1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:35,840 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,360 --> 00:00:37,320 Speaker 1: Keep more of City Group. 11 00:00:37,320 --> 00:00:40,360 Speaker 3: Writing this, we view the market as exhibiting the relief 12 00:00:40,680 --> 00:00:44,320 Speaker 3: due to the recent terff roadblogs. However, uncertainty remains in 13 00:00:44,360 --> 00:00:48,559 Speaker 3: corporate management. Teams will resist large capex and hiring plans 14 00:00:48,760 --> 00:00:51,800 Speaker 3: until further clarity on trade rules. Kate joins us now 15 00:00:52,040 --> 00:00:55,000 Speaker 3: with a dose of cold water on the Goldilocks. 16 00:00:55,360 --> 00:00:58,280 Speaker 1: Sorry it is so good. Sorry the borage is too cold. 17 00:00:58,320 --> 00:01:01,800 Speaker 3: Apparently this morning wondering you know what do you make 18 00:01:01,840 --> 00:01:03,160 Speaker 3: of all this Goldilocks talk. 19 00:01:03,200 --> 00:01:04,800 Speaker 1: I mean, not all this Goldilocks talks so. 20 00:01:04,800 --> 00:01:06,959 Speaker 3: Vi the Supermannia which is talking about that, but this 21 00:01:07,040 --> 00:01:10,080 Speaker 3: feeling companies will adapt it to just and get it through, 22 00:01:10,200 --> 00:01:11,679 Speaker 3: and that's what we have continued to say. 23 00:01:12,000 --> 00:01:14,559 Speaker 4: Yeah, look, I have all of the faith in large 24 00:01:14,560 --> 00:01:17,600 Speaker 4: cap companies being able to adopt, but we don't know 25 00:01:17,600 --> 00:01:20,119 Speaker 4: what they're adopting too. And this is the big question mark. 26 00:01:20,120 --> 00:01:22,480 Speaker 4: Everyone says, Okay, we're going to get past tariffs, or 27 00:01:22,480 --> 00:01:24,039 Speaker 4: we're going to get past the worst in terms of 28 00:01:24,040 --> 00:01:27,319 Speaker 4: tariff news, but we know that all of these sectoral 29 00:01:27,360 --> 00:01:31,160 Speaker 4: tariffs can have much greater to pardon me, impact than 30 00:01:31,200 --> 00:01:33,280 Speaker 4: some of the reciprocal tariffs. And if I was a 31 00:01:33,280 --> 00:01:35,560 Speaker 4: company making investment decisions, is what I was writing in 32 00:01:35,600 --> 00:01:37,920 Speaker 4: that note, I would say, like, I can wait it 33 00:01:37,959 --> 00:01:40,039 Speaker 4: out for another couple months or another quarter or two 34 00:01:40,160 --> 00:01:43,880 Speaker 4: before I make decisions, because I want more clarity into 35 00:01:44,000 --> 00:01:46,200 Speaker 4: what my margin story is going to look like. 36 00:01:46,720 --> 00:01:48,520 Speaker 1: And I think that's a prudent thing to do. 37 00:01:48,560 --> 00:01:50,840 Speaker 4: And it is the behavior that these large cap companies 38 00:01:50,840 --> 00:01:54,560 Speaker 4: have exhibited through many years, over a decade at this point, 39 00:01:54,600 --> 00:01:57,000 Speaker 4: and really managed their bottom line. It's one of the 40 00:01:57,040 --> 00:01:58,920 Speaker 4: reasons why we love them and one of the reasons 41 00:01:58,920 --> 00:01:59,840 Speaker 4: why we want to continue to. 42 00:01:59,800 --> 00:02:02,280 Speaker 3: Own There's this larger question, and we were talking about 43 00:02:02,320 --> 00:02:04,920 Speaker 3: it at the open this idea of how long can 44 00:02:05,000 --> 00:02:09,279 Speaker 3: this sort of feeling of adapting, adjusting continue without recognizing 45 00:02:09,280 --> 00:02:12,080 Speaker 3: the structural framework that could be shifting. We just got 46 00:02:12,160 --> 00:02:15,160 Speaker 3: news that the European Commission is recommending that Bulgaria joins 47 00:02:15,200 --> 00:02:18,160 Speaker 3: the Euro next year. There is this question about whether 48 00:02:18,280 --> 00:02:21,280 Speaker 3: the Euro is getting fortified as a viable alternative to 49 00:02:21,360 --> 00:02:23,120 Speaker 3: the dollar at a time where we have seen the 50 00:02:23,160 --> 00:02:26,400 Speaker 3: dollar really lose steam. How much do you give credence 51 00:02:26,440 --> 00:02:29,160 Speaker 3: to that the idea that outside of the US you 52 00:02:29,200 --> 00:02:32,120 Speaker 3: can rely more considerably at the adapting and the adjusting 53 00:02:32,440 --> 00:02:33,920 Speaker 3: and the framework remaining the same. 54 00:02:34,120 --> 00:02:35,880 Speaker 4: I think it's too soon for us to call the 55 00:02:36,040 --> 00:02:38,400 Speaker 4: end of dollar dominance, not just because of trade, but 56 00:02:38,440 --> 00:02:41,639 Speaker 4: because there is to this point not a viable alternative. 57 00:02:42,040 --> 00:02:44,080 Speaker 4: But I think all these moves on the margins are 58 00:02:44,240 --> 00:02:47,560 Speaker 4: very much worth watching. Like if we see different governments, 59 00:02:47,639 --> 00:02:50,120 Speaker 4: if we see different policy makers, if we see different 60 00:02:50,160 --> 00:02:53,400 Speaker 4: investment communities start to take a good look at other 61 00:02:53,480 --> 00:02:59,359 Speaker 4: currency alternatives and just incrementally shift their own positioning, and 62 00:02:59,680 --> 00:03:02,000 Speaker 4: many of them do it at the same time or 63 00:03:02,040 --> 00:03:04,519 Speaker 4: over a number of years, that can really start to 64 00:03:04,560 --> 00:03:08,240 Speaker 4: move the needle. I think most currency strategist would agree 65 00:03:08,280 --> 00:03:10,520 Speaker 4: the dollar was a little overvalued even before all of 66 00:03:10,520 --> 00:03:12,360 Speaker 4: this stuff, and so kind of we're getting back to 67 00:03:12,400 --> 00:03:15,120 Speaker 4: a more normal valuation for the dollar. But this idea 68 00:03:15,120 --> 00:03:17,160 Speaker 4: that we're going to have a massive and consistent decline 69 00:03:17,200 --> 00:03:19,160 Speaker 4: and they're going to be these fiable alternatives by the 70 00:03:19,240 --> 00:03:22,400 Speaker 4: end of twenty five, I think is probably too far gone. 71 00:03:22,400 --> 00:03:24,200 Speaker 5: It doesn't need to be a viable alternative. I mean, 72 00:03:24,240 --> 00:03:25,680 Speaker 5: there's been a lot of talk about this is just 73 00:03:25,760 --> 00:03:28,440 Speaker 5: kind of kind of rebalancing that equilibrium. And when you 74 00:03:28,480 --> 00:03:30,880 Speaker 5: look at the currencies that have performed so well over 75 00:03:30,919 --> 00:03:32,960 Speaker 5: the past few months, you look at the Swiss franc, 76 00:03:33,080 --> 00:03:35,160 Speaker 5: you look at some of the other European or even 77 00:03:35,200 --> 00:03:37,720 Speaker 5: the euro which that probably won't last. But I mean, 78 00:03:37,800 --> 00:03:39,640 Speaker 5: let's take the Swiss frank for example, because I think 79 00:03:39,680 --> 00:03:41,360 Speaker 5: a lot of people have talked about how a lot 80 00:03:41,400 --> 00:03:44,400 Speaker 5: of asset managers have shifted some allocations over to the 81 00:03:44,440 --> 00:03:46,320 Speaker 5: franc as a way to hedge against what's going on 82 00:03:46,360 --> 00:03:49,320 Speaker 5: here in the US. Maybe that's not a structural change, 83 00:03:49,440 --> 00:03:53,640 Speaker 5: but over time that can wottle awagh at the value. 84 00:03:53,240 --> 00:03:53,720 Speaker 6: Of the dollar. 85 00:03:53,960 --> 00:03:55,760 Speaker 4: What I will say is a lot of our clients, 86 00:03:55,760 --> 00:03:59,200 Speaker 4: particularly some very large clients, and I'm going to highlight, 87 00:03:59,200 --> 00:04:03,080 Speaker 4: clients in age specifically have been asking about ways to 88 00:04:03,120 --> 00:04:05,480 Speaker 4: hedge their dollar exposure. They just want to kind of 89 00:04:05,520 --> 00:04:08,440 Speaker 4: neutralize that in portfolios, and that makes a ton of sense. 90 00:04:08,480 --> 00:04:11,920 Speaker 4: So we're seeing this across all segments, but particularly the 91 00:04:12,000 --> 00:04:15,120 Speaker 4: larger clients who have this outsized dollar position, or if 92 00:04:15,120 --> 00:04:17,000 Speaker 4: it's we've seen that kind of drift in the dollar 93 00:04:17,000 --> 00:04:19,840 Speaker 4: position over the last couple of years. Looking right now 94 00:04:19,880 --> 00:04:23,720 Speaker 4: now that there's relative stability as an opportunity for making that. 95 00:04:23,680 --> 00:04:26,000 Speaker 5: Move, is there though a long term case to be 96 00:04:26,040 --> 00:04:29,280 Speaker 5: made for a certain level of instability, a certain lack 97 00:04:29,320 --> 00:04:32,680 Speaker 5: of trust in the US system that had bolstered the 98 00:04:32,720 --> 00:04:35,839 Speaker 5: dollar for basically the last fifty six years. 99 00:04:36,160 --> 00:04:38,599 Speaker 4: I think it's a fair question, honestly, And I think 100 00:04:38,640 --> 00:04:41,360 Speaker 4: as we go through the discussions around tax and as 101 00:04:41,360 --> 00:04:44,880 Speaker 4: we watch what happens to the deficit, and we understand 102 00:04:44,960 --> 00:04:48,240 Speaker 4: that there are going to be some significant challenges to 103 00:04:48,279 --> 00:04:50,640 Speaker 4: the bond market over the next year or two unless 104 00:04:50,680 --> 00:04:54,279 Speaker 4: we have a significant reverse. Of course, it's fair for 105 00:04:54,360 --> 00:04:58,479 Speaker 4: global investors to revisit their portfolios and say, hey, we 106 00:04:58,520 --> 00:05:01,200 Speaker 4: may have the best companies the world in the US, 107 00:05:01,440 --> 00:05:05,159 Speaker 4: the most innovative, the best free cash generators, but we're 108 00:05:05,160 --> 00:05:07,080 Speaker 4: not as confident that we should have this much of 109 00:05:07,080 --> 00:05:10,800 Speaker 4: our fixed income allocation in US bonds. And again this 110 00:05:10,839 --> 00:05:13,320 Speaker 4: is on the margin. We're not talking about a wholesale reversal. 111 00:05:13,800 --> 00:05:15,840 Speaker 4: But you know, when this happens over a period of 112 00:05:15,920 --> 00:05:17,960 Speaker 4: quarters or period of years, it can have a really 113 00:05:18,000 --> 00:05:19,880 Speaker 4: significant impact. 114 00:05:19,279 --> 00:05:22,120 Speaker 5: But Lisa was showing the thirty year yield at four 115 00:05:22,160 --> 00:05:23,839 Speaker 5: to nine, and I look at four to nine and 116 00:05:23,960 --> 00:05:26,280 Speaker 5: change over there. Let's just round it up the five. Yeah, 117 00:05:26,360 --> 00:05:28,960 Speaker 5: that's not attractive. With a ten year at four or five, 118 00:05:29,000 --> 00:05:31,520 Speaker 5: it's not attractive. If I look at the contours of 119 00:05:31,560 --> 00:05:35,040 Speaker 5: this tax bill, great, I love the tax cuts. I'm 120 00:05:35,080 --> 00:05:37,279 Speaker 5: not so great about the fact that they're not making 121 00:05:37,320 --> 00:05:39,840 Speaker 5: that up in any way, shape or form. So if 122 00:05:39,839 --> 00:05:42,559 Speaker 5: you're a long term investor, why would you go longer 123 00:05:42,600 --> 00:05:43,560 Speaker 5: out on the curve right now? 124 00:05:43,640 --> 00:05:46,760 Speaker 4: I mean, we certainly aren't like a lot of acid allocators. 125 00:05:46,800 --> 00:05:50,000 Speaker 4: We've been hiding in the short end, maybe a little 126 00:05:50,040 --> 00:05:53,000 Speaker 4: bit to the belly, but really being very concentrated there. 127 00:05:53,040 --> 00:05:54,960 Speaker 4: And we keep on having this debate within the team 128 00:05:55,000 --> 00:05:56,839 Speaker 4: and across all of the city. You know, at what 129 00:05:56,920 --> 00:05:59,480 Speaker 4: point do we want to buy duration? And it's not 130 00:05:59,520 --> 00:06:01,280 Speaker 4: just the level. It's how do you get to that 131 00:06:01,400 --> 00:06:04,680 Speaker 4: level with the drivers of the of the that move 132 00:06:04,760 --> 00:06:07,080 Speaker 4: to that level, and whether or not we feel it 133 00:06:07,240 --> 00:06:11,479 Speaker 4: adequately compensates us, compensates us for the risk on the 134 00:06:11,480 --> 00:06:14,080 Speaker 4: fiscal side, on the risk on the tax side. And 135 00:06:14,400 --> 00:06:17,400 Speaker 4: you know, the truth is that growth is okay right now. 136 00:06:17,440 --> 00:06:20,039 Speaker 4: It's not phenomenal, and we're not looking for kind of 137 00:06:20,040 --> 00:06:22,760 Speaker 4: a three to four percent GDP world or for the 138 00:06:22,880 --> 00:06:26,280 Speaker 4: US in the next couple of years, so it's pretty tough. 139 00:06:26,520 --> 00:06:29,279 Speaker 3: It also raises questions about what drives that kind of 140 00:06:29,360 --> 00:06:32,599 Speaker 3: desire to own long duration assets. Is it a good thing, 141 00:06:32,800 --> 00:06:37,440 Speaker 3: the idea of fiscal responsibility or some sort of sense 142 00:06:37,520 --> 00:06:40,240 Speaker 3: that maybe you can get compensated with this kind of yield, 143 00:06:40,680 --> 00:06:42,440 Speaker 3: or is it the idea that we're really going to 144 00:06:42,480 --> 00:06:44,320 Speaker 3: hit some sort of slow patch. And this is something 145 00:06:44,360 --> 00:06:46,320 Speaker 3: that was introduced by Savida. At what point are we 146 00:06:46,320 --> 00:06:48,559 Speaker 3: looking at bond yields going up as a positive thing, 147 00:06:48,880 --> 00:06:51,799 Speaker 3: as a sign of risk on elsewhere because it's coming 148 00:06:51,800 --> 00:06:52,279 Speaker 3: with growth. 149 00:06:52,279 --> 00:06:54,839 Speaker 1: I mean, can you get your hands around that argument? 150 00:06:55,440 --> 00:06:57,400 Speaker 4: You know, I'm not at a place where I think 151 00:06:57,440 --> 00:07:00,479 Speaker 4: bond yields are reflecting better growth in the future right, 152 00:07:00,600 --> 00:07:03,960 Speaker 4: and a lot would need to happen. By the way, 153 00:07:04,080 --> 00:07:07,000 Speaker 4: I thought the economy was slowing even before the introduction 154 00:07:07,080 --> 00:07:09,600 Speaker 4: of these tariffs, which I think are quite growth growth negative, 155 00:07:09,640 --> 00:07:12,640 Speaker 4: Even if, as I was saying before, there reciprocal tariffs 156 00:07:12,640 --> 00:07:14,760 Speaker 4: don't end up coming through and we're just talking about 157 00:07:14,760 --> 00:07:15,720 Speaker 4: the sectoral tariffs. 158 00:07:15,720 --> 00:07:17,760 Speaker 1: This is a headwind. We just need to acknowledge that. 159 00:07:18,720 --> 00:07:21,320 Speaker 4: But the consumer and certain segments of the consumer were 160 00:07:21,400 --> 00:07:23,920 Speaker 4: showing stress at the end of last year in the 161 00:07:23,920 --> 00:07:26,560 Speaker 4: beginning of this year, even if the aggregate data looks 162 00:07:26,560 --> 00:07:29,680 Speaker 4: pretty good, and we were starting to see more cautious 163 00:07:29,680 --> 00:07:33,080 Speaker 4: spending from companies in general after it prolonged economic cycle. 164 00:07:33,360 --> 00:07:36,640 Speaker 4: So all that was in place before this uncertainty. So 165 00:07:36,680 --> 00:07:38,680 Speaker 4: I think it's really too soon for us to say 166 00:07:38,880 --> 00:07:41,280 Speaker 4: we're going to be able to forecast at acceleration in 167 00:07:41,320 --> 00:07:44,440 Speaker 4: the US economy, maybe based on tax cuts or based 168 00:07:44,480 --> 00:07:47,200 Speaker 4: on consumption looking good, when there's so many other challenges. 169 00:07:47,480 --> 00:07:49,480 Speaker 1: Just to sum up, would you sell this rally? 170 00:07:50,480 --> 00:07:53,640 Speaker 4: I would not be adding a lot of equity risk 171 00:07:53,720 --> 00:07:55,960 Speaker 4: to this rally. But again, I think large caps are 172 00:07:56,000 --> 00:07:58,880 Speaker 4: going to be the better place within the US market. 173 00:08:09,000 --> 00:08:12,440 Speaker 1: Wendy Schiller Brown University joins us. Now, Wendy, wonderful to 174 00:08:12,480 --> 00:08:14,160 Speaker 1: see you. Thank you so much for being with us. 175 00:08:14,320 --> 00:08:16,400 Speaker 3: I want to start with the idea of some of 176 00:08:16,400 --> 00:08:19,520 Speaker 3: these trade negotiations as part of the three prong stool 177 00:08:19,800 --> 00:08:22,800 Speaker 3: that President Trump's administration has put out there. What do 178 00:08:22,880 --> 00:08:25,960 Speaker 3: you make of the progress being made both racing ahead 179 00:08:25,960 --> 00:08:27,920 Speaker 3: when it comes to trade deals as well as the 180 00:08:27,920 --> 00:08:30,360 Speaker 3: deficit discussion down in Washington, d C. 181 00:08:31,680 --> 00:08:33,600 Speaker 7: Well, Lisa, I think that they are related in the 182 00:08:33,600 --> 00:08:36,320 Speaker 7: sense that President Trump wants to shore up, particularly in 183 00:08:36,320 --> 00:08:39,839 Speaker 7: the Senate now Republican support for his big, beautiful tax bill, 184 00:08:40,600 --> 00:08:44,800 Speaker 7: and to settle the trade environment and not put inflationary 185 00:08:44,840 --> 00:08:47,960 Speaker 7: pressures on the US economy and also sort of raise 186 00:08:48,000 --> 00:08:51,080 Speaker 7: consumer fears about future price increases. 187 00:08:51,880 --> 00:08:53,480 Speaker 1: That's really important not. 188 00:08:53,440 --> 00:08:56,360 Speaker 7: Only for him, but also for members of Congress that 189 00:08:56,400 --> 00:08:59,000 Speaker 7: have to go back to their town halls and hear 190 00:08:59,120 --> 00:09:01,040 Speaker 7: all about people's concerns. 191 00:09:01,080 --> 00:09:02,920 Speaker 1: First, it was dozed in the budget. 192 00:09:02,760 --> 00:09:07,720 Speaker 7: And now will soon be inflation, deficit, spending, bonds, treasuries, 193 00:09:07,960 --> 00:09:11,440 Speaker 7: all those sorts of indicators of economic health. So it's 194 00:09:11,440 --> 00:09:15,600 Speaker 7: important for the President to inject I think more stability. 195 00:09:15,080 --> 00:09:18,200 Speaker 1: Into his trade negotiation persona. 196 00:09:17,840 --> 00:09:22,000 Speaker 7: Or platform because that will also affect Congresses, particularly the 197 00:09:22,000 --> 00:09:25,200 Speaker 7: Senate's willingness to try to really pass this bill by 198 00:09:25,240 --> 00:09:27,080 Speaker 7: July fourth, which was supposed to get passed as we 199 00:09:27,080 --> 00:09:29,880 Speaker 7: would call bi Memorial Day, and that deadline came and went. 200 00:09:30,880 --> 00:09:33,760 Speaker 8: When the China's lead negotiated with the United States, Hayloftings 201 00:09:33,800 --> 00:09:37,280 Speaker 8: says that the nation is ready to discuss all major 202 00:09:37,400 --> 00:09:39,839 Speaker 8: issues with the US. Does that include Taiwan? I mean, 203 00:09:39,840 --> 00:09:41,319 Speaker 8: what sort of messaging do you take out of. 204 00:09:41,240 --> 00:09:43,120 Speaker 1: That, Damie. 205 00:09:43,200 --> 00:09:46,200 Speaker 7: I think it's a I think a treacherous path for 206 00:09:46,280 --> 00:09:49,000 Speaker 7: the President and his staff to sort of conflate not 207 00:09:49,120 --> 00:09:53,720 Speaker 7: sort of just conflate tariffs and economic policy with our 208 00:09:53,760 --> 00:09:57,360 Speaker 7: military stances. He's got a complicated situation with Ukraine, a 209 00:09:57,360 --> 00:10:02,160 Speaker 7: complicated situation obviously with Israel, Gaza, and the Taiwan issue 210 00:10:02,360 --> 00:10:04,480 Speaker 7: is something that if it's loaded up onto the plate 211 00:10:04,840 --> 00:10:08,559 Speaker 7: without really consistent US foreign policy right now, that will 212 00:10:08,600 --> 00:10:12,320 Speaker 7: complicate as negotiations, not make them simple. And I think 213 00:10:12,360 --> 00:10:15,080 Speaker 7: the President likes to cut deals, and he likes to 214 00:10:15,120 --> 00:10:19,160 Speaker 7: cut relatively clear, straightforward deals where he can claim victory. 215 00:10:19,440 --> 00:10:20,280 Speaker 1: Taiwan is going to. 216 00:10:20,200 --> 00:10:22,600 Speaker 7: Be more complicated, and it puts the United States in 217 00:10:22,600 --> 00:10:26,040 Speaker 7: a position that affects its military stances in other conflicts 218 00:10:26,080 --> 00:10:26,679 Speaker 7: around the world. 219 00:10:26,920 --> 00:10:29,720 Speaker 8: Why the Treasury Secretary vessins on the tape discussing global 220 00:10:29,760 --> 00:10:32,720 Speaker 8: imbalances and points to China's inability to shift from an 221 00:10:32,720 --> 00:10:36,640 Speaker 8: export oriented economy to one that's driven by consumption. I mean, 222 00:10:36,679 --> 00:10:38,679 Speaker 8: this flies in the face of decades of conditioning as 223 00:10:38,760 --> 00:10:41,800 Speaker 8: Chinese households propensity to save is grounded in overall lack 224 00:10:41,840 --> 00:10:44,840 Speaker 8: of trust by a beaging themselves. So you know, what 225 00:10:44,920 --> 00:10:46,600 Speaker 8: do we really hope to accomplish here? You know what 226 00:10:46,679 --> 00:10:48,800 Speaker 8: comes next? What is a Treasury Besson really trying to 227 00:10:48,840 --> 00:10:49,480 Speaker 8: accomplish here? 228 00:10:49,480 --> 00:10:52,800 Speaker 7: In my just curious, I mean, I think JERGI Besson 229 00:10:52,880 --> 00:10:56,960 Speaker 7: has seemed to, from what we can tell, exert influence 230 00:10:56,960 --> 00:10:59,640 Speaker 7: on the president, right, stabilizing the president, getting to back 231 00:10:59,679 --> 00:11:04,040 Speaker 7: off really huge tariffs, and trying to add more consistency 232 00:11:04,040 --> 00:11:06,280 Speaker 7: and more justification with the tower policy. So I think 233 00:11:06,280 --> 00:11:09,360 Speaker 7: his public remarks about China and saying, Okay, you've got 234 00:11:09,360 --> 00:11:12,960 Speaker 7: an economy that really depends on the United States consumption tendencies, 235 00:11:13,160 --> 00:11:15,160 Speaker 7: and we want to produce more of our own goods. 236 00:11:15,400 --> 00:11:17,800 Speaker 7: Let's strike a balance so that we can do that. 237 00:11:18,080 --> 00:11:20,559 Speaker 7: And you can still have US markets, but you've got 238 00:11:20,559 --> 00:11:23,200 Speaker 7: to show up your own consumptive markets. I think that's 239 00:11:23,240 --> 00:11:27,600 Speaker 7: a sensible public persona when you're trying to get China 240 00:11:27,640 --> 00:11:29,920 Speaker 7: to come to the table. You know what that actually 241 00:11:29,960 --> 00:11:33,360 Speaker 7: results in in terms of internal economics in China will 242 00:11:33,400 --> 00:11:35,480 Speaker 7: have to see. But on the steel plants, you know, 243 00:11:35,520 --> 00:11:38,280 Speaker 7: we've lost so hundreds of thousands of jobs in steel 244 00:11:38,280 --> 00:11:40,640 Speaker 7: over the last thirty years, and we can't bring steel 245 00:11:40,640 --> 00:11:43,160 Speaker 7: back completely at all. And it was interesting that the 246 00:11:43,160 --> 00:11:46,719 Speaker 7: President's going to take credit for saving existing jobs that 247 00:11:46,760 --> 00:11:50,040 Speaker 7: are in the United States and relatively small compared to 248 00:11:50,040 --> 00:11:52,960 Speaker 7: the rest of the economy. So there are some imbalances 249 00:11:53,000 --> 00:11:55,560 Speaker 7: we will not be able to fix, Wendy. 250 00:11:55,760 --> 00:11:56,680 Speaker 1: You know, I'm curious. 251 00:11:56,760 --> 00:12:01,240 Speaker 9: So we've been in an environment where demand for US assets, bonds, 252 00:12:01,320 --> 00:12:05,200 Speaker 9: equities is sort of imperiled. Do you see Section eight 253 00:12:05,320 --> 00:12:08,600 Speaker 9: ninety nine, which is this remedy against foreign you know, 254 00:12:08,720 --> 00:12:11,720 Speaker 9: unfairness and foreign taxes. Do you see that as a 255 00:12:11,720 --> 00:12:14,319 Speaker 9: big hit to demand for US assets? 256 00:12:15,200 --> 00:12:18,360 Speaker 7: Well, and I think it produces me to it produces instability. 257 00:12:18,440 --> 00:12:18,959 Speaker 1: I mean, as the. 258 00:12:18,920 --> 00:12:21,040 Speaker 7: President could wake up in the morning or in the 259 00:12:21,120 --> 00:12:23,640 Speaker 7: late early hours of the morning and decide Okay, I'm 260 00:12:23,679 --> 00:12:26,000 Speaker 7: going to change the rules of the game today, and 261 00:12:26,000 --> 00:12:29,480 Speaker 7: that just reeks havoc you know on markets, but also 262 00:12:29,520 --> 00:12:30,600 Speaker 7: on small business people. 263 00:12:30,880 --> 00:12:32,319 Speaker 1: And then you know, as they in. 264 00:12:32,280 --> 00:12:35,319 Speaker 7: Their own communities get concerned and get worried and think 265 00:12:35,320 --> 00:12:37,920 Speaker 7: about passing on cost to consumers, then those consumers in 266 00:12:37,960 --> 00:12:40,280 Speaker 7: those communities start to worry about the economy. And we've 267 00:12:40,320 --> 00:12:43,240 Speaker 7: seen some real dips in consumer confidence. So I think 268 00:12:43,440 --> 00:12:46,120 Speaker 7: there are ripple effects to this sort of ping pong 269 00:12:46,280 --> 00:12:50,520 Speaker 7: or yo yonis of the president's trade positions, and certainly 270 00:12:50,559 --> 00:12:52,679 Speaker 7: we rely on the rest of the world and internally 271 00:12:53,280 --> 00:12:53,960 Speaker 7: to buy. 272 00:12:53,760 --> 00:12:55,280 Speaker 1: Our treasuries to float our debt. 273 00:12:55,520 --> 00:12:58,320 Speaker 7: And that's where the really big debt ceiling increase comes in. 274 00:12:58,559 --> 00:13:01,640 Speaker 1: And that's what Run Paul is complaining about. That it's 275 00:13:01,640 --> 00:13:03,559 Speaker 1: not just deficit spending, it's. 276 00:13:03,400 --> 00:13:08,400 Speaker 7: Also creating you know, unsustainable literally unsustainable debt, because sooner 277 00:13:08,480 --> 00:13:10,840 Speaker 7: or later people will stop buying it. And if they 278 00:13:10,880 --> 00:13:13,160 Speaker 7: stop buying it, you know, we have no way of 279 00:13:13,200 --> 00:13:14,400 Speaker 7: floating our expenses. 280 00:13:14,720 --> 00:13:17,160 Speaker 3: Wendy Schiller, Brown University, thank you so much for being 281 00:13:17,200 --> 00:13:29,160 Speaker 3: with us. This is the latest the US thirty year 282 00:13:29,320 --> 00:13:33,320 Speaker 3: underperforming short term debt year to date. As investors continue 283 00:13:33,320 --> 00:13:36,880 Speaker 3: to monitor fiscal risk, leading to speculation the Treasury might 284 00:13:36,960 --> 00:13:40,280 Speaker 3: scale back or even halt auctions of its long bond. 285 00:13:40,520 --> 00:13:43,160 Speaker 3: Molly Brooks of T Security is writing this, rates have 286 00:13:43,240 --> 00:13:46,240 Speaker 3: been very focused over the last weeks with passage of 287 00:13:46,440 --> 00:13:49,439 Speaker 3: one big beautiful bill. However, if we see the macro 288 00:13:49,559 --> 00:13:53,079 Speaker 3: data turning, the markets will react to recession risk. Mollie 289 00:13:53,160 --> 00:13:55,720 Speaker 3: joins us Now for more, it's sort of a question of. 290 00:13:55,640 --> 00:13:58,760 Speaker 1: What would you like to focus on today for every market. 291 00:13:58,800 --> 00:14:00,839 Speaker 3: It seems like, Molly, I want to start with that 292 00:14:01,240 --> 00:14:04,720 Speaker 3: this question of if we get negative economic data, do 293 00:14:04,760 --> 00:14:08,079 Speaker 3: you believe in your core that thirty year yields will 294 00:14:08,120 --> 00:14:11,719 Speaker 3: truly rally substantially and could even potentially outperform. 295 00:14:12,240 --> 00:14:15,880 Speaker 10: I think that they would probably rally, however, not as 296 00:14:15,960 --> 00:14:18,960 Speaker 10: much as the front end. In the last couple of weeks, 297 00:14:18,960 --> 00:14:21,360 Speaker 10: we have seen kind of the correlation between the two 298 00:14:21,440 --> 00:14:24,960 Speaker 10: year and the third year declining. So that's showing that 299 00:14:25,000 --> 00:14:27,400 Speaker 10: the third year isn't being driven right now as much 300 00:14:27,440 --> 00:14:31,520 Speaker 10: by FED cuts and macro risk. It's being driven more 301 00:14:31,680 --> 00:14:35,840 Speaker 10: by deficit concerns and concerns of the quality of the 302 00:14:35,920 --> 00:14:36,560 Speaker 10: long bond. 303 00:14:37,000 --> 00:14:38,000 Speaker 1: So I do think. 304 00:14:37,840 --> 00:14:41,720 Speaker 10: That while it'll rally on FED, you'll probably see the 305 00:14:41,720 --> 00:14:44,760 Speaker 10: front end rally a little bit harder than the long end. 306 00:14:44,800 --> 00:14:47,080 Speaker 5: There is there a risk though, at those two worlds 307 00:14:47,160 --> 00:14:49,520 Speaker 5: kind of converging, meaning the concerns about what's going on 308 00:14:49,560 --> 00:14:52,200 Speaker 5: with the deficit and obviously the macro read through. 309 00:14:52,720 --> 00:14:55,760 Speaker 10: Yeah, I mean, at some point, if thirty year yields 310 00:14:55,880 --> 00:14:59,360 Speaker 10: increase enough and they're high enough, then conditions are going 311 00:14:59,400 --> 00:15:02,640 Speaker 10: to be tight enough that we might see that feed 312 00:15:02,680 --> 00:15:05,680 Speaker 10: through to growth, and then that would therefore be feeding 313 00:15:05,680 --> 00:15:08,680 Speaker 10: through to fed cuts as well. So it's kind of 314 00:15:08,680 --> 00:15:11,080 Speaker 10: circular in that that you could see that the just 315 00:15:11,160 --> 00:15:14,760 Speaker 10: the pure level of the long end bond is impacting 316 00:15:14,840 --> 00:15:15,600 Speaker 10: growth concerns. 317 00:15:15,640 --> 00:15:17,600 Speaker 5: Well, what becomes that light? I mean, because I mean 318 00:15:17,600 --> 00:15:19,200 Speaker 5: we kind of already know what's in the bill. I mean, 319 00:15:19,240 --> 00:15:23,080 Speaker 5: you can model out the increase in debt servicing costs 320 00:15:23,120 --> 00:15:25,840 Speaker 5: based on what we know already. So what becomes that 321 00:15:25,920 --> 00:15:28,080 Speaker 5: light that the market is going to look to as 322 00:15:28,160 --> 00:15:30,400 Speaker 5: sort of okay, now we finally reach that rubicon? 323 00:15:30,600 --> 00:15:32,360 Speaker 6: Is it the labor market? Is it? 324 00:15:32,600 --> 00:15:35,200 Speaker 5: As you said, actual economic recession of some sort. 325 00:15:35,280 --> 00:15:38,520 Speaker 10: What I would say, they don't really need a recession 326 00:15:38,600 --> 00:15:40,360 Speaker 10: in order to begin this rally. 327 00:15:41,040 --> 00:15:42,760 Speaker 1: Investors might need more of. 328 00:15:42,680 --> 00:15:46,360 Speaker 10: A kind of catalyst that is more recessionary for them 329 00:15:46,360 --> 00:15:49,360 Speaker 10: to actually be able to jump in into longs, just 330 00:15:49,400 --> 00:15:52,800 Speaker 10: because we've been burnt a lot in recent weeks of 331 00:15:53,080 --> 00:15:56,360 Speaker 10: just kind of sell offs here. But I do think 332 00:15:56,400 --> 00:15:58,880 Speaker 10: that if we see any type of weakness in the 333 00:15:58,960 --> 00:16:03,520 Speaker 10: labor market specific and on Friday specifically the unemployment rate, 334 00:16:04,280 --> 00:16:06,000 Speaker 10: that's what the FED is going to be looking at. 335 00:16:06,040 --> 00:16:08,600 Speaker 10: So if we're seeing the unemployment rate rising and rising 336 00:16:08,680 --> 00:16:11,480 Speaker 10: quick enough, that's when markets are going to start get 337 00:16:11,520 --> 00:16:15,360 Speaker 10: concerned and that they're going to react to the likelihood 338 00:16:15,360 --> 00:16:16,920 Speaker 10: of FED cuts in the near term. 339 00:16:17,600 --> 00:16:19,360 Speaker 4: Molly, I wanted to ask you because I've seen a 340 00:16:19,360 --> 00:16:22,280 Speaker 4: lot of like ringing of hands and gnashing of teeth 341 00:16:22,320 --> 00:16:25,760 Speaker 4: ahead of all these auctions in recent weeks. People have 342 00:16:25,760 --> 00:16:27,880 Speaker 4: been really stressed about it, and of course they've gone 343 00:16:27,920 --> 00:16:30,840 Speaker 4: really smoothly. You know, if it's not the auctions and 344 00:16:30,880 --> 00:16:33,920 Speaker 4: they continue to get that bid, what should be watching 345 00:16:34,160 --> 00:16:36,440 Speaker 4: to really kind of signal a meaningful change in the 346 00:16:36,440 --> 00:16:38,280 Speaker 4: direction of yields, especially at the long end. 347 00:16:39,000 --> 00:16:42,120 Speaker 10: Yeah, I think right now, I would say stay focused 348 00:16:42,120 --> 00:16:44,000 Speaker 10: on the macro data. 349 00:16:44,040 --> 00:16:47,360 Speaker 1: The FED has continued tables. Do you think or at 350 00:16:47,360 --> 00:16:47,840 Speaker 1: this point. 351 00:16:47,960 --> 00:16:50,600 Speaker 10: Yeah, I would say less of the headline, but we're 352 00:16:50,640 --> 00:16:53,520 Speaker 10: looking more at the unemployment rate just given that it's 353 00:16:53,520 --> 00:16:56,520 Speaker 10: a little bit more of a clear signal there. So 354 00:16:56,560 --> 00:16:59,560 Speaker 10: if we see unemployment rate up to four four four five, 355 00:17:00,080 --> 00:17:02,480 Speaker 10: that's when we think the federal get concerned, and that's 356 00:17:02,560 --> 00:17:06,200 Speaker 10: probably when we'll see most investors more comfortable to step in. 357 00:17:06,960 --> 00:17:08,280 Speaker 1: I'll turn that question back to you. 358 00:17:08,400 --> 00:17:10,240 Speaker 3: I mean, how much do you expect this to really 359 00:17:10,280 --> 00:17:14,639 Speaker 3: turn from supply concerns that have been on the peripheres 360 00:17:14,680 --> 00:17:17,000 Speaker 3: but really aren't center stage. How much will that shift 361 00:17:17,040 --> 00:17:20,200 Speaker 3: immediately the second we get some sort of pessimistic print 362 00:17:20,240 --> 00:17:20,760 Speaker 3: in the data. 363 00:17:21,119 --> 00:17:23,280 Speaker 4: Well, I think we have to be very careful around 364 00:17:23,280 --> 00:17:25,560 Speaker 4: the labor market because this is a place where to 365 00:17:25,600 --> 00:17:28,240 Speaker 4: this point it's been holding strong, and in fact, we've 366 00:17:28,240 --> 00:17:30,919 Speaker 4: seen companies continue to hold onto their workforce to not 367 00:17:31,000 --> 00:17:33,000 Speaker 4: really engage in widespread layoffs. 368 00:17:33,119 --> 00:17:34,680 Speaker 1: But when you peel back the surface. 369 00:17:34,440 --> 00:17:36,560 Speaker 4: Much like if you're peeling back the labor market report, 370 00:17:36,840 --> 00:17:39,439 Speaker 4: you do find that there are pockets of companies that 371 00:17:39,480 --> 00:17:41,960 Speaker 4: have been trimming on the margin or this is something 372 00:17:41,960 --> 00:17:45,080 Speaker 4: else I've been watching really closely, have been have stopped 373 00:17:45,080 --> 00:17:48,760 Speaker 4: filling their open requisitions you know, lots of job openings, 374 00:17:49,119 --> 00:17:51,600 Speaker 4: but whether it's a CEO or the CFO or some 375 00:17:51,800 --> 00:17:54,720 Speaker 4: HR manager saying you're going to hold off there, I 376 00:17:54,720 --> 00:17:59,200 Speaker 4: mean that on balance shakes people's confidence in the labor 377 00:17:59,240 --> 00:18:02,360 Speaker 4: market and their future earnings. And so if that then 378 00:18:02,720 --> 00:18:05,200 Speaker 4: you know, feeds through into consumer spending and these I mean, 379 00:18:05,560 --> 00:18:10,000 Speaker 4: there could be this sort of slow moving domino effect 380 00:18:10,440 --> 00:18:12,199 Speaker 4: impacting growth in the second half of the year. 381 00:18:12,240 --> 00:18:13,720 Speaker 1: And that's kind of what I'm watching and. 382 00:18:13,680 --> 00:18:15,159 Speaker 5: That's just hard to wrap my head around. And I 383 00:18:15,200 --> 00:18:17,439 Speaker 5: assume that has to just make your job, Molly, just 384 00:18:17,480 --> 00:18:18,520 Speaker 5: a lot harder. 385 00:18:19,000 --> 00:18:22,400 Speaker 10: Definitely makes it more interesting seeing how does this pass 386 00:18:22,400 --> 00:18:25,800 Speaker 10: through pass through come through. We saw soft data versus 387 00:18:25,800 --> 00:18:28,320 Speaker 10: hard data, the whole debate on does soft data turn 388 00:18:28,359 --> 00:18:32,080 Speaker 10: into hard data. We're seeing kind of weakening in different 389 00:18:32,119 --> 00:18:34,720 Speaker 10: areas of the labor market to your point, that are 390 00:18:34,760 --> 00:18:38,440 Speaker 10: maybe not the traditional headline payrolls, and so it's when 391 00:18:38,480 --> 00:18:41,320 Speaker 10: does this hit these big numbers that then kind of 392 00:18:41,520 --> 00:18:45,080 Speaker 10: scares the market into rallying a little bit sharper and 393 00:18:45,119 --> 00:18:46,399 Speaker 10: pricing and more fed cuts. 394 00:18:46,640 --> 00:18:49,000 Speaker 3: Mollybrooks of TD Securities, thank you so much for being 395 00:18:49,000 --> 00:19:01,119 Speaker 3: with us. Volliedbrooks down we give this hour with stocks 396 00:19:01,160 --> 00:19:03,919 Speaker 3: hire after posting back to back gains. Jim Karen of 397 00:19:03,960 --> 00:19:08,600 Speaker 3: Morgan Stanley writing this, we have rebalanced by increasing equity exposures, 398 00:19:08,680 --> 00:19:11,359 Speaker 3: not just in the United States, but also Europe. Our 399 00:19:11,440 --> 00:19:14,840 Speaker 3: highest conviction overweight. Jim joins us Now, Jim, thank you 400 00:19:14,840 --> 00:19:15,640 Speaker 3: so much for being here. 401 00:19:15,680 --> 00:19:16,720 Speaker 6: Thank you, and good morning to both of you. 402 00:19:16,880 --> 00:19:19,320 Speaker 3: Morton, Well, it's a real question here going forward about 403 00:19:19,400 --> 00:19:21,840 Speaker 3: how much this long Europe trade was just a trade 404 00:19:21,880 --> 00:19:24,159 Speaker 3: or whether it's something that actually can stick. 405 00:19:24,640 --> 00:19:26,520 Speaker 1: You're making the argument, even. 406 00:19:26,280 --> 00:19:28,800 Speaker 3: With the recent gains in the US, you would still 407 00:19:28,840 --> 00:19:30,879 Speaker 3: be a buyer of Europe over what we've seen. 408 00:19:31,400 --> 00:19:33,600 Speaker 11: Yeah, it's really about balancing. So it's not that we 409 00:19:33,640 --> 00:19:36,000 Speaker 11: don't like the US. We just think that Europe has 410 00:19:36,040 --> 00:19:39,280 Speaker 11: a higher risk adjustice return profile. They've got fiscal stimulus, 411 00:19:39,320 --> 00:19:42,400 Speaker 11: they've got monetary stimulus, they seem to have their inflation 412 00:19:42,840 --> 00:19:44,280 Speaker 11: a bit more under control. 413 00:19:44,720 --> 00:19:46,000 Speaker 6: Plus a lot of. 414 00:19:45,880 --> 00:19:47,880 Speaker 11: The investment and a lot of the money that's being 415 00:19:48,000 --> 00:19:51,800 Speaker 11: put through through whether it's the defense spending or it's 416 00:19:51,840 --> 00:19:54,960 Speaker 11: through infrastructure spending. All of this is actually a positive 417 00:19:55,119 --> 00:19:57,840 Speaker 11: for them. And essentially we also have to recognize that 418 00:19:57,880 --> 00:20:02,840 Speaker 11: their valuations They're a large ca value area for the markets. 419 00:20:03,080 --> 00:20:06,400 Speaker 11: People are trying to diversify their portfolios from large cap 420 00:20:06,440 --> 00:20:10,600 Speaker 11: growth and tech into something like large cap value. Europe 421 00:20:10,680 --> 00:20:14,600 Speaker 11: is actually the poster child for that in our view. Plus, 422 00:20:14,680 --> 00:20:17,399 Speaker 11: you get to invest in an asset whose currency is 423 00:20:17,440 --> 00:20:19,800 Speaker 11: appreciating relatives to the dollar, so you get a tailwind. 424 00:20:19,840 --> 00:20:21,360 Speaker 3: Okay, I want to pick up on that because we've 425 00:20:21,359 --> 00:20:23,639 Speaker 3: been talking to your colleagues over the past couple of days, 426 00:20:23,680 --> 00:20:25,400 Speaker 3: and this is the point that I think is fascinating. 427 00:20:25,480 --> 00:20:29,679 Speaker 3: Morgan Stanley sees everything rallying except for the dollar. This 428 00:20:29,760 --> 00:20:31,919 Speaker 3: idea that you could see rates rally and even in 429 00:20:31,960 --> 00:20:35,639 Speaker 3: the US, you could see equities rally, even in the US, 430 00:20:35,760 --> 00:20:38,800 Speaker 3: but the dollar is going to be the continuing weakest 431 00:20:38,880 --> 00:20:40,080 Speaker 3: person in the boat. 432 00:20:40,119 --> 00:20:42,439 Speaker 1: And I'm just wondering, at what point that. 433 00:20:42,400 --> 00:20:44,920 Speaker 3: Really is the entire trade that you're talking about here. 434 00:20:44,920 --> 00:20:47,080 Speaker 3: It's a currency play more than anything else. 435 00:20:47,640 --> 00:20:51,480 Speaker 11: So I would say it's a rebalancing, it's a global rebalancing. 436 00:20:51,560 --> 00:20:53,840 Speaker 11: So if we look at the Fed's broad nominal trade 437 00:20:53,840 --> 00:20:57,640 Speaker 11: weighted Dollar Index, the dollar has appreciated in value since 438 00:20:57,680 --> 00:20:59,880 Speaker 11: twenty ten to the end of twenty twenty four by 439 00:21:00,119 --> 00:21:04,320 Speaker 11: forty percent four zero percent. So essentially the rest of 440 00:21:04,320 --> 00:21:06,680 Speaker 11: the world became overweight US assets. They had to buy 441 00:21:06,800 --> 00:21:09,879 Speaker 11: US dollars in order to do that. Now you have 442 00:21:09,920 --> 00:21:12,119 Speaker 11: growth coming in other parts of the world. This is 443 00:21:12,160 --> 00:21:15,760 Speaker 11: the rebalancing what that means. And we're doing it too right. 444 00:21:15,800 --> 00:21:19,479 Speaker 11: You know, we are actually overweight European equities, so we 445 00:21:19,520 --> 00:21:22,119 Speaker 11: are seeing other opportunities in other parts of the world. 446 00:21:22,320 --> 00:21:24,320 Speaker 11: The US markets are going to do fine, it's just 447 00:21:24,359 --> 00:21:29,040 Speaker 11: that it's not the only game in town anymore. So ultimately, 448 00:21:29,119 --> 00:21:31,320 Speaker 11: what that means is that if the US has a deficit, 449 00:21:31,359 --> 00:21:34,199 Speaker 11: which it will have a deficit, the dollar needs to 450 00:21:34,240 --> 00:21:37,320 Speaker 11: adjust lower to get foreign capital to come in. So 451 00:21:37,480 --> 00:21:39,840 Speaker 11: all of this is part of a readjustment. It's not 452 00:21:39,880 --> 00:21:43,520 Speaker 11: necessarily a it's not necessarily a bad thing. This is 453 00:21:43,560 --> 00:21:46,959 Speaker 11: a very common, normal readjustment that's taking place, and we 454 00:21:47,000 --> 00:21:47,679 Speaker 11: want to get on this. 455 00:21:48,600 --> 00:21:50,959 Speaker 5: But do you have conviction that it will last? 456 00:21:51,520 --> 00:21:51,840 Speaker 6: I do. 457 00:21:52,200 --> 00:21:54,040 Speaker 11: I think this is a long term thing. I mean, look, 458 00:21:54,080 --> 00:21:57,000 Speaker 11: I mean the dollar rally lasted for about fourteen years 459 00:21:57,440 --> 00:21:59,479 Speaker 11: in the period that I'm talking about, twenty ten to 460 00:21:59,480 --> 00:22:02,880 Speaker 11: twenty four. I think this is a multi year process. 461 00:22:02,880 --> 00:22:05,480 Speaker 11: It's a multi year trade reset, I mean Tarris. We 462 00:22:05,520 --> 00:22:08,280 Speaker 11: all know this is going on too. This is a 463 00:22:08,320 --> 00:22:11,160 Speaker 11: trade rebalance and a trade reset. We get these types 464 00:22:11,200 --> 00:22:14,240 Speaker 11: of cycles every you know, fifteen to twenty years. 465 00:22:14,600 --> 00:22:16,000 Speaker 6: We're just starting one right now. 466 00:22:16,040 --> 00:22:17,800 Speaker 5: But there's a reason why we kind of had that 467 00:22:17,880 --> 00:22:20,520 Speaker 5: advantage here in the US because we were the growth 468 00:22:20,560 --> 00:22:23,639 Speaker 5: story globally. And I get this idea that, Okay, the 469 00:22:23,680 --> 00:22:26,880 Speaker 5: fiscal constraints in Europe are loosening, just a bit of 470 00:22:26,960 --> 00:22:28,639 Speaker 5: China and other parts of the world are going to 471 00:22:28,680 --> 00:22:31,119 Speaker 5: try to sort of fill the void of where the 472 00:22:31,200 --> 00:22:33,280 Speaker 5: US is pulling back. But at the end of the day, 473 00:22:33,320 --> 00:22:35,720 Speaker 5: I'm still not seeing a growth story in Europe, or 474 00:22:35,880 --> 00:22:36,840 Speaker 5: maybe there is one. 475 00:22:37,400 --> 00:22:40,399 Speaker 11: Well I think there is one. I mean, Europe doesn't 476 00:22:40,440 --> 00:22:44,080 Speaker 11: have sectors like large cap tech, right, so you're not 477 00:22:44,160 --> 00:22:46,520 Speaker 11: going to see, you know, a stock go up like 478 00:22:46,520 --> 00:22:49,000 Speaker 11: two hundred percent or something like that like we have 479 00:22:49,040 --> 00:22:51,680 Speaker 11: in our large cap tech spaces. So I think this 480 00:22:51,720 --> 00:22:53,359 Speaker 11: is more of a This is more of like a 481 00:22:53,400 --> 00:22:56,080 Speaker 11: slow grinding move. When I look at pees and I 482 00:22:56,080 --> 00:22:59,280 Speaker 11: look at multiples and valuations, if I look at as 483 00:22:59,400 --> 00:23:01,440 Speaker 11: much as I can and a like for like companies, 484 00:23:01,480 --> 00:23:03,440 Speaker 11: say in the financial industry, a big bank in Europe, 485 00:23:03,480 --> 00:23:06,199 Speaker 11: big bank in the US. The Pe multiple trades at 486 00:23:06,200 --> 00:23:08,240 Speaker 11: about a forty percent discount. And I'm not saying that 487 00:23:08,440 --> 00:23:11,200 Speaker 11: they should be absolutely equal, but what I am saying 488 00:23:11,320 --> 00:23:13,080 Speaker 11: is that that Europe has a lot of catch up. 489 00:23:13,200 --> 00:23:14,640 Speaker 6: It's just going to it's going to be a. 490 00:23:14,560 --> 00:23:19,879 Speaker 11: Slower, stable, lower evall, higher sharp ratio, higher qualitility. 491 00:23:19,640 --> 00:23:20,879 Speaker 5: And it's going to be more than and it's going 492 00:23:20,920 --> 00:23:22,439 Speaker 5: to be more than just defense contractors. 493 00:23:22,600 --> 00:23:24,480 Speaker 11: Yeah, oh yeah, I think so, because what we have 494 00:23:24,480 --> 00:23:28,040 Speaker 11: to understand is that an ecosystem gets created. Once Europe 495 00:23:28,080 --> 00:23:31,720 Speaker 11: decided to spend about close to a trillion euro in stimulus, 496 00:23:31,720 --> 00:23:35,480 Speaker 11: which they did back in February early March. You start 497 00:23:35,520 --> 00:23:38,080 Speaker 11: to develop an ecosystem. You have to develop supply chains, 498 00:23:38,119 --> 00:23:41,880 Speaker 11: you need energy, energy security, you need to reshape your economy, 499 00:23:41,920 --> 00:23:44,320 Speaker 11: you need housing if you're going to build more industry, 500 00:23:44,359 --> 00:23:47,560 Speaker 11: potentially even data centers, so a lot of different There's 501 00:23:47,560 --> 00:23:51,600 Speaker 11: a big ecosystem that's starting, and I think that's underappreciated. 502 00:23:50,760 --> 00:23:51,240 Speaker 6: By the market. 503 00:23:51,359 --> 00:23:53,680 Speaker 3: Let's take a step back, because right now we're talking 504 00:23:53,680 --> 00:23:56,359 Speaker 3: about where is the best place to find value in 505 00:23:56,600 --> 00:24:00,000 Speaker 3: a ship that is undefined, which is the global economy. 506 00:24:00,240 --> 00:24:03,000 Speaker 3: And where we are in terms of the US and 507 00:24:03,040 --> 00:24:07,000 Speaker 3: however we're entering some period of stagflation like behavior, whether 508 00:24:07,040 --> 00:24:10,680 Speaker 3: we're going to have higher inflation and faster growth or 509 00:24:10,720 --> 00:24:13,200 Speaker 3: whether we could see an outright recession, and that really 510 00:24:13,280 --> 00:24:15,600 Speaker 3: matters for all of this in terms of the adjustment 511 00:24:16,280 --> 00:24:17,800 Speaker 3: of portfolio management. 512 00:24:17,840 --> 00:24:19,840 Speaker 1: I just wonder how you're viewing the data. 513 00:24:19,840 --> 00:24:23,160 Speaker 3: We're getting the ADP data just coming up about five 514 00:24:23,200 --> 00:24:26,240 Speaker 3: minutes away, we get the jobs report on Friday. How 515 00:24:26,240 --> 00:24:30,359 Speaker 3: do you view that within this paradigm of understanding? You know, Okay, 516 00:24:30,400 --> 00:24:32,639 Speaker 3: should we shift around a little bit more to duration, 517 00:24:32,720 --> 00:24:34,760 Speaker 3: should we shift a little bit more to risk? 518 00:24:35,320 --> 00:24:38,239 Speaker 11: So, you know, the data has been disappointing to the 519 00:24:38,320 --> 00:24:41,000 Speaker 11: better side of the equation, right, So many people have 520 00:24:41,080 --> 00:24:43,359 Speaker 11: been focusing on We're going to fall off a cliff. 521 00:24:43,359 --> 00:24:44,479 Speaker 6: We're going to fall off a cliff. 522 00:24:44,520 --> 00:24:46,760 Speaker 11: We've been talking about this, the markets have been talking 523 00:24:46,840 --> 00:24:48,879 Speaker 11: about this since twenty twenty three. We're going to have 524 00:24:48,920 --> 00:24:50,600 Speaker 11: a recession. We're going to have a recession. In twenty four, 525 00:24:50,640 --> 00:24:53,080 Speaker 11: We're going to have a recession, and it really hasn't happened. 526 00:24:53,080 --> 00:24:55,320 Speaker 11: So ultimately, what this is really down to is the 527 00:24:55,320 --> 00:24:58,159 Speaker 11: consumer and the jobs report So if you have a 528 00:24:58,160 --> 00:25:01,119 Speaker 11: strong labor market, reason strong, and we saw that from 529 00:25:01,160 --> 00:25:05,000 Speaker 11: the Jold data yesterday, then what you have is a 530 00:25:05,000 --> 00:25:08,520 Speaker 11: consumer that stays relatively robust. You can't really have a 531 00:25:08,560 --> 00:25:12,120 Speaker 11: recession a deprocession in the US unless the consumer rolls over. 532 00:25:12,280 --> 00:25:14,640 Speaker 11: What you end up having is a mid cycle slow down. 533 00:25:14,960 --> 00:25:17,919 Speaker 11: So everything that you're saying matters. There's a lot of uncertainty. 534 00:25:18,160 --> 00:25:20,280 Speaker 11: But look, people were telling me by June we'd have 535 00:25:20,320 --> 00:25:22,439 Speaker 11: empty shelves and stores and things like that. 536 00:25:22,600 --> 00:25:24,520 Speaker 6: It's not here yet. The data. 537 00:25:24,640 --> 00:25:26,840 Speaker 11: I think the jobs data will get a little bit 538 00:25:26,840 --> 00:25:30,000 Speaker 11: worse going forward. That's anticipated. I believe that's going to happen. 539 00:25:30,320 --> 00:25:33,520 Speaker 11: But ultimately, if the confidence in the US in terms 540 00:25:33,560 --> 00:25:36,080 Speaker 11: of the direction that it's going with the economy, I 541 00:25:36,119 --> 00:25:39,600 Speaker 11: think that keeps the confidence alive. And remember, it's deregulation, 542 00:25:40,080 --> 00:25:42,920 Speaker 11: it's tariffs and taxes. We can't focus on any one. 543 00:25:43,119 --> 00:25:45,640 Speaker 11: It's the package that we're focusing on. And right now 544 00:25:45,640 --> 00:25:48,600 Speaker 11: we're hearing the tax component which could be stimulative and 545 00:25:48,640 --> 00:25:51,200 Speaker 11: that could actually be helpful to employment. 546 00:25:52,040 --> 00:25:55,600 Speaker 2: This is the Bloomberg Seventans podcast bringing you the best 547 00:25:55,600 --> 00:25:58,680 Speaker 2: in markets, economics, an gie politics. You can watch the 548 00:25:58,720 --> 00:26:01,720 Speaker 2: show live on Bloomberg Tea weekday mornings from six am 549 00:26:01,840 --> 00:26:05,800 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple, Spotify, 550 00:26:05,960 --> 00:26:08,200 Speaker 2: or anywhere else you listen, and as always, on the 551 00:26:08,200 --> 00:26:10,600 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.