WEBVTT - Bloomberg Surveillance TV: May 7, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.080 Terminal and the Bloomberg Business App. Here's the take from 0:00:37.120 --> 0:00:40.200 evercre Julian Emmanuel is somewhat cautious. Here's the quote from him. 0:00:40.440 --> 0:00:42.839 Given the uncertainty on policy in the economy and with 0:00:42.960 --> 0:00:46.320 stocks expensive, three plus steps forward rally is set to 0:00:46.400 --> 0:00:49.360 yield to two steps back correction. Julian joins us now 0:00:49.360 --> 0:00:51.120 for more. Julian, good Mornick, good morning. We want to 0:00:51.120 --> 0:00:53.000 give you some credit. A number of weeks ago, still 0:00:53.000 --> 0:00:54.760 a lot of pan account there, a lack of confidence, 0:00:54.760 --> 0:00:58.000 and you said, we've seen the lows recession averted. That 0:00:58.080 --> 0:01:01.120 certainly looks like a good call. At least can things 0:01:01.200 --> 0:01:02.040 change and how quickly? 0:01:02.200 --> 0:01:05.199 Well, It's amazing, John, because when you think about it, right, 0:01:05.240 --> 0:01:09.080 as long term investors, we are supposed to be thinking twelve, 0:01:09.400 --> 0:01:13.440 twenty four, thirty six months in advance, and in this environment, 0:01:13.520 --> 0:01:16.600 there is so much news and so much change that 0:01:16.640 --> 0:01:19.640 you can barely think twelve twenty four or thirty six 0:01:19.800 --> 0:01:23.440 hours in advance. And that was really part of the 0:01:23.480 --> 0:01:27.440 condition that's set up that low on April seventh, you know, 0:01:27.600 --> 0:01:33.360 just abject panic about the state of the economy, you know, 0:01:33.480 --> 0:01:36.440 the need to de risk, and from our point. 0:01:36.200 --> 0:01:39.360 Of view, we do believe that you are. 0:01:39.400 --> 0:01:43.120 Going to end It's obviously a difficult path avert the 0:01:43.160 --> 0:01:47.720 recession barely, but again, when we think about where the 0:01:47.760 --> 0:01:52.400 market is right now, there's that high level of uncertainty 0:01:53.120 --> 0:01:56.600 that makes it, you know, a difficult proposition to commit 0:01:56.640 --> 0:01:57.520 capital long term. 0:01:57.440 --> 0:01:59.640 At least a frank the econom account comes quite well, 0:02:00.120 --> 0:02:02.840 not just about recession or no recession, and we'll continue 0:02:02.840 --> 0:02:06.040 that conversation later on. This morning, we've seen growth expectations 0:02:06.080 --> 0:02:09.160 come down from two to somewhere closer to zero, and 0:02:09.240 --> 0:02:11.720 I just wonder what your expectations are now phenomenal growth 0:02:11.760 --> 0:02:13.840 in the year ahead, and what you need to see 0:02:13.919 --> 0:02:17.160 from these talks between the US and China. What's achievable, 0:02:17.320 --> 0:02:18.120 what's reasonable? 0:02:18.360 --> 0:02:22.959 Well, I think the acknowledgment and I think Secretary Vesson 0:02:23.400 --> 0:02:26.120 is painting it the correct way, is that this is 0:02:26.120 --> 0:02:29.200 a process. It's going to take time, it's going to 0:02:29.240 --> 0:02:30.520 take a number of months. 0:02:30.680 --> 0:02:33.240 There will probably be wins. 0:02:32.840 --> 0:02:37.840 Announced small ones over the next several weeks. Obviously TikTok 0:02:37.960 --> 0:02:41.720 is an issue that's coming up again in reasonably short order. 0:02:42.400 --> 0:02:45.080 But from our point of view, again, just the fact 0:02:45.120 --> 0:02:48.080 that the process is going in the right direction is 0:02:48.120 --> 0:02:49.800 a plus. But at the end of the day, and 0:02:49.840 --> 0:02:52.240 as you said at the top of the show, we 0:02:52.320 --> 0:02:54.680 don't know where the landing zone is. And if the 0:02:54.760 --> 0:02:59.320 landing zone is a global weighted tariff right somewhere of 0:02:59.320 --> 0:03:04.040 around fifty teen to seventeen percent, that's still extraordinarily high 0:03:04.080 --> 0:03:07.600 by historical standards, and that brings you to growth. 0:03:07.680 --> 0:03:10.720 In our mind, we're looking for point nine for the year. 0:03:10.960 --> 0:03:14.000 Is this a tyflation type environment that calls for a 0:03:14.040 --> 0:03:18.400 stagflation type playbook that we haven't seen for many years. 0:03:18.480 --> 0:03:21.520 Well, we would actually say that, and again in true 0:03:21.560 --> 0:03:26.520 market discounting fashion is that that's already been discounted. So 0:03:27.000 --> 0:03:32.280 in this stagflation playbook. The market averages annually a ten 0:03:32.320 --> 0:03:37.840 percent decline, led by sectors like energy and consumer staples, 0:03:38.040 --> 0:03:40.760 and we've seen in various points of the last few 0:03:40.800 --> 0:03:42.560 months those themes. 0:03:42.200 --> 0:03:44.720 Play out to us. It's actually, again, I. 0:03:44.720 --> 0:03:46.480 Go back to what I said a little while ago, 0:03:46.840 --> 0:03:50.600 to the extent possible and necessary, we want to look 0:03:50.680 --> 0:03:55.280 through this under the assumption that all sides are incentivized 0:03:55.600 --> 0:03:58.640 to make sure the global economy stays on course. So 0:03:58.840 --> 0:04:02.400 we think that now's the time to re engage in 0:04:02.440 --> 0:04:07.360 the longer term themes of the sectors that we're leading 0:04:07.720 --> 0:04:10.200 prior to the sell off, and the sectors that we 0:04:10.280 --> 0:04:13.160 think are going to continued to lead technology centric. 0:04:13.320 --> 0:04:15.520 Okay, you say you look through this, but what is 0:04:15.560 --> 0:04:17.240 this that we're looking through? And I talked, I think 0:04:17.240 --> 0:04:19.200 about what you just said, which is the market's pricing 0:04:19.200 --> 0:04:22.000 and a cyflationary like scenario. But they're not necessarily pricing 0:04:22.040 --> 0:04:25.839 in a federal reserve that responds to stagflation. They are 0:04:25.880 --> 0:04:29.520 actually pricing in a federal reserve that responds to something 0:04:29.720 --> 0:04:33.080 more like recession or more like some kind of negative 0:04:33.360 --> 0:04:36.359 growth shock that maybe isn't in the cards. If we 0:04:36.400 --> 0:04:39.279 have a sagflation type of environment. How much is that 0:04:39.320 --> 0:04:42.040 the ultimate wildcard, whether the that is going to respond 0:04:42.040 --> 0:04:44.960 to this like some sort of recessionary or recessionary like 0:04:45.000 --> 0:04:48.599 condition versus stiflation, which is much more difficult. 0:04:48.720 --> 0:04:51.880 So look, there's no question about the fact that we 0:04:51.920 --> 0:04:54.720 will find out we already know this, but we'll find 0:04:54.720 --> 0:04:57.560 out more that the Fed's hands are in fact tied 0:04:57.600 --> 0:05:00.279 to with a certain extent, and that obviously goes back 0:05:00.279 --> 0:05:03.400 to the ratcheting hire of inflation expectations. 0:05:03.640 --> 0:05:04.920 But ultimately I. 0:05:04.960 --> 0:05:07.560 Go back to Chair Pale's use of the t word 0:05:07.920 --> 0:05:11.520 transitory a number of weeks ago. I don't think he 0:05:11.600 --> 0:05:15.200 would have used that without having true conviction whether it's 0:05:15.200 --> 0:05:21.040 a function of demand moderating Inflation's happened before. Go on, Well, 0:05:22.680 --> 0:05:26.840 you try not to repeat the same mistakes. But actually, 0:05:26.880 --> 0:05:31.239 to us, that's the path forward, And I would say 0:05:31.560 --> 0:05:34.279 that in fact, as we've seen in other times over 0:05:34.279 --> 0:05:36.839 the last couple of years, if we take the under 0:05:37.320 --> 0:05:39.880 on the number of cuts the market is pricing, that 0:05:40.000 --> 0:05:41.720 will end up being a market positive. 0:05:41.960 --> 0:05:44.560 How challenging is it going to be as these talks start, 0:05:44.720 --> 0:05:47.400 to Jonathan's point first time, around eighteen months we see 0:05:47.440 --> 0:05:49.840 fits and starts. Sometimes when it comes to these negotiations, 0:05:50.080 --> 0:05:52.760 how challenging is it going to be to keep your 0:05:52.760 --> 0:05:55.120 head on and look straight ahead and say, I'm not 0:05:55.240 --> 0:05:58.239 going to get distracted by all the stop and start 0:05:58.279 --> 0:06:00.800 and go and potentially some of the rhetoric that will 0:06:00.839 --> 0:06:01.200 come from this. 0:06:01.480 --> 0:06:05.040 Well, that's kind of why we're cautious in the near term, 0:06:05.480 --> 0:06:08.560 within the context of our view that that April seventh 0:06:08.600 --> 0:06:12.800 low was the resumption of the structuraball market, that at 0:06:12.839 --> 0:06:15.000 some point down the road we are going to see 0:06:15.200 --> 0:06:18.039 new all time highs. But to your point, it's even 0:06:18.120 --> 0:06:21.200 more of a challenge because we know we're about to 0:06:21.240 --> 0:06:25.080 get data that's going to scare us over the next 0:06:25.560 --> 0:06:26.679 number of weeks and months. 0:06:26.760 --> 0:06:28.080 What a scary data look like. 0:06:29.440 --> 0:06:29.720 You know? 0:06:30.560 --> 0:06:33.320 To us, it all goes back to the labor market. 0:06:33.760 --> 0:06:36.719 So the thing that we focus on the most is 0:06:36.760 --> 0:06:40.840 the high frequency weekly jobless claims. If that starts nudging 0:06:40.880 --> 0:06:44.320 towards three hundred thousand, that's when you're going to get 0:06:44.400 --> 0:06:47.720 sort of gross scare act too. And that's sort of 0:06:47.480 --> 0:06:49.520 our two steps back process. 0:06:49.240 --> 0:06:51.120 Takes us back to the FED last summer. We know 0:06:51.160 --> 0:06:53.120 what they did. They reduced interest rates by one hundred 0:06:53.160 --> 0:06:55.520 basis points the moment you've got to freak out in 0:06:55.560 --> 0:06:57.760 the labor market, just a small one in the summer 0:06:57.760 --> 0:07:00.240 of last year. That's when it started. They move. Are 0:07:00.240 --> 0:07:01.200 they constrained this time? 0:07:01.320 --> 0:07:03.680 They are constrained. There's no question about it. 0:07:03.760 --> 0:07:07.360 And you know even more so because they're certainly going 0:07:07.360 --> 0:07:10.720 to get political pressure in however many hours that's going 0:07:10.760 --> 0:07:14.680 to be. But the fact is is that the inflation 0:07:14.800 --> 0:07:19.400 dynamic is different and at risk of being more anchored 0:07:19.440 --> 0:07:21.680 than it has been in the past. We don't think 0:07:21.760 --> 0:07:23.200 ultimately it will be, but. 0:07:23.160 --> 0:07:24.000 There is that risk. 0:07:24.160 --> 0:07:26.440 The President doesn't like it when other central banks reduce 0:07:26.480 --> 0:07:28.640 interest rights. And it's interesting that going into this one, 0:07:28.720 --> 0:07:31.560 it's not the ECP this time around, it's the Chinese, and. 0:07:31.520 --> 0:07:33.680 They're doing it pretty aggressively to pave the way for 0:07:33.720 --> 0:07:36.760 fiscal stimulus. In addition, it's basically everything the US isn't doing, 0:07:37.000 --> 0:07:40.400 and they're setting the stage potentially to bolster an economy 0:07:40.400 --> 0:07:43.400 that has been flagging, but also potentially to gurd to 0:07:43.440 --> 0:07:46.160 sort of set the stage for retaliation potentially to head 0:07:46.200 --> 0:07:46.760 into these talks. 0:07:47.240 --> 0:07:49.360 It's going to say, as always, thanks for dropping by 0:07:49.520 --> 0:08:03.080 Chilian and Manuel another cult premissra of JP Morgan writing, 0:08:03.080 --> 0:08:05.400 we are in a giant game of check in between 0:08:05.440 --> 0:08:08.280 the market, the administration, and the rest of the world. 0:08:08.560 --> 0:08:11.360 Maybe great deals are just a round the corner, prayer 0:08:11.400 --> 0:08:13.560 joint is now for more preaking mornic morning. Are they 0:08:13.600 --> 0:08:14.600 just a rand the corner? 0:08:14.840 --> 0:08:18.280 I think that's what the equity markets hoping, not realizing, 0:08:18.360 --> 0:08:21.800 or maybe hoping that that doesn't happen. That trade deals, 0:08:22.000 --> 0:08:25.080 even in agreement in principle with all our trading partners, 0:08:25.200 --> 0:08:26.120 is incredibly hard. 0:08:26.160 --> 0:08:27.200 It's going to take a while. 0:08:27.800 --> 0:08:31.360 The administration saying this is strategic uncertainty, which tells you 0:08:31.400 --> 0:08:35.600 remember when we were thinking maybe April second was peak uncertainty, Well, okay, 0:08:35.640 --> 0:08:37.480 maybe it was peak or not. 0:08:37.520 --> 0:08:38.319 That much lower. 0:08:38.520 --> 0:08:41.600 This is a plateau of uncertainty that the economy. 0:08:41.720 --> 0:08:44.240 It's going to weigh on the economy. It's very nonlinear. 0:08:44.520 --> 0:08:47.440 You can handle some time of uncertainty. When that just 0:08:47.840 --> 0:08:51.400 goes into weeks and months, and you know, Congress is 0:08:51.400 --> 0:08:53.880 also sort of dealing with the fiscal side. So there's 0:08:53.960 --> 0:08:56.600 uncertainty on immigration, there's uncertainty on trade. 0:08:56.720 --> 0:08:59.280 When all that uncertainty starts to weigh on the economy, 0:08:59.760 --> 0:09:01.560 I think the equity market's hoping, well. 0:09:01.440 --> 0:09:03.680 The deals right here. At least we know they're talking. 0:09:03.760 --> 0:09:04.560 That's good news. 0:09:04.600 --> 0:09:06.199 We weren't sure if that was happening. 0:09:06.559 --> 0:09:08.079 But it's going to take a long time even to 0:09:08.120 --> 0:09:09.920 get that agreement in principle, So we don't know how 0:09:09.920 --> 0:09:10.560 long it will. 0:09:10.480 --> 0:09:12.480 Take, and we don't know the end point. 0:09:12.679 --> 0:09:16.160 The end point is not where we were on, you know, 0:09:16.240 --> 0:09:17.200 at the start of this year. 0:09:17.280 --> 0:09:20.199 No question, it's a policy shock. The ACP's decided it's 0:09:20.200 --> 0:09:23.360 a disinflationary shock that've cut rights. The Chinese have done 0:09:23.440 --> 0:09:26.440 the same thing overnight. The Federal Reserve when they have 0:09:26.520 --> 0:09:28.280 to address the same question, what kind of a shock 0:09:28.360 --> 0:09:29.200 is it for them? 0:09:29.960 --> 0:09:32.520 I think Cheval's going to have to master the art 0:09:32.520 --> 0:09:33.560 of saying nothing today. 0:09:34.160 --> 0:09:36.680 You know. So, what kind of shock is a great question. 0:09:37.200 --> 0:09:39.560 I think it's a supply shock, which is very hard 0:09:39.600 --> 0:09:42.840 for monitory policy to address, but the Fed really can't. 0:09:42.679 --> 0:09:44.680 Commit to it. It might morph. 0:09:45.160 --> 0:09:47.000 I think it will from a supply shock to a 0:09:47.000 --> 0:09:49.880 demand shock when you get prices going up and the 0:09:49.880 --> 0:09:54.800 consumer has to pick between dolls or anything else and services. 0:09:54.840 --> 0:09:58.080 Do they cut back on services? The US is a service. 0:09:58.120 --> 0:10:00.120 Led econy, but look at the data right now. Now, 0:10:00.120 --> 0:10:02.280 if you take a step back, the hard data is okay. 0:10:02.960 --> 0:10:06.040 You know, payrolls are strong, Inflation is still above target. 0:10:06.280 --> 0:10:08.760 So I think the financial conditions have eased in the 0:10:08.840 --> 0:10:11.000 last month, or at least in the last few weeks. 0:10:11.080 --> 0:10:13.120 So I think the Fed will say we have no urgency. 0:10:13.160 --> 0:10:16.400 They've already cut rates, They've taken the preemptive steps. I 0:10:16.400 --> 0:10:18.480 think people are looking for them to be preemptive. They've 0:10:18.559 --> 0:10:21.600 already preemptive last year. They've taken rates down. We're at 0:10:21.600 --> 0:10:23.280 four and a half. They're going to keep it here 0:10:23.400 --> 0:10:26.560 until they figured out what's the shock, what's the policy offset. 0:10:26.600 --> 0:10:29.160 Do we get a big fiscal stimulus deal, in which 0:10:29.200 --> 0:10:32.160 case they don't need to address the supply shock. So 0:10:32.360 --> 0:10:35.640 I think for the Fed, it's trying to, you know, 0:10:35.880 --> 0:10:37.720 I think clarify the reaction function. 0:10:37.880 --> 0:10:39.600 That's the most they can do that. 0:10:39.720 --> 0:10:42.360 Look, if the economy slows down, we'll respond. We're not 0:10:42.400 --> 0:10:45.679 there yet. We're watching like everyone else, we're watching everything, 0:10:45.720 --> 0:10:47.360 and we'll respond appropriate. 0:10:47.080 --> 0:10:48.000 The reaction function. 0:10:48.240 --> 0:10:50.320 This is really interesting to me because right now we 0:10:50.320 --> 0:10:52.440 don't have a clear sense of what the reaction function 0:10:52.600 --> 0:10:54.960 is and what data dependency means in the new world, 0:10:55.200 --> 0:10:58.880 where data is incredibly backward looking, and this economy depends 0:10:58.880 --> 0:11:01.320 on people having thirty dollars, is not necessarily two dollars. 0:11:01.360 --> 0:11:03.760 And when you start to have that come to fruition, 0:11:03.920 --> 0:11:06.679 how quickly could you see it manifest in the actual 0:11:06.679 --> 0:11:10.000 heart data as a demand shock rather than the much 0:11:10.040 --> 0:11:14.200 more quickly moving supply shock that translates into higher inflation 0:11:14.360 --> 0:11:15.880 that could come as soon as next. 0:11:15.679 --> 0:11:18.440 Week, right, So, I think that's the question we're all 0:11:18.440 --> 0:11:20.640 grappling with that. You know, we've not seen it in 0:11:20.679 --> 0:11:23.439 the hard data. How long does it take? I don't 0:11:23.480 --> 0:11:25.520 think it's that long. I do think it's a little 0:11:25.559 --> 0:11:28.719 more delayed because we learn from the pandemic, companies learn 0:11:28.760 --> 0:11:32.120 from the pandemic consumers. I've not done any early shopping, 0:11:32.160 --> 0:11:34.760 but people have, you know. I think this front loading. 0:11:34.800 --> 0:11:36.560 You're seeing it in the data, You're seeing it in 0:11:36.600 --> 0:11:40.400 the trade data. You're seeing it in you know, companies 0:11:40.760 --> 0:11:44.120 sort of picking up appiling inventories. So the lag might 0:11:44.160 --> 0:11:46.280 be a little longer. What I'm watching is what do 0:11:46.400 --> 0:11:49.400 companies do. Do they pass on that cost? Do prices 0:11:49.480 --> 0:11:51.480 go up? Do we see it next week in CPI? 0:11:51.600 --> 0:11:54.440 If prices are going up. That's when consumers have to 0:11:54.440 --> 0:11:56.920 decide where do they cut back because real incomes are 0:11:56.960 --> 0:11:57.680 not really growing. 0:11:58.040 --> 0:11:59.040 So maybe it. 0:11:59.000 --> 0:12:02.840 Shows up in prices first, and then consumers start to 0:12:02.840 --> 0:12:06.480 pull back on demand. Or do companies say, our margins 0:12:08.080 --> 0:12:11.520 can afford to take that price increase, and in that case, 0:12:11.559 --> 0:12:14.920 when margin compression starts to build, do they start to 0:12:15.000 --> 0:12:17.120 lay off people? So I think we're going to have 0:12:17.120 --> 0:12:20.000 to watch consumers. We're also watching companies. What do companies do? 0:12:20.040 --> 0:12:22.920 I think hiring freezers are happening to the layoff start. 0:12:23.280 --> 0:12:25.160 And so it's the next few months. I don't think 0:12:25.160 --> 0:12:27.560 we're waiting till fourth quarter. I think the next few 0:12:27.559 --> 0:12:30.240 months you'll either see the consumers pulling back or you'll 0:12:30.240 --> 0:12:33.800 see companies trying to keep some margin and having to 0:12:33.800 --> 0:12:36.720 cut costs elsewhere. And I guess the interplay of that 0:12:36.800 --> 0:12:38.800 will show up in the economic data, which the FED 0:12:38.840 --> 0:12:39.400 will respond to. 0:12:39.480 --> 0:12:41.600 It seems like the Chris Waller reaction function is to 0:12:41.640 --> 0:12:44.200 look through the price increases and look straight to what 0:12:44.240 --> 0:12:47.040 could potentially happen with the demand shock, What could happen 0:12:47.080 --> 0:12:49.400 to the labor market. Do you expect to get a 0:12:49.400 --> 0:12:52.040 better sense of whether that's consensus today at a meeting 0:12:52.240 --> 0:12:54.000 that francistan Al is going to sleep through. 0:12:54.800 --> 0:12:57.720 I don't think we'll get such a cleaner signal from 0:12:58.160 --> 0:13:00.920 chap Out because we've and I think there's a little 0:13:00.920 --> 0:13:04.800 bit of path dependency. We just lived through a transitory 0:13:04.920 --> 0:13:08.960 supply driven pandemic shock becoming a demand shock because we 0:13:08.960 --> 0:13:11.600 had a lot of fiscal stimulus and it fed through 0:13:11.640 --> 0:13:12.600 into wages. 0:13:12.280 --> 0:13:13.520 And inflation expectations. 0:13:13.600 --> 0:13:16.040 So I think what we'll hear from Chepaul is we 0:13:16.120 --> 0:13:18.880 haven't seen it in the data. We're watching inflation expectations, 0:13:19.559 --> 0:13:21.439 so you know, which is why I struggled with them 0:13:21.480 --> 0:13:24.560 being preemptive. But I do think when they see that data, 0:13:24.600 --> 0:13:26.600 and I think it's a matter of months, they can 0:13:26.640 --> 0:13:30.240 be very aggressive. The power leg fed doesn't necessarily move 0:13:30.240 --> 0:13:33.160 in twenty five increments. They started hiking late and then 0:13:33.160 --> 0:13:35.560 they went in seventy five increments. I think they're going 0:13:35.640 --> 0:13:38.760 to start almost by definition, a little late because they're 0:13:38.760 --> 0:13:40.600 waiting on data that is lagging. 0:13:40.960 --> 0:13:42.680 But once they realize it, and I think. 0:13:42.559 --> 0:13:44.600 That's where the market's pricing in the market's pricing in 0:13:44.640 --> 0:13:46.960 a scenario where they don't need to do anything because 0:13:47.080 --> 0:13:51.480 maybe we get these quick deals, credible quick deals, or 0:13:51.520 --> 0:13:53.640 the scenario where the economy actually slows down and the 0:13:53.679 --> 0:13:56.400 FED then aggressively cuts. I think we're pricing in this 0:13:56.760 --> 0:13:59.400 bimodal distribution, which is why the rate market's pricing in 0:13:59.440 --> 0:14:01.800 these rate cuts. I think actually the market can price 0:14:01.840 --> 0:14:04.000 him more if you start to see that hard data. 0:14:04.600 --> 0:14:05.760 You said they're going to be like I can think 0:14:05.760 --> 0:14:07.840 of one person who doesn't like people being like, particularly 0:14:07.880 --> 0:14:10.120 Chairman Pound. It's the President of the United States. That 0:14:10.200 --> 0:14:11.880 this afternoon is going to be somewhat interesting. 0:14:12.080 --> 0:14:13.840 Absolutely, I think you're going to get a live drip 0:14:13.840 --> 0:14:16.319 feed on truth social of him, job voting, or potentially 0:14:16.360 --> 0:14:18.959 we talks to the press. He's going to say chair 0:14:19.040 --> 0:14:21.640 Pal is wrong and should be cutting interest rates. But 0:14:21.680 --> 0:14:23.960 that's not going to be new. We've heard this all 0:14:24.040 --> 0:14:25.880 wong from the President. The one thing that he has 0:14:25.960 --> 0:14:27.480 come out and said is he does not want to 0:14:27.480 --> 0:14:28.960 actually get rid of him, even though he has in 0:14:28.960 --> 0:14:30.560 the past. He's the word termination. 0:14:30.680 --> 0:14:32.240 Do you think this comes up in the news conference 0:14:32.240 --> 0:14:33.880 today or is this yesterday's news. 0:14:33.960 --> 0:14:36.320 I'm sure it'll come up, and I'm sure Chefal is 0:14:36.400 --> 0:14:40.400 prepared to say we're apolitical, We're not even thinking about 0:14:40.440 --> 0:14:42.800 this because there is an argument which I don't love 0:14:42.880 --> 0:14:46.080 that because he's getting this pushback to cut that that 0:14:46.200 --> 0:14:47.320 chepel may not cut. 0:14:47.560 --> 0:14:47.640 No. 0:14:47.800 --> 0:14:50.680 I think they're looking at their mandate, the mandate. I 0:14:50.720 --> 0:14:53.440 agree it's backward looking data, but the hard data is 0:14:53.480 --> 0:14:55.560 not suggesting that they need to cut here. So he's 0:14:55.600 --> 0:14:57.680 got an easy pass. I think it can get a 0:14:57.720 --> 0:15:00.400 lot harder if the unemployment rate starts to rise and 0:15:00.520 --> 0:15:03.400 inflation starts to rise. I think then he's going to 0:15:03.440 --> 0:15:06.480 have to explain why he's not cutting rates. 0:15:06.600 --> 0:15:09.120 But JUX suppose this moment in time to before the 0:15:09.160 --> 0:15:11.920 election when he cut rates, Why did he do it? 0:15:11.960 --> 0:15:12.080 Then? 0:15:12.640 --> 0:15:15.200 I think, you know, the labor market was showing signs 0:15:15.200 --> 0:15:17.840 of weakness. Now I'd like to give the Fed credit 0:15:17.920 --> 0:15:20.480 that just because the cut rates, the labor market sort 0:15:20.520 --> 0:15:21.120 of recover. 0:15:21.240 --> 0:15:21.280 No. 0:15:21.400 --> 0:15:23.880 I think turns out that was a sort of noise 0:15:23.920 --> 0:15:27.800 in the data. We had those week three week payroll reports. 0:15:27.640 --> 0:15:29.400 And FED funds was at five and a half. 0:15:29.640 --> 0:15:31.880 So the cut rates to take some of that edge 0:15:31.960 --> 0:15:36.520 off the economy to move rates lower, they didn't need 0:15:36.560 --> 0:15:37.080 to do more. 0:15:37.200 --> 0:15:38.760 The long and sold off, So I think. 0:15:38.640 --> 0:15:40.720 The market pushed back and said no, you actually don't 0:15:40.720 --> 0:15:42.680 need to cut a lot more. The FED heard it, 0:15:43.040 --> 0:15:45.240 so I think that I don't think is political. He'll 0:15:45.280 --> 0:15:47.960 absolutely be asked that. But you know, I think the 0:15:48.160 --> 0:15:50.240 as long as he's not fired, I think it's a 0:15:50.280 --> 0:15:50.920 free country. 0:15:51.040 --> 0:15:54.200 People can slight barrier, right, as long as he's not 0:15:54.320 --> 0:15:56.320 five let's build on some of this and unpack it. 0:15:56.520 --> 0:15:58.760 So on March nineteenth, we close around four twenty four 0:15:58.800 --> 0:16:02.000 on tens. We're around four to twenty four on tens, 0:16:02.000 --> 0:16:04.560 despite the fact we had a major policy shop Dan 0:16:04.640 --> 0:16:06.800 in Washington, DC. You know where this is cat number 0:16:06.840 --> 0:16:09.640 one question for portfolio managers right now for anybody's cross 0:16:09.680 --> 0:16:12.080 ass set. Is the long bond going to provide me 0:16:12.200 --> 0:16:14.520 some comfort if things go wrong with the economy. 0:16:15.280 --> 0:16:16.720 I'm not sure about the long bond. 0:16:16.840 --> 0:16:19.720 I think the long bond has supply demand for treasuries 0:16:19.800 --> 0:16:24.120 as much as the economic fundamentals of where FED policy 0:16:24.160 --> 0:16:24.680 is going to be. 0:16:25.040 --> 0:16:25.760 The five year. 0:16:25.960 --> 0:16:29.320 Absolutely, we've been adding any backup in interest rates, We've 0:16:29.320 --> 0:16:32.520 been adding to the five year. Concerns around releveraging, we've 0:16:32.520 --> 0:16:35.080 been adding to the five year because that's much more 0:16:35.240 --> 0:16:39.440 levered to essentially fedcuts and that end point. So we 0:16:39.440 --> 0:16:41.360 don't have to have necessarily a view. Do they start 0:16:41.360 --> 0:16:44.040 cutting in July or September, what's the end point. I 0:16:44.040 --> 0:16:46.000 think it's going to be below that three percent. So 0:16:46.080 --> 0:16:48.480 the five year, I think does provide you that hedge. 0:16:48.840 --> 0:16:51.040 You know, I think it's it's a true hedge. The 0:16:51.080 --> 0:16:54.480 long end, now we're talking about supply demand, is what's 0:16:54.520 --> 0:16:58.440 the end goal of tariffs. Is it to remove the 0:16:58.480 --> 0:17:01.120 trade deficit. If it is to remove the trade deficits 0:17:01.160 --> 0:17:02.440 of the rest of the world, doesn't need to hold 0:17:02.440 --> 0:17:05.080 as much in treasures. I don't think that's the end goal, 0:17:05.160 --> 0:17:07.280 but you know, I think the long end has a 0:17:07.280 --> 0:17:10.560 lot more supply demand. We're also talking about this reconciliation package. 0:17:10.760 --> 0:17:13.240 It's very hard to get the Medicaid cuts in there. 0:17:13.440 --> 0:17:16.000 So if Congress doesn't end up doing the cuts but 0:17:16.119 --> 0:17:19.399 still manages to do all these tax cuts, you know, 0:17:19.480 --> 0:17:22.160 beyond the extension, I think that's going to put pressure 0:17:22.200 --> 0:17:25.080 on the long end. If we have a politicized FED 0:17:25.119 --> 0:17:27.280 at some point, inflation rist premium skin rise. 0:17:27.280 --> 0:17:28.879 So I think there's a lot more going on with 0:17:28.920 --> 0:17:31.040 the long end. I would stay away from the long end. 0:17:31.040 --> 0:17:34.440 We like steepness, but I think that zero to five 0:17:34.600 --> 0:17:35.720 is still rock solid. 0:17:35.960 --> 0:17:38.720 What has changed in the past month or really since 0:17:38.760 --> 0:17:42.160 the last FED meeting that makes you that much less 0:17:42.240 --> 0:17:43.560 positive on the long. 0:17:43.440 --> 0:17:47.600 End of the YELD curve. April second, But what about it? 0:17:48.000 --> 0:17:50.119 So I think the idea you know, and I think 0:17:50.160 --> 0:17:51.480 you all have talked about it, which I think is 0:17:51.480 --> 0:17:52.879 a great way to saying, is this a shock to 0:17:52.920 --> 0:17:55.240 the cycle or the system? And is this like a 0:17:55.359 --> 0:18:00.000 change in the US lead world order? Trading order, economic DAN? 0:18:00.359 --> 0:18:02.360 Trade is always a lot of US have been talking 0:18:02.400 --> 0:18:04.960 about trade. The flip side of trade is that the 0:18:05.000 --> 0:18:07.840 rest of the world buys US assets, and if we're 0:18:07.920 --> 0:18:10.600 trying to reduce the trade deficit, it means that the 0:18:10.640 --> 0:18:13.919 net international capital position of the US is going to change. 0:18:14.000 --> 0:18:15.520 If the rest of the world doesn't need. 0:18:15.440 --> 0:18:18.680 To own as much in US assets, cost of capital 0:18:18.720 --> 0:18:21.679 is going to go up. It's not just for companies 0:18:21.720 --> 0:18:25.160 and consumers, for the US government. And at the same time, 0:18:25.160 --> 0:18:27.119 what are we getting in terms of the on the 0:18:27.119 --> 0:18:30.520 fiscal side, If we were getting significant fiscal retrenchment, I 0:18:30.520 --> 0:18:32.720