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Speaker 1: Joining us now is Brandon Ferris of the Steel Manufacturers Association. Brandon,
Speaker 1: thank you so much for being with us. I just
Speaker 1: want to start with how the increase in stealing aluminum
Speaker 1: tariffs works hand in hand with this deal for some
Speaker 1: sort of participation with dpon steel taking a stake of
Speaker 1: US steal.
Speaker 3: Absolutely well. Thank you for having me today, and with
Speaker 3: the deal and with what President Trump announced on Friday
Speaker 3: of raising the tariffs to fifty percent, President Trump is
Speaker 3: responding to an industry that has suffered from surges of
Speaker 3: dirt cheap steel from foreign imports, particularly from China, and
Speaker 3: so as part of this which was the largest investment
Speaker 3: in Pennsylvania history these fifty percent. Raising the tariffs to
Speaker 3: fifty percent helps protect the American steel industry.
Speaker 4: We've learned that the US imports about seventy percent of
Speaker 4: its steel needs is according to Morgan Stanley. So do
Speaker 4: you think actually they really need this level of protection.
Speaker 3: Yes, so even at twenty five percent, And the US
Speaker 3: International Trade Commission did a report on the two thirty
Speaker 3: two tariffs for steel, and what they found was that
Speaker 3: the price impacts were minimal, but what they really had
Speaker 3: a tremendous effect on was lowering the imports. Twenty four
Speaker 3: percent of imports were lowered when President Trump first instituted
Speaker 3: these tariffs in twenty eighteen. And so what we're still
Speaker 3: seeing is surges of steel into the US. China over
Speaker 3: the last year has dumped more than one hundred million
Speaker 3: tons into the global market. That is more than we
Speaker 3: make in the US in a year. So yes, we
Speaker 3: do believe that bumping up the number to fifty percent
Speaker 3: is going to be very helpful for our industry.
Speaker 4: Construction companies, I'm sure you've seen have worn that these
Speaker 4: levees are going to be increasing the cost of critical
Speaker 4: building materials. Do you have concern about the knock on
Speaker 4: effects what this fifty percent level means for the steel
Speaker 4: industry for things like construction as well as the auto sector.
Speaker 3: Absolutely, anytime a tear, for any time a trade knob
Speaker 3: is turned, you have to look at the ramifications. And
Speaker 3: when the International Trade Commission studied the two thirty two tariffs,
Speaker 3: what it found was for the downstream industries, zero point
Speaker 3: two percent increase on their prices, So again small increase
Speaker 3: on prices, but a major effect on taking the imports down.
Speaker 4: The Trump administration, though had or Trump himself had opposed
Speaker 4: this deal on the campaign trail. Are you happy about
Speaker 4: the nip on US steel deal.
Speaker 3: We're looking forward to receiving more information. Again, what we
Speaker 3: look at is right now it is the number one
Speaker 3: deal that has ever been announced in Pennsylvania. One of
Speaker 3: our other members, New Course Steel, had just recently announced
Speaker 3: the largest investment in West Virginia history. So two out
Speaker 3: of fifty states the largest investment in their history is steel,
Speaker 3: and so we like where this trend is heading.
Speaker 5: Brandon, you mentioned the dumping of steel in US markets
Speaker 5: coming from China, but let's be clear, this terifile effect
Speaker 5: much more than China. It is a sledgehammer, and you've
Speaker 5: seen complaints, for example, from the EU, from the UK.
Speaker 5: Is this the right method to take for what is
Speaker 5: a very serious problem. Should there have been something more
Speaker 5: surgical coming from the administration.
Speaker 3: We do believe that the two thirty two steel tariffs
Speaker 3: are searched, and with this, yes, we do believe that
Speaker 3: it will help our industry. And the problem is not
Speaker 3: just China, it's global overcapacity. Lots of countries use cheap
Speaker 3: Chinese steel to replace their own and then send theirs
Speaker 3: onto the global market, and so this will help solve
Speaker 3: that issue.
Speaker 5: So another concern, which again the most recent moves I'm
Speaker 5: sure you're hoping to concern, is something of just job
Speaker 5: stability and job security and any guarantees that the administration
Speaker 5: and many people hope that kneepon Steel will guarantee, Brandon,
Speaker 5: how far can those guarantees go when it is an
Speaker 5: industry that is facing a lot of changes, that is
Speaker 5: facing changes when it comes to technology that change the workforce.
Speaker 5: How long can job security be guaranteed.
Speaker 3: I can't speak for US Steel, but what I can
Speaker 3: say for all of our members is that they have
Speaker 3: a more full order book than they've had in years.
Speaker 3: And what we're hearing is that we're hearing growth. Nearly
Speaker 3: every one of our members has announced growth, and this
Speaker 3: means more jobs, this means more revenue, this means better
Speaker 3: benefits for the economy. And so right now, what we're
Speaker 3: looking at, and what we've looked at since President Trump
Speaker 3: first instituted these terraces in twenty eighteen, is a changed
Speaker 3: industry and a changed for the better. And that's what
Speaker 3: we're looking at when President Trump has recently made this
Speaker 3: change to fifty percent as well.
Speaker 1: Brandon, are you worried about the US losing customers if
Speaker 1: the US angers essentially Canada and the European Union, as
Speaker 1: some of its biggest exporters are the people who actually
Speaker 1: buy some of this steel and aluminum, maybe setting them
Speaker 1: to look elsewhere if suddenly prices are that much more expensive.
Speaker 3: What we can say is that most of the steel
Speaker 3: produced in the US is used in the US. We
Speaker 3: do have some trade with Canada, we do have some
Speaker 3: trade with Mexico, and I know that there are going
Speaker 3: to be negotiations this year talking about that. But as
Speaker 3: far as protecting the domestic steel industry, which is vital
Speaker 3: for economic security, energy security, national security. We believe that
Speaker 3: moving the tariffs up to fifty percent was a very
Speaker 3: good move.
Speaker 1: Brandon Faris of the Steel Manufacturers Association, thank you so
Speaker 1: much for being with us. Turning back to trade, China
Speaker 1: hitting back the Trump administration accusing the US and violating
Speaker 1: is trade truths. Former Trump trade official Kate Calluquids joins
Speaker 1: US now.
Speaker 6: Kate, thank you so much for being with us. What's
Speaker 6: your take.
Speaker 1: On the ratcheting up intensions that we saw between the
Speaker 1: officials in China and the US over the past four
Speaker 1: or five days.
Speaker 7: It has been a whirlwind. I think in the US
Speaker 7: China space. Of course, we saw huge tariffs, We saw
Speaker 7: those tariffs come down without much else agreed between the
Speaker 7: two parties, and now this war of words. I think
Speaker 7: it lends itself to the fact that some of the
Speaker 7: very baseline issues between the two nations remain very much
Speaker 7: in place, even though domestic pressure forced both sides to
Speaker 7: bring those tariffs down. So we're very much in the
Speaker 7: same space without the tear of pressure.
Speaker 4: I think, Kate, is there really going to be an
Speaker 4: agreement if there isn't some understanding between the two countries
Speaker 4: on the AI sector and advanced semiconductors.
Speaker 7: Well, you know, I suppose it depends on what China
Speaker 7: is willing to accept here, because I think that it's
Speaker 7: very clear from the United States perspective that these types
Speaker 7: of export restrictions on high tech goods are here to stay.
Speaker 7: In the big strategic economic competition with China, the focus
Speaker 7: from both sides, frankly in DC has been to restrict
Speaker 7: access of these technologies. So unless China is willing to
Speaker 7: accept that, I think we're not going to see an agreement.
Speaker 7: They're going to have to decide I think whether this
Speaker 7: is a status quo that they can move forward with.
Speaker 4: Is there a chance that the Trump administration gives in
Speaker 4: more and allows them some access to this sector.
Speaker 7: Well, you know, President Trump, of course, has sent some
Speaker 7: mixed messages around what he expects and hopes from China.
Speaker 7: After the tear off Detonte, the President announced his long
Speaker 7: term goal is to do business with China, which you
Speaker 7: know undermines a bit this notion that we could really
Speaker 7: sever our economies.
Speaker 6: So I wouldn't say never.
Speaker 7: The President certainly has shown, you know, willingness to walk
Speaker 7: back some of his strong rhetoric but this will be
Speaker 7: difficult because, you know, in a bipartisan way, Congress has
Speaker 7: been quite firm on this point.
Speaker 6: The rhetor grick.
Speaker 4: We've seen the war of words back and forth over
Speaker 4: the weekend from Friday to today. Could that derail a
Speaker 4: potential talk that Kevin has had said we should expect
Speaker 4: this week between the two leaders.
Speaker 7: I suppose it could, although the signals I see on
Speaker 7: the US side at least are very strong language from
Speaker 7: the President, softer language of course from his his you know,
Speaker 7: cabinet officials. We saw Ambassador Greer, Secretary Bessett try to
Speaker 7: walk back a bit the very strong tone to say
Speaker 7: things aren't going great, but we're hoping the leaders will speak.
Speaker 7: So the US at least is sending a very strong
Speaker 7: signal that it would like to see a leader level discussion.
Speaker 1: Do we have a sense, Kate of what the ultimate
Speaker 1: goal is? It feels like that's getting lost in all
Speaker 1: of this, is the idea to decouple with respect to
Speaker 1: tech between the US and China, to time or on
Speaker 1: video saying that that's not the answer. Is it to
Speaker 1: just isolate China with the allies that we have, albeit
Speaker 1: in a somewhat messy way, we don't have real sense
Speaker 1: of that through all of this, do you.
Speaker 8: Well?
Speaker 7: I wish I could help come up with a stronger
Speaker 7: clear plan here. The reality is the President has many,
Speaker 7: many goals when it comes to economic relationships with the
Speaker 7: rest of the world, and at times these do appear
Speaker 7: somewhat to conflict with one another. As I said, I
Speaker 7: do think his long term goal here is to reset
Speaker 7: the relationship with China, but to continue to have an
Speaker 7: economic relationship with China. Regrettably, I think some of these
Speaker 7: other discussions, whether it's with the Europeans, India, others, the
Speaker 7: stealing aluminum tariff announcements, cloud the the framework of where
Speaker 7: we're gonna go with China. So I'd say we're not
Speaker 7: quite there yet. I don't know that the President has
Speaker 7: been as specific as he needs to be with the
Speaker 7: Chinese as to where he hopes to go, and so
Speaker 7: we're gonna need to have a little bit more discussion
Speaker 7: before we can see something emerging.
Speaker 1: We heard over the weekend from a number of different
Speaker 1: advisors to President Trump that July ninth is the deadline
Speaker 1: and it will not be extended past that. In terms
Speaker 1: of the reciprocal tariffs, do you believe that.
Speaker 7: Well, I think the President is always flexible, and I
Speaker 7: think if we need to go beyond July ninth, we'll
Speaker 7: find a way to go beyond July ninth. Of course,
Speaker 7: the President is a bit on his heels given the
Speaker 7: court decision last week, but I think it means that
Speaker 7: he's going to show signals that he can move tariff's
Speaker 7: forward in other manners as we've seen. We saw the
Speaker 7: announcement on steel in aluminum. He has quite a few
Speaker 7: other tools in his toolbox to bring to the ready.
Speaker 7: So I think other nations really ought to continue negotiating
Speaker 7: with the United States and keep this date in mind.
Speaker 6: It benefits them as.
Speaker 7: Well to negotiate some deals before the President starts to
Speaker 7: use these other tariffs. But if we need to extend,
Speaker 7: I think the President and certainly Secretary Dissent has indicated
Speaker 7: if we need more time, we'll take more time.
Speaker 8: Just quickly.
Speaker 1: When you talk to your clients, what are the risk dates,
Speaker 1: the risk events that you have the flag to them
Speaker 1: saying this, actually you need to keep your eye out.
Speaker 7: For Well, when I talk to my clients, I really say,
Speaker 7: you know, predicting is too late in the game. We
Speaker 7: need to anticipate big outcomes as opposed to the actual
Speaker 7: when and the dates and to when they might occur,
Speaker 7: because we know the President wants to move on large
Speaker 7: scale sectoral tariffs beyond II but beyond China. We are
Speaker 7: anticipating several big decisions this summer when it comes to
Speaker 7: semiconductor tariffs, pharmaceuticals, copper, critical minerals, and a range of
Speaker 7: other two thirty two tariffs. We have impending review of
Speaker 7: the US Mexico Canada agreement. So when I speak to
Speaker 7: my clients, we're working to prepare for all of these
Speaker 7: eventualities to ensure that they're they're well positioned even before
Speaker 7: a date is announced.
Speaker 1: Kay Klukwitz, former Trump trade official, thank you so much
Speaker 1: for being with us. Anita Bajave of Bank of America, writing,
Speaker 1: we now forecast one hundred basis points of cuts next
Speaker 1: year with low conviction. Who pencil these cuts in for
Speaker 1: the second half of twenty twenty six? Aditya joins us
Speaker 1: now and Aditya thank you for that, because we're all
Speaker 1: humbly having low conviction about absolutely everything, So join the club.
Speaker 6: We're joining the club.
Speaker 1: I am curious what you make of some of those
Speaker 1: Chris Waller comments where he seems to talk about good
Speaker 1: news rate cuts at a time when so many other
Speaker 1: FED officials are saying, we have no clue.
Speaker 8: Thank you for having me. I think we have no clue.
Speaker 8: It is probably a more accurate representation of where we stand.
Speaker 8: The challenge here is that we had fairly favorable based
Speaker 8: effects on inflation for the first four months of the year,
Speaker 8: and so it isn't hugely surprising that we got down
Speaker 8: to about two and a half percent on the core.
Speaker 8: The problem is over the next eight months, the base
Speaker 8: effects are much less favorable, and so going down further
Speaker 8: is very unlikely, and in fact, it's more likely that
Speaker 8: as the tariff set in, inflation will increase on a
Speaker 8: year of year basis.
Speaker 3: Well.
Speaker 5: Chris Waller's argument in that was that you could look
Speaker 5: through that because we don't have the same tightness in
Speaker 5: the labor market, and the ability for employees to go
Speaker 5: to their employer and say, hey, inflation's going up, pay
Speaker 5: me more is limited because they just want to hold
Speaker 5: on to their jobs at this point. Is that a
Speaker 5: fair characterization of where we are?
Speaker 8: Okay, But if inflation's above target and you aren't sure
Speaker 8: whether you should look through the shock or not. And
Speaker 8: at the same time, the labor market's holding up, what's
Speaker 8: the why do you need to cut it all?
Speaker 5: Yeah, fair enough, We don't.
Speaker 8: Think they're cutting this year, just to be clear.
Speaker 5: So they're not cutting this year. But also another input
Speaker 5: in to this, and this is something Michael Gabe and
Speaker 5: Morgan Stanley has talked about. This idea that we're going
Speaker 5: to have low immigration and low immigration also means that
Speaker 5: the labor market's going to stay tight as employment growth slows.
Speaker 5: How much is that going to impact the outlook as
Speaker 5: this year progresses.
Speaker 8: That's a more difficult one. I think it'll be very
Speaker 8: differentiated sector by sector. You're going to be seeing some
Speaker 8: sectors that are more dependent on immigration that could see
Speaker 8: wage pressure, such as construction, measure, in hospitality, agriculture. But
Speaker 8: in aggregate, if you're basically shrinking the population, you're reducing
Speaker 8: supply and demands. So it could also end up being
Speaker 8: a wash.
Speaker 4: You said that if the labor market is holding up
Speaker 4: and inflation goes higher, why should the Fed do anything? Well,
Speaker 4: if inflation is going higher, shouldn't.
Speaker 5: It be hiking?
Speaker 8: Right? So that's a question that comes up every now
Speaker 8: and then I think there's some ways away from hiking,
Speaker 8: just because policy rates are already quite elevated, so they'll
Speaker 8: feel like they have some buffer. And again they'd rather
Speaker 8: be late than wrong. This is a point that we've
Speaker 8: made and I think it holds in both directions.
Speaker 4: So you think this potentially will happen even though you
Speaker 4: have a little bit of great salt on there the
Speaker 4: second half of twenty twenty six. So do you think
Speaker 4: we'll have certainty on trade policy out of Washington by
Speaker 4: the second half of twenty twenty six?
Speaker 8: Right, So the way we're thinking about the second half
Speaker 8: of twenty twenty six is that by that point inflation
Speaker 8: will the tariff riven. Inflation will start to roll off
Speaker 8: the year of a year rate because of base effects.
Speaker 8: So with inflation below three percent, maybe a slightly loser
Speaker 8: label market and different FED leadership, you might end up
Speaker 8: getting great cuts.
Speaker 1: You said, different FED leadership. This is the question that
Speaker 1: we all really want to ask. Is Chris Waller just
Speaker 1: trying to get the job?
Speaker 8: I'll let you decide that.
Speaker 1: Okay, Well, it seems like a lot of people would
Speaker 1: say yes. Is this the mainstream thought or could this
Speaker 1: be the mainstream thought?
Speaker 8: Of the Federal Reserve.
Speaker 1: Do you think that this is the person to watch
Speaker 1: to see the direction for the Federal Reserve in twenty
Speaker 1: twenty six Chris Waller.
Speaker 8: So he seems to be for now at least a
Speaker 8: bit of an outlier on the committee. I think what
Speaker 8: you're hearing from Chair Powell and then others like Hammock
Speaker 8: and Williams is that the FED is very patient right now.
Speaker 8: They just have no idea. Honestly, if you ask me
Speaker 8: told me that the FED should be preemptive, I would
Speaker 8: ask you, what is the FED even trying to preempt
Speaker 8: right now? There's risks in both directions to trade policy,
Speaker 8: there's risks in both directions to fiscal policy. Let's just
Speaker 8: wait and see how it plays out. So Waller seems
Speaker 8: to have a pretty optimistic outlook that we're going to
Speaker 8: be able to do good news rate cuts by the
Speaker 8: end of this year, and that just seems a little
Speaker 8: bit too soon for us.
Speaker 6: I'm sympathetic with this.
Speaker 1: The question though, of wait and see for a data
Speaker 1: dependent FED really raises a question of what are you
Speaker 1: waiting for? Because the data is so incredibly messy, not
Speaker 1: only from a backward looking forward looking midigum working kind
Speaker 1: of point of view, but also just from a data
Speaker 1: collection point of view, You've had a real question about
Speaker 1: lowering of response rates to some of the nonfarm payrolls.
Speaker 1: Responses sentiment surveys are basically throw a darted to dartboard.
Speaker 1: What do you do with the integrity of some of
Speaker 1: the data that we're getting.
Speaker 8: So the good news about the payroll surveys is that
Speaker 8: at least by the time you get to the third reading,
Speaker 8: the response rate is pretty decent.
Speaker 6: Yeah when you get that, yeah, you get that.
Speaker 8: Two months later.
Speaker 6: Okay, but the piping.
Speaker 5: Well, and then you have data that's unreliable. You have
Speaker 5: a FED that's not moving. The FED is not in
Speaker 5: the driver's seat. It is a political economy, and you
Speaker 5: can even see it in what's happening with the currency market.
Speaker 5: Interest rate differentials are not making a difference. Is it
Speaker 5: a problem that the FED is very passive right now?
Speaker 5: That they are very reactive? Is it a problem, especially
Speaker 5: if this economy heads in a worse direction.
Speaker 8: I wouldn't characterize the FED as fassive. I think they've
Speaker 8: actually been pretty clear about their stunds. They've pushed back
Speaker 8: against market pricing of rate cuts. They've made it very
Speaker 8: clear that they're concerned about inflation to a degree that
Speaker 8: was more than perhaps I would have expected. I mean,
Speaker 8: did you look at the minutes last week? It was
Speaker 8: it was really striking for me. They had this when
Speaker 8: they were the discussion around balance of risks. They basically
Speaker 8: gave you this laundry list of concerns about why inflation
Speaker 8: might end up being sticky, and then just a sentence
Speaker 8: or two in the other direction, right, which is probably
Speaker 8: written by.
Speaker 5: What is the danger? Just just lay it out for us.
Speaker 5: If the FOMC starts to coalesce a Chris Waller type
Speaker 5: of policy, outlook, what is the scenario? Why is that
Speaker 5: the wrong decision?
Speaker 8: I think it's concerning in the sense that we just
Speaker 8: don't know what policy is going to get implemented first,
Speaker 8: and then second, we don't know how it's going to
Speaker 8: affect the economy. Right, Basically, what we're looking at is
Speaker 8: a negative supply shop from the tariffs being offset by
Speaker 8: potentially a positive demand shock from fiscal policy. That can
Speaker 8: give you the offset that you're looking for on the
Speaker 8: fiscal side. It you can give you the offset that
Speaker 8: you're looking for on the output side. The problem is
Speaker 8: it can be additive on inflation, right. That's why they
Speaker 8: have to be very careful about the risks around inflation.
Speaker 8: And the other concern would be just that companies could
Speaker 8: raise their prices a little bit every year if they're
Speaker 8: concerned about losing market share. Right, So you could get
Speaker 8: less inflation in the short run, but stickier inflation over time.
Speaker 1: Just to give us a compass for how to look
Speaker 1: at the weak head, what data point do you think
Speaker 1: is going to be most relevant? The jolts, the job openings,
Speaker 1: the non farm payrolls report on Friday, or the Beige
Speaker 1: Book with all those quotes from specific regions telling you
Speaker 1: I feel good, I feel terrible, I feel inflation, I
Speaker 1: feel layoffs.
Speaker 8: I think it's the unemployment rate. You really want to
Speaker 8: watch the unemployment rate. I mean, typically the establishment survey
Speaker 8: is more reliable than the household survey. But as you
Speaker 8: mentioned earlier, we're in an environment where there's some very
Speaker 8: movement around immigration policy and that can effect leave a
Speaker 8: supply that can affect non farm payrolls. So the unemployment rate,
Speaker 8: as long as that stays four point two percent or below,
Speaker 8: I think the Fed's going to be very comfortable sitting
Speaker 8: where they are.
Speaker 1: Adj Bahave thank of America, Thank you so much.
Speaker 6: Great to see you.
Speaker 1: Victoria Fernandez of cross Mark writing, uncertainty remains even if
Speaker 1: economic data and tacticals show the markets holding their own
Speaker 1: for now, we see additional toppiness in the coming quarters.
Speaker 1: Victoria joins us now for more, Victoria join the club.
Speaker 1: Everyone's seeing choppiness because it's very hard to get a
Speaker 1: sense of what kind of direction to go in. I
Speaker 1: want to start with something that Danny was talking about earlier,
Speaker 1: which is that it's very hard to know which thing
Speaker 1: to focus on at any given time. Have we gone
Speaker 1: past earnings and so now the focus just shifts squarely
Speaker 1: to trade or does it shift to the deficit, or
Speaker 1: does it shift to something else completely.
Speaker 9: Yeah, I wish i could give you a good answer
Speaker 9: on that, Lisa, but I'm just not really sure where
Speaker 9: the focus is going to be.
Speaker 6: As you guys.
Speaker 9: Mentioned earlier, it changes on a daily basis. So we're
Speaker 9: mostly through earnings, but there still are some good retail
Speaker 9: earnings that are going to be coming out this week.
Speaker 9: We've got some tech earnings coming out, but I think
Speaker 9: we're basically through that component. It's going to be do
Speaker 9: expectations of earnings continue to get.
Speaker 6: Moved lower for the next couple of quarters.
Speaker 9: That's going to be the key component as it relates
Speaker 9: to earnings, and we've seen that happen, so that's going
Speaker 9: to be of concern. But obviously headlines they're going to
Speaker 9: be driving so much of this. The consumer is what
Speaker 9: people are watching. Credit spreads is what we're watching, Corporate
Speaker 9: profits is what we're watching.
Speaker 6: Those are all important, and they're all going to.
Speaker 9: Move on a daily basis depending on what it's hearing
Speaker 9: from trade and from the tax bill.
Speaker 6: So I think you have to take it.
Speaker 9: All in stride through a lens however, of not being
Speaker 9: sure how much you can rely on the data, because
Speaker 9: how much of it is just due to the pull
Speaker 9: forward that we saw on March. That's another element you
Speaker 9: have to bake into your observations.
Speaker 1: Which is one reason Victoria that a lot of people
Speaker 1: got a lot of confidence from earnings over the past
Speaker 1: couple of weeks. They came in significantly better than expected,
Speaker 1: Julian Emmanuel calling it a boom in earnings and the
Speaker 1: consequence in the response in markets.
Speaker 6: That's real.
Speaker 1: You are seeing those profits, you are seeing companies that
Speaker 1: are still able to reaffirm some of their guidance.
Speaker 6: Does that give you confidence to.
Speaker 1: Be a little bit more bullish in risk assets than
Speaker 1: you were previously.
Speaker 9: I think it gives a confidence in knowing that we
Speaker 9: will come through the choppiness that we're talking about over
Speaker 9: the next couple of quarters, through all of the trade headlines.
Speaker 9: We will come through that, hopefully with stronger economic elements
Speaker 9: on the other side of that. One of the most
Speaker 9: important things I think we're seeing out of earnings is
Speaker 9: that we can continue to have that CAPEX number because
Speaker 9: profits remains strong. So you had revenues of what six
Speaker 9: percent or so this last quarter. When you look at CAPEX,
Speaker 9: you go to two and a half times multiplier in
Speaker 9: regards to every dollar spent, and that's thirteen percent of
Speaker 9: our GDP. So I think CAPEX could be an element
Speaker 9: that continues to boost the economy even with the churning
Speaker 9: that we anticipate Victoria.
Speaker 5: How surprising is that figure, just because when all of
Speaker 5: the trade headlines started to kick off, the narrative was,
Speaker 5: and let's be honestill, is that businesses are paralyzed by
Speaker 5: it that they're not committing capital. They don't want to
Speaker 5: put things to work because they just don't know what
Speaker 5: type of environment they're going to be operating in. The
Speaker 5: CAPEX figures we got and the expectations for them. Not
Speaker 5: trying to be cute here, but are they real?
Speaker 9: You know, I would have thought if you'd ask me
Speaker 9: that maybe six weeks ago, I would have been very
Speaker 9: concerned in regards to the earnings that were coming, to
Speaker 9: the guidance that we would get as it relates to CAPEX,
Speaker 9: because of exactly the elements you said, because of the
Speaker 9: uncertainty and not knowing what to do going forward. But
Speaker 9: it seems like a lot of the businesses over this
Speaker 9: last earning season have really kind of reiterated some of
Speaker 9: those CAPEX spins. Obviously some has been pulled back, but
Speaker 9: overall we've still had some strength there. So I think
Speaker 9: if that continues, which it seems like it might, if
Speaker 9: things stay status quo or slowly begin to improve on
Speaker 9: the tear front and on the tax bill front, then
Speaker 9: I think you have the opportunity to see the markets
Speaker 9: move higher once we get through the headlines.
Speaker 5: So American companies still want to spend, still want capital expenditures.
Speaker 5: Victoria in Europe, it was much weaker what we got
Speaker 5: from there. Earnings in terms of capital expenditures, we are
Speaker 5: looking at an S and P that's up just half
Speaker 5: a percent so far from the year in Europe. Stocks
Speaker 5: are up seven and a half percent looking at the
Speaker 5: company earnings. Does that suggests that that balance needs to
Speaker 5: shift back to the US, that European outperformance maybe has
Speaker 5: gone as far as it can.
Speaker 9: I think there's a few elements that kind of drive
Speaker 9: that story of shifting maybe back to the US. We had,
Speaker 9: you know, kind of broadened out some of our exposure
Speaker 9: to include Europe earlier in the year, but you had
Speaker 9: a lot of catalysts that drove that. You had the
Speaker 9: change to the debt, you had an increase in defense spending,
Speaker 9: and we saw the European markets really respond, and at
Speaker 9: that point we thought it was time to take some money.
Speaker 6: Off the table and move back.
Speaker 9: And now you have increased concerns around inflation, We're seeing
Speaker 9: increased concerns, like you said, around corporate profits and what
Speaker 9: that means for capex. So I do think you could
Speaker 9: trim those positions, move them back into the US, into
Speaker 9: some of the sectors where you're seeing the momentum play.
Speaker 9: That's the most important factor right now, and the market
Speaker 9: is the momentum factor. Beta has kind of hit a
Speaker 9: little bit of a peak, and so I think that
Speaker 9: flows into this story of trimming those winners and maybe
Speaker 9: moving back into some of the areas that have better
Speaker 9: potential going forward.
Speaker 1: How much of the international story will be told by
Speaker 1: what happens with some of the budget negotiations in Washington,
Speaker 1: DC right.
Speaker 9: Now, Well, I think it all ties into what we're
Speaker 9: seeing as it relates to the dollar and into currencies,
Speaker 9: which you guys have been talking about this morning. So
Speaker 9: we've seen the dollar come down in concern around the deficit.
Speaker 9: You see that play out on a global basis, So
Speaker 9: you want to look at some of those countries that
Speaker 9: maybe have current accounts on the positive side of that
Speaker 9: that should be supportive of their currencies versus the US.
Speaker 9: But obviously it's a global trade economy right now, and
Speaker 9: so anything that happens on these fronts is going to
Speaker 9: affect everywhere. And we've seen it in yields rising. We
Speaker 9: talked about US yields rising this morning. We've seen it
Speaker 9: in guilt and we've seen it in boons as well well.
Speaker 4: But how much of what's going on in Washington, DC
Speaker 4: when it comes to the fiscal package actually a headwind
Speaker 4: or is it a tail wind, because the fact of
Speaker 4: the matter is this is just current policy as the
Speaker 4: crux of this bill.
Speaker 6: Yeah, Am Marie.
Speaker 9: It's interesting because we always thought that from the very
Speaker 9: beginning of this new administration.
Speaker 6: We didn't think it was just like tariffs on their own.
Speaker 6: It was always kind.
Speaker 9: Of a more holistic plan of tariffs and deregulation and
Speaker 9: lower taxes and improving some of these elements for businesses.
Speaker 6: And so I think you have to look at what's
Speaker 6: going on.
Speaker 9: In Washington through that lens and say, how does this
Speaker 9: help counteract some of the more downside elements that we're
Speaker 9: seeing from tariffs. It's a very important component. Congress is
Speaker 9: relying on some of the tariff revenue to offset some
Speaker 9: of the deficit costs. That's how they're able to go
Speaker 9: in and say that this is not going to add
Speaker 9: to the deficit.
Speaker 6: So it's something that we have to watch.
Speaker 9: It's all tied together and hopefully we come out of
Speaker 9: this with some benefits from both sides.
Speaker 1: Victoria cross Mark, thank you so much for being with us.
Speaker 1: Have a great week ahead, and we'll see you soon.
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