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Speaker 2: Raymond James joins us now for more, and let's continue
Speaker 2: the conversation we started with here the big tariffs on
Speaker 2: steel and aluminum and whether there will be any carve outs.
Speaker 2: What's your base case on that one?
Speaker 3: I think the base cases know. I think that the
Speaker 3: base cases that they go up from here, John, and
Speaker 3: I think you are one hundred percent right saying that
Speaker 3: there's all these expectations out there that they're not coming.
Speaker 4: They're coming.
Speaker 3: And I think it's really instructive to look exactly what
Speaker 3: happened with the announcements on Canada, Mexico and China. The
Speaker 3: Chinese tariffs are in and then we move away from
Speaker 3: the kind of Mexico and Canada tariffs, and then we
Speaker 3: put on a tariff on what is the largest imports
Speaker 3: from Canada and Mexico on steel, And this is something
Speaker 3: the Biden administration was doing. One of the things that
Speaker 3: we're concerned about is the Mexico back door, the fact
Speaker 3: that a lot of Chinese steel goes to Mexico or
Speaker 3: Canada and then gets imported into the United.
Speaker 4: States without a tariff.
Speaker 3: So my expectation is that this is happening and it
Speaker 3: only escalates from here.
Speaker 5: So if this happens a knee stick twenty five percent
Speaker 5: on aluminum and twenty five percent on steel by March twelfth,
Speaker 5: what are we supposed to expect when it comes to
Speaker 5: reciprocal tariffs that Trump says we're going to get in
Speaker 5: the next day or two.
Speaker 3: I think that what we're going to see is that
Speaker 3: what you've seen the administration talk about is that what
Speaker 3: are the average tariffs? So on the UK, there's an
Speaker 3: average tariff of four and a half percent for US goods.
Speaker 3: We'll probably put that on the UK. For India it's
Speaker 3: eighteen percent. When I've talked to folks within the administration.
Speaker 3: When I've talked to folks who are the trade experts
Speaker 3: who work for him previously, what they always tell me
Speaker 3: is that as long as the other country is willing
Speaker 3: to drop their tariffs to match our tariffs, then they
Speaker 3: don't go into effect.
Speaker 4: But that's a kind of a push.
Speaker 3: Here to make sure that what we get tariffed versus
Speaker 3: what they pay is exactly the same.
Speaker 4: Memory.
Speaker 5: So, ed, who do you think's lining up to try
Speaker 5: and drop their terror first?
Speaker 3: I don't know if we get that kind of immediately.
Speaker 3: It does seem like India is top of the list
Speaker 3: kind of within the focus of the Trump administration. I
Speaker 3: am certainly looking to see if kind of Europe is
Speaker 3: willing to do this. I do think when I've talked
Speaker 3: to other strategists and other folks who are informing foreign governments,
Speaker 3: one of the big concerns that I hear from them
Speaker 3: is that maybe they offer up something and then Trump
Speaker 3: embarrasses them, which is absolutely part of the negotiating strategy.
Speaker 3: You look back to twenty eight eighteen, we put steel
Speaker 3: and aluminum tariffs on in the first Trump administration. Over
Speaker 3: the next couple of years, Trump worked out deals to
Speaker 3: remove those tariffs. Look at a deal with Australia. Those
Speaker 3: now are kind of blown up. If a country makes
Speaker 3: a deal, can they actually see Trump follow through at
Speaker 3: this or does he come on top and do something different,
Speaker 3: Which makes it hard to want to be the first
Speaker 3: one that lines up and tries to do something to
Speaker 3: stop this ed.
Speaker 6: The market has been pretty sanguine right now. Stocks aren't
Speaker 6: really responding in a significant kind of way. Julian Emanuel
Speaker 6: have ever core ISSI. So this will only actually encourage
Speaker 6: the president to go further and be more aggressive with tariffs.
Speaker 3: Do you agree that's what we saw on the first term, Lisa.
Speaker 3: We saw that whenever he was aggressive in the market
Speaker 3: was okay with that.
Speaker 4: He doubled down, he tripled down. It was only when the.
Speaker 3: Market sold off ten to fifteen percent where we would
Speaker 3: get kind of a tweet out there or a state
Speaker 3: that there was progress being made.
Speaker 4: That would be my expectation.
Speaker 3: Again, we've entered into a new Trump put on the market,
Speaker 3: which is, let's look at what's going on within the
Speaker 3: bond market. If we see yields kind of on the
Speaker 3: long end of the curve really start to blow out,
Speaker 3: that would be a binding constraint from him, but certainly
Speaker 3: to the extent that there is not a negative reaction,
Speaker 3: he feels emboldened. And this is one of the problems
Speaker 3: with the market right now is that they live through
Speaker 3: Trump one point zero and therefore have this expectation that
Speaker 3: if it gets bad, he reversus course, and so we're
Speaker 3: kind of stuck in this feedback loop of no one
Speaker 3: wants to be the first person to sell because there's
Speaker 3: going to be a reversal, and therefore people are kind
Speaker 3: of sticking with this a lot longer than they normally would.
Speaker 3: But that threat doesn't mean it's gone away.
Speaker 6: So you think that when people realize that these tariffs
Speaker 6: are for real, that there actually will be a whole
Speaker 6: host of pressure that maybe we're not seeing right now
Speaker 6: because people aren't taking things seriously.
Speaker 2: Is that right?
Speaker 3: I think that is right, but I would layer in,
Speaker 3: let's see what else is happening. So in the first term,
Speaker 3: there was a massive push for deregulation, or that was
Speaker 3: one of the stories, and that didn't get realized. We've
Speaker 3: already seen this week a takeover of the CFPB. We
Speaker 3: have an aggressive action to try to shut that down.
Speaker 3: That's greater than any regulatory action that was taken in
Speaker 3: his first term, and we're already only in the first month.
Speaker 3: So if there is those deregulatory tail winds, if the
Speaker 3: Trump tax cuts get made permanent, if they add to
Speaker 3: those Trump tax cuts, if the dollar remains strong, if
Speaker 3: exports kind of are rebounding because of these trade kind
Speaker 3: of restrictions, then the market can hold in there. But
Speaker 3: if it is tariffs and only terriffs, and we have
Speaker 3: inflationary pressures in the ten year blows.
Speaker 4: Out the FED is thinking.
Speaker 3: About raising rates, that's when we have the negative market reaction.
Speaker 1: Ed.
Speaker 2: I appreciate you time, sir, going to say at most
Speaker 2: that of Raymond Chang Stefal County of UBS writing we
Speaker 2: look for longer term bull state with two FED cuts
Speaker 2: in the second half of twenty twenty five, less they
Speaker 2: joined us. Now for more, Leslie, it's good to see you.
Speaker 2: Last time we caught up towards the end of last year.
Speaker 2: You were looking for I think four in twenty twenty five.
Speaker 2: What's changed things the data or the prospect the policy
Speaker 2: might change too well.
Speaker 1: We were looking for for prior to the December FED
Speaker 1: meeting and then we actually cut it back to that too.
Speaker 1: And obviously growth is well, what was much, you know,
Speaker 1: greater than we expected. Inflation turned out to be a
Speaker 1: little bit more sticky. But we are still looking for
Speaker 1: two cuts. And you know, we do think that this
Speaker 1: disinflation trend, while it might be stalled, it's not completely drilled.
Speaker 1: So we are looking for inflation to continue to come
Speaker 1: down and more than likely the FED cuts in the
Speaker 1: second half of the year.
Speaker 6: Is it because of policy though, back to John's question,
Speaker 6: or is it because just there is more momentum in
Speaker 6: the underlying economy than a lot of people expected before
Speaker 6: December of last year.
Speaker 1: Well, and there's definitely more momentum if you look at
Speaker 1: some of these GDP growth numbers, if you look at
Speaker 1: consumer spending in the fourth quarter, even the first quarter
Speaker 1: of Lanta, FED now is at like two point eight percent,
Speaker 1: so and the labor market remains strong. So there is
Speaker 1: obviously growth has been this much stronger than anticipated. But
Speaker 1: I think when people say the FED is on hold,
Speaker 1: that's prisoning of the marketplace. I mean the market. The
Speaker 1: market this morning is only pricing in about thirty thirty
Speaker 1: five basis points of cuts for twenty twenty five, So
Speaker 1: I think that you hold for longer is there. We
Speaker 1: just think the market's getting a little bit too hawkish
Speaker 1: right now, so we're still looking for two in the
Speaker 1: second half.
Speaker 6: When you talk about a bull steepener, it kind of
Speaker 6: goes against what we're seeing right now in the market.
Speaker 6: To your point, and you say that the market's a
Speaker 6: little bit incorrect with its pricing in of policy staying
Speaker 6: where it is. There is this belief that in the
Speaker 6: short term and two year and five year types of timeframes,
Speaker 6: you're going to see inflation move up because of tariffs,
Speaker 6: because of policy, but over the longer term you'll see
Speaker 6: inflation come back down and you'll see the sense of
Speaker 6: slower growth. Do you reject that narrative, that scenario.
Speaker 7: I don't.
Speaker 1: I think the market's doing it exactly what we expected
Speaker 1: to do. I mean, the bull steeper won't come until
Speaker 1: the Fed actually cuts. Having this flatter right now is
Speaker 1: what you would anticipate, given you know, the tariffs that
Speaker 1: we're saying, the fact that you mentioned earlier inflation expectations,
Speaker 1: you know in the break evens, which is exactly the
Speaker 1: floor plan that we saw from Trump one point zero.
Speaker 1: So what happens is you have these inflation expectations rise.
Speaker 1: You know, they take the cuts out two year goes up,
Speaker 1: the curve flattens. But the latter part, when you actually
Speaker 1: see some of the growth impact, the FED cuts and
Speaker 1: you bull steep it. So I think the path is
Speaker 1: exactly what we would expect.
Speaker 5: Well, what if you do see material inflation with all
Speaker 5: these tariff concerns, but then also a tighter labor market
Speaker 5: potentially because of what Trump is doing on the immigration front.
Speaker 5: Is that what could up end your thesis for two
Speaker 5: cuts in the back half of the year.
Speaker 1: Yeah, I mean we're not looking for a stagflation scenario.
Speaker 1: I mean I think that you know, the FED is
Speaker 1: going to look at that long term inflation sterario, which
Speaker 1: has been fairly anchored. You know, we don't think that
Speaker 1: inflation is going to stay as sticky as what people think.
Speaker 1: We do think this is one time price increases that
Speaker 1: the FED does look through. So we're not thinking right
Speaker 1: now from what we've seen, unless it's organic, grown, fundamentally
Speaker 1: consumer driven inflation kind of reacceleration, we don't think it's
Speaker 1: going to alter the Fed's path.
Speaker 5: What are you hoping to hear from Powell today.
Speaker 1: I don't think we're going to hear very much. I
Speaker 1: think it's going to be a question about inflation, there's
Speaker 1: no question. But remember, I mean even in the December
Speaker 1: meeting they pushed their target of two percent from twenty
Speaker 1: six to twenty seven, So they've pushed that out right.
Speaker 1: And I think he's explained enough in terms of the
Speaker 1: recent commentary, which I mean the last FED meeting was very.
Speaker 4: Boring.
Speaker 1: In my opinion, He's going to wait for the data.
Speaker 1: He's going to see what happens in terms of inflation.
Speaker 1: But I don't think that he's really going to alter
Speaker 1: his rhetoric that what we saw in the last FED meeting.
Speaker 2: When it comes to taris, I think a lot of
Speaker 2: economists would agree with you. A lot of economists on
Speaker 2: Wall Street to the Federal Reserve would choose to look
Speaker 2: through any price level impact and see it as a
Speaker 2: one off. What would constrain that is an important question,
Speaker 2: though in Deutsche Bank said the following their a bitter
Speaker 2: seat to do so could be constrained if inflation expectations
Speaker 2: begin to rise and all the labor market re emerges
Speaker 2: as an additional source of inflationary pressure. Have we had
Speaker 2: any evidence of that, seen any evidence of that in
Speaker 2: the days we got on Friday on you Mitch and
Speaker 2: in the jobs report, was in.
Speaker 1: The way to say that we got on Friday was
Speaker 1: actually stronger than expected. And I think when you think
Speaker 1: about the policies as a whole, we don't know the
Speaker 1: impact of say immigration with them we'd have in the
Speaker 1: labor market or inflation. We don't know what some of
Speaker 1: these policy impacts.
Speaker 7: Are going to be.
Speaker 1: But we're still looking for in our opinion, labor markets
Speaker 1: to stay strong and growth to stay above trend. We
Speaker 1: just don't think it's going to force them to completely,
Speaker 1: you know, stay on the sidelines. And we especially don't
Speaker 1: think they're going to force a hike in the near term.
Speaker 2: Constraining the bus to waize versus forcing a hiker two
Speaker 2: separate things. I think constraining the bustu weize, I think
Speaker 2: would be sufficient to spook investors, Which is why I
Speaker 2: think this price sanction that we got on Friday was
Speaker 2: some material off the back of what we saw in
Speaker 2: you metch together with the wage report, the hotter than
Speaker 2: expected wages with inflation expectations in chin Kaya or be
Speaker 2: it not confirmed by the New York Feds release yesterday.
Speaker 2: It's enough, it's sufficient just to keep people on.
Speaker 6: Edge because there's no reason for the FED to move
Speaker 6: right now. There has been no data that would really
Speaker 6: push the FED off the shelf where they're very happy
Speaker 6: to remain out of the fray, out of the political
Speaker 6: and just saying pretty much nothing and being really boring.
Speaker 6: And so I think ultimately what you're going to get,
Speaker 6: and I think that your point is a salient one,
Speaker 6: which is the removal of the option of cutting or
Speaker 6: the potential for cutting, is.
Speaker 4: Enough to spook this market.
Speaker 6: How much more would have to get priced in? Or
Speaker 6: is that the fully price scenario at this point?
Speaker 2: Even speaker if you think growth is slowing and no
Speaker 2: Dunta Runmack does Neil right in this. And I repeated
Speaker 2: this a little bit earlier, so I'll share it with
Speaker 2: you again in case you missed it. He thinks growth
Speaker 2: is slowing. He's worried about that. It was written his
Speaker 2: note that he put out yesterday, and he thinks growth
Speaker 2: is slowing while the FED is playing a game of
Speaker 2: chicken with a Trump administration. That's problematic. If you believe
Speaker 2: that's the case, you can.
Speaker 6: Tell a different story depending on what sector you look at.
Speaker 6: He's looking at the housing sector. But you listened to
Speaker 6: what McDonald said yesterday. They actually had an okay outlook.
Speaker 6: You saw a rally because they outperformed based on non
Speaker 6: US sales. But they said low income consumers in the
Speaker 6: US are still under pressure, and they said the overall
Speaker 6: market is pretty muted. The low income segment really is
Speaker 6: still feeling it, and that is a significant portion of
Speaker 6: their customer base. So that type of commentary is enough
Speaker 6: to keep certain people an.
Speaker 2: That's choiceful translated. That's some real detail. I hate the
Speaker 2: word choice it too. That's the detail that I think
Speaker 2: we need to hear from these companies. So let's it's
Speaker 2: good to see you as always. Thanks for being here,
Speaker 2: Leslie Falconio. There of ups most times. To Sarah Malic
Speaker 2: of moving. Sarah joins us now for more on financial market. Sarah,
Speaker 2: welcome to the program. I want to talk to you
Speaker 2: about Chairman Powell. A little bit later on, we heard
Speaker 2: from an economist just there that we could be talking
Speaker 2: about rate hikes later this year. Would you expect to
Speaker 2: be having that conversation.
Speaker 7: Well, I wouldn't take rate hikes off the table. But
Speaker 7: right now we are expecting for about one to two
Speaker 7: rate cuts this year. I mean what markets are hoping
Speaker 7: is for the dust to settle on tech and also terriffs.
Speaker 7: So if we're starting with technology, the concern of you're
Speaker 7: over tech earnings is the amount of spending that companies
Speaker 7: are doing on artificial intelligence and the impact that we've
Speaker 7: seen from deep c and the lower costs there, and
Speaker 7: I think markets are nervous. Are US tech means overspending
Speaker 7: on artificial intelligence and will we get the return on
Speaker 7: investment from that.
Speaker 8: On teriffs, the questions are around is this.
Speaker 7: A negotiation tactic? Are we going to have retaliation? And
Speaker 7: who's going to bear the burden of the higher cost
Speaker 7: of tariffs. I don't think it's just a negotiation tactic.
Speaker 7: I think we are going to see some retaliation and
Speaker 7: I think producers and consumers will bear the cost of
Speaker 7: higher tariffs. And the question of course around that is
Speaker 7: what does that mean for inflation? If you look at history,
Speaker 7: terriffs tend to cause a one time bump in inflation.
Speaker 7: Whether or not the federal look through that is yet
Speaker 7: for us to find out.
Speaker 6: So we've gone over a lot of things, whether it's
Speaker 6: the tech world, and we're talking about the tariffs and
Speaker 6: how it.
Speaker 4: All goes together.
Speaker 6: What's your framework for how you filter out some of
Speaker 6: the news that you get every day to understand how
Speaker 6: to prioritize either the proposals from the White House, the
Speaker 6: earnings that we're getting, or the economic data.
Speaker 7: Well, first we focus on fundamentals and looking at fourth
Speaker 7: quarter earnings. We're wrapping up earning season and they're going
Speaker 7: twelve percent year of year, so the US economy does
Speaker 7: remain straw.
Speaker 8: But then you have to look at valuations.
Speaker 7: And here's an interesting tidbit for this year that I
Speaker 7: think most investors didn't expect. European markets are out performing
Speaker 7: US markets. So why is that when we know European
Speaker 7: markets are cheaper. But that's because of the tech trade.
Speaker 7: Europe has much less disposure to tech and tech has
Speaker 7: struggled this year, so you're seeing EU outperform the US.
Speaker 8: And that's also due to US valuations.
Speaker 7: So we need to be conscious of the fact that
Speaker 7: US markets are trading at a twenty percent premium. You
Speaker 7: might say that's deservedly so because the strength of our economy.
Speaker 7: But going forward, of course, we have to think about
Speaker 7: this sticky inflation. What does that mean for the FED?
Speaker 7: Can the economy continue to chug along with higher tariffs?
Speaker 7: Also thinking about two other factors from the administration, taxes
Speaker 7: and deregulation, which are pro growth for the US.
Speaker 8: So areas that we're looking at that we like are
Speaker 8: small caps. Small caps in the US.
Speaker 7: I think they'll perform better with tax cuts that are
Speaker 7: more positive for the US economy, and deregulation should open
Speaker 7: up the m and a market that's good for small caps.
Speaker 7: So looking at those areas of the world where there's
Speaker 7: valuation support and fundamental.
Speaker 8: Support, I think that's going to be increasingly important this year.
Speaker 6: That's a pretty controversial call, Sarah. We've had a lot
Speaker 6: of people come on the show and say that they
Speaker 6: really don't like small caps because they have a narrow
Speaker 6: pathway to really be successful.
Speaker 4: How do you push back.
Speaker 6: Again, set at a time when a lot of people
Speaker 6: think it's a very real possibility that this sedule reserve
Speaker 6: isn't going to cut rates and that you're not going
Speaker 6: to necessarily get the tax cuts and other pro growth
Speaker 6: policies quickly enough to really give that boost to the sector.
Speaker 7: Well, oftentimes you make the most money when you go
Speaker 7: against consensus, So I'm often pleased to hear that other.
Speaker 8: People don't like that call.
Speaker 7: I think it's important not to just focus on valuations,
Speaker 7: because valuations can say cheap or expensive for a long
Speaker 7: time unless you have a catalyst. And that's the key
Speaker 7: with small caps here they're cheap, but finally they have
Speaker 7: that catalyst, and that is some of these policies from
Speaker 7: Trump that we expect tax cuts should help boost the
Speaker 7: US economy, help the consumer continue to spend, and create
Speaker 7: some operating leverage for the economy. We saw manufacturing data
Speaker 7: start to pick up last week, so that's also strong
Speaker 7: for operating leverage for the economy. Small caps that are
Speaker 7: more domestically oriented, don't forget about the strong dollar negative
Speaker 7: for multinationals, positive for domestic companies like small cap And
Speaker 7: of course, finally deregulation. I think that does help open
Speaker 7: up m and a positive for small companies that larger
Speaker 7: companies tend to look to buy. So those are the
Speaker 7: catalysts there to help finally close that valuation gap between
Speaker 7: smaller and larger companies.
Speaker 5: But are all catalysts created equal. We have tariffs today,
Speaker 5: tax cuts that's going to take months, especially when every
Speaker 5: congressman and congresswoman is king or Queen of the Hill
Speaker 5: and having tons of demands on what gets put in
Speaker 5: this reconciliation package.
Speaker 4: I agree.
Speaker 7: I mean, we have talk about tariffs today, but it's
Speaker 7: still a I think there's still a lot of negotiation left.
Speaker 8: We have to see what the retaliation looks like. And again,
Speaker 8: who's going to.
Speaker 7: Bear the burden of those tariffs? Is it going to
Speaker 7: be consumers or producers? But I do think tariffs are
Speaker 7: the wildcard this year. It is what everybody is talking about.
Speaker 7: It could be a serious issue for the economy, and
Speaker 7: how the Fed reacts to that could be important. Though
Speaker 7: our view is still though if it will get CPI
Speaker 7: and PPI data later this week, inflation is moderating. I
Speaker 7: think Defense still has the room to cut one or
Speaker 7: two times this year, as long as inflation doesn't reaccelerate.
Speaker 5: We mentioned when it comes to Europe and the tariffs,
Speaker 5: Ursula Vunderlin's QUI statement this morning about how it's unjustified
Speaker 5: and will not go unanswered will trigger firm and proportionate countermeasures.
Speaker 5: You started this chat talking about how the EU market
Speaker 5: beat the United States. Do you still think that's possible
Speaker 5: for the rest of the year. Given this potential tit
Speaker 5: for chap between Washington and Brussels, I.
Speaker 7: Think an acceleration of retaliation in tariffs could be ahead
Speaker 7: round for EU. The offset for that, of course, will
Speaker 7: be what goes on with the technology sector with deep
Speaker 7: seek lower cost access to artificial intelligence, and whether US
Speaker 7: companies will be able to able to monetize their investments
Speaker 7: at their rate and degree that investors are hoping for.
Speaker 7: If the tech sort of negativity continues, I think that
Speaker 7: is positive for European markets, and they do, of course
Speaker 7: have about a forty percent discount versus US markets. They
Speaker 7: do have valuation sport there Now a couple of the
Speaker 7: things that we haven't really talked about on this also
Speaker 7: that's happening this year is first of all, the return
Speaker 7: of the retail investor. Last Tuesday was the third biggest
Speaker 7: trading volume for retail investors in the past three years.
Speaker 8: So retail investors coming back in.
Speaker 7: I think that is good for small caps, so that's
Speaker 7: important there and that also could be another.
Speaker 8: Driver for the markets. And then finally, you every want
Speaker 8: is talking about.
Speaker 7: Inflation and worried about it, but look at the tenure
Speaker 7: settling now down around the four and a half percent
Speaker 7: level ten years, also telling you bond markets are a
Speaker 7: little bit less concerned about equation.
Speaker 2: Bonyos have been pretty contained, that's for sure. Cera manic
Speaker 2: that of moving. Let's get to the market conversation, joining
Speaker 2: us around the table, Sanain cold and grant of b
Speaker 2: and why she ain't good to see you good to
Speaker 2: see too?
Speaker 7: John?
Speaker 2: Is this a problem for the market because at at
Speaker 2: the moment equities are doing okay? Taking this in a stride,
Speaker 2: The dacks in Frankfurt, Germany is up by something like
Speaker 2: ten percent, So father Shear, is this a problem?
Speaker 9: Well, there are a couple of things that I think
Speaker 9: we need to focus on here. The first is and RBU,
Speaker 9: who has always been China would be first came to tariffs,
Speaker 9: and we've seen that the discussion on tariffs at the
Speaker 9: EU in particular, think about autos. Not all European autos
Speaker 9: are actually manufactured in the EU. A lot of them
Speaker 9: are manufactured here. It is a very big pain point
Speaker 9: when you consider what's actually happened, for example, the German
Speaker 9: car industry, where they've seen such an influx of vehicles
Speaker 9: from China, they didn't have any tariffs in place, and
Speaker 9: the industry has well, let's not say decimated, but it's
Speaker 9: been very badly hurt as a result. But look, there's
Speaker 9: been a lot of talk. We had tariffs for maybe
Speaker 9: a couple of hours on Mexico and Canada, and then
Speaker 9: they were lifted. There were more negotiations. We need to
Speaker 9: wait and see exactly what the details are here.
Speaker 6: Are you basically saying that you would count all tariffs
Speaker 6: that are threatened against trading partners other than China as
Speaker 6: more smoke and mirrors than actuality. Is that that seems
Speaker 6: to be how the market's treating it for now.
Speaker 9: I think that is the appropriate response because the details
Speaker 9: really matter here. Right, they'll have sector impacts, they'll have
Speaker 9: individual name in but we also want to think through
Speaker 9: to what it means for inflation potentially and how big
Speaker 9: of an impact could that be, because as we've seen
Speaker 9: and are seeing the last mile of inflation, getting back
Speaker 9: down to that two percent is really hard.
Speaker 5: How would you know if this is just a one
Speaker 5: time hit or it's more pervasive when it comes to inflation.
Speaker 5: Because a lot of the criticism for people who say
Speaker 5: tariffs don't work and it means longer inflation. We'll look
Speaker 5: back at Trump one point zero and say, well, the
Speaker 5: Fed took it on the chin as just a one
Speaker 5: time hit.
Speaker 9: It's complicated. So there are a couple of things that
Speaker 9: can temper the impact. The first is last time round,
Speaker 9: we actually saw individual companies decide to take the impact
Speaker 9: of tariffs in their profit margin. So that's one way
Speaker 9: it can be dampened. We've got a pretty strong dollar
Speaker 9: that immediately mutes the impact. And then lastly, if consumers
Speaker 9: start to buy more domestically produced goods and you see
Speaker 9: that substitution effect, then the impact of tariffs is lessened.
Speaker 2: We've covered a lot of ground in the last few minutes,
Speaker 2: or so Cham and Pow absent from the conversation for
Speaker 2: the last fifteen minutes. What are you expecting from him
Speaker 2: on day one and then again on day two? Is
Speaker 2: this a big event for you?
Speaker 9: Look, we always listen to what Powell says, because sometimes
Speaker 9: it's not what he says, it's what he doesn't say.
Speaker 9: The thing that we're really interested in is any commentary
Speaker 9: around how they're thinking about the timing of cuts, because look,
Speaker 9: they still do have an easing bias. They're going to
Speaker 9: be more data dependent, and tomorrow's CPI print is going
Speaker 9: to be really important because look, a lot of companies
Speaker 9: just raise prices in January.
Speaker 2: True, in some ways, maybe tomorrow is more interesting once
Speaker 2: we get that CPI report and then we hear from
Speaker 2: him in front of the House.
Speaker 6: How he characterizes it and exactly what the metrics are,
Speaker 6: what the benchmark is for them to feel confident enough
Speaker 6: to cut rates. Does he essentially indicate that ray cuts
Speaker 6: are becoming a more remote possibility in.
Speaker 4: Twenty twenty five.
Speaker 2: The criticize everyone in the House, but sometimes the questions
Speaker 2: in the House are of a different caliber to the
Speaker 2: questions that take place in the Senate.
Speaker 6: So we've been to cham and there's a large All
Speaker 6: I know is that we've insulted the French leader, the
Speaker 6: German leader, but then the house at different caliber, different cabs.
Speaker 5: Well, it's look, German French child is going to take
Speaker 5: issue with us tomorrow.
Speaker 2: No, he's a good friend of mine, and I've got
Speaker 2: a lot of time for the Chairman of the House
Speaker 2: financial Services medic I'm just talking about the pet project,
Speaker 2: other individuals in the House that have pet projects.
Speaker 6: Exactly, And so you start asking him about you know
Speaker 6: one program in this town.
Speaker 2: They want to make a YouTube video.
Speaker 4: Right, Yeah, we all agree.
Speaker 8: It'll get much.
Speaker 5: Worse as we get closer to the midterm election, so.
Speaker 2: This might be a good one. We'll see, Schnick. Appreciate
Speaker 2: your time. Thank you. This is the Bloomberg Surveillance Podcast,
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