WEBVTT - Bloomberg Surveillance TV: December 16th, 2025 0:00:02.400 --> 0:00:08.640 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hortenn. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business App. 0:00:36.240 --> 0:00:38.560 So Franz withs Donald of RBC, how are you reading 0:00:38.560 --> 0:00:39.879 the tea leaves slowly? 0:00:40.640 --> 0:00:42.240 Because there's a lot of tea leaves here. 0:00:42.280 --> 0:00:44.080 But a couple things that jump out to me right 0:00:44.120 --> 0:00:46.440 away is the three month moving average now for non 0:00:46.440 --> 0:00:49.479 farm perils is about twenty two thousand. So if your 0:00:49.560 --> 0:00:52.279 break even raid is maybe thirty to forty thousand, then 0:00:52.280 --> 0:00:54.520 that means you're not creating enough jobs, and that's enough 0:00:54.520 --> 0:00:57.840 to lift that une unemployment rate higher. But let's just 0:00:57.880 --> 0:00:59.960 remember if you make a chart of the unemployment rate 0:01:00.080 --> 0:01:02.480 going back to the nineteen seventies or only two periods 0:01:02.480 --> 0:01:04.839 in history where the unemployment rate has been this low. 0:01:05.160 --> 0:01:08.440 This is still a very tight labor market. So in 0:01:08.480 --> 0:01:10.560 my mind, I'm wondering why we're not using words like 0:01:10.720 --> 0:01:13.920 normalizing as we see that unemployment rate move back towards 0:01:14.000 --> 0:01:16.760 levels that we're more accustomed to. But while everybody's talking 0:01:16.800 --> 0:01:19.240 about jobs, I'm looking at the retail sales number, which 0:01:19.280 --> 0:01:21.920 is very strong. And so the biggest question for an 0:01:21.920 --> 0:01:24.080 economist right now it's not what is the direction of 0:01:24.080 --> 0:01:26.480 the labor market, because that's sort of fuzzy. It's what 0:01:26.560 --> 0:01:29.880 are the implications of a weaker job market for the economy, 0:01:30.000 --> 0:01:32.479 And if the job market is weakening for young folks 0:01:32.520 --> 0:01:34.360 twenty to twenty four, which is what we've seen in 0:01:34.400 --> 0:01:36.720 the past, if it is less hiring and not so 0:01:36.840 --> 0:01:40.440 much firing or layoffs, and the implications for spending are less. 0:01:40.680 --> 0:01:42.559 And so my first rate on this is that, yes, 0:01:42.600 --> 0:01:45.679 we have what we expected, ongoing softness in the labor market, 0:01:45.840 --> 0:01:48.520 but it isn't creating a pullback in the broad economy. 0:01:48.640 --> 0:01:50.520 And that's going to be a really key narrative moving 0:01:50.560 --> 0:01:51.840 into twenty twenty six, which is the. 0:01:51.840 --> 0:01:54.960 Reason why people are bidding up esque equities and risk assets, 0:01:55.000 --> 0:01:58.280 even with potentially a worse than expected number of Michael 0:01:58.320 --> 0:02:01.560 Collins I PGM fixing cups still with us. Mike, just congratulations, 0:02:01.560 --> 0:02:03.840 you are positioned correctly ahead of this. I'm just wondering 0:02:04.160 --> 0:02:06.520 whether this was the read you were looking for. If 0:02:06.560 --> 0:02:09.480 this is just bad enough to keep the FED in play, 0:02:09.520 --> 0:02:12.000 but good enough to the point that Francis was making 0:02:12.160 --> 0:02:14.480 to keep risk us, it's potentially attractive. 0:02:15.480 --> 0:02:18.680 Yeah, we haven't heard the Goldilocks economy phrase lately, but 0:02:19.000 --> 0:02:21.000 you know, as Francis said, you know this is actually 0:02:21.000 --> 0:02:23.959 not not bad, right. An unemployment rate, you know, ticking 0:02:24.040 --> 0:02:25.760 up slowly, job. 0:02:25.520 --> 0:02:26.720 Growth close to zero. 0:02:26.880 --> 0:02:28.880 She throws out that, you know, thirty to forty thousand 0:02:28.960 --> 0:02:31.160 numbers kind of the new normal, right, So don't be 0:02:31.240 --> 0:02:34.079 shocked by these really low job gains. I think they're 0:02:34.120 --> 0:02:37.120 just kind of standard given the population growth is really 0:02:37.200 --> 0:02:40.760 trending down in terms of immigration and you know, births 0:02:40.960 --> 0:02:43.640 and deaths, I mean, fertility rates in this country have plummeted, 0:02:44.040 --> 0:02:46.680 and so this is a natural state, right, and it's 0:02:46.720 --> 0:02:49.560 not bad. It keeps the FED in play, keeps rates 0:02:49.800 --> 0:02:52.280 coming down a little bit. So this is what we 0:02:52.320 --> 0:02:55.000 call the muddle through environment, and we have like a 0:02:55.040 --> 0:02:58.480 fifty percent base case probability on this muddle through, which is, 0:02:58.639 --> 0:03:03.120 you know, growth slow, okay, inflation a little sticky, but 0:03:03.200 --> 0:03:05.960 not going up anymore, you know, maybe even coming down 0:03:06.000 --> 0:03:09.320 a little bit. The Fed cutting rates a couple more times, right, 0:03:09.400 --> 0:03:12.800 staying in a nice range here, and corporate earnings have 0:03:12.840 --> 0:03:13.880 been really the star here. 0:03:13.960 --> 0:03:15.320 Corporations, you know. 0:03:15.280 --> 0:03:18.240 The private sector has been the star, right, and they 0:03:18.280 --> 0:03:20.560 continue to figure out how to keep their margins up, 0:03:20.600 --> 0:03:25.120 which has really been surprisingly impressive to me, Jamien. 0:03:25.200 --> 0:03:26.880 We do see the move in the markets kind of 0:03:26.880 --> 0:03:29.520 temper itself as people look at the details, look at 0:03:29.560 --> 0:03:31.639 the fact that the response rate wasn't great, and look 0:03:31.639 --> 0:03:33.840 at the fact that there's a lot of strength despite 0:03:33.840 --> 0:03:35.640 some of the weakness that we see in the unemployment rate. 0:03:35.760 --> 0:03:38.640 And in August and September we saw revised down by 0:03:38.640 --> 0:03:40.640 another thirty three thousand as well. I mean, I'm just 0:03:40.680 --> 0:03:43.040 looking at the unemployment rate ticking up to four point 0:03:43.040 --> 0:03:45.520 six percent. You know, the labor force participation rate also 0:03:45.560 --> 0:03:47.920 ticked up, so that could be fueling a little bit 0:03:47.920 --> 0:03:50.000 of that as well, which is, you know, means it's 0:03:50.000 --> 0:03:52.600 not as bad as you would have otherwise thought. But yeah, 0:03:52.640 --> 0:03:55.240 I mean you had some backward divisions. Thirty three thousand 0:03:55.360 --> 0:03:58.160 jobs lost in August and September. That's just you know, 0:03:58.280 --> 0:04:01.240 feeding the bullish bentree here, Mike, how much. 0:04:01.120 --> 0:04:03.400 Do you look at this data, given the fact that 0:04:03.680 --> 0:04:06.360 we have gotten a response rates come down significantly, how 0:04:06.440 --> 0:04:09.080 much do you look at this data as truly better 0:04:09.160 --> 0:04:11.280 quality than some of the other data points that we've 0:04:11.280 --> 0:04:15.840 been getting versus just as noisy, just as easy to discount. 0:04:16.360 --> 0:04:18.800 Well, there's a lot more of it, right, We have 0:04:18.960 --> 0:04:22.400 months worth of data out trickling out, and I don't 0:04:22.400 --> 0:04:25.360 know if the quality of any of it is that great, Lisa, right, 0:04:25.400 --> 0:04:27.039 So I think you all have to take all of 0:04:27.040 --> 0:04:29.720 it with a grain of salt, which probably explains the 0:04:29.760 --> 0:04:30.920 market reaction. 0:04:31.040 --> 0:04:31.800 You know, you obvious see a. 0:04:31.800 --> 0:04:34.320 Big knee jerk move when the numbers first come out, 0:04:34.360 --> 0:04:36.599 and then they kind of settle in and many times 0:04:36.640 --> 0:04:39.640 actually reverse right. So you know, the FED doesn't meet 0:04:39.680 --> 0:04:42.400 for almost six weeks, so they have a lot more 0:04:42.480 --> 0:04:45.839 data to come, and presumably the data they get over 0:04:45.880 --> 0:04:48.880 the next six weeks will be higher quality and again 0:04:48.960 --> 0:04:52.560 continue to paint a bigger picture of the direction of 0:04:52.600 --> 0:04:57.039 the labor market, direction of consumption director direction of inflation. 0:04:57.240 --> 0:04:59.880 So there's a lot more to come before the FED meets. 0:05:00.080 --> 0:05:01.360 You know, right now, as you know, the markets are 0:05:01.400 --> 0:05:04.839 pricing and basically the next cut not really until June, 0:05:05.160 --> 0:05:09.040 and a second one by December, so really two next year, 0:05:09.480 --> 0:05:12.080 but really slowly through throughout the year. 0:05:12.800 --> 0:05:15.000 And that makes sense to us. And unless you get 0:05:15.000 --> 0:05:17.200 a big change in the direction of this data. 0:05:16.880 --> 0:05:19.960 Michael, we mentioned this prior to the release manufacturing payrolls. 0:05:19.960 --> 0:05:22.000 They're now at their lowest level since March of twenty 0:05:22.040 --> 0:05:25.040 twenty two. Certainly not what the Trump administration would like 0:05:25.080 --> 0:05:27.080 to see. Talk to us a little bit about you know, 0:05:27.120 --> 0:05:27.880 your read from there. 0:05:28.720 --> 0:05:31.440 Yeah, I mean the whole, this whole manufacturing you know, 0:05:31.520 --> 0:05:35.640 renaissance that the administration is trying to engineer is pushing 0:05:35.680 --> 0:05:37.719 on a string to some extent. 0:05:37.839 --> 0:05:41.360 Right, There's been lots of evidence and research. 0:05:41.000 --> 0:05:44.040 Done on the amount of manufacturing jobs and the desire 0:05:44.480 --> 0:05:48.000 for Americans to work in those manufacturing jobs, and the 0:05:48.040 --> 0:05:52.760 availability and education and skill level for Americans to work 0:05:52.800 --> 0:05:56.120 in those manufacturing jobs, right, does not bode well for 0:05:56.240 --> 0:06:00.840 this big jump in manufacturing employment. You know, we are 0:06:00.920 --> 0:06:07.120 a service economy where technology economy, We're a financial services economy. 0:06:07.880 --> 0:06:09.640 That's where you know the jobs are. 0:06:09.640 --> 0:06:11.720 Those are the sectors that are doing the best, not 0:06:11.720 --> 0:06:14.440 not surprisingly, So yeah, I think you really have to, 0:06:14.600 --> 0:06:16.920 you know, push back on that, the idea that we're 0:06:16.920 --> 0:06:19.560 going to have this giant manufacturing, you know, labor market 0:06:19.640 --> 0:06:20.760 renaissance in this country. 0:06:21.080 --> 0:06:23.159 So Francis, I mean, equities are hirer on this news 0:06:23.279 --> 0:06:25.600 yields you're down. What do you think the market's focused 0:06:25.640 --> 0:06:26.200 on right here? 0:06:26.320 --> 0:06:28.680 Well, I'm focused on the fact that you called it. 0:06:28.760 --> 0:06:30.760 The big job in the unemployment rate is coming from 0:06:30.880 --> 0:06:33.720 re entrance into the labor market, and this is the 0:06:33.720 --> 0:06:35.640 big thing. We all want this number to give us 0:06:35.680 --> 0:06:38.400 a signal up or down, but it's really the composition 0:06:38.480 --> 0:06:40.440 that matters. So what we do is we think about 0:06:40.440 --> 0:06:43.680 who is losing their job and who is actually being hired. 0:06:43.680 --> 0:06:46.920 And if people are falling into unemployment because they've started 0:06:46.920 --> 0:06:48.960 to look for a job and they haven't quite found one, 0:06:49.040 --> 0:06:52.000 they don't represent a permanent loss of income. They're actually 0:06:52.040 --> 0:06:54.920 starting the process again. So this is kind of bullish 0:06:54.960 --> 0:06:56.760 in the sense that it's enough for the FED if 0:06:56.800 --> 0:06:59.279 they want to keep cutting. This is a green light 0:06:59.360 --> 0:07:01.440 for them, But it isn't enough to signal that there's 0:07:01.480 --> 0:07:04.039 a hockey shaped weakness in the labor market. It is 0:07:04.160 --> 0:07:06.520 enough to signal that growth is going to materially slow down, 0:07:06.720 --> 0:07:09.840 or there's any sort of nefarious economic activity under the surface. 0:07:10.000 --> 0:07:11.840 And what have we learned from the Fed? They have 0:07:12.040 --> 0:07:14.360 a range of opinions if they want to cut. This 0:07:14.440 --> 0:07:16.120 is the data that allows them to do that. If 0:07:16.160 --> 0:07:18.400 you want to maintain a hawkish bias, there's enough under 0:07:18.400 --> 0:07:20.720 here to tell you, Hey, the economy is fine, Retail 0:07:20.760 --> 0:07:23.080 sales are up, the control group did really, really well, 0:07:23.400 --> 0:07:25.320 and there's still a lot of uncertainty around how much 0:07:25.320 --> 0:07:26.520 we should read into these numbers. 0:07:26.640 --> 0:07:29.720 Mike Collins, Ephgion fixed income just quickly here, how much 0:07:29.720 --> 0:07:31.520 do you think this really does greenlight the potential for 0:07:31.560 --> 0:07:33.680 a rate cut given the fact that the unemployment rate 0:07:34.280 --> 0:07:37.200 might give the ammunition that this Federal Reserve is looking for. 0:07:38.640 --> 0:07:43.440 Yeah, I really think the Fed should pause here, take 0:07:43.480 --> 0:07:48.440 a breather, get another handful of months of data before 0:07:48.480 --> 0:07:50.680 they move again. Like I said, they've moved almost two 0:07:50.720 --> 0:07:54.200 hundred basis points already, as Pala says, they're kind of 0:07:54.240 --> 0:07:58.360 getting toward the neutral or in the neutral range right now. 0:07:58.400 --> 0:08:03.720 The lack of consistency and consensus among the FOMC members 0:08:03.760 --> 0:08:06.040 is really remarkable. How you have a bunch of people 0:08:06.040 --> 0:08:08.240 who actually think they should hike rates from here, a 0:08:08.240 --> 0:08:10.160 bunch think they should keep rates the same, and if 0:08:10.160 --> 0:08:12.080 you think they should cut once twice, I mean it 0:08:12.120 --> 0:08:15.200 is a real scatterplot of views among the committee. So 0:08:15.520 --> 0:08:18.600 it feels like the general tendency is to just pause 0:08:18.680 --> 0:08:21.320 and wait. Like I said, the markets aren't pricing in 0:08:21.360 --> 0:08:24.200 a full cut until June, and that seems like the 0:08:24.280 --> 0:08:26.160 right path for the FED at this point, unless things 0:08:26.200 --> 0:08:27.680 change dramatically between now and then. 0:08:27.800 --> 0:08:30.680 Michael Collins of PGM Fixed and Comment, thank you so much. 0:08:30.760 --> 0:08:31.280 It seems like. 0:08:31.280 --> 0:08:34.280 Markets have retraced a lot of where they were from 0:08:34.520 --> 0:08:36.920 before this release. Do you agree with that, Francis that 0:08:36.960 --> 0:08:38.480 even though there's a lot of division, it seems like 0:08:38.520 --> 0:08:38.920 this is a. 0:08:38.840 --> 0:08:41.400 FED that may cut but probably shouldn't. 0:08:41.480 --> 0:08:43.960 Well, it's jobs Day, so it's the doves day. They 0:08:44.040 --> 0:08:46.320 get to focus on their side of the mandate. But 0:08:46.400 --> 0:08:48.240 in two days, forty eight hours you're going to be 0:08:48.240 --> 0:08:51.520 doing inflation Day. And if consensus is right and CPI 0:08:51.640 --> 0:08:54.640 jumps to three point one percent, well that'll be fifty 0:08:54.760 --> 0:08:57.559 six months that inflation is above the two percent target, 0:08:57.720 --> 0:09:00.360 going in the wrong direction, and everybody in the mother 0:09:00.440 --> 0:09:03.240 knows that there's goods inflation still coming in the system. 0:09:03.360 --> 0:09:05.200 So on Thursday, it's going to be really easy for 0:09:05.240 --> 0:09:07.280 the Hawks to argue their side of the mandate. And 0:09:07.320 --> 0:09:09.160 this is the problem when you have a dual mandate. 0:09:09.240 --> 0:09:12.280 You're in a stagflationary light type of environment. You have 0:09:12.280 --> 0:09:15.360 a FED that is revealing its bias towards the employment side. 0:09:15.440 --> 0:09:17.080 But it will be easy to make the case that 0:09:17.120 --> 0:09:20.200 inflation is still problematic at the end of this week, 0:09:20.240 --> 0:09:22.640 So balancing those two will be important. FED speak will 0:09:22.640 --> 0:09:25.240 be important going forward, but I'll continue to emphasize the 0:09:25.320 --> 0:09:27.959 details matter. Four point six percent that is driven by 0:09:28.200 --> 0:09:30.680 new entrants, that has a lot of healthcare jobs, sticky 0:09:30.720 --> 0:09:33.560 healthcare jobs in it, that's a better type of weaker 0:09:33.679 --> 0:09:36.920 job number, inflation that is broad based or has services 0:09:36.960 --> 0:09:39.440 component inflation in it. On Thursday will work on the 0:09:39.480 --> 0:09:42.320 other side. So let the doves have their day, but 0:09:42.400 --> 0:09:43.840 Thursdays I think will belong. 0:09:43.640 --> 0:09:44.160 To the Hawks. 0:09:45.800 --> 0:09:49.320 Stay with us. Multpleinberg Savannah's coming up off to this. 0:09:58.040 --> 0:10:01.040 Here's the latest lawmaker scrambling to reach a healthcare solution 0:10:01.160 --> 0:10:03.880 with enhanced subsidies set to expire on New Year's Eve. 0:10:04.200 --> 0:10:06.679 That was preparing to vote on a slimmed. 0:10:06.320 --> 0:10:09.400 Down health plan this week, joining us down. Terry Haynes 0:10:09.400 --> 0:10:12.160 at Pangaea Policy Terry, how much are people counting on 0:10:12.200 --> 0:10:14.920 the idea that subsidies are going to fall away and 0:10:15.080 --> 0:10:17.280 healthcare costs are going to increase when they talk about 0:10:17.320 --> 0:10:20.040 stimulus coming down the pike in twenty twenty. 0:10:19.760 --> 0:10:22.240 Six, Well, a couple of things lie. 0:10:22.360 --> 0:10:25.600 So one is that you know, work expands the time 0:10:25.640 --> 0:10:29.440 to fit a lot to fill, and you know they've 0:10:30.160 --> 0:10:32.000 they've got a few more days here at least or 0:10:32.000 --> 0:10:35.280 maybe in the next week. So legislatively speaking, that's a 0:10:35.280 --> 0:10:40.000 lot of time. The mishmash of everything that's that's in 0:10:40.040 --> 0:10:46.200 front of them suggests a solution of a small bump 0:10:46.720 --> 0:10:50.199 in the current subsidies, you know, bump forward into twenty 0:10:50.240 --> 0:10:53.199 twenty six, combined with a number of other things. But 0:10:53.280 --> 0:10:57.480 what markets ought on and is that this is one 0:10:57.800 --> 0:11:00.199 this is one step and a two step game. There's 0:11:00.240 --> 0:11:02.960 almost certainly going to be a big, beautiful bill two 0:11:03.000 --> 0:11:06.040 dot oh next year. I think as early as the 0:11:06.080 --> 0:11:10.439 first quarter. Senate Budget Chair Graham's already been talking about it, 0:11:10.440 --> 0:11:14.160 and already been talking about the need to do some 0:11:14.200 --> 0:11:18.719 more on Obamacare subsidies and on Medicaid next year. So 0:11:18.800 --> 0:11:21.320 what you're going to see here is a very interim 0:11:21.440 --> 0:11:24.640 band aid solution, I think a little bit more likely 0:11:24.720 --> 0:11:31.200 than not, combined with the UH the more likely two 0:11:31.240 --> 0:11:34.320 dot oh solution coming early next year. So there's going 0:11:34.400 --> 0:11:37.439 to be a lot of volatility in healthcare stocks as 0:11:37.440 --> 0:11:41.120 a result of that, but that can't be helped. 0:11:41.760 --> 0:11:45.280 Kerry and yesterday's Wall Street Journal Wall Street Journal interview, 0:11:45.440 --> 0:11:48.120 Trump stated that he's, you know, he's not sure if 0:11:48.120 --> 0:11:50.040 it's handling of the economy is going to, you know, 0:11:50.440 --> 0:11:52.679 cause the Republicans to win the midterms. He's all but 0:11:52.800 --> 0:11:55.000 conceded defeat there. And I'm curious to hear your thoughts 0:11:55.000 --> 0:11:57.880 about this big, beautiful bill two point zero. What type 0:11:57.920 --> 0:12:00.560 of reforms, what type of legislation can we to find 0:12:00.559 --> 0:12:00.760 in that? 0:12:02.080 --> 0:12:04.400 Well, A couple of things, Damien. First, you know, I 0:12:04.440 --> 0:12:09.120 would I'd suggest that the jobs report may play a 0:12:09.200 --> 0:12:13.880 role in deciding what happens in the Congress this week. 0:12:14.360 --> 0:12:16.560 If the economy looks weak going into the holidays, I 0:12:16.559 --> 0:12:22.240 think there's probably a greater desire to do something to 0:12:23.600 --> 0:12:30.040 push back against that on healthcare, precisely for affordability reasons. Secondly, 0:12:30.080 --> 0:12:31.760 what you have here, and there's been already been some 0:12:31.800 --> 0:12:34.480 discussion on your program this morning about this, is you're 0:12:34.480 --> 0:12:36.280 going to have a lot of stimulus happening early in 0:12:36.280 --> 0:12:39.319 twenty twenty six. On top of that comes to you 0:12:39.480 --> 0:12:42.080 from the twenty twenty five bill. On top of that 0:12:42.120 --> 0:12:45.760 comes twenty twenty six, which Graham describes as a little 0:12:45.760 --> 0:12:48.800 more of everything. A little more entitlement reform outside of 0:12:48.840 --> 0:12:52.160 Social Security other than Social Security, a little more on Medicaid, 0:12:52.240 --> 0:12:54.720 a little more on tax including expensing, a little more 0:12:54.800 --> 0:12:58.840 money for the military, probably something if Graham has his 0:12:58.920 --> 0:13:02.280 brothers on a him, I'm tariff, and I would suggest 0:13:02.360 --> 0:13:06.120 a lot more on enshuring manufacturing incentives, because that is 0:13:06.240 --> 0:13:12.280 key to speeding a more robust US defense industrial base. 0:13:12.800 --> 0:13:16.319 Sorry, Polymarket currently assigns with the twenty seven percent probability 0:13:16.320 --> 0:13:18.800 that the Supreme Court is going to vote in favor 0:13:18.960 --> 0:13:21.160 of Trump's tariffs. This is down from high fifty three 0:13:21.160 --> 0:13:24.000 percent just a few months back. What's the timeline here 0:13:24.000 --> 0:13:26.680 for scotus, you know, to give us any color, how 0:13:26.720 --> 0:13:28.360 do you believe the market's going to react if Trump's 0:13:28.400 --> 0:13:29.400 tariffs are voted down? 0:13:30.440 --> 0:13:32.920 Well, I think, Damien a couple of things. One is, 0:13:33.280 --> 0:13:36.040 I wouldn't rely on polymarket too much. That's if you're 0:13:36.080 --> 0:13:38.000 sitting around a roulette table, that's a bunch of people 0:13:38.040 --> 0:13:42.040 kibbets behind you, so fundamentally you know, so would you 0:13:42.080 --> 0:13:44.600 rely on them for your results or for your advice? 0:13:44.679 --> 0:13:50.720 I'm not sure? But beyond that, you know my Firstly, 0:13:50.760 --> 0:13:53.280 I always push back against the idea that the Court 0:13:54.520 --> 0:13:57.600 presumptively rules against Trump's tariffs. I think that's based on 0:13:57.679 --> 0:14:02.480 a flawed assumption at the Court doesn't take the economic 0:14:02.520 --> 0:14:06.680 emergency seriously. So I think what happens is at the 0:14:06.800 --> 0:14:10.760 very worst for the administration. They say they can't put 0:14:10.840 --> 0:14:15.240 the tariffs in place using that AIPA authority, but there's 0:14:15.240 --> 0:14:19.920 plenty of other teriff authorities. Secondly, I think they probably 0:14:20.000 --> 0:14:24.280 give the Congress some time to fix the statute, and 0:14:24.520 --> 0:14:26.800 that's something you can do also in that two dot 0:14:26.880 --> 0:14:29.080 zero reconciliation bill. 0:14:29.120 --> 0:14:32.440 Stay with US multlindex. Savana's coming up off to. 0:14:32.480 --> 0:14:42.960 This, turning to market, it's Bank of America releasing It's 0:14:43.000 --> 0:14:46.920 December Global Fund Manager Survey showing macro optivism at its 0:14:47.040 --> 0:14:50.120 highest going back to twenty twenty one. Joining us now 0:14:50.200 --> 0:14:53.160 is Elis Galu of Bank of America. Elie is great 0:14:53.160 --> 0:14:54.920 to see you. Thank you so much for being with us. 0:14:55.160 --> 0:14:57.080 Let's start on the cash holding. So the idea that 0:14:57.160 --> 0:14:59.880 cash allocations fell to three point three percent the low 0:15:00.680 --> 0:15:03.840 in Bank of America's Global Fund Manager Survey. How much 0:15:03.840 --> 0:15:05.960 of a contrarian indicator do you see this as. 0:15:08.240 --> 0:15:11.280 This is a very contrarian indicator, Liza, Look, I mean 0:15:11.440 --> 0:15:14.360 just a bit of context on the FMS cash levels 0:15:14.400 --> 0:15:17.280 which fell to a record low three point three percent today. 0:15:17.600 --> 0:15:20.320 This series is one of the most important of the 0:15:20.320 --> 0:15:23.920 Fund Manager survey. It has been around since ninety ninety nine, 0:15:24.160 --> 0:15:28.720 so we are able to track several cycles through this series, 0:15:28.760 --> 0:15:31.480 and even at the height of the Internet bubble, at 0:15:31.520 --> 0:15:34.520 the height of the subprime bubble, and during the bomb 0:15:34.520 --> 0:15:38.720 bubble of the post GFC era, the FMS cash level 0:15:38.800 --> 0:15:41.680 did not drop to the level it did today three 0:15:41.680 --> 0:15:46.240 point three percent, which is just strictly speaking and focusing 0:15:46.280 --> 0:15:49.840 on this metric, this is a very bearish contrarian signal. 0:15:50.080 --> 0:15:52.960 And we back tested this series since over the past 0:15:53.000 --> 0:15:56.720 twenty five years, whenever the cash level fell to three 0:15:56.760 --> 0:16:00.400 point six percent or below, the average four weekly for 0:16:00.480 --> 0:16:03.880 global equities has been minus two percent, and over eight 0:16:03.920 --> 0:16:06.360 weeks it's been global equities we're flat. 0:16:06.680 --> 0:16:09.320 Well, as I scored with this, with the idea that 0:16:09.360 --> 0:16:12.040 people are really optimistic about twenty twenty six returns, is 0:16:12.080 --> 0:16:14.680 it consistent given the fact that we might see sort 0:16:14.680 --> 0:16:16.880 of mandering stock returns heading into year end kind of 0:16:16.880 --> 0:16:19.280 what we're seeing this morning. But next year people will 0:16:19.320 --> 0:16:22.680 see that physical stimulas come in, that monetary stimulas come in, 0:16:22.800 --> 0:16:24.920 and it will really support this sort of broader story 0:16:25.040 --> 0:16:26.400 that people seem to be leaning into. 0:16:29.080 --> 0:16:31.560 I think if we had to define the December twenty 0:16:31.600 --> 0:16:34.800 twenty five fund manager survey, it would be the most 0:16:34.840 --> 0:16:39.040 bullish survey of this AI led bull market. And the 0:16:39.080 --> 0:16:43.640 culprit of this palpable bullishness is the expectation of run 0:16:43.640 --> 0:16:48.160 it hot policies. FMS Investors look at the FED. They 0:16:48.280 --> 0:16:50.920 know and I'm convinced that the FED under the next 0:16:51.040 --> 0:16:54.040 chairman will be much more accomodative than in the past 0:16:54.040 --> 0:16:56.680 few years. They know that there is a big election 0:16:57.160 --> 0:16:59.280 in the US on November the third next year, and 0:16:59.320 --> 0:17:03.040 they expect the administration to push up it further in 0:17:03.080 --> 0:17:05.800 terms of fiscal policy, and they also, you know, last 0:17:05.800 --> 0:17:09.440 week's announcement from the Fed in terms of the liquidity backstop, 0:17:09.600 --> 0:17:13.760 I think has clearly emboldened FMS investors to increase allocation 0:17:13.920 --> 0:17:19.520 to risk asset because another important metrics that was extreme 0:17:19.640 --> 0:17:22.800 in this survey was the fact that liquidity conditions were 0:17:22.880 --> 0:17:26.199 rated as the most positive since twenty twenty one, and 0:17:26.240 --> 0:17:30.080 in fact, over the past twenty years, the liquidity conditions 0:17:30.119 --> 0:17:33.320 have only been greater than today. At the peak of 0:17:33.560 --> 0:17:37.600 the COVID boom in mid twenty twenty one. 0:17:38.040 --> 0:17:40.560 Las long mag seven and long gold had been the 0:17:40.560 --> 0:17:42.879 most crowded trades for the past three months in a row. 0:17:42.920 --> 0:17:45.000 Yet at the margin, a small handful of investors are 0:17:45.040 --> 0:17:47.760 now they now believe that being short ggbs and long 0:17:47.760 --> 0:17:50.840 global bank stocks are the most crowded trades. So I'm curious, 0:17:50.880 --> 0:17:54.000 you know, it's notable giving the impending bog ratik at 0:17:54.040 --> 0:17:57.000 the end of this week, the near universal belief that 0:17:57.080 --> 0:18:00.400 yield curves are going to steepen across the globe. Can 0:18:00.400 --> 0:18:02.640 you provide just a bit more color on these newly 0:18:02.680 --> 0:18:03.880 referenced pain trades. 0:18:06.080 --> 0:18:06.399 Sure. 0:18:06.520 --> 0:18:08.560 I think if you look at in the details of 0:18:08.560 --> 0:18:12.560 the fund manager survey, the one challenge where it's actually 0:18:12.560 --> 0:18:17.040 tough to square institutional investor bullishness is on expectations for 0:18:17.119 --> 0:18:20.240 bond deals. There is this big conviction that bond deals 0:18:20.240 --> 0:18:22.960 will be higher in twelve months time. This huge conviction 0:18:23.440 --> 0:18:27.440 nets seventy five percent see an even steeper yield curve, 0:18:27.520 --> 0:18:31.240 and then investors are very bullish risk assets. So you know, 0:18:31.320 --> 0:18:33.320 at the end of the day, it's important to take 0:18:33.359 --> 0:18:35.359 a step back and look at the big picture. And 0:18:35.400 --> 0:18:38.879 the most important question here, Damien, is can risk assets 0:18:38.920 --> 0:18:41.560 global equities US equities that are very rich in terms 0:18:41.600 --> 0:18:46.520 of valuation with stan five percent plus bond deals and 0:18:46.840 --> 0:18:49.240 I think you know, at this level of positioning, at 0:18:49.240 --> 0:18:52.560 this level of valuation, risk assets will be struggling if 0:18:52.600 --> 0:18:56.240 the thirty year treasury exceed five percent, which has been 0:18:56.440 --> 0:18:59.840 a line in the scent for US policymakers. But for now, 0:19:00.080 --> 0:19:04.439 investors prefer to focus on AI, the productivity gains that 0:19:04.520 --> 0:19:08.080 AI adoption will deliver and in terms of EPs growth, 0:19:08.240 --> 0:19:10.439 and this is what they prefer to focus on and 0:19:10.600 --> 0:19:13.480 is also driving their the abolishness for in twenty twenty 0:19:13.520 --> 0:19:14.240 six Elis. 0:19:14.320 --> 0:19:18.119 Despite the pro cyclical rotation into equities and commodities, allocation 0:19:18.200 --> 0:19:21.040 to the energy sector is nearly Tuesday on the deviations 0:19:21.080 --> 0:19:23.800 below the twenty year average according to your FMS. Yet 0:19:23.840 --> 0:19:26.320 with brain crude now dipping below sixty dollars this morning 0:19:26.320 --> 0:19:29.240 and most analysts calling for it to stay, there is 0:19:29.240 --> 0:19:33.880 there any benefit in fading that call. 0:19:34.080 --> 0:19:37.520 It's one of the big contrariant trades of twenty twenty six. Really, 0:19:37.600 --> 0:19:40.840 you know one. The energy sector has been has seen 0:19:40.840 --> 0:19:45.680 a continuous underweight of FMS investors, and rightly so. Now 0:19:45.760 --> 0:19:48.720 I think it's quite interesting to see the dichotomy between 0:19:49.080 --> 0:19:52.520 an increase and increasing allocation to commodities. The net of 0:19:52.560 --> 0:19:55.480 a weight on commodities is the highest in September twenty 0:19:55.480 --> 0:19:57.840 twenty two, but at the same time a very big 0:19:57.960 --> 0:20:02.560 underweight on energy, and that dichotomy is explains is explained 0:20:02.600 --> 0:20:07.199 by the divergence between metals and energy. I think in 0:20:07.240 --> 0:20:11.040 twenty twenty six, if growth surprises to the upside as 0:20:11.119 --> 0:20:14.359 investors expect, I think clearly there is a lot of 0:20:14.440 --> 0:20:19.200 value in the energy sectors and probably the stronger growth 0:20:19.359 --> 0:20:21.760