WEBVTT - Bloomberg Surveillance TV: December 30th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business app. 0:00:36.560 --> 0:00:39.400 The President saying he has preferred fed Share candidate, but 0:00:39.720 --> 0:00:42.240 is in no hurry to make an announcement. Mark Banna, 0:00:42.360 --> 0:00:44.839 Bank of America joins us now for more. Mark, I 0:00:44.920 --> 0:00:47.800 am curious from your vantage point and good morning, how 0:00:47.840 --> 0:00:50.279 relevant you find all these comments job. 0:00:50.080 --> 0:00:51.159 Owning the Fedger Reserve. 0:00:51.720 --> 0:00:55.200 What's your takeaway when you hear President Trump continue to 0:00:55.240 --> 0:00:57.200 talk and really bash fetcher? 0:00:57.280 --> 0:01:00.000 Jerome Powell, good morning, Happy New Year. 0:01:00.000 --> 0:01:01.960 I hope you had a nice holiday with you your family. 0:01:02.960 --> 0:01:05.759 So our take is that we've heard this so many 0:01:05.800 --> 0:01:09.680 times before, and what we're really interested in is who 0:01:09.760 --> 0:01:12.399 is the individual going to be? What is their preference 0:01:12.440 --> 0:01:15.640 on policy broadly, and then will there be any further 0:01:15.840 --> 0:01:18.479 turnover or change within the Federal Reserve. 0:01:19.280 --> 0:01:20.200 It is a committee. 0:01:20.400 --> 0:01:23.039 We do know that it takes a number of individuals 0:01:23.080 --> 0:01:25.960 to move the needle on FED policy and impact interest rates, 0:01:26.200 --> 0:01:27.960 and we're really trying to figure out who that's going 0:01:27.959 --> 0:01:30.560 to be, what their preferences are, and how does the 0:01:30.600 --> 0:01:33.640 committee composition change. So we, just like the rest of 0:01:33.680 --> 0:01:35.679 the market, are waiting for guidance on this. So we 0:01:35.720 --> 0:01:38.440 do think it'll come relatively soon. As you know, at 0:01:38.440 --> 0:01:41.760 the end of January, that's when Stephen Moran's term ends. 0:01:41.840 --> 0:01:45.200 He can stay on, but we do expect that as his. 0:01:45.240 --> 0:01:47.480 Term comes to a close, we will get the nomination 0:01:47.560 --> 0:01:50.080 for the next FED chair. If it is an outsider, 0:01:50.160 --> 0:01:53.120 a e not Bowman or Waller, then they're going to 0:01:53.200 --> 0:01:55.600 likely want to be confirmed by the end of January, 0:01:56.320 --> 0:01:59.040 and then they will join the committee serving in a 0:01:59.040 --> 0:02:02.160 bit of a shadow chair capacity, and we're going to 0:02:02.200 --> 0:02:04.760 learn a little bit more about what their preferences are 0:02:04.760 --> 0:02:07.720 on rates and what that means for the general outlook 0:02:07.800 --> 0:02:09.280 for policy in the near future. 0:02:11.040 --> 0:02:13.639 Mar good morning, it's this guy. Is it important if 0:02:13.680 --> 0:02:19.760 Powell when he steps down, leaves entirely entirely or continues 0:02:19.800 --> 0:02:22.960 to retain a seat. Is that going to be important 0:02:22.960 --> 0:02:24.000 and how pivotal could it be? 0:02:24.760 --> 0:02:27.000 Yeah, it doesn't matter a lot because it influences that 0:02:27.080 --> 0:02:29.720 composition of the committee. As you know, it takes seven 0:02:29.800 --> 0:02:32.640 voters for any action at the FED. And if Powell 0:02:32.680 --> 0:02:37.360 chooses to stay, which would be historically unprecedented, then it 0:02:37.400 --> 0:02:41.440 will mean that there's probably less willingness to cut rates aggressively. 0:02:41.760 --> 0:02:44.079 If he leaves, it'll give the Trump administration one more 0:02:44.080 --> 0:02:47.520 seat in which they can potentially remake that committee and 0:02:48.040 --> 0:02:51.680 potentially then advocate for lower rates. History would suggest that 0:02:51.720 --> 0:02:54.399 Powell will step down, but this is indeed his decision, 0:02:55.320 --> 0:02:57.720 and if he goes, it's just going to mean one 0:02:57.760 --> 0:03:01.120 more vote for potentially lower rates and reference to likely 0:03:01.200 --> 0:03:04.480 overweight the unemployment side of the Fed's mandate versus the 0:03:04.520 --> 0:03:06.040 inflation side of the feds mandate. 0:03:06.440 --> 0:03:08.240 And look, when we think about the outlook. 0:03:07.919 --> 0:03:09.960 For interest rates over the course of twenty twenty six, 0:03:10.040 --> 0:03:12.560 we do think that the FED composition is extremely important, 0:03:12.880 --> 0:03:14.760 and that's one of the reasons that we do believe 0:03:14.760 --> 0:03:17.079 that the distribution of risk to the rate outlook is 0:03:17.160 --> 0:03:20.040 kewed to the downside, we do believe it means likely 0:03:20.080 --> 0:03:23.480 lower rates. It's deeper curve, lower real rates, higher inflation, 0:03:23.680 --> 0:03:26.160 lower volatility, which, by the way, I do think is 0:03:27.320 --> 0:03:29.480 quite a story for the end of twenty twenty five. 0:03:29.520 --> 0:03:31.799 That doesn't get a ton of airplay, but that low 0:03:31.919 --> 0:03:35.960 ball environment is so important for US rates, for US 0:03:36.000 --> 0:03:39.680 fixed income more broadly, for elements of the dollar, elements 0:03:39.680 --> 0:03:42.000 of the commodities trade and the goal trade that you 0:03:42.040 --> 0:03:46.400 were talking about before, and that FED composition does very 0:03:46.480 --> 0:03:49.880 much influence the outlook for rates and the outlet for 0:03:50.000 --> 0:03:51.840 VALL and we do think that that's going to be 0:03:51.840 --> 0:03:54.760 a very very relevant theme as we start twenty twenty six. 0:03:56.160 --> 0:03:57.880 Mark, I was thinking about this as well this morning. 0:03:58.840 --> 0:04:01.880 The move index that you guys create been tracking lower 0:04:02.000 --> 0:04:04.600 throughout the back half of the year. What I don't 0:04:04.640 --> 0:04:07.480 get is if I have a more volatile FED, if 0:04:07.480 --> 0:04:10.760 I have a more volatile FMC, why doesn't that translate 0:04:10.840 --> 0:04:12.360 into a more volatile market. 0:04:12.480 --> 0:04:13.280 Can you explain that? 0:04:14.120 --> 0:04:16.040 Yeah, So, the way that we think about it is 0:04:16.040 --> 0:04:18.400 that there may be disagreement within the FED, but as 0:04:18.400 --> 0:04:20.960 you get the shift in composition at the FED, what 0:04:21.000 --> 0:04:23.799 it does is it just narrows the range of potential 0:04:23.880 --> 0:04:27.000 rate outcomes, and as you increasingly staff the FED with 0:04:27.080 --> 0:04:29.719 individuals that are going to be advocating for at worst 0:04:29.800 --> 0:04:33.279 rates on hold or potentially lower rates, what it does 0:04:33.360 --> 0:04:35.880 is that just further trims the potential that rates will 0:04:35.880 --> 0:04:39.000 be moving higher. And as you narrow the range of outcomes, 0:04:39.040 --> 0:04:42.760 that does mean that VAUL should be moving lower and lower. 0:04:42.839 --> 0:04:46.359 Rate VAULT does touch a wide set of financial markets, 0:04:46.360 --> 0:04:47.720 and we do think that that's going to be a 0:04:47.839 --> 0:04:51.599 key and persistent theme over the first half of twenty 0:04:51.640 --> 0:04:54.520 twenty six. As you get later into twenty twenty six, 0:04:54.640 --> 0:04:58.640 the range of outcomes widens, there's midterms to consider and 0:04:59.200 --> 0:05:03.560 just natural uncertainty that that rises with time. But in 0:05:03.600 --> 0:05:05.599 the first half of twenty twenty six, we do things 0:05:05.600 --> 0:05:07.400 that VUL will remain low, and that's going to keep 0:05:07.440 --> 0:05:10.960 financial conditions quite easy, and that's going to be generally 0:05:10.960 --> 0:05:13.840 supportive for the growth backdrop. As long as you have 0:05:14.000 --> 0:05:18.720 FED that's not hiking, then you've got really only, you know, either. 0:05:18.560 --> 0:05:21.000 Stable rates or lower rates to seriously consider. 0:05:21.160 --> 0:05:23.520 I can think of all the metals traders out there 0:05:23.640 --> 0:05:26.800 listening to this conversation and saying, but gold it's telling 0:05:26.880 --> 0:05:27.320 us something. 0:05:27.400 --> 0:05:28.320 What is it telling us? 0:05:28.520 --> 0:05:31.080 The idea that copper has been on a tear, that 0:05:31.160 --> 0:05:33.440 silver has been on a tear, that you have seen 0:05:33.520 --> 0:05:36.479 a depreciation of the dollar, and frankly and underperformance of 0:05:36.560 --> 0:05:40.680 US assets in relation to some of these precious metals. 0:05:40.720 --> 0:05:42.480 Do you think that this is telling you of some 0:05:42.600 --> 0:05:45.440 kind of inflationary impulse that will come out in what 0:05:45.480 --> 0:05:47.800 we're seeing with respect to steeper yield curves and even 0:05:47.800 --> 0:05:51.440 if it's not volatility, that that will grind wider throughout 0:05:51.480 --> 0:05:54.000 the year and potentially put a cap on some of 0:05:54.000 --> 0:05:55.279 that risk appetite. 0:05:55.720 --> 0:05:56.160 Well, we do. 0:05:56.240 --> 0:05:58.159 I mean, look, we think it's going to be a 0:05:58.240 --> 0:06:02.520 dynamic that is characterized by very strong growth, by inflation, 0:06:02.839 --> 0:06:08.040 albeit sticky that generally gets overlooked in favor of driving 0:06:08.160 --> 0:06:11.840 a continued strong labor market and keeps it all out. 0:06:11.960 --> 0:06:14.440 All of those things will be very, very supportive of growth, 0:06:14.480 --> 0:06:16.800 and I do think that metals are very consistent with 0:06:16.839 --> 0:06:19.840 that right now. Doctor Copper, as you mentioned, certainly is 0:06:19.880 --> 0:06:22.279 telling me that growth is going to be very strong 0:06:22.480 --> 0:06:26.279 globally over the course of twenty twenty six. What we 0:06:26.360 --> 0:06:29.080 see in gold and silver, there's no doubt some technicals 0:06:29.120 --> 0:06:31.479 that are at play there that drove the very very 0:06:31.480 --> 0:06:35.240 sharp spike in silver and then slight rebound or slight 0:06:35.279 --> 0:06:37.360 decline that we've seen over the last few days. 0:06:37.680 --> 0:06:39.240 But I do think that there is a bit of 0:06:39.279 --> 0:06:40.720 a debasement concern there. 0:06:40.839 --> 0:06:41.280 I e. 0:06:41.520 --> 0:06:44.120 Central banks, especially the FED, that may be a little 0:06:44.160 --> 0:06:47.480 bit more dismissive of inflation than they've traditionally been, and 0:06:47.520 --> 0:06:50.240 that should mean weaker dollar, should mean lower rates, and 0:06:50.279 --> 0:06:53.480 that again should be tailwinds broadly for financial conditions. 0:06:54.440 --> 0:06:56.839 All of this points to a better growth backdrop. 0:06:56.920 --> 0:07:00.200 All of this points to a very supportive backdrop for 0:07:00.320 --> 0:07:04.160 activity and continued easing in financial conditions of the course 0:07:04.200 --> 0:07:07.520 of twenty twenty six. We think the biggest risk do 0:07:07.640 --> 0:07:11.640 all of that is inflation. The biggest risk is that 0:07:11.680 --> 0:07:15.920 the FED has to consider raising rates at some point 0:07:15.960 --> 0:07:18.240 over the course of next year. We put very low 0:07:18.280 --> 0:07:21.240 probability on that right now. The market does as well 0:07:21.280 --> 0:07:24.360 it seems, but that would be the biggest shift that 0:07:24.440 --> 0:07:27.800 could potentially throw a wrench into the low ball and 0:07:27.880 --> 0:07:32.200 easy financial conditions and high overall base metal price conditions 0:07:32.240 --> 0:07:33.520 that we are currently seeing today. 0:07:33.640 --> 0:07:35.760 So next year we're going to see the one big 0:07:35.760 --> 0:07:38.960 beautiful bill. In some of the tax cuts that people 0:07:39.120 --> 0:07:41.920 are already expecting, we could potentially see two thousand dollars 0:07:42.040 --> 0:07:43.480 checks sent out. 0:07:43.320 --> 0:07:45.160 To different individuals. 0:07:45.400 --> 0:07:48.640 There is a concern about budget deficits, especially if AIPA 0:07:48.760 --> 0:07:49.720 is overturned. 0:07:50.080 --> 0:07:52.880 What happened to bond vigilantes? Are they of sleep? Do 0:07:52.960 --> 0:07:53.840 they not exist? 0:07:53.920 --> 0:07:55.480 Is that going to be a story that's going to 0:07:55.640 --> 0:07:57.200 come back in twenty twenty six? 0:07:58.560 --> 0:08:01.360 It could right now. You're right, Lisa, that the market 0:08:01.400 --> 0:08:04.040 is very unconcerned with that. If you look at asset 0:08:04.080 --> 0:08:06.640 swap spreads in addition to VALL, they tell you that 0:08:07.280 --> 0:08:09.800 the bond vinchil Anti concerns are very very low. We 0:08:09.880 --> 0:08:12.960 think that they remain at bay and a big part 0:08:13.000 --> 0:08:16.520 of that is due to changes that we are seeing 0:08:16.560 --> 0:08:21.360 with US Treasury issuance changes very technically that the FED 0:08:21.440 --> 0:08:24.280 is pursuing in terms of these reserve management purchases and 0:08:24.320 --> 0:08:26.760 the addition of liquidity that we're seeing to really better 0:08:26.760 --> 0:08:31.400 anchor repo rates in the Fed's target range, and potentially 0:08:32.400 --> 0:08:36.720 changes that are happening on the regulatory front for banks 0:08:36.760 --> 0:08:40.640 and as well as dealers. There's also important market structure changes, 0:08:41.440 --> 0:08:43.880 very technical in nature that I won't go into in 0:08:43.920 --> 0:08:46.240 great depth, but you're going to get cross margining benefits, 0:08:46.240 --> 0:08:48.679 you're going to get something called collateral and loo. All 0:08:48.720 --> 0:08:51.480 of these things we do think will be supportive of 0:08:51.600 --> 0:08:55.360 increasing dealer intermediation capacity. And what that will mean is 0:08:55.400 --> 0:08:58.160 that you're just going to have a better environment for 0:08:58.400 --> 0:09:01.640 risk taking and fixed income, specially in the treasury market. 0:09:02.200 --> 0:09:05.000 And that should mean that you don't get these type 0:09:05.040 --> 0:09:07.080 of bond vigilanity concerns in a big way. 0:09:07.160 --> 0:09:07.920 It helps a lot. 0:09:08.040 --> 0:09:11.320 The Treasury is really only increasing issuance at the very 0:09:11.320 --> 0:09:14.079 front end of the curve where duration risk is very, 0:09:14.160 --> 0:09:17.160 very minimal, and what that should mean is that that 0:09:17.200 --> 0:09:20.080 will limit those concerns of bard and vigilantes from really 0:09:20.120 --> 0:09:23.480 taking off despite all of the headwinds that you just mentioned. 0:09:24.800 --> 0:09:26.959 Well, can I come that question from a different angle. 0:09:27.120 --> 0:09:29.679 I'm talking a little bit about market structure. There is 0:09:29.720 --> 0:09:34.680 an increasing more we're seeing the treasury market being held 0:09:34.679 --> 0:09:39.480 increasingly by private foreign holders, right and the data you 0:09:39.480 --> 0:09:41.960 look at, the ticket data that supports that when you 0:09:42.040 --> 0:09:45.520 get shifts in sentiment, does that mean that you're going 0:09:45.559 --> 0:09:50.480 to see those shifts in sentiment being amplified because traditional 0:09:50.520 --> 0:09:55.360 reserve managers although kind of more stable position, private owners don't, 0:09:55.440 --> 0:09:59.719 and therefore are likely to change opinions and more dramatically 0:10:00.160 --> 0:10:01.240 once once the ground. 0:10:01.040 --> 0:10:01.840 Shifts under them. 0:10:02.360 --> 0:10:04.280 If we do see some sort of a change in 0:10:04.320 --> 0:10:07.240 twenty twenty six, if inflation is a problem, does that 0:10:07.280 --> 0:10:09.599 mean the magnitude of that shift is going to be 0:10:09.640 --> 0:10:10.200 even greater? 0:10:12.160 --> 0:10:13.079 It certainly could. 0:10:13.559 --> 0:10:17.000 Now when we think about ownership of treasuries, you rightly 0:10:17.040 --> 0:10:22.520 highlight that private foreign demand has been remarkably resilient despite 0:10:22.679 --> 0:10:25.800 all of the concerns that were evidenced over the course 0:10:25.800 --> 0:10:28.480 of twenty twenty five. But when we think about for 0:10:29.400 --> 0:10:31.840 private foreign demand, I really think of it coming through 0:10:31.960 --> 0:10:35.079 two different ways, One through let's say the more traditional 0:10:35.120 --> 0:10:38.240 asset manager or real money investor, and then the second 0:10:38.400 --> 0:10:42.480 through a highly levered let's say relative value hedge fund 0:10:42.600 --> 0:10:46.600 type trade. In the real money sector. We think that 0:10:46.600 --> 0:10:49.880 that money should be pretty stable, that should be pretty sticky, 0:10:50.679 --> 0:10:53.840 And that's largely because when we talk to global investors, 0:10:53.920 --> 0:10:56.800 what they frequently reiterate is just that there's not a 0:10:56.840 --> 0:10:59.880 lot of great alternatives in the global fixed income markets 0:11:00.080 --> 0:11:03.720 away from the US dollar fixed income and if you 0:11:03.840 --> 0:11:06.640 want relatively risk free assets, like you get in the 0:11:06.640 --> 0:11:09.439 treasury market. The size of the market, the depth of 0:11:09.480 --> 0:11:12.920 the market is really unparalleled, and so many investors feel like, well, 0:11:12.920 --> 0:11:15.040 they might not want to be in dollars, but they 0:11:15.040 --> 0:11:17.320 don't have many other good alternatives, so they have to 0:11:17.360 --> 0:11:18.120 remain there. 0:11:18.679 --> 0:11:20.080 Now, where we do get a little. 0:11:19.840 --> 0:11:23.000 Bit more concern is when we think about the relative 0:11:23.120 --> 0:11:27.320 value and highly levered let's say hedge fund positions. Those 0:11:27.360 --> 0:11:31.040 investors are worldwide, but there's a high concentration of those investors, 0:11:31.120 --> 0:11:33.760 especially in the UK. And what we do worry about 0:11:33.760 --> 0:11:38.520 there is anything that could potentially trigger elevated volatility and 0:11:39.080 --> 0:11:42.959 subsequent deleveraging That could come from the repo market, it 0:11:43.000 --> 0:11:45.800 could come from a very volatile macro environment, and we 0:11:45.880 --> 0:11:49.559 do worry about the concentration of ownership. There is potentially 0:11:49.640 --> 0:11:54.040 exacerbating volatility if it were to rise meaningfully. Now we 0:11:54.160 --> 0:11:56.160 don't think that'll be the case in the first half 0:11:56.160 --> 0:11:59.800 of twenty twenty six. We do think that low fall inflation, 0:12:00.000 --> 0:12:02.800 it's moving generally lower, a FED that's at worst on hold, 0:12:02.800 --> 0:12:06.560 if not cutting, will characterize the market in the first 0:12:06.640 --> 0:12:09.800 half of twenty twenty six. But that concentration is in 0:12:09.920 --> 0:12:13.000 data risk that these market structure and regulatory changes should 0:12:13.160 --> 0:12:15.960 help limit that risk in the near term. 0:12:17.240 --> 0:12:20.679 Stay with US multile impag Savannah's counting up off. 0:12:20.480 --> 0:12:20.800 To this. 0:12:29.480 --> 0:12:31.640 Investors looking ahead to fresh data in the new year 0:12:31.679 --> 0:12:34.720 to get a clear read on the US economy, Constance 0:12:34.800 --> 0:12:38.320 Hunter of Economist Intelligence writing, the US will face a 0:12:38.360 --> 0:12:41.000 bumpy road. If twenty twenty six were a fairy tale, 0:12:41.080 --> 0:12:43.280 it would be a mashup of chicken little and ugly 0:12:43.320 --> 0:12:47.200 duckling to talk about this story to Constance joins us, now, 0:12:47.360 --> 0:12:49.839 do we have a sense of how clear the data 0:12:49.920 --> 0:12:52.440 has been so far? In other words, have we gotten 0:12:52.480 --> 0:12:54.880 any tell from the data in November and December that 0:12:55.000 --> 0:12:57.280 has been muddied by the government shutdown. 0:12:58.360 --> 0:13:00.840 We've gotten very little data that's showed the impact of 0:13:00.840 --> 0:13:03.560 the government shutdown. The first piece of data would be 0:13:03.640 --> 0:13:07.640 the Job's data that we received earlier this month, and 0:13:07.760 --> 0:13:10.640 of course that shows that the number of people who 0:13:10.760 --> 0:13:15.599 took the early retirement packages that came into effect in October. 0:13:15.920 --> 0:13:18.880 But of course we know that the October collection for 0:13:19.000 --> 0:13:25.840 both jobs and NCPI had flaws, so there's not a 0:13:25.880 --> 0:13:30.320 lot there, And honestly, I don't think that matters that much. 0:13:30.679 --> 0:13:35.240 What matters is how the interplay of the risks and 0:13:35.320 --> 0:13:38.559 the tailwinds are going to interplay in twenty twenty six. 0:13:39.000 --> 0:13:41.480 So of course we have tailwinds in the fact that 0:13:41.520 --> 0:13:44.720 we have really strong consumption in the US. The Q 0:13:44.800 --> 0:13:48.560 three GDP report was solid. If you had a smooth 0:13:48.640 --> 0:13:52.120 road ahead of you, that would absolutely be the ugly 0:13:52.200 --> 0:13:55.720 duckling right where it turns into a swan, and everybody 0:13:55.800 --> 0:13:58.720 thinks it's beautiful, But of course there are potholes in 0:13:58.720 --> 0:14:02.840 the road, and that acorn that falls on Chicken Little's 0:14:02.840 --> 0:14:05.440 head may in fact mean that there are more acorns 0:14:05.480 --> 0:14:07.600 than that. The sky may fall right, So we have 0:14:08.000 --> 0:14:11.079 the whole situation with trade, so not just that the 0:14:11.120 --> 0:14:14.079 IEPA tariffs may be overturned, but the US MCA is 0:14:14.160 --> 0:14:18.559 up for renegotiation. And remember these agreements that have been 0:14:18.600 --> 0:14:22.120 made are not trade deals. It takes decades to negotiate 0:14:22.160 --> 0:14:26.200 trade deals, and so there's still a great deal of 0:14:26.240 --> 0:14:28.880 uncertainty there. And then, of course, as we've been talking 0:14:28.880 --> 0:14:32.400 about all morning, is the geopolitical uncertainty, whether we're talking 0:14:32.440 --> 0:14:35.520 about the Middle East, whether we're talking about China Taiwan, 0:14:35.680 --> 0:14:38.400 which is now of course saber rattling to send a 0:14:38.400 --> 0:14:42.520 message to Japan, whether we talk about China making breakthroughs 0:14:42.600 --> 0:14:46.400 in the Arctic, whether we're talking about strikes against Venezuela. 0:14:46.480 --> 0:14:48.960 There's a lot of political. 0:14:48.440 --> 0:14:50.440 Uncertainty on the horizon as well. 0:14:50.520 --> 0:14:51.480 So con says this to me. 0:14:51.840 --> 0:14:54.560 There is the unknown unknown, right, which is the geopolitics, 0:14:54.600 --> 0:14:57.160 and then there's a known unknown, which is whether we 0:14:57.200 --> 0:14:59.600 see any kind of resurgence in the labor market or 0:14:59.720 --> 0:15:01.840 whether we see a resurgence in inflation. 0:15:02.080 --> 0:15:04.640 Which do you think is the bigger risk some sort of. 0:15:04.600 --> 0:15:08.880 Resurgence in inflation or a real substantial deterioration in the 0:15:08.920 --> 0:15:10.440 backdrop for the jobs market. 0:15:11.800 --> 0:15:14.920 So you know, I don't know that they're mutually exclusive. 0:15:15.560 --> 0:15:18.040 And you know, you had the Stephen Marin interview playing 0:15:18.080 --> 0:15:21.160 earlier and he talked about it depends if you have 0:15:21.200 --> 0:15:23.080 a surgeon demand, but you also have a surgeon, and 0:15:23.120 --> 0:15:25.440 supply we don't think there's going to necessarily be a 0:15:25.480 --> 0:15:28.760 surgeon to apply. One of the really interesting things about 0:15:28.760 --> 0:15:31.920 the Q three GDP report was all of the corporate 0:15:31.960 --> 0:15:36.280 profit information that was contained in there. So basically the 0:15:36.480 --> 0:15:39.960 measure that's that's sort of similar to retained earnings rose 0:15:40.160 --> 0:15:44.000 thirty three percent. Quoter a q Q three over Q three, 0:15:44.040 --> 0:15:47.480 so year over year in the third quarter, firms retained 0:15:47.520 --> 0:15:49.480 a huge amount of earnings, and we saw in the 0:15:49.560 --> 0:15:52.400 data that they didn't hire, They really slowed hiring. They 0:15:52.440 --> 0:15:55.320 absorbed some of the costs of the tariffs. They also 0:15:55.440 --> 0:15:58.360 front loaded those tariffs right by importing at the end 0:15:58.360 --> 0:16:00.920 of last year and beginning of this year. And we 0:16:00.960 --> 0:16:04.000 really think that that that something has to give there, Right, 0:16:04.080 --> 0:16:07.800 So firms don't keep thirty three percent retain year over 0:16:07.880 --> 0:16:11.400 year retained earnings, they invest in capex, they pay them 0:16:11.440 --> 0:16:13.840 out in the form of dividends, or they hire more people. 0:16:14.880 --> 0:16:17.400 We think some combination of those things will happen. 0:16:17.320 --> 0:16:22.680 In conjunction with them passing on higher prices. In addition, 0:16:22.800 --> 0:16:25.080 we're going to get the tax refunds from the One 0:16:25.120 --> 0:16:28.200 Big Beautiful Bill Act. So the first quarter GDP data 0:16:28.280 --> 0:16:30.360 and all of the data leading up to that release 0:16:30.400 --> 0:16:33.200 of the first quarter GDP is going to look fairly 0:16:33.240 --> 0:16:36.880 strong after coming off a pretty weak Q four because 0:16:36.880 --> 0:16:40.520 of the government shutdown. Right, So it's going to be 0:16:40.640 --> 0:16:44.440 a very confusing data landscape. And I think people have 0:16:44.560 --> 0:16:46.680 this idea that the tariffs are behind us, and that 0:16:46.720 --> 0:16:50.600 the the uncertainty from tariffs are behind us. 0:16:50.640 --> 0:16:51.440 That is not our view. 0:16:51.480 --> 0:16:53.920 We think that that uncertainty is going to prevail next year. 0:16:54.480 --> 0:16:57.360 And again, one of those signals from that high retained 0:16:57.440 --> 0:17:01.440 earnings shows that firms are paralyzed. They're uncertain what are 0:17:01.480 --> 0:17:03.680 what are they going to do with this profits? And 0:17:03.720 --> 0:17:06.480 I think that's the big The answer to that question 0:17:06.680 --> 0:17:08.600 is going to be the answer to the contour of 0:17:08.640 --> 0:17:10.000 the economy. 0:17:10.640 --> 0:17:12.920 Okay, let's let's break that down a little bit. 0:17:13.160 --> 0:17:13.560 Consons. 0:17:13.560 --> 0:17:15.879 Can the FED continue to cut with inflation sounding as 0:17:15.880 --> 0:17:17.800 sticky as you make it sound. 0:17:19.560 --> 0:17:22.920 Well, I suppose it could, depending upon the makeup of 0:17:23.000 --> 0:17:26.160 the FOMC. Is it likely to in the first half 0:17:26.160 --> 0:17:28.879 of the year. We don't think so. We think that 0:17:28.920 --> 0:17:33.400 there will continue to be descents and that the FED 0:17:33.480 --> 0:17:36.159 will will hold rate steady for the first half of 0:17:36.160 --> 0:17:36.520 the year. 0:17:37.840 --> 0:17:39.640 On the other hand, if we see. 0:17:39.520 --> 0:17:44.560 Deterioration as a result of higher tariffs, and if firms 0:17:44.600 --> 0:17:46.639 margins compress in the second half of the year, then 0:17:46.680 --> 0:17:48.840 we could very well see two rate cuts in the 0:17:48.880 --> 0:17:52.240 second half of the year, especially as the pass through 0:17:52.280 --> 0:17:55.080 from tariffs is likely to have dissipated by that time. 0:17:56.040 --> 0:17:59.479 But it's a big unknown when and how firms are 0:17:59.480 --> 0:18:01.520 going to pass on tear frates. We also don't know 0:18:01.560 --> 0:18:05.399 if these tari frates are the permanent tariff rates. We 0:18:05.480 --> 0:18:08.600 know that the administration likes to move things around as 0:18:08.640 --> 0:18:12.520 a matter of strategy, right, so there's a lot of 0:18:12.600 --> 0:18:14.320 uncertainty in that realm. 0:18:14.720 --> 0:18:18.240 Stay with us. Mulpleinberg Savanna's coming up off to this. 0:18:27.240 --> 0:18:30.320 The stocks going nowhere as traders trim bets on megacap 0:18:30.400 --> 0:18:32.920 tech stocks heading into the end of twenty twenty five. 0:18:33.200 --> 0:18:36.800 Data Doria Investment joins us now Data. You did some 0:18:36.880 --> 0:18:40.120 work on what a Santa rally actually is, looking at 0:18:40.280 --> 0:18:42.080 how often you usually see gains. 0:18:42.119 --> 0:18:44.200 Why is it not working this time around? 0:18:45.040 --> 0:18:46.960 Yeah, unfortunately it's not. 0:18:47.040 --> 0:18:48.800 I mean, of course, we have nothing to complain about, 0:18:48.880 --> 0:18:52.200 right that this has been another double digit year, and 0:18:52.480 --> 0:18:55.399 you know, the economy has remained very strong in spite 0:18:55.440 --> 0:18:57.639 of kind of taking some crazy hits. So when we 0:18:57.640 --> 0:19:00.280 look back across the course of the air may not 0:19:00.359 --> 0:19:02.879 hit that twenty percent. It's not looking good at this 0:19:02.960 --> 0:19:03.680 stage of the game. 0:19:04.080 --> 0:19:04.880 But it's still been. 0:19:04.800 --> 0:19:07.480 A phenomenal year in markets, and I think, you know, 0:19:07.560 --> 0:19:09.520 it might be too much to expect at this point, 0:19:09.600 --> 0:19:11.760 you know, and stocks don't really have a catalyst, right 0:19:12.240 --> 0:19:15.120 there's you know, to your point on you know, kind 0:19:15.119 --> 0:19:18.760 of FED meeting minutes coming out later this afternoon. We'll 0:19:18.800 --> 0:19:21.920 get some interesting content there, but you know, and jobs 0:19:21.920 --> 0:19:23.880 be who are coming out. But I mean, where things 0:19:23.920 --> 0:19:26.439 stand today, there's not a huge amount that's going to 0:19:26.440 --> 0:19:27.920 happen in the course of this week that's going to 0:19:28.000 --> 0:19:29.040 kind of drive stocks forward. 0:19:29.080 --> 0:19:29.520 I think we. 0:19:29.600 --> 0:19:32.199 Probably have to be happy with the phenomenal performance we 0:19:32.200 --> 0:19:33.400 already received this year. 0:19:33.640 --> 0:19:35.800 That probably is too much to ask for people waiting 0:19:35.800 --> 0:19:37.879 for extra gains to put into their stocking at year end. 0:19:37.880 --> 0:19:39.800 There is this question though about whether we are seeing 0:19:39.840 --> 0:19:42.760 a true rotation, and that's what you're seeing this morning 0:19:42.840 --> 0:19:45.119 on the margins. I mean, it is tepid, Let's be honest. 0:19:45.119 --> 0:19:47.399 It's not exactly an active trading session. But you are 0:19:47.400 --> 0:19:50.080 seeing the outperformance come from the rustle two thousand and 0:19:50.240 --> 0:19:52.320 you have seen that over the past three weeks. Is 0:19:52.320 --> 0:19:54.040 that something you can kind of sink your teeth into 0:19:54.080 --> 0:19:55.760 and say it has lasting power? 0:19:57.080 --> 0:19:57.679 We'll see. 0:19:57.960 --> 0:20:01.479 We certainly have economic data point that suggests that the 0:20:01.480 --> 0:20:03.640 FED saying that there's one R eight cut coming next 0:20:03.680 --> 0:20:06.639 year is low. Right, we know FED Fund's futures already 0:20:06.640 --> 0:20:08.320