WEBVTT - Bloomberg Surveillance TV: September 30th, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 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 Hordernt. 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 --> 0:00:37.760 Terminal and the Bloomberg Business App. Investors bracing for a 0:00:37.800 --> 0:00:41.160 potential government shutdown to begin at midnight, Mark hay Fley, 0:00:41.159 --> 0:00:43.960 the chief investment officer in UBS Global Wealth Management, right 0:00:44.040 --> 0:00:46.600 in the following. With the direct impact of a government 0:00:46.640 --> 0:00:50.280 shutdown on financial markets likely to be muted, we maintain 0:00:50.320 --> 0:00:53.959 a positive outlook for US secrates. Mark joins us now 0:00:53.960 --> 0:00:55.840 for more make welcome back is Vincin long, my friend, 0:00:55.920 --> 0:00:58.160 Let's talk about what's anchoring that view. What's making you 0:00:58.200 --> 0:00:59.000 bullish right now? 0:01:00.320 --> 0:01:04.240 Well, I think we've had continued strong earnings. We've seen 0:01:04.319 --> 0:01:10.760 this continued investment on the AI side, and then we 0:01:10.880 --> 0:01:14.840 have the FED cutting rates, so those are positive backdrops 0:01:15.200 --> 0:01:20.319 would also add in there, you know, the strong fiscal 0:01:20.360 --> 0:01:24.679 spend that continues, and that's been supporting the economic picture 0:01:24.760 --> 0:01:25.200 as well. 0:01:25.480 --> 0:01:28.520 Mark, I know that these are real numbers, real revenue, 0:01:28.720 --> 0:01:32.760 real profits. There's been some concerns recently about circle of finance, 0:01:33.160 --> 0:01:37.280 financial engineering. Do you see any pockets of speculative behavior 0:01:37.319 --> 0:01:40.720 that concern you and the team? 0:01:41.040 --> 0:01:44.360 Absolutely that there is, you know, and there has been 0:01:44.480 --> 0:01:50.240 for several years, speculation in various parts of the market. 0:01:50.320 --> 0:01:54.240 I think focus on quality is something that we have 0:01:54.440 --> 0:01:58.640 maintained and will continue to maintain a focus on cash flows. 0:01:59.680 --> 0:02:02.360 There are plenty of stocks. It does seem like, you know, 0:02:02.760 --> 0:02:04.600 you could put dot Com in your name and your 0:02:04.640 --> 0:02:06.960 stock would go up. Now you put AI in your 0:02:07.040 --> 0:02:09.160 name and your stock would go up. That kind of 0:02:09.200 --> 0:02:13.360 thing is a worrisome sign to a degree, and that's 0:02:13.360 --> 0:02:15.680 why you really do have to start digging in on 0:02:16.080 --> 0:02:19.440 particularly I think on the cash flow side, Mark. 0:02:19.280 --> 0:02:21.880 Until now, a lot of the money that's gone into 0:02:21.919 --> 0:02:25.280 tech investment has been cash flow free cash flow. Now 0:02:25.320 --> 0:02:27.840 we're starting to see more leverage get introduced to more 0:02:27.880 --> 0:02:30.359 of these deals. I'm thinking of the core Weave Core 0:02:30.400 --> 0:02:32.960 Weave deal right now, that we announced this morning. 0:02:33.160 --> 0:02:34.520 With Meta Core. 0:02:34.600 --> 0:02:38.120 Weave is a below investment grade rated company that relies 0:02:38.160 --> 0:02:40.640 heavily on the debt market, and this comes along with 0:02:40.720 --> 0:02:44.240 a slew of LBOs and other deal activity. Does that 0:02:44.360 --> 0:02:48.240 raise concerns about the debt side of the financing structure 0:02:48.440 --> 0:02:51.160 heading into a really uncertain economic time. 0:02:52.320 --> 0:02:54.480 Well, I think it's a I think it's a good point, 0:02:55.000 --> 0:02:59.400 as you've noted. I think rightly we're starting to see 0:03:00.440 --> 0:03:03.520 really just kind of the beginnings maybe of some of 0:03:03.520 --> 0:03:08.680 the more excitement on the institutional side about IPOs and 0:03:08.800 --> 0:03:11.320 other things. So, you know, I think some of this 0:03:11.560 --> 0:03:16.440 financing is absolutely something to watch, but we still believe, 0:03:17.200 --> 0:03:19.679 you know, some of it in the around the core, 0:03:19.760 --> 0:03:22.800 around some of the core of the hyperscalers. That's still 0:03:22.919 --> 0:03:25.880 very early, but there's no question that there are pockets 0:03:25.880 --> 0:03:28.720 of leverage as well building up in the system. I think, 0:03:29.120 --> 0:03:30.880 you know, the way the way we look at it 0:03:30.919 --> 0:03:37.560 overall with the AI project, it's something that we think 0:03:37.680 --> 0:03:40.520 is one of the longer term themes that we want 0:03:40.560 --> 0:03:44.600 to stay invested in because we do see the productivity growth, 0:03:44.640 --> 0:03:47.040 we hear it from our clients who are our customers. 0:03:47.080 --> 0:03:50.080 That's something they're investing in. We still like the power 0:03:50.160 --> 0:03:53.400 and resources story associated with that, We still like the 0:03:53.400 --> 0:03:57.480 healthcare story. These are areas you know, there are big 0:03:57.520 --> 0:04:00.920 problems for governments UH and and where there's big problems, 0:04:00.920 --> 0:04:03.520 there's big money going in. We've seen the President of 0:04:03.560 --> 0:04:06.040 the United States say we're going to win it. We 0:04:06.160 --> 0:04:13.040 must win on AI. These are existential, ultimately defense issues, 0:04:13.080 --> 0:04:17.719 both for companies and for nations, and so I think 0:04:17.720 --> 0:04:19.919 that gives it something of a little bit of a 0:04:20.000 --> 0:04:22.600 different quality. And those are the kind of longer term 0:04:22.600 --> 0:04:25.479 trends we want to be behind. Even if there is 0:04:25.560 --> 0:04:28.400 certainly the potential for some choppy trading into the end 0:04:28.400 --> 0:04:29.720 of the year mark, if you. 0:04:29.680 --> 0:04:31.919 Do have all of this investment, the IPO is the 0:04:31.960 --> 0:04:36.039 deals activity. Can you get a real acceleration in growth 0:04:36.200 --> 0:04:39.880 heading into the fourth quarter without a reacceleration and inflation. 0:04:42.800 --> 0:04:47.120 Look, we think there might be some acceleration of inflation. 0:04:47.960 --> 0:04:51.200 It's I think it's something about how much the Fed 0:04:51.200 --> 0:04:55.240 and other central banks would be willing to look through that. 0:04:55.720 --> 0:04:59.479 But also keep in mind for some of if you 0:04:59.560 --> 0:05:05.600 take the tech sector, that inflation is not necessarily an 0:05:05.600 --> 0:05:09.160 issue for them, because if you take the hyperscalers. They're 0:05:09.200 --> 0:05:14.440 not that reliant on debt financing, right, So there again, 0:05:14.480 --> 0:05:16.520 I think it could be a time to get a 0:05:16.520 --> 0:05:22.559 little more selective about who can continue to benefit given 0:05:22.600 --> 0:05:25.080 the very large changes we've had in the way the 0:05:25.160 --> 0:05:27.640 economy has been moving forward this year. 0:05:27.920 --> 0:05:30.039 Mark, I've got to squeeze this in. Got about forty 0:05:30.080 --> 0:05:32.279 five seconds. You're at UBS. I've got to ask you 0:05:32.279 --> 0:05:35.679 about gold, the move we've seen this year this month. 0:05:36.040 --> 0:05:38.720 Can you walk us through how investors have taken exposure 0:05:38.800 --> 0:05:42.160 to the precious metal, whether it's physical paper, and if 0:05:42.160 --> 0:05:45.040 it is physical, whether they're choosing to store it closer 0:05:45.080 --> 0:05:45.680 to home. 0:05:48.000 --> 0:05:50.960 All of the above. Jonathan, you should come visit the 0:05:51.000 --> 0:05:56.159 vault someday. Long long equities and long gold has worked 0:05:56.240 --> 0:05:58.800 very well for us, and we think that will continue 0:05:58.839 --> 0:05:59.200 to work. 0:06:00.520 --> 0:06:01.160 Stay with us. 0:06:01.480 --> 0:06:13.880 Multilomberg Surveillance coming up after this. Monica Querra of Mark 0:06:13.920 --> 0:06:16.359 and Stanley Ontica, welcome to the program. A lot of 0:06:16.360 --> 0:06:18.680 people looking through this Wall Street saying it doesn't matter 0:06:18.760 --> 0:06:20.839 to show me the economic tanctor and everything's okay. Do 0:06:20.839 --> 0:06:22.159 you think about it slightly differently? 0:06:22.839 --> 0:06:24.440 I think you have to look at it, you know, 0:06:24.480 --> 0:06:28.560 from where the risk actually could bubble up. Now, historically 0:06:28.560 --> 0:06:31.440 markets do look through. You get Marcus outperforming at average 0:06:31.480 --> 0:06:34.880 about four point four percent during periods of shutdown. Granted 0:06:34.880 --> 0:06:37.320 they can last from you know, three days to thirty 0:06:37.320 --> 0:06:40.240 four days, so that's a huge window in time. But 0:06:40.320 --> 0:06:43.039 typically even with the long shutdowns, you still have markets 0:06:43.080 --> 0:06:46.600 out performing. So the risk comes and which industries and 0:06:46.640 --> 0:06:51.680 sectors are most reliant on those government contracts and that's defense, healthcare, 0:06:51.920 --> 0:06:55.720 et cetera. Is this a nice by opportunity potentially if 0:06:55.720 --> 0:06:58.479 you're trying to you know, take a tactical approach, But 0:06:58.600 --> 0:07:02.039 again it's a short to a short window where markets 0:07:02.080 --> 0:07:02.680 like to look through. 0:07:02.839 --> 0:07:05.400 Well, that last shutdown that was thirty four to thirty 0:07:05.400 --> 0:07:07.640 five days in the end, what kind of impact did 0:07:07.640 --> 0:07:09.760 that have on Wall Street and the economy? 0:07:10.400 --> 0:07:13.960 Very little, because the macroeconomic factors were really important. The 0:07:14.040 --> 0:07:16.840 other thing that's critical here is that it was a 0:07:16.840 --> 0:07:19.440 partial shutdown. It wasn't a full shutdown. So in twenty 0:07:19.440 --> 0:07:21.240 thirteen we had a full shutdown, and I think the 0:07:21.400 --> 0:07:23.760 estimate from the CBO is that they lost about twenty 0:07:23.800 --> 0:07:29.040 four billion or so in productivity in twenty eighteen, even 0:07:29.080 --> 0:07:32.240 though it was a double the length twice as long 0:07:32.400 --> 0:07:35.200 or more of a shutdown, They only lost eleven billion 0:07:35.360 --> 0:07:37.400 three billion net at the end of the day after 0:07:37.440 --> 0:07:38.400 everyone was made whole. 0:07:38.720 --> 0:07:40.000 So even with. 0:07:40.040 --> 0:07:43.080 That length of time, there could be you know, a 0:07:43.200 --> 0:07:46.239 variety rate of factors that could impact growth. 0:07:46.440 --> 0:07:49.360 The conversation I'm hearing out of Washington yesterday today this 0:07:49.440 --> 0:07:52.600 morning talking to people is obviously the government is shutting down, 0:07:52.640 --> 0:07:54.880 it's the length. What are you thinking about in terms 0:07:54.880 --> 0:07:56.520 of how long the government will be shut down? 0:07:56.840 --> 0:08:00.160 So when we're thinking about the political factors here, right 0:08:00.200 --> 0:08:03.880 with the Democrats, they are taking a stand. Earlier this 0:08:04.000 --> 0:08:06.520 year when Schumer came to the table and they passed 0:08:06.520 --> 0:08:10.080 the cr there was a large outcry within the Democratic electorate. 0:08:09.680 --> 0:08:11.560 Right upset that they moved so quickly. 0:08:11.800 --> 0:08:15.320 So I think it does behoove them from a voter standpoint, 0:08:15.400 --> 0:08:18.080 right of speaking to their base to actually hold a 0:08:18.120 --> 0:08:21.320 firm line. Then they have to balance that with pressures 0:08:21.320 --> 0:08:22.880 that can potentially come from the White House. 0:08:23.280 --> 0:08:24.960 They were calling for mass layoffs. 0:08:25.040 --> 0:08:28.320 That's likely not to happen, but other areas that could 0:08:28.320 --> 0:08:31.640 be a catalyst is potentially, you know, apportionment control, meaning 0:08:31.720 --> 0:08:35.040 that the president could deny a transfer of funds posts 0:08:35.160 --> 0:08:39.640 or daring this shutdown as essentially a catalyst opportunity to 0:08:39.800 --> 0:08:41.640 look under the hood and see where they can cut. 0:08:41.679 --> 0:08:44.600 Why has that been the shift and focus away from 0:08:44.679 --> 0:08:49.120 possibly some sort of mass layoff program and more just 0:08:49.160 --> 0:08:51.520 shifting where money goes in the government. 0:08:52.040 --> 0:08:54.040 So we look at what happened with DOGE. 0:08:54.160 --> 0:08:57.760 They were largely unsuccessful, right, They were able to get 0:08:57.800 --> 0:09:02.600 some cuts through. There was such significant power within the 0:09:02.600 --> 0:09:07.720 federal unions protecting the status of workers, and the legal 0:09:07.760 --> 0:09:11.400 response right was essentially a significant pushback. They don't want 0:09:11.400 --> 0:09:14.040 to run into that sort of hurdle again. So I 0:09:14.040 --> 0:09:17.760 think it's more of an issue of which agencies, which programs, 0:09:17.760 --> 0:09:21.280 which departments are ideologically aligned with the president, and could 0:09:21.360 --> 0:09:24.280 those areas actually be in trouble if they choose to 0:09:24.280 --> 0:09:25.000 withhold funds. 0:09:25.160 --> 0:09:26.880 Okay, so let's talk specifics. 0:09:27.000 --> 0:09:30.280 What are the areas that could possibly see reductions in funding? 0:09:30.480 --> 0:09:32.840 What are the areas that could potentially see increases in 0:09:32.880 --> 0:09:35.719 funding as soon as the next few weeks if there 0:09:35.800 --> 0:09:37.520 is some sort of shutdown, I mean you. 0:09:37.440 --> 0:09:38.480 Could see some risk. 0:09:38.840 --> 0:09:41.320 I mean, this is pretty high level and widespread. It's 0:09:41.360 --> 0:09:44.600 already happening right on the DEI front that's likely to continue. 0:09:44.840 --> 0:09:48.480 They could also look at anything that's clean energy related. 0:09:48.880 --> 0:09:51.679 You could maybe see some impacts to EPA. And then 0:09:51.720 --> 0:09:53.960 the other areas that I think are critical is on 0:09:54.160 --> 0:09:58.480 the Medicaid healthcare front. They're continuing to want to clamp down, 0:09:58.559 --> 0:10:01.240 especially on those ACA subsi that the Democrats are looking 0:10:01.280 --> 0:10:02.319 forward to extending. 0:10:03.040 --> 0:10:05.040 Do they get that that's the big question. What's the 0:10:05.120 --> 0:10:07.240 off ramp. The off ramp here, I. 0:10:07.160 --> 0:10:11.000 Think is if you start getting really notable aggressive activity 0:10:11.000 --> 0:10:13.720 from the White House, and then that could move the 0:10:13.800 --> 0:10:18.000 Democrats forward because there's a significant amount of programs that 0:10:18.040 --> 0:10:20.000 they don't want to lose and they want to make 0:10:20.000 --> 0:10:23.240 sure that their support outside of ACA subsidies. Right now, 0:10:23.280 --> 0:10:25.040 this is their bargaining chip. This is the thing that 0:10:25.080 --> 0:10:27.120 they want to get a win on. If they can't 0:10:27.120 --> 0:10:30.040 get that and everything else starts to see this, you know, 0:10:30.040 --> 0:10:31.560 you start to see the train go off the tracks 0:10:31.559 --> 0:10:34.120 in other ways, that could be the catalyst that gets 0:10:34.120 --> 0:10:34.640 the Democrats. 0:10:34.720 --> 0:10:38.400 The Vice President yesterday was talking about rural healthcare policy 0:10:38.480 --> 0:10:40.880 and how potentially that is one place where they can 0:10:40.880 --> 0:10:41.800 come to an agreement. 0:10:41.960 --> 0:10:43.440 Is this where the off ramp. 0:10:43.240 --> 0:10:46.000 Will be, though it will be in the healthcare policy sector. 0:10:46.679 --> 0:10:49.880 If Democrats get a concession, that's their off ramp. 0:10:49.960 --> 0:10:51.600 The other piece that I'm talking about is. 0:10:51.640 --> 0:10:53.880 The stick off room, right that if the White House says, no, 0:10:53.920 --> 0:10:56.480 we're not negotiating with you, we're not giving you those subsidies, 0:10:56.720 --> 0:10:58.000 then you have to come to the table because we're 0:10:58.000 --> 0:10:59.600 going to cut other things. Right, And it's more of 0:10:59.600 --> 0:11:04.960 a fear tactic now on the ACA and rural healthcare component. 0:11:06.320 --> 0:11:09.120 When you're looking at red states, Rural red states their 0:11:09.160 --> 0:11:12.360 most reliant on ACA. They didn't do Medicaid expansion, so 0:11:12.400 --> 0:11:14.800 the Medicaid rulebcks don't really impact them. So it is 0:11:14.840 --> 0:11:17.960 really all about ACA subsidy extension, and that is an 0:11:18.000 --> 0:11:20.079 area where you do get bipartisan consensus. 0:11:20.280 --> 0:11:21.960 Taking a step back and looking at some of the 0:11:22.000 --> 0:11:25.439 macro implications, not clear what the longer term macro implications 0:11:25.440 --> 0:11:27.200 are for bond yield. It's based on just sort of 0:11:27.200 --> 0:11:31.000 this broader sense that it isn't essentially an economic issue. 0:11:31.040 --> 0:11:34.040 You do see though, longer term an impact on the dollar. 0:11:34.280 --> 0:11:37.880 There has been a weaker dollar associated with shutdowns. Do 0:11:37.920 --> 0:11:41.240 you expect that to be correlation that continues this time around? 0:11:42.080 --> 0:11:45.960 Yes, this is a historical relationship. One of the things 0:11:46.000 --> 0:11:49.800 that we want to note though, is that the length 0:11:49.880 --> 0:11:53.000 of time right is going to impact that how week 0:11:53.040 --> 0:11:55.440 it goes. So if we get a week, that's going 0:11:55.480 --> 0:11:57.080 to be very different than if we get another thirty 0:11:57.080 --> 0:11:58.440 five day window. 0:11:59.280 --> 0:12:02.839 Sight with us more Bloomberg Surveillance coming up after this. 0:12:12.000 --> 0:12:15.600 FI Lorlando, a Federated Global Investment sees momentum building. He 0:12:15.640 --> 0:12:18.959 writes the following. Given the potential for a strengthening labor 0:12:19.000 --> 0:12:22.800 market and moderating inflation, economic growth could accelerate in the 0:12:22.840 --> 0:12:25.520 second half of this year. Phil joins a snapper more, Phil, 0:12:25.600 --> 0:12:27.640 good morning, good morning, Thanks for having me back, thanks 0:12:27.679 --> 0:12:29.360 for being here. Just to build on that quote, is 0:12:29.400 --> 0:12:31.000 that the story we're priced for. 0:12:32.840 --> 0:12:37.120 Stock market's up thirty eight percent since the Liberation Day 0:12:37.240 --> 0:12:40.360 lows back in the middle of April. So clearly they're 0:12:40.400 --> 0:12:43.960 not jumping out of the upper floors of the towers 0:12:44.000 --> 0:12:47.640 because they're concerned that the labor market's collapsing. Has the 0:12:47.720 --> 0:12:50.800 data been soft the last four months, no question, But 0:12:51.480 --> 0:12:54.280 in our view the data was sort of troughing here 0:12:54.320 --> 0:12:56.680 and has the potential to accelerate going in the next 0:12:56.679 --> 0:12:57.079 couple of. 0:12:57.000 --> 0:13:00.120 Months relative to what this is what I want to understand, 0:13:00.160 --> 0:13:02.360 were priced for a lot of this going into twenty six. 0:13:02.440 --> 0:13:05.559 Expectations have already picked up. We've had the equity market rally. 0:13:05.760 --> 0:13:07.719 How much of that has been about earnings? How much 0:13:07.720 --> 0:13:10.120 of that is just a better economic story or reading. 0:13:10.520 --> 0:13:13.120 So the earning situation we think is excellent. You know, 0:13:13.160 --> 0:13:14.920 you look at the first quarter. In the second quarter, 0:13:15.920 --> 0:13:18.880 second quarter, revenues up six percent, earnings up twelve percent, 0:13:18.960 --> 0:13:23.120 much better than expected, the consensus expectations for the third 0:13:23.200 --> 0:13:25.920 quarter starting to come in. Those numbers look pretty strong. 0:13:26.120 --> 0:13:29.640 We're in the process of upgrading our earnings estimates for 0:13:29.800 --> 0:13:32.160 full year this year, full year next year. So the 0:13:32.200 --> 0:13:36.520 earnings pictures in pretty good shape. Clearly, the labor market 0:13:36.559 --> 0:13:39.400 has been the weekly. Now you look at the August 0:13:39.760 --> 0:13:43.280 jobs report, it was terrible, admittedly, but there are a 0:13:43.280 --> 0:13:47.360 couple of things associated with that number. One, August tends 0:13:47.360 --> 0:13:49.720 to be the quirkiest month of the year. You've got 0:13:49.920 --> 0:13:54.400 you know, schools starting and starting up again, factories taking 0:13:54.440 --> 0:13:59.680 downtime to retool, temporarily furloughing workers. So the August non 0:13:59.720 --> 0:14:04.840 farm payroll report historically is the quirkiest report of the year. 0:14:05.160 --> 0:14:09.440 So you look at for example, Kevin Hassett, the National 0:14:09.600 --> 0:14:13.760 chairman director, came out and said that they're expecting seventy 0:14:13.800 --> 0:14:16.800 thousand jobs to be revised up over the course in 0:14:16.800 --> 0:14:19.840 the next couple of months. That's consistent with what we've 0:14:19.840 --> 0:14:23.520 seen historically. All of the noise and the nonsense in 0:14:23.560 --> 0:14:26.200 August tends to gets revised up. All right, that's point 0:14:26.280 --> 0:14:29.600 number one. Point number two. When we saw the initial 0:14:29.600 --> 0:14:33.120 weekly jobas claims the first week of September, the numbers 0:14:33.120 --> 0:14:34.960 were terrible. I think it was about two hundred and 0:14:35.000 --> 0:14:38.480 sixty four thousand. The market was freaking out a little bit, 0:14:38.520 --> 0:14:41.800 but you know, we suggested take a deep breath. Number one, 0:14:41.880 --> 0:14:44.400 it's a holiday shortened week. And number two, you had 0:14:44.440 --> 0:14:48.080 the allegations of claims fraud in Texas. So as we 0:14:48.160 --> 0:14:50.520 went to the next week, which was the survey week 0:14:50.560 --> 0:14:52.880 for September, the number came down on about two hundred 0:14:52.920 --> 0:14:55.320 and thirty thousand, and then last week came down further 0:14:55.400 --> 0:14:57.720 about two hundred and seventeen thousand. So we think the 0:14:57.760 --> 0:14:59.920 claims are pointing to the fact that the numbers are 0:15:00.080 --> 0:15:02.560 to be pretty good. And then you know, we were 0:15:02.600 --> 0:15:07.040 talking about nonfarm versus ADP. Going into this, the expectations 0:15:07.040 --> 0:15:11.040 for ADP about fifty thousand plus. That's kind of the 0:15:11.120 --> 0:15:14.080 number we're looking for for nonfarm That would be a 0:15:14.160 --> 0:15:16.800 number roughly double what we saw in the month of 0:15:16.840 --> 0:15:20.400 August for nonfarm So we think the labor market there 0:15:20.440 --> 0:15:25.160 may be a little too much pessimism built in, so 0:15:25.240 --> 0:15:28.280 our expectation that the number is probably troughed here and 0:15:28.320 --> 0:15:29.640 we'll start to see some improvement. 0:15:29.760 --> 0:15:32.160 Given that backdrop, there's a mystery, and we were unpacking 0:15:32.240 --> 0:15:35.480 that ahead of the Nike earnings after the bell This idea, 0:15:35.720 --> 0:15:40.280 even CEOs don't know how much consumers will absorb price increases. 0:15:40.960 --> 0:15:44.400 What is the connection right now between corporate profits and 0:15:44.440 --> 0:15:46.000 potential inflationary pressure? 0:15:47.000 --> 0:15:51.080 No question. If you look at the piece that I 0:15:51.120 --> 0:15:54.120 wrote last week focused on how good the back to 0:15:54.120 --> 0:15:56.880 school season was, back to school was up four point 0:15:56.960 --> 0:16:00.480 two percent three months through August. Back to school a 0:16:00.560 --> 0:16:02.760 year ago is only up two point three percent. So 0:16:03.040 --> 0:16:06.000 the consumers in pretty good shape, particularly at the high end. 0:16:06.200 --> 0:16:11.640 But I think there is absolutely some consternation about what 0:16:11.720 --> 0:16:14.400 pricing is, particularly at the low end of the price spectrum. 0:16:14.440 --> 0:16:17.400 So companies are going to have to you know sort 0:16:17.400 --> 0:16:23.280 of weigh that that situation high end consumers can afford 0:16:23.400 --> 0:16:25.960 a little bit more in pricing. But the question of 0:16:26.960 --> 0:16:29.680 are there going to be any forced pricing issues because 0:16:29.680 --> 0:16:32.200 of the tariff situation that companies need to pass on 0:16:32.280 --> 0:16:35.280 in order to maintain profit margins. Profit margins have been 0:16:35.280 --> 0:16:38.560 pretty strong up until now. Is that situation going to 0:16:38.600 --> 0:16:41.520 deteriorate in the third quarter in the fourth quarter. We 0:16:41.560 --> 0:16:43.880 don't know the data yet, but that's something that we're 0:16:43.880 --> 0:16:44.520 going to have to say. 0:16:44.680 --> 0:16:47.000 The big question mark over this has been holding back 0:16:47.080 --> 0:16:49.800 the broadening out in the S and P five hundred, 0:16:49.920 --> 0:16:51.480 in the RUSS of two thousand and the S and 0:16:51.520 --> 0:16:55.480 P six hundred Pickure index. How much are you betting 0:16:55.600 --> 0:16:57.640 that we are going to see that broadening out versus 0:16:57.800 --> 0:17:00.560 just this consolidation in big tech, this idea that the 0:17:00.600 --> 0:17:04.600 profits will continue to be driven by the biggest ten names. 0:17:04.960 --> 0:17:08.000 We're absolutely in the broadening out camp, and that's been 0:17:08.000 --> 0:17:10.720 our call for the last year. In case in point, 0:17:11.280 --> 0:17:13.960 look how well the small camps have done both growth 0:17:14.000 --> 0:17:16.080 and value over the course of the last couple of months. 0:17:16.560 --> 0:17:20.000 In our view, the small caps were completely mispriced, and 0:17:20.119 --> 0:17:23.840 once we began to see the fed kipped over their cards, 0:17:23.840 --> 0:17:26.880 they're going to cut interest rates. An interest rate reduction 0:17:27.000 --> 0:17:30.320 cycle is usually beneficial to the small cap companies. It 0:17:30.359 --> 0:17:34.040 improves their ability to self finance, kicks off an M 0:17:34.080 --> 0:17:37.720 and A and an IPO cycle, And you've got a 0:17:37.760 --> 0:17:42.119 situation where domestically, we think economic growth is accelerating. Small 0:17:42.119 --> 0:17:44.520 cap companies do eighty percent of their business here. If 0:17:44.520 --> 0:17:46.879 the US economy is doing well, that's going to benefit 0:17:46.920 --> 0:17:47.840 small cap companies. 0:17:47.960 --> 0:17:50.480 But aren't more tariffs going to hurt small cap companies 0:17:50.520 --> 0:17:52.080 even if they do business here? A lot of the 0:17:52.119 --> 0:17:54.000 import could be coming from other countries. 0:17:54.040 --> 0:17:57.679 Well, again, that's a case by case situation. I was 0:17:57.720 --> 0:18:01.239 on Bloomberg Radio recently and we were talking about this, 0:18:01.320 --> 0:18:03.760 and I got some random person that sent me an 0:18:03.800 --> 0:18:06.800 email when I got back to the office asking that question, 0:18:07.119 --> 0:18:10.280 isn't that going to impact pricing and imports and won't 0:18:10.359 --> 0:18:13.880 Christmas sales be a disaster? And the answer in our 0:18:14.040 --> 0:18:15.880 situation is, we think it's going to be a case 0:18:15.880 --> 0:18:20.600 by case situation. How is a company sourcing what they're selling? 0:18:21.600 --> 0:18:24.280 What's the pricing of that? Can they source more domestically? 0:18:25.119 --> 0:18:28.399 What's their labor situation? Immigrant versus native born that there 0:18:28.440 --> 0:18:30.639 are a lot of factors here that are going to 0:18:30.680 --> 0:18:32.240 dictate the answer to that question. 0:18:32.480 --> 0:18:34.840 Is there an area within the small caps that's immune 0:18:34.880 --> 0:18:35.399 to a lot of this. 0:18:35.880 --> 0:18:43.080 We love healthcare and within healthcare biotechnology. These are biotechnology 0:18:43.119 --> 0:18:46.560 gurus are telling us that the pipelines have never looked 0:18:46.560 --> 0:18:50.040 better yet, the valuations have never been more extreme out 0:18:50.040 --> 0:18:52.919 of favor. And what we've been waiting for is some catalysts, 0:18:52.920 --> 0:18:56.600 and we think the interest rate cutting cycle is that catalyst. 0:18:56.640 --> 0:18:59.879 The big cap companies Pfizer and MERKETC will start to 0:18:59.840 --> 0:19:03.920 think about you know, M and A activity. Lower interest 0:19:03.960 --> 0:19:07.240 rates again will make it easier to self finance, and 0:19:07.359 --> 0:19:10.359 people are now going to focus on the really good 0:19:10.680 --> 0:19:13.600 phase one, phase two, phase three clinical work that these 0:19:13.640 --> 0:19:16.840 companies have done with their drug development. That's the sector 0:19:16.920 --> 0:19:19.000 we think is poised to move higher. 0:19:20.080 --> 0:19:23.600 Stay with us more Bloomberg Surveillance coming up after this. 0:19:33.400 --> 0:19:36.400 Investors looking for signals the US economy is heading back 0:19:36.440 --> 0:19:41.000 towards stable growth of vlacility and higher inflation. Bruce Van 0:19:41.040 --> 0:19:43.480 Sun is the CEO of Citizens Financial Group, which serves 0:19:43.480 --> 0:19:47.439 approximately six million consumer and business customers. Bruce joins us 0:19:47.440 --> 0:19:48.800 Now for more Bruce, good morning. 0:19:48.600 --> 0:19:49.240 Good to see you. 0:19:49.240 --> 0:19:50.320 Oh, it's great to be here. 0:19:50.400 --> 0:19:55.200 Do we say happy anniversary? Twelfth anniversary, Yeah, that's twelve years. 0:19:55.040 --> 0:19:57.560 That's well, it is flown by. You've got to read 0:19:57.560 --> 0:19:59.640 on both the consumer and businesses as well. We talked 0:19:59.640 --> 0:20:01.800 a lot of our corporate confidence, the m and A, 0:20:02.160 --> 0:20:04.960 the boom things picking up. Consumer confidence still hold back. 0:20:05.000 --> 0:20:07.080 Would you see across the business a difference between the two. 0:20:08.119 --> 0:20:11.480 I'd say we're in generally good shape. So I think 0:20:11.720 --> 0:20:15.640 everybody's still a little holding back because of the uncertainty 0:20:15.760 --> 0:20:19.600 around tariffs and some of the fiscal policies, but that's 0:20:19.640 --> 0:20:22.159 become the new normal, and so I think businesses now 0:20:22.200 --> 0:20:25.800 are leaning in a little more. And I'd say consumer 0:20:25.880 --> 0:20:29.160 is split. So the higher end consumer is still enjoying life, 0:20:29.160 --> 0:20:33.080 sees the stock market very strong, spending money, a little 0:20:33.080 --> 0:20:37.280 more pressure at the lower end. Inflation still is persistent 0:20:37.440 --> 0:20:40.679 and real wage gains haven't fully covered that, so they're 0:20:40.800 --> 0:20:41.719 pulling in a little bit. 0:20:41.800 --> 0:20:43.840 What opportunities are available to you and the team right 0:20:43.880 --> 0:20:46.000 now to lean into that higher end consumer just a 0:20:46.040 --> 0:20:48.800 little bit more higher income the private side of the business. 0:20:48.880 --> 0:20:51.159 Yeah, So one of the moves that we made a 0:20:51.160 --> 0:20:53.480 couple of years back was we tried to buy all 0:20:53.480 --> 0:20:57.880 the first Republic JPM. Ultimately was successful, but we hired 0:20:57.920 --> 0:20:59.359 a lot of the talent, a lot of the private 0:20:59.400 --> 0:21:02.639 bankers came over to citizens. Hired one hundred and fifty 0:21:02.760 --> 0:21:05.879 folks on day one, and then we've ramped that up 0:21:05.960 --> 0:21:09.159 now to close to five hundred people. We're a cross 0:21:09.359 --> 0:21:13.400 ten billion of deposits and we're kind of target at 0:21:13.480 --> 0:21:16.480 year end hitting twelve billion in deposits eleven billion of AUM, 0:21:16.600 --> 0:21:20.840 So the business is basically exploding in terms of new 0:21:21.200 --> 0:21:24.360 customers coming onto the platform. I think we're delivering really 0:21:24.400 --> 0:21:27.520