WEBVTT - Bloomberg Surveillance TV: March 25, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:36.880 Bloomberg Terminal and the Bloomberg Business app. We begin this 0:00:36.920 --> 0:00:39.200 sour stock steady after notching one of the best days 0:00:39.200 --> 0:00:41.319 of the year so far. Cameron Dawston and new Weege 0:00:41.360 --> 0:00:44.280 Welsh writing, our key message to clients is get comfortable 0:00:44.520 --> 0:00:48.400 being uncomfortable. We see volatility continuing even as we bounce 0:00:48.720 --> 0:00:52.040 off of over sold low sentiment levels. Cameron joins us, 0:00:52.040 --> 0:00:53.280 Now from what camera's good to see you. 0:00:53.320 --> 0:00:53.840 Good to see you. 0:00:53.920 --> 0:00:56.280 Let's talk about your conversations with those clients. What they're 0:00:56.280 --> 0:00:57.960 telling you. Are they're freaking out? Are they bear us? 0:00:58.040 --> 0:00:58.840 What's the response? 0:00:58.880 --> 0:01:01.800 Clients are still very common. We think it's because if 0:01:01.840 --> 0:01:05.160 you look at a seventy thirty portfolio of AQUI versus 0:01:05.240 --> 0:01:08.920 the IG you're still up about one percent for the years. So, yes, 0:01:09.000 --> 0:01:11.520 we have seen this weakness within US equities, But if 0:01:11.560 --> 0:01:13.959 you are a diversified investor, for the first time in 0:01:14.000 --> 0:01:17.959 a while, you actually feel good about having non US exposure, 0:01:18.160 --> 0:01:20.480 which has helped to dle some of the pain that 0:01:20.560 --> 0:01:23.280 you have seen within the concentrated US markets. 0:01:23.319 --> 0:01:25.720 How far out are they willing to extrapolate that recent 0:01:25.800 --> 0:01:28.800 underperformance US versus Europe? Are they starting to wonder whether 0:01:28.800 --> 0:01:30.880 this could be a multi year game or is it 0:01:30.920 --> 0:01:31.760 a short term game. 0:01:31.959 --> 0:01:34.760 We're certainly asking that question, meaning are we going to 0:01:34.760 --> 0:01:37.080 see a repeat of the two thousand to two thousand 0:01:37.080 --> 0:01:39.440 and seven period where it truly was a multi year 0:01:39.480 --> 0:01:43.039 period of non US underperformance versus the rest of the world. 0:01:43.240 --> 0:01:45.600 We think it really depends on two key factors. You 0:01:45.720 --> 0:01:48.400 have to see continued dollar weakness. You have to see 0:01:48.600 --> 0:01:51.160 much further downside in the dollar to suggest that capital 0:01:51.200 --> 0:01:53.120 will leave the US and go to the rest of 0:01:53.120 --> 0:01:55.120 the world. And you have to see it backed up 0:01:55.160 --> 0:01:57.400 by earnings. So if you look here to date, all 0:01:57.440 --> 0:02:00.960 of the outperformance of Europe has been driven by valuation expansion. 0:02:01.000 --> 0:02:03.640 It's gone from thirteen and a half times to fifteen times. 0:02:03.840 --> 0:02:06.760 Earning sestiments have actually gotten cut. So if you think 0:02:06.800 --> 0:02:08.760 that this is going to last more than just a 0:02:08.840 --> 0:02:11.359 couple of months or a couple of quarters, you have 0:02:11.400 --> 0:02:12.600 to believe in the earning story. 0:02:12.840 --> 0:02:15.480 So how do you understand that multiple shift? How do 0:02:15.520 --> 0:02:17.840 you understand the idea that we've seen a weakening in 0:02:17.880 --> 0:02:19.480 the dollar and a sellof in the s and P 0:02:19.560 --> 0:02:21.960 five hundred for one of the longest periods that we 0:02:22.040 --> 0:02:25.359 have in the past few decades. If it isn't necessarily 0:02:25.400 --> 0:02:27.320 some fundamental shift, what is it. 0:02:27.800 --> 0:02:29.959 We have to appreciate that we went into this year 0:02:30.080 --> 0:02:33.040 with a massive record dollar long position. 0:02:33.320 --> 0:02:34.040 If you looked at. 0:02:33.919 --> 0:02:37.400 Futures trading, you had a huge position where everybody was 0:02:37.480 --> 0:02:40.440 long to their eyeballs the dollar. That has now reversed 0:02:40.480 --> 0:02:43.320 and you actually see traders being slightly short the dollar. 0:02:43.600 --> 0:02:45.600 So we think that the dollar could actually find some 0:02:45.680 --> 0:02:48.040 stability here. Maybe in the short term you see some 0:02:48.160 --> 0:02:50.799 mean reversion in some of those trades. The last two days, 0:02:51.000 --> 0:02:54.800 Europe has been underperforming the US, So it's very alluring 0:02:54.840 --> 0:02:58.040 to try to ascribe a narrative to price action to say, 0:02:58.160 --> 0:03:01.760 inter view US exceptionalism, the US exceptional in story is over. 0:03:01.960 --> 0:03:04.200 We think it's actually a lot more about dollar positioning, 0:03:04.240 --> 0:03:05.240 at least in the short term. 0:03:05.320 --> 0:03:07.519 Yeah, you've said this question in your notes, which I 0:03:07.520 --> 0:03:09.360 thought was great. Is at the end of US exceptionalist 0:03:09.520 --> 0:03:11.600 or just a positioning unwined? It seems like maybe it's 0:03:11.600 --> 0:03:13.400 a little bit of the latter. I am curious what 0:03:13.440 --> 0:03:16.160 this means going forward. Then if this gives a sense 0:03:16.200 --> 0:03:18.440 that not only the will there be stability to the dollar, 0:03:18.480 --> 0:03:21.360 but also say to the Magnificent seven, which have unwound 0:03:21.400 --> 0:03:22.640 at a disproportional pace. 0:03:23.000 --> 0:03:24.880 Well, and we do think the weakness of the mag 0:03:24.960 --> 0:03:27.520 seven was a function of its strength at the end 0:03:27.560 --> 0:03:30.920 of the year. MAG seven outperforms so much in December 0:03:31.040 --> 0:03:33.800 that was not justified by the fundamentals earning sessments were 0:03:33.800 --> 0:03:34.239 getting cut. 0:03:34.240 --> 0:03:37.440 It was all valuations. So this is all just these. 0:03:37.280 --> 0:03:40.320 Positioning shifts moving around. We've now gotten to the point 0:03:40.320 --> 0:03:43.160 where positioning is a bit more balanced. You've gone from 0:03:43.160 --> 0:03:46.120 the ninety eighth percentile in US positioning to the twenty 0:03:46.200 --> 0:03:49.080 six percentile. That does set you up for a little 0:03:49.120 --> 0:03:51.720 bit of a relief rally. The question is Europe is 0:03:51.760 --> 0:03:54.960 still trading at fifteen times versus the US at twenty times. 0:03:55.040 --> 0:03:58.600 What's the driver to potentially see those multiples converge further. 0:03:58.760 --> 0:04:01.120 You know, you said get used to being uncomfortable. There 0:04:01.160 --> 0:04:02.640 are a lot of people say I don't want to 0:04:02.640 --> 0:04:04.880 be uncomfortable. I want to have some sort of forward 0:04:04.880 --> 0:04:07.120 indicator to get an edge at a time where it 0:04:07.120 --> 0:04:09.480 seems like there's a lot of noise in nothing else. 0:04:10.000 --> 0:04:13.040 What are you looking for to change materially to get 0:04:13.080 --> 0:04:14.600 some conviction one way or another. 0:04:14.840 --> 0:04:17.600 We have to start from the basis that indicator economics 0:04:17.600 --> 0:04:19.880 and what used to work in prior cycles does not 0:04:20.040 --> 0:04:22.600 work in the post COVID world, which means that we 0:04:22.640 --> 0:04:24.800 can't look to things like the tend to curve of 0:04:24.839 --> 0:04:27.320 telling us if we're having a recession. We can't look 0:04:27.360 --> 0:04:30.200 at those sentiment indicators because they've been so misleading. 0:04:30.480 --> 0:04:32.200 One of the things over the last two years that. 0:04:32.160 --> 0:04:34.360 We've been saying is that watch what they do, not 0:04:34.440 --> 0:04:37.440 what they say, meaning that you cannot look at sentiment 0:04:37.520 --> 0:04:40.760 and soft data and extrapolate it into hard data. We 0:04:40.839 --> 0:04:42.720 think it's actually more important to look at what the 0:04:42.760 --> 0:04:45.880 equity market is saying about the consumer for example, So 0:04:45.960 --> 0:04:48.480 look at equal weight discretionary versus staples. 0:04:48.760 --> 0:04:49.719 If discretionary is. 0:04:49.760 --> 0:04:52.720 Underperforming staples, the equity market is sniffing out that there's 0:04:52.720 --> 0:04:56.080 trouble in River City with the consumer. If it continues 0:04:56.120 --> 0:04:58.000 to be in an up trend, then the equity market 0:04:58.040 --> 0:05:00.960 is telling you a message of it's okay, watch what. 0:05:00.960 --> 0:05:01.920 They do, not what they say. 0:05:01.920 --> 0:05:03.960 Are you also using that same logic when it comes 0:05:04.000 --> 0:05:05.440 to policy makers in Washington? 0:05:06.800 --> 0:05:10.559 Not necessarily there has been followed through in what they've 0:05:10.600 --> 0:05:12.640 been saying. And I think that that was one of 0:05:12.680 --> 0:05:15.240 the follies going into this year, thinking that it was 0:05:15.279 --> 0:05:17.680 all just rhetoric coming out of DC and that we 0:05:17.720 --> 0:05:21.159 wouldn't see policy follow through. But we certainly are seeing it, 0:05:21.160 --> 0:05:23.119 at least to an extent. Yes, we have the flip 0:05:23.120 --> 0:05:25.520 flop and the ping pong about how much we're actually 0:05:25.560 --> 0:05:28.640 going to see tariffs enacted, but there are real policies 0:05:28.680 --> 0:05:31.800 being enacted, which is weighing on activity that we see today. 0:05:32.000 --> 0:05:35.159 April second is increasingly difficult to understand. The Financial Times 0:05:35.200 --> 0:05:37.560 just put out this report that a president is considering 0:05:37.560 --> 0:05:40.640 a two step tariff regime on April second. According to 0:05:40.640 --> 0:05:43.920 people familiar with the matter among proposals, and I'm citing 0:05:43.960 --> 0:05:46.720 this story directly. Now his team has been discussing as 0:05:46.760 --> 0:05:49.080 a plan to launch so called Section three oh one 0:05:49.120 --> 0:05:53.520 investigations into trading partners, so that's unfair trading practices, while 0:05:53.520 --> 0:05:58.360 simultaneously using ready invoked emergency powers to apply immediate tariffs 0:05:58.560 --> 0:05:59.279 in the interim. 0:05:59.400 --> 0:06:00.159 So you could see a. 0:06:00.200 --> 0:06:02.960 Couple of phases of this, which is a reason why 0:06:03.000 --> 0:06:05.720 the people like Max Counter of HSBC or worried that 0:06:05.760 --> 0:06:08.400 this uncertainty will linger beyond April second. And I'm Marie, 0:06:08.400 --> 0:06:10.960 this is something you've talked about repeatedly. There are things 0:06:10.960 --> 0:06:13.280 you can do on day one and April second, there 0:06:13.279 --> 0:06:14.920 are other things you'll have to wait. 0:06:14.760 --> 0:06:16.679 To execute on right If you want to use Section 0:06:16.720 --> 0:06:19.080 three three eight or IEPO, you can maybe use national 0:06:19.080 --> 0:06:22.039 security lever and you can have a tariff that day 0:06:22.240 --> 0:06:24.560 in an executive order. If you want to look at 0:06:24.600 --> 0:06:28.280 something that is more long term, if you need public feedback, 0:06:28.680 --> 0:06:31.320 then you would take weeks or months. But what the 0:06:31.320 --> 0:06:33.680 Financial Times is saying, and it's something I think makes 0:06:33.680 --> 0:06:36.279 sense for how Trump likes to enact policy. You might 0:06:36.360 --> 0:06:39.080 see both on that day come out with something really 0:06:39.120 --> 0:06:40.920 sharp because he wants to deliver, but then at the 0:06:41.000 --> 0:06:42.719 same time it's a little bit more nuanced when it 0:06:42.720 --> 0:06:44.720 comes to maybe specific countries or sectors. 0:06:44.839 --> 0:06:47.279 Camera This makes April second really tough because is it 0:06:47.320 --> 0:06:50.760 going to be a clearing event maximum uncertainty, move beyond it, 0:06:50.839 --> 0:06:53.560 move on by stocks, or will it just get more confusing. 0:06:54.000 --> 0:06:56.440 I think that Peter Cheer earlier this week was really 0:06:56.480 --> 0:06:59.120 wise in saying that if we get clarity, is that 0:06:59.240 --> 0:07:02.280 actually a bad thing in the sense that the current 0:07:02.960 --> 0:07:05.960 EPs estimates do not contemplate the kind of tariff regime 0:07:06.000 --> 0:07:09.040 that's even the tariff light that is being presented, which 0:07:09.080 --> 0:07:11.360 means that we do think that there is downside to 0:07:11.400 --> 0:07:13.920 earning sestments if we get the clarity that people could 0:07:13.960 --> 0:07:17.160 actually start putting it into numbers. We see this arrested 0:07:17.160 --> 0:07:20.320 development and decision making. It's the if you choose not 0:07:20.440 --> 0:07:23.120 to decide, you are still making a choice. Businesses are 0:07:23.160 --> 0:07:26.320 sitting on their hands and not making decisions, and that 0:07:26.400 --> 0:07:29.040 could result, we think, in lower earnings estiments, which we 0:07:29.120 --> 0:07:32.360 think challenges the valuations of equities even further. 0:07:32.240 --> 0:07:35.000 Bad thing for who and bad for witch aquacies the 0:07:35.080 --> 0:07:37.320 United States or the outperformance we've seen in Europe and 0:07:37.360 --> 0:07:38.800 elsewhere in China. 0:07:38.840 --> 0:07:42.240 I don't think that the European rally has been pricing 0:07:42.320 --> 0:07:45.559 in the risk of tariffs being escalated, which just means 0:07:45.600 --> 0:07:48.640 that you're seeing all of this strength and rerating, which 0:07:48.720 --> 0:07:52.560 is more of a positioning flip than necessarily thinking that 0:07:52.600 --> 0:07:54.840 Europe is going to do better because of the tariffs. 0:07:54.880 --> 0:07:57.600 So if we actually see them enacted, we think it's 0:07:57.720 --> 0:08:01.800 more of money leaving global act versus shifting from one 0:08:01.840 --> 0:08:02.640 place to another. 0:08:02.720 --> 0:08:03.120 I'm with you. 0:08:03.160 --> 0:08:05.240 I love the piece from p over the weekend. Careful 0:08:05.240 --> 0:08:06.960 what you wish for if you get the clarity, you 0:08:07.000 --> 0:08:09.200 get the certainty is that when we start to fully 0:08:09.200 --> 0:08:11.320 appreciate the kind of damage it could do to the economy. 0:08:11.360 --> 0:08:13.920 And I'm not talking about the United States, I'm talking 0:08:13.920 --> 0:08:15.360 about the rest of the world, which. 0:08:15.160 --> 0:08:16.800 Is something that people were pricing in at the end 0:08:16.800 --> 0:08:18.880 of last year and everybody seemed to ignore because they 0:08:18.880 --> 0:08:22.040 were all benumbed by the idea of Germans spending money 0:08:22.040 --> 0:08:24.480 and that seemed to take everyone's idea of what tariffs 0:08:24.520 --> 0:08:26.040 would do to the rest of the world out of 0:08:26.080 --> 0:08:26.480 the mines. 0:08:26.720 --> 0:08:28.920 Cameron, good to see you as always. Great to catch up. 0:08:28.960 --> 0:08:41.920 Cameron Dawson, their Avenue Edge, twelve Banks for America cunning 0:08:41.960 --> 0:08:44.040 their growth out looks for the United States and the World. 0:08:44.280 --> 0:08:46.600 Rights and the Growth Revision seek to capture the impact 0:08:46.640 --> 0:08:49.920 of the policy uncertainty shock on spending in CAPEX in 0:08:49.960 --> 0:08:53.080 the coming months, as well as a more hawkish tarist stance. 0:08:53.280 --> 0:08:55.760 Claudia Irigozan of Bank of America joins us now for more. 0:08:55.760 --> 0:08:57.600 Cladia. Good to see you, sir, Thank you. 0:08:57.760 --> 0:09:01.000 First question, hardest question on earth to put out a 0:09:01.040 --> 0:09:03.520 forecast in this environment? How difficult is that? 0:09:03.880 --> 0:09:07.840 It's extremely difficult. But and to be honest, some times, 0:09:07.920 --> 0:09:12.200 uncertainty it's worse than bad news because that impacts the 0:09:12.280 --> 0:09:17.000 decision of companies, irreversible decisions to invest or not. So 0:09:17.240 --> 0:09:20.000 the optional value of waiting is higher when you don't 0:09:20.000 --> 0:09:21.800 know what's going to happen and you can see the Fed. 0:09:21.840 --> 0:09:24.600 The FED is exactly in the same position. They cannot 0:09:24.600 --> 0:09:26.559 move the needle until they figured out what's going to happen. 0:09:26.640 --> 0:09:28.360 So, without of mind, how bad key one going to be? 0:09:29.240 --> 0:09:32.480 Actually it's not going to be that bad. Generally data 0:09:32.679 --> 0:09:36.720 was bad. February data was much better. So probably generally 0:09:36.800 --> 0:09:40.520 was a one off. We mark to market the first quarter, 0:09:41.200 --> 0:09:43.400 we expect probably something between one and a half and 0:09:43.440 --> 0:09:45.640 two percent, So the first half is going to be 0:09:45.640 --> 0:09:47.920 around one and a half one point seven and the 0:09:47.920 --> 0:09:50.600 second half is going to be around two percent, which 0:09:50.600 --> 0:09:52.920 is to try and grow. It's not that bad really. 0:09:53.120 --> 0:09:54.400 At the same time, I think what a lot of 0:09:54.400 --> 0:09:56.679 people are worried about is that tariffs are going to 0:09:57.080 --> 0:10:00.880 keep the inflation picture a little bit stickier than otherwise. 0:10:01.480 --> 0:10:03.240 Than otherwise was on track for Atlanta. 0:10:03.240 --> 0:10:06.080 FED President Rafael Biostik yesterday speaking with our Michael McKee, 0:10:06.160 --> 0:10:08.600 saying that he moved to one rate cut projected for 0:10:08.640 --> 0:10:11.080 this year because he thinks that the path of this 0:10:11.200 --> 0:10:13.559 inflation is going to be very bumpy and not moved 0:10:13.640 --> 0:10:15.800 dramatically and in a clear way to the two percent target. 0:10:15.840 --> 0:10:19.040 Do you agree that that now seems further out of reach. 0:10:19.720 --> 0:10:22.840 Yeah. We had the view that the inflation was sticky 0:10:22.880 --> 0:10:25.280 and was going to continue to remain sticky even before 0:10:25.320 --> 0:10:29.400 the title shock, and we expect the PC inflation around 0:10:29.440 --> 0:10:31.480 three percent, which is too high for the FED to 0:10:31.520 --> 0:10:35.480 feel comfortable cuddion rates. With all that uncertainty, that is 0:10:35.520 --> 0:10:38.959 basically upside risk to inflation. So we have the call 0:10:39.040 --> 0:10:41.360 that the FED will remain a whole for the foreseeable 0:10:41.400 --> 0:10:44.280 future and inflation will remain sticky. Absolutely. 0:10:44.440 --> 0:10:46.679 So it raises this question when you talk about a 0:10:46.720 --> 0:10:48.400 growth slow down. A muhammadal Area and was on this 0:10:48.440 --> 0:10:49.640 program and he asked this question. 0:10:49.679 --> 0:10:50.280 And I've given a. 0:10:50.240 --> 0:10:53.120 Lot of thought to it slowing to what if it's 0:10:53.160 --> 0:10:56.240 not recession. If growth slows to a certain place, does 0:10:56.280 --> 0:10:59.800 it become really difficult for the United States to sustain 0:10:59.840 --> 0:11:03.520 the deficit that it has and continue with the growth 0:11:03.520 --> 0:11:07.079 that it has. If you have inflation that is sticky, 0:11:07.120 --> 0:11:09.360 it's not stiflation, but it doesn't feel great. 0:11:10.000 --> 0:11:16.320 It's a staflationary flavor. Let me put it away. If 0:11:16.320 --> 0:11:18.640 you have the level of uncertainty that you have over 0:11:18.679 --> 0:11:21.720 the last three weeks for another three months, that will 0:11:21.760 --> 0:11:25.600 have a permanent effect on investment decisions and on consumption. 0:11:26.200 --> 0:11:31.880 So this administration can change the way communicates to the market. 0:11:32.320 --> 0:11:36.280 Because the market has no political color. They just price 0:11:36.400 --> 0:11:39.079 what they see and the correction in the market is 0:11:39.120 --> 0:11:41.320 the market telling we don't like these policies or we 0:11:41.360 --> 0:11:44.360 don't understand this policy. So at least communication could be 0:11:44.440 --> 0:11:47.360 more transparent for the market to understand that if this 0:11:47.480 --> 0:11:50.760 is a short and pain for learning game. Usually markets 0:11:50.840 --> 0:11:53.600 rally when the net present value of a project is positive. 0:11:53.640 --> 0:11:56.600 So communication is going to be key. And I notice 0:11:56.640 --> 0:11:59.160 in the last three or four days that communication is 0:11:59.240 --> 0:12:01.079 more careful at least well. 0:12:01.080 --> 0:12:03.320 Trump has talked about being flexible at least when it 0:12:03.320 --> 0:12:05.679 comes to terrorists. When it comes to your inflation forecast, 0:12:06.160 --> 0:12:10.320 it's very hawkish. Do you use some of these tariffs driven. 0:12:11.480 --> 0:12:13.679 For you to have a sense if you have an 0:12:13.720 --> 0:12:17.640 increase of one percent in effected tatifs, that gives you 0:12:17.760 --> 0:12:22.560 between seven, maybe ten or more than ten basis points 0:12:23.240 --> 0:12:30.120 increasing PC. So tariffs the twenty percent is from China, 0:12:30.320 --> 0:12:33.240 that gives you two and a half points of increasing 0:12:33.240 --> 0:12:39.120 effective tittifs, So that gives you already twenty points or 0:12:39.120 --> 0:12:42.480 so on PC. And then if you do reciprocity, you 0:12:42.520 --> 0:12:45.400 can have another half a point in increasing in effected tititis. 0:12:45.440 --> 0:12:48.320 So you can have a sense the things get more 0:12:48.320 --> 0:12:50.920 heity when you say, okay, I'm going to also take 0:12:50.920 --> 0:12:54.559 into account when I do reciprocity VAT then it's a 0:12:54.600 --> 0:12:56.040 completely different discussion. 0:12:56.080 --> 0:12:59.200 And digital services, tax and currency exchanges. They're looking at 0:12:59.200 --> 0:13:02.360 everything across the that's the executive order called for. What 0:13:02.400 --> 0:13:04.720 I'm hearing from you is it's not so much the tariffs, 0:13:04.720 --> 0:13:05.640 it's the uncertainty. 0:13:05.760 --> 0:13:07.760 Can we have an uncertainty driven recession? 0:13:08.760 --> 0:13:13.040 Well, you really really have to keep this uncertainty letter 0:13:13.080 --> 0:13:18.200 for a while. Three weeks easy enough for showing up 0:13:18.200 --> 0:13:21.280 in the soft data. As we were discussing before, Still 0:13:21.320 --> 0:13:24.719 consumption data remains strong. Our cregit card data shows that 0:13:24.800 --> 0:13:29.240 the consumption is resilient. You had massive wealth effects over 0:13:29.280 --> 0:13:34.320 the last year and a half. Consumers heah their interest 0:13:34.360 --> 0:13:37.480 rate exposure big time when interstrate collapsed, the refinance their mortgages. 0:13:37.520 --> 0:13:39.760 So the balance sheet of the private sector is fine. 0:13:40.400 --> 0:13:42.720 The balance sheet of the public sector is not fine, 0:13:43.160 --> 0:13:44.719 and that remains to be seeing how it's going to 0:13:44.760 --> 0:13:45.240 be addressed. 0:13:45.280 --> 0:13:47.559 It's interesting listening to the administration the last twenty four 0:13:47.600 --> 0:13:49.640 houns when they talk about challenges to the economy, they 0:13:49.720 --> 0:13:52.160 kind of brush to a side the terror story. They 0:13:52.200 --> 0:13:55.000 will accept, though the doge and the rebalance of the 0:13:55.000 --> 0:13:57.640 economy away from government spending towards the private sector could 0:13:57.679 --> 0:13:59.680 be damaging. And we heard that from Stephen Merron, the 0:13:59.760 --> 0:14:03.040 chair the Council of Economic Advices, just yesterday speaking to 0:14:03.240 --> 0:14:05.360 blimp Back News. I don't think there's going to be 0:14:05.440 --> 0:14:07.920 a material short term pain from the tariffs. I think 0:14:07.920 --> 0:14:10.160 the short term pain is coming from the re orientation 0:14:10.280 --> 0:14:13.160 of the economy from the government to the private sector. 0:14:13.360 --> 0:14:15.080 How do you even the THA think about DOGE and 0:14:15.120 --> 0:14:16.760 what it could do to your outlook. 0:14:18.600 --> 0:14:20.000 I think it's too early to tell. There are a 0:14:20.040 --> 0:14:22.960 lot of things that the administrations say we're going to 0:14:23.000 --> 0:14:25.320 do it, and it's not easy to implement. The execution 0:14:25.480 --> 0:14:28.760 risks are still high. But dogs is another example in 0:14:28.840 --> 0:14:34.400 which uncertainty. It's not enough to characterize this economy. You 0:14:34.520 --> 0:14:37.960 have to add to to uncertain the confusion. So we 0:14:38.000 --> 0:14:42.920 can agree that tardies will be two twenty percent higher 0:14:43.000 --> 0:14:45.280 or not in April. Second, we can agree on the 0:14:45.280 --> 0:14:49.119 probority distribution of that random event, but we can disagree 0:14:49.120 --> 0:14:51.280 and people disagree a lot on the effect of that 0:14:51.480 --> 0:14:52.200 on the economy. 0:14:53.080 --> 0:14:55.160 When it comes to doughg is your concern and the 0:14:55.200 --> 0:14:58.240 effect of the economy on the labor market and potentially 0:14:58.280 --> 0:15:01.320 the business contracts that you have the private sector doing 0:15:01.320 --> 0:15:02.240 with the US government. 0:15:03.080 --> 0:15:06.560 It's still when you quantify it, it's still relatively minor 0:15:06.640 --> 0:15:10.480 and very concentrated on some geographical areas the DC et cetera. 0:15:11.080 --> 0:15:15.480 But it's going to impact on sentiments, right, so it 0:15:15.600 --> 0:15:19.600 creates uncertainty of where we are going. So if you 0:15:19.640 --> 0:15:25.800 have a master plan that has different pars energy, immigration, 0:15:28.280 --> 0:15:32.240 physical consolidation chart, if you got to put it together 0:15:32.280 --> 0:15:34.120 and explain to the market, this is what we have 0:15:34.200 --> 0:15:37.640 in mind. If you do it piecemeal, you create confusion. 0:15:37.760 --> 0:15:40.080 Well, they have a master plan, but they're doing a 0:15:40.080 --> 0:15:42.800 piecemeal in the sense that they're dressing tariffs first. By 0:15:42.800 --> 0:15:44.360 the end of the year, they want an extension of 0:15:44.440 --> 0:15:47.640 TCGA and they want deregulation along the way. If you 0:15:47.720 --> 0:15:52.880 take the Trump administration's economic policy together, do you think 0:15:52.960 --> 0:15:54.040 it's a fair outcome? 0:15:55.560 --> 0:15:58.200 What we have in our forecast is an economy that 0:15:58.240 --> 0:16:04.119 eventually will continue running the wrong potential. I think policies 0:16:04.120 --> 0:16:09.240 can have the right the thea would be great, but 0:16:09.360 --> 0:16:12.920 implementation rates are very high. If you impose studies in 0:16:12.960 --> 0:16:15.560 the morning and removing in the afternoon, even if you 0:16:15.680 --> 0:16:20.560 end up with at the end, that transition doesn't help. 0:16:20.720 --> 0:16:22.320 It's difficult to plan with that bad job. 0:16:22.360 --> 0:16:23.880 That's for Claudia. It's good to see. 0:16:23.880 --> 0:16:25.280 It's good to catch up and get your thoughts from 0:16:25.280 --> 0:16:25.800 the team over. 0:16:25.760 --> 0:16:26.520 A Bank of America. 0:16:26.760 --> 0:16:39.480 Claudia Rigo isn't there to extend the conversation joining us 0:16:39.480 --> 0:16:41.120 around the table here in New York. Let me control 0:16:41.160 --> 0:16:42.360 the pimp cod Let's be good to see you. 0:16:42.400 --> 0:16:42.960 Good to see you. 0:16:43.160 --> 0:16:45.320 Attempting to read the tea leaves in Washington is a 0:16:45.400 --> 0:16:47.320 dangerous game, but we're going to play it just quickly. 0:16:47.600 --> 0:16:49.200 Do you think maybe, based on the comments in the 0:16:49.280 --> 0:16:51.240 last twenty four hours, the President in this White House 0:16:51.280 --> 0:16:53.840 are realizing some of the legal constraints around what they 0:16:53.880 --> 0:16:55.240 can and can't do on aight Pril second. 0:16:55.400 --> 0:16:58.120 Yeah, And what we know about his trade advisors, jameson 0:16:58.160 --> 0:17:01.120 Greer in particular, who's his US trade presentative. He is 0:17:01.320 --> 0:17:05.240 particularly focused on the legality and the durability of these 0:17:05.320 --> 0:17:08.439 terriff actions. We remember that April second was the first 0:17:08.680 --> 0:17:10.679 sort of the date that was set out in the 0:17:10.720 --> 0:17:14.439 executive order in the first week of the administration that 0:17:14.520 --> 0:17:17.800 really was supposed to clarify kind of the trade agenda. 0:17:18.480 --> 0:17:21.880 It was before the Canada Mexico terriffs, before the Columbia threats, 0:17:21.920 --> 0:17:25.520 before the aluminum steel tariffs. So I think in some 0:17:25.560 --> 0:17:29.280 ways this should, I think provide some coherence in terms 0:17:29.320 --> 0:17:32.640 of the trade agenda. But again, the legality I think 0:17:32.760 --> 0:17:35.400 is very crucial here. One thing that we were talking 0:17:35.400 --> 0:17:37.679 to clients about is is this just an announcement of 0:17:37.720 --> 0:17:40.880 future tariffs. Is this sort of forward guidance, if you will, 0:17:40.920 --> 0:17:44.479 for tariffs or is this actually an announcement that tariffs 0:17:44.520 --> 0:17:46.879 are rolling on on April second? And I think that 0:17:46.920 --> 0:17:50.000 actually has to interplay with the legality. If this is 0:17:50.040 --> 0:17:52.680 being used under AEPA, then he can do this day one. 0:17:53.119 --> 0:17:55.320 If this is more of a broader investigation, then that 0:17:55.320 --> 0:17:56.560 will take several months. 0:17:56.560 --> 0:17:58.320 Well, the ft is saying it's both. There's going to 0:17:58.359 --> 0:17:58.919 be two tiers. 0:17:58.920 --> 0:18:01.639 Potentially we get some pars day one and then longer 0:18:01.720 --> 0:18:04.280 term they're going to look into some trade and balances. 0:18:04.480 --> 0:18:07.880 I love that you talk about mind numbing process because 0:18:07.920 --> 0:18:09.959 I actually think it's important whether or not they use AIPA, 0:18:10.000 --> 0:18:11.919 whether or not they use three thirty eight. Can you 0:18:12.000 --> 0:18:14.800 walk us through what they potentially have a menu of 0:18:15.240 --> 0:18:16.440 to enact on April second. 0:18:16.520 --> 0:18:19.119 Yeah, I mean, as we've discussed before, the executive branch 0:18:19.280 --> 0:18:22.159 just has wide discretion in terms of what they can 0:18:22.240 --> 0:18:23.200 do on tariffs. 0:18:23.240 --> 0:18:23.880 You know, latterly. 0:18:23.920 --> 0:18:25.560 So of course they don't need to go through Congress 0:18:25.560 --> 0:18:28.360 for any of these things. These are authorities that they 0:18:28.359 --> 0:18:31.480 already have, but they do depend in terms of timing. 0:18:31.640 --> 0:18:34.960 So Section three oh one, for instance, that's an investigation 0:18:35.440 --> 0:18:38.400 that usually looks into a country as specific country's practices. 0:18:38.680 --> 0:18:40.560 That investigation can take months. 0:18:40.640 --> 0:18:41.160 This is the. 0:18:41.200 --> 0:18:43.800 Authority that they that the Trump one point zero put 0:18:44.320 --> 0:18:47.439 tariffs on China. So if it's an announcement of a 0:18:47.520 --> 0:18:50.160 three oho one investigation, then again you're kind of giving 0:18:50.200 --> 0:18:53.560 the market some for guidance about what to expect. If 0:18:53.600 --> 0:18:56.080