1 00:00:02,400 --> 00:00:08,640 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,400 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,640 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,680 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,360 --> 00:00:24,840 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,880 --> 00:00:27,640 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,879 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:33,960 --> 00:00:35,800 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,240 --> 00:00:39,440 Speaker 3: We begin this hour, though with US futures mostly unchanged, 11 00:00:39,520 --> 00:00:42,320 Speaker 3: a little bit softer following a Christmas Eve rally, investors 12 00:00:42,320 --> 00:00:45,720 Speaker 3: hoping the so called Santa Claus rally will continue from 13 00:00:45,720 --> 00:00:48,879 Speaker 3: the final four trading days of the year. I was 14 00:00:48,880 --> 00:00:52,000 Speaker 3: looking at a stat this morning, Peter. Since nineteen fifty, 15 00:00:52,040 --> 00:00:54,320 Speaker 3: the S and P five hundred has generated average and 16 00:00:54,360 --> 00:00:58,080 Speaker 3: medium returns of one point three percent during the Santa 17 00:00:58,120 --> 00:01:01,600 Speaker 3: Claus period, wildly outpacing them market's average seven day gain 18 00:01:01,840 --> 00:01:04,960 Speaker 3: of three tens percent. And this is coming from LPL Financial. 19 00:01:05,200 --> 00:01:07,560 Speaker 3: So actually, if you're willing to be in the markets 20 00:01:07,560 --> 00:01:11,160 Speaker 3: around the holidays, maybe it'll be good for you. 21 00:01:11,160 --> 00:01:12,319 Speaker 4: You know, normally it has been. 22 00:01:12,319 --> 00:01:14,480 Speaker 5: I think this year though, everyone's kind of been looking 23 00:01:14,480 --> 00:01:17,039 Speaker 5: for that opportunity to buy. We had the dip post FOMC. 24 00:01:17,440 --> 00:01:19,360 Speaker 5: I think people bought that dip. I think we've already 25 00:01:19,360 --> 00:01:21,160 Speaker 5: had a lot of the Santa Rally, then we had 26 00:01:21,160 --> 00:01:22,880 Speaker 5: the weird stuff that went on with the budget. I 27 00:01:22,880 --> 00:01:24,640 Speaker 5: think people are going to have to digest what does 28 00:01:24,640 --> 00:01:27,240 Speaker 5: it look like in the new year with President Trump, 29 00:01:27,480 --> 00:01:29,600 Speaker 5: with Musk, how's the economy. 30 00:01:29,160 --> 00:01:29,880 Speaker 4: Going to shake out? 31 00:01:29,959 --> 00:01:31,920 Speaker 5: And I think that's actually going to you know, maybe 32 00:01:32,200 --> 00:01:34,200 Speaker 5: maybe we get the Santa rally, but I think come 33 00:01:34,240 --> 00:01:36,440 Speaker 5: early January, we're going to get a lot of volatility. 34 00:01:36,680 --> 00:01:38,319 Speaker 3: So you think the market has baked in all the 35 00:01:38,360 --> 00:01:40,520 Speaker 3: good stuff when it comes to Trump, I think. 36 00:01:40,600 --> 00:01:41,759 Speaker 4: Lock got baked in again. 37 00:01:41,840 --> 00:01:44,080 Speaker 5: I think you go back to post election, everyone was 38 00:01:44,120 --> 00:01:47,120 Speaker 5: really worried about tariffs. Then all of a sudden consensus became, Oh, 39 00:01:47,200 --> 00:01:48,560 Speaker 5: it's just a negotiating point. 40 00:01:48,960 --> 00:01:49,200 Speaker 4: You know. 41 00:01:49,680 --> 00:01:52,320 Speaker 5: He tends to like volatility, he tends to like chaos. 42 00:01:52,400 --> 00:01:54,640 Speaker 5: So the more the market gets complacent, I think the 43 00:01:54,640 --> 00:01:57,120 Speaker 5: more he likely he is up to up the ante. 44 00:01:57,360 --> 00:01:59,960 Speaker 6: What do you think in terms of sequencing come January. 45 00:02:00,600 --> 00:02:02,280 Speaker 5: You know, I think he's going to go for easy wins. 46 00:02:02,320 --> 00:02:03,960 Speaker 5: So I think as he gets out there, he's going 47 00:02:04,000 --> 00:02:06,080 Speaker 5: to look what can be done. So anything that can 48 00:02:06,080 --> 00:02:08,080 Speaker 5: be done in executive order, look for him to go 49 00:02:08,080 --> 00:02:10,000 Speaker 5: ahead with that, right because he can do that simply. 50 00:02:10,240 --> 00:02:11,960 Speaker 5: Then he's going to look for the opportunities. 51 00:02:12,240 --> 00:02:12,480 Speaker 4: Again. 52 00:02:12,520 --> 00:02:14,760 Speaker 5: I think we're already seeing some progress in terms of immigration. 53 00:02:14,840 --> 00:02:16,560 Speaker 5: He's working with New York City Mayor Adams. So he's 54 00:02:16,600 --> 00:02:19,280 Speaker 5: going to go for those high visibility easy wins. And 55 00:02:19,400 --> 00:02:21,440 Speaker 5: he doesn't start getting those, That's when I think you 56 00:02:21,440 --> 00:02:24,000 Speaker 5: see a more messy and chaotic problem when it. 57 00:02:23,960 --> 00:02:26,040 Speaker 3: Comes to the easy wins though the market is looking for, 58 00:02:26,200 --> 00:02:30,080 Speaker 3: really is a tax bill. When do you start baking 59 00:02:30,120 --> 00:02:33,640 Speaker 3: in the fact that this could actually become real legislation. 60 00:02:34,400 --> 00:02:36,119 Speaker 5: I think you have to wait until you really see 61 00:02:36,160 --> 00:02:39,480 Speaker 5: what people come back acting like. Again, this budget thing 62 00:02:39,560 --> 00:02:42,160 Speaker 5: was kind of weird, right. There's clearly some element, certainly 63 00:02:42,160 --> 00:02:44,239 Speaker 5: even within the Republican Party that does not want to 64 00:02:44,280 --> 00:02:47,320 Speaker 5: grow the deficit. There's concern about the deficit growing. You're 65 00:02:47,320 --> 00:02:50,120 Speaker 5: seeing yields and entire almost every day for the last 66 00:02:50,360 --> 00:02:52,600 Speaker 5: few weeks we have I think it's about twelve trillion 67 00:02:52,639 --> 00:02:54,720 Speaker 5: dollars of debt that we have to refinance next year. 68 00:02:54,919 --> 00:02:56,880 Speaker 5: So one, you need that demand to be there, but 69 00:02:56,919 --> 00:02:59,240 Speaker 5: the higher if we're rolling that over to higher yields, 70 00:02:59,360 --> 00:03:01,520 Speaker 5: that's going to add problems to the budget deficit. So 71 00:03:01,680 --> 00:03:03,320 Speaker 5: I think the deficit is going to take front and center. 72 00:03:03,360 --> 00:03:05,320 Speaker 5: It's going to make it more difficult than most of 73 00:03:05,360 --> 00:03:07,519 Speaker 5: us would like to get some of those policies pushed through. 74 00:03:07,760 --> 00:03:09,760 Speaker 6: You write about bonds, be wary of bonds. 75 00:03:09,800 --> 00:03:12,520 Speaker 3: Nothing from the past days tells us that there won't 76 00:03:12,560 --> 00:03:15,400 Speaker 3: be a lot of spending, just the direction of spending. 77 00:03:14,960 --> 00:03:15,880 Speaker 6: Will be altered. 78 00:03:16,080 --> 00:03:18,280 Speaker 3: You're talking about what happened in terms of the debt 79 00:03:18,280 --> 00:03:21,480 Speaker 3: ceiling debacle, which pretty much when silent once they pass 80 00:03:21,520 --> 00:03:24,120 Speaker 3: through this clean cr Do you think it's going to 81 00:03:24,160 --> 00:03:26,640 Speaker 3: be the bond market that is the ultimate check of 82 00:03:26,760 --> 00:03:29,959 Speaker 3: power in twenty twenty five when it comes to Washington, DC. 83 00:03:30,160 --> 00:03:30,960 Speaker 4: I think it will be right. 84 00:03:31,040 --> 00:03:34,080 Speaker 5: It's become the interest expense is already a big part 85 00:03:34,120 --> 00:03:37,240 Speaker 5: of the deficit. It's growing, it's going to continue to grow, 86 00:03:37,320 --> 00:03:39,280 Speaker 5: and the bond market, I think is very wary. Right, 87 00:03:39,320 --> 00:03:40,840 Speaker 5: how are we going to pay for all these things? 88 00:03:40,960 --> 00:03:42,440 Speaker 5: I think everyone out the corner of the eye is 89 00:03:42,440 --> 00:03:45,320 Speaker 5: still looking at Doge and saying, Okay, maybe something gets 90 00:03:45,360 --> 00:03:45,640 Speaker 5: done there. 91 00:03:45,640 --> 00:03:46,800 Speaker 4: I think that's the. 92 00:03:46,520 --> 00:03:49,480 Speaker 5: Bright shining light that's kept market somewhat in check. Is well, 93 00:03:49,480 --> 00:03:51,680 Speaker 5: if those can really get some efficiencies, maybe we don't 94 00:03:51,680 --> 00:03:52,840 Speaker 5: see the deficit bloom. 95 00:03:53,000 --> 00:03:54,720 Speaker 4: Everything else, though, I think is just telling. 96 00:03:54,480 --> 00:03:57,000 Speaker 5: Us this deficit is going to go higher, and that's problematic. 97 00:03:57,320 --> 00:03:59,960 Speaker 6: Do you see any fiscal hawks left in Washington? 98 00:04:01,160 --> 00:04:01,680 Speaker 7: Apparently? 99 00:04:01,720 --> 00:04:04,280 Speaker 5: Maybe what the twenty seven Republicans who voted against the 100 00:04:04,400 --> 00:04:07,920 Speaker 5: cr They're thirty eight, so yeah, maybe that's it. 101 00:04:08,000 --> 00:04:08,760 Speaker 4: There is no one. 102 00:04:08,920 --> 00:04:11,200 Speaker 5: It's all a matter of where they spend their tax cuts. 103 00:04:11,320 --> 00:04:14,560 Speaker 5: And again, dog seems to be the one thing. Maybe 104 00:04:14,560 --> 00:04:16,760 Speaker 5: that's where they eke out some gains and do something 105 00:04:16,800 --> 00:04:19,080 Speaker 5: about the deficit. I just don't see that happening very 106 00:04:19,080 --> 00:04:20,440 Speaker 5: cleanly or very quickly. 107 00:04:20,600 --> 00:04:23,880 Speaker 3: You also say that there's hope of discipline discipline, but 108 00:04:24,040 --> 00:04:27,320 Speaker 3: quote the swamp seems well in trench. So I see 109 00:04:27,360 --> 00:04:30,720 Speaker 3: consistent upward pressure on bond yields. T row Price is 110 00:04:30,800 --> 00:04:33,640 Speaker 3: talking about maybe five percent. Some people are even saying 111 00:04:34,040 --> 00:04:36,680 Speaker 3: six percent on the ten year yield. Do you think 112 00:04:36,680 --> 00:04:37,760 Speaker 3: we can reach those levels? 113 00:04:38,000 --> 00:04:40,599 Speaker 5: I certainly think five percents in the cards. Six percent 114 00:04:40,720 --> 00:04:42,280 Speaker 5: might be high. We'd have to see some of the 115 00:04:42,360 --> 00:04:45,400 Speaker 5: policies actually get implemented, but yeah, I think five percent's 116 00:04:45,400 --> 00:04:48,680 Speaker 5: pretty realistic. Don't forget. Also, we might see some inflation 117 00:04:48,760 --> 00:04:52,080 Speaker 5: pressures come back again. One people were buying goods ahead 118 00:04:52,120 --> 00:04:55,040 Speaker 5: of the tariffs or potential tariffs. You're seeing that, You're 119 00:04:55,040 --> 00:04:57,840 Speaker 5: seeing the economy still move along reasonably, Well, it's that 120 00:04:57,960 --> 00:04:58,679 Speaker 5: shopping season. 121 00:04:58,880 --> 00:05:00,960 Speaker 4: Plus I do think there's been an artificial. 122 00:05:00,560 --> 00:05:03,279 Speaker 5: Bias to the data pushing things higher than they really 123 00:05:03,320 --> 00:05:05,880 Speaker 5: are in terms of jobs and inflation January February, so 124 00:05:05,960 --> 00:05:08,320 Speaker 5: that could spook the market as well. Six percent seems 125 00:05:08,360 --> 00:05:10,800 Speaker 5: high though, unless we get really aggressive policy. 126 00:05:11,200 --> 00:05:14,080 Speaker 3: What do you make if we get five percent ten 127 00:05:14,120 --> 00:05:17,359 Speaker 3: year yields? What happens to this idea of US exceptionalism Now? 128 00:05:17,440 --> 00:05:19,520 Speaker 5: I think the US economy will struggle at that level. 129 00:05:19,560 --> 00:05:22,960 Speaker 5: You're starting to see small companies default pick up. 130 00:05:23,240 --> 00:05:24,160 Speaker 4: You're also One thing. 131 00:05:24,080 --> 00:05:26,120 Speaker 5: That kind of really caught my eye is they've gone 132 00:05:26,200 --> 00:05:27,960 Speaker 5: back in Q two and said now that we're actually 133 00:05:28,080 --> 00:05:31,280 Speaker 5: job losses rather than job gains in Q two. So 134 00:05:31,360 --> 00:05:33,600 Speaker 5: every time they do the revisions, the economy actually seems 135 00:05:33,600 --> 00:05:35,880 Speaker 5: slightly worse. So I'm not sure where we're managing to. 136 00:05:36,040 --> 00:05:36,560 Speaker 4: I do think the. 137 00:05:36,560 --> 00:05:39,120 Speaker 5: Fed's going to be much more cautious on rate cuts. 138 00:05:39,160 --> 00:05:41,159 Speaker 5: They did their one hundred BIPs. They're sending that message. 139 00:05:41,320 --> 00:05:44,479 Speaker 5: So I think we're susceptible to a yield driven slowdown. 140 00:05:45,160 --> 00:05:47,119 Speaker 6: What does that then mean for the equity market? 141 00:05:47,680 --> 00:05:49,920 Speaker 5: You know, I think we could see some pressure on 142 00:05:49,960 --> 00:05:52,080 Speaker 5: the big high flyers again. So much of this market 143 00:05:52,120 --> 00:05:55,159 Speaker 5: to me, is about the leverageddtfs you have now single 144 00:05:55,240 --> 00:05:57,880 Speaker 5: stock leverage gts. Have no idea why those have been improved. 145 00:05:58,160 --> 00:06:00,560 Speaker 5: They're out there. You're seeing a lot of high around that. 146 00:06:00,680 --> 00:06:02,840 Speaker 5: You've seen a lot of hype around you know, Bitcoin, 147 00:06:02,960 --> 00:06:04,560 Speaker 5: it got to one hundred thousand a couple times. I 148 00:06:04,600 --> 00:06:07,080 Speaker 5: think it crossed ninety nine just yesterday, and now it's 149 00:06:07,120 --> 00:06:09,880 Speaker 5: back to ninety five thousand. So I feel that that's 150 00:06:09,920 --> 00:06:12,080 Speaker 5: that froth that's in the market. That's what the liquidity 151 00:06:12,160 --> 00:06:13,880 Speaker 5: is going to get taken out of, and it'll be 152 00:06:13,880 --> 00:06:15,880 Speaker 5: pretty aggressive and pretty quickly when it happens. 153 00:06:16,040 --> 00:06:18,039 Speaker 3: Do you think there's any chance than in twenty twenty 154 00:06:18,120 --> 00:06:21,240 Speaker 3: five for broadening out or the concentration will remain in 155 00:06:21,320 --> 00:06:22,520 Speaker 3: these mag seven names. 156 00:06:22,839 --> 00:06:24,840 Speaker 5: I think we could see broadening out. We might even 157 00:06:24,880 --> 00:06:27,120 Speaker 5: see maybe globals start doing better. It's really going to 158 00:06:27,240 --> 00:06:30,000 Speaker 5: come down to, I think how many fights does Trump pick, 159 00:06:30,320 --> 00:06:32,480 Speaker 5: who do we pick fights with, are we winning them? 160 00:06:32,800 --> 00:06:34,200 Speaker 4: And what sort of policy do we get. 161 00:06:34,279 --> 00:06:36,480 Speaker 5: So but with higher yields, I think that's going to 162 00:06:36,520 --> 00:06:38,240 Speaker 5: make it more and more difficult for this to really 163 00:06:38,279 --> 00:06:38,760 Speaker 5: broaden out. 164 00:06:38,839 --> 00:06:42,360 Speaker 3: Unfortunately, when you say you think globally we can potentially 165 00:06:42,440 --> 00:06:45,640 Speaker 3: see pickups where exactly right. 166 00:06:45,600 --> 00:06:47,680 Speaker 5: Now, I still wouldn't touch Europe. I think Europe's a disaster. 167 00:06:48,000 --> 00:06:49,360 Speaker 5: You mentioned I think at the start of the top 168 00:06:49,400 --> 00:06:52,159 Speaker 5: of the show how the europe declined free fall. 169 00:06:53,440 --> 00:06:54,400 Speaker 4: So it's hard. 170 00:06:54,480 --> 00:06:56,680 Speaker 5: And what scares me about Europe is Germany's kind of 171 00:06:56,720 --> 00:06:59,360 Speaker 5: been the juggernaut. Europe's kind of Germany's been what's held 172 00:06:59,400 --> 00:07:03,160 Speaker 5: Europe together. They're doing very poorly right now. So I'm 173 00:07:03,240 --> 00:07:05,720 Speaker 5: not yet there, But I do think sentiments become so 174 00:07:05,839 --> 00:07:08,080 Speaker 5: bad over there and so excessive over here that you 175 00:07:08,200 --> 00:07:10,440 Speaker 5: do get that potential for a reversal because. 176 00:07:10,200 --> 00:07:13,040 Speaker 6: It's so low. The entring point is that what you're 177 00:07:13,040 --> 00:07:14,120 Speaker 6: saying an entry point. 178 00:07:14,080 --> 00:07:15,760 Speaker 4: Right and really is a contrary you're looking for. 179 00:07:15,960 --> 00:07:18,600 Speaker 5: Okay, once everyone's given up on something that tends to 180 00:07:18,680 --> 00:07:20,920 Speaker 5: be where it doesn't take much to push that around, 181 00:07:21,240 --> 00:07:24,440 Speaker 5: and everyone is still so very focused mag seven over here. 182 00:07:24,760 --> 00:07:27,800 Speaker 5: Every time we've tried to rally, you know, small caps, 183 00:07:27,840 --> 00:07:30,560 Speaker 5: that's failed, and I keep thinking everyone's looking for that 184 00:07:30,640 --> 00:07:32,760 Speaker 5: small cap rally and maybe the surprise is going to 185 00:07:32,800 --> 00:07:35,080 Speaker 5: be Europe or someone does better. I don't think it 186 00:07:35,120 --> 00:07:37,280 Speaker 5: happens this month or next month, but that could be 187 00:07:37,360 --> 00:07:38,800 Speaker 5: the trade of the year where all of a sudden 188 00:07:38,800 --> 00:07:40,560 Speaker 5: people say, let's give the world a chance. 189 00:07:40,880 --> 00:07:44,600 Speaker 6: The Dacks, though, is up so much double digits on 190 00:07:45,240 --> 00:07:45,600 Speaker 6: this year. 191 00:07:45,720 --> 00:07:48,320 Speaker 3: Jonathan brings up this point all the time, yet the 192 00:07:48,400 --> 00:07:49,840 Speaker 3: German economy. 193 00:07:50,360 --> 00:07:51,120 Speaker 4: Is on its back. 194 00:07:51,600 --> 00:07:51,720 Speaker 7: You know. 195 00:07:51,760 --> 00:07:53,360 Speaker 5: I think one of the things with all these is 196 00:07:53,480 --> 00:07:55,640 Speaker 5: most of these companies are big and global. So that's 197 00:07:55,680 --> 00:07:57,360 Speaker 5: one reason I think you can look at this and say, 198 00:07:57,440 --> 00:07:58,960 Speaker 5: you know, I think the S and P five hundred, 199 00:07:58,960 --> 00:08:01,040 Speaker 5: close to fifty percent of your owns come from overseas. 200 00:08:01,440 --> 00:08:03,840 Speaker 5: So it's the same for some of those big German companies. Right, 201 00:08:03,920 --> 00:08:07,440 Speaker 5: Mercedes is not really a German company per se. Right, 202 00:08:07,480 --> 00:08:10,280 Speaker 5: They're very dependent on global So I think that's you know, 203 00:08:10,400 --> 00:08:12,200 Speaker 5: it's hard when we look at these things and really 204 00:08:12,320 --> 00:08:14,920 Speaker 5: nationalize them when some of the big companies really are 205 00:08:15,040 --> 00:08:17,600 Speaker 5: so global and why would they trade it a much smaller, 206 00:08:17,720 --> 00:08:19,600 Speaker 5: you know, as a market lower pe. 207 00:08:19,960 --> 00:08:20,920 Speaker 4: I think some of it makes sense. 208 00:08:20,960 --> 00:08:24,480 Speaker 5: Some of it's telcode things, banks that don't have that potential, 209 00:08:25,000 --> 00:08:27,920 Speaker 5: but there is that opportunity I think for growth there. 210 00:08:28,040 --> 00:08:29,680 Speaker 6: The one area you haven't mentioned is China. 211 00:08:30,280 --> 00:08:33,400 Speaker 3: China overnight is apparently giving local officials more leeway and 212 00:08:33,480 --> 00:08:36,160 Speaker 3: how they invest government bonds. We do see them coming 213 00:08:36,200 --> 00:08:39,319 Speaker 3: out and trying whatever they can to stimulate the economy. 214 00:08:39,920 --> 00:08:41,480 Speaker 6: Is it enough for you to want to go there? 215 00:08:42,120 --> 00:08:44,880 Speaker 5: Yeah, I actually don't mind China as an investment, and 216 00:08:45,000 --> 00:08:47,080 Speaker 5: we'll be interested when we talked to the guests later today. 217 00:08:47,400 --> 00:08:50,280 Speaker 5: But I do think that this is almost an existential 218 00:08:50,320 --> 00:08:52,880 Speaker 5: sort of moment for GI and the Communist Party, So 219 00:08:52,960 --> 00:08:55,120 Speaker 5: they are going to keep throwing things at this until 220 00:08:55,120 --> 00:08:55,480 Speaker 5: they get. 221 00:08:55,400 --> 00:08:56,440 Speaker 4: The economy turned around. 222 00:08:56,679 --> 00:08:58,640 Speaker 5: And I am a big believer that their whole strategy 223 00:08:58,760 --> 00:09:01,600 Speaker 5: is this made by So they're taking their brands, they're 224 00:09:01,600 --> 00:09:03,920 Speaker 5: trying to sell them globally. They're trying to use bricks 225 00:09:03,920 --> 00:09:06,000 Speaker 5: as another way to get their brands out there. So 226 00:09:06,040 --> 00:09:08,440 Speaker 5: I think Chinese companies actually might do pretty well. And again, 227 00:09:08,559 --> 00:09:11,400 Speaker 5: sentiment's been awful since, you know, there was that brief flurry, 228 00:09:11,960 --> 00:09:13,200 Speaker 5: you know when everyone said, oh, we have to buy 229 00:09:13,320 --> 00:09:17,320 Speaker 5: China late in the fall. It's kind of reversed again. 230 00:09:17,600 --> 00:09:19,839 Speaker 5: I think there is some opportunity there. I think, to 231 00:09:19,920 --> 00:09:22,480 Speaker 5: me though, it's still a trade, it's not an investment. 232 00:09:22,880 --> 00:09:25,800 Speaker 3: You're a traveler, not a settler when it comes to Chenna, definitely. 233 00:09:35,920 --> 00:09:40,320 Speaker 3: Andy Schiller of the Taubman Center for American Politics at 234 00:09:40,400 --> 00:09:43,559 Speaker 3: Brown University joins us now, Wendy, thank you so much 235 00:09:43,600 --> 00:09:45,640 Speaker 3: for joining us, and happy holidays to you. 236 00:09:45,760 --> 00:09:47,760 Speaker 6: Thank you for joining us the day after Christmas. 237 00:09:48,280 --> 00:09:50,640 Speaker 3: We have a long list of grievances coming from President 238 00:09:50,720 --> 00:09:53,679 Speaker 3: elect Trump before he even gets into office, whether or not. 239 00:09:53,760 --> 00:09:58,400 Speaker 6: It's Canada, Mexico, China, Greenland. 240 00:09:57,960 --> 00:09:59,079 Speaker 3: And now the Panama Canal. 241 00:09:59,120 --> 00:09:59,880 Speaker 6: What do you make of all that? 242 00:10:00,040 --> 00:10:01,800 Speaker 1: Yes, good morning, Henry. 243 00:10:02,120 --> 00:10:02,280 Speaker 6: Well. 244 00:10:02,400 --> 00:10:07,320 Speaker 8: President Trump, you know, did successfully renegotiate NAFTA, at least 245 00:10:07,360 --> 00:10:09,600 Speaker 8: in his eyes, in the eyes of a lot of people, 246 00:10:10,000 --> 00:10:12,880 Speaker 8: trying to secure better terms for the United States in 247 00:10:13,000 --> 00:10:16,000 Speaker 8: terms of trade. And this is something presidents can do 248 00:10:16,520 --> 00:10:19,319 Speaker 8: in terms of executive authority. They have a trade representative. 249 00:10:19,840 --> 00:10:22,679 Speaker 8: They do have a lot of leeway in determining what 250 00:10:22,880 --> 00:10:24,760 Speaker 8: our economic relationships are in terms. 251 00:10:24,559 --> 00:10:28,520 Speaker 1: Of trade and also user fees with foreign nations. 252 00:10:28,600 --> 00:10:31,200 Speaker 8: And so there's a long history with the Panama Canal, 253 00:10:32,040 --> 00:10:34,240 Speaker 8: and so I'm not sure how much the president will 254 00:10:34,280 --> 00:10:37,719 Speaker 8: invoke that history. But he's looking for victories, and he's 255 00:10:37,760 --> 00:10:41,640 Speaker 8: looking for victories that he can demonstrate using executive power 256 00:10:42,040 --> 00:10:45,760 Speaker 8: and really pretty much end running Congress. Because he was 257 00:10:45,800 --> 00:10:49,199 Speaker 8: president for four years, he understands, even with a Republican trifecta, 258 00:10:49,520 --> 00:10:51,719 Speaker 8: as he saw last week, you're not always going to 259 00:10:51,760 --> 00:10:54,320 Speaker 8: get your victories quickly or easily through Congress. 260 00:10:54,640 --> 00:10:56,719 Speaker 1: So you're going to look to other venues and other 261 00:10:56,920 --> 00:11:00,199 Speaker 1: uses of presidential power to achieve quick victories. It's to 262 00:11:00,200 --> 00:11:00,880 Speaker 1: look successful. 263 00:11:01,320 --> 00:11:03,880 Speaker 3: China doesn't control the canal at all, but it does 264 00:11:04,040 --> 00:11:07,800 Speaker 3: have two of the main five ports adjacent to the canal. 265 00:11:08,000 --> 00:11:10,280 Speaker 6: Is that really what Trump is getting after? 266 00:11:11,679 --> 00:11:14,520 Speaker 8: Well, I think observers would like to believe that the 267 00:11:14,679 --> 00:11:17,439 Speaker 8: President wants to strengthen the United States position visa each 268 00:11:17,520 --> 00:11:19,559 Speaker 8: China in a lot of different ways. We know that 269 00:11:19,679 --> 00:11:22,280 Speaker 8: China is also investing in a lot of parts of 270 00:11:23,040 --> 00:11:27,559 Speaker 8: South America and also Africa, and using its resources to 271 00:11:27,640 --> 00:11:30,480 Speaker 8: sort of gain leverage in those areas. That's been happening 272 00:11:30,520 --> 00:11:32,360 Speaker 8: for a long time and the United States hasn't really 273 00:11:32,440 --> 00:11:35,000 Speaker 8: confronted it head on. And I think these are going 274 00:11:35,080 --> 00:11:37,599 Speaker 8: to be ways in which the Trump administration looks to 275 00:11:37,679 --> 00:11:41,360 Speaker 8: sort of counter China, beyond even tariffs in the places 276 00:11:41,400 --> 00:11:42,920 Speaker 8: that China is trying to gain a foothold. 277 00:11:43,400 --> 00:11:44,959 Speaker 5: What do you think are the top two or three 278 00:11:45,000 --> 00:11:48,080 Speaker 5: things he could do basically on day one to set 279 00:11:48,160 --> 00:11:49,960 Speaker 5: that agenda and get that tone going. 280 00:11:50,800 --> 00:11:50,959 Speaker 7: Well. 281 00:11:51,000 --> 00:11:53,439 Speaker 1: I can certainly issues some executive orders. 282 00:11:53,480 --> 00:11:56,320 Speaker 8: He can certainly raise tariffs under a sort of national 283 00:11:56,400 --> 00:11:59,520 Speaker 8: security he can do those sorts of things. He can 284 00:11:59,600 --> 00:12:05,200 Speaker 8: certainly try to block some issues of visas or travel like. 285 00:12:05,240 --> 00:12:06,360 Speaker 1: You did with the Muslim ban. 286 00:12:06,720 --> 00:12:08,520 Speaker 8: You know, there's a fair number of things presidents can 287 00:12:08,559 --> 00:12:10,160 Speaker 8: do with executive horizon the first day. 288 00:12:10,440 --> 00:12:13,480 Speaker 1: What he can't do is get his ambassador cleared right away. 289 00:12:13,880 --> 00:12:16,320 Speaker 8: That's up to the Senate, and the Senate seems under 290 00:12:16,480 --> 00:12:19,200 Speaker 8: John Thune, the incoming Repulican leader, to want to exert 291 00:12:19,240 --> 00:12:22,520 Speaker 8: its constitutional privilege and really examine his nominees. Now that 292 00:12:22,640 --> 00:12:24,600 Speaker 8: examination may take a day, a day and a half, 293 00:12:24,840 --> 00:12:26,520 Speaker 8: but they're still going to go through the process. So 294 00:12:26,640 --> 00:12:29,520 Speaker 8: all these ambassadors, all these cabinet levels, they have to 295 00:12:29,600 --> 00:12:31,679 Speaker 8: still go through the Senate and that's going to take 296 00:12:31,679 --> 00:12:32,280 Speaker 8: a little while. 297 00:12:32,559 --> 00:12:36,200 Speaker 1: So how much that frustrates President Trump. We're about to see, Wendy. 298 00:12:36,520 --> 00:12:40,679 Speaker 6: What's the Democrats strategy for next year? Henry? 299 00:12:40,760 --> 00:12:42,840 Speaker 8: That is a question I think the Democrats themselves are 300 00:12:42,960 --> 00:12:46,360 Speaker 8: looking for an answer to. It depends which faction of 301 00:12:46,400 --> 00:12:49,640 Speaker 8: the Democratic Party emerges, you know, sort of as the 302 00:12:49,760 --> 00:12:55,640 Speaker 8: chief spokesperson against the incoming presidential Trump's administration. We saw 303 00:12:55,679 --> 00:12:57,679 Speaker 8: a little bit of playbook from the Democrats on the 304 00:12:57,679 --> 00:13:00,800 Speaker 8: budget bill, you know, referring to President Musk or co 305 00:13:01,080 --> 00:13:04,760 Speaker 8: President Elon Musk. I think the Democrats have real concerns 306 00:13:04,840 --> 00:13:07,560 Speaker 8: about these non elected influences on President Trump. 307 00:13:07,800 --> 00:13:10,880 Speaker 1: You know, President Trump, we've seen four years in office. 308 00:13:11,120 --> 00:13:14,760 Speaker 1: There's a bit of a playbook. Unpredictable, but there's a playbook. 309 00:13:15,040 --> 00:13:18,240 Speaker 8: But new actors with this kind of influence, particularly with communications, 310 00:13:18,440 --> 00:13:21,520 Speaker 8: presents a challenge for the Democrats, and they're trying to 311 00:13:21,600 --> 00:13:24,840 Speaker 8: sort of drive a wedge between those influences, particularly Musk 312 00:13:25,040 --> 00:13:27,199 Speaker 8: and the President. Because of the President, they know what 313 00:13:27,240 --> 00:13:28,640 Speaker 8: they're dealing with with Musk. 314 00:13:28,720 --> 00:13:29,920 Speaker 1: It's much more out of their control. 315 00:13:30,280 --> 00:13:30,640 Speaker 6: Right now. 316 00:13:30,760 --> 00:13:34,120 Speaker 3: We still have a sitting president Joe Biden. Yet when 317 00:13:34,160 --> 00:13:38,400 Speaker 3: it came to the debt, the potential shutdown debt ceiling 318 00:13:38,480 --> 00:13:42,239 Speaker 3: debacle of last week, he pretty much seated the spotlight 319 00:13:42,600 --> 00:13:46,440 Speaker 3: to incoming President Trump. Are you surprised by how much 320 00:13:46,640 --> 00:13:50,040 Speaker 3: power Joe Biden is seeding right now on the global stage. 321 00:13:51,160 --> 00:13:53,319 Speaker 8: Well, I mean, I think Joe Biden and even the 322 00:13:53,400 --> 00:13:56,679 Speaker 8: Democrats do want to set this up as a relationship 323 00:13:56,720 --> 00:13:59,960 Speaker 8: between Republican President Trump and a Republican. 324 00:13:59,440 --> 00:14:01,000 Speaker 1: Controlled House and Senate. 325 00:14:01,280 --> 00:14:03,440 Speaker 8: Because whatever happened in the next couple of months, maybe 326 00:14:03,520 --> 00:14:06,720 Speaker 8: things sail down, inflation goes down, maybe the economy stays solid, 327 00:14:07,000 --> 00:14:07,439 Speaker 8: maybe not. 328 00:14:07,960 --> 00:14:09,400 Speaker 1: They want nothing to do with that. 329 00:14:09,640 --> 00:14:12,199 Speaker 8: They want to start their twenty twenty six campaign now 330 00:14:12,600 --> 00:14:14,920 Speaker 8: against the trifecta. So it's not really a bad thing 331 00:14:15,040 --> 00:14:17,319 Speaker 8: for the Democrats for President Biden to sort of, you know, 332 00:14:17,480 --> 00:14:18,520 Speaker 8: not be involved. 333 00:14:18,960 --> 00:14:22,520 Speaker 1: He's also doing things with executive power, things like clemency 334 00:14:22,680 --> 00:14:23,280 Speaker 1: for example. 335 00:14:23,640 --> 00:14:26,800 Speaker 8: I mean, he's trying to do all he can nilaterally 336 00:14:27,480 --> 00:14:31,240 Speaker 8: and somewhat quietly before the new president takes over. But 337 00:14:31,400 --> 00:14:33,760 Speaker 8: right now the strategy is to say it's the Republicans 338 00:14:33,840 --> 00:14:37,640 Speaker 8: government to run, and it's the Republican's government to succeed 339 00:14:37,960 --> 00:14:38,400 Speaker 8: or fail. 340 00:14:39,640 --> 00:14:41,120 Speaker 5: What do you think the rest of the world's going 341 00:14:41,200 --> 00:14:42,720 Speaker 5: to do in response to some of these things? Right, 342 00:14:42,800 --> 00:14:44,920 Speaker 5: so far we seem to be talking about this in isolation, 343 00:14:45,000 --> 00:14:45,960 Speaker 5: what Trump wants to do. 344 00:14:46,280 --> 00:14:48,240 Speaker 4: What's the world going to do to push back on that? 345 00:14:48,360 --> 00:14:49,360 Speaker 4: Or are they going to do anything? 346 00:14:50,400 --> 00:14:52,760 Speaker 8: Well, yeah, you have to think about economic markets, So 347 00:14:52,800 --> 00:14:55,480 Speaker 8: we also have to think about military security and security 348 00:14:55,520 --> 00:14:59,680 Speaker 8: of Europe. And with Germany's government very shaky, with France's 349 00:14:59,720 --> 00:15:04,280 Speaker 8: governm shaky, and even with Great Britain's government shaky, you 350 00:15:04,440 --> 00:15:07,280 Speaker 8: start to really have concerns about military encouragion. 351 00:15:07,360 --> 00:15:09,160 Speaker 1: You think about Putin, you think about Ukraine. 352 00:15:09,480 --> 00:15:11,840 Speaker 8: You know the instability that could come to Europe with 353 00:15:11,960 --> 00:15:13,680 Speaker 8: economically and even militarily. 354 00:15:14,160 --> 00:15:16,240 Speaker 1: That's a challenge. It's unclear that Trump. 355 00:15:16,080 --> 00:15:19,160 Speaker 8: Administration is prepared for, and we just don't know what 356 00:15:19,320 --> 00:15:22,240 Speaker 8: moves the Trump meministration will make to steady the ship, 357 00:15:22,560 --> 00:15:25,240 Speaker 8: and of course the global economy will depend on studying 358 00:15:25,320 --> 00:15:28,320 Speaker 8: that ship. So those are the kinds of unforeseen external 359 00:15:28,400 --> 00:15:31,440 Speaker 8: shocks that could come earlier in the Trump administration that 360 00:15:31,480 --> 00:15:32,720 Speaker 8: anyone's expecting. 361 00:15:32,680 --> 00:15:35,520 Speaker 3: Trump definitely takes a more bilateral view of the world, 362 00:15:36,600 --> 00:15:39,400 Speaker 3: while the Democrats or Biden administration had taken more of 363 00:15:39,440 --> 00:15:41,960 Speaker 3: a multilateral view of the world. If Trump used the 364 00:15:42,040 --> 00:15:45,160 Speaker 3: world bilaterally, who do you think is going to be 365 00:15:45,400 --> 00:15:47,080 Speaker 3: his best partner in Europe? 366 00:15:48,640 --> 00:15:50,200 Speaker 1: You know, that is a really interesting question. 367 00:15:50,560 --> 00:15:54,120 Speaker 8: I just haven't seen any inclination from the prior Trump 368 00:15:54,160 --> 00:15:57,880 Speaker 8: administration or his rhetoric now that he's looking for a partner. 369 00:15:58,320 --> 00:16:00,280 Speaker 8: I mean, he you know, he sort of wants Poton 370 00:16:00,320 --> 00:16:03,160 Speaker 8: to stay in his corner, maybe resolve Ukraine and look 371 00:16:03,240 --> 00:16:06,040 Speaker 8: good for that. But you know, Trump is Trump, and 372 00:16:06,280 --> 00:16:09,320 Speaker 8: as we see in domestic politics and international politics, he 373 00:16:09,720 --> 00:16:10,400 Speaker 8: is a loner. 374 00:16:10,600 --> 00:16:13,000 Speaker 1: He wants to exert influence where he can and where he. 375 00:16:13,040 --> 00:16:15,640 Speaker 8: Can be successful, but he's not really interested in giving 376 00:16:15,680 --> 00:16:19,240 Speaker 8: anything to other partners. And that's something that's really strikingly 377 00:16:19,320 --> 00:16:23,080 Speaker 8: different from the US foreign policy posture than we've seen 378 00:16:23,120 --> 00:16:23,680 Speaker 8: from a lot. 379 00:16:23,560 --> 00:16:24,400 Speaker 1: Of former presidents. 380 00:16:24,560 --> 00:16:27,000 Speaker 3: So we're less than a month away from his inauguration, Wendy, 381 00:16:27,320 --> 00:16:30,720 Speaker 3: when it comes to this sequencing of things like tax cuts, 382 00:16:31,280 --> 00:16:34,960 Speaker 3: immigration policy, as well as tariffs, how do you expect 383 00:16:35,240 --> 00:16:36,840 Speaker 3: all of this to play out in Washington. 384 00:16:37,720 --> 00:16:39,800 Speaker 8: Well, you know, Emri as you well know because you've 385 00:16:39,840 --> 00:16:42,360 Speaker 8: discussed it reported on before. You know, there's a difference 386 00:16:42,440 --> 00:16:45,800 Speaker 8: between Mike Johnson and John Thune on getting reconciliation going 387 00:16:45,880 --> 00:16:48,320 Speaker 8: and getting an early version of the tax cut you know, 388 00:16:48,640 --> 00:16:51,840 Speaker 8: on the table and under consideration in both the House 389 00:16:51,880 --> 00:16:54,960 Speaker 8: and the Senate, an early victory to extend the tax cuts, 390 00:16:55,000 --> 00:16:57,640 Speaker 8: the Trump tax cuts, that would give the president a 391 00:16:57,680 --> 00:17:00,560 Speaker 8: lot of momentum to focus on other things like border security. 392 00:17:00,880 --> 00:17:03,960 Speaker 8: So border security he can do, and to some extent, 393 00:17:04,200 --> 00:17:06,560 Speaker 8: you know, if he invokes the military in trying to 394 00:17:06,640 --> 00:17:09,680 Speaker 8: do border security, that will create controversy and that could 395 00:17:09,760 --> 00:17:12,280 Speaker 8: upend other kinds of domestic priorities he has, like the 396 00:17:12,359 --> 00:17:15,640 Speaker 8: tax cut bill. One thing that Trump administration doesn't seem 397 00:17:15,720 --> 00:17:18,280 Speaker 8: to quite get yet, which is surprising given they were 398 00:17:18,320 --> 00:17:21,240 Speaker 8: there for four years before, is that these things are interrelated. 399 00:17:21,440 --> 00:17:23,840 Speaker 8: If you ask somebody to make a politically difficult decision 400 00:17:23,880 --> 00:17:26,359 Speaker 8: on one issue, it's going to affect whether they're going 401 00:17:26,400 --> 00:17:29,120 Speaker 8: to help you on another. And that's something these Republican 402 00:17:29,200 --> 00:17:31,640 Speaker 8: leaders will have to manage. But it's unclear how well 403 00:17:31,680 --> 00:17:32,480 Speaker 8: Trump will manage it. 404 00:17:32,920 --> 00:17:35,159 Speaker 3: Wendy Schiler Best of holidays to you. Thank you so 405 00:17:35,280 --> 00:17:36,600 Speaker 3: much for joining us this morning. 406 00:17:46,440 --> 00:17:46,640 Speaker 4: Jay. 407 00:17:46,760 --> 00:17:48,240 Speaker 6: I'm so excited he's going to join us for the 408 00:17:48,280 --> 00:17:49,159 Speaker 6: next sixty minutes. 409 00:17:49,560 --> 00:17:51,960 Speaker 3: So what you're saying there, what it sounds like is 410 00:17:52,080 --> 00:17:54,720 Speaker 3: almost twenty twenty four was the peak when it comes 411 00:17:54,760 --> 00:17:55,840 Speaker 3: to US exceptionalism. 412 00:17:55,960 --> 00:17:56,560 Speaker 6: Is that accurate? 413 00:17:56,800 --> 00:17:59,360 Speaker 7: Well, it could be, right, I mean US has led. 414 00:17:59,600 --> 00:18:01,240 Speaker 7: I mean it's one of the things that's interesting. We 415 00:18:01,320 --> 00:18:03,600 Speaker 7: talked about those big moments right. One of them was 416 00:18:03,640 --> 00:18:07,439 Speaker 7: election night, where we talked about the great economic story 417 00:18:07,520 --> 00:18:11,439 Speaker 7: of the Biden administration did not translate politically, but clearly 418 00:18:11,520 --> 00:18:15,320 Speaker 7: the US is a global growth leader, best performer on inflation. 419 00:18:16,040 --> 00:18:18,560 Speaker 7: And yet now we're looking at a situation where we 420 00:18:18,680 --> 00:18:22,320 Speaker 7: think there's uncertainty in the US with the new administration. 421 00:18:23,320 --> 00:18:26,480 Speaker 7: The rest of the world is responding. We're in what 422 00:18:26,600 --> 00:18:28,360 Speaker 7: we call is that we touched on at the top 423 00:18:28,400 --> 00:18:31,879 Speaker 7: of the long cycle. It's really being driven by competition 424 00:18:32,400 --> 00:18:37,240 Speaker 7: within our tripolar world thesis of regional competition between Asia, Europe, 425 00:18:37,240 --> 00:18:40,520 Speaker 7: and the Americas in the three areas of climate AI. 426 00:18:40,680 --> 00:18:45,720 Speaker 7: In defense, that competition requires a new industrial policy. So 427 00:18:45,880 --> 00:18:49,160 Speaker 7: we're talking about the marriage of fiscal and monetary policy, 428 00:18:49,520 --> 00:18:52,119 Speaker 7: and it has to be done well, right, and so 429 00:18:52,320 --> 00:18:54,600 Speaker 7: you really have to start putting a premium on the 430 00:18:54,680 --> 00:18:57,680 Speaker 7: policy makers and their ability to be in alignment with 431 00:18:57,880 --> 00:19:01,080 Speaker 7: public and private sector. We see that in China, right. 432 00:19:01,160 --> 00:19:04,639 Speaker 7: You were talking earlier about the evs. China led the 433 00:19:04,720 --> 00:19:07,879 Speaker 7: way in the climate space and they now dominate the 434 00:19:08,040 --> 00:19:11,159 Speaker 7: entire space. So now the fight is in AI and 435 00:19:11,280 --> 00:19:14,359 Speaker 7: people are throwing money at this. Every government, every company 436 00:19:14,400 --> 00:19:16,760 Speaker 7: in the world needs to compete in AI, and so 437 00:19:17,160 --> 00:19:20,240 Speaker 7: these investments are too big for anyone company. That's why 438 00:19:20,280 --> 00:19:21,879 Speaker 7: the governments have to get involved. That's all. We have 439 00:19:21,920 --> 00:19:24,440 Speaker 7: fiscal spending, but you have to do it well. And 440 00:19:24,480 --> 00:19:26,919 Speaker 7: if you don't do it well, the markets rebel, as 441 00:19:26,960 --> 00:19:30,359 Speaker 7: we're seeing in Brazil right, nine ten percent fiscal deficit, 442 00:19:30,800 --> 00:19:36,639 Speaker 7: currency collapsing, rates skyrocketing, in equities underperforming, and so there 443 00:19:36,680 --> 00:19:39,959 Speaker 7: really is this competition, and we think we're shifting now 444 00:19:40,119 --> 00:19:42,560 Speaker 7: where the rest of the world has to respond. So 445 00:19:42,720 --> 00:19:46,119 Speaker 7: you have deflation in China, you have stagnation in Europe, 446 00:19:46,600 --> 00:19:49,959 Speaker 7: and so we're seeing policy mixes responding now to those issues. 447 00:19:50,240 --> 00:19:53,959 Speaker 7: And we see President ELEC. Trump as an accelerator of that, right, 448 00:19:54,000 --> 00:19:57,120 Speaker 7: I mean, he's renting caras on everybody. So people China, 449 00:19:57,160 --> 00:20:01,480 Speaker 7: in particular export led economy, they don't start to drive 450 00:20:01,600 --> 00:20:05,399 Speaker 7: domestic consumption. They're more at risk being held hostage by 451 00:20:05,440 --> 00:20:08,480 Speaker 7: the US, and so they are responding. And one of 452 00:20:08,560 --> 00:20:10,639 Speaker 7: the great unknowns we talk about the US and the 453 00:20:10,800 --> 00:20:16,360 Speaker 7: S and P. Guess what, China is outperforming the US FXI, 454 00:20:16,600 --> 00:20:19,840 Speaker 7: the large cap China ETF is up twenty nine percent 455 00:20:19,960 --> 00:20:23,240 Speaker 7: year to date, outperforming the S and P. Nobody knows 456 00:20:23,280 --> 00:20:26,400 Speaker 7: about that, Nobody talks about that. But that's the reality. 457 00:20:26,800 --> 00:20:29,560 Speaker 7: So it's already starting to happen. And so our view 458 00:20:29,760 --> 00:20:31,680 Speaker 7: is that year three in a bull market, which is 459 00:20:31,720 --> 00:20:34,399 Speaker 7: what we're in in the US in globally, tends to 460 00:20:34,520 --> 00:20:37,959 Speaker 7: be a kind of rest here. Single digit type returns 461 00:20:38,000 --> 00:20:40,680 Speaker 7: are the average for three year bull markets. So as 462 00:20:40,760 --> 00:20:44,119 Speaker 7: we see global growth picking up outside the US, we 463 00:20:44,240 --> 00:20:46,680 Speaker 7: think we're going to see earnings do better outside the 464 00:20:46,840 --> 00:20:50,320 Speaker 7: US then in the US. That's new, particularly in emerging markets, 465 00:20:50,720 --> 00:20:53,760 Speaker 7: and therefore we think investors can start to take profits 466 00:20:54,040 --> 00:20:56,520 Speaker 7: in the US, particularly if there's uncertainty with the new 467 00:20:56,560 --> 00:21:01,040 Speaker 7: Trump administration, and allocate to the on US markets which 468 00:21:01,080 --> 00:21:04,200 Speaker 7: are completely under owned at like fifty year lows in 469 00:21:04,320 --> 00:21:08,240 Speaker 7: relative evaluation, starting to pick up earnings growth, starting to 470 00:21:08,320 --> 00:21:11,480 Speaker 7: do the right policy mix. So that's the opportunity take 471 00:21:11,560 --> 00:21:14,040 Speaker 7: some money off the table in the US, move it 472 00:21:14,160 --> 00:21:18,200 Speaker 7: into the non US markets, and we think commodities as well, 473 00:21:18,280 --> 00:21:21,800 Speaker 7: and so there's really that pause. So you're three in 474 00:21:21,880 --> 00:21:24,720 Speaker 7: the US bowl market, single digit earnings growth, that's what 475 00:21:24,800 --> 00:21:27,880 Speaker 7: we're driving with our single digit return expectation, and then 476 00:21:28,320 --> 00:21:31,920 Speaker 7: non US markets can go up fifteen percent, eighteen percent 477 00:21:32,400 --> 00:21:37,280 Speaker 7: earnings growth, economic growth. You know, investors start to allocate there, 478 00:21:37,320 --> 00:21:37,440 Speaker 7: you go. 479 00:21:37,720 --> 00:21:39,240 Speaker 6: Let's look at China a little bit more though. I 480 00:21:39,320 --> 00:21:41,800 Speaker 6: know equity market there you're saying is doing very well. 481 00:21:41,960 --> 00:21:45,960 Speaker 6: But the economy they are still struggling, don't you think. 482 00:21:46,160 --> 00:21:48,080 Speaker 3: I mean you look at you five percent growth, look 483 00:21:48,119 --> 00:21:52,800 Speaker 3: at consumer healthy or non consumer demand, it's not really there. 484 00:21:53,160 --> 00:21:54,840 Speaker 3: I mean, at some point do you think China is 485 00:21:54,840 --> 00:21:57,000 Speaker 3: going to come out with an even bigger bazuka When 486 00:21:57,040 --> 00:21:58,480 Speaker 3: it comes to fiscal demand. 487 00:21:58,440 --> 00:22:00,600 Speaker 7: Well, a lot of it, as we've talked about, is 488 00:22:00,680 --> 00:22:03,960 Speaker 7: what's in the price right. And you know the China stimulus, 489 00:22:04,040 --> 00:22:07,040 Speaker 7: they are taking out the left tail risk. They've told 490 00:22:07,119 --> 00:22:09,320 Speaker 7: you months ago that they're not going to let the 491 00:22:09,359 --> 00:22:11,920 Speaker 7: equity market go down and guess what, they have the 492 00:22:12,000 --> 00:22:15,200 Speaker 7: ability to do that, and so they're doing it. And 493 00:22:15,280 --> 00:22:17,600 Speaker 7: so as an investor, you know, when you look at 494 00:22:17,640 --> 00:22:20,680 Speaker 7: single DIGITPE, which is what you know China trades on, 495 00:22:21,400 --> 00:22:23,440 Speaker 7: when you look at the government saying, you know, we're 496 00:22:23,440 --> 00:22:26,520 Speaker 7: going to we're going to stimulate the economy. When you 497 00:22:26,680 --> 00:22:30,080 Speaker 7: look at the tech stuff, right, so the US is 498 00:22:30,119 --> 00:22:32,400 Speaker 7: trying to freeze China out of the high end tech 499 00:22:32,480 --> 00:22:35,639 Speaker 7: so it could lead in AI. That's the game. The 500 00:22:35,720 --> 00:22:38,520 Speaker 7: way we look at that is that's an opportunity to 501 00:22:38,640 --> 00:22:43,160 Speaker 7: buy China tech, which is now going to dominate the China. Yeah, 502 00:22:43,760 --> 00:22:47,520 Speaker 7: the China e commerce market, which is much bigger than 503 00:22:47,560 --> 00:22:50,520 Speaker 7: the US, growing much faster than the US, and the 504 00:22:50,640 --> 00:22:54,200 Speaker 7: companies that dominate them are trading at like a sixty 505 00:22:54,240 --> 00:22:57,200 Speaker 7: percent discount to the US peer group. And so we're 506 00:22:57,320 --> 00:23:00,720 Speaker 7: long China tech because we think that's really where the opportunities. 507 00:23:01,000 --> 00:23:03,800 Speaker 7: And as we said before, China knows it has to 508 00:23:03,960 --> 00:23:07,920 Speaker 7: act because it's struggling with deflation. Right. The property sector 509 00:23:07,960 --> 00:23:10,000 Speaker 7: has been a big problem. By the way it's bottoming, 510 00:23:10,160 --> 00:23:12,960 Speaker 7: you can start the data starting to finally show properties 511 00:23:13,160 --> 00:23:15,320 Speaker 7: starting to pick up a little bit in China. And 512 00:23:15,440 --> 00:23:18,320 Speaker 7: now we have a situation where they are threatened by 513 00:23:18,359 --> 00:23:23,000 Speaker 7: President Trump with exports. Okay, they're export led economy. They 514 00:23:23,119 --> 00:23:26,919 Speaker 7: need to switch that export focus to domestic demand focus, 515 00:23:27,240 --> 00:23:30,800 Speaker 7: and that's what they are doing. So stimulus, stimulus, stimulus, 516 00:23:31,320 --> 00:23:34,119 Speaker 7: not a huge bazooka. We all, we don't expect that, 517 00:23:34,880 --> 00:23:38,240 Speaker 7: but stimulus, stimulus, stimulus, more stimulus coming in the spring. 518 00:23:38,720 --> 00:23:42,040 Speaker 7: And therefore, you know, growing at five percent, earnings growth 519 00:23:42,119 --> 00:23:44,639 Speaker 7: needs to pick up, So that's important. Earnings growth has 520 00:23:44,640 --> 00:23:47,359 Speaker 7: been disappointing in China, but we think it's going to 521 00:23:47,440 --> 00:23:51,040 Speaker 7: pick up. And as it does, stocks are completely under owned. 522 00:23:51,160 --> 00:23:54,040 Speaker 7: Nobody owns China. I mean I saw something and I 523 00:23:54,119 --> 00:23:56,280 Speaker 7: can't remember which firm because you know so many year 524 00:23:56,320 --> 00:23:58,440 Speaker 7: ahead outfits, and I think there was a list of 525 00:23:58,520 --> 00:24:02,960 Speaker 7: like fifteen major banks and not a single one thought 526 00:24:03,119 --> 00:24:05,680 Speaker 7: China growth was going to be better in twenty twenty 527 00:24:05,720 --> 00:24:08,399 Speaker 7: five than it is in twenty twenty four. I love that, 528 00:24:08,800 --> 00:24:11,439 Speaker 7: you know, when everybody is thinking one thing, we. 529 00:24:11,640 --> 00:24:13,560 Speaker 3: Like to go the other way, right, when everyone's on 530 00:24:13,600 --> 00:24:15,120 Speaker 3: one side of the book real and the other way. 531 00:24:15,200 --> 00:24:16,720 Speaker 6: Yes, Okay, so we talked about China. 532 00:24:17,400 --> 00:24:20,800 Speaker 3: You to this idea that potentially they have domestic consumption 533 00:24:20,960 --> 00:24:23,240 Speaker 3: trying to boost it. At the same time, many say 534 00:24:23,320 --> 00:24:25,639 Speaker 3: that with the walls going up around the United States, 535 00:24:25,920 --> 00:24:27,479 Speaker 3: they dump more on Europe. 536 00:24:27,960 --> 00:24:28,879 Speaker 6: Can you handle that? 537 00:24:29,440 --> 00:24:32,359 Speaker 7: Yeah, Europe is a challenge, right, So in our tripolar world, 538 00:24:32,440 --> 00:24:35,399 Speaker 7: you have China leading because they're the best at marrying 539 00:24:35,520 --> 00:24:40,040 Speaker 7: this industrial policy, fiscal and monetary, public and private. They've 540 00:24:40,359 --> 00:24:43,480 Speaker 7: shown that with the climate space right. US responds with 541 00:24:43,600 --> 00:24:48,800 Speaker 7: the Biden's Chip Act, Infrastructure Act, IRA Act, and now 542 00:24:48,840 --> 00:24:51,120 Speaker 7: we're in the game best growth of the G seven? 543 00:24:51,480 --> 00:24:54,000 Speaker 7: And now where is Europe? So Europe has to respond. 544 00:24:54,040 --> 00:24:56,200 Speaker 7: They know it. You know, there's report after report, the 545 00:24:56,320 --> 00:24:59,080 Speaker 7: draggy report, this, that and the other. They know what 546 00:24:59,160 --> 00:25:02,040 Speaker 7: they have to do. It's a matter of political will, 547 00:25:02,720 --> 00:25:05,040 Speaker 7: and I think you're going to see that political kind 548 00:25:05,080 --> 00:25:09,159 Speaker 7: of logjam break this spring in Germany. Germany is the 549 00:25:09,440 --> 00:25:13,200 Speaker 7: you know, the engine of Europe, and it's been going 550 00:25:13,280 --> 00:25:16,720 Speaker 7: nowhere for years, Okay, in part because Germany has not 551 00:25:17,280 --> 00:25:19,840 Speaker 7: gone down the fiscal stimulus route that pretty much every 552 00:25:19,880 --> 00:25:22,840 Speaker 7: other major economy has. They have the famous debt break right, 553 00:25:23,400 --> 00:25:26,399 Speaker 7: very strict on how much debt they can issue. So 554 00:25:26,600 --> 00:25:29,960 Speaker 7: guess what they now understand They have to kind of 555 00:25:30,240 --> 00:25:32,800 Speaker 7: fudge that a little bit, and they need to stimulate 556 00:25:33,280 --> 00:25:35,760 Speaker 7: to pick get their economy to pick up, because they too, 557 00:25:35,960 --> 00:25:39,240 Speaker 7: like China, a very export dependent and their export dependency 558 00:25:39,320 --> 00:25:42,680 Speaker 7: is on China. So China's weak consumption really hurts Germany. 559 00:25:43,000 --> 00:25:47,159 Speaker 7: All right, So we expect in the upcoming election, right, 560 00:25:47,240 --> 00:25:50,040 Speaker 7: the government has failed. We wrote a piece last week 561 00:25:50,080 --> 00:25:53,080 Speaker 7: in our Musings was called vote of no confidence, right, 562 00:25:53,280 --> 00:25:56,479 Speaker 7: because there's so many no confidence votes in Germany. Had 563 00:25:56,520 --> 00:25:59,920 Speaker 7: one new government we expect in the spring to be 564 00:26:00,080 --> 00:26:03,359 Speaker 7: led by the more conservative side of Europe, of German 565 00:26:03,640 --> 00:26:07,320 Speaker 7: political space, and we think they are going to lead 566 00:26:07,440 --> 00:26:10,359 Speaker 7: the talk about easing on the debt break. So we 567 00:26:10,480 --> 00:26:14,720 Speaker 7: expect fiscal stimulus in Germany next year in Europe more broadly, 568 00:26:15,080 --> 00:26:18,520 Speaker 7: and we think that is going to help attract capital 569 00:26:18,560 --> 00:26:19,480 Speaker 7: to the European. 570 00:26:19,359 --> 00:26:21,000 Speaker 6: Are they're potentially going to be though. 571 00:26:21,200 --> 00:26:24,120 Speaker 3: Well, Donald Trump is being inaugurated January twenty and he's 572 00:26:24,160 --> 00:26:27,320 Speaker 3: a very different view on Europe than the Biden administration. 573 00:26:27,560 --> 00:26:31,080 Speaker 7: Well, I mean, look, I think the tariff thing is overstated. 574 00:26:31,160 --> 00:26:33,720 Speaker 7: Let me just go back to the auto to Europe 575 00:26:33,800 --> 00:26:37,280 Speaker 7: in Germany one second. Really, the auto companies show it, right, 576 00:26:37,600 --> 00:26:41,119 Speaker 7: That is the leading edge of European manufacturing, and they 577 00:26:41,160 --> 00:26:43,840 Speaker 7: are getting their heads handed to them all around the world, 578 00:26:43,920 --> 00:26:47,119 Speaker 7: but especially in China, so they know, they understand they 579 00:26:47,200 --> 00:26:49,800 Speaker 7: have got to act, and they're going to act on 580 00:26:49,920 --> 00:26:52,879 Speaker 7: the tariff side. I think the markets are telling you 581 00:26:53,359 --> 00:26:56,239 Speaker 7: that for the most part, it's already in the price. Right. 582 00:26:56,359 --> 00:26:59,679 Speaker 7: Trump came out twenty five percent on Mexico, on Canada. 583 00:27:00,200 --> 00:27:01,320 Speaker 6: Is it ready negotiating? 584 00:27:01,440 --> 00:27:01,560 Speaker 4: Right? 585 00:27:01,640 --> 00:27:05,159 Speaker 7: But here's the thing, it's not the news. It's the 586 00:27:05,240 --> 00:27:08,119 Speaker 7: reaction to the news that counts. And you look at 587 00:27:08,160 --> 00:27:11,119 Speaker 7: the reaction to these markets. There was no reaction, no, 588 00:27:11,400 --> 00:27:14,919 Speaker 7: no reaction. Pay So higher after a week, China stocks 589 00:27:15,000 --> 00:27:18,680 Speaker 7: higher after a week, Europe, no stocks, no action. So 590 00:27:18,960 --> 00:27:20,800 Speaker 7: I think the tariffs for the most part are in 591 00:27:20,880 --> 00:27:21,240 Speaker 7: the price. 592 00:27:22,880 --> 00:27:26,400 Speaker 2: This is the Bloomberg Surveillance podcast, bringing you the best 593 00:27:26,440 --> 00:27:30,000 Speaker 2: in markets, economics, angiopolitics. You can watch the show live 594 00:27:30,119 --> 00:27:33,080 Speaker 2: on Bloomberg TV weekday mornings from six am to nine 595 00:27:33,160 --> 00:27:36,840 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or 596 00:27:36,920 --> 00:27:39,480 Speaker 2: anywhere else you listen, and as always on the Bloomberg 597 00:27:39,600 --> 00:27:41,440 Speaker 2: Terminal and the Bloomberg Business app.