WEBVTT - Bloomberg Surveillance TV: March 10, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.600 Bloomberg Terminal and the Bloomberg Business app. Recession fears rising 0:00:37.600 --> 0:00:39.720 on the hills have increased tarifs and federal job cuts. 0:00:39.760 --> 0:00:42.519 Ronica Clark of City Rights the payrolls report was not 0:00:42.640 --> 0:00:46.040 far off expectations, but details of the report suggest a 0:00:46.159 --> 0:00:48.879 softening trend in labor demand for Anica joins us now 0:00:48.920 --> 0:00:50.120 from what Bronica, good morning. 0:00:49.960 --> 0:00:51.400 It's good to see you, Good morning, Thanks for having me. 0:00:51.520 --> 0:00:53.519 Let's talk about those details. Where do you see the weakness? 0:00:53.560 --> 0:00:54.640 What concerns you at the moment? 0:00:54.760 --> 0:00:56.880 Yeah, on the surface, this looked like a jobs report 0:00:56.920 --> 0:00:58.600 that looks like the last six or seven months, we 0:00:58.680 --> 0:01:00.880 had the unemployment rate staying that range. It's been in 0:01:00.920 --> 0:01:03.880 one hundred and fifty thousand jobs. That's fine, but it 0:01:03.920 --> 0:01:06.360 was really the increase in the unemployment rate, so it's 0:01:06.400 --> 0:01:09.680 still in the range, but that occurred alongside of decline 0:01:09.680 --> 0:01:13.560 and participation, so people maybe leaving the labor force. Unemployment 0:01:13.640 --> 0:01:15.480 rate would have been even higher, something like four point 0:01:15.560 --> 0:01:18.480 four percent if that hadn't happened. And then even in 0:01:18.520 --> 0:01:20.880 the details of perils, you know, hours work that are 0:01:20.920 --> 0:01:23.360 coming down, it doesn't feel like there's a lot of 0:01:23.360 --> 0:01:25.040 demand for workers right now. 0:01:25.040 --> 0:01:27.959 Which raises this question of how resilient this labor market 0:01:28.040 --> 0:01:30.640 is in the face potentially of a policy shock that 0:01:30.680 --> 0:01:31.560 a lot of people. 0:01:31.280 --> 0:01:33.240 Are talking about. What's your sense. 0:01:33.280 --> 0:01:35.400 I know, you guys have been saying that the economy 0:01:35.520 --> 0:01:38.959 was weakening. How off sides are people in their expectations 0:01:39.000 --> 0:01:40.839 at the robustness of the US labor market. 0:01:40.920 --> 0:01:43.199 Yeah, we have been seeing this weekening for a while. 0:01:43.280 --> 0:01:45.880 Primarily this has looked like a very low churn labor 0:01:45.920 --> 0:01:48.880 market that's low hiring, low quits, low layoffs. 0:01:49.840 --> 0:01:51.160 But that low hiring. 0:01:50.880 --> 0:01:53.800 Dynamic, I do think it's restrictive rates that got us here, 0:01:54.080 --> 0:01:56.840 and that means the labor market's not very well positioned 0:01:56.880 --> 0:01:59.920 to absorb a shock, even if it's coming from from government. 0:02:00.480 --> 0:02:03.080 Obviously we're tracking the numbers of those layoffs and the 0:02:03.120 --> 0:02:06.400 direct impact of those might be minimal enough, you know, 0:02:06.440 --> 0:02:08.960 a couple tenths on the unemployment rate could could get bigger. 0:02:09.760 --> 0:02:12.000 But I would really worry about the spillover to you know, 0:02:12.040 --> 0:02:15.799 private private sector contractors and just hiring that is solo 0:02:15.919 --> 0:02:18.840 and might be going even lower in face of uncertainty. 0:02:19.600 --> 0:02:21.880 Why would you be hiring people right now? And that 0:02:21.880 --> 0:02:23.760 could be the bigger impact on the labor market. 0:02:23.840 --> 0:02:25.839 It seems like there is a grand plan, and there's 0:02:25.880 --> 0:02:27.760 sort of this sense that you take your paint up 0:02:27.760 --> 0:02:30.359 front and then some of the positive and you rejigger 0:02:30.400 --> 0:02:31.440 the US economy. 0:02:31.720 --> 0:02:34.360 And it's moving on a one or two year cycle. 0:02:34.760 --> 0:02:37.600 President Trump saying he judges himself in quarters. Can you 0:02:37.639 --> 0:02:40.040 talk about the timeframe of a labor market that is 0:02:40.120 --> 0:02:41.120 much slower moving? 0:02:41.440 --> 0:02:41.720 Yeah? 0:02:41.840 --> 0:02:44.119 Yeah, I mean we've come a long way in terms 0:02:44.160 --> 0:02:46.480 of the labor market loosening already. Of course, mean we 0:02:46.560 --> 0:02:49.079 had the increase in the unemployment rate last year, had 0:02:49.080 --> 0:02:51.920 looked like maybe there was some stability, But I think, 0:02:52.040 --> 0:02:55.440 you know, we're at that point where in past cycles 0:02:55.440 --> 0:02:58.239 you see this much sharper increase in the unemployment rate. 0:02:58.800 --> 0:02:59.960 That's the layoff. 0:02:59.600 --> 0:03:02.040 Stage of this weakening labor market. So it's been slow 0:03:02.080 --> 0:03:04.720 moving for now. It's been maybe taking a bit longer 0:03:04.760 --> 0:03:07.560 to get to that last stage than usual, But this 0:03:07.639 --> 0:03:09.560 could be what pushes us there for sure. 0:03:09.639 --> 0:03:12.160 What kind of impact is DOGE having on the labor market? 0:03:12.280 --> 0:03:14.280 Yeah, I mean we do track, you know, the outright 0:03:14.360 --> 0:03:16.799 numbers of layoffs that we've seen so far, Well, we'll 0:03:16.800 --> 0:03:18.600 start to see that. I think in the March employment 0:03:18.639 --> 0:03:21.080 report wasn't as you know, showing up in this February 0:03:21.160 --> 0:03:24.120 data quite yet, but we're, you know, something around forty 0:03:24.200 --> 0:03:25.520 to sixty k right now. 0:03:26.080 --> 0:03:27.799 The bigger numbers would come over the summer. 0:03:27.840 --> 0:03:29.959 You know, we have these plans for mass layoffs that 0:03:30.000 --> 0:03:32.880 are supposed to happen over the summer. Maybe we're looking 0:03:32.919 --> 0:03:35.080 at something like three hundred thousand maybe more. 0:03:35.640 --> 0:03:38.160 Do you think the private sector could absorb these jobs? 0:03:38.200 --> 0:03:39.680 I don't think so. Yeah. 0:03:39.920 --> 0:03:42.880 I think this is a private sector also that has 0:03:42.920 --> 0:03:45.720 been weakening for a while, hiring. 0:03:45.480 --> 0:03:46.240 Rates very low. 0:03:46.880 --> 0:03:48.720 Of course, the private sector is going to feel some 0:03:48.800 --> 0:03:52.600 of this also. You know, government contractors, just general uncertainty. 0:03:52.640 --> 0:03:54.160 Those are going to be people who. 0:03:54.120 --> 0:03:56.240 Are not spending in the economy as much. You know, 0:03:56.240 --> 0:03:57.680 they'll there will be ripple effects. 0:03:57.800 --> 0:04:00.080 Isn't that They ultimate goal of the administration though, The 0:04:00.160 --> 0:04:02.480 ultimate goal it is to rebalance the economy. And your 0:04:02.520 --> 0:04:04.440 response to that is, I don't think so, you're not 0:04:04.440 --> 0:04:06.240 finish as possible in. 0:04:06.240 --> 0:04:07.880 A nice, orderly rebalancing. 0:04:07.960 --> 0:04:11.680 I think no, because I think we had a weaker 0:04:11.800 --> 0:04:14.480 view of the economy, you know, going into this year already, 0:04:14.480 --> 0:04:16.920 and I think we've seen that in the data. So yeah, 0:04:16.920 --> 0:04:19.800 this is a really precarious labor market that maybe can't 0:04:19.800 --> 0:04:21.080 handle some of these these changes. 0:04:21.200 --> 0:04:23.400 Is it a rebalancing the FED needs to support. 0:04:23.720 --> 0:04:25.640 I think the FED will be there to support the 0:04:25.720 --> 0:04:29.960 labor market. Obviously, we do have concerns of inflation, and 0:04:30.160 --> 0:04:31.360 tariffs are related to that. 0:04:32.040 --> 0:04:34.000 But if this is a true, you. 0:04:33.960 --> 0:04:36.800 Know, weakening economy, maybe you can't pass on those price 0:04:36.839 --> 0:04:39.000 increases as much. You can't demand a higher wage, and 0:04:39.000 --> 0:04:41.800 so you're not actually as worried about the persistent inflation. 0:04:41.920 --> 0:04:43.200 From this is what. 0:04:43.160 --> 0:04:44.720 Does the FED have to see then in order to 0:04:44.760 --> 0:04:48.039 actually start cutting rates. Does that sort of avoid a 0:04:48.080 --> 0:04:50.520 recession or does that mean that we have to see 0:04:50.560 --> 0:04:53.320 the whites of recession size before they start engaging. 0:04:53.400 --> 0:04:55.960 I think they will probably be getting more concerned on 0:04:56.080 --> 0:04:57.880 the labor market, on the growth side of things. And 0:04:57.920 --> 0:05:00.640 so if you do see some inflation dat alone that 0:05:00.640 --> 0:05:03.760 look a bit more favorable, maybe Wednesday's numbers, you'll add 0:05:03.760 --> 0:05:05.919 to that confidence that inflation is slowing. 0:05:06.600 --> 0:05:08.320 Then they can be cutting as soon as May. That's 0:05:08.360 --> 0:05:08.919 our base. 0:05:08.800 --> 0:05:13.000 Case Wednesday for CPI. The following week, FED Powell a 0:05:13.080 --> 0:05:16.240 news conference and FED decision on March nineteenth. Two things 0:05:16.240 --> 0:05:18.240 to look for. Veronica's good to see you as always. 0:05:18.240 --> 0:05:30.560 Thank you, Ronica Clark. There a city. Let's turn back 0:05:30.600 --> 0:05:33.160 to the tariff agenda. Twenty five percent tariffs on steel 0:05:33.360 --> 0:05:36.200 and aluminum imports still on deck for Wednesday, the former 0:05:36.279 --> 0:05:39.400 NEC deputy director Kelly and Shaw writing, the ambiguity of 0:05:39.440 --> 0:05:41.880 Trump's tariff plans are a feature and not a bug. 0:05:42.120 --> 0:05:45.440 As he sets to negotiate both USMCA and relationships with 0:05:45.480 --> 0:05:48.480 a number of key trading partners, Kelly and Shaw joined 0:05:48.520 --> 0:05:50.560 US Now for more Kelly and welcome to the program. 0:05:50.640 --> 0:05:53.040 Those negotiations set to kick off a whole lot more 0:05:53.240 --> 0:05:55.000 in the next month at a start of April when 0:05:55.000 --> 0:05:57.680 we get the reciprocal tariffs. What are you expecting to 0:05:57.720 --> 0:05:59.720 see in the next month or so. 0:06:00.680 --> 0:06:01.480 Yeah, good morning. 0:06:01.720 --> 0:06:04.400 I think what's been really interesting is despite the fact 0:06:04.440 --> 0:06:07.920 that last week's terrifaction on Canada and Mexico was the 0:06:07.960 --> 0:06:11.719 single largest terrifaction of any president in modern history, the 0:06:11.720 --> 0:06:15.840 administration keeps saying, hold your breath and wait till April second. 0:06:16.160 --> 0:06:19.560 So I'm expecting the announcement of large tariffs on a 0:06:19.680 --> 0:06:24.120 number of US trading partners, particularly those with large trade deficits, 0:06:24.320 --> 0:06:27.320 which will give them an opportunity to potentially negotiate their 0:06:27.320 --> 0:06:30.160 way out of whatever the administration has planned in terms 0:06:30.160 --> 0:06:32.240 of rebalancing those trading relationships. 0:06:32.400 --> 0:06:34.080 Kelly, And when it comes to April second, is this 0:06:34.200 --> 0:06:36.119 just the announcement and then we're going to have a 0:06:36.160 --> 0:06:39.039 public comment period. How long until we see that tariffs 0:06:39.080 --> 0:06:39.960 actually take place? 0:06:41.040 --> 0:06:42.880 Yeah. The truth is we don't know yet. 0:06:42.920 --> 0:06:46.400 We're not clear on how the administration intends to structure this, 0:06:46.480 --> 0:06:49.320 whether they intend to actually move forward with tariffs under 0:06:49.360 --> 0:06:52.479 something like AIPA or Section three three eight on April second, 0:06:52.880 --> 0:06:55.000 as well as some of these sectoral tariffs that they've 0:06:55.000 --> 0:06:58.320 been talking about or whether they'll announce their plan and 0:06:58.320 --> 0:07:01.120 then kick those off into investigations, which would take several 0:07:01.200 --> 0:07:03.400 more months before those tariffs went into effect. 0:07:03.560 --> 0:07:04.640 They could pick either path. 0:07:05.040 --> 0:07:07.520 If it's a path that they're going to have some 0:07:07.600 --> 0:07:10.520 more time. Does that mean that Trump is a negotiating 0:07:10.520 --> 0:07:13.880 mode and he's happy to maybe pull back the tariff 0:07:13.920 --> 0:07:16.120 threat if he gets something from one of the trading partners. 0:07:17.360 --> 0:07:19.280 Well, I think the President has been clear that he 0:07:19.440 --> 0:07:23.480 is open to negotiations on these reciprocal tariffs. His idea 0:07:23.680 --> 0:07:26.280 is that we'll charge you what you charge us, and 0:07:26.320 --> 0:07:28.520 if other countries come to the table and lower their 0:07:28.560 --> 0:07:31.920 own tariff barriers, then those teriff rates would go down 0:07:31.960 --> 0:07:33.840 on the US side as well. And I think that 0:07:34.040 --> 0:07:37.520 is the beauty of this concept of reciprocity. It really 0:07:37.560 --> 0:07:40.160 is the epitome of fairness from the perspective of the president. 0:07:40.200 --> 0:07:42.400 So I certainly think their scope for negotiation. 0:07:42.800 --> 0:07:45.280 What about Wednesday when it comes to aluminum steel, Do 0:07:45.320 --> 0:07:46.680 you expect those tariffs to go through? 0:07:46.720 --> 0:07:48.680 As Howard Latnix said over the weekend. 0:07:49.280 --> 0:07:50.320 Yeah, I do. 0:07:50.640 --> 0:07:52.360 I think that this is a redo of what the 0:07:52.400 --> 0:07:56.040 administration did back in twenty eighteen, and the view that 0:07:56.040 --> 0:07:58.040 you're hearing coming out from the White House is that 0:07:58.080 --> 0:08:01.280 there were so many exceptions, so many illusions, that it 0:08:01.320 --> 0:08:03.200 became a loophole you could drive a truck through. 0:08:03.280 --> 0:08:05.000 And so they're starting with the. 0:08:04.920 --> 0:08:08.560 Maximalist tariff approach when it comes to steel and aluminum. 0:08:08.760 --> 0:08:11.360 I do think that there's scope for countries like Australia 0:08:11.440 --> 0:08:13.880 or maybe Canada and Mexico to get some sort of 0:08:13.920 --> 0:08:17.320 country exception country exclusion, but for now, I think he's 0:08:17.360 --> 0:08:18.080 moving forward with. 0:08:18.040 --> 0:08:18.640 The full measure. 0:08:18.800 --> 0:08:20.840 A number of studies callyan IF and pointing to the 0:08:20.880 --> 0:08:23.720 fact that actually production might move more quickly out of 0:08:23.720 --> 0:08:28.560 the United States if the twenty five percent tariffs do continue, particularly. 0:08:28.040 --> 0:08:28.960 On Canada and Mexico. 0:08:29.000 --> 0:08:32.719 I'm talking about autoparts makers in particular. How much do 0:08:32.760 --> 0:08:35.000 you think that the president accounts for this type of 0:08:35.080 --> 0:08:37.080 behavior at a time where a lot of companies are 0:08:37.120 --> 0:08:40.520 trying to insulate themselves for themselves from headline risk. 0:08:41.880 --> 0:08:45.160 Yeah, I think that the President's reaction to pair back 0:08:45.280 --> 0:08:47.800 some of the Canada and Mexico tariffs and say that 0:08:48.120 --> 0:08:51.600 for companies that are complying with USMCA rules of origin, 0:08:51.800 --> 0:08:53.960 that you would be exempted from the measure shows that 0:08:54.000 --> 0:08:56.800 the President is paying attention to this and that it's 0:08:56.840 --> 0:08:59.760 not just about production in America but in North America. 0:09:00.120 --> 0:09:03.280 But this is an administration that is really focused on production, 0:09:03.720 --> 0:09:06.160 and so not only are they using tariffs to achieve that, 0:09:06.240 --> 0:09:09.559 but they have forecasted that when it comes to tax cuts, deregulation, 0:09:09.679 --> 0:09:11.880 in a number of other policies, they're going to do 0:09:11.920 --> 0:09:14.240 what they can to incentivize producing in the US and 0:09:14.440 --> 0:09:15.600 producing in North America. 0:09:15.840 --> 0:09:18.120 Kelly, and what do you make of this theory that 0:09:18.200 --> 0:09:20.240 this is all by design, that a little bit of 0:09:20.280 --> 0:09:23.080 pain is kind of the goal here to get interest 0:09:23.120 --> 0:09:26.160 rates lower to offset some of the tax cuts and 0:09:26.280 --> 0:09:30.240 just the increasing deficit and increasing interest expense that the 0:09:30.320 --> 0:09:33.280 US is paying. Do you believe that that could actually 0:09:33.280 --> 0:09:34.360 be by design. 0:09:36.000 --> 0:09:38.960 I'm not sure if that's the objective of the administration. 0:09:39.360 --> 0:09:41.360 I think when they talk about the fact that there's 0:09:41.400 --> 0:09:43.840 going to be pain, and when the President talks about 0:09:43.880 --> 0:09:47.240 this transition period, what they're talking about is the fact 0:09:47.280 --> 0:09:49.959 that they have their eye on the ball ten steps ahead, 0:09:50.240 --> 0:09:52.439 and that at the end of the administration, they want 0:09:52.480 --> 0:09:55.240 to be in a place where US trading relationships are 0:09:55.280 --> 0:09:59.000 in a more balanced position where there are lower tax 0:09:59.120 --> 0:10:01.840 rates and they're is a greater incentive to produce in 0:10:01.880 --> 0:10:04.280 the United States and what they refer to as this 0:10:04.360 --> 0:10:07.800 golden age of manufacturing, Golden age of production, but that 0:10:07.800 --> 0:10:09.480 that is not going to be easy to get to. 0:10:09.520 --> 0:10:11.560 It's not a straight line. You're gonna have to break 0:10:11.559 --> 0:10:14.080 some plates in the meantime. And so if some of 0:10:14.080 --> 0:10:17.960 these other economic consequences are happening, that is part of 0:10:18.240 --> 0:10:20.160 the entire measure. But I'm not sure that all of 0:10:20.160 --> 0:10:22.720 these are necessarily intended consequences, Killy. 0:10:22.760 --> 0:10:24.720 And there's one place we know where the tariffs are 0:10:24.960 --> 0:10:27.240 going to stick, and of course that's China. Twenty percent 0:10:27.440 --> 0:10:31.559 and as of today, China's reciprocal tariffs on the United States, 0:10:31.600 --> 0:10:33.920 those retaliatory measures have gone into place for a number 0:10:33.920 --> 0:10:35.160 of agricultural products. 0:10:35.480 --> 0:10:36.200 Given you were. 0:10:36.120 --> 0:10:39.240 There for Phase one, do you think potentially there's a 0:10:39.280 --> 0:10:41.400 bigger deal to be had at the end of this 0:10:41.440 --> 0:10:43.920 when it comes to China, Because I remember twenty eighteen 0:10:44.280 --> 0:10:47.319 there was billions of dollars of losses from the agricultural 0:10:47.360 --> 0:10:49.439 sector in the United States and then Trump to actually 0:10:49.480 --> 0:10:50.920 have a bailout for these farmers. 0:10:52.640 --> 0:10:55.480 Yeah, agriculture really is at the tip of the sphere 0:10:55.480 --> 0:10:58.080 when it comes to trade and tariff policy because they're 0:10:58.360 --> 0:11:01.480 the first to get retaliated. They are one of the 0:11:01.480 --> 0:11:04.480 most politically sensitive products in the United States, and every 0:11:04.480 --> 0:11:07.360 member of Congress has some form of agriculture in their district, 0:11:07.600 --> 0:11:09.880 which is why it's so attractive for our trading partners 0:11:09.920 --> 0:11:10.920 to hit them first. 0:11:11.800 --> 0:11:12.960 We'll have to see where this goes. 0:11:13.000 --> 0:11:15.520 I mean, the President has tweeted and posted on true 0:11:15.600 --> 0:11:20.280 social about taking care of the farmers, having them sell domestically. 0:11:20.440 --> 0:11:23.240 I think he is keenly aware that they are getting 0:11:23.320 --> 0:11:25.600 hit first. But when it comes to China and some 0:11:25.600 --> 0:11:28.400 sort of trade deal the juries out. We'll have to 0:11:28.400 --> 0:11:30.600 see what happens and whether China wants to come to 0:11:30.640 --> 0:11:33.920 the table with the United States and vice versa. April second, 0:11:34.000 --> 0:11:36.760 the President has a report on China's compliance with the 0:11:36.760 --> 0:11:40.000 Phase one deal, a review of the eighteen billion dollars 0:11:40.000 --> 0:11:43.520 in tariffa the Biden administration added, and then China's IP practices. 0:11:43.920 --> 0:11:46.080 So I fully expect this relationship to get a bit 0:11:46.120 --> 0:11:48.880 more tumultuous before it gets better. And then maybe this 0:11:48.880 --> 0:11:51.199 spring or summer there may be some scope for negotiating 0:11:51.240 --> 0:11:51.559 some of. 0:11:51.520 --> 0:11:53.920 It back down, well, said Keleon, going to say, you 0:11:54.280 --> 0:11:57.400 wise cleon show that they form any say Deputy Director 0:12:07.280 --> 0:12:10.800 Barbara rein Hardefouyer Investment Management, writing, it's challenging to have 0:12:10.840 --> 0:12:13.720 strong views in this turbulent market environment. If the pride 0:12:13.720 --> 0:12:18.000 Trump administration is guidance ratified, trade policy should be better 0:12:18.400 --> 0:12:20.959 than feared. Barbara joins, just now for more, Barbara got Mornick, 0:12:21.040 --> 0:12:23.880 Good morning. Is that playbook even worth looking at anymore? 0:12:24.000 --> 0:12:26.360 You know, I think it's the problem is the stopping 0:12:26.440 --> 0:12:29.720 go nature of the administration's policy seem to really be 0:12:29.800 --> 0:12:32.000 what's causing a lot of indigestion in the markets. 0:12:32.440 --> 0:12:34.000 And that also. 0:12:33.800 --> 0:12:38.400 Coupled with softer survey data, Earnings revisions have been marked 0:12:38.440 --> 0:12:40.000 down a bit at least for the first half of 0:12:40.040 --> 0:12:42.679 this year, and it's causing a lot of problems. I mean, 0:12:42.679 --> 0:12:44.839 it was just on February twenty that we hit a 0:12:44.880 --> 0:12:46.880 new all time high for the S and P five hundred. 0:12:47.160 --> 0:12:48.560 It feels like it was about a year ago. 0:12:48.720 --> 0:12:51.120 Things have changed quickly. The President's not stepping in, He's 0:12:51.120 --> 0:12:54.160 not changing course certainly days why would he? The channel 0:12:54.160 --> 0:12:56.560 of the Fed Reserve is not stepping in or changing course, 0:12:56.840 --> 0:12:58.840 what do you need to see to generate a counter 0:12:58.880 --> 0:12:59.400 trend rally? 0:12:59.400 --> 0:13:02.720 Here happen, markets are very oversold at this point. So 0:13:02.760 --> 0:13:05.320 we have long term indicators and short term indicators on 0:13:05.360 --> 0:13:09.239 investor sentiment, and our short term indicators are as oversold 0:13:09.320 --> 0:13:11.840 as they have been in over three years. 0:13:11.840 --> 0:13:12.360 At this point. 0:13:13.000 --> 0:13:14.600 You'd have to go back to the twenty twenty two 0:13:14.679 --> 0:13:17.719 sell off to have this type of short term oversold indicators. 0:13:18.160 --> 0:13:21.199 I think that you probably need some clarity on tariffs 0:13:21.400 --> 0:13:22.959 in order to be able to get the market to 0:13:23.040 --> 0:13:26.800 have put in a sustainable rally. Now, when a counter 0:13:26.800 --> 0:13:29.920 trend rally comes, what's likely to do well The things 0:13:29.920 --> 0:13:31.760 that have sold off the most. I mean US small 0:13:31.760 --> 0:13:34.319 cap stocks, so one of my team pointed this out 0:13:34.360 --> 0:13:37.520 to me, are down over twenty percent from September or 0:13:37.520 --> 0:13:39.679 twenty twenty four. So likely you're going to see a 0:13:39.720 --> 0:13:42.400 big counter trend rally in US small caps, US midcaps, 0:13:42.559 --> 0:13:45.480 potentially US growth stocks as well, but it could be 0:13:45.520 --> 0:13:47.760 a while before you get enough visibility to generate that 0:13:47.800 --> 0:13:48.680 counter trend rally. 0:13:48.840 --> 0:13:51.560 You said that the over sold indicators were the most 0:13:51.600 --> 0:13:54.080 going back to twenty twenty two, and yet we're still 0:13:54.080 --> 0:13:56.520 at some twenty one times earnings. We're still at a 0:13:56.559 --> 0:13:59.840 pretty elevated valuation, which goes to the structural argument that 0:13:59.840 --> 0:14:03.120 may maybe money has been flowing into the US disproportionately 0:14:03.200 --> 0:14:06.520 for so long that now just a normalization, especially back 0:14:06.520 --> 0:14:09.160 to Europe, makes a little bit of sense. How much 0:14:09.720 --> 0:14:11.240 credence do you give that idea. 0:14:11.320 --> 0:14:13.400 I don't discount it all that. I mean, I give 0:14:13.400 --> 0:14:15.600 it a lot of credence. However, I would note the following. 0:14:15.800 --> 0:14:18.320 The fiscal stimulus plans that Germany is planning to put 0:14:18.320 --> 0:14:20.400 into place is really only for Germany. 0:14:20.440 --> 0:14:20.880 At this point. 0:14:20.960 --> 0:14:23.600 You still have long term structural issues that have to 0:14:23.600 --> 0:14:26.400 be solved for Europe. According to the Droggy report, you 0:14:26.400 --> 0:14:27.320 have demographics that. 0:14:27.280 --> 0:14:28.120 Are working against you. 0:14:28.120 --> 0:14:31.120 You've got regulation that is very heavy in Europe. Those 0:14:31.120 --> 0:14:35.360 things have to be addressed and changed dramatically in order 0:14:35.400 --> 0:14:38.080 for Europe to say, in order to say Europe's going 0:14:38.120 --> 0:14:38.680 to outperform in. 0:14:38.680 --> 0:14:40.000 The US for the next three years. 0:14:40.320 --> 0:14:43.840 One difficulty right now is you don't invest in hours, 0:14:43.880 --> 0:14:46.160 right I assume that you have a longer. 0:14:45.920 --> 0:14:48.120 Term arized I mean, I'm investing free timing. 0:14:48.480 --> 0:14:49.800 And it's technically forty years. 0:14:49.960 --> 0:14:52.640 This is the difficult aspect, right this is a trader's 0:14:52.680 --> 0:14:55.680 market right now, we're talking about shifts that are incremental 0:14:56.240 --> 0:14:58.720 when you have to look over the big term and 0:14:58.840 --> 0:15:01.160 understand what the long term goal is and whether it's 0:15:01.160 --> 0:15:02.400 feasible for us to get there. 0:15:02.840 --> 0:15:03.560 So how you doing that? 0:15:03.600 --> 0:15:03.760 Well? 0:15:03.800 --> 0:15:05.920 I think the big issue that we're considering now is 0:15:05.960 --> 0:15:09.560 that the stagflationary scenario is getting a lot of traction 0:15:09.640 --> 0:15:12.160 in the markets. And if that's the case, no asset 0:15:12.160 --> 0:15:16.240 class works, not bonds, not stocks, no international nothing. Well 0:15:16.280 --> 0:15:19.520 maybe cash works for you over the very short term. Now, 0:15:19.720 --> 0:15:21.880 if you get a little bit less policy uncertainty, you 0:15:21.920 --> 0:15:24.880 can look a little forward to the US data seems 0:15:24.920 --> 0:15:27.560 to be softening a bit, at least on the survey side. 0:15:27.800 --> 0:15:31.440 If it starts to reach the hard data such as employment, 0:15:32.080 --> 0:15:34.560 you would see a FED policy response if they have 0:15:34.640 --> 0:15:37.520 the air cover on inflation. But the problem is is 0:15:37.560 --> 0:15:40.840 that even with the change in policy on Friday, you 0:15:40.880 --> 0:15:43.880 did not see this big rally off of oh, we're 0:15:43.920 --> 0:15:44.880 giving some relief on. 0:15:44.840 --> 0:15:46.280 Tariffs that you had seen before. 0:15:46.800 --> 0:15:48.840 So I think the market is in very much a 0:15:48.880 --> 0:15:51.200 show me state, and the only way that you get 0:15:51.200 --> 0:15:54.560 there is clarity on inflation, and clarity on terraffs. 0:15:54.680 --> 0:15:56.280 Neither of those seem to be coming now. 0:15:57.200 --> 0:16:01.080 Having said all that doom and gloom, potentially see a 0:16:01.160 --> 0:16:03.480 very good case that the FED has the ability to 0:16:03.520 --> 0:16:06.320 cut rates in the second half of this year, maybe 0:16:06.360 --> 0:16:09.160 really kind of like the late third quarter, because if 0:16:09.240 --> 0:16:12.560 all goes well, if tarists are indeed staved off, it's 0:16:12.600 --> 0:16:13.880 a one time inflation hit. 0:16:13.920 --> 0:16:15.600 To the upside, you. 0:16:15.560 --> 0:16:19.640 Should get enough relief from weaker economic data that inflation's 0:16:19.680 --> 0:16:22.520 coming down, that core PCE is dropping, that the Fed 0:16:22.520 --> 0:16:24.240 may be able to say we can cut interest rates 0:16:24.240 --> 0:16:27.120 maybe twice this year. That should give the market enough 0:16:27.160 --> 0:16:30.440 relief as long as the underlying earnings picture stays pretty 0:16:30.480 --> 0:16:30.960 much intact. 0:16:31.160 --> 0:16:33.520 The narrative is focused on the political economy and all 0:16:33.560 --> 0:16:35.520 these headlines from Trump, So you're saying that it can 0:16:35.560 --> 0:16:37.200 shift back to the Fed, and that could be the 0:16:37.240 --> 0:16:39.440 catalyst for an upswing in US eecrities. 0:16:39.160 --> 0:16:41.600 It could be in upswinging equities globally. At that point, 0:16:41.680 --> 0:16:45.440 I think that you need to see at least some 0:16:45.480 --> 0:16:49.320 policy certainty from the administration, and don't forget as we 0:16:49.360 --> 0:16:51.640 get towards the second half of this year, they have 0:16:51.720 --> 0:16:54.640 to start worrying about the midterm elections in twenty twenty six, 0:16:54.960 --> 0:16:58.920 So the clock on the very difficult, very uncertain Trump 0:16:59.000 --> 0:17:02.160 policies that could be growth negative do have somewhat of 0:17:02.200 --> 0:17:04.080 a time decay associated with them. 0:17:04.200 --> 0:17:06.440 We do have some certainty though tariffs have gone into 0:17:06.440 --> 0:17:09.719 place on China. Are you saying potentially uncertainty on everything 0:17:09.760 --> 0:17:12.720 else is almost worse than tariffs going into place. 0:17:12.840 --> 0:17:15.440 Well, tariffs in place on China is really an old 0:17:15.480 --> 0:17:17.320 story that's been coming through for a long time. So 0:17:17.359 --> 0:17:19.639 what happened after the first tariffs went in on China? 0:17:20.040 --> 0:17:22.720 You had this opportunity set where the rest of the 0:17:22.760 --> 0:17:23.640 world stepped in. 0:17:23.560 --> 0:17:24.640 To be the manufacturer. 0:17:24.720 --> 0:17:29.600 Right, so countries in Asia, Japan, excuse me, on Thailand, Malaysia, 0:17:29.640 --> 0:17:32.639 the Philippines, and also even to Mexico when you're starting 0:17:32.680 --> 0:17:35.919 to talk about tariffing our two biggest trading partners, that 0:17:36.080 --> 0:17:39.560 is a whole different story. Those will certainly put Mexico 0:17:39.760 --> 0:17:44.600 and Canada into a recession, and they account for forty 0:17:44.640 --> 0:17:47.440 percent of globally traded goods. So it's a very different 0:17:47.520 --> 0:17:52.480