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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Towson Slock of Apollo joins the surround the table. Sawson,

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Speaker 2: good morning, sir, It's good to see you morning. Can

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Speaker 2: I ignore all that?

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Speaker 3: Well, this is.

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Speaker 4: A golden lug starting point for the FED, at least,

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Speaker 4: I mean the dual mandate it says inflation should be too.

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Speaker 4: We moved a little bit more in that direction, better

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Speaker 4: than expected, and on jobless claims. We also had a

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Speaker 4: label market that still is reasonably strong. So from that perspective,

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Speaker 4: this is absolutely good news for the FED that we

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Speaker 4: did not get yet any inflation surprise to the upside.

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Speaker 4: But obviously we still have terriffs in the pipeline and

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Speaker 4: what's left on the tariff front could still add as

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Speaker 4: much as one percentage point to tariffs over the next

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Speaker 4: I'm sorry to inflation over the next twelve months. So

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Speaker 4: in that sense, this is backward looking. As Mike is saying,

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Speaker 4: the risks are of course that there's now more upside

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Speaker 4: coming to inflation.

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Speaker 2: So this is the issue, and it's a sequencing Giessue,

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Speaker 2: and I'd love to get your thoughts on it. So

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Speaker 2: sentiments collapsed basically created over the past few months. What

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Speaker 2: we've started to see with CPI is just a bit

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Speaker 2: of softness that's encouraging. How long before we see the

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Speaker 2: weakness in the output dates before we then say the

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Speaker 2: higher prices in months to come?

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Speaker 4: What comes before the other Well, let's think about how

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Speaker 4: companies might respond to this.

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Speaker 3: So now you know tariffs are coming.

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Speaker 4: For example, if you think about Amazon, of the sellers

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Speaker 4: on Amazon, seventy one percent they source their goods in China.

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Speaker 4: So one very important aspect is that it will be

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Speaker 4: visible for everyone the prices are going up on things

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Speaker 4: that are imported, of course from China. So the conclusion

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Speaker 4: to your question is how do you respond to that?

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Speaker 4: Do you take your existing inventory and sell that at

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Speaker 4: the old prices? Do you take your existing inventory and

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Speaker 4: raise the price immediately? That profile will probably be individual

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Speaker 4: for different companies, depending on the competitive situation, which sets

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Speaker 4: are there in how sensitive they are to tariffs.

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Speaker 3: So we just don't know.

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Speaker 4: Yet what the impact will be and how quickly this

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Speaker 4: will feed through. But we do know that higher prices

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Speaker 4: are coming as a result of goods coming from China

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Speaker 4: becoming significantly more expensive. So even if companies decide to

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Speaker 4: sell the existing inventory at the old price, we will

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Speaker 4: over time see some outware pressure on goods infasion coming

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Speaker 4: from this source.

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Speaker 3: Is there that.

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Speaker 5: We ignore this data at our own peril the idea

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Speaker 5: that actually lower energy prices are giving more disposable income

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Speaker 5: to consumers to potentially go out there and buy, and that,

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Speaker 5: oh yeah, it's also an offset for a lot of

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Speaker 5: potential producers in the US.

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Speaker 4: Absolutely, low energy prices is very, very helpful for the consumer.

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Speaker 4: But the other thing, of course, is that the whole

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Speaker 4: surrounding sentiment around what's being going on is that we

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Speaker 4: literally went from the last few days from nuclear winter,

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Speaker 4: so now back to talking about stackflation and staflation.

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Speaker 3: Has these risks of course, that you.

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Speaker 4: Have hit winds from consumer sentiment being weak, corporate centimingly weak.

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Speaker 4: If you look at the fit survey for Capex planning,

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Speaker 4: they are really beginning to turn south. So companies are

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Speaker 4: beginning to put back more likely because of the uncertainty.

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Speaker 4: And let's not forget we still have a five trillion

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Speaker 4: dollar net wealth effect on consumers from the stock market

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Speaker 4: going down. So if I add this whole list together

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Speaker 4: of week A corporate sentiment, week A consumer sentiment, tariff

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Speaker 4: is coming and a negative wealth effect, and on top

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Speaker 4: of that also retaliation from foreigners who might be doing

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Speaker 4: things to us simply because of the trade wall that

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Speaker 4: brings you a fairly long list of downside risks to

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Speaker 4: the outlooker world.

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Speaker 1: Which raises this issue of how we even game out

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Speaker 1: the idea of inflation.

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Speaker 3: Why potentially are we.

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Speaker 1: Not talking about deflation or disinflation? And I say this

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Speaker 1: given the fact that we see Walmart, for example, saying

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Speaker 1: that they are going to invest in price competitiveness, basically

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Speaker 1: they're going to absorb all of the costs from tariffs.

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Speaker 5: At what point could potentially the lack of demand be

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Speaker 5: the main story more than inflation.

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Speaker 4: And that's why the key issue here is who is

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Speaker 4: going to absorb the increase in tariffs?

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Speaker 3: Who's going to absorb.

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Speaker 4: The price increase in goods that are coming here, in

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Speaker 4: particular from China.

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Speaker 3: Is it going to be.

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Speaker 4: Consumers that will face higher prices or is it going

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Speaker 4: to be taking out of margins?

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Speaker 3: Will the E in the pe ratio go down as

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Speaker 3: a result of this?

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Speaker 4: As companies such as Walmart, Costco, and of course Amazon

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Speaker 4: begins to say, well, maybe we are going to absorb

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Speaker 4: some of this and that remains to be seen exactly.

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Speaker 3: Maybe it's going to be.

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Speaker 4: Split across corporates and across consumers, but the bottom line

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Speaker 4: still is that someone has to.

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Speaker 3: Foot the bill when tariffs are going up.

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Speaker 6: Wall Street Journal has this morning that the President privately

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Speaker 6: acknowledged that his trained policies could potentially lead to a

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Speaker 6: trigger a recession, but he said he wanted to make

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Speaker 6: sure it didn't cause a depression. Where are you now

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Speaker 6: in terms of potentially having a recession this year?

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Speaker 4: So, of course the last few days, it was pretty

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Speaker 4: clear that there would be a certain stop in the

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Speaker 4: economy where prices would go up significantly, literally on all

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Speaker 4: trading partners and everything coming in. So that was a

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Speaker 4: scenario where a recession was very likely, almost at one

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Speaker 4: hundred percent where we came from. Today, the recessiont probability

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Speaker 4: is probably fifty to fifty percent, meaning we think that

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Speaker 4: there is still a likelihood we will have a slow down,

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Speaker 4: but the risk is we just don't know what the

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Speaker 4: response is going to be from consumers, corporates, how much

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Speaker 4: will markets go down further? In particular, this wealth effect

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Speaker 4: on his own think about how we normally talk about

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Speaker 4: when the stock market's going down. We go back to

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Speaker 4: the spreadsheets and say, what's the marginal propensieses to consume?

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Speaker 4: How does consumers react when the stock market goes down?

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Speaker 4: Here on his own, the stock market down now five

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Speaker 4: trillion so far, and of course now it's rebounding and

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Speaker 4: then coming a little bit back again. That's, on its own,

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Speaker 4: a fairly significant hit to consumers and the wealth effect

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Speaker 4: for the Kajuma outlook,