, to the potential for this type of disruption. 433 00:21:05,200 --> 00:21:07,040 Speaker 2: It's diffinity. Do you think the FED will react when 434 00:21:07,040 --> 00:21:08,520 Speaker 2: they meet in March. They've got to put out some 435 00:21:08,560 --> 00:21:11,360 Speaker 2: new forecasts, and we know that we've got certain tariff 436 00:21:11,359 --> 00:21:14,240 Speaker 2: proposals on the table for March, including twenty five percent 437 00:21:14,280 --> 00:21:17,720 Speaker 2: on Canada and Mexico, twenty five percent on steel and aluminum, 438 00:21:17,760 --> 00:21:19,840 Speaker 2: and then in the following month that we go into April, 439 00:21:20,080 --> 00:21:22,600 Speaker 2: there's the reciprocal tariffs that people are looking for as well. 440 00:21:22,720 --> 00:21:24,600 Speaker 2: How do you expect the forecast the change of at 441 00:21:24,600 --> 00:21:25,879 Speaker 2: all at the Federal Reserve? 442 00:21:28,040 --> 00:21:29,680 Speaker 10: Yeah, I mean, I think this puts the FED in 443 00:21:29,920 --> 00:21:34,080 Speaker 10: a really tricky position, you know, because these types of policies, 444 00:21:34,480 --> 00:21:37,840 Speaker 10: they will result in a or likely will result in 445 00:21:38,000 --> 00:21:41,720 Speaker 10: a delay of the Fed meeting its two percent inflation goal. 446 00:21:42,040 --> 00:21:44,640 Speaker 10: That will result in one time kind of price level 447 00:21:44,640 --> 00:21:47,560 Speaker 10: adjustments as these tariffs are passed on to consumers. But 448 00:21:47,600 --> 00:21:49,480 Speaker 10: at the same time they could also result in some 449 00:21:49,560 --> 00:21:50,560 Speaker 10: economic disruption. 450 00:21:51,359 --> 00:21:53,959 Speaker 5: Growth can can have a bit of a drag from this. 451 00:21:54,359 --> 00:21:58,000 Speaker 10: You know, other policies that the Trump administration are implementing, 452 00:21:58,080 --> 00:22:00,919 Speaker 10: you know, like more aggressive immigration policy, these, you know, 453 00:22:00,960 --> 00:22:03,760 Speaker 10: some of the government's potential government spending cuts that are 454 00:22:03,760 --> 00:22:06,400 Speaker 10: being discussed within these reconciliation bills. All of that will 455 00:22:06,400 --> 00:22:09,960 Speaker 10: put downward pressure on growth, and so that's not you know, 456 00:22:10,000 --> 00:22:12,320 Speaker 10: that kind of goes against the dual mandate. 457 00:22:12,359 --> 00:22:14,080 Speaker 5: You have conflicting issues. 458 00:22:14,280 --> 00:22:16,560 Speaker 10: I think in terms of the FED, basically what they've 459 00:22:16,600 --> 00:22:19,000 Speaker 10: signaled is that the economy is coming into this period 460 00:22:19,320 --> 00:22:24,640 Speaker 10: relatively strong position. You know, inflation has been stickier than expected, 461 00:22:24,680 --> 00:22:27,240 Speaker 10: that last mile has been more difficult, and with all 462 00:22:27,280 --> 00:22:29,359 Speaker 10: of this uncertainty, they're kind of happy to sit and 463 00:22:29,400 --> 00:22:31,600 Speaker 10: watch for now at least, and to kind of see 464 00:22:31,600 --> 00:22:32,520 Speaker 10: how this plays out. 465 00:22:32,720 --> 00:22:35,919 Speaker 6: Tiffany, could that lead to something that looks like a 466 00:22:35,960 --> 00:22:38,960 Speaker 6: policy mistake if history has told us that one of 467 00:22:38,960 --> 00:22:41,119 Speaker 6: the impacts of tariffs is weaker growth. 468 00:22:40,840 --> 00:22:43,480 Speaker 5: And you have a FED that's still squarely. 469 00:22:43,000 --> 00:22:46,800 Speaker 6: Focused on inflation, perhaps with recency bias, that they might 470 00:22:46,840 --> 00:22:48,840 Speaker 6: not move or might not cut as much as they 471 00:22:48,840 --> 00:22:51,280 Speaker 6: should when we know what some of the impacts of 472 00:22:51,280 --> 00:22:53,600 Speaker 6: tariffs are and as you say, it's not great for 473 00:22:53,640 --> 00:22:55,400 Speaker 6: the economy. 474 00:22:56,640 --> 00:22:58,520 Speaker 5: Yeah, I mean I certainly think that's possible. 475 00:22:58,600 --> 00:23:00,560 Speaker 10: You know, I still think that the FED or Reserve 476 00:23:00,640 --> 00:23:03,600 Speaker 10: is is squarely focused on the labor market. You know, 477 00:23:03,680 --> 00:23:06,000 Speaker 10: as we saw in the you know, the latter half 478 00:23:06,040 --> 00:23:10,200 Speaker 10: of last year, with you know, an unexpected weakness in 479 00:23:10,240 --> 00:23:12,359 Speaker 10: the labor market, you know, really kicking off about one 480 00:23:12,400 --> 00:23:14,720 Speaker 10: hundred basis points of cuts and adjustment lower in the 481 00:23:14,720 --> 00:23:17,239 Speaker 10: FED funds rate. You know, we really do think they 482 00:23:17,240 --> 00:23:20,120 Speaker 10: are focused on that. You know, so ultimately maybe they're 483 00:23:20,119 --> 00:23:22,560 Speaker 10: a little bit more delayed. But if the labor markets 484 00:23:22,560 --> 00:23:25,919 Speaker 10: really deteriorate, you know, we would we would expect the 485 00:23:25,920 --> 00:23:28,040 Speaker 10: Fed to react in a in a strong way. 486 00:23:28,280 --> 00:23:30,840 Speaker 1: But Tiffany, what about the inflation side. We're going to 487 00:23:30,880 --> 00:23:34,440 Speaker 1: get University of Michigan. We've already seen these surveys come out, 488 00:23:34,480 --> 00:23:38,479 Speaker 1: and people are concerned about potentially higher prices, even if 489 00:23:38,520 --> 00:23:41,560 Speaker 1: it's a one hit because of teriffs. How is the 490 00:23:41,600 --> 00:23:42,920 Speaker 1: FED going to react to that? 491 00:23:45,160 --> 00:23:45,480 Speaker 5: Yeah? 492 00:23:45,560 --> 00:23:48,080 Speaker 10: Yeah, I mean ultimately, I we we agree it's a 493 00:23:48,119 --> 00:23:51,199 Speaker 10: tricky position for the Fed. I think ultimately, for now, 494 00:23:51,520 --> 00:23:53,480 Speaker 10: you know, the Fed is is going to stay on 495 00:23:53,520 --> 00:23:56,200 Speaker 10: hold and is going to watch how this plays out. 496 00:23:56,440 --> 00:24:00,360 Speaker 5: You know, inflation movement, higher in inflation. 497 00:24:00,119 --> 00:24:03,400 Speaker 10: Expectations would be something that the Fed would would be 498 00:24:03,800 --> 00:24:07,679 Speaker 10: you know, very much focused on and ultimately, could you know, 499 00:24:07,760 --> 00:24:10,919 Speaker 10: delay or or mute the extent to which you know, 500 00:24:10,960 --> 00:24:13,560 Speaker 10: they they cut the policy rate even amid you know, 501 00:24:14,000 --> 00:24:17,000 Speaker 10: a growth scare or some deceleration you know on the 502 00:24:17,040 --> 00:24:19,160 Speaker 10: activity side. You know, so I think this is something 503 00:24:19,200 --> 00:24:21,760 Speaker 10: again that they're they're going to continue to watch and 504 00:24:22,119 --> 00:24:24,040 Speaker 10: it sets up for a very tricky position for them. 505 00:24:24,240 --> 00:24:27,760 Speaker 2: It's definitely, what is our experience of taro threats lingering 506 00:24:28,040 --> 00:24:30,680 Speaker 2: for this long? If this just persists through the year, 507 00:24:30,840 --> 00:24:32,719 Speaker 2: do you have an experience of that, What happens? How 508 00:24:32,720 --> 00:24:35,119 Speaker 2: does the consumer behave, how the companies behave? 509 00:24:37,680 --> 00:24:39,560 Speaker 10: Yeah, well, you know here again, you know, I think 510 00:24:39,560 --> 00:24:41,159 Speaker 10: it's a there's a little bit of you know, I 511 00:24:41,200 --> 00:24:43,560 Speaker 10: hate to be a two handed economist, but you know, 512 00:24:43,600 --> 00:24:48,080 Speaker 10: you do have expectations that impact behavior and that can 513 00:24:48,119 --> 00:24:51,000 Speaker 10: go in in both ways in terms of growth and inflation. 514 00:24:51,440 --> 00:24:51,560 Speaker 5: You know. 515 00:24:51,640 --> 00:24:55,560 Speaker 10: So you certainly have evidence from the first you know, 516 00:24:55,600 --> 00:24:59,880 Speaker 10: the first Trump administration that increases in just policy uncertain 517 00:25:00,000 --> 00:25:03,280 Speaker 10: see economic or trade policy uncertainty, you know, does hold 518 00:25:03,320 --> 00:25:06,680 Speaker 10: back hiring, does hold back investment, you know, as as 519 00:25:06,760 --> 00:25:08,640 Speaker 10: as businesses or more unsure. 520 00:25:08,280 --> 00:25:09,240 Speaker 5: Of what the rules of the game. 521 00:25:09,280 --> 00:25:09,520 Speaker 3: Are. 522 00:25:09,840 --> 00:25:12,840 Speaker 10: At the same time, though, you also see some you 523 00:25:12,840 --> 00:25:15,159 Speaker 10: know call it front loading behavior, and we think we 524 00:25:15,200 --> 00:25:18,840 Speaker 10: are absolutely seeing consumers do that now. So we've seen 525 00:25:18,840 --> 00:25:23,679 Speaker 10: an increase in goods purchases that drove the acceleration and 526 00:25:23,760 --> 00:25:26,280 Speaker 10: consumption in the second half of last year. You know, 527 00:25:26,320 --> 00:25:28,960 Speaker 10: we calculate it contribute about two percentage points to the 528 00:25:29,040 --> 00:25:32,240 Speaker 10: roughly four percentage point growth that we had in real consumption. 529 00:25:32,640 --> 00:25:35,639 Speaker 10: And that's consumers, we think, just hurrying up their purchases 530 00:25:35,640 --> 00:25:38,879 Speaker 10: of various goods expecting some of these tariffs, you know, 531 00:25:38,920 --> 00:25:41,480 Speaker 10: So that is kind of a near term boost to growth. Obviously, 532 00:25:41,520 --> 00:25:44,439 Speaker 10: that won't last forever, you know, and eventually, you know, 533 00:25:44,440 --> 00:25:47,000 Speaker 10: we think the broader trade policy uncertainty, if it continues, 534 00:25:47,040 --> 00:25:50,040 Speaker 10: will really start to hurt growth, and ultimately, you know, 535 00:25:50,040 --> 00:25:53,240 Speaker 10: I think the risk here, you know, relative to where 536 00:25:53,240 --> 00:25:56,760 Speaker 10: we see you know, consensus in terms of forecasts two 537 00:25:56,760 --> 00:25:59,480 Speaker 10: percent growth for twenty twenty five, I think the risk 538 00:25:59,520 --> 00:26:01,640 Speaker 10: here is probably where the growth comes in lower than that. 539 00:26:02,080 --> 00:26:04,919 Speaker 10: You know, as you look across these policies you know 540 00:26:04,960 --> 00:26:08,840 Speaker 10: that are being discussed and even implemented, you know, many 541 00:26:08,880 --> 00:26:11,439 Speaker 10: of them, you know, outside of maybe tax cuts, you know, 542 00:26:11,520 --> 00:26:14,199 Speaker 10: are aren't great for the growth outlook, at least in 543 00:26:14,240 --> 00:26:16,320 Speaker 10: the near term. And of course, when, when and if 544 00:26:16,320 --> 00:26:18,240 Speaker 10: we do get tax cuts, that's more of a second 545 00:26:18,240 --> 00:26:20,040 Speaker 10: half story in a twenty twenty sixth story. So the 546 00:26:20,080 --> 00:26:22,680 Speaker 10: near term risk I think is more of a loss 547 00:26:22,680 --> 00:26:24,840 Speaker 10: of momentum in the US economy. 548 00:26:24,320 --> 00:26:26,640 Speaker 2: Here Tiffany, Can I just finish by saying, God, bless 549 00:26:26,680 --> 00:26:28,040 Speaker 2: you to the you and the team at PIMCO for 550 00:26:28,080 --> 00:26:30,240 Speaker 2: waking up so early on the West coast. It's amazing 551 00:26:30,280 --> 00:26:32,359 Speaker 2: what you and the team do. Tiffany Wanting of Pimco. 552 00:26:32,440 --> 00:26:35,560 Speaker 2: Five thirty Eastern Time, Western Time, rather on a West 553 00:26:35,560 --> 00:26:40,480 Speaker 2: coast in Newport Beach, California. This is the Bloomberg Surveillance Podcast, 554 00:26:40,640 --> 00:26:44,560 Speaker 2: bringing you the best in markets, economics, antient politics. You 555 00:26:44,560 --> 00:26:47,359 Speaker 2: can watch the show live on Bloomberg TV weekday mornings 556 00:26:47,359 --> 00:26:50,280 Speaker 2: from six am to nine am Eastern. Subscribe to the 557 00:26:50,320 --> 00:26:53,800 Speaker 2: podcast on Apple, Spotify, or anywhere else you listen, and 558 00:26:53,880 --> 00:26:56,359 Speaker 2: as always, on the bloom Blog terminal and the Bloomberg 559 00:26:56,359 --> 00:26:56,960 Speaker 2: Business app.