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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app. So here's the laces

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Speaker 2: this morning. The President threatening House Republicans taking a stand

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Speaker 2: against his tariff agenda. The President posting on truth Social

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Speaker 2: there will be consequences after six GOP lawmakers cross party

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Speaker 2: lines to reboot the President's levies on Canada. The Republican

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Speaker 2: Congressman French Hill voting against the measure to override President

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Speaker 2: Trump's tariffs, and he joined us now for more. Congressman Hill,

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Speaker 2: welcome to the program, sir. Your reaction to what happened

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Speaker 2: on the Hill yesterday and why votes to the way

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Speaker 2: you did.

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Speaker 3: Well. Good morning, Jonathan. Look, I think we should handle

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Speaker 3: the tariff discussion in a more comprehensive way and not

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Speaker 3: take votes every week on the floor that turns the

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Speaker 3: House floor over to the Democratic Party. That's why I

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Speaker 3: believe that standing with the Speaker Mike Johnson on this

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Speaker 3: maintains Republican control of the floor. So this is a

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Speaker 3: very important strategic issue in a parliamentary body like Congress

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Speaker 3: with a very narrow majority. What we should be doing

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Speaker 3: about trade is urging the President to renew USMCA with

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Speaker 3: Canada and Mexico, which is under review for its five

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Speaker 3: year review this summer. It's a very important trade arrangement

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Speaker 3: for the three countries. Progress is being made in working

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Speaker 3: with the Canadians and the Mexicans, So that's number one.

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Speaker 3: It's not to be connected, in my judgment to the

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Speaker 3: vote last night, which is did the President have the

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Speaker 3: right to put tariffs on Canada under IEPA because of

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Speaker 3: the fentanyl matter? You get my point. Let's stick with

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Speaker 3: the big picture here, which is growing America's exports and

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Speaker 3: growing America's influence using tariffs as a tool to change

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Speaker 3: trade behavior of other nations. Number one on that list,

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Speaker 3: of course, is China.

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Speaker 2: Congressman, you mentioned USMCA. I've seen down in Washington. I'm

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Speaker 2: sure you're familiar with the work at josh Wen Grows

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Speaker 2: wrote just yesterday that the President is privately musing about

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Speaker 2: exiting the North American Trade pack That accordings people familiar

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Speaker 2: with the matter. When you read a story like that,

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Speaker 2: do you just consider that part of the negotiation for

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Speaker 2: the upcoming negotiations or does that concern you?

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Speaker 3: Yeah, no, I do because of the way President Trump

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Speaker 3: is responsible for dramatically improving the North American Free Trade

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Speaker 3: Agreement from the nineteen ninety two to nineteen ninety three

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Speaker 3: timeframe in creating USMCA in his first term, and it

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Speaker 3: worked quite well. But there's more to be done on

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Speaker 3: Canadians on dairy or Canadians on softwood lumber, or how

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Speaker 3: the automotive business works back and forth between the two countries.

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Speaker 3: We're now the role of IA. We live in an

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Speaker 3: ever changing economy with ever changing priorities. But let's face

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Speaker 3: the reality that thirty percent of GDP in my home

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Speaker 3: state of Arkansas is connected to cross border trade with

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Speaker 3: Mexico and Canada. So the agreement is important. And it's

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Speaker 3: also important for you to note in that comment that

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Speaker 3: President Trumps does not impose additional tariffs on USMCA compliant goods,

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Speaker 3: so we are living by the agreement.

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Speaker 1: Congressman, there's a trade off here, and I think a

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Speaker 1: lot of people would be sympathetic with the idea of

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Speaker 1: trying to get certain trade partners to change behaviors and

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Speaker 1: thinking particularly of China. On the other hand, there's a

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Speaker 1: real affordability crisis, and this is a real issue for

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Speaker 1: a whole host of representatives who are coming up for

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Speaker 1: election later this later this year. I just wonder how

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Speaker 1: much influence you think that Republicans on the Hill have

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Speaker 1: over President Trump's negotiations around tariffs to potentially either abstain

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Speaker 1: from putting additional ones on or rolling some of the

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Speaker 1: existing ones back.

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Speaker 3: Well, what you've seen do is fine tune the efforts

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Speaker 3: with individual countries or regions like the EU, UK, Japan,

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Speaker 3: for example. I want to see the consolidate the wins

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Speaker 3: from those agreements that he has done over this first

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Speaker 3: year in the first place. Secondly, you've seen him roll

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Speaker 3: back some tariffs on commodities that we don't make here

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Speaker 3: in the United States, but we need to use. Whether

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Speaker 3: it's a fruit or vegetable or a coffee for example. Now,

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Speaker 3: I think that makes sense. You don't want to burden

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Speaker 3: the consumer as you're attempting to change trade policies in

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Speaker 3: other countries or compel them to follow Americans lead on

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Speaker 3: something like transnational drug cartel, countering those drug cartels. But

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Speaker 3: on the affordability side least. I think the most important

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Speaker 3: thing we can do is stay focused on the supply side.

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Speaker 3: The one big beautiful bill last year signed in a

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Speaker 3: law by President Trump will see real wage increases this

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Speaker 3: year for American families in Arkansas. Expect some ten thousand

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Speaker 3: dollars and benefit to a family of four from the

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Speaker 3: increased child tax credit, the lower taxes on tips, the

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Speaker 3: use of the standard deduction, lower taxes on seniors, Social Security,

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Speaker 3: so on. That's apply side, combined with what we're doing

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Speaker 3: on regulations and the proposal I made for housing in

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Speaker 3: the twenty first Century Housing Act. We got three hundred

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Speaker 3: and ninety votes on the House floor for that.

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Speaker 1: This week, I personally would like to boost consumption by

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Speaker 1: taking a flight to a number of places in the

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Speaker 1: next week. And I'm just wondering if TSA is going

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Speaker 1: to be an operation. Is the government going to shut

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Speaker 1: down tomorrow night?

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Speaker 3: Congressman, Oh, Lisa, I hope not. I just I just look,

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Speaker 3: it was so hard on my TSA agency in Little

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Speaker 3: Rock and up in the tower at Little Rock National Airport,

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Speaker 3: the air traffic controllers. That was a bad forty two days.

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Speaker 3: That's not how to run the government. President Trump has

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Speaker 3: used Tom Holman as a leader to consolidate both ICE

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Speaker 3: and CBB operations in Minneapolis. Brain transparency the operations, streamline it,

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Speaker 3: make sure the training is in place, make sure the

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Speaker 3: operation is consistent with federal law. They're using body cams.

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Speaker 3: Let's take that as the right direction and keep our

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Speaker 3: government funded in homeland security so important to so many people.

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Speaker 2: Congressman, it just fails Massy down in Washington. But you

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Speaker 2: pointed out the housing for the twenty first Century Act.

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Speaker 2: We can get things done. We can find support on

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Speaker 2: both sides. Congressman, what was actually a chief down in Washington?

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Speaker 2: And how important is that to you?

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Speaker 3: Well, it's very important, you know, Jonathan. On the properties,

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Speaker 3: I've had to have conservative, center right policy on redirecting

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Speaker 3: regulation and policy for people's investment opportunities, more crowdfunding, more

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Speaker 3: public offerings, community banking, making community banking great again by

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Speaker 3: lowering the regulatory burden on small banks that make sixty

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Speaker 3: percent of the home loans in this country, and now

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Speaker 3: twenty first century housing. We got three hundred votes for

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Speaker 3: those policies, as we did for our digital assets and

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Speaker 3: crypt to work last year. That shows that Republicans and

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Speaker 3: Democrats when it comes to economic policy, can get on

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Speaker 3: the same page and pass legislation that President Trump should

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Speaker 3: sign into law that will make people's lives better. Costs

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Speaker 3: will be brought down, supply chain, supply side capital, wild advance,

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Speaker 3: and community banking will thrive in this country. And those

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Speaker 3: are all good things.

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Speaker 2: Final question, Congressman, I've got about twenty seconds. Are you

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Speaker 2: happy you don't have to chair the House Judiciary Committee

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Speaker 2: because that was wild yesterday.

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Speaker 3: Well, I had a pretty wild hearing last week with

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Speaker 3: my ranking member and mister Bessett's testimony, so I know wild,

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Speaker 3: but it was. But that's what happens on kapin how

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Speaker 3: we bring the public and they're elected representatives together to

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Speaker 3: try to find solutions, and they can get spicy sometimes.

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Speaker 2: Stay with us. Mult Bloomberg Savannan's coming up after this,

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Speaker 2: Let's talk about European equities climates, fresh record highs the

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Speaker 2: stock six hundred, outperforming the S and P five hundred

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Speaker 2: so far. This shere. Sharon Bell of Goldman Sachs, writing,

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Speaker 2: the search for insulation from AI disruption risk has accelerated

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Speaker 2: the ongoing cyclical rally in the US. We continue to

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Speaker 2: see rising allocations through Europe as a diversifier with reasonable valuation.

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Speaker 2: Sharon joins US now for more. Sharon, welcome to the program.

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Speaker 2: Let's just build on what you've just written there the

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Speaker 2: idea that Europeans are starting to look at home again.

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Speaker 2: Are Americans looking abroad? Are they participating in this?

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Speaker 4: I think it's both. In fact, I would say it's

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Speaker 4: more American investors US dollar based investors that are worried

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Speaker 4: that the US market looks expensive. They're very concentrated in

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Speaker 4: their positions in the US dollar. You've got four or

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Speaker 4: five companies which are all big bets and one thing AI.

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Speaker 4: So that may pay off, but you don't know, and

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Speaker 4: it just leaves you with some risks. So people wanting

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Speaker 4: to do US for including US investors, but domestic investors too.

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Speaker 4: Both have been buying Europe this year, Sharon.

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Speaker 2: Apart from just being European, what is the diversification in Europe.

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Speaker 4: What does it OLFA, Yeah, offers very different sector exposure.

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Speaker 4: I would say there is a tech sector obviously in Europe.

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Speaker 4: It's much smaller than the sector in the US. You

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Speaker 4: don't have the large hyperscalers not spending as much in

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Speaker 4: the way that it is the hyperscalers are in the US,

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Speaker 4: So very different from a tech sector perspective. But also,

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Speaker 4: and I think this is more important, Europe offers things

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Speaker 4: like much more exposure to as a share of the

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Speaker 4: index to commutity related areas, materials, industrials, financials, which have

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Speaker 4: all in the last year performed very well.

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Speaker 1: Yeah, I'm thinking about Glencore for example, or Shell or

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Speaker 1: some of the big banks that have also done pretty

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Speaker 1: well in the region. I just am curious, though, if

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Speaker 1: someone is looking internationally and they're not from Europe, why

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Speaker 1: not go to Asia? What is the DRATA to Europe

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Speaker 1: that has better exposures? It's going to somehow outperform at

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Speaker 1: a time where there's a real kind of question around

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Speaker 1: how much they can break out from some of the

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Speaker 1: crosswinds coming from both the US and China.

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Speaker 4: Absolutely, and I agree with that. Philosophy has been you

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Speaker 4: want to broaden your exposure and diversify not just into

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Speaker 4: Europe but into Asia, into emerging markets. We've just upped

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Speaker 4: our emerging market targets for example, So and Nactually, Asian

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Speaker 4: emerging markets have seen better earnings performance this year and

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Speaker 4: have performed extremely well, better than Europe and the US

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Speaker 4: dot markets. So I think there's plenty of opportunity globally

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Speaker 4: to diversify, including Europe as part of that as well.

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Speaker 4: But I do agree there are headwinds for Europe. I mean,

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Speaker 4: economic growth is slower in Europe than elsewhere, although it's

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Speaker 4: still positive and it's been boosted obviously by the fiscal

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Speaker 4: spend in Germany. But yes, there are headwinds such as

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Speaker 4: China competition, although I do think European policymakers are starting

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Speaker 4: to acknowledge this.

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Speaker 2: Now.

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Speaker 1: You know, we're talking about the motivation and we talk

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Speaker 1: about the Cell America trade, which has become cliche. It

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Speaker 1: feels like a little bit different than that, and that's

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Speaker 1: the reason why we keep going back to this. George

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Speaker 1: Serahvellos of Deutsche Bank note or he's talking about the

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Speaker 1: loss of safe haven status for the dollar, not necessarily

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Speaker 1: in the sense that it's going to go to zero,

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Speaker 1: but you're not getting the same diversification feature in terms

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Speaker 1: of the dollar our performing when risk has to sell off.

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Speaker 1: How much do you see that as a driver, not

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Speaker 1: just people wanting to look home or some of the

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Speaker 1: emotions of the moment.

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Speaker 4: Yeah, I think it's definitely that. There's often when you

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Speaker 4: see a changing trend, there isn't one single driver of it.

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Speaker 4: There's several drivers. I think we talked about the diversification

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Speaker 4: sector exposure. I mentioned valuation differences, but I also think

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Speaker 4: concern about having all your exposure and dollars and wanting

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Speaker 4: to diversify that is also another element of this. And

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Speaker 4: the euro sterling Swiss Frank provides different currency exposure as well.

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Speaker 4: So I think there's many elements to this desire for

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Speaker 4: global investors to diversify and broaden out their exposures.

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Speaker 2: There's a lot of anticipation about how much money is

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Speaker 2: going to be spent on AI and the beneficiaries of

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Speaker 2: that shoan. As you know, it's a big thing for

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Speaker 2: the year ahead as well. With six hundred and fifty

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Speaker 2: billion dollars in campex coming from just four companies, which

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Speaker 2: is just absolutely absurd. People are thinking about the minus

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Speaker 2: Sharan in a much bigger way. And when I think

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Speaker 2: about minus, I think about the foot seat and some

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Speaker 2: of the listings for UK equities. Are you seeing that

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Speaker 2: generate some bigger returns for large camp UK?

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Speaker 4: Absolutely? FOE one hundred has done extremely well this year.

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Speaker 4: We you know, index targets have generally been raised. I

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Speaker 4: think in honesty, it's an index which will been ignored

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Speaker 4: for ten or fifteen years by global investors and domestic

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Speaker 4: UK investors. Doesn't really have very much tech exposure. It's

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Speaker 4: gone a very different type of exposure, but that's actually

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Speaker 4: doing quite well at the moment. It's also an index

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Speaker 4: which looks relatively inexpensive. So the UK markets still trades

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Speaker 4: at thirteen and a half times PE, which is not

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Speaker 4: quite half what the S and P trades on but

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Speaker 4: not far off.

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Speaker 2: Stay with us more Bloomberg Surveillance coming up after this.

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Speaker 2: The Fellow Reserve facing a busy week of data on

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Speaker 2: both sides of the Central banks mandate, the US economy

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Speaker 2: delivering a blowout payrolls report ahead of a fresh read

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Speaker 2: on inflation with cpides tomorrow. Steven a shootout of Miszoo,

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Speaker 2: writing the first half of the year is seeing benefiting

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Speaker 2: from strong individual tax refunds and the second half from

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Speaker 2: last year's seventy five basis point reduction in the funds. Right,

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Speaker 2: Steve Johns is snaw for more, Steve, and welcome to

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Speaker 2: the show. So always good to can't shut with you, sir.

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Speaker 2: How much weight should we put on that payrolls report?

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Speaker 2: Is it the real deal?

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Speaker 4: Well?

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Speaker 5: I think when you when back it up against the

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Speaker 5: claims data that we've been seeing on a regular basis,

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Speaker 5: I ignore last week's numbers. When you look at where

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Speaker 5: claims are, you look at where continuing claims are, and

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Speaker 5: you look at the decline in the exhaustion erate ie

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Speaker 5: people falling off the continuing claims role, you're seeing a

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Speaker 5: healthier labor market environment and you're seeing it actually picking

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Speaker 5: up speed. You see a healthy labor market environment in

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Speaker 5: the nfi B numbers. You saw some healthy data in

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Speaker 5: the ISM numbers. I think, you know you have to

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Speaker 5: look at all this data and say, well, why is

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Speaker 5: it taking place the way it is? And I think

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Speaker 5: the answer is because the economy is fundamentally healthy, and

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Speaker 5: I think it is going to accelerate as we go

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Speaker 5: forward into twenty twenty six. And I don't worry about

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Speaker 5: the second half of the year, as I wrote in

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Speaker 5: that little piece, because primarily we think the interest rate

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Speaker 5: story comes up to really replace the tax cuts as

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Speaker 5: the driver of the economy as we go into the

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Speaker 5: second half of the year. Remember in twenty twenty five,

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Speaker 5: we had a real acceleration and growth in the second

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Speaker 5: half of the year after a disappointing first half of

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Speaker 5: the year, and the FED was all worried about the

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Speaker 5: first half growth decline, and that's you know what they

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Speaker 5: used to justify the rate cuts. But at the end

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Speaker 5: of the day, the economy accelerated in the second half

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Speaker 5: as a result of the tax the rate cuts in

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Speaker 5: twenty twenty four, and I think that continues to dominate

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Speaker 5: again this year.

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Speaker 2: Well, Steve, I want to pick up on that point,

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Speaker 2: the twelve month, like, what is the twelfth month like about?

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Speaker 2: Because for someone just following financial markets, they might sit

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Speaker 2: here and say I might sit here and say, highly

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Speaker 2: financialized economy. It goes through financial markets almost immediately and

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Speaker 2: you can fairly effect straight away. What takes twelve months?

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Speaker 5: It takes twelve months for people to reassess their situation.

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Speaker 5: And we're really talking about a six month flagg, which

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Speaker 5: I think is the important piece of the equation because

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Speaker 5: you know there's usually this that monetary policy takes anywhere

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Speaker 5: from six months to eighteen months to be reflected in

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Speaker 5: the economy. The long invariable legs the aults you've had

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Speaker 5: Chairman like to talk about. But the reality of the

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Speaker 5: situation is those long invariable legs really depend on the

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Speaker 5: underlying health of balance sheets. And I know you were

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Speaker 5: talking before about the K shaped economy and the adjustments

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Speaker 5: taking place in the economy, But when you look at

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Speaker 5: where the economy is, you go back, you're looking at

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Speaker 5: five years ago, which was the COVID environment, and we're

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Speaker 5: renormalizing to a pre COVID environment. And that's what you're

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Speaker 5: seeing in a lot of the data when you look

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Speaker 5: at things like delinquency rates relative to balances, balances are

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Speaker 5: very low, so delinquency rates look high. But when you

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Speaker 5: scale them by income or you scale them by GDP,

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Speaker 5: suddenly delinquency rates don't look to be a problem. This

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Speaker 5: is all the type of normalizing as analysis that I

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Speaker 5: think we've been doing relative to other people that I

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Speaker 5: think is really really driving the point that this economy

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Speaker 5: is on a solid fundamental trajectory, and I disagree completely

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Speaker 5: about the argument that we're going to get inflation coming down.

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Speaker 5: We've been talking about inflation coming down from three percent

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Speaker 5: for several years now and it isn't happening. How long

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Speaker 5: are we going to continue to wait for goodob that's

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Speaker 5: the real problem, because the Federal Reserve has to wake

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Speaker 5: up and smell the roses, and inflation is stuck at

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Speaker 5: these levels.

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Speaker 1: We'll get to inflation in just a second. I'm just curious.

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Speaker 1: I'm dealing with whiplash right now. After David Tinsley was

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Speaker 1: just telling us that the middle class is falling into

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Speaker 1: the same type of affordability crisis as the lower income

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Speaker 1: individuals in this country. How do you square that story

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Speaker 1: with this idea that there is stimulus that is working

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Speaker 1: its way through the system.

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Speaker 5: Well, I think you come out with the fact that

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Speaker 5: the corporate stimulus came last year, the consumer kit stimulus

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Speaker 5: comes this year. A lot of people are just now

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Speaker 5: filing their tax returns, they're just now getting their refund distributions.

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Speaker 5: We're on the real exponential rise in refund check distribution,

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Speaker 5: so we expect to start seeing it showing up in

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Speaker 5: the data in the next couple of weeks. With regard

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Speaker 5: to the concept of the middle income households. You remember,

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Speaker 5: you just went through the longest government shutdown in history.

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Speaker 5: You went through a very very cold winter early winter environment.

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Speaker 5: You went through the reciprocal tariff adjustments last year. So

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Speaker 5: seeing some disruptions you get developed as a result of

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Speaker 5: that is not surprising. It's where do we go forward

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Speaker 5: that becomes the critical issue. The indicators that he's been

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Speaker 5: looking at basically indication that tells you where we were

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Speaker 5: and not looking at. Well, if the economy does get

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Speaker 5: the cyclical boost we're expecting, if labor markets do get

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Speaker 5: the cyclical improvement we're expecting, then guess what, you wind

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Speaker 5: up reversing all those trends after being worried about them

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Speaker 5: for so long.

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Speaker 2: So even going back, you thing to show that's.

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Speaker 1: Happening, going back to the inflation point that you're making,

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Speaker 1: the pushback that you're hearing across Wall Street, and Tiffany

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Speaker 1: Wilding of PIMCO put this out there that after a

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Speaker 1: period of stubbornly high rental housing inflation, you're actually seeing

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Speaker 1: the opposite, surprisingly low housing related inflation, and this is

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Speaker 1: being born out a whole host of different data. I'm

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Speaker 1: just wondering, where is the inflation going to come from.

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Speaker 5: Well, you're going to see it in the good side.

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Speaker 5: I mean, we honestly believe that the acceleration and growth

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Speaker 5: in the economy is going to lead to a greater

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Speaker 5: demand pull equation. Think we're going to see it in

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Speaker 5: a lot of those factors that really lead to higher prices.

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Speaker 5: A tighter labor market environment will lead to higher wages.

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Speaker 5: Higher wages will help contribute to stronger demand. Stronger demand

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Speaker 5: will contribute to higher prices in some of the areas

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Speaker 5: where good price have been declining. This is why CPI

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Speaker 5: is an index. It's not one component. And this is

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Speaker 5: the thing everyone keeps on forgetting about CPI. Remember two

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Speaker 5: years ago, it was all about, oh my god, you

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Speaker 5: got to ignore the rising insurance rates that were driving

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Speaker 5: CPI higher. The reality is you can't ignore it rising

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Speaker 5: insurance rates. You can't ignore all the other components. You

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Speaker 5: have to look at the aggregate of the index. That's

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Speaker 5: what really matters, is the aggregate, not all these individual components.

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Speaker 5: You look at the number of components that can always

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Speaker 5: find something to hang my hat on. To be boised

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Speaker 5: like people looked at the payroll employment number and they

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Speaker 5: started doing some really apples to oranges comparisons in the

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Speaker 5: birth death model. The reality is it's the best data

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Speaker 5: we have. Stop arguing with the data. The data is

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Speaker 5: the data, except the for what it is. Make your

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Speaker 5: analysis of the data. Stop looking for arguments within the

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Speaker 5: data to discredit the data.

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Speaker 2: Steve, don't stop. This was great. Steve's good to see you.

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Speaker 2: I've got twenty seconds. Quick question, Next move, hiker. A

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Speaker 2: cut at the feder Reserve.

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Speaker 5: Nothing. They do nothing for at least twelve months.

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Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best

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