WEBVTT - Bloomberg Surveillance TV: December 2, 2024 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 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 --> 0:00:36.920 Terminal and the Bloomberg Business app. Tell me up this 0:00:36.960 --> 0:00:38.640 our will catch er. We're seen as Shower of Principal 0:00:38.680 --> 0:00:41.800 ASSEM Management with stocks at record highs, Edmill's of Raymond 0:00:41.840 --> 0:00:45.159 James as Canada and Mexico respond to Trump's tariff threads, 0:00:45.240 --> 0:00:47.519 and Wendy Steward of Bank for America on the outlook 0:00:47.600 --> 0:00:50.120 for commercial banking. We begin this sour with stocks at 0:00:50.120 --> 0:00:52.680 all time highs, investors looking ahead to pay rolls to 0:00:52.720 --> 0:00:55.800 CPI and the last FED decision of the year. Same 0:00:55.840 --> 0:00:58.360 as Shower of Principal ASSA Management, saying come early twenty 0:00:58.440 --> 0:01:01.080 twenty five rather than rece you've seen policy rates at 0:01:01.080 --> 0:01:03.560 each meeting, the FED is likely to slow it's coming 0:01:03.600 --> 0:01:06.360 pace to every other meeting, with some risks that rates 0:01:06.400 --> 0:01:09.200 don't fall as far as either the FED or the 0:01:09.280 --> 0:01:13.560 market had originally envisioned. Saman joined just now for more Samoa, 0:01:13.600 --> 0:01:15.400 welcome back and it's good to see you as always. 0:01:15.440 --> 0:01:18.360 How problematic do you expect that to be to equities? 0:01:20.319 --> 0:01:21.520 Well, actually, I don't. 0:01:21.360 --> 0:01:23.319 Know if it's going to be that problematic, but equities, 0:01:23.400 --> 0:01:26.319 I think the key thing that equities need is the 0:01:26.360 --> 0:01:29.120 strong growth and almost a FED put so. Where it 0:01:29.160 --> 0:01:32.160 becomes really challenging, though, is if inflation starts to become 0:01:32.160 --> 0:01:35.080 a little bit more concerning and then the FED doesn't 0:01:35.080 --> 0:01:38.360 cut race it's far because they're worried about inflation expectations increasing. 0:01:38.680 --> 0:01:40.920 That I think would be the flying the ointment for equities. 0:01:41.080 --> 0:01:42.759 But otherwise I'm going to add to the masses. I'm 0:01:42.760 --> 0:01:44.360 pretty positive about next year. 0:01:44.480 --> 0:01:47.280 Really positive about next year for the US and Europe, 0:01:47.360 --> 0:01:49.720 or just the US, because all I've heard is the US, US, 0:01:49.840 --> 0:01:52.520 US and Europe's kind of been left in a dust. 0:01:53.280 --> 0:01:55.600 Yeah, I think the story for Europe has got even 0:01:55.640 --> 0:01:59.080 worse in the last couple of weeks. Use exceptionalism was 0:01:59.080 --> 0:02:00.560 the story for this year. It's going to be the 0:02:00.560 --> 0:02:03.000 story for next year, even more so now that we've 0:02:03.040 --> 0:02:05.760 got the election behind US and Europe it was already 0:02:05.760 --> 0:02:07.200 struggling with weak fundamentals. 0:02:07.560 --> 0:02:08.880 The economy is already struggling. 0:02:08.880 --> 0:02:12.560 We've already seen evidence it now services is joy manufacturing 0:02:13.280 --> 0:02:15.720 in that cooling period. So I think it's a challenging 0:02:15.720 --> 0:02:18.000 period for Europe and certainly for US. It's more about 0:02:18.080 --> 0:02:20.560 US secrities in Europe. I think there are opportunities in 0:02:20.639 --> 0:02:25.399 other parts of the world, some segments in Asia, various pockets, 0:02:25.880 --> 0:02:27.560 but overall, I think this is going to be another 0:02:27.639 --> 0:02:30.000 year where you see continued strength for the US. 0:02:30.000 --> 0:02:33.680 Seem Can you quantify how much you're sort of doubling 0:02:33.720 --> 0:02:35.960 down on this bet that the United States is going 0:02:35.960 --> 0:02:37.960 to be the bright spot and that Europe is going 0:02:38.000 --> 0:02:40.040 to be even worse than it was this year. 0:02:42.360 --> 0:02:43.200 I think that Europe. 0:02:43.200 --> 0:02:44.680 I think the thing that we're trying to watch as 0:02:44.680 --> 0:02:46.680 well is we have to keep in eye those technicals. 0:02:46.680 --> 0:02:47.400 We're a sentiment. 0:02:47.760 --> 0:02:51.240 We do think that sentiment is getting incredibly negative about Europe. 0:02:51.760 --> 0:02:54.240 As you've just said, everyone is joining in to that 0:02:54.280 --> 0:02:58.240 massive US over Europe and becoming very, very negative on 0:02:58.280 --> 0:03:01.800 that side, valuations value attractive figure. So it could be 0:03:01.880 --> 0:03:04.480 that you just need a slight improvement in the outlook 0:03:04.520 --> 0:03:07.840 for Europe, some kind of upside surprises with regards to 0:03:07.880 --> 0:03:11.320 the economy. Maybe the ECB really stepping in and starting 0:03:11.320 --> 0:03:14.480 to improve expect investor expectations, and that could be enough 0:03:14.520 --> 0:03:17.079 to shift that needle vicinity. At this stage, it's quite 0:03:17.080 --> 0:03:18.320 difficult to see that coming through. 0:03:18.600 --> 0:03:20.600 There's a question more about whether you can bet at 0:03:20.639 --> 0:03:22.960 least in European bonds at the same time that you 0:03:23.000 --> 0:03:26.600 bet on American exceptionalism, because you can imagine the ECB 0:03:26.760 --> 0:03:29.160 is going to have to cut rates more aggressively and 0:03:29.280 --> 0:03:31.440 if there is some sort of downturn that could be 0:03:31.480 --> 0:03:33.840 some sort of have in trade. Do you believe that 0:03:33.840 --> 0:03:35.480 that is the correct way to go or do you 0:03:35.520 --> 0:03:37.440 think that that is premature at a time where the 0:03:37.440 --> 0:03:39.800 bond vigilantes seem to be having their pens and papers 0:03:39.800 --> 0:03:41.160 out for the likes of France. 0:03:43.200 --> 0:03:45.680 Well, I think, as it is always the case with you, 0:03:45.920 --> 0:03:48.800 you can't just look at Europus as one entity. There's 0:03:48.800 --> 0:03:52.440 so many different entities which are very different disparant that 0:03:53.760 --> 0:03:57.240 in that region overall, Yes, the ECB is going to 0:03:57.240 --> 0:03:59.520 be cutting rates far more aggressively than the US, and 0:03:59.560 --> 0:04:02.080 think the would be a fifty basis pointcut thrown in 0:04:02.120 --> 0:04:04.480 there at some point in twenty twenty five, and they're 0:04:04.520 --> 0:04:07.560 going to be reducing rates below neutral, whereas a FED 0:04:07.960 --> 0:04:09.960 is going to get maybe a little bit close to neutral, 0:04:10.040 --> 0:04:11.120 but probably not below. 0:04:11.560 --> 0:04:14.200 So there is reason to have that overweight to European 0:04:14.240 --> 0:04:16.520 sovereigns rather than the US. But as you said, you have. 0:04:16.440 --> 0:04:18.400 To be really careful and keeping an eye on what 0:04:18.520 --> 0:04:20.480 is going on with the budget deficits in every country 0:04:20.480 --> 0:04:22.120 that we're looking at. I think is going to be 0:04:22.120 --> 0:04:24.320 a key thing for next year because you know, we 0:04:24.360 --> 0:04:26.400 talk about FED policy uncertainty all the time, but there's 0:04:26.440 --> 0:04:28.920 so much on the government policy side with As you said, 0:04:28.960 --> 0:04:31.560 bond vigilante is really something to gear up and keep 0:04:31.560 --> 0:04:33.760 an eye on what's going on in different countries. We've 0:04:33.760 --> 0:04:38.200 already seen it in the UK, we've seen some idea 0:04:38.240 --> 0:04:40.719 of it within the US, and clearly is coming through 0:04:40.760 --> 0:04:42.440 in France as well. So I think that is going 0:04:42.480 --> 0:04:44.919 to be a key conversation for all the countries for 0:04:44.960 --> 0:04:45.400 next year. 0:04:45.520 --> 0:04:48.159 Which is the question Siema about whether the correct trade 0:04:48.200 --> 0:04:51.120 on American exceptionalism is with the small caps, given the 0:04:51.200 --> 0:04:53.919 fact that they seven most leverage to the potential of 0:04:53.960 --> 0:04:57.720 bond vigilantes just peeking out the window in the United States, 0:04:57.760 --> 0:05:01.679 even that alone would be enough to potentially some other valuations. 0:05:02.880 --> 0:05:05.000 Well, look, I think a small cap the run it's 0:05:05.000 --> 0:05:07.919 hand so far is really about valuations. 0:05:09.120 --> 0:05:10.760 It's still due for that catchup. 0:05:10.440 --> 0:05:12.360 Try so it's catching up with a large cap, and 0:05:12.360 --> 0:05:15.240 it's attractive valuations. But as you were saying before, you 0:05:15.279 --> 0:05:18.080 know small caps small businesses, they have a really significant 0:05:18.080 --> 0:05:20.440 exposure to floating rate debt. So if you're not going 0:05:20.480 --> 0:05:23.520 to see very significant rate cuts coming through next year, 0:05:23.880 --> 0:05:27.520 maybe because of increased inflation concerns, then that's going to 0:05:27.520 --> 0:05:28.839 be a fly and the oapment for small caps. 0:05:28.880 --> 0:05:30.640 So I think that you can run through for a 0:05:30.680 --> 0:05:31.839 little bit long for small caps. 0:05:31.839 --> 0:05:34.760 But once valuations start to look a little bit less attractive, 0:05:35.080 --> 0:05:37.239 and certainly from a relative standpoint, where a large cap 0:05:38.000 --> 0:05:39.920 does continue to look more attractive, and then I think 0:05:39.960 --> 0:05:42.000 the small cap agenda starts to really become a little 0:05:42.000 --> 0:05:44.440 bit more a little bit more unattractive. 0:05:44.800 --> 0:05:48.279 New question for the office quiz over the Christmas holiday period, 0:05:48.480 --> 0:05:50.400 do you want the new question. Yeah, please, what's the 0:05:50.480 --> 0:05:52.479 dag's done in twenty twenty four. I'm not going to 0:05:52.480 --> 0:05:53.880 put you on the spot and make you answer that. 0:05:54.480 --> 0:05:57.520 See me show the DACK so far this year? Is 0:05:57.520 --> 0:06:00.000 that by more than eighteen percent? And as we speak 0:06:00.200 --> 0:06:02.720 about how bad Europe is, the DAX is at all 0:06:02.839 --> 0:06:05.920 time highs. Sema Beg's the question, what is the dak's 0:06:05.960 --> 0:06:07.680 doing a record highs? If things are so bad in 0:06:07.720 --> 0:06:09.680 Europe and things aren't great in China either. 0:06:11.440 --> 0:06:13.320 It's a great question, and I think this is a 0:06:13.360 --> 0:06:15.600 key thing for investors to remember. Is it look from 0:06:15.600 --> 0:06:18.440 a relative standpoint, Yes, it's going to be big differences 0:06:18.480 --> 0:06:20.640 and these going to look more attractive. But if the 0:06:20.760 --> 0:06:23.680 US market is doing well, it does tend to carry 0:06:23.680 --> 0:06:27.200 most markets with it, so there will be opportunities globally. 0:06:27.320 --> 0:06:29.640 And I think when we're going into twenty twenty five, 0:06:29.640 --> 0:06:33.680 we so much uncertain team from a policy perspective, especially 0:06:33.680 --> 0:06:36.080 now with the new Trump administration coming in, it does 0:06:36.120 --> 0:06:39.080 make sense to have that global divestification. Are still our 0:06:39.080 --> 0:06:41.560 preference is still for Europe, but we do think that 0:06:41.600 --> 0:06:43.880 there's opportunities outside of US as well, so you do 0:06:44.000 --> 0:06:47.560 get to have some diversification, some exposure to different markets too. 0:06:47.680 --> 0:06:51.200 It's the bank's Bramo Commerce Bank Deutsche Bank yesterday perform 0:06:51.279 --> 0:06:51.720 really well. 0:06:52.080 --> 0:06:53.120 Yeah, how much is this. 0:06:53.200 --> 0:06:55.240 A catch up trade? How much is this because there 0:06:55.279 --> 0:06:56.960 is this bed on rate cuts? And how much is 0:06:57.000 --> 0:06:59.599 it because the likes of Deutsche Bank have expanded dramatically 0:06:59.640 --> 0:07:02.360 outside of Europe. So it sort of goes to Sima's 0:07:02.360 --> 0:07:05.560 point that if they have some sort of footprint outside 0:07:05.600 --> 0:07:07.680 of Europe, they can benefit even if they're listed on 0:07:07.720 --> 0:07:08.080 the decks. 0:07:08.400 --> 0:07:10.480 It's good to hear from your same as Shambare Principal 0:07:10.520 --> 0:07:13.040 Asset Management on the path forward into twenty twenty five. 0:07:23.200 --> 0:07:25.280 But here's the exist on that front. Fresh off of 0:07:25.400 --> 0:07:29.240 visits and Mari Lanago, Canadian Prime Minister Justin Trudeau promising 0:07:29.280 --> 0:07:33.120 to increase border enforcement to try and avoid tariffs, Mexican 0:07:33.120 --> 0:07:36.640 President Claudia Schambaum also saying she's confident she can reach 0:07:36.680 --> 0:07:39.160 a deal with President Trump. At Mills of Raema, James, 0:07:39.240 --> 0:07:41.320 John just now for more at Mills, what does that 0:07:41.400 --> 0:07:42.760 deal actually look like? 0:07:43.840 --> 0:07:45.720 Well, I think John, it's a question do we pull 0:07:45.760 --> 0:07:48.920 forward some of that renegotiation of the USMCA, which is 0:07:49.000 --> 0:07:52.400 due to be renegotiated in twenty twenty six. I think 0:07:52.560 --> 0:07:54.440 it is clear that there's going to have to be 0:07:54.600 --> 0:08:00.480 significant increases in border related items. We see that Donald 0:08:00.520 --> 0:08:03.480 Trump is going to lead off after he's inaugurated with 0:08:03.520 --> 0:08:08.080 a number of immigration related issues. I do think, as 0:08:08.080 --> 0:08:11.920 it relates to both Canada and Mexico, a lot of 0:08:12.000 --> 0:08:16.080 changes to the way in which tariffs are done on autos, 0:08:16.400 --> 0:08:20.720 and probably a huge push towards protecting the US auto industry, 0:08:20.840 --> 0:08:24.240 especially visa each China. And I think what it really 0:08:24.280 --> 0:08:27.320 comes down to, especially as it relates to Mexico, is 0:08:27.360 --> 0:08:30.600 that US tariff policy. John states that you put a 0:08:30.680 --> 0:08:34.000 tariff on where a product is finished. China knows that 0:08:34.360 --> 0:08:38.120 China is moving a lot of production into Mexico and 0:08:38.160 --> 0:08:40.880 then is able to bring things into the United States 0:08:41.000 --> 0:08:44.280 TIF free. That's known as the Mexico backdoor. Donald Trump 0:08:44.320 --> 0:08:46.600 is going to want to make sure that Mexico backdoor 0:08:46.960 --> 0:08:47.920 is fully closed. 0:08:48.200 --> 0:08:50.160 And there is a lot of people are listening to 0:08:50.160 --> 0:08:52.040 what you say, they heard from the President in the 0:08:52.120 --> 0:08:54.120 last week, and they just believe that the tariffs that 0:08:54.160 --> 0:08:57.400 he's threatening are credible threats because he won't follow through 0:08:57.440 --> 0:09:01.120 on them. Pitychev Academy right over the weekend. Consensus is, 0:09:01.240 --> 0:09:03.760 right now, this is just a bargaining chip, bring him 0:09:03.800 --> 0:09:06.160 to the table that've come to the table and maybe 0:09:06.240 --> 0:09:08.240 get a little bit of something count from them. They 0:09:08.320 --> 0:09:10.319 don't think he's going to follow through. Do your client 0:09:10.400 --> 0:09:13.120 see it quite the same way yet, John. 0:09:12.920 --> 0:09:14.880 I think that's probably right. 0:09:14.920 --> 0:09:18.880 I was kind of going through this yesterday thinking that 0:09:19.480 --> 0:09:22.240 when I wrote the note last week about the tweet 0:09:22.240 --> 0:09:25.080 on the twenty five percent tariffs that could be coming, 0:09:25.640 --> 0:09:29.000 there wasn't the same market reaction that we saw back 0:09:29.040 --> 0:09:32.160 twenty seventeen to twenty twenty one during Trump one point zero. 0:09:32.520 --> 0:09:34.880 I think that there is a long list of tariffs 0:09:34.920 --> 0:09:39.160 that were proposed against Mexico, in particular during his first 0:09:39.200 --> 0:09:42.560 term that never were followed through. So right now, I 0:09:42.600 --> 0:09:45.440 think that the market would be surprised to the extent 0:09:45.520 --> 0:09:49.000 that these go into effect. The thing that I am watching, 0:09:49.559 --> 0:09:51.880 especially as it relates to Mexico, is that I think 0:09:51.920 --> 0:09:55.640 there's a personality clash between Donald Trump and Mexican President 0:09:55.679 --> 0:09:59.520 Claudia Steinbaum ready to happen, and I think that is 0:09:59.600 --> 0:10:03.160 probable the wild card to watch. She's going to be 0:10:03.320 --> 0:10:07.720 much more forceful in protecting Mexico and Donald Trump is 0:10:08.520 --> 0:10:11.800 going to be also much more forceful on immigration in 0:10:11.840 --> 0:10:14.080 his second term than he was in his first term, 0:10:14.200 --> 0:10:17.520 and as that personality clash pays out, I think there's 0:10:17.520 --> 0:10:19.680 a higher probability for some of these tariffs to go 0:10:19.760 --> 0:10:23.360 into place, at least temporarily. He's talked about using some 0:10:23.440 --> 0:10:26.880 dormant authorities that the President has not been using in 0:10:26.920 --> 0:10:30.480 the past that can put on temporarily terrorists up to 0:10:30.559 --> 0:10:34.559 fifteen percent without Congress, without an investigation on day one, 0:10:34.600 --> 0:10:35.560 if he wants to do it. 0:10:35.720 --> 0:10:37.480 And can you take that a step further in terms 0:10:37.520 --> 0:10:40.240 of what we've learned from some of the recent conversations 0:10:40.280 --> 0:10:43.160 or at least the readouts and the contradictory readouts from 0:10:43.240 --> 0:10:48.080 Mexican head Claudia Scheinbaum and Donald Trump, as well as 0:10:48.120 --> 0:10:51.480 the recent meeting with Canadian Prime Minister Justin Trudeau. How 0:10:51.559 --> 0:10:56.000 much is this just Donald Trump testing different leaders' abilities 0:10:56.000 --> 0:10:59.920 and willingness to come kiss the ring versus actual policy prescription, 0:11:00.000 --> 0:11:02.360 and at this point before he even enters the White House. 0:11:03.480 --> 0:11:04.920 Now, at least I think you are right. 0:11:05.000 --> 0:11:08.040 I do think that this is a testing the waters 0:11:08.080 --> 0:11:11.920 phase of this. I do think that the readouts have 0:11:11.960 --> 0:11:14.520 to be taken with a grain of salt. Donald Trump 0:11:14.559 --> 0:11:16.880 is not using kind of the traditional ways in which 0:11:16.920 --> 0:11:20.800 we deal with diplomacy, not getting the State Department involved. 0:11:21.280 --> 0:11:24.400 We all know that, so kind of each president is 0:11:24.480 --> 0:11:28.240 able to put out their own kind of message as 0:11:28.240 --> 0:11:31.200 it relates to Donald Trump or Claudia Scheinbaum. Justin Trudeau 0:11:31.200 --> 0:11:33.400 as Prime Minister is able to put out whatever he 0:11:33.480 --> 0:11:37.760 thinks that is necessary. But I don't necessarily think that 0:11:37.880 --> 0:11:41.680 this is something that you tested out, get some changes 0:11:41.840 --> 0:11:45.960 to clear victory and move on the issues that he's 0:11:46.000 --> 0:11:48.400 talking about, and then you put into play some of 0:11:48.440 --> 0:11:52.240 the personnel picks. Howard Lutnik at Commerce going to be 0:11:52.360 --> 0:11:56.120 very aggressive on tariff's. Jamison Greer, who is going to 0:11:56.160 --> 0:11:59.360 be the pick for US Trade Representative. One of the 0:11:59.400 --> 0:12:02.040 reasons Donald Trump picked him is he's going to be 0:12:02.160 --> 0:12:04.599 much more willing to be more aggressive with some of 0:12:04.640 --> 0:12:08.400 those authorities that I've discussed than Bob Litthheiser. So I 0:12:08.520 --> 0:12:13.000 understand the reluctance to over index or over expect that 0:12:13.120 --> 0:12:15.880 this is going to happen on day one, But tariffs 0:12:15.920 --> 0:12:18.520 are coming. It is going to be volatile, and we 0:12:18.679 --> 0:12:21.440 have to expect the unexpected when we think about Trump 0:12:21.480 --> 0:12:23.439 two point zero for this market and how many. 0:12:23.280 --> 0:12:25.440 Of these nominees are actually going to get through at 0:12:25.480 --> 0:12:27.760 a time where we have a lot of clashes between 0:12:27.760 --> 0:12:29.520 already John Thune, who is the head of the Senate 0:12:29.600 --> 0:12:33.040 Leadership for Republicans, and at least one or two of 0:12:33.080 --> 0:12:33.839 these candidates. 0:12:34.800 --> 0:12:36.400 Yeah, so I was looking at the ones that you've 0:12:36.400 --> 0:12:38.560 put up on your screen. I think most, if not all, 0:12:38.600 --> 0:12:45.360 of the picks for Treasury Secretary, US Trade Representative Howard 0:12:45.440 --> 0:12:50.640 Latnik more likely than not to get confirmed. FBI director 0:12:50.760 --> 0:12:54.000 a big question mark, the Defense Secretary, big question mark, 0:12:54.160 --> 0:12:56.280 Health and Human Services in the area at Raymond James 0:12:56.320 --> 0:12:58.760 that we've been getting a lot of question more of 0:12:58.800 --> 0:13:02.800 a question mark, but in that toss up category. So 0:13:02.880 --> 0:13:05.880 Donald Trump with fifty three votes in the Senate and 0:13:05.920 --> 0:13:11.120 it only takes fifty to get the nominee confirmed, far 0:13:11.160 --> 0:13:14.760 more than would normally get confirmed if we had the 0:13:14.880 --> 0:13:18.280 old sixty vote majority that was required in the Senate. 0:13:18.320 --> 0:13:22.520 Get confirmed, Donald Trump will have a cabinet that he wants. 0:13:23.120 --> 0:13:25.280 There will be some exceptions, but for the most part, 0:13:25.600 --> 0:13:29.760 been telling clients expect the vast majority of these nominees 0:13:30.280 --> 0:13:33.040 to be sitting in their posts sooner rather than later. 0:13:33.080 --> 0:13:36.079 Lisa, you whi ed, we do still have a sitting president, 0:13:36.120 --> 0:13:37.959 and he occasionally tries to remind us of that. The 0:13:38.040 --> 0:13:42.920 latest coming out with some new restrictions on Chinese semiconductors, 0:13:43.000 --> 0:13:46.160 in particular having to do with AI memory and tools 0:13:46.200 --> 0:13:50.080 to build the high end chips. How much How do 0:13:50.120 --> 0:13:52.280 you interpret this basically, some of the actions that we're 0:13:52.280 --> 0:13:54.040 seeing out of the White House now at a time 0:13:54.080 --> 0:13:57.520 where a lot of people have almost discounted current President 0:13:57.600 --> 0:13:58.520 Joe Biden. 0:13:59.320 --> 0:14:01.600 So as it related to tech restrictions, Lisa, I've been 0:14:01.600 --> 0:14:04.800 telling clients at Raymond James, this is bipartisan. This is 0:14:04.840 --> 0:14:07.840 something that the Biden administration picked up the torch from 0:14:08.360 --> 0:14:12.440 Trump one point zero and accelerated that during his term. 0:14:12.960 --> 0:14:16.520 We will get these restrictions out during the Biden term, 0:14:16.760 --> 0:14:20.040 but they probably go even further during the Trump term. 0:14:20.200 --> 0:14:24.000 The restrictions that we're discussing this morning are restrictions that 0:14:24.080 --> 0:14:27.720 have been in the hopper for months. The Biden administration 0:14:27.800 --> 0:14:30.360 has been working with the Netherlands in Japan trying to 0:14:30.400 --> 0:14:33.200 get a trilateral deal. There are some differences in the 0:14:33.240 --> 0:14:35.560 way in which the United States, the Dutch, and the 0:14:35.640 --> 0:14:41.160 Japanese enforce these tech restrictions. That is an unfeared issue 0:14:41.160 --> 0:14:45.040 for US companies. The expansion is about making sure that 0:14:45.160 --> 0:14:47.800 China doesn't engage in what has been a game of 0:14:47.800 --> 0:14:50.320 whack a mole, where as soon as we put on restrictions, 0:14:50.320 --> 0:14:53.560 they either move production to a new country or they 0:14:53.680 --> 0:14:58.080 establish new companies that are not on restricted lists. I 0:14:58.120 --> 0:15:01.920 am anticipating that the administration tries to tighten up that 0:15:01.960 --> 0:15:05.040 game of wackamle. The big question to me for clients 0:15:05.080 --> 0:15:07.760 is how much of a hammer does Donald Trump come 0:15:07.840 --> 0:15:10.840 after that next year and tries to end that game 0:15:10.840 --> 0:15:14.360 of whacka mall and has much more restrictive, you know, 0:15:14.880 --> 0:15:19.080 changes to semiicap equipment going into China, especially on legacy 0:15:19.080 --> 0:15:21.200 equipment during his second term. 0:15:21.320 --> 0:15:23.000 It's a big question for all of us going into 0:15:23.200 --> 0:15:26.160 twenty twenty five. And Mills of Raymond James ed thank you, sir. 0:15:26.720 --> 0:15:30.280 Just check out the picture of Donald Trump President Alec's 0:15:30.400 --> 0:15:32.640 economic team. And let's go through the names, and we'll 0:15:32.680 --> 0:15:34.720 talk about the name that's not there. How's it? A 0:15:34.920 --> 0:15:39.240 Nec Jamison Greer, US trade representative Scott Best and a Treasury. 0:15:39.240 --> 0:15:41.880 How would Lutnik a commace. The market was very worried 0:15:41.920 --> 0:15:45.280 at one point about Ambassador Lightheiser going into the cabinet 0:15:45.320 --> 0:15:48.280 again but maybe becoming Treasury secretary, maybe ending up for 0:15:48.400 --> 0:15:52.240 anyc The reporting from Axios side for the weekend almost 0:15:52.240 --> 0:16:05.000 reinforced by Ed Knows there from Raymond James, Well, Claudia, 0:16:05.040 --> 0:16:06.800 welcome to the program. I think we should start there 0:16:06.840 --> 0:16:09.320 the supply side of the economy and how much of 0:16:09.360 --> 0:16:12.240 the hard work that's been doing so far over the 0:16:12.280 --> 0:16:14.360 course of twenty twenty four and why it leaves the 0:16:14.360 --> 0:16:17.240 federal Reserve as it thinks about twenty twenty five and beyond. 0:16:18.760 --> 0:16:21.160 All right, well, it is so important that we don't 0:16:21.200 --> 0:16:23.040 just look at a GDP number and say, oh, it's 0:16:23.080 --> 0:16:25.640 almost three percent and move along. 0:16:25.880 --> 0:16:28.000 We need to stop and what is going on? Why 0:16:28.120 --> 0:16:29.680 is growth so good? Are we overheating? 0:16:29.680 --> 0:16:32.320 If we're overheating, then the FED steps in the raise rates, 0:16:32.320 --> 0:16:33.360 they cool things down. 0:16:33.680 --> 0:16:37.160 That is not what's happening. We have seen a real 0:16:37.440 --> 0:16:38.480 pickup and growth. 0:16:38.560 --> 0:16:42.239 Remember we were promised a recepsion and we got an acceleration, 0:16:42.720 --> 0:16:45.360 and we've seen for two years running now almost three 0:16:45.400 --> 0:16:47.920 percent growth and a lot of that, if you look 0:16:48.000 --> 0:16:49.840 under the hood, is coming from. 0:16:49.720 --> 0:16:52.880 Productivity, and that is the holy grail. 0:16:52.840 --> 0:16:55.400 Of economic prosperity, and we should be spending a lot 0:16:55.440 --> 0:16:57.880 of time trying to figure out exactly how did we 0:16:57.920 --> 0:16:59.720 get to this place that we've seen a pickup and 0:16:59.720 --> 0:17:01.720 growth and this is something us is seeing in our 0:17:01.720 --> 0:17:02.640 peer countries are not. 0:17:03.160 --> 0:17:05.840 So it's a really important question to dig into. 0:17:05.760 --> 0:17:09.119 Claudia, given that people believe in yourself is as one 0:17:09.160 --> 0:17:12.680 of them, that this is becoming a productivity story. Does 0:17:12.680 --> 0:17:16.320 this mean that from your perspective, it's not inflationary, that 0:17:16.400 --> 0:17:19.320 it doesn't necessarily preclude the fetter reserve from cutting in 0:17:19.359 --> 0:17:20.240 a couple weeks time. 0:17:21.480 --> 0:17:21.680 Right. 0:17:21.720 --> 0:17:24.719 Inflation happens when demand is outstripping supply. 0:17:25.160 --> 0:17:26.679 That's the one O one. There's more to it. 0:17:26.760 --> 0:17:28.800 But in general, if we have too much demand and 0:17:28.800 --> 0:17:31.520 not enough supply, then we're going to get price increases 0:17:31.760 --> 0:17:34.280 to kind of you know, make the market work. But 0:17:34.359 --> 0:17:36.159 if we can get more supply in there, and that 0:17:36.359 --> 0:17:39.720 is the lesson. We did not get the big disinflation 0:17:40.000 --> 0:17:43.359 without a recession without this supply side help. And we 0:17:43.400 --> 0:17:45.080 got it not just from supply chains. We got it 0:17:45.119 --> 0:17:48.000 from workers coming online, and we also got this kick 0:17:48.080 --> 0:17:51.880 of getting people in more productive positions, getting more capital 0:17:52.040 --> 0:17:55.000 in their hands to do their jobs, and like that 0:17:55.160 --> 0:17:56.879 was such the way to solve the problem of the 0:17:56.960 --> 0:18:00.600 high inflation. Well, that's not the only problem that a 0:18:00.640 --> 0:18:03.439 good supply side solves. It also can really help us 0:18:03.480 --> 0:18:05.359 thinking about growth over the long term. 0:18:05.680 --> 0:18:06.920 But we got to get out. 0:18:06.840 --> 0:18:10.199 Of our head that it's like all growth and the 0:18:10.240 --> 0:18:13.040 FED does interest rates Like productivity is a really tough 0:18:13.119 --> 0:18:15.600 nut to crack, and it actually is not primarily about 0:18:15.600 --> 0:18:16.439 the Federal Reserve. 0:18:16.880 --> 0:18:20.399 Claudia, How does Fedshair J. Powell message this at a 0:18:20.440 --> 0:18:22.760 time when he is going to be speaking on Wednesday 0:18:23.000 --> 0:18:26.520 at a moderated conversation ahead of a time where inevitably, 0:18:26.600 --> 0:18:28.480 as we've been caring from a host of analysts, the 0:18:28.520 --> 0:18:31.080 FED is likely to revise a lot of its projections 0:18:31.480 --> 0:18:34.919 with inflation going up, with unemployment going down, and with 0:18:35.000 --> 0:18:37.800 growth also going up, given the fact that you have 0:18:37.840 --> 0:18:40.280 seen those upside surprises to growth. 0:18:41.640 --> 0:18:44.159 Pale has made a real effort on this, and I 0:18:44.200 --> 0:18:46.560 would just kind of tell him to double down on it. 0:18:46.600 --> 0:18:48.520 He said multiple times the FED doesn't have. 0:18:48.440 --> 0:18:50.840 A growth mandate, but that's a kind of a wishy 0:18:50.960 --> 0:18:53.520 washy say way of saying that sometimes when growth is high, 0:18:53.560 --> 0:18:55.480 the FED needs to step in, and sometimes when growth 0:18:55.520 --> 0:18:57.400 is high, the FED needs to get out of the way. 0:18:57.720 --> 0:18:58.520 And this is one of. 0:18:58.480 --> 0:19:00.560 Those times where the FED needs to get out of 0:19:00.600 --> 0:19:03.520 the way because it is there's productivity there and high 0:19:03.560 --> 0:19:08.800 interest rates being unnecessarily restrictive on the economy relative the 0:19:08.880 --> 0:19:13.800 dual mandate, it has costs. This high growth is not guaranteed. 0:19:13.920 --> 0:19:14.400 Unfortunately. 0:19:14.480 --> 0:19:16.680 That is the thing about productivity that we have learned 0:19:16.720 --> 0:19:19.399 from the past is yeah, sometimes we get it and 0:19:19.440 --> 0:19:21.840 holding on to it is what is really hard. So like, 0:19:21.880 --> 0:19:24.880 we should not be taking this lightly that we've got 0:19:24.920 --> 0:19:27.760 this kind of growth, pick up this productivity renaissance. The 0:19:27.800 --> 0:19:30.280 question should be what can all policy makers and frankly 0:19:30.280 --> 0:19:32.040 a lot of these lovers are not with the feather 0:19:32.160 --> 0:19:35.359