Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hortern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
Speaker 2: live on Bloomberg Television weekday mornings from six to nine
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business App.
Speaker 1: US Interior Secretary Doug Burghram joins us.
Speaker 3: Now.
Speaker 1: Secretary Burghram, thank you so much for being with us.
Speaker 1: I want to start with just how important it is
Speaker 1: right now for the United States to increase energy supplies
Speaker 1: across the board, not just with drilling, but across the
Speaker 1: board the face of the demand coming from AI.
Speaker 3: Well, good morning, Lid. You say, yes, it's absolutely essential,
Speaker 3: and this is.
Speaker 4: Part of the just a noun to National Security Plan
Speaker 4: that the White House has released. That Security plan mentions
Speaker 4: energy twenty three times. There's an entire section about energy dominance,
Speaker 4: and folks should think about energy dominance as the ability
Speaker 4: for the US to sell energy to our friends and
Speaker 4: allies so they don't have to buy it from adversaries,
Speaker 4: particularly those adversaries that are either funding terrorism or are
Speaker 4: funding wars, actively funding war machines, and so it's core
Speaker 4: to the strategy right now. But it's also, as you've
Speaker 4: talked about on the show, is about with AI because
Speaker 4: never before in a history have we been able to
Speaker 4: convert a kill, a lot of electricity into intelligence.
Speaker 3: The demand for that, regardless.
Speaker 4: Of stock prices or stock movements, the demand for AI
Speaker 4: for intelligence applied to every job, every company, every industry
Speaker 4: is going to continue to increase the demand.
Speaker 3: For electricity around the world.
Speaker 4: The US as an energy dominant country, now the largest
Speaker 4: oil producer in the world, largest LG exporter in the world,
Speaker 4: and growing quickly with that strategy, it bodes well for
Speaker 4: the future of the US, both in terms.
Speaker 3: Of peace and in terms of prosperity. Secretary, I'm sure.
Speaker 5: You're aware WTI is under sixty dollars a barrel. What's
Speaker 5: the impetus for the oil and gas companies in the
Speaker 5: United States to continue drilling wells at this price level,
Speaker 5: which potentially could be a loss for them.
Speaker 4: Well, I think one thing that we know that in
Speaker 4: Trump administration we're cutting red tape so rapidly. We think
Speaker 4: that one of the early targets we had was cut
Speaker 4: ten percent of the cost away from those producers just
Speaker 4: by cutting red tape. So if you think about sixty
Speaker 4: bucks to day, it might be what sixty seven bucks
Speaker 4: was a year ago because of our ability to take
Speaker 4: cost out for those producers. And there's example after example,
Speaker 4: whether it's from the EPA, the Department of Energy, Department
Speaker 4: of Interior, where we've been able.
Speaker 3: To help reduce costs.
Speaker 4: And of course this industry has been better than almost
Speaker 4: any in terms of gaining productivity. The shale producers now
Speaker 4: drilling three mile laterals instead of two mile laterals, up
Speaker 4: to four mile laterals in many places offshore. We've seen
Speaker 4: examples overseas of people driving building ten mile laterals when
Speaker 4: they're getting after the shale rock, all with the same.
Speaker 3: Small well pad on the surface.
Speaker 4: So, you know, great for great for land management, and
Speaker 4: great for energy production.
Speaker 3: And kudos to this industry.
Speaker 4: This, the entire shale revolution has occurred through innovation, and
Speaker 4: that innovation is going to continue, and with AI applied
Speaker 4: to that, it's going to even get even better. So
Speaker 4: I see the leading companies are getting their costs down
Speaker 4: even as demand is going up.
Speaker 5: But Baker Hughes is talking about drilling reactivity has falling
Speaker 5: sixteen percent since Trump took office this year. The President
Speaker 5: loves to talk about drill, baby, drill. Do you expect
Speaker 5: that to change those numbers to change next year?
Speaker 4: Well, I think again, I have to take a look
Speaker 4: at the at the numbers when we talk about drilling activity.
Speaker 4: In my home state of North Dakota, we had a
Speaker 4: number of the well count was going down, but the
Speaker 4: miles of lateral productive rock could be going up.
Speaker 3: And so you know, analysts have.
Speaker 4: Got to make sure that they're actually keeping up with
Speaker 4: how fast this industry is changing, because we've got again
Speaker 4: record production occurring right now and we expect to see
Speaker 4: records through twenty twenty six.
Speaker 1: One area where you have seen price increases has been
Speaker 1: natural gas. Natural gas prices rising to the highest levels
Speaker 1: in the US going back to twenty twenty two, and
Speaker 1: a real question on how much the US can continue
Speaker 1: to export to places like Europe in the face of
Speaker 1: significantly higher prices here in the United States. How do
Speaker 1: you plan to sort of set policy so that the
Speaker 1: US can be a big exporter to places like Europe
Speaker 1: while not allowing prices to go up so significantly in
Speaker 1: the future.
Speaker 4: Well, again, the key is its supply and its infrastructure.
Speaker 4: We have places in the US right now where again,
Speaker 4: there's not one price for gas in America as you know.
Speaker 4: I mean, even though we've got the markets and we've
Speaker 4: got Henry Hub, but we've got we've got widely raging prices,
Speaker 4: I mean even in the different and a price in
Speaker 4: Pennsylvania versus in New England because the lack of natural
Speaker 4: gas pipelines that have been blocked into places like New England.
Speaker 4: And when we think about we think about markets, you're
Speaker 4: talking about AI and the Capital spen and going against
Speaker 4: AI where we're an AI factory where we're actually creating
Speaker 4: and manufacturing intelligence. Those plants are going to go to
Speaker 4: the places where states have low electricity prices and policies
Speaker 4: are setting price, not just markets. And we've got policies
Speaker 4: in blue states around our country. California. You mentioned California.
Speaker 4: Sixty three percent of California's oil is being imported from
Speaker 4: foreign countries because of blocking of pipelines coming into that state.
Speaker 4: They have a record number of internal combustion cars in California.
Speaker 4: They have more internal combustion cars than any other state
Speaker 4: as cars. And yet two refineries have announced that they're
Speaker 4: shutting down in California because of policies, not because of
Speaker 4: lack of demand, not because of lack of consumers.
Speaker 3: And so what's going to happen.
Speaker 4: You're going to have oil tankers and refined products coming
Speaker 4: into San Francisco Bay and coming into Long Beach and
Speaker 4: record numbers in California. Because of policies, they will have
Speaker 4: higher gas prices than virtually any other state. So again,
Speaker 4: we have a we have a strategy in America to
Speaker 4: help every state. The Trump administration wants to have low
Speaker 4: affordable energy prices for everybody, whether it's heating your home
Speaker 4: or driving your car, or producing electricity for AI. But
Speaker 4: we're going to need the collaboration from states to make sure.
Speaker 3: And if states don't.
Speaker 4: Want to collaborate on that, then you're going to see
Speaker 4: this uh trillion dollars at AI, a historic amount of spend,
Speaker 4: all going towards states that have pro energy policies that
Speaker 4: drive down prices.
Speaker 5: Secretary, We've seen a significant increase in energy costs especially
Speaker 5: for individuals who live near data centers. How is the
Speaker 5: US going to do both at once, both support these
Speaker 5: AI inities but also make sure consumers energy prices remain affordable.
Speaker 4: Well, if you said on the show, I mean these
Speaker 4: prices are in electricity are local, not national.
Speaker 3: And so there are the examples that you think.
Speaker 4: We're driving that analysis right now and we're going to
Speaker 4: be publishing that from the White House to the National
Speaker 4: Energy Dominance Council, the Department of Energy doing great work
Speaker 4: on that. But a lot of the higher prices that
Speaker 4: you're seeing are not related to the AI data centers.
Speaker 4: A lot of the A data centers are going to
Speaker 4: be off the grid, behind the meter and then producing
Speaker 4: adding more energy.
Speaker 3: Then and putting some of that energy onto the grid.
Speaker 3: So we could be actually increasing.
Speaker 4: The supply in some of those areas where we've got
Speaker 4: increased pricing. It's because of the policies they pursued the
Speaker 4: last five years of having unreliable, intermittent and highly subsidized
Speaker 4: and projects, including things like offshore wind where people were
Speaker 4: spending eleven billion dollars to create one gigawatt of intermittent,
Speaker 4: you know, versus spending one or two billion dollars to
Speaker 4: create one gig a lot of assured seven by twenty
Speaker 4: four hour powers. So the policy choices of the last
Speaker 4: five years, driven by sometimes climate extremists, were the ones
Speaker 4: that were that were that are driving up the prices
Speaker 4: you're seeing. I mean, electricity costs three times as much
Speaker 4: in New England as it does in North Dakota. That
Speaker 4: is not that is not because of data centers. That's
Speaker 4: because of policies.
Speaker 2: Stay with us, Mulplinpex Savana's coming up off.
Speaker 1: To this, Kate Moore of City Wealth writing, we remain
Speaker 1: fully invested in equities on this nominal growth backdrop and
Speaker 1: prefer gold over long and duration as a hedge to
Speaker 1: risk given.
Speaker 6: The upward pressure on rates.
Speaker 1: Kate, I am so pleased to say, joins us now
Speaker 1: for more.
Speaker 6: Kate, good morning, Thank you forboding with warning.
Speaker 1: So this has been a market that you've been cautious
Speaker 1: about for a lot of this year. You still see
Speaker 1: reasons that maybe the everything rally can't continue for.
Speaker 6: Hours, but the tone has shifted. Why.
Speaker 7: Okay, So it's not that I've been cautious, it's that
Speaker 7: we didn't aggressively add to risk because we prefer to
Speaker 7: take our exposure in large caps, and I continue to
Speaker 7: even after seeing some of the small cap rally. I
Speaker 7: think most of that and you kind of let into
Speaker 7: this a moment. Ago has been around rate cut expectations,
Speaker 7: and relative to some others, we don't think the FED
Speaker 7: should be cutting of rates at every meeting from now
Speaker 7: until next June. I know some people are hoping for
Speaker 7: that and some pricing that in, and we think small
Speaker 7: companies desperately need that in order to really sustain a
Speaker 7: rally and to have better earnings and fundamentals. So we
Speaker 7: prefer to take our risk in the large caps space.
Speaker 7: We've done quite well there, but it's not that we've
Speaker 7: been out of the equity market or been underweight in
Speaker 7: any way a shape or form. We just want to
Speaker 7: be where their earnings are and where the free cash
Speaker 7: is and where we have visibility.
Speaker 6: And that served us really well this year.
Speaker 1: So what you're saying is it sounds like you don't
Speaker 1: buy that there is this truly durable rotation into small
Speaker 1: caps and to expand out of just where the leadership
Speaker 1: has been.
Speaker 6: Is that correct?
Speaker 8: Yeah?
Speaker 6: I want to.
Speaker 7: You know, so many people have written their year ahead
Speaker 7: report saying once again, same thing they did at this
Speaker 7: time last year. Next year is going to be year
Speaker 7: of broadening. It's going to be your broadening in sectors,
Speaker 7: it's going to be your broadening in terms of regions.
Speaker 7: And I'm not a buyer of that today, this first
Speaker 7: week in December. And let me explain why. Because we
Speaker 7: are kind of later in the cycle. We are at
Speaker 7: a point where you can pick and choose whatever economic
Speaker 7: data you want to fit the narrative you want to
Speaker 7: tell about the overall macro and what policy might do
Speaker 7: to respond to that macro. And I think you have
Speaker 7: to be very anchored to fundamentals and where we have
Speaker 7: visibility into fundamentals.
Speaker 6: Where we can see earnings, where.
Speaker 7: We know that companies have the ability to weather any
Speaker 7: kind of sort of storm in the economy, whether that's
Speaker 7: a bit of inflation spike or a slightly weaker labor
Speaker 7: market or policy headwind. That's where we want to be anchored,
Speaker 7: and I think many investors will as well. You don't
Speaker 7: just rotate for the sake of rotation. You just don't
Speaker 7: buy the laggards for the sake of it. In fact,
Speaker 7: we've done a bunch of quantitative studies to show that
Speaker 7: when you employ that strategy, particularly after a full year
Speaker 7: performance of kind of tech and comms, etc. You don't
Speaker 7: perform as well. Some of these things that are doing
Speaker 7: well deserve it, and we don't rotate for the sake
Speaker 7: of rotating. But isn't the.
Speaker 5: Table set this time around better than it was last
Speaker 5: year in the sense that the FED looks likely remain accommoative.
Speaker 5: You have deregulation push from this administration, and the trade
Speaker 5: policy uncertainty is now behind us.
Speaker 7: Well, so let me say this, We are really constructive
Speaker 7: on the deregulatory side, and it's a reason we've been
Speaker 7: talking about the opportunity in banks. I realize I do
Speaker 7: work in a bank, but I also can be objective
Speaker 7: and my job is to make my clients money in
Speaker 7: all parts of the cycle and in all sectors. So yeah,
Speaker 7: I see the regulatory side is a good tailwind for
Speaker 7: parts of the market and for the economy. On the
Speaker 7: trade side, much of the uncertainty is behind us, but
Speaker 7: not all. And I like to say we were past
Speaker 7: peak tariff shock, but we're still kind of working through
Speaker 7: what's going to happen with the IEPA tariffs, which tariffs
Speaker 7: are going to be enduring.
Speaker 6: What will trade life like look.
Speaker 7: I'll be honest, I'm encouraged when the administration is pulling
Speaker 7: back or rolling back some of the tear of stay employed.
Speaker 7: I think that I'd like to see a more moderate
Speaker 7: inflation environment. But we know that higher prices are still
Speaker 7: filtering into the costs and to the end prices that
Speaker 7: companies are charging consumers. So I don't think we're past
Speaker 7: the concern. I think people are tired of talking about
Speaker 7: it and want it to go away. But inflation, I
Speaker 7: think is spicier than many are pricing in the market.
Speaker 6: That's a core of you of mine.
Speaker 5: Lisa and I've been talking about all week what the
Speaker 5: signal should be from the dollar stores and Walmart. Is
Speaker 5: it a good signal in the economy and the consumer
Speaker 5: or is it actually.
Speaker 6: A negative one.
Speaker 7: I think it is a cautious signal. I think we
Speaker 7: are getting consumers who are continuing to spend. We like this,
Speaker 7: but they're continuing to spend in a way that is
Speaker 7: conscious of you know, brand, it's conscious of value, and it's.
Speaker 6: Conscious of like, you know where the best deals are.
Speaker 7: We all know how this went kind of over Black
Speaker 7: Friday and the following weekend consumers are if they're in
Speaker 7: the big box stores, they're using their phones to price
Speaker 7: check at the same time, and we saw more people
Speaker 7: shopping online than in the stores than we have historically.
Speaker 6: Continued that to see that trend.
Speaker 7: And that's largely because people are comparison pricing on non prices,
Speaker 7: and I think that's a smart thing to do, but
Speaker 7: they are not stopping spending. But we do need to
Speaker 7: be recognized that we are at this later part of
Speaker 7: the cycle that consumers are a bit fatigued. This has
Speaker 7: been a tough year. They don't feel many things are affordable,
Speaker 7: from the regular basket of goods to housing, et cetera.
Speaker 6: And we need to listen to that.
Speaker 7: In the administration needs to listen to that as well.
Speaker 1: So you talk about how you are somewhat looking at
Speaker 1: the large caps to continue to outperform, you're not screamingly
Speaker 1: optimistic about the US economy at the same time not
Speaker 1: seeing long duration as a hedge. I wonder how much
Speaker 1: this has to do with the glut of supply not
Speaker 1: only coming from the treasury market, but also from the
Speaker 1: corporate bond space, as it helps to finance a lot
Speaker 1: of the AI tech boom that we're seeing.
Speaker 7: Yeah, so we've seen some sort of an uptick in
Speaker 7: some of the financing for AI projects and AI adjacent
Speaker 7: projects and infrastructure, but it's not setting off any.
Speaker 6: Alarm bells for US. Frankly.
Speaker 7: On the duration side, the thing that we're most concerned
Speaker 7: about is that we are exhibiting very little fiscal discipline
Speaker 7: in the US government. That is not a political statement,
Speaker 7: that's true across both Republican and democratic administrations, and that
Speaker 7: the rest of the world is kind of waking up
Speaker 7: to this, and that this is not a great picture
Speaker 7: over the medium term. Frankly, if we think inflation is
Speaker 7: going to be a little spicier, and we think that
Speaker 7: they were likely to get no fiscal discipline in twenty
Speaker 7: twenty six, you know, the likelihood that bond yields stay
Speaker 7: where they are and move a little bit higher, that
Speaker 7: we're not going to get a lot of juice, you know,
Speaker 7: I think.
Speaker 6: Is quite high.
Speaker 7: We prefer to hedge our long equity position with more
Speaker 7: gold at this point.
Speaker 6: Well, I wonder where credit fits in with this.
Speaker 1: I'm saying this after Warner Brothers and Netflix their tie
Speaker 1: up has been confirmed this morning. That deal is expected
Speaker 1: to close of twelve to eighteen months. Netflix has been
Speaker 1: talking about using a lot of cash as well as
Speaker 1: buying shares. That is code for deb markets that are
Speaker 1: going to be financing this since they don't have that
Speaker 1: cash on their balance sheets. At what point do you
Speaker 1: think that the credit market is going to experience some
Speaker 1: fatigue with the massive issueance and seeing not only from
Speaker 1: AI but from some of the other eminent activity that's
Speaker 1: come down the pipe.
Speaker 7: Yeah, I mean, this is an excellent question and actually
Speaker 7: something we've been spending a lot of time on our
Speaker 7: research side on this week, because we're asking ourselves, you know,
Speaker 7: how much juice is they're left in the credit market.
Speaker 7: We know spreads on the IG and the high yield
Speaker 7: side are close to the fifteen year tights. It's great
Speaker 7: if you're a company that's issuing, it's not so great
Speaker 7: if you're looking for like a great total return from
Speaker 7: that ass a class and as acid allocators, that's what
Speaker 7: we're really examining. So while I'm not calling for any
Speaker 7: significant spike in defaults, we have to ask ourselves, relative
Speaker 7: to equities, can we get the returns that we need
Speaker 7: on a risk adjusted basis from credit at this point
Speaker 7: and we're less convinced, and we've been a little bit
Speaker 7: underweight relative to our index. So if you're underweight credit,
Speaker 7: but overweight equity, but overweight equities and underweight long duration,
Speaker 7: balancing out with goal balancing out with this is a
Speaker 7: new portfolio allocation. This looks like a different kind of
Speaker 7: model than you know, pre pandemic, the sixty forty type
Speaker 7: of allocation. It absolutely is and a big project we're
Speaker 7: also undergoing is really kind of rethinking how we construct
Speaker 7: portfolios in general for all of our clients. They need
Speaker 7: to be outcomes based and not just static based on
Speaker 7: a sixty forty benchmark. You know what part of the
Speaker 7: portfolio needs to be generating growth, income and uncorrelated returns,
Speaker 7: and then where do the traditional asset classes and factor
Speaker 7: exposures fit into that. So this is a huge project
Speaker 7: for us and we are really really excited about.
Speaker 6: What will take it.
Speaker 2: Stay with us. Multilemberg Savannah's coming up.
Speaker 3: Off to this.
Speaker 1: Cossa's Hunter of Economist Intelligence saying a hasset led FED
Speaker 1: could go in multiple directions, writing if the hase To
Speaker 1: who wrote about the deleterious effects of inflation shows up
Speaker 1: at the FED, the markets should feel relieved. If his
Speaker 1: loyalty to the president shows up, markets may show concerns.
Speaker 1: Constance joins us. Now, Constant is great to see you.
Speaker 1: Thank you so much for being here. I want to
Speaker 1: start with why we haven't seen more concerned markets yet,
Speaker 1: because ultimately, if you're looking to the market as a
Speaker 1: barometer of fear, you're not saying any huge red flags.
Speaker 6: So you're seeing zero fear.
Speaker 8: And part of that could be that markets are looking
Speaker 8: sort of short term, right they know that there's going
Speaker 8: to be another or think that there's going to be
Speaker 8: another FED rate cut in December. Also, it's the makeup
Speaker 8: of the FED, right, the FED was designed as an
Speaker 8: institution to be immune.
Speaker 6: From political pressure.
Speaker 8: So whether you're talking about the terms of the governors,
Speaker 8: whether you're talking about the way the regional presidents are
Speaker 8: set up, so all of this is a very intricate
Speaker 8: timing game. I think the markets are betting on the
Speaker 8: fact that the Supreme Court will punt the decision to
Speaker 8: after February and so therefore Lisa Cook will remain in place. Right,
Speaker 8: that's really critical because if you have a threshold of
Speaker 8: five or four governors, they can overrule of the president's terms.
Speaker 8: So there's a lot going on in terms of timing,
Speaker 8: and I think the market is betting on a few
Speaker 8: things that will keep that independence in place regardless of
Speaker 8: who is fed share. But also, if you look at
Speaker 8: Kevin Hasset's work from before he joined the first Trump administration,
Speaker 8: it really centers on the importance of keeping inflation low
Speaker 8: because the tax code is geared towards benefiting low firms
Speaker 8: during periods of low inflation. Right, So it depends on
Speaker 8: which Kevin Hassett shows up.
Speaker 1: Yeah, it depends on which economy shows up too, right,
Speaker 1: because ultimately you're at the behest of the market and
Speaker 1: of the economy. Right now, we're kind of flying in
Speaker 1: the dark because we aren't getting a lot of real
Speaker 1: time data.
Speaker 6: We should have just gotten the Non Bails report.
Speaker 1: Sorry, newsflash, we're not getting it until December sixteenth. But
Speaker 1: right now we are looking to September PCE report coming
Speaker 1: up in about ninety minutes time.
Speaker 6: I mean, what do they do with this?
Speaker 1: How do we understand whether inflation is the bigger problem
Speaker 1: or whether it's the labor market.
Speaker 8: Well, we pretty much know what the PC report is
Speaker 8: going to say with regard to inflation because a lot
Speaker 8: of that is derived from the CPI and the PPI.
Speaker 8: So we think it's about two point nine percent for
Speaker 8: a headline zero point two two percent for core. Those
Speaker 8: are both month over month numbers, right. The more interesting
Speaker 8: thing is going to be looking for any signals in
Speaker 8: the wage and income data. And so we are looking
Speaker 8: for a little bit of softness in the wage data,
Speaker 8: but that's going to give an indication of the strength
Speaker 8: of the labor market.
Speaker 5: When you say which Kevin Hasseid shows up, isn't he
Speaker 5: being chosen because the one that is going to be
Speaker 5: Donald Trump's chief marketer when it comes to the economy.
Speaker 5: Isn't it going to be him that is going to
Speaker 5: listen to him when it comes to lower rates, because
Speaker 5: it's the only reason why he's being chosen.
Speaker 8: I don't think it's the only reason why he's being chosen.
Speaker 8: I mean, he is an economist who has a long
Speaker 8: track record of being in DC being a policy maker.
Speaker 8: He basically crafted the TCJA and he was very influential
Speaker 8: and the Cares Act. So I think I think is
Speaker 8: he's being chosen for those reasons. But remember he's going
Speaker 8: to have to convince his fellow board members and the
Speaker 8: presidents who are going to be voting next year, that
Speaker 8: his policy direction is the direction that the FED needs
Speaker 8: to go in, and that is a big question mark.
Speaker 8: I mean that is he's going to have to use
Speaker 8: a framework, and he's going to have to think about
Speaker 8: policy within that framework. And keep in mind, we have
Speaker 8: the benefits of the One Big Beautiful Bill Act coming
Speaker 8: the delayed tax refunds. We're looking for over three percent
Speaker 8: GDP growth in the first quarter, about three percent in
Speaker 8: the second, and about three percent in the third. How
Speaker 8: do you cut rates into that environment?
Speaker 5: Do you think that potentially the rebates we're going to
Speaker 5: get the One Big Beautiful Bill and the fact that
Speaker 5: this administration is talking about two thousand dollars checks is
Speaker 5: going to make the inflation picture that much harder for
Speaker 5: the FED next year.
Speaker 8: Well, the two thousand dollars checks, I think we need
Speaker 8: to put aside because.
Speaker 5: We keep talking going, but they keep talking, do keep
Speaker 5: talking to and it's a midterm election?
Speaker 8: Yes, fair enough, but yes, that would put more money
Speaker 8: in people's pockets, and it would make them able to
Speaker 8: withstand price increases because I think what you've seen with
Speaker 8: the tariffs is a lot of concern about people's ability
Speaker 8: to handle price increases. Firms have absorbed some of that
Speaker 8: tariff increase, They've reduced hiring in order to sort of
Speaker 8: compensate for that, and so the question is how much
Speaker 8: are they going to be able to pass on? It
Speaker 8: would stand to reason if people have more money in
Speaker 8: their pockets, companies are going to be able to pass
Speaker 8: on bigger price increases.
Speaker 1: We're talking about a federal reserve that's set to ease policy,
Speaker 1: and we're talking about pain among the consumer base at
Speaker 1: the same time that Wall Street is talking about enthusiasm
Speaker 1: for mergers and acquisitions. We've been talking on morning about
Speaker 1: this deal of Netflix agreeing to buy Warner Brothers. We're
Speaker 1: talking about returns that are likely to be above ten
Speaker 1: percent on the S and P next year. Is this
Speaker 1: a potential headwind or a tailwind for essential bankers that
Speaker 1: are both looking for some sort of boost from consumption
Speaker 1: that will come with more of the wealth effect, but
Speaker 1: also could potentially be fueling froth in markets that seem
Speaker 1: pretty accommodative.
Speaker 8: So it all comes down to productivity, right, If we
Speaker 8: really are getting the productivity gains and not just from
Speaker 8: when we say AI right. It's not just generative AI
Speaker 8: and chat GPT, but the productivity gains from just regular
Speaker 8: AI right are still being diffused throughout the economy, and
Speaker 8: that is an important driver of productivity growth.
Speaker 6: So it really comes down to are.
Speaker 8: We in a period of enhance productivity growth, in which
Speaker 8: case the markets are not excessively frothy, in which case
Speaker 8: the Fed has a lot more room to maneuver because
Speaker 8: ultimately that will help inflation. But there's going to be
Speaker 8: a lot of noise in the first and second quarter
Speaker 8: in the data, and it's going to be very difficult
Speaker 8: to interpret the underlying.
Speaker 6: Factors that are happening in the economy.
Speaker 2: This is the Bloomberg Surveillance podcast, bringing you the best
Speaker 2: in markets, economics, a gio politics. You can watch the
Speaker 2: show live on Bloomberg TV weekday mornings from six am
Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple,
Speaker 2: Spotify or anywhere else you listen, and as always on
Speaker 2: the Bloomberg Terminal and the Bloomberg Business app.