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

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and a Marie Hordernt. Join us each

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Speaker 2: day for insight from the best in markets, economics, and

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Speaker 2: geopolitics from our global headquarters in New York City. We

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Speaker 2: are live on Bloomberg Television weekday mornings from six to

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Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify

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Speaker 2: or anywhere else you listen, and as always on the

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Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Here's a few

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Speaker 2: on Wall Street this morning. Julian and Manuel, I've ever

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Speaker 2: course saying it's not yet the time to parle in

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Speaker 2: right in the following, A pullback is our base case,

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Speaker 2: given the parabolic move already and the risks from tariffs

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Speaker 2: and policy to the economy. Judy had joined us now

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Speaker 2: for more. Julian, good morning, good morning. Aha, we take

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Speaker 2: a beat. How's it feel the last quarter? What was

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Speaker 2: that like for you?

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Speaker 3: Look?

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Speaker 4: Incredible in many respects.

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Speaker 5: So the market actually did what it was supposed to do. Okay,

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Speaker 5: you had this incredible surprise reaction to something where we

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Speaker 5: were completely not used to what we were seeing, which

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Speaker 5: was a tariff schedule, you know, higher than smooth Holly.

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Speaker 5: And then you got what you actually didn't get at

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Speaker 5: the bottom in October of twenty twenty two, a volatility event,

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Speaker 5: an actual capitulation that really presented the buying opportunity very

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Speaker 5: very clearly. And from our point of view, the surprise

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Speaker 5: is the unrelenting speed with which the market continues the advance.

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Speaker 2: Massive move twenty percent plus off the lows on the

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Speaker 2: S and P thirty percent something like that in the

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Speaker 2: last nine one hundred. I sait here, and I wonder

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Speaker 2: looking out twelve months now, can you say with confidence

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Speaker 2: the outlook for runnings is getting better or worse?

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Speaker 5: At this point it's it's definitely getting better, okay, because

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Speaker 5: basically what has happened is you've had this adjustment from tariffs,

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Speaker 5: and now that there is this presumption that you are

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Speaker 5: going to get and we can talk about the effect

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Speaker 5: on interest rates later or what have you, that you're

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Speaker 5: going to get some form of stimulus that is going

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Speaker 5: to be more favorable to the twenty twenty six picture. Obviously,

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Speaker 5: the twenty twenty five picture remains in flux, and we're

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Speaker 5: going to find that out in a couple of weeks

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Speaker 5: when the earning seasons start. But in general, the whole

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Speaker 5: narrative of the economy having avoided a recession is a

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Speaker 5: reasonably positive backdrop.

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Speaker 6: Let's put the one big beautiful bill on the side

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Speaker 6: for one second and just go to the tariffs, which

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Speaker 6: you mentioned are still at the highest going back to

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Speaker 6: the nineteen thirties and haven't fully been priced in yet.

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Speaker 6: When it comes to whether it's consumer prices, whether it's

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Speaker 6: companies absorbing it in the profit margins, what makes you

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Speaker 6: think this isn't going to show up in earnings and

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Speaker 6: a material hit to profit margins for a significant number

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Speaker 6: of companies.

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Speaker 5: Well, so, the work that we've done was the expectation

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Speaker 5: that roughly it be a fifty to fifty split. You know,

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Speaker 5: larger companies will will shoulder less, smaller companies will will

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Speaker 5: shoulder more of.

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Speaker 4: The tariff hit.

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Speaker 5: And yes, it definitely will fall into earnings. But again

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Speaker 5: there is this presumption that it is the one time

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Speaker 5: hit and that there will be this transition period, which

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Speaker 5: obviously for the market began in the spring, but we're

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Speaker 5: already sort of pricing through that. And again, what it

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Speaker 5: points to is the resilience of corporate America, the ability

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Speaker 5: to adapt, the ability to move supply chains, and the

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Speaker 5: ability to figure out what a correct pricing strategy is.

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Speaker 6: We're putting an economic narrative to a market story, to

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Speaker 6: something that really is big tech names that continue to

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Speaker 6: innovate in a technological boom that is trickling out into

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Speaker 6: other companies at the same time that there are these

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Speaker 6: independent factors that are very real that are affecting other

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Speaker 6: asset classes. And we talked about the dollar that might

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Speaker 6: be some of the vigilantes are going, or this question

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Speaker 6: of where the marginal buyer is going to be, how

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Speaker 6: the market responds to negative news in the economy. How

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Speaker 6: much are we making an economic argument for something that

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Speaker 6: is now increasingly divorced from the economy.

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Speaker 5: Well, again stepping back the story of this year, and

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Speaker 5: in large part from our point of view, the reason

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Speaker 5: that the advance off the April bottom has been as

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Speaker 5: unrelenting as it's been is because we are now finding

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Speaker 5: that corporate America is understanding how to use AI constructively

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Speaker 5: across all industries, not just for cost saves, but for

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Speaker 5: revenue enhancement well as well. And this is something that

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Speaker 5: we think is going to continue to proliferate, and when

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Speaker 5: you think about it, is part of the reason. Look,

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Speaker 5: we're uncomfortable with where multiples are, which is why we

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Speaker 5: think that you're likely.

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Speaker 4: To have a pullback.

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Speaker 5: But on balance, it is something that supports higher multiples

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Speaker 5: x ANTI than what we've seen.

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Speaker 7: I'll pull back when though, because you talk about a

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Speaker 7: FOMO driven melt up.

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Speaker 1: What if you missed that?

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Speaker 5: So, look, it could be going on right now, but

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Speaker 5: from our point of view, there's enough policy uncertainty out

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Speaker 5: there that I would equate this more to the sort

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Speaker 5: of FOMO that we had in and around the election.

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Speaker 5: Remember a lot of froth there, you know, led by

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Speaker 5: crypto names, led by names that were tied into the

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Speaker 5: Trump administration. And I think we're seeing a lot of

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Speaker 5: the same thing now. But again, the actual activity supporting

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Speaker 5: a more prolonged period of FOMO hasn't materialized yet. We

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Speaker 5: do think you need to get less policy uncertainty to

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Speaker 5: get to that period.

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Speaker 7: What uncertainty unnerves you the most? Lisa mentioned tariffs. Right now,

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Speaker 7: we have this debate on the one big beautiful bill,

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Speaker 7: but no one thinks it's not going to pass. It

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Speaker 7: just might be an absolute slog and it's probably not

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Speaker 7: going to come on July fourth. What's the uncertainty that

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Speaker 7: makes you nervous to really want to add more to

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Speaker 7: your exposure?

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Speaker 5: So I think it's a what the response is going

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Speaker 5: to be in and around July to ninth. That's the

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Speaker 5: you know, the tariff story. But again this other idea

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Speaker 5: that you know, we're seeing the resilience on the corporate

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Speaker 5: earnings front. But if you go back to last Friday,

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Speaker 5: it was really the first indication with the inflation numbers

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Speaker 5: higher than expected and the income and spending numbers weaker

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Speaker 5: than expected. GDP revised down that yes, in fact, this

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Speaker 5: theorized pass through.

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Speaker 4: From tariffs might actually in fact be dding. What's the

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Speaker 4: best outcome for July ninth?

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Speaker 2: Ask this question? Yes, and I, as an extended pretend

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Speaker 2: keep the Guschett and go ten percent and move on.

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Speaker 2: What's the best outcome for you?

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Speaker 5: I think it's I think, well, you'd like certainty. I mean,

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Speaker 5: if you just went to ten and said that's it,

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Speaker 5: that would be fine.

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Speaker 4: The market would embrace that.

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Speaker 5: But something leads me to believe that it isn't quite

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Speaker 5: going to be that simple.

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Speaker 2: In negotiation, You're not alone, by the way, And I

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Speaker 2: think this is interesting that the market is just sort

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Speaker 2: of happy, and I think it was happy several months

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Speaker 2: ago with the idea of a ten percent universal tariff.

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Speaker 2: Move on to other things.

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Speaker 6: Then companies can actually price it in, they can re

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Speaker 6: raise your supply chains, and like Julian said, the adapt

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Speaker 6: adjusts wi you see in so many different companies is

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Speaker 6: what we've already seen with respect to half being absorbed

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Speaker 6: by them, a little being absorbed by them, and maybe

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Speaker 6: just a small marginal one time price increase.

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Speaker 7: And to your point, Jonathan, the market was happy.

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Speaker 8: I was there. It was rallying when.

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Speaker 7: The President got up in the rose garden said here's

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Speaker 7: a ten percent across the board tariff. It only started

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Speaker 7: to crater when they came out with the massive billboard

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Speaker 7: of the reciprocal tariff rates that were extortioned for some

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Speaker 7: countries an kittsult to the extreme.

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Speaker 2: And now we're happy with ten percent, and apparently even

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Speaker 2: the EU is now happy with a ten percent universal tariff.

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Speaker 6: With carvauts in sure, whatever, that's not what we're going

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Speaker 6: to get because we also have sectoral tariffs and you've

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Speaker 6: got countries that are waiting for the two through twos.

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Speaker 2: These countries aren't arguing about the ten percent universal tariff.

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Speaker 2: They're not even debating it with the US at all,

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Speaker 2: which goes the.

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Speaker 6: Question of if you anchored the extreme, is that the

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Speaker 6: way to get people to all accept something that would

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Speaker 6: have been extreme?

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Speaker 7: It's a massive You turn to when I was in

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Speaker 7: the Netherlands last week and they said they would not

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Speaker 7: accept a ten percent across the board tariff. Now a

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Speaker 7: week later, okay, fine, walk ccept ten percent. We need

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Speaker 7: some help on stealing autos.

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Speaker 2: What's the relationship between your outlook for the equity market

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Speaker 2: and what's been happening in fixed income?

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Speaker 5: No, it is definitely a mystery, There's no question about it.

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Speaker 5: And it almost makes you wonder as if there might

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Speaker 5: be a time where, let's say this bill passes and

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Speaker 5: then we wake up and yields start moving higher by

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Speaker 5: a reasonably significant amount. But at the end of the day,

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Speaker 5: if you look at it, the yields have been going

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Speaker 5: sideways for two years. Okay, literally somewhere between four and

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Speaker 5: four and a half for two whole years, And frankly,

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Speaker 5: that's perfectly fine for the equity market, because again that

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Speaker 5: removes part of the uncertainty.

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Speaker 6: Well, okay, they say the same, but the backdrop has

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Speaker 6: been very different.

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Speaker 8: Economically.

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Speaker 1: People went from a.

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Speaker 6: Very high benchmark industry understanding of the world that was

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Speaker 6: high inflation to one that now if you put all

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Speaker 6: of the other potential tariffs and other disruptions out of

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Speaker 6: the picture, we would be looking at pretty much close

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Speaker 6: to two percent inflation rate. We're looking at basically mission accomplished.

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Speaker 6: So is this highlighting a new premium that will ultimately

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Speaker 6: challenge US valuations and risk markets in a way that

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Speaker 6: has not fully been appreciated.

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Speaker 5: Well, there's certainly an element to that. However, the countervail

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Speaker 5: to that is that we are likely to get a

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Speaker 5: new FED chairman sometime next year that is going to

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Speaker 5: be let's say a little bit more accommodating in terms

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Speaker 5: of ringing infrastrates down.

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Speaker 6: Let's say that they are accommodating and taking sharpie messages

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Speaker 6: of the world's interest rates and saying, okay, we'll cut

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Speaker 6: three percentage points in this meeting, regardless of what happens.

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Speaker 8: What happens the long end, that's true, you.

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Speaker 5: Will get a yield curve steepening the likes of which

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Speaker 5: most investors do not remember that twenty years ago and

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Speaker 5: so on, twos tens was more in the neighborhood of

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Speaker 5: one hundred and fifty over rather than fifty over. A

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Speaker 5: very rapid steepening. And frankly, when we think about what

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Speaker 5: the risks to the equity market are, ten year yields

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Speaker 5: going through five percent far and away at this point

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Speaker 5: are the most significant risk.

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Speaker 8: What can that happen?

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Speaker 4: Again?

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Speaker 5: It just the psychology right now is telling you it

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Speaker 5: doesn't seem likely, you know, because as John pointed out,

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Speaker 5: you know, counter to expectations, and really the same way

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Speaker 5: the dollar. This is counter to the expectations of people

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Speaker 5: that thought.

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Speaker 4: Tariffs would be bullish to the dollar.

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Speaker 5: It really just takes a turnaround in psychology that we

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Speaker 5: don't see. But I would suggest that if the inflation

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Speaker 5: data continues to firm, at the same time we get

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Speaker 5: more sort of pushback on the direction of tariffs, that's

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Speaker 5: the mix that.

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Speaker 2: The dollar move. I think Julian speaks to exactly the

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Speaker 2: risks you describe. Just go through the scenario. You face

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Speaker 2: a situation where you do get a fed chair, let's

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Speaker 2: say it's more willing to drop interest rates regardless of

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Speaker 2: what's happening gaswag, you get the curve stinkning you describe,

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Speaker 2: you get all the debt issued at the front end

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Speaker 2: with a Federal Reserve cutting interest rates, then it's precisely

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Speaker 2: one of the reasons you're seeing the dollar strength has

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Speaker 2: been developingly so over the last several months.

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Speaker 6: What is the fear that this is going to be

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Speaker 6: a FED that's going to try to monetize the debt

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Speaker 6: that's going to try to essentially print money to offset

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Speaker 6: this by having rates at a very low level and

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Speaker 6: then just printing money at that level. And how much

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Speaker 6: does it take at this point to create dollar strength,

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Speaker 6: given that that fear has been embedded in the overall

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Speaker 6: investor base.

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Speaker 2: It's in the President actually arguing for that right now

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Speaker 2: over the last several months, almost explicitly saying that he

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Speaker 2: wants the Federal Reserve to drop interest rights so they

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Speaker 2: can issue that at the front end and get lower

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Speaker 2: interest rates.

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Speaker 6: He's saying there is a direct connection between the FED

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Speaker 6: rate policy and what the US pays and interest payments.

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Speaker 6: And then Scott bess And came out and said, yeah,

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Speaker 6: we're not going to turn out the debt, We're going

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Speaker 6: to focus on the front end because right now the

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Speaker 6: term premium is just too great. So you put those together,

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Speaker 6: and that is to your point explicit explicitly calling for

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Speaker 6: the FED to help the country lower its interest payments.

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Speaker 7: In the sharpie black and white, you have cost the

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Speaker 7: USA a fortune and continue to do so. He's talking

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Speaker 7: about the net interest we are paying on our debt,

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Speaker 7: which has basically toppled the entire US budget higher than Defenseman.

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Speaker 2: Quick found of word dollar witness how much for a

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Speaker 2: tail whend does that for the S and P five hundred.

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Speaker 5: It's definitely been significant, and it has definitely contributed, among

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Speaker 5: other reasons for the large cap our performance over small

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Speaker 5: cap In general, it tends to be a positive, but

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Speaker 5: again there's always sort of until it isn't. And I

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Speaker 5: would suggest, and it's not our base case, that there

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Speaker 5: are going to be issues around getting this bill passed.

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Speaker 5: But if we start getting towards August and again not

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Speaker 5: our base case, chill, that is where you run into problems.

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Speaker 2: So many reasons for dollar weakness, which I think makes

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Speaker 2: the pain. Try to Q three dollar strength, that's going

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Speaker 2: to be the pain. Try to Q three dollars strength.

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Speaker 2: Who's position for.

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Speaker 6: That I couldn't agree more. I was thinking, people say

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Speaker 6: that there's going to be a stimulative effect. No memory

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Speaker 6: would agree argue with this from the one big beautiful bill,

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Speaker 6: Let's say that plays in with better than expected earnings

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Speaker 6: and economic data.

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Speaker 1: What does a dollar do?

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Speaker 2: Jitdy, and it's gott to say you s thanks for

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Speaker 2: dropping by, thank you doning in to mind We that

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Speaker 2: of evicle as we kick off the second half of

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Speaker 2: twenty twenty five. Up next the former NEC Deputy director

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Speaker 2: Evera Eisenstadt as the EU comes to the table for

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Speaker 2: trade talks plus Your Moves with Danny Berger the latest

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Speaker 2: on Tesla.

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Speaker 8: In case you missed it on the opening trade, I.

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Speaker 9: Think we could go to say one forty, that's that's right,

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Speaker 9: one one four zero absolutely, that's.

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Speaker 8: Where at one fourteen right now?

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Speaker 9: Well one fourteen yeah, yes, yeah, yeah. This is the

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Speaker 9: scale of moves over what time for it? This could

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Speaker 9: be within one or two years, that's the that's first.

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Speaker 9: That's fast. Absolutely, yeah, yeah, yeah. I mean if you

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Speaker 9: look at how fast the dollar fell from two thousand

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Speaker 9: and two to two thousand and four, it was similarly

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Speaker 9: large as this. To me, it's not out of the

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Speaker 9: realm's possibility.

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Speaker 8: So I'm just sitting.

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Speaker 10: I can't quite Yeah, So take us to the US economy.

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Speaker 10: I mean, does the underlying state of the US economy

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Speaker 10: matter in that trade? It seems as if interest rate

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Speaker 10: differentials in the state of the US economy may be

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Speaker 10: pushed to the sideline by this border big picture narratives.

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Speaker 1: That you describe.

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Speaker 9: Absolutely. Yeah, the normal cyclical dynamics much less important with

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Speaker 9: this type of structural change.

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Speaker 8: Miss the Opening Trade every weekday in case you missed

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Speaker 8: it on the Pulse.

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Speaker 11: I think the idea of wait and see and pause.

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Speaker 11: As Bill Yesterday's news, our best advice to CEOs right

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Speaker 11: now is that if you're not operating differently than you

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Speaker 11: were a year ago, you may be falling behind. Yes,

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Speaker 11: we need to build resilient, but we need to also

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Speaker 11: build growth despite the environment, and that requires a different

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Speaker 11: strategy than.

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Speaker 8: Just a year ago.

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Speaker 7: Don't miss the Pulse live every weekday.

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Speaker 2: Welcome to the second half LI from New York City

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Speaker 2: this morning. Good morning, Your scores look like their secretary

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Speaker 2: feature is negative by two tenths of one percent on

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Speaker 2: the SMP, following back to back all time highs on

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Speaker 2: a benchmark in the United States. We're coming into Q

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Speaker 2: three on a three day winning streak. Come then, that's

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Speaker 2: that one hundred after a major rally off the lows

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Speaker 2: of April, we're down just zero zero point three percent

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Speaker 2: with threeans until the opening bout. Let's get you some morning.

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Speaker 9: Movers, henri to trace us at the papers.

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Speaker 4: Of the House.

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Speaker 2: We'll roll over and accept the Senate's more material deficit increases.

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Speaker 2: Henrietta joins us. Now for more, henri to welcome back

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Speaker 2: to the program. Just describe what's taking place in the

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Speaker 2: Senate right now and whether you believe we're pretty close

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Speaker 2: to getting this done.

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Speaker 12: Yeah, it looks like we're enforce it mode. We've got

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Speaker 12: jd Vance going up to the Senate clearly indicating with

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Speaker 12: some muscle that he's there to break a vote if

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Speaker 12: he needs to and be the holdout. But I want

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Speaker 12: to just emphasize one thing here. Him having to vote

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Speaker 12: for the bill now means that over the last seventy

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Speaker 12: two hours, the trajectory of this bill has actually lost

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Speaker 12: a Senator along the way. So his vote was not

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Speaker 12: needed for the motion to proceed on Saturday night, and

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Speaker 12: now it is, and that's not necessarily that's how not

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Speaker 12: a good sign. And I think a big part of

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Speaker 12: that could be the distributional tables that were released by

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Speaker 12: the JCT at about two o'clock this morning, which show

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Speaker 12: the top bracket is going to see twelve five hundred

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Speaker 12: dollars when this bill has passed, and the lowest bracket

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Speaker 12: is going to see one hundred and fifty bucks. So

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Speaker 12: that's really the fallout here, that's what's got Alaska flipped out.

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Speaker 12: We've got some problems.

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Speaker 8: Still, Henritta.

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Speaker 7: Is it when it comes to the Senator of Alaska

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Speaker 7: Lisa Murkowski? Is she the one that Majority Leader Johnson

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Speaker 7: has to flip?

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Speaker 12: She's essential to the package. What we always watch, and

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Speaker 12: you know it's been decades now is the combination of

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Speaker 12: Collins and Murkowski. And let's not forget that Dan Sullivan

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Speaker 12: is one of the Alaska Senators that's actually up next cycle.

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Speaker 12: So when you get thirty five percent of the Medicaid

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Speaker 12: recipients in Alaska that are under risk of seeing their

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Speaker 12: cuts or their healthcare lost, that's a material problem for

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Speaker 12: the state. But then we still have the IRA issues

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Speaker 12: that are critical to Maine and a whole host of

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Speaker 12: other states as well. So I think we actually have

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Speaker 12: a little bit longer to go before this is all

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Speaker 12: nailed down.

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Speaker 7: In your note, you think that in the end the

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Speaker 7: final passage will get Moretowski and Senator of Collins vote.

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Speaker 7: But Senator Collins had an amendment earlier this morning when

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Speaker 7: it would give more money to rural hospitals in lieu

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Speaker 7: of raising the tax rate on those making twenty five

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Speaker 7: million dollars more, and that was struck down. So is

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Speaker 7: she a no now given her amendment went down in flames?

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Speaker 12: You know, in my experience, that's more of a messaging document.

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Speaker 12: You're not going to get Republicans to vote for tax

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Speaker 12: increases for any individual brackets. Even President Trump tried to

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Speaker 12: do that earlier on in the year and the party

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Speaker 12: killed it pretty quickly. So I see that more of

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Speaker 12: as a message and you know, pretty serious signals to

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Speaker 12: Senator Collins, who was also upper reelection next cycle, that

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Speaker 12: she has another workaround. But the fact again that Vance

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Speaker 12: is there means she might be a no vote. And

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Speaker 12: she made it really clear during the motion to proceed

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Speaker 12: on Saturday night that she was only voting to proceed

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Speaker 12: she did not have support for the underlying bill. So

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Speaker 12: Vance being there suggests that they have lost the senator

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Speaker 12: from the process.

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Speaker 8: Alone, Henrietta.

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Speaker 7: Then this goes to the House and you think the

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Speaker 7: House just accepts it, although we're already seeing some housemen

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Speaker 7: come out the Salt Caucus. I don't like what they

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Speaker 7: did to tweak what happened with the salt cap. You

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Speaker 7: have the House Freedom Caucus saying, actually, this raises the deficit.

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Speaker 7: We're going to be increasing spending. Why are you so short?

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Speaker 7: The House is just going to take this on the chin.

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Speaker 4: Yeah, and I'm.

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Speaker 12: Sorry, it's been a long night, but I got to

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Speaker 12: say the Salt caucaus has to sit down. I mean,

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Speaker 12: they've gotten enough of their carve out. They got a

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Speaker 12: forty k cap, They've got it up to five hundred

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Speaker 12: thousand dollars for an income bracket. So they've gotten what

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Speaker 12: they're going to get. That's why the distributional tables are

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Speaker 12: so bad. I would really expect that the Murkowski Earnst

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Speaker 12: Grassley bill on the IRA or the amendment has to

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Speaker 12: pass in order to satiate the House IRA supporters, of

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Speaker 12: which there are anywhere between eighteen and thirty members. To me,

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Speaker 12: that's a bigger caucus than the Salt Conference, who's already

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Speaker 12: gotten as much as they can ask for, much more

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Speaker 12: than I anticipated, indeed, so I think that they need

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Speaker 12: to sit down and we need to move into the

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Speaker 12: IRA place. We haven't even gotten an amendment vote on

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Speaker 12: that bill yet, so we need to see that happen.

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Speaker 2: We're getting closer. Hanretta, Thank you. Hanretta tries the Aida Pomas.

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Speaker 2: Let's turn to the bond market and the federal serve.

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Speaker 2: Colin Martin of the Swap Center for Financial Research righting

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Speaker 2: expectations for the number of federright cuts this year continues

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Speaker 2: to increase despite the relatively stable labor market. Colin joins

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Speaker 2: us now for more. Colin, good morning, good morning. Can

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Speaker 2: you explain that then, why's not happening?

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Speaker 13: Well?

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Speaker 3: I think it has to do with the idea that

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Speaker 3: inflation actually continues to move lower despite the fact that

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Speaker 3: tariffs are in place.

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Speaker 1: If we take away.

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Speaker 3: The tariffs, which we can't do, of course, but absent

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Speaker 3: the tariffs, the Fed probably would have cut already. And

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Speaker 3: if we look at what's going on in the inflation

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Speaker 3: data right now, we're still seeing that dichotomy between services

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Speaker 3: and goods, and we are seeing a slight pick up

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Speaker 3: in the goods inflation, specifically things coming in from China,

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Speaker 3: but we're seeing a lot of disinflation, maybe even deflation

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Speaker 3: on the services side. So the inflation data said just

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Speaker 3: that they could be cutting absent those tariffs, but the

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Speaker 3: labor market's still holding up.

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Speaker 1: I mean, maybe that starts to change soon.

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Speaker 3: But what I think is really remarkable is if you

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Speaker 3: look at that unemployment rate four percent to four point

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Speaker 3: two percent, that very narrow range, for thirteen straight months.

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Speaker 1: It's expected to increase a.

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Speaker 3: Little bit when we get the report on Thursday, but

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Speaker 3: if it doesn't, if it's four to two, that's fourteen

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Speaker 3: straight months.

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Speaker 1: The labor markets holding in.

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Speaker 3: We're seeing you know, the low hiring, low firing, but

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Speaker 3: that's okay for the economy to kind of continue to

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Speaker 3: chug along right now.

445
00:23:32,280 --> 00:23:33,359
Speaker 1: So that's doing okay.

446
00:23:33,520 --> 00:23:35,560
Speaker 3: I think you're the concerns in the second half of

447
00:23:35,560 --> 00:23:37,520
Speaker 3: the year, now that it is July, is what happens

448
00:23:37,520 --> 00:23:40,399
Speaker 3: next and will we start to see the weakness in

449
00:23:40,400 --> 00:23:43,320
Speaker 3: that labor market. Given that the tariffs have to have

450
00:23:43,359 --> 00:23:45,960
Speaker 3: an impact somewhere. If they're not passed along to the consumer,

451
00:23:46,160 --> 00:23:49,639
Speaker 3: does that impact margins, which therefore might impact the labor market.

452
00:23:49,880 --> 00:23:52,160
Speaker 3: So right now we're kind of stuck between the rock

453
00:23:52,240 --> 00:23:55,399
Speaker 3: and a hard place, But all signs are suggesting we

454
00:23:55,680 --> 00:23:57,000
Speaker 3: get read cuts later this year.

455
00:23:57,119 --> 00:24:01,280
Speaker 6: If we rewind to April. Second was the tariffs will

456
00:24:01,280 --> 00:24:05,000
Speaker 6: cause the inflation rate to surge and deficits will ignite

457
00:24:05,040 --> 00:24:08,840
Speaker 6: bond vigilantes with their pitchforks to never buy us bonds ever. Again,

458
00:24:09,280 --> 00:24:10,960
Speaker 6: are we saying both of those things are not true?

459
00:24:11,480 --> 00:24:14,520
Speaker 3: Well, on the tariffront, that's the confusing part right now.

460
00:24:14,560 --> 00:24:17,159
Speaker 3: If you look at FED expectations, even though there is

461
00:24:17,240 --> 00:24:19,560
Speaker 3: kind of some vocal members who think we can be

462
00:24:19,600 --> 00:24:22,639
Speaker 3: cutting soon, if you look and dive into the FED projections,

463
00:24:22,840 --> 00:24:25,800
Speaker 3: the medium projections suggest inflation should increase. And even if

464
00:24:25,800 --> 00:24:30,400
Speaker 3: you look at that range, the lowest expected inflation core

465
00:24:30,440 --> 00:24:31,760
Speaker 3: inflation rate by the end of the year is still

466
00:24:31,760 --> 00:24:33,880
Speaker 3: two and a half percent. So there's still an expectation

467
00:24:33,920 --> 00:24:35,200
Speaker 3: that it should increase prices.

468
00:24:35,480 --> 00:24:36,720
Speaker 1: We just haven't seen it yet.

469
00:24:36,760 --> 00:24:40,840
Speaker 3: So there's this idea that maybe people imported goods early

470
00:24:40,920 --> 00:24:43,399
Speaker 3: in advance to this they haven't chosen to pass it through.

471
00:24:43,840 --> 00:24:45,880
Speaker 3: We think there has to be some sort of impact

472
00:24:46,040 --> 00:24:48,280
Speaker 3: at some point. Of course, not the full effect of

473
00:24:48,320 --> 00:24:50,760
Speaker 3: the tariffs, but some of it should get passed along,

474
00:24:50,840 --> 00:24:52,920
Speaker 3: especially when you add in the fact that the dollars decline,

475
00:24:52,960 --> 00:24:54,879
Speaker 3: so you have that working against you as well. On

476
00:24:55,000 --> 00:24:58,880
Speaker 3: the bond vigilantes, they don't care right now. We've long

477
00:24:59,000 --> 00:25:02,600
Speaker 3: held that jets and deficits are not a key driver

478
00:25:02,880 --> 00:25:06,240
Speaker 3: of the direction of long term industries. We've always focused

479
00:25:06,280 --> 00:25:10,359
Speaker 3: on monetary policy and growth and inflation expectations. We dialed

480
00:25:10,359 --> 00:25:13,200
Speaker 3: that back a little bit recently just because our debt

481
00:25:13,240 --> 00:25:16,200
Speaker 3: continues to grow and there doesn't appear to be any

482
00:25:16,280 --> 00:25:19,160
Speaker 3: interest in Washington to fix the situation.

483
00:25:19,400 --> 00:25:21,440
Speaker 6: Okay, hold on a second, I'm sorry to jump in here.

484
00:25:21,480 --> 00:25:25,119
Speaker 6: So deficits don't matter. People could just keep on printing

485
00:25:25,160 --> 00:25:28,800
Speaker 6: money until a point and then they do matter. We've

486
00:25:28,800 --> 00:25:30,000
Speaker 6: been talking about this all year.

487
00:25:30,040 --> 00:25:30,640
Speaker 1: When do they matter?

488
00:25:30,680 --> 00:25:32,520
Speaker 6: I mean, this expanding right now and no one seems

489
00:25:32,560 --> 00:25:34,359
Speaker 6: to care. Bond deals are actually lower on the day.

490
00:25:34,640 --> 00:25:36,520
Speaker 3: Yeah, we don't have the number for when it matters

491
00:25:36,520 --> 00:25:39,040
Speaker 3: because there just hasn't been the relationship. So how we've

492
00:25:39,080 --> 00:25:41,440
Speaker 3: been framing it is because we get this concern from

493
00:25:41,440 --> 00:25:43,919
Speaker 3: our clients at Schwab all the time. We hear about it,

494
00:25:44,000 --> 00:25:46,600
Speaker 3: especially with everything going on in Washington. Is this going

495
00:25:46,640 --> 00:25:49,360
Speaker 3: to send long term meals significantly higher? And we say

496
00:25:49,400 --> 00:25:51,639
Speaker 3: they're not. We don't expect the tenure to get to

497
00:25:51,840 --> 00:25:54,720
Speaker 3: six seven eight percent anytime soon. What we have thought,

498
00:25:54,960 --> 00:25:56,840
Speaker 3: and which actually hasn't been the case over the past

499
00:25:56,880 --> 00:25:57,919
Speaker 3: handful of days, is.

500
00:25:57,920 --> 00:25:59,320
Speaker 1: That maybe it keeps them elevated.

501
00:25:59,440 --> 00:26:01,680
Speaker 3: We thought maybe the ten year goes to that five

502
00:26:01,720 --> 00:26:03,920
Speaker 3: percent range, or maybe hovers between four and a half

503
00:26:04,119 --> 00:26:07,800
Speaker 3: to five percent, so instead of falling in line with

504
00:26:07,880 --> 00:26:11,160
Speaker 3: potential rate cuts late later this year, maybe the fact

505
00:26:11,200 --> 00:26:13,439
Speaker 3: that debt needs to continue to rise, we need to

506
00:26:13,520 --> 00:26:16,200
Speaker 3: attract new buyer survivos, maybe that just kind of keeps

507
00:26:16,200 --> 00:26:18,719
Speaker 3: them where they are. But that's been proven wrong over

508
00:26:18,720 --> 00:26:19,920
Speaker 3: the past couple of days as well.

509
00:26:20,000 --> 00:26:22,840
Speaker 7: Would the bond market pushback on a FED chair that

510
00:26:23,200 --> 00:26:26,639
Speaker 7: they don't see as credible, an extension of Trump, extension

511
00:26:26,640 --> 00:26:27,200
Speaker 7: of the White House?

512
00:26:27,240 --> 00:26:29,280
Speaker 1: You know, that's we've been talking about that a lot.

513
00:26:29,320 --> 00:26:32,800
Speaker 3: What happens if we get what the administration has been

514
00:26:32,880 --> 00:26:35,159
Speaker 3: hinting that they could do in terms of, you know,

515
00:26:35,240 --> 00:26:39,119
Speaker 3: shifting their issuance from coupons to tee bills or a

516
00:26:39,240 --> 00:26:40,400
Speaker 3: huge drop.

517
00:26:40,160 --> 00:26:41,080
Speaker 1: In the FED funds rate.

518
00:26:41,080 --> 00:26:43,560
Speaker 3: I mean, we've heard things from two hundred basis points

519
00:26:43,560 --> 00:26:46,480
Speaker 3: to three hundred and fifty basis points. That would pull

520
00:26:46,520 --> 00:26:49,119
Speaker 3: short term rates a lot lower, I would think, But

521
00:26:49,200 --> 00:26:50,800
Speaker 3: I think that could weigh on the long end.

522
00:26:50,800 --> 00:26:52,160
Speaker 1: We might see long term.

523
00:26:52,000 --> 00:26:55,800
Speaker 3: Yields fall initially just based on that supply demand imbalance.

524
00:26:56,000 --> 00:26:57,880
Speaker 7: But I'm not talking about what the new FED chair

525
00:26:58,040 --> 00:27:00,320
Speaker 7: might do next year. I'm talking about the fact is

526
00:27:00,359 --> 00:27:04,000
Speaker 7: this person seen as credible to the institution.

527
00:27:04,240 --> 00:27:05,560
Speaker 1: Yeah, that concerns us.

528
00:27:05,600 --> 00:27:08,280
Speaker 3: We worry about a lack of FED independence, and we

529
00:27:08,359 --> 00:27:11,560
Speaker 3: know that can have bad impacts if the FED share

530
00:27:11,800 --> 00:27:14,160
Speaker 3: and the Committee as a whole are doing things that

531
00:27:14,480 --> 00:27:17,160
Speaker 3: are more based on short term goals that the administration

532
00:27:17,280 --> 00:27:20,840
Speaker 3: wants versus what their dual mandate suggests, price stability and

533
00:27:20,880 --> 00:27:23,560
Speaker 3: maximum employment. We do worry that that can have an

534
00:27:23,560 --> 00:27:27,520
Speaker 3: effect on the treasury market, specifically long term treasuries the

535
00:27:27,600 --> 00:27:30,560
Speaker 3: dollar market. We could see the dollar continue to decline

536
00:27:30,560 --> 00:27:32,160
Speaker 3: if that were to happen. So that is a worry

537
00:27:32,200 --> 00:27:34,200
Speaker 3: of ours, and it could send long term meals a

538
00:27:34,200 --> 00:27:34,720
Speaker 3: little bit high.

539
00:27:34,760 --> 00:27:37,200
Speaker 2: Haven't They totally, unutterly failed to hit the price stability

540
00:27:37,200 --> 00:27:39,040
Speaker 2: side of that Joe mandate For the last several years.

541
00:27:39,480 --> 00:27:41,800
Speaker 1: They have we're moving in the right direction though.

542
00:27:42,400 --> 00:27:45,520
Speaker 2: Directionally yes, But isn't that the ultimate criticism of them

543
00:27:45,800 --> 00:27:48,040
Speaker 2: and this FED chair. I know that he celebrates it

544
00:27:48,040 --> 00:27:50,439
Speaker 2: a lot on Wall Street by economists that work on

545
00:27:50,520 --> 00:27:53,040
Speaker 2: Wall Street, but ultimately he's full and short, or rather

546
00:27:53,400 --> 00:27:55,280
Speaker 2: full and a buff where it should be for a

547
00:27:55,320 --> 00:27:56,879
Speaker 2: long long time now. And if you go back a

548
00:27:56,880 --> 00:27:59,400
Speaker 2: few years ago when he delivered that speech at Jackson

549
00:27:59,440 --> 00:28:02,040
Speaker 2: Hole eight minutes of pain, then there wasn't any pain,

550
00:28:02,080 --> 00:28:04,320
Speaker 2: and everyone celebrates it. I'm not sure why they celebrates it.

551
00:28:04,320 --> 00:28:06,240
Speaker 2: Inflation never went back down to target. It was never

552
00:28:06,320 --> 00:28:07,880
Speaker 2: mission accomplished, was it.

553
00:28:07,960 --> 00:28:10,879
Speaker 3: Yeah, well, technically no, you're right. Definitionally we have not

554
00:28:10,960 --> 00:28:13,399
Speaker 3: gotten two percent, if anything, though, that calls for the

555
00:28:13,480 --> 00:28:17,040
Speaker 3: rate to stay where it is, or arguably higher, and

556
00:28:17,080 --> 00:28:18,960
Speaker 3: that's I think where you get the lack of confidence

557
00:28:19,000 --> 00:28:21,239
Speaker 3: in the market, because you're right, we're not at that

558
00:28:21,240 --> 00:28:24,480
Speaker 3: two percent goal. Yet they're projecting it to continue to

559
00:28:24,480 --> 00:28:26,239
Speaker 3: move higher at the end of this year if the

560
00:28:26,280 --> 00:28:29,480
Speaker 3: tariff in fact plays a role, and yet there.

561
00:28:29,359 --> 00:28:31,000
Speaker 1: Are these calls for rate cuts.

562
00:28:31,200 --> 00:28:33,600
Speaker 3: So you know, it is tough, and I think if

563
00:28:33,640 --> 00:28:36,120
Speaker 3: we were to get a FED, a newge FED share

564
00:28:36,200 --> 00:28:37,840
Speaker 3: or just the committee as a whole, and they start

565
00:28:37,840 --> 00:28:40,040
Speaker 3: cutting rates and we're still above target.

566
00:28:40,160 --> 00:28:40,920
Speaker 1: I think that's a risk.

567
00:28:41,040 --> 00:28:43,240
Speaker 2: That's the ultimate issue, which is why the criticism, to

568
00:28:43,280 --> 00:28:45,400
Speaker 2: your point, is kind of misplaced at this feder Reserve

569
00:28:45,560 --> 00:28:48,000
Speaker 2: that cut rates one hundred basis points. Last year, rates

570
00:28:48,000 --> 00:28:50,040
Speaker 2: went up in the long end, so did mortgage rates.

571
00:28:50,400 --> 00:28:52,080
Speaker 2: That's the thing you need to get your teeth into,

572
00:28:52,120 --> 00:28:54,400
Speaker 2: Bob Michael JP Morgan is talking about the same thing

573
00:28:54,800 --> 00:28:55,960
Speaker 2: earlier this morning.

574
00:28:55,840 --> 00:28:58,120
Speaker 6: And it might be the consequence of cutting certainly as

575
00:28:58,160 --> 00:29:01,280
Speaker 6: much as President Trump would life. It really goes to

576
00:29:01,320 --> 00:29:04,160
Speaker 6: this question of how you trust data, because remember last year,

577
00:29:04,160 --> 00:29:06,400
Speaker 6: the sum rule was triggered and it was a headfake,

578
00:29:06,760 --> 00:29:08,720
Speaker 6: and the Fed took that on its face and it

579
00:29:08,760 --> 00:29:12,560
Speaker 6: cut rates significantly, and maybe in retrospect, Veder doesn't think

580
00:29:12,560 --> 00:29:14,480
Speaker 6: it was a mistake, but it raises a question, what

581
00:29:14,600 --> 00:29:17,160
Speaker 6: data do you follow to understand that dual mandate when

582
00:29:17,160 --> 00:29:19,400
Speaker 6: you're looking at inflation at a fuzzy moment and when

583
00:29:19,400 --> 00:29:21,160
Speaker 6: you're looking at the labor market at a fuzzy moment.

584
00:29:21,240 --> 00:29:24,400
Speaker 2: The chairman of the Federal Reserve about thirty five minutes away,

585
00:29:24,520 --> 00:29:27,560
Speaker 2: alongside some of its peers, including the ECB President Christine

586
00:29:27,600 --> 00:29:30,680
Speaker 2: Thegard and the Bojvovna away to look out for that.

587
00:29:30,720 --> 00:29:32,360
Speaker 2: A little bit later, Colin mont and a Charles Swat.

588
00:29:32,440 --> 00:29:34,360
Speaker 2: Thank you, sir, I'm going to see you. Colin, appreciate it.

589
00:29:34,400 --> 00:29:34,719
Speaker 8: Thank you.

590
00:29:44,560 --> 00:29:46,640
Speaker 2: Joining us now to talk about it right now is

591
00:29:46,680 --> 00:29:49,840
Speaker 2: Blarina Ricci of t RO Price. Blarina, let's talk about it.

592
00:29:49,840 --> 00:29:52,360
Speaker 2: The low cha dynamic that Lisa just gave a nod to.

593
00:29:52,880 --> 00:29:55,080
Speaker 2: How much longer can we stick in that kind of situation,

594
00:29:55,240 --> 00:29:56,080
Speaker 2: that kind of dynamic.

595
00:29:57,800 --> 00:30:01,480
Speaker 13: It's a very interesting dynamic the US economy right now.

596
00:30:01,520 --> 00:30:04,280
Speaker 13: When you look at the flow of data up to date,

597
00:30:04,480 --> 00:30:07,560
Speaker 13: you really see the labor market has loosened a lot,

598
00:30:07,920 --> 00:30:11,080
Speaker 13: and that's come at the back of slowing demand for workers.

599
00:30:11,520 --> 00:30:14,840
Speaker 13: I am not too concerned We're not seeing a big

600
00:30:14,880 --> 00:30:18,000
Speaker 13: pickup in the unemployment rate, but it does tell you

601
00:30:18,080 --> 00:30:22,480
Speaker 13: that if the Fed were to base monetar policy purely

602
00:30:22,520 --> 00:30:25,240
Speaker 13: on the progress made on inflation so far and the

603
00:30:25,320 --> 00:30:27,760
Speaker 13: cooling in the labor market, I think they would be

604
00:30:27,960 --> 00:30:32,800
Speaker 13: much more comfortable signaling cutting interest rates later this year.

605
00:30:33,200 --> 00:30:36,520
Speaker 13: But the key here was what Mike McKee was alluding

606
00:30:36,560 --> 00:30:40,080
Speaker 13: to earlier, that the outlook has changed so much, and

607
00:30:40,200 --> 00:30:45,080
Speaker 13: most of the risks point to upside to inflation, and

608
00:30:45,160 --> 00:30:48,240
Speaker 13: so the FED has come so far. I think they're

609
00:30:48,360 --> 00:30:51,920
Speaker 13: very reluctant to undo all the progress we've made and

610
00:30:52,000 --> 00:30:55,719
Speaker 13: cut prematurely. And again, what matters for the economy and

611
00:30:55,800 --> 00:30:59,760
Speaker 13: for the long end of the curve is if montrepolicy

612
00:30:59,880 --> 00:31:02,480
Speaker 13: is appropriately set or not. And we saw that in

613
00:31:02,560 --> 00:31:05,400
Speaker 13: last September when the FED cut interest rates by fifty

614
00:31:05,440 --> 00:31:08,959
Speaker 13: bass points, but the long end went higher, and that

615
00:31:09,200 --> 00:31:12,120
Speaker 13: was basically telling the FED that, wait a minute, the

616
00:31:12,160 --> 00:31:15,480
Speaker 13: economy is resilient, why are we cutting interest rates. I

617
00:31:15,520 --> 00:31:18,560
Speaker 13: think this is not setting us up for success for

618
00:31:18,640 --> 00:31:21,200
Speaker 13: the risks going ahead, and I think the FED wants

619
00:31:21,800 --> 00:31:23,320
Speaker 13: to avoid that situation.

620
00:31:23,480 --> 00:31:26,040
Speaker 6: This year, there's been a tone shift, though, and John

621
00:31:26,080 --> 00:31:28,280
Speaker 6: alluded to it when he started talking about the Goldman

622
00:31:28,400 --> 00:31:30,920
Speaker 6: Sachs note that came out Yon Hansis and the team

623
00:31:31,320 --> 00:31:34,320
Speaker 6: that brought forward rate cuts and see a greater number

624
00:31:34,360 --> 00:31:37,760
Speaker 6: of them this year. FED members themselves are saying it

625
00:31:37,800 --> 00:31:41,600
Speaker 6: looks as though the inflation impact from the tariffs will

626
00:31:41,640 --> 00:31:43,959
Speaker 6: be a more of a one time shock than they

627
00:31:44,000 --> 00:31:47,800
Speaker 6: will some sort of protracted inflationary impulse. And you aren't

628
00:31:47,840 --> 00:31:50,440
Speaker 6: seeing any kind of inflationary read through from the labor

629
00:31:50,480 --> 00:31:54,160
Speaker 6: market that is cooling, if not maybe even showing signs

630
00:31:54,160 --> 00:31:57,320
Speaker 6: of cracks. Are you also coming around that kind of

631
00:31:58,080 --> 00:32:00,600
Speaker 6: conclusion where it seems to make sense for the cut

632
00:32:01,040 --> 00:32:03,000
Speaker 6: for the FED to cut more and sooner.

633
00:32:04,600 --> 00:32:08,680
Speaker 13: So my baseline for the FED this year is two cuts,

634
00:32:08,680 --> 00:32:12,880
Speaker 13: two twenty five basis point cuts starting in September. I

635
00:32:12,880 --> 00:32:16,400
Speaker 13: think the market has fluctuated between one and a half

636
00:32:16,440 --> 00:32:19,520
Speaker 13: to three cuts at different points of the year. The

637
00:32:19,680 --> 00:32:25,000
Speaker 13: question is, can the Fed bring forward interest rate cuts

638
00:32:25,040 --> 00:32:28,400
Speaker 13: to the July meeting. I think that's something that the

639
00:32:28,440 --> 00:32:31,480
Speaker 13: market is not really prepared for. I don't think we

640
00:32:31,600 --> 00:32:35,120
Speaker 13: have enough time to see a deterioration in the data

641
00:32:35,200 --> 00:32:38,120
Speaker 13: that would push the Fed in that direction. So then

642
00:32:38,280 --> 00:32:42,520
Speaker 13: what would make the Fed and the market price let's

643
00:32:42,520 --> 00:32:45,000
Speaker 13: say three or four cuts for this year. I think

644
00:32:45,040 --> 00:32:48,680
Speaker 13: we would need to see a pretty big increase in

645
00:32:48,720 --> 00:32:52,920
Speaker 13: the unemployment rate. Otherwise, even though the labor market is

646
00:32:52,960 --> 00:32:56,920
Speaker 13: not a source of inflation right now, if you have

647
00:32:56,960 --> 00:33:01,680
Speaker 13: a one or two timeshock two inflation, even though it's

648
00:33:01,720 --> 00:33:06,600
Speaker 13: not supposed to be persistent, it candy anchor inflation expectations.

649
00:33:06,960 --> 00:33:10,760
Speaker 13: So I'm looking at the unemployment rate here, because that's

650
00:33:10,840 --> 00:33:14,880
Speaker 13: the only way that you get the labor market to

651
00:33:14,960 --> 00:33:17,840
Speaker 13: push the FED of the fence. And when I'm thinking

652
00:33:17,840 --> 00:33:21,080
Speaker 13: about the unemployment rate, there are two components that matter.

653
00:33:21,520 --> 00:33:25,640
Speaker 13: One is labor demand and hiring and firing. I think

654
00:33:25,680 --> 00:33:30,920
Speaker 13: labor demand has cooled significantly, but we're not seeing mass

655
00:33:30,960 --> 00:33:34,000
Speaker 13: firing yet. And then I also think the break even

656
00:33:34,120 --> 00:33:37,600
Speaker 13: rate of employment has come down a lot. The break

657
00:33:37,640 --> 00:33:40,360
Speaker 13: even rate of employment is that which keeps the unemployment

658
00:33:40,440 --> 00:33:43,240
Speaker 13: rates steady. It doesn't go up, it doesn't go lower.

659
00:33:43,400 --> 00:33:45,960
Speaker 13: It's come down a lot because net migrant flows have

660
00:33:46,080 --> 00:33:49,520
Speaker 13: decelerated in the last twelve months or so, and so

661
00:33:49,640 --> 00:33:53,480
Speaker 13: with quaker labor supply, is much harder to get the

662
00:33:53,560 --> 00:33:57,160
Speaker 13: unemployment rate to increase a lot unless you have mass firing.

663
00:33:57,440 --> 00:34:01,320
Speaker 13: So I think we're here at an uneasy equilibrium, and

664
00:34:01,360 --> 00:34:03,280
Speaker 13: so for me, it makes a lot of sense for

665
00:34:03,360 --> 00:34:06,360
Speaker 13: the FED to tread carefully. So I feel comfortable with

666
00:34:06,560 --> 00:34:09,319
Speaker 13: keeping two interest rate cuts in my outlook for this year.

667
00:34:09,480 --> 00:34:12,080
Speaker 6: What's the potential for upside surprises later in the year,

668
00:34:12,160 --> 00:34:15,239
Speaker 6: particularly once the One Big Beautiful Bill has passed and

669
00:34:15,840 --> 00:34:18,720
Speaker 6: once people have more certainty around what the tariff outlook

670
00:34:18,760 --> 00:34:19,200
Speaker 6: looks like.

671
00:34:20,560 --> 00:34:23,719
Speaker 13: So in terms of inflation upside surprises, I see two

672
00:34:23,800 --> 00:34:27,480
Speaker 13: pivotal moments in the next two to three CPI reports.

673
00:34:27,520 --> 00:34:30,799
Speaker 13: I'm looking for signs that we're getting significant passed through

674
00:34:30,800 --> 00:34:34,200
Speaker 13: to consumer prices from higher tariffs. What we see so

675
00:34:34,440 --> 00:34:38,000
Speaker 13: far is import prices have not budged, So that's telling

676
00:34:38,040 --> 00:34:42,120
Speaker 13: me that exporters into the US are not adjusting prices.

677
00:34:42,360 --> 00:34:46,719
Speaker 13: So then that leaves domestic firms and consumers as the

678
00:34:46,920 --> 00:34:49,080
Speaker 13: agents that are going to bear the brand of the

679
00:34:49,160 --> 00:34:51,960
Speaker 13: tariff increases. We also have a weeker dollar, so the

680
00:34:52,000 --> 00:34:55,120
Speaker 13: currency is not helping us on the inflation front. So

681
00:34:55,160 --> 00:34:58,279
Speaker 13: I'm looking at the CPI reports for upside risks, and

682
00:34:58,280 --> 00:35:01,239
Speaker 13: that's the one off shock that everybody talking about. But

683
00:35:01,280 --> 00:35:04,080
Speaker 13: then we have the one big, beautiful bill. I think

684
00:35:04,239 --> 00:35:07,759
Speaker 13: there is a real chance that this stimulates demand in

685
00:35:07,800 --> 00:35:10,520
Speaker 13: the near term. So then the next risk that I

686
00:35:10,560 --> 00:35:14,640
Speaker 13: see to inflation is in twenty twenty six from fiscal policy.

687
00:35:14,920 --> 00:35:17,560
Speaker 13: I think we learned our lessons from the supply chain

688
00:35:17,680 --> 00:35:21,439
Speaker 13: disruptions and from the fiscal bill post COVID that they

689
00:35:21,560 --> 00:35:24,880
Speaker 13: can push inflation higher. I don't think the size of

690
00:35:24,920 --> 00:35:27,160
Speaker 13: the shocks right now is as big as it was

691
00:35:27,200 --> 00:35:30,360
Speaker 13: back then, but I do think it's realistic to expect

692
00:35:30,360 --> 00:35:31,480
Speaker 13: some upside to inflation.

693
00:35:31,800 --> 00:35:34,840
Speaker 6: Laurio Ritti of turo Prise, Thank you so much.

694
00:35:35,520 --> 00:35:39,040
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695
00:35:39,120 --> 00:35:42,680
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696
00:35:42,760 --> 00:35:45,719
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697
00:35:45,800 --> 00:35:49,480
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