WEBVTT - Markets Get Nvidia Boost Ahead of Anticipated Fed Cut 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.240 --> 0:00:28.320 Incredibly important. 0:00:28.480 --> 0:00:32.640 Somebody said, like ten billion dollars or some ginormous NUMBERD 0:00:33.080 --> 0:00:36.600 is a ginormous excellence. Julian Emmanuel joins as chief Equity 0:00:36.640 --> 0:00:40.640 and quand strategist Evercore ISI with a definitive note. What's 0:00:40.720 --> 0:00:44.440 distinctive about your daily research note that your team writes 0:00:44.479 --> 0:00:46.920 for you? We know you don't write it, But what's 0:00:47.000 --> 0:00:50.320 distinctive about the note now versus the other previous quarters? 0:00:50.560 --> 0:00:52.560 OMG earnings are better than we thought. 0:00:53.800 --> 0:00:57.440 That's the headline, Tom, and the reality is it's broader 0:00:57.480 --> 0:01:01.160 than you might have thought. I'm balance right. We know 0:01:01.320 --> 0:01:04.280 Tech's going to beat. Tech has beaten, it will continue 0:01:04.280 --> 0:01:08.840 to beat. But one of the more malign sectors, energy 0:01:09.280 --> 0:01:14.119 is also showing very consistent beats, as is financials, which 0:01:14.200 --> 0:01:16.640 was the story that started us off on what is 0:01:16.720 --> 0:01:18.119 likely to be double digit earning. 0:01:18.120 --> 0:01:20.680 Squirrel, you bring it over all. The heritage of Edheimen. 0:01:21.120 --> 0:01:25.600 Evercorn Frankly, you know Isi and frankly, Evercore. 0:01:25.760 --> 0:01:28.480 Is this just because GDP was better than we expected? 0:01:28.520 --> 0:01:31.240 I mean, is this just a real or even nominal 0:01:31.280 --> 0:01:34.319 GDP pop is helping out broad earnings? 0:01:34.520 --> 0:01:36.560 Well, that's certainly part of it. 0:01:36.560 --> 0:01:40.920 It's also this idea that the stress from tariffs has 0:01:41.040 --> 0:01:44.960 sort of dissipated through the system in unseen ways. But again, 0:01:45.480 --> 0:01:48.680 it is the story of what it's been, certainly the 0:01:48.760 --> 0:01:51.320 three years of this bull market, and going back further 0:01:51.360 --> 0:01:54.680 than that, is that every time you think the corporate 0:01:54.720 --> 0:01:58.800 America can't find a way to make margins you know 0:01:59.040 --> 0:02:03.240 better or at least stable at these high levels, productivity 0:02:03.320 --> 0:02:04.120 tends to happen. 0:02:05.080 --> 0:02:05.800 It tends to happen. 0:02:05.840 --> 0:02:09.560 You're right, I mean, don't underestimate the corporate entity out 0:02:09.600 --> 0:02:11.720 there or the consumer. Where do we go here from 0:02:11.919 --> 0:02:14.480 the stock market? I'm guessing a lot of the questions 0:02:14.480 --> 0:02:17.160 you get from your clients is, boy, it feels rich here. 0:02:17.919 --> 0:02:19.160 How do we think about it? Where do we go 0:02:19.200 --> 0:02:19.520 from here? 0:02:19.680 --> 0:02:20.760 So it does. 0:02:21.360 --> 0:02:24.640 And frankly, when you think about the wall of worry, 0:02:25.040 --> 0:02:27.840 we like that because that means there is. 0:02:27.760 --> 0:02:30.280 A wall of worry. I will say in the last 0:02:30.280 --> 0:02:30.919 week or so. 0:02:31.400 --> 0:02:35.160 The fact that September and October were as positive as 0:02:35.200 --> 0:02:39.240 they were have gotten people very, very bullish, and almost 0:02:39.360 --> 0:02:42.320 rightly so, because seasonality tends to be good in November 0:02:42.600 --> 0:02:47.160 and December. But when you think about all this event risk, geopolitical, 0:02:47.600 --> 0:02:55.080 monetary earnings, elections, etc. There may be a step back 0:02:55.200 --> 0:03:00.680 in here. But again, the story of the long time story, 0:03:00.880 --> 0:03:03.760 the AI driven bull market, as we've seen by the 0:03:03.760 --> 0:03:06.520 news flow in the last twenty four hours, is largely 0:03:06.560 --> 0:03:07.079 on track. 0:03:07.919 --> 0:03:10.520 What do you make of gold? What a run that was? 0:03:10.800 --> 0:03:12.720 Is pullback that was? 0:03:12.800 --> 0:03:13.240 That is? 0:03:13.600 --> 0:03:14.720 I don't know? What do you make of gold? 0:03:14.919 --> 0:03:18.800 We think, actually so a lot of our conversations this 0:03:18.919 --> 0:03:22.160 summer in the fall have been about bubbles in the market, 0:03:22.680 --> 0:03:24.920 in the stock market. We think you're a long way 0:03:24.960 --> 0:03:28.680 from that in the s and P. Five hundred and 0:03:28.760 --> 0:03:33.200 in the AI story. But gold could be the bubble 0:03:33.400 --> 0:03:36.120 that has burst in our view, because if you think 0:03:36.160 --> 0:03:39.680 about it, the same reasons that people were buying gold, 0:03:40.320 --> 0:03:44.080 fear of inflation being more permanent, that is not coming 0:03:44.120 --> 0:03:46.600 to roost. It it's still too high, but it is 0:03:46.640 --> 0:03:49.680 on track to come down in twenty twenty six. And 0:03:49.720 --> 0:03:52.400 then this whole idea of the debasement trade. Ye, the 0:03:52.520 --> 0:03:57.040 quote unquote debasement trade. We'll call bunk on that because 0:03:57.080 --> 0:03:59.320 if you think about it, A the dollar has been 0:03:59.440 --> 0:04:01.160 very stable the last several months. 0:04:01.600 --> 0:04:04.080 B yields our law. 0:04:04.960 --> 0:04:07.000 That's right, we're going to go Julian Emmanuel with this, 0:04:07.080 --> 0:04:10.160 folks at evercore Isi here to set up the earning season. 0:04:10.240 --> 0:04:13.160 Let me take the sixty thousand macro view. I'm looking 0:04:13.200 --> 0:04:15.520 to the screen this morning and I see a jump condition, 0:04:15.960 --> 0:04:19.680 and it's because of Donald Trump. He's over in Asia, 0:04:20.080 --> 0:04:23.160 he's getting, as he would say, deals done. I have 0:04:23.200 --> 0:04:27.080 a three day jump condition in ren Minby's strength. I 0:04:27.120 --> 0:04:30.760 got Sterling flat on their back as well. Some of 0:04:30.839 --> 0:04:35.679 the evercore Isi view into your earnings belief for Q 0:04:35.800 --> 0:04:39.560 one of next year, for Q two, does this every 0:04:39.640 --> 0:04:43.799 ninety day idiocy olmng earnings. We thought they'd be terrible, 0:04:43.960 --> 0:04:47.000 they're doing phenomenal. Do we just continue this bad habit? 0:04:48.520 --> 0:04:52.280 Look, we think high single digit earnings growth is in 0:04:52.320 --> 0:04:56.320 our future for twenty twenty six. And you know, frankly 0:04:56.400 --> 0:04:59.640 again to your point this morning in Asia, go back 0:04:59.680 --> 0:05:02.119 to w when the President was in the Middle East, 0:05:02.600 --> 0:05:06.919 deals were getting done, Deals are the lifeblood of what's 0:05:07.080 --> 0:05:11.039 powering the economy and specifically the AI shop. 0:05:11.279 --> 0:05:13.800 So do you take your terminal value out farther? What 0:05:13.880 --> 0:05:15.200 are the rooms today? Google? 0:05:15.839 --> 0:05:21.279 Meta, Facebook, Facebook, Ye Facebook? Do you take your terminal 0:05:21.360 --> 0:05:24.400 value out for Fortress Zuck? Do you take it out 0:05:24.440 --> 0:05:27.800 instead of three years? Find your study? Are you because 0:05:28.160 --> 0:05:30.880 of this juggernaut economy? Do you take it up to 0:05:30.960 --> 0:05:31.640 seven years? 0:05:31.880 --> 0:05:34.960 Well, you have to be careful because the counter veil 0:05:35.080 --> 0:05:39.799 here is again we remember twenty twenty was a low 0:05:39.920 --> 0:05:43.719 in global bond yields, and likely at some point we 0:05:43.880 --> 0:05:48.080 are going to move higher in global bond yields, particularly 0:05:48.120 --> 0:05:53.239 since deficits around the world continue to expand. So that's 0:05:53.960 --> 0:05:57.160 that's part of the offset. But on balance, when you 0:05:57.200 --> 0:06:02.400 think about it, you hear the potential for productivity you're 0:06:02.760 --> 0:06:06.080 gains from AI. You're only starting to see it, but 0:06:06.360 --> 0:06:09.919 that is part of the long term story that causes us. 0:06:10.000 --> 0:06:13.200 In our view, you don't get full AI adoption until 0:06:13.240 --> 0:06:17.600 twenty twenty eight, so we're certainly looking out to there. 0:06:18.080 --> 0:06:21.000 We got lots of obviously earnings today, but we also 0:06:21.040 --> 0:06:21.960 have to fit today here. 0:06:22.000 --> 0:06:23.720 What are you going to be listening for? 0:06:24.160 --> 0:06:28.040 From our chairman so this one seems kind of easy, 0:06:27.839 --> 0:06:30.880 and you know, we're going to get the twenty five cut. 0:06:31.240 --> 0:06:34.760 We're going to get a sort of no promises data 0:06:34.800 --> 0:06:39.960 dependency or lack of data dependency for December. But the 0:06:39.960 --> 0:06:43.320 bottom line is is that the burden of proof is 0:06:43.440 --> 0:06:46.680 on the data to be either too hot in inflation 0:06:47.360 --> 0:06:51.640 or you know, too hot in terms of job growth 0:06:51.920 --> 0:06:54.320 to not cut another twenty five And. 0:06:54.360 --> 0:06:55.920 You know, maybe we're not even going to get any 0:06:55.920 --> 0:06:56.400 more data. 0:06:57.560 --> 0:07:01.159 So I don't know, maybe it's just recency bias. With 0:07:01.200 --> 0:07:03.120 the headlines. It seems like they've seen a lot of 0:07:03.200 --> 0:07:04.080 job cuts out there. 0:07:04.320 --> 0:07:07.440 Don't if it's material, I don't know, if it's yeah, 0:07:07.520 --> 0:07:10.160 yesterday was a wow day. I mean, I don't know 0:07:10.200 --> 0:07:12.880 if this is AI related, if this is just seasonal, 0:07:13.080 --> 0:07:15.360 or if this is anecdotal. How do you guys think 0:07:15.400 --> 0:07:16.680 about the labor market or how do you think the 0:07:16.720 --> 0:07:18.000 Fed thinks about the libor market? 0:07:18.040 --> 0:07:20.040 So it's incredibly challenging. 0:07:20.120 --> 0:07:23.000 You know, first of all, if you go to immigration policy, 0:07:23.280 --> 0:07:26.200 we don't know what the break even monthly payroll adds 0:07:26.280 --> 0:07:29.720 is to keep the unemployment rates steady. It was one 0:07:29.760 --> 0:07:32.800 hundred and twenty thousand last year. Our people think it's 0:07:32.800 --> 0:07:35.800 closer to sixty thousand. But if you assume that migration 0:07:36.000 --> 0:07:38.640 is actually that negative, that number might be twenty or 0:07:38.640 --> 0:07:39.360 thirty thousand. 0:07:39.560 --> 0:07:41.880 So that alone is an incredible problem. 0:07:41.960 --> 0:07:44.320 I mean, folding yesterday, what was it, Paul, we had 0:07:44.480 --> 0:07:46.680 thirty four thousand and fourteen thousand. 0:07:46.760 --> 0:07:50.200 I can there's at math matth is old news. 0:07:50.280 --> 0:07:53.520 If we have AI layoffs at these big companies, how 0:07:53.520 --> 0:07:57.200 does that change something as prosaic is given the shutdown, 0:07:57.240 --> 0:08:00.600 we don't know non farm payrolls or the un deployment rate. 0:08:00.720 --> 0:08:03.920 So here's the flip side of this. Tom and David 0:08:03.920 --> 0:08:07.640 Weston did an amazing interview a few days ago with 0:08:07.720 --> 0:08:11.680 the head of Arizona State University. Is that the transformative 0:08:11.720 --> 0:08:16.720 power of AI in the education field. Imagine this. We 0:08:16.760 --> 0:08:19.880 have a chronic shortage of doctors, the chronic shortage of 0:08:19.960 --> 0:08:23.640 healthcare professionals because half the time they just don't want 0:08:23.680 --> 0:08:26.760 to commit to the payback period that it takes. Could 0:08:26.800 --> 0:08:29.400 AI actually shorten that payback period? 0:08:29.480 --> 0:08:30.120 Absolutely? 0:08:30.400 --> 0:08:34.000 Could AI make it more enticing for teachers where the 0:08:34.040 --> 0:08:37.839 attrition rate has been enormous in recent years, to go 0:08:37.920 --> 0:08:41.880 back into those areas. It's the economy transforming, you know, 0:08:41.960 --> 0:08:45.599 creative destruction, and you don't want to be on the 0:08:45.960 --> 0:08:49.040 destruction side. But it is how economies advanced. 0:08:49.120 --> 0:08:51.920 Get one more in here, folks. So you know Lisa Matteo, 0:08:52.120 --> 0:08:56.120 Paul Sweeney yesterday at BAM mutual Oh yeah, driven by AI, 0:08:56.400 --> 0:08:57.680 exactly right, Julian. 0:08:57.760 --> 0:09:00.400 Is there something that screens well for you guys right now, 0:09:00.440 --> 0:09:03.800 whether it's sectors or factors, what do you, guys, what 0:09:03.920 --> 0:09:05.080 gets your attention these days? 0:09:05.120 --> 0:09:06.640 So we actually think that. 0:09:08.240 --> 0:09:11.040 This is the week where you're seeing the end of 0:09:11.520 --> 0:09:15.560 mutual fun, tax laws selling, and from our point of view, 0:09:15.840 --> 0:09:19.559 when you think it is particularly in a year this strong, 0:09:19.760 --> 0:09:22.280 but there are lots and lots of stocks that are 0:09:22.320 --> 0:09:24.520 down on the year. A number of them are in 0:09:24.760 --> 0:09:29.240 the healthcare sector. Healthcare is at very depressed valuations, and 0:09:29.360 --> 0:09:32.280 healthcare is the focus of the shutdown. 0:09:33.200 --> 0:09:41.360 Twenty seconds ed Iiman and your team their recession call. 0:09:39.360 --> 0:09:43.199 No recession, that they were firm about it during February, 0:09:43.280 --> 0:09:46.040 March and April. They continue to be firm about it. 0:09:46.280 --> 0:09:48.640 The call is for one and a half percent growth 0:09:48.679 --> 0:09:51.560 next year. In my mind, that risk es to the upside. 0:09:51.640 --> 0:09:54.160 Julian, Manuel, don't be stranger we'll see you Monday morning, 0:09:54.240 --> 0:09:57.400 seven am as well. He's with Evercore i EI, their 0:09:57.480 --> 0:10:01.160 chief equity and quantitative strategists. He lifts some market futures 0:10:01.240 --> 0:10:04.320 up nineteen with our news. 0:10:05.080 --> 0:10:05.800 Stay with us. 0:10:06.040 --> 0:10:09.280 More from Bloomberg Surveillance coming up after this. 0:10:16.520 --> 0:10:20.080 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:10:20.160 --> 0:10:23.320 weekday afternoons from seven to ten am Eastern. Listen on 0:10:23.400 --> 0:10:26.800 Apple Karplay and Android Auto with the Bloomberg Business app, 0:10:26.960 --> 0:10:28.800 or watch US live on YouTube. 0:10:28.920 --> 0:10:30.199 We need to get brief right now. 0:10:30.280 --> 0:10:33.000 Thomas Simmons joins US now chief feel as Economists at 0:10:33.040 --> 0:10:35.319 Jeffries as well. I love the bottom of your note 0:10:35.360 --> 0:10:39.199 where AIAI and all this caught to the chase and 0:10:39.320 --> 0:10:41.240 Jeffries is you know, there's sort of like a hip ferm. 0:10:41.280 --> 0:10:43.520 They're like involved in all this texture. 0:10:43.840 --> 0:10:48.840 How much is AI scaring the young kids or the 0:10:48.920 --> 0:10:51.760 older kids as well, the sixty year olds. Is it 0:10:51.840 --> 0:10:54.840 a revolution like nineteen ninety five in the Internet. 0:10:55.200 --> 0:10:58.440 I think eventually will be, although I'm not particularly sure 0:10:58.480 --> 0:11:00.840 that it's there just yet. I think that it's an 0:11:00.920 --> 0:11:03.920 easy kind of scapegoat to look at AI and say, oh, 0:11:04.080 --> 0:11:06.240 all of these firms are probably not hiring young college 0:11:06.240 --> 0:11:09.000 graduates because they have chatbots that do their job, or 0:11:09.000 --> 0:11:12.520 they have coding resources that you know, replace all of 0:11:12.520 --> 0:11:16.520 these IT focused majors and whatnot. I think it's actually 0:11:16.520 --> 0:11:19.200 significantly more risky for older folks, right, So, like if 0:11:19.240 --> 0:11:21.319 you were, for instance, a professional who did a lot 0:11:21.320 --> 0:11:24.760 of photo editing. I mean that's been a pretty democratized 0:11:24.800 --> 0:11:27.000 technology in terms of how AI has been kind of 0:11:27.000 --> 0:11:28.439 put in your pocket with your cell phone. So I 0:11:28.480 --> 0:11:30.600 think it's more in terms of like consumption of services 0:11:30.600 --> 0:11:34.199 on the consumer end, we see less demand for very 0:11:34.240 --> 0:11:37.000 specialized services. And I imagine that you know, as people 0:11:37.440 --> 0:11:39.480 progress through their careers and they get kind of close 0:11:39.520 --> 0:11:41.319 to the end of them, then the issue is more 0:11:41.360 --> 0:11:43.640 so that they kind of, you know, they're runways a 0:11:43.679 --> 0:11:45.880 lot shorter in terms of whether when you know, sort 0:11:45.880 --> 0:11:48.200 of how much more big time they thought they had 0:11:48.240 --> 0:11:49.719 before retirement and that sort of thing. 0:11:50.000 --> 0:11:52.480 So given that background, they're on the labor market, there 0:11:52.520 --> 0:11:55.520 are obviously FED focuses on the labor market, focuses on 0:11:55.600 --> 0:11:56.760 price stability, inflation. 0:11:57.480 --> 0:11:58.719 How do you think they're going to proceed here? 0:11:58.920 --> 0:12:01.320 What do you think the message FED Chairman JPAW would 0:12:01.320 --> 0:12:01.920 like to get across. 0:12:01.960 --> 0:12:05.400 Today, I think that the message is pretty much unchanged 0:12:05.440 --> 0:12:07.760 really from where it was after Jackson Hole. I mean, 0:12:08.000 --> 0:12:09.720 I think that there was a c change in the 0:12:09.760 --> 0:12:12.280 sort of perception of how healthy the labor market was. 0:12:12.600 --> 0:12:15.800 You know, you refer to this curious balance of how 0:12:15.840 --> 0:12:17.880 surprising it is that sort of demand and supply and 0:12:17.920 --> 0:12:20.280 the labor market come down at the same time, and 0:12:20.320 --> 0:12:22.960 then very shortly afterwards you see data that suggests that, well, 0:12:23.080 --> 0:12:25.600 maybe it isn't quite as imbalanced as it maybe appeared 0:12:25.640 --> 0:12:28.439 to be earlier in the year, And nothing that we've 0:12:28.440 --> 0:12:31.559 seen since then has really, you know, kind of challenged 0:12:31.559 --> 0:12:32.160 that narrative. 0:12:32.800 --> 0:12:33.000 You know. 0:12:33.200 --> 0:12:34.600 I think that it's one thing to kind of look 0:12:34.600 --> 0:12:37.400 at the labor market and say, well, we're not in 0:12:37.440 --> 0:12:39.280 the midst of some sort of collapse, some sort of 0:12:39.280 --> 0:12:43.840 like really you know, spiraling weakness. However, I do think 0:12:43.880 --> 0:12:46.240 that if you look at the history of labor market data, 0:12:46.520 --> 0:12:50.720 economic data in general, equilibria tend not to last forever, right, So, 0:12:50.880 --> 0:12:53.360 like it's nice that we're at this balance point. Is 0:12:53.400 --> 0:12:56.200 the risk that from a very balanced point you reaccelerate 0:12:56.240 --> 0:12:58.720 to something quite strong or is it probably more balance 0:12:58.800 --> 0:13:01.160 towards the downside where things kind of start to sling. 0:13:01.160 --> 0:13:03.760 We Robert Kaplan and yesterday of Harvard Business School, of 0:13:03.760 --> 0:13:05.480 gold and Sax the former president of the FED, and 0:13:05.559 --> 0:13:09.839 we spent a good amount of time talking about retraining 0:13:10.040 --> 0:13:14.679 in this bargain that we blew it on clothing industry, 0:13:14.679 --> 0:13:19.040 the clothing industry the Carolinas decades and decades ago at Jeffries. 0:13:19.160 --> 0:13:25.720 Do you see a dislocation of labor now and coming forward? 0:13:26.120 --> 0:13:27.600 Jeffrey's sensor run pretty lean. 0:13:27.800 --> 0:13:30.880 So fortunately, I think that our you know, kind of 0:13:30.920 --> 0:13:34.360 corporate culture is aimed at making sure everybody is kind 0:13:34.360 --> 0:13:38.520 of utilizing technology as much as possible. We're pretty careful 0:13:38.520 --> 0:13:41.400 about it, I imagined most other competitors of ours are 0:13:41.440 --> 0:13:44.840 as well. You know, obviously there's information security issues that 0:13:45.240 --> 0:13:46.880 you want to make sure you have buttoned up before 0:13:46.880 --> 0:13:49.120 you just kind of dump out this technology to everybody. 0:13:49.160 --> 0:13:51.839 But you know, it's it's always a risk, right, I mean, 0:13:52.080 --> 0:13:57.280 whenever we've had relatively or you know, revolutionary changes in technology, 0:13:57.600 --> 0:13:59.360 part of the problem is that it looks like it's 0:13:59.400 --> 0:14:01.920 going to be this huge productivity boom that you get 0:14:01.960 --> 0:14:04.319 from it. Eventually, in the long run, you more or 0:14:04.400 --> 0:14:05.920 less do get that, But in the meantime you have 0:14:06.000 --> 0:14:08.120 this kind of messy period where people waste a lot 0:14:08.160 --> 0:14:09.560 of time kind of trying to figure out how to 0:14:09.640 --> 0:14:11.400 use it, and it ends up being kind of an 0:14:11.480 --> 0:14:14.880 investment in productivity, whereas down for a little bit before 0:14:14.920 --> 0:14:17.080 it comes up. So I don't get the sense that 0:14:17.120 --> 0:14:20.280 we're necessarily looking at this as like, oh, we will 0:14:20.320 --> 0:14:23.320 never need to hire more people. I think that that's 0:14:23.360 --> 0:14:26.200 going to be a monstrous mistake if businesses actually do that, 0:14:26.280 --> 0:14:29.600 because you know, it's just a kind of law of 0:14:29.600 --> 0:14:32.360 the universe that your labor force ages every day and 0:14:32.560 --> 0:14:34.960 you need a talent pipeline to continue to fill in 0:14:35.040 --> 0:14:36.960 for people who are moving on for all sorts of 0:14:36.960 --> 0:14:41.000 different reasons, whether that's retirements or pivots to other things. 0:14:42.480 --> 0:14:44.240 How are you viewing inflation out there? I think a 0:14:44.280 --> 0:14:47.480 lot of folks, myself included, are pleasant surprise that we 0:14:48.240 --> 0:14:51.640 haven't seen higher level inflation that may have resulted from terrorists. 0:14:51.680 --> 0:14:53.920 Right, I haven't really seen it in the numbers here. 0:14:54.400 --> 0:14:56.960 How do you guys view that, I, you know, early 0:14:57.000 --> 0:14:59.880 on was really confused about how to interpret the whole tarif. 0:15:00.240 --> 0:15:02.120 I think that you know, most of folks in my 0:15:02.200 --> 0:15:06.240 profession were you know, either suffering for some righteous indignation 0:15:06.320 --> 0:15:10.160 about how silly and kind of you know, misdirected the 0:15:10.200 --> 0:15:12.800 policy is. But that's not for us to debate or 0:15:12.840 --> 0:15:14.720 really it's just trying to figure out what the what 0:15:14.760 --> 0:15:17.440 the impact is. And you know, we've seen a lot 0:15:17.480 --> 0:15:19.400 of price increases in a lot of different goods and 0:15:19.440 --> 0:15:22.400 services for many years. I think a great example of 0:15:22.840 --> 0:15:25.880 something that's really kind of illustrative of the whole situation 0:15:25.960 --> 0:15:28.320 is in auto and home insurance. Right, if your auto 0:15:28.360 --> 0:15:32.080 insurance rates rise, you are pretty much immediately going to switch. 0:15:32.120 --> 0:15:33.640 You don't get utility. 0:15:33.200 --> 0:15:35.400 From like the service that one of these you know, 0:15:35.480 --> 0:15:37.880 insurers provides you on a day to day basis. You 0:15:37.920 --> 0:15:39.600 need them maybe three or four times in your life, 0:15:39.640 --> 0:15:43.960 hopefully fewer than that. So there's a first mover disadvantage 0:15:44.000 --> 0:15:46.840 amongst the insurers to raise their rates, right, like they 0:15:46.880 --> 0:15:49.560 would say, we'll try to capture market share from people 0:15:49.840 --> 0:15:52.800 who are getting away from the companies that are kind 0:15:52.800 --> 0:15:55.000 of forced to move with prices. I think that we're 0:15:55.000 --> 0:15:56.520 going to see that with goods too. I mean, like 0:15:56.520 --> 0:16:00.480 they're very substitutable across a number of different vectors and 0:16:00.720 --> 0:16:02.600 you know, to this point, we haven't really seen much 0:16:02.600 --> 0:16:06.200 in the inflation data that's shown that prices have risen significantly. 0:16:06.480 --> 0:16:08.040 I think it's kind of crazy to look at one 0:16:08.120 --> 0:16:10.640 hundred plus percent tariff rates on China and then say 0:16:10.840 --> 0:16:13.320 a nine tenths increase in like window coverings is the 0:16:13.360 --> 0:16:14.760 result of of that. 0:16:14.920 --> 0:16:17.760 The heart of the matter is, are we in the 0:16:17.800 --> 0:16:19.520 phrase that I'm using more and more now is a 0:16:19.560 --> 0:16:23.120 decline in purchasing power among a huge body of Americans? 0:16:23.120 --> 0:16:24.400 Okay? 0:16:24.440 --> 0:16:29.800 Within the tariffs and the debate, how do we withstand prices? 0:16:29.840 --> 0:16:35.120 And the research so far is we're accepting higher prices, right. 0:16:35.560 --> 0:16:38.440 I think there is enough of the consumer base that 0:16:38.560 --> 0:16:41.680 is accepting higher prices, right. I think that we focus 0:16:41.720 --> 0:16:44.840 a lot of people who are struggling appropriately, so there's 0:16:44.880 --> 0:16:47.200 policy action needs to be taken to try to help 0:16:47.240 --> 0:16:49.800 people out. But like anyone who bought a home or 0:16:49.840 --> 0:16:53.840 refinance their mortgage before twenty twenty has not suffered any 0:16:53.920 --> 0:16:57.160 shelter inflation in five years, right, They've actually had their 0:16:57.160 --> 0:16:58.160 purchasing power. 0:16:57.920 --> 0:16:59.080 Increase over that whole time. 0:16:59.120 --> 0:17:00.520 And I think that that's one of the key reasons 0:17:00.520 --> 0:17:04.119 why we've seen the consumer writ large done so well here, 0:17:04.320 --> 0:17:06.919 And I think that businesses will probably focus on that 0:17:06.960 --> 0:17:10.119 and say, hey, if I'm charging a lot for a 0:17:10.160 --> 0:17:12.560 frivolous option on a car, for instance, maybe I can 0:17:12.600 --> 0:17:14.520 bump the price of that quite a lot while keeping 0:17:14.520 --> 0:17:17.879 the base price lower so the broad consumer doesn't suffer 0:17:17.920 --> 0:17:19.880 the same kind of inflation pressure as the ones who 0:17:19.880 --> 0:17:22.000 are sort of better able to accept this price. 0:17:22.119 --> 0:17:23.600 How much of. 0:17:23.480 --> 0:17:27.040 This consumer boom that we have, you know, I don't 0:17:27.040 --> 0:17:29.760 even know if they're doing Atlanta GDP now, but let's 0:17:29.760 --> 0:17:33.040 call it two point five percent plus real GDP now 0:17:33.119 --> 0:17:37.400 almost four four point four, four point eight, whatever it is. 0:17:37.800 --> 0:17:40.320 How much of that do you calculate as a wealth effect? 0:17:40.760 --> 0:17:41.200 A lot? 0:17:41.800 --> 0:17:45.040 I do think that it's Lisa, A lot doesn't cut it. 0:17:45.160 --> 0:17:49.280 I don't want a number eighty five ninety Yeah, No, 0:17:49.359 --> 0:17:52.159 I pop is wealth effect. When folks ask me what 0:17:52.280 --> 0:17:54.880 my biggest sort of concern downside risk thing that keeps 0:17:54.920 --> 0:17:57.320 me up at night sort of thing, is my concern 0:17:57.520 --> 0:17:59.080 is that we're going to get some sort of big 0:17:59.119 --> 0:18:02.119 decline in asset prices that I think will crush the 0:18:02.200 --> 0:18:06.120 consumer in the aggregate overnight. Right Like, I do think 0:18:06.119 --> 0:18:10.160 that there's reasons why we see kind of weakening participation 0:18:10.200 --> 0:18:12.199 amongst different groups in the labor market. Part of that 0:18:12.240 --> 0:18:14.320 is because they've made enough money or they have enough 0:18:14.320 --> 0:18:17.080 assets that they can retire early or reduce their work 0:18:17.440 --> 0:18:20.639 load or that sort of thing that changes very quickly 0:18:20.720 --> 0:18:23.359 if prices kind of you know, enter into a very 0:18:23.520 --> 0:18:27.120 nasty sort of negative spiral. So it's not so much 0:18:27.119 --> 0:18:29.800 that I think people are saying like, oh, my portfolio 0:18:29.800 --> 0:18:32.240 went up x percent overnight, I can spend that much more. 0:18:32.400 --> 0:18:35.919 It's more so like, how comfortable am I such that 0:18:35.960 --> 0:18:38.439 I can make some more? You know, I have more 0:18:38.480 --> 0:18:41.520 flexibility in my spending choices because of how well I'm 0:18:41.560 --> 0:18:42.520 doing with my assets. 0:18:42.760 --> 0:18:45.920 What's your GDP twelve months for real GDP? 0:18:46.480 --> 0:18:48.680 Turish, I'm a little higher than that. I think we're 0:18:48.680 --> 0:18:51.439 closer to like two and a half. I think that, yeah, well, 0:18:51.680 --> 0:18:52.280 I mean, have. 0:18:52.280 --> 0:18:56.360 We ever seen apatanism from Jefferies? I've always been an optimist. 0:18:56.560 --> 0:19:00.840 I've am more amongst the most optimist economists mystic economists 0:19:00.840 --> 0:19:03.080 out there, I would say, but I think that it's 0:19:03.119 --> 0:19:07.160 underappreciated on a couple of different fronts. One, wealthier households 0:19:07.160 --> 0:19:08.720 are actually going to get a tax break with the 0:19:08.720 --> 0:19:12.160 big increase in salt deductions. Yeah, everybody in this room, 0:19:12.200 --> 0:19:14.720 I think, is you know, kind of aware of that. 0:19:15.080 --> 0:19:17.800 But I also think it's underappreciated that we actually have 0:19:17.960 --> 0:19:21.160 much more certainty on fiscal policy now than we would 0:19:21.200 --> 0:19:24.560 in previous years. Oh, tariffs are Yeah, they're kind of 0:19:24.560 --> 0:19:26.239 in the rear view mirror, like I think the kind 0:19:26.280 --> 0:19:29.479 of range of outcomes is narrower. But also just the 0:19:29.520 --> 0:19:33.000 investment incentives and the tax structure. It's not that long 0:19:33.040 --> 0:19:35.960 ago several years in the recent past where the IRS 0:19:36.040 --> 0:19:40.400 was like reprinting tax forms on New Year's Eve because 0:19:40.440 --> 0:19:43.280 some tax law had just been passed at the eleventh hour. 0:19:43.640 --> 0:19:45.480 We've known the kind of broad strokes of what the 0:19:45.520 --> 0:19:48.240 policy is going to look like since Independence Day, and 0:19:48.560 --> 0:19:50.520 that's I can't remember the last year we've had something 0:19:50.560 --> 0:19:52.840 like that where there's been enough time for business planning 0:19:53.440 --> 0:19:55.720 for next year. So I think that we'll get some 0:19:55.880 --> 0:19:58.800 dovetailing between stronger consumer and also business investment. 0:19:58.920 --> 0:19:59.879 Thank you, Thomas Simms. 0:20:00.000 --> 0:20:02.040 I really appreciate the break with Jeffreys aer or real 0:20:02.080 --> 0:20:05.480 Dosa optimism moving forward, and we do that on this 0:20:05.640 --> 0:20:11.359 FED day as well. Stay with us more from Bloomberg 0:20:11.480 --> 0:20:20.560 Surveillance coming up after this. 0:20:20.560 --> 0:20:24.480 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:20:24.520 --> 0:20:27.919