WEBVTT - Bloomberg Surveillance TV: May 23, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.920 Terminal and the Bloomberg Business App. Jim biancov Bianco Research 0:00:38.000 --> 0:00:40.120 joins us now for more. Jim, Welcome to the program Sir. 0:00:40.440 --> 0:00:42.680 I was hoping for a quiet weekend. We're not getting 0:00:42.680 --> 0:00:44.280 one going into this open and bow. We've got a 0:00:44.280 --> 0:00:47.400 thread against Europe, a threat against Apple. Out of the 0:00:47.440 --> 0:00:49.240 two of those, what do you think is more important 0:00:49.240 --> 0:00:50.160 to this market this morning? 0:00:50.240 --> 0:00:54.080 Jim, Oh, I think it's probably Europe because it's a 0:00:54.120 --> 0:00:57.520 bigger market and encompasses more goods. So we're back to 0:00:57.600 --> 0:01:00.800 tariffs on and terrify on. I think is going to 0:01:00.800 --> 0:01:02.680 be an interesting way for the market to. 0:01:02.640 --> 0:01:04.400 Try and navigate this. 0:01:05.120 --> 0:01:08.360 Does that mean that we're going to see weakness because 0:01:08.400 --> 0:01:11.199 we're going to have higher prices, or is it because 0:01:11.200 --> 0:01:14.240 we're going to have higher prices? Which one is going 0:01:14.280 --> 0:01:15.760 to be the dominant factor? 0:01:15.840 --> 0:01:16.120 Now? 0:01:16.920 --> 0:01:19.720 When we turn it to the Federal Reserve, they usually 0:01:19.760 --> 0:01:21.680 are focused, I think on more on prices. 0:01:21.720 --> 0:01:23.199 And I think that's the thing. 0:01:23.080 --> 0:01:24.639 That a lot of people on Wall Street are missing, 0:01:24.920 --> 0:01:27.679 is that all things being equal, if tariffs are coming 0:01:27.760 --> 0:01:31.360 back and prices are going up, and that might be weakness. 0:01:31.720 --> 0:01:33.080 The Fed's not going to cut rates. 0:01:33.400 --> 0:01:35.960 They're not going to cut rates until they see their 0:01:36.120 --> 0:01:38.759 prices have stabilized, and right now we might be looking 0:01:38.760 --> 0:01:39.440 at more inflation. 0:01:39.640 --> 0:01:41.600 So, Jim, that takes important because I want to take 0:01:41.600 --> 0:01:43.080 you over to the move of the bond market off 0:01:43.120 --> 0:01:46.520 the back of this news. Yields are lower across the curve, 0:01:46.720 --> 0:01:49.280 with down eight basis points at the front end three 0:01:49.440 --> 0:01:51.360 ninety one. I know we're not breaking down to the 0:01:51.400 --> 0:01:53.560 new range, the range of the last several months, but 0:01:53.600 --> 0:01:56.480 still yields are falling back the ten years down by 0:01:56.480 --> 0:02:00.000 six basis points full forty seven. What your to respond 0:02:00.160 --> 0:02:02.480 to be to that early move, given that you think 0:02:02.480 --> 0:02:04.960 this ends up with more inflation down the road. 0:02:05.880 --> 0:02:08.120 Well, you know that's a knee jerk response to the 0:02:08.120 --> 0:02:09.120 stock market falling. 0:02:09.240 --> 0:02:12.480 I think what we're seeing right now on this move. 0:02:12.560 --> 0:02:14.880 But if you were to back up and go back 0:02:14.919 --> 0:02:18.560 to you know, when we started talking about tariffs, there's 0:02:18.600 --> 0:02:20.600 been a trend higher in yields, and. 0:02:20.600 --> 0:02:22.679 The trend higher in yields is really. 0:02:22.400 --> 0:02:26.600 About as things settle down, we're looking at higher prices. 0:02:27.040 --> 0:02:29.160 You know, as I'd like to argue, you know, if 0:02:29.200 --> 0:02:31.360 you look at the tariffs that were collected in April, 0:02:31.760 --> 0:02:34.800 that was one in three quarters percent increase on the 0:02:34.800 --> 0:02:37.560 four hundred billion dollars of goods. That's an extra seven 0:02:37.560 --> 0:02:39.320 and a half billion dollars of tariffs in April, one 0:02:39.360 --> 0:02:41.400 and three quarter percent on the fourhundred billion dollars of 0:02:41.400 --> 0:02:43.560 goods that we collect that we imported in April. 0:02:43.560 --> 0:02:46.320 Who's paying that? Somebody's got to be paying that now. 0:02:46.320 --> 0:02:48.520 The President wants us to believe it's going to be 0:02:48.560 --> 0:02:51.720 Walmart and Apple eating those tariffs, and maybe the Chinese. 0:02:52.120 --> 0:02:54.240 But if you look at numbers like true inflation and 0:02:54.320 --> 0:02:57.200 price stats and stuff, which are these millions of prices 0:02:57.280 --> 0:02:59.880 that they check on the internet, prices are going up. 0:03:00.120 --> 0:03:02.440 The prices are going up for the consumer, and I 0:03:02.480 --> 0:03:06.400 think as that continues to happen, that reality is going 0:03:06.400 --> 0:03:09.120 to drive the bond market more than a weakness reality. 0:03:09.320 --> 0:03:11.080 One thing that we've been talking about throughout the morning 0:03:11.120 --> 0:03:13.240 Gym is if this is not isolated to the United 0:03:13.240 --> 0:03:14.960 States when it comes to the yield move and some 0:03:15.000 --> 0:03:18.080 of these inflation concerns, how much is this applicable in 0:03:18.200 --> 0:03:21.919 terms of a broader inflation globally in developed markets? 0:03:22.000 --> 0:03:24.280 That leads bonds globally. 0:03:24.160 --> 0:03:26.520 To be less attractive in the same kind of way 0:03:26.840 --> 0:03:30.320 as they were traditionally for a price action, albeit more 0:03:30.320 --> 0:03:31.960 attractive from a yield perspective. 0:03:32.880 --> 0:03:33.920 Oh, I think you're right. 0:03:33.960 --> 0:03:38.160 It does affect the all bonds worldwide, especially developed markets, 0:03:38.200 --> 0:03:41.640 because the tariffs are pushing all these markets to do 0:03:41.720 --> 0:03:44.840 trade deals. You have done a trade deal as well, 0:03:45.200 --> 0:03:48.280 and so what we're seeing is the opposite of globalization, 0:03:48.600 --> 0:03:51.360 which I've become aware is now the word is segmentation. 0:03:51.840 --> 0:03:55.440 So we've got a segmentation coming in global trade, and 0:03:55.480 --> 0:03:57.840 that's going to just add frictions and add more costs, 0:03:57.920 --> 0:04:00.480 and those costs are going to show up as elevated 0:04:00.560 --> 0:04:02.920 or sticky inflation, and that's going to start to impact 0:04:03.000 --> 0:04:05.840 all bond markets, and it has been because if you 0:04:05.880 --> 0:04:08.440 look over the last month or so, develop world bond 0:04:08.480 --> 0:04:12.480 markets have been going higher. The one exception has been China, 0:04:12.560 --> 0:04:15.400 where their interest rates have been moving lower. But their 0:04:15.440 --> 0:04:20.080 economy is in such an alarming shape right now that 0:04:20.160 --> 0:04:23.600 you can almost argue that even with these higher inflationary 0:04:23.680 --> 0:04:26.640 numbers that we have, their economy is more being driven 0:04:26.720 --> 0:04:28.839 by growth than it is being driven by prices. 0:04:29.040 --> 0:04:31.080 I'm struck by the fact that the bond yield move 0:04:31.400 --> 0:04:34.279 is not special to the United States. It is something 0:04:34.279 --> 0:04:36.919 that is global and developed markets. The move, though, in 0:04:36.960 --> 0:04:39.640 the dollar is distinct, and it is raising a lot 0:04:39.640 --> 0:04:42.000 of concern that this could be the biggest casualty of 0:04:42.040 --> 0:04:44.640 some of the trade disagreements. We are seeing a bit 0:04:44.680 --> 0:04:47.480 of a strengthening in the dollar off the heels of 0:04:47.520 --> 0:04:50.680 this news with respect to potentially higher tariffs on Europe. 0:04:51.000 --> 0:04:54.000 I just wonder whether you think that this weaker dollar 0:04:54.080 --> 0:04:56.840 theme is going to persist even if you do get 0:04:57.160 --> 0:05:00.600 some serious, significant increases to tariffs some of the trading 0:05:00.640 --> 0:05:02.919 partners in the US at a time when a lot 0:05:02.960 --> 0:05:05.799 of people have shrugged off some of what these proposals 0:05:05.839 --> 0:05:06.160 could do. 0:05:07.279 --> 0:05:09.000 Well, yeah, I do I do think that the weaker 0:05:09.080 --> 0:05:11.080 dollar would persist for a couple of reasons. One, I 0:05:11.080 --> 0:05:14.040 think it's what the administration wants it doesn't or it's 0:05:14.080 --> 0:05:16.360 the least. It's not going to complain about a weeker dollar. 0:05:16.440 --> 0:05:20.080 And the weeker dollar isn't really bringing around talk about 0:05:20.080 --> 0:05:22.279 the end of dollar dominance or the reserve currency. It 0:05:22.279 --> 0:05:25.360 shouldn't because there isn't a alternative to it. 0:05:25.640 --> 0:05:27.160 So they want it. 0:05:27.240 --> 0:05:30.040 And the second thing is, if you've watched the currency 0:05:30.040 --> 0:05:33.880 markets long enough, you'll realize that when these things trend, 0:05:34.000 --> 0:05:37.520 they trend much further and much longer than everybody thinks. 0:05:37.520 --> 0:05:40.640 Whenever you think the dollar is overbought or over sold, 0:05:41.000 --> 0:05:42.839 the joke is way. Do you see how or overbought 0:05:42.880 --> 0:05:45.599 or oversold it's about to get? And right now it 0:05:45.680 --> 0:05:48.159 is trending lower. And I suspect that over the next 0:05:48.200 --> 0:05:50.880 several weeks or a few months that that's going to continue, 0:05:50.880 --> 0:05:53.320 even if we get higher rates, even if we get 0:05:53.360 --> 0:05:57.279 a widening of spreads to say Europe or something like that. 0:05:56.600 --> 0:05:58.919 It's that hasn't been working right. 0:05:58.760 --> 0:05:59.599 Now, Jim. 0:05:59.640 --> 0:06:01.719 I just want to finish on the equity coll the 0:06:01.720 --> 0:06:04.520 equity market. There is a plainbook here, the president comes 0:06:04.520 --> 0:06:08.640 out and tries to anchor negotiations with extremes. Come out 0:06:08.640 --> 0:06:10.760 and say you're going to face a fifty percent tariff 0:06:11.080 --> 0:06:13.320 on June one. You've not been great to deal with. 0:06:13.920 --> 0:06:16.880 Just the same playbook that applied to China applied to Europe. 0:06:17.240 --> 0:06:19.240 Is this different? Have we exhausted that? 0:06:19.320 --> 0:06:21.720 Because there will be a lot of people out there thinking, okay, 0:06:21.839 --> 0:06:23.880 equity features of Gambler, I'm going to buy that. 0:06:23.920 --> 0:06:26.039 I've seen this movie before. Is this different? 0:06:27.279 --> 0:06:28.120 I mean it could be. 0:06:28.279 --> 0:06:30.400 I mean, you know, the biggest issue I think that 0:06:30.560 --> 0:06:34.400 Wall Street's been struggling with is our tariff's leverage to 0:06:34.440 --> 0:06:37.400 get a deal or our tariff's revenue. If they're leveraged, 0:06:37.440 --> 0:06:39.520 I think most people on Wall Street be fine with 0:06:39.600 --> 0:06:41.880 that to get a deal, you know, to use them 0:06:42.000 --> 0:06:45.240 as leverage to lower tariffs, open up trade. But are 0:06:45.240 --> 0:06:48.880 they a form of attacks on foreigners to try and 0:06:48.960 --> 0:06:52.159 raise revenue. That has been the bigger issue that we've 0:06:52.160 --> 0:06:54.960 been trying to struggle with. When it comes to Europe, 0:06:55.839 --> 0:06:58.880 I think most people think it's more in the leverage camp, 0:06:59.320 --> 0:07:02.800 and therefore this is just a negotiating play. When it 0:07:02.800 --> 0:07:05.359 comes to China, I think more people are worried that 0:07:05.440 --> 0:07:08.039 it's in the revenue camp and it's more than just 0:07:08.080 --> 0:07:10.280 a leverage play. So that's why I think that when 0:07:10.320 --> 0:07:12.600 it comes to Europe, it's going to probably be viewed 0:07:12.640 --> 0:07:15.320 as a leverage play to try to get a deal 0:07:15.400 --> 0:07:16.720 done sooner rather than later. 0:07:17.000 --> 0:07:19.320 Jim, I appreciate your time, sir as always is going 0:07:19.360 --> 0:07:32.440 to say a Jimpianco, the of Bianco Research, Nati level 0:07:32.440 --> 0:07:35.280 of ups down grunting US anquities to neutral, writing we 0:07:35.360 --> 0:07:39.360 see limited upside near term and expend continued volatility as 0:07:39.400 --> 0:07:42.480 trade in the US fiscal uncertainty remain high. Nadia joins 0:07:42.520 --> 0:07:44.560 us now for more, Natia, good morning, Good morning. How 0:07:44.560 --> 0:07:46.440 good does it feel not to defend an overweight gun 0:07:46.440 --> 0:07:47.120 into the weekend? 0:07:47.680 --> 0:07:48.920 You know, it never. 0:07:48.760 --> 0:07:51.400 Feels good when markets are down, but you know, this 0:07:51.600 --> 0:07:54.000 is some of the issues that we were struggling with 0:07:54.080 --> 0:07:56.440 last week and we were concerned about. As Lisa said, 0:07:56.480 --> 0:07:59.400 we'll past peak on certainty, but there was still uncertainty 0:07:59.520 --> 0:08:04.560 still high, and that's why we downgraded US equities last week. Now, 0:08:04.600 --> 0:08:07.760 we had been attractive view on US equities in April. 0:08:07.840 --> 0:08:11.920 We took that opportunity right after the ninety day pause, 0:08:12.240 --> 0:08:14.960 but after being up thirteen percent in a month, we 0:08:15.120 --> 0:08:18.040 just thought that the versual war was balanced. And yes, 0:08:18.240 --> 0:08:20.360 you know, the effective tower for it has come down 0:08:20.360 --> 0:08:22.960 from twenty five percent to fifteen percent, but it feels 0:08:22.960 --> 0:08:25.160 like a lot of the good news is already praised 0:08:25.160 --> 0:08:27.080 it and this risk for it to go higher than 0:08:27.080 --> 0:08:28.480 the fifteen percent it is currently. 0:08:28.560 --> 0:08:31.960 Obviously, price action, as you know, can condition behavior. I 0:08:32.000 --> 0:08:34.040 just wonder how many investors have been conditioned by the 0:08:34.080 --> 0:08:38.840 experience of April big dislocation. Then things suffer and markets 0:08:38.920 --> 0:08:41.880 rip and you can miss out really quickly, and we 0:08:41.920 --> 0:08:43.840 saw that early this week we had this small dip 0:08:43.840 --> 0:08:45.560 of the back of a down grade. Dip gets bought, 0:08:45.920 --> 0:08:48.240 and I just wondered, from your perspective, whether this dip 0:08:48.640 --> 0:08:50.160 is going to be brought too. Because people have got 0:08:50.160 --> 0:08:52.280 the plane book from April, maybe they're comfortable with it. 0:08:52.559 --> 0:08:55.320 We know that the president likes to wank negotiations to 0:08:55.360 --> 0:08:58.040 the extreme, comes out and says to Europe, make a move, 0:08:58.080 --> 0:09:00.320 otherwise you're going to get a fifty percent tariff equity 0:09:00.320 --> 0:09:03.240 markets post back. Would you suggest people be more careful 0:09:03.400 --> 0:09:05.480 this time around or do the same rule still apply? 0:09:06.200 --> 0:09:09.160 Yeah, we are looking for our opportunities to buy dip. 0:09:09.240 --> 0:09:11.480 You know, one percent two percent down is not much 0:09:11.520 --> 0:09:12.920 of a dip for us. If we see a five 0:09:12.960 --> 0:09:16.160 percent down, that's a different conversation. At the same time, 0:09:16.160 --> 0:09:18.360 we also have equity valuations that have recovered. 0:09:18.400 --> 0:09:20.239 We're at twenty one times forward. 0:09:20.080 --> 0:09:22.960 Pe, you know, above the five year average, so there's 0:09:23.080 --> 0:09:25.480 very little room here. And at the end of the day, 0:09:25.559 --> 0:09:27.760 we know that it's earnings over the longer term that 0:09:27.800 --> 0:09:30.440 would drive markets, and we think that the consensus earning 0:09:30.559 --> 0:09:33.520 is still too hot nine percent from consensus this year. 0:09:33.559 --> 0:09:36.040 We think it needs to come down closer to four percent. 0:09:36.240 --> 0:09:38.839 So we're also waiting for just more clarity around what 0:09:38.880 --> 0:09:41.520 the tariff policies will eventually look like. You know, we 0:09:41.559 --> 0:09:44.319 thought that ninety day pause will take us to July obviously, 0:09:44.640 --> 0:09:48.000 now it's you know, potentially June first. And remember we 0:09:48.120 --> 0:09:51.640 still have the sectorial tariffs to come on the five 0:09:51.720 --> 0:09:57.000 critical sectors, you know, farmer, semis, lumber, copper, and critical minerals, 0:09:57.240 --> 0:09:59.480 and we're not sure what those exactly a gonna look like. 0:09:59.600 --> 0:10:01.480 Is a twenty five percent of is it something higher? 0:10:02.200 --> 0:10:04.400 I'm looking at your base case, it's six thousand in 0:10:04.480 --> 0:10:06.920 terms of year end for SP five hundred, the bull 0:10:06.960 --> 0:10:10.760 case is sixty seven hundred, the barecase is forty five hundred. 0:10:11.200 --> 0:10:12.280 What could get you. 0:10:12.400 --> 0:10:15.040 To feel like one or the other is the more 0:10:15.200 --> 0:10:16.120 likely tail risk? 0:10:16.640 --> 0:10:19.640 It depends on what happens, you know, after this ninety 0:10:19.720 --> 0:10:22.680 day pause or something even children and not obviously now 0:10:22.720 --> 0:10:25.920 if we see you know, a re escalation and those 0:10:25.920 --> 0:10:29.000 reciprocal tires get put on even at a higher rate, 0:10:29.280 --> 0:10:31.000 you know, that is going to have a huge drag 0:10:31.040 --> 0:10:33.079 on the economy, and that puts us closer to a 0:10:33.200 --> 0:10:36.360 recessionary scenario that would get us to that forty five hundred. 0:10:36.520 --> 0:10:38.880 What could get us up to that sixty seven hundred? 0:10:39.040 --> 0:10:41.240 Right now? There are legal challenges we know, you know, 0:10:41.400 --> 0:10:44.880 you have Oregon versus Trump, you have you know, Vos 0:10:45.520 --> 0:10:48.040 versus Trump, And there could be a decision in the 0:10:48.120 --> 0:10:52.040 next couple of weeks, potentially an injunction that will challenge, 0:10:52.080 --> 0:10:54.320 you know, do use of IEPA for these broad based 0:10:54.360 --> 0:10:56.480 tires and the market isn't price for that, So you 0:10:56.480 --> 0:10:58.160 could see some of that. But that's not to say 0:10:58.200 --> 0:10:59.960 that that's going to be the end of story, because 0:11:00.040 --> 0:11:02.120 there's always a Supreme Court, and that could be taken 0:11:02.120 --> 0:11:04.720 to the Supreme Court and be reversed. But that's what 0:11:04.760 --> 0:11:07.680 could get us to that sixty six sixty seven hundred 0:11:07.960 --> 0:11:11.840 if we get any sort of rollback, even the baseline. 0:11:11.440 --> 0:11:13.680 Towers who is trading every day, And I asked this 0:11:13.760 --> 0:11:15.360 because there are so many people who come out with 0:11:15.360 --> 0:11:18.040 these conspiracy theories. It's the retail trader on the margin 0:11:18.160 --> 0:11:20.679 that's creating the buy the dip mentality, and everybody else 0:11:20.760 --> 0:11:22.600 is just following them. It's the hedge funds that are 0:11:22.640 --> 0:11:25.640 causing the volatility in the bond market. I mean, is 0:11:25.679 --> 0:11:28.400 there truth to that that there are these technical underpinnings 0:11:28.440 --> 0:11:30.600 that are just whipsawing everything and that we're the ones 0:11:30.600 --> 0:11:32.040 here trying to make a narrative. 0:11:31.720 --> 0:11:32.240 Out of it. 0:11:32.360 --> 0:11:33.880 There is a little bit of that, and there's also 0:11:33.880 --> 0:11:36.240 systematics as well that are in the market, you know, 0:11:36.360 --> 0:11:39.319 and you know when you see spiking volatilities, those funds 0:11:39.320 --> 0:11:41.480 have to also respond to us. So there's some of that. 0:11:41.720 --> 0:11:43.720 You know, the retail investors have been in and out 0:11:43.720 --> 0:11:45.959 of the market. I think the retail investors right now 0:11:46.000 --> 0:11:47.600 is a little bit more hesitant to sort of by 0:11:47.679 --> 0:11:51.000 the dip, and so that's what that's that's at the 0:11:51.080 --> 0:11:52.560 end of the day, it's the flows that are driving 0:11:52.600 --> 0:11:54.800 the near term volatility in the market. But I think 0:11:54.840 --> 0:11:57.679 the real money is still trying to assess, you know, 0:11:57.760 --> 0:11:59.559 what economic growth is going to look like. 0:11:59.600 --> 0:12:00.480 In a second and half. 0:12:00.720 --> 0:12:02.840 We think that you will see the economy slow close 0:12:02.880 --> 0:12:05.640 to a one and a half percent, so again not recessionary. 0:12:06.040 --> 0:12:10.120 But again, although the range of outcome have narrowed, you know, 0:12:10.160 --> 0:12:12.079 it still can end up to be flat growth or 0:12:12.120 --> 0:12:14.320 it could be one and a half percent, depending on 0:12:14.400 --> 0:12:18.520 trade policies and the president's tweets. 0:12:18.760 --> 0:12:22.119 Nadia, Just finally, just before you go within that defensive 0:12:22.160 --> 0:12:24.520 posture you have relative to where you were before, what 0:12:24.559 --> 0:12:27.360 do you like inequities? What's the favorite sector at the moment? 0:12:27.400 --> 0:12:30.000 Look, we still continue to like tech. We've seen a rebound, 0:12:30.080 --> 0:12:33.520 but I would say tech excluding Apple is in a 0:12:33.040 --> 0:12:35.920 better place than it was back in February when it 0:12:36.000 --> 0:12:36.720 was at its high. 0:12:36.800 --> 0:12:37.000 Why. 0:12:37.120 --> 0:12:40.360 We've seen, you know, the pause on the China Yours tariff. 0:12:40.400 --> 0:12:46.480 We've seen a rollback of the AI diffusion rule that 0:12:46.520 --> 0:12:50.080 was supposed to going to affect last week, and so 0:12:50.200 --> 0:12:51.079 we also see. 0:12:50.880 --> 0:12:52.280 A pickup in capex spending. 0:12:52.320 --> 0:12:54.120 Look at all the deals that have been announced, you know, 0:12:54.160 --> 0:12:57.640 around Sovereign's KAPEC spend spending an AI. So we think 0:12:57.679 --> 0:13:00.319 that the outlook for tech has actually improved than it 0:13:00.520 --> 0:13:01.800 was just a few weeks ago. 0:13:01.920 --> 0:13:03.640 Now, dear, I appreciate your time. You knew what the 0:13:03.640 --> 0:13:16.079 follow up would be, then't you. Apple Souse the advisory 0:13:16.120 --> 0:13:19.280 Group down grounding Deck is outdoor to market perform, noting 0:13:19.320 --> 0:13:22.720 the company's lack of visibility around tariffs A stick with 0:13:22.760 --> 0:13:25.840 retail Dania TOUSEI wank In on the mixed earning season, writing, 0:13:25.880 --> 0:13:29.360 a consistent narrative across retailers and brands is that higher 0:13:29.400 --> 0:13:32.600 costs will be passed on to consumers. Dania joins us 0:13:32.600 --> 0:13:34.200 now for more. Donnicot Sea, good morning. 0:13:34.080 --> 0:13:35.320 Nice to see you, Thank you for having me. 0:13:35.360 --> 0:13:37.440 Do you seeing that across the industry? Are there any 0:13:37.480 --> 0:13:40.000 bright spots where they're able to withstand this shock? 0:13:40.440 --> 0:13:43.040 You've seen some companies being able to withstand the shock, 0:13:43.280 --> 0:13:46.679 whether it's Ralph Lauren and a tapestry. Brand leaders are 0:13:46.679 --> 0:13:50.240 making the difference with product innovation, but most others the 0:13:50.280 --> 0:13:53.280 impact of tariffs is uncertain in terms of the magnitude 0:13:53.559 --> 0:13:57.560 and also the acceptance of price increases. By consumers, because 0:13:57.600 --> 0:13:59.400 at the end of the day, retail is are going 0:13:59.440 --> 0:14:01.680 to have to raise prices with these types of teriffs. 0:14:01.800 --> 0:14:04.640 We were talking after Walmart or released to earnings and 0:14:04.679 --> 0:14:06.760 came out saying that because of tariffs they might have 0:14:06.800 --> 0:14:09.680 to increase prices, and said maybe this gives actually a 0:14:09.720 --> 0:14:12.560 cart blaunche to other companies to say, we too are 0:14:12.640 --> 0:14:15.240 getting affected by tariffs, are going to have to raise prices. 0:14:15.679 --> 0:14:18.800 Are you surprised we haven't seen that more or that 0:14:18.960 --> 0:14:22.200 companies have been sort of chastened, in your view by 0:14:22.240 --> 0:14:25.320 what happened subsequently with respect to a response from the president. 0:14:25.840 --> 0:14:29.000 I think no company has the scale or the attention 0:14:29.120 --> 0:14:32.240 of the president like Walmart does. It's the biggest one 0:14:32.240 --> 0:14:35.560 out there. Most of the other companies are now saying 0:14:35.920 --> 0:14:39.240 what the impact of tariffs could be or the magnitude 0:14:39.320 --> 0:14:42.040 of what the cost will be. They're not saying what 0:14:42.080 --> 0:14:44.480 the price increase will be and how much it will be. 0:14:44.720 --> 0:14:46.640 But what they are saying is that the second half 0:14:46.680 --> 0:14:49.040 of the year, we don't know how our customer is 0:14:49.080 --> 0:14:51.760 going to react to price increases. For the most part, 0:14:51.840 --> 0:14:54.800 retailer is going to raise prices, not on every good, 0:14:54.840 --> 0:14:57.360 but on a select amount of goods, and that is 0:14:57.480 --> 0:15:00.960 drawing concern about a slowdown in in terms of consumer 0:15:01.000 --> 0:15:04.040 spending in the back half because will consumers pay or 0:15:04.040 --> 0:15:04.800 will they not pay? 0:15:05.040 --> 0:15:08.360 Companies are spending so much time thinking about how to communicate. 0:15:08.680 --> 0:15:11.400 They're going into NX season almost unbothered by what the 0:15:11.480 --> 0:15:13.120 numbers look like in the quarter and trying to work 0:15:13.160 --> 0:15:15.240 out how to communicate what the next quarter might look like, 0:15:15.440 --> 0:15:18.880 the year ahead. Dual guidance, Cut the guidance, pull the guidance, 0:15:18.960 --> 0:15:22.360 keep the guidance. Who's approached this in the optimal way? 0:15:22.360 --> 0:15:24.880 From your standpoint, who would you like to celebrate? Who 0:15:24.880 --> 0:15:26.840 do you think has done the better job this quarter? 0:15:26.920 --> 0:15:29.520 Well, like I said, I mean Ralph Lauren and Tapestry 0:15:29.560 --> 0:15:31.840 both have done a very good job given they were 0:15:31.880 --> 0:15:34.920 able to talk about what's happening with their pricing now, 0:15:35.240 --> 0:15:38.240 what the consumer acceptance is. When you think who else 0:15:38.560 --> 0:15:42.080 TJX has done a very good job. Also, most companies 0:15:42.120 --> 0:15:45.360 are talking about how sales are here and now, not 0:15:45.480 --> 0:15:48.480 just the first quarter, because to your point, it's almost 0:15:48.520 --> 0:15:52.680 like revenues and business in the first quarter is divorced 0:15:52.720 --> 0:15:55.400 from what's happening now. It's like you said, it's a 0:15:55.440 --> 0:15:59.120 week by week basis in terms of what's changing more 0:15:59.120 --> 0:16:02.160 to come next week, gap Alta, there's a lot more 0:16:02.200 --> 0:16:04.000 to cut Macy's in terms of what we'll. 0:16:03.880 --> 0:16:06.840 See consumers, so they feel terrible, What are they doing? 0:16:07.400 --> 0:16:09.680 I think consumers for the most part, depending upon their 0:16:09.680 --> 0:16:13.120 income level, they're pulling back. They're more discerning on their spend. 0:16:13.400 --> 0:16:15.080 You're seeing it in terms of some of the data 0:16:15.120 --> 0:16:17.600 of travel and what they're not looking to do or 0:16:17.600 --> 0:16:20.360 how they're pulling back. Take a look at luxury brands. 0:16:20.600 --> 0:16:23.480 Luxury brands, except for those at the super high end, 0:16:23.800 --> 0:16:26.800 we've seen a slowdown and luxury brands spend too, so 0:16:26.840 --> 0:16:28.560 they are pulling back on their spending. 0:16:28.880 --> 0:16:29.800 Also at restaurants. 0:16:29.920 --> 0:16:32.880 You say, depending on their income, what is the big 0:16:32.880 --> 0:16:35.880 difference right now between low income and high income earners 0:16:35.920 --> 0:16:37.960 and their spend? And I think what we've been tracking 0:16:37.960 --> 0:16:40.840 around this table now for years is that high income 0:16:40.880 --> 0:16:43.360 spenders consumers in this country of how do well. We're 0:16:43.360 --> 0:16:45.600 trying to work out whether the stress is migrating up. 0:16:45.920 --> 0:16:48.560 You mentioned some pressure and luxury. Are you seeing signs 0:16:48.560 --> 0:16:48.760 of that? 0:16:49.200 --> 0:16:51.480 Well, we've seen signs of pressure and luxury because of 0:16:51.520 --> 0:16:54.800 the slowdown in sales. Look at LVMH's sales which are 0:16:54.840 --> 0:16:57.800 down low single digits. It's different than what you've seen 0:16:57.840 --> 0:17:02.200 from LVMH in the past. We've seen, for example, look 0:17:02.240 --> 0:17:05.280 at traffic to some of the different types of centers. 0:17:05.520 --> 0:17:09.280 We've seen that slow down. We've seen on grocery purchases, 0:17:09.560 --> 0:17:11.800 more of an increase in some of the private label 0:17:12.160 --> 0:17:14.359 So I've seen that change. I'll tell you I was 0:17:14.359 --> 0:17:16.879 at a real estate conference earlier this week, and the 0:17:16.920 --> 0:17:20.720 mood is everything's good, but the butt meaning that when 0:17:20.800 --> 0:17:23.600 is the greatest slow down going to occur? And the 0:17:23.640 --> 0:17:27.160 bulk of what price? When price increases could start sometime 0:17:27.280 --> 0:17:28.359 during the early summer. 0:17:28.720 --> 0:17:31.600 Anyone moving production back to the US very hard. 0:17:31.640 --> 0:17:34.760 Can't move production back to the US too costly to make. 0:17:35.000 --> 0:17:37.240 Who has some of the greatest production in the US 0:17:37.600 --> 0:17:40.280 Back and Body Works around eighty percent of their goods 0:17:40.280 --> 0:17:41.080 are made in the US. 0:17:41.240 --> 0:17:41.960 Did not know that? 0:17:42.280 --> 0:17:44.280 Yes, Dinah, thank you, thanks you for the start. 0:17:44.359 --> 0:17:56.199 Donna T. Townsei, the Townsea Advice recruit, on. 0:17:56.280 --> 0:17:58.200 The Trice situation and what it all means for market 0:17:58.280 --> 0:18:00.399 someplace to say that Russell Brown Pack have crock Is 0:18:00.440 --> 0:18:01.120 with us around a table. 0:18:01.160 --> 0:18:01.879 Russ a good morning. 0:18:02.040 --> 0:18:04.600 Thanks for having me give us the constructive view for 0:18:04.680 --> 0:18:05.879 the US economy this morning. 0:18:05.920 --> 0:18:10.280 Okay, so we have another dose of uncertainty this morning, 0:18:11.119 --> 0:18:13.760 but it's no different really from the last three years, 0:18:13.760 --> 0:18:16.840 where we had a historic FED tightening cycle, we had 0:18:17.280 --> 0:18:19.880 a regional banking crisis that felt scary in the moment. 0:18:20.000 --> 0:18:22.879 Last year, we had a very acrimonious election, and you 0:18:22.920 --> 0:18:26.159 had these structural underpinnings in the US economy where in 0:18:26.200 --> 0:18:30.000 both twenty twenty three and twenty four the economy accelerated 0:18:30.040 --> 0:18:32.880 into the fourth quarter. Now, listen, we've got some real 0:18:32.920 --> 0:18:37.320