WEBVTT - A Look Ahead to the Fed & Trump 2.0 0:00:02.400 --> 0:00:07.240 Bloomberg Audio Studios, podcasts, radio news. 0:00:11.920 --> 0:00:16.320 This is the Bloomberg Surveillance Podcast. Catch us live weekdays 0:00:16.360 --> 0:00:19.840 at seven am Eastern on applecar Player, Android Auto with 0:00:19.880 --> 0:00:23.320 the Bloomberg Business App. Listen on demand wherever you get 0:00:23.360 --> 0:00:26.239 your podcasts, or watch us live on YouTube. 0:00:26.760 --> 0:00:30.320 Abby Joseph Cohen does not remember eighteen fifty six. She's 0:00:30.360 --> 0:00:34.280 too young for this, but she does know what unified 0:00:34.360 --> 0:00:38.640 government is. It's really an interesting thing, a great paragraph. 0:00:38.720 --> 0:00:41.040 I'm stealing this from News Nation. I has some nice 0:00:41.080 --> 0:00:44.959 history here if I can find it. But unified government 0:00:45.800 --> 0:00:50.559 is more common than we think. There's been twenty three 0:00:50.600 --> 0:00:54.920 times Democrats have had unified government, twenty five times Republicans 0:00:54.920 --> 0:00:59.120 have had unified government. Abbi Joseph Cohen, a Columbia University 0:00:59.360 --> 0:01:03.440 will get to the markets. Abby, is gridlock good or 0:01:03.480 --> 0:01:07.640 can we get something done with unified government that supports 0:01:07.640 --> 0:01:10.280 American finance and capitalism. 0:01:11.640 --> 0:01:14.720 Wow, that's a big question, Tom, and thank you for 0:01:14.760 --> 0:01:19.080 inviting me to be here this morning. It depends what 0:01:19.200 --> 0:01:24.320 unified government decides to do. So clearly, if you have 0:01:24.360 --> 0:01:28.440 a policy agenda that is favorable, unified government is good news. 0:01:29.000 --> 0:01:31.039 If not, there are a number of things to watch 0:01:31.080 --> 0:01:31.479 out for. 0:01:32.959 --> 0:01:36.160 Abby, What do you expect here? We've had obviously a big, 0:01:36.280 --> 0:01:39.800 big change on the political stage here in the United States. 0:01:40.240 --> 0:01:44.000 What's your expectation of a second Trump presidency and what 0:01:44.040 --> 0:01:46.240 does that mean for markets? We've certainly had a big 0:01:46.319 --> 0:01:49.600 rally yesterday in financial assets. What do you expect going forward? 0:01:50.640 --> 0:01:53.920 Well, let me put the marker out there, which is 0:01:54.520 --> 0:01:58.360 don't know, because we don't yet know, for example, who 0:01:58.440 --> 0:02:02.080 the key members of the administry will be. We don't 0:02:02.120 --> 0:02:05.000 know who the Secretary of Treasury will be, for example, 0:02:05.480 --> 0:02:07.400 nor do we have an idea of who some of 0:02:07.440 --> 0:02:10.160 the other members of the cabinet will be. The other 0:02:10.240 --> 0:02:12.760 thing that we're not sure about, of course, is what 0:02:12.960 --> 0:02:18.040 happens going forward with regard to regulatory policy. Now there 0:02:18.120 --> 0:02:22.919 is a presumption that less regulation is good for the economy. 0:02:23.320 --> 0:02:28.160 That's not always the case. Obviously regulation is not always perfect, 0:02:28.520 --> 0:02:30.880 but there are a number of areas in which looser 0:02:30.960 --> 0:02:37.480 regulation is in fact quite destabilizing and inflationary. So, for example, 0:02:37.919 --> 0:02:42.920 looser anti trust policy is typically associated with higher inflation, 0:02:43.720 --> 0:02:46.080 and that's something that we need to keep an eye on. 0:02:46.480 --> 0:02:48.120 The Other thing that we need to keep an eye 0:02:48.200 --> 0:02:53.200 on because members of the Trump organization have been chatting 0:02:53.240 --> 0:02:56.120 about this, and when I say Trump Organization, I'm referring 0:02:56.160 --> 0:02:59.920 to the campaign, not the company. They've been talking about 0:03:00.240 --> 0:03:06.000 providing a very easy regulatory environment for crypto and that's 0:03:06.000 --> 0:03:09.560 something that could in fact be problematic with regard to 0:03:10.280 --> 0:03:14.720 whether it creates a source of potential instability for the 0:03:14.760 --> 0:03:15.760 financial markets. 0:03:15.960 --> 0:03:19.640 Listen to that. I mean, I don't know. Let's do it. 0:03:19.720 --> 0:03:22.280 Let's do a crypto data check here right now. I 0:03:22.360 --> 0:03:25.800 quoted the Doze yesterday for the first time ever seventy 0:03:25.840 --> 0:03:29.200 four thousand, seven hundred down eleven hundred. We had seventy 0:03:29.200 --> 0:03:31.080 five thousand print on bitcoin. 0:03:30.800 --> 0:03:31.680 We did for bitcoin. 0:03:31.960 --> 0:03:36.920 Sot's let's let's make the point, however, Tom, and that 0:03:37.120 --> 0:03:41.160 is there has been some discussion among Trump advisors that 0:03:42.080 --> 0:03:46.440 digital currency could be used on bank balance sheets for 0:03:46.520 --> 0:03:51.120 regulatory purposes. And basically, over over time, over history, we 0:03:51.200 --> 0:03:54.480 see that the best assets to put on bank balance 0:03:54.520 --> 0:03:57.440 sheets are the ones that are not quite so volatile. 0:03:57.920 --> 0:04:01.680 Exactly so politicous. She's just got it down, cult. She's 0:04:01.760 --> 0:04:04.200 laughing at me because she knows exactly where I am 0:04:04.200 --> 0:04:04.800 on this poot. 0:04:04.840 --> 0:04:05.920 She knows what she's doing. 0:04:06.200 --> 0:04:06.480 Abby. 0:04:06.520 --> 0:04:09.280 I guess the last time we chatted, you were concerned 0:04:09.320 --> 0:04:11.640 about concentration in the market, as are a lot of 0:04:11.640 --> 0:04:13.800 people when you think about the Magnificent seven or some 0:04:13.880 --> 0:04:17.080 of the AI trade here. Has anything changed there? How 0:04:17.080 --> 0:04:19.480 do you think about that? Just the health of this 0:04:19.560 --> 0:04:20.479 equity market here? 0:04:21.680 --> 0:04:25.520 Yeah, wonderful question, and we if we had a crystal 0:04:25.520 --> 0:04:28.480 ball and we knew what earnings were going to be 0:04:28.680 --> 0:04:31.000 like in twenty twenty five, we might be able to 0:04:31.040 --> 0:04:34.080 answer it better. Yesterday's close on the S and P 0:04:34.200 --> 0:04:38.240 five hundred in excess of fifty nine hundred is something 0:04:38.360 --> 0:04:41.600 that really is touching the top end of the range 0:04:41.960 --> 0:04:45.360 that many people had expected as it relates to valuation 0:04:46.040 --> 0:04:48.400 for the S and P five hundred. So to think 0:04:48.440 --> 0:04:50.880 that the market in general can go higher from here, 0:04:51.200 --> 0:04:54.880 you really need to have an enthusiastic view about economic 0:04:54.920 --> 0:04:57.839 growth next year. But we also now need to worry 0:04:57.920 --> 0:05:02.159 about the interest rate aspect valuation. While there's been so 0:05:02.240 --> 0:05:06.600 much focus about how much the stock market responded yesterday, 0:05:06.600 --> 0:05:09.200 there was also a big response in the bond market, 0:05:09.480 --> 0:05:12.680 and with higher interest rates that creates more of an 0:05:12.720 --> 0:05:15.719 obstacle to equity valuation as well. 0:05:15.839 --> 0:05:19.240 Are the earnings that we're seeing abby this quarter last quarter, 0:05:19.279 --> 0:05:22.680 and more importantly, kind of the forecast. Are the earnings 0:05:22.680 --> 0:05:24.680 there to support this market or do we really have 0:05:24.680 --> 0:05:26.000 some valuation concerns here? 0:05:27.520 --> 0:05:32.919 Based upon consensus earnings expectations, things look like we are okay, 0:05:33.560 --> 0:05:36.880 but clearly this very little margin for error. So should 0:05:36.920 --> 0:05:40.560 there be some unpleasant surprises perhaps in one of the 0:05:40.640 --> 0:05:44.599 high profile names on the company side, or perhaps some 0:05:44.839 --> 0:05:50.679 unpleasant inflation news or interest rates notably higher from current levels, 0:05:51.040 --> 0:05:55.800 That in fact could be problematic, But let's make Let's 0:05:55.839 --> 0:05:58.400 go back to the original question, and that is mag 0:05:58.520 --> 0:06:01.800 seven versus the rest of the market. There are much 0:06:01.839 --> 0:06:06.360 better valuation opportunities amongst small and MidCap names, and some 0:06:06.400 --> 0:06:10.200 people might also argue that there's some opportunities outside the 0:06:10.320 --> 0:06:13.160 United States. The problem, of course, is that the US 0:06:13.279 --> 0:06:16.840 economy is looking far more robust than many of the 0:06:16.960 --> 0:06:18.120 nations are at this point. 0:06:18.279 --> 0:06:21.280 Eby and I think about, you know, if this had occurred, 0:06:21.320 --> 0:06:23.720 all this maelstrom that we're in right now, it occurred 0:06:23.720 --> 0:06:26.320 thirty years ago, you'd be on with Lou Rukaiser Friday 0:06:26.440 --> 0:06:29.120 night and Lou would turn to you and say, okay, 0:06:29.400 --> 0:06:32.640 what is the exuberance ed Yard Denny, who we all 0:06:32.720 --> 0:06:37.880 respect immensely, models out the roaring twenties. He models out 0:06:38.000 --> 0:06:39.920 a bull market. I'm not asking you to give me 0:06:39.960 --> 0:06:43.720 an S and P call, but are the roaring twenties 0:06:43.960 --> 0:06:48.039 that we get with a Republican House, Senate and presidency. 0:06:48.800 --> 0:06:52.520 Can they lead to an exuberance that causes harm? Or 0:06:52.560 --> 0:06:55.480 can we be managed in our enthusiasm. 0:06:57.360 --> 0:07:01.320 The exuberance that you were referring to earlier, Tom, when 0:07:02.320 --> 0:07:07.120 Alan Greenspan spoke about it was irrational exuberance. And the 0:07:07.160 --> 0:07:11.200 irrational exuberance that green Span often referred to was not 0:07:11.280 --> 0:07:13.680 just in the equity market but also in the fixed 0:07:13.680 --> 0:07:17.040 income market. So we need to be looking there very carefully. 0:07:17.800 --> 0:07:20.800 And one of my concerns, and I think needs to 0:07:20.840 --> 0:07:25.400 be carefully monitored by investors, is what will some of 0:07:25.440 --> 0:07:29.360 these new policies mean with regard to inflation. You know, 0:07:29.400 --> 0:07:32.680 the starting point is quite good if you exclude housing, 0:07:32.760 --> 0:07:35.080 which I know is a big exclusion because it does 0:07:35.160 --> 0:07:39.080 harm many people. But if you exclude housing prices, right now, 0:07:39.240 --> 0:07:43.000 core inflation is already under two percent, so it's a 0:07:43.000 --> 0:07:47.680 great starting point. There are, however, some possibilities that inflation 0:07:48.440 --> 0:07:52.920 could be rising from these levels. So, for example, if 0:07:53.000 --> 0:07:57.040 you have fiscal policy that stimulates demand but not supply, 0:07:57.720 --> 0:08:01.600 all of the things being equal, that's inflation. Getting rid 0:08:01.800 --> 0:08:06.000 of the Affordable Care Act is inflationary on a long 0:08:06.080 --> 0:08:10.320 term basis. Not paying attention to climate change is inflationary. 0:08:10.400 --> 0:08:15.280 Think about the wildfire right now in California. How much 0:08:15.360 --> 0:08:18.920 that costs to bring under control, to rebuild, and then 0:08:18.960 --> 0:08:23.360 of course insurance costs go up for everyone afterwards. Just 0:08:23.400 --> 0:08:25.720 think about insurance costs right now in the state of 0:08:25.720 --> 0:08:29.720 Florida because of the bad storms over the last few years. 0:08:30.280 --> 0:08:33.680 Is the fiscal deficit our debt and deficit. Is it 0:08:33.840 --> 0:08:36.760 a constraint for President elect Trump? 0:08:38.400 --> 0:08:42.000 It is a constraint only if from a political standpoint 0:08:42.320 --> 0:08:45.480 it is a constraint right now. With the dollar as 0:08:45.600 --> 0:08:48.360 robust as it is, I think that they will be 0:08:48.400 --> 0:08:52.720 demand for treasury securities from around the world. And I 0:08:52.760 --> 0:08:56.080 also think that at current rates and maybe higher rates 0:08:56.080 --> 0:08:59.520 that we'll be seeing, there will be demand for those 0:08:59.520 --> 0:09:02.840 security and we can finance it. The question, of course, 0:09:03.080 --> 0:09:06.559 is the long term one. If we have a situation 0:09:07.400 --> 0:09:11.240 where we in fact see lower growth in population and 0:09:11.320 --> 0:09:15.840 labor force, that does not bode well for example, for 0:09:16.120 --> 0:09:19.439 the funding for social security and other needs of the government. 0:09:19.960 --> 0:09:22.040 And there's something going on in America. For those of 0:09:22.040 --> 0:09:25.440 you that listen every day, it's just plain and simple. 0:09:25.600 --> 0:09:28.920 I disaggregate. There are the haves the have nots. I 0:09:28.920 --> 0:09:31.920 think we saw that within the tension, the disparity, the 0:09:31.920 --> 0:09:35.000 polarization of this election. And I want to wrap it 0:09:35.000 --> 0:09:38.720 around the Nobel Prize of Osimo Blu Robinson and Simon Johnson. 0:09:39.040 --> 0:09:41.000 We hope to speak to Simon Johnson here in the 0:09:41.040 --> 0:09:46.200 coming days the Laureate on productivity his book Power and Progress, 0:09:46.280 --> 0:09:50.920 Abby Joseph Cohen with US now Columbia University. Abby, there's 0:09:50.920 --> 0:09:53.480 a labor input, there's a capital input, and there's a 0:09:53.559 --> 0:09:58.719 strange thing total total factor productivity. Bill Easterley at a 0:09:58.760 --> 0:10:02.600 school south of Columbi makes clear it's a huge part 0:10:02.720 --> 0:10:07.840 of economic growth. Is our productivity gain going to an 0:10:07.960 --> 0:10:11.360 ever narrower part of the American public. 0:10:12.920 --> 0:10:17.120 I think you've answered your question and the answer is yes, 0:10:17.160 --> 0:10:20.199 of course it has been. And one of the things 0:10:20.280 --> 0:10:24.080 that any new administration needs to address is to make 0:10:24.120 --> 0:10:27.560 sure that all of our people feel that they're participating 0:10:28.080 --> 0:10:31.960 in the American growth and the American dream. And one 0:10:31.960 --> 0:10:34.480 of the things that we need to focus on, of course, 0:10:34.679 --> 0:10:38.720 is long term investment, by which I mean are we 0:10:38.800 --> 0:10:43.080 investing in productivity, are we investing in education in our people? 0:10:44.000 --> 0:10:48.720 And are we investing in the scientific merit and the 0:10:48.760 --> 0:10:53.120 scientific progress that gave us so much economic growth over 0:10:53.160 --> 0:10:57.439 the past few decades. And the answer to those questions 0:10:57.520 --> 0:11:00.520 will really have a dramatic impact on all of us. 0:11:00.880 --> 0:11:04.480 One of the things I'm concerned about, quite frankly, is 0:11:04.520 --> 0:11:10.520 something called Schedule F, which has been talked about during 0:11:10.600 --> 0:11:13.160 the last few years. It was something that was in 0:11:13.200 --> 0:11:17.840 fact enacted by the prior Trump administration, but was gotten 0:11:17.920 --> 0:11:21.319 rid of immediately when mister Biden came into office. Now 0:11:21.320 --> 0:11:24.640 what is it. It's basically not looking at the top 0:11:24.760 --> 0:11:28.440 level of political appointees in the US government, but the 0:11:28.480 --> 0:11:32.359 next forty thousand. So there are ten thousand political appointees. 0:11:32.760 --> 0:11:35.600 Below them are the forty thousand experts in a variety 0:11:35.600 --> 0:11:39.359 of categories, and under Schedule F, many of these positions 0:11:39.400 --> 0:11:43.920 would be converted to political appointments rather than appointments based 0:11:44.000 --> 0:11:46.640 upon what do you know? And I worry that this 0:11:46.679 --> 0:11:49.800 will affect, for example, a number of our science agencies 0:11:50.160 --> 0:11:53.000 and will also affect a number of the agencies that 0:11:53.080 --> 0:11:59.439 are directly involved in boosting productivity throughout the economy. 0:12:00.040 --> 0:12:02.400 Again, we've been so focused on the political agenda over 0:12:02.400 --> 0:12:04.640 the last several days that we almost forget we've got 0:12:04.679 --> 0:12:08.040 a FED meeting today and that historically has had an 0:12:08.080 --> 0:12:09.719 impact on these markets. 0:12:09.800 --> 0:12:13.319 Are future FED Chairman Abby Joseph Colin. I think she's 0:12:13.320 --> 0:12:14.839 shortlisted by President Trump. 0:12:15.000 --> 0:12:17.560 Very good, Abby. What do you what do you what 0:12:17.600 --> 0:12:19.120 do you expect to hear from this FED today? 0:12:21.160 --> 0:12:24.240 You guys might recall that I started my career at 0:12:24.280 --> 0:12:27.360 the FED. I was a very junior economist, and I 0:12:27.640 --> 0:12:33.480 don't think I'm being invited back. The FED always works 0:12:33.559 --> 0:12:36.800 best when it is a political when it looks at 0:12:36.840 --> 0:12:39.080 the facts that it has in front of it and 0:12:39.200 --> 0:12:42.040 makes a decision about what needs to get done. Obviously, 0:12:42.080 --> 0:12:47.000 they do a forecast based upon their prospects for the economy, 0:12:47.640 --> 0:12:50.640 and at a time like this, whenever a new administration 0:12:50.800 --> 0:12:53.720 comes in, you're never quite sure what the new policies 0:12:53.760 --> 0:12:56.520 are really going to be. There's a big difference between 0:12:56.760 --> 0:13:00.280 the campaign and governing. So I believe that the FED 0:13:00.400 --> 0:13:03.839 will make an apolitical decision. They'll look at the data 0:13:03.920 --> 0:13:07.559 in front of them, which basically says the US economy 0:13:07.640 --> 0:13:11.840 is doing well. Inflation has come down except for housing 0:13:11.880 --> 0:13:14.720 as I mentioned before, and of course the price of eggs, 0:13:14.720 --> 0:13:18.480 which the Fed can control because of Avian flu. And 0:13:18.520 --> 0:13:21.080 I think the markets have it right in terms of 0:13:21.360 --> 0:13:25.160 expecting a twenty five basis point reduction in the FED 0:13:25.160 --> 0:13:28.640 Funds rate. But let's be clear. What is happening in 0:13:28.720 --> 0:13:32.120 recent weeks, of course, is that intermediate and long yields 0:13:32.160 --> 0:13:35.040 are going up. So what we're ending up with is 0:13:35.080 --> 0:13:38.559 a steeper yield curve, a more normal looking yell curve. 0:13:39.000 --> 0:13:41.560 And who borrows at the FED funds rate? You know, 0:13:41.640 --> 0:13:46.760 it's not individuals, it's not corporations, it's banks, So the 0:13:46.800 --> 0:13:50.440 banks will be borrowing at a somewhat lower FED Funds rate. 0:13:50.880 --> 0:13:54.040 The thing to watch, particularly if you're an equity investor, 0:13:54.400 --> 0:13:58.120 is what's happening at the intermediate and long yield level. 0:13:58.920 --> 0:14:01.040 And yesterday those yield all moved higher. 0:14:03.200 --> 0:14:06.440 So abby we're eighty percent through earnings for the S 0:14:06.480 --> 0:14:08.959 and P five hundred here, what have you seen? 0:14:09.040 --> 0:14:09.800 What have you heard? 0:14:09.880 --> 0:14:13.559 What? In terms of guidance and outlook here from this 0:14:13.600 --> 0:14:15.440 earning cycle for corporate America. 0:14:16.480 --> 0:14:21.200 The cycle has gone well. The economy underneath it has 0:14:21.240 --> 0:14:25.280 been growing well, not as quickly as it was in 0:14:25.320 --> 0:14:28.640 the immediate post pandemic period, but it's a good, solid, 0:14:28.760 --> 0:14:33.400 sustainable rate of increase. What I often look at, as 0:14:33.480 --> 0:14:36.400 do so many others, particularly this time of year, is 0:14:36.440 --> 0:14:39.240 the forward guidance. And what we have seen is that 0:14:39.320 --> 0:14:42.560 the forward guidance, why and large, is good. There are 0:14:42.600 --> 0:14:46.800 some exceptions. There are some companies with idiosyncratic problems that 0:14:46.920 --> 0:14:50.760 have decided not to issue forward guidance, but in general, 0:14:51.080 --> 0:14:55.080 what companies are saying is consistent with the consensus economic forecast, 0:14:55.400 --> 0:14:57.920 which is that there is no recession on the near 0:14:58.000 --> 0:15:01.440 term horizon. For the United States. Growth is pretty good, 0:15:01.880 --> 0:15:04.800 and it's good enough to generate not just profits but 0:15:04.960 --> 0:15:10.400 also jobs. Last month's data were disrupted by strikes and 0:15:10.480 --> 0:15:13.960 storms and so on, but it looks like we're creating 0:15:15.120 --> 0:15:18.680 enough new jobs for everyone who wants to look and 0:15:18.760 --> 0:15:22.480 get one. There's obviously friction. People need to take some 0:15:22.560 --> 0:15:25.280 time to find the right job for them, but this 0:15:25.360 --> 0:15:27.320 is an economy that's doing quite well. 0:15:27.680 --> 0:15:29.920 Abby Joseph Coin, thank you so much. Thrilled to have 0:15:30.000 --> 0:15:33.280 you on here. Two days after the nation votes Abby 0:15:33.360 --> 0:15:40.520 Joseph Cohen of Columbia University. 0:15:42.840 --> 0:15:46.680 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:15:46.800 --> 0:15:50.080 weekday afternoons from seven to ten am. Easter. Listen on 0:15:50.160 --> 0:15:52.680 Apple car Play and and Brote Auto with a Bloomberg 0:15:52.720 --> 0:15:55.200 Business app, or watch us live on YouTube. 0:15:55.280 --> 0:15:57.760 I'm not going to mince words. We protect the copyright 0:15:57.840 --> 0:16:01.400 of all of our guests. Go to Morgan's family to 0:16:01.520 --> 0:16:06.120 get a jewel of a lengthy post election report by 0:16:06.160 --> 0:16:11.200 Monica where ahead of US policy at Morgan Stanley Wealth Management. 0:16:11.360 --> 0:16:14.360 Let me just get to exhibit one because it's sixteen 0:16:14.400 --> 0:16:17.840 hundred Pennsylvania Avenue. They're going to get to Exhibit one. 0:16:18.640 --> 0:16:22.320 Net interest outlays could account for nearly two thirds of 0:16:22.400 --> 0:16:26.280 the federal deficit. Forget about all the happy happy what's 0:16:26.320 --> 0:16:28.880 the budget constraint on the president elect? 0:16:29.600 --> 0:16:32.400 Yeah, that's a great question. Your first Thanks for having 0:16:32.400 --> 0:16:33.520 you guys. It's great to be back. 0:16:33.560 --> 0:16:37.760 But when your last time, yeah, it. 0:16:37.680 --> 0:16:41.320 Was Zetler like, it was a huge continue fantastic. 0:16:41.440 --> 0:16:44.920 Now, when we're thinking about the debt and deficit, what's 0:16:44.960 --> 0:16:48.520 important here is if you have a unified government, if 0:16:48.520 --> 0:16:51.800 we get to a place where Congress is unified, debt 0:16:51.840 --> 0:16:54.480 becomes less of a factor. Yes, we have this ballooning 0:16:54.560 --> 0:16:57.680 interest rate piece, it's going to have to become part 0:16:57.680 --> 0:17:00.000 of the discussion. But when you have you by government, 0:17:00.240 --> 0:17:02.800 that's when time to get your wishless items through and 0:17:02.840 --> 0:17:05.800 so it becomes less about fiscal responsibility. So the best 0:17:05.840 --> 0:17:08.320 thing for the Detton deficit is actually to have that 0:17:08.440 --> 0:17:13.240 gridlock Congress because then fiscal responsibility because the calling card. 0:17:13.400 --> 0:17:17.960 So what's going to happen here without a gridlock Congress? 0:17:18.160 --> 0:17:20.280 Yeah. So, I mean, if you're looking at just the 0:17:20.320 --> 0:17:24.119 baseline for the Tax Custom Jobs Act and you're extending that, 0:17:24.359 --> 0:17:27.760 it adds about five trillion to the federal deficit ten 0:17:27.840 --> 0:17:30.920 year period, ten year period. What it doesn't account for 0:17:30.960 --> 0:17:33.879 these estimates is any kind of government reduction or efficiency 0:17:33.880 --> 0:17:36.920 measures that Trump has talked about Musk measures, musk measures, 0:17:36.960 --> 0:17:38.399 if you want to call it that. I like that, 0:17:38.480 --> 0:17:42.439 I might use it copyright, but tail gets it. You know. 0:17:42.480 --> 0:17:44.399 The other factor is that there's no other sort of 0:17:44.400 --> 0:17:47.760 revenue raisers or clawbacks. So, for example, if they rolled 0:17:47.800 --> 0:17:50.400 back some of the clean energy tax credits, money that 0:17:50.440 --> 0:17:52.280 they can bring back into the government, well. 0:17:52.280 --> 0:17:55.520 A clawback at home is where you order the offspring, 0:17:55.560 --> 0:17:58.520 they have to eat the left over seamless exactly. 0:17:58.720 --> 0:18:02.040 That's a clawback monica. They say financial services, and we 0:18:02.080 --> 0:18:05.800 saw the big stocks. JP Morgan, we're sending Goldman sacs yesterday. 0:18:05.960 --> 0:18:09.840 Just sore Yep talk to us about financial services and 0:18:09.880 --> 0:18:13.640 how a Trump and a Republican administration Republican Congress will 0:18:13.680 --> 0:18:15.199 look at the financial services industry. 0:18:15.240 --> 0:18:15.440 Yeah. 0:18:15.440 --> 0:18:17.359 I mean a lot of the rip from yesterday is 0:18:17.359 --> 0:18:21.000 because of the deregulation promise, and that's what you're likely 0:18:21.040 --> 0:18:23.960 to see, especially with financials. You're likely to see an 0:18:24.000 --> 0:18:27.360 SEC that is shaped differently and let has different leadership, 0:18:27.560 --> 0:18:31.320 as well as potential push on the basil three endgame 0:18:31.400 --> 0:18:34.640 provisions to be looser and more flexible on the cap requirements. 0:18:34.920 --> 0:18:37.479 So that's going to be, you know, a really big factor. 0:18:37.520 --> 0:18:41.920 You know, other areas that are deregulatory rate or AI tech, crypto, 0:18:42.320 --> 0:18:45.240 so we're likely to continue to see tailings in those areas. 0:18:45.400 --> 0:18:45.879 How about it. 0:18:45.840 --> 0:18:48.480 I think if I'm an M and a banker or 0:18:48.520 --> 0:18:51.760 an M and a attorney, I feel pretty good now, 0:18:51.880 --> 0:18:54.399 because I mean the regulatory environment that from the Federal 0:18:54.400 --> 0:18:56.880 Trade Commission to the Department of Justice it's been tough 0:18:56.880 --> 0:18:59.959 to get deals done and improved. Is that also a benefit? 0:19:00.280 --> 0:19:02.640 That is going to be a huge beneficiary. Lena Kon 0:19:02.960 --> 0:19:05.920 does not have a job in January, right, I mean, 0:19:05.960 --> 0:19:08.360 she probably will be employed, but not in the government. 0:19:08.480 --> 0:19:10.919 And so at this point, you know, that's going to 0:19:10.920 --> 0:19:13.040 be an area that we look to. You could see 0:19:13.119 --> 0:19:15.159 m and A activity pick up as a response to that. 0:19:15.400 --> 0:19:18.680 Are you paying attention to like a cabinet, a Trump cabinet, 0:19:18.720 --> 0:19:20.560 because I'm not sure where the Trump cabinet is going 0:19:20.600 --> 0:19:22.679 to come from or when we're going to hear about that, 0:19:22.680 --> 0:19:26.400 but my assumption is that's going to be important as 0:19:26.400 --> 0:19:27.520 to where policy goes. 0:19:27.600 --> 0:19:30.480 Yeah, and we're definitely paying attention to that. We're paying 0:19:30.480 --> 0:19:33.439 particular attention to, you know, who's you know, adding up 0:19:33.480 --> 0:19:36.600 the treasury. One of the things that is critical that 0:19:36.640 --> 0:19:40.280 we saw even at the RNC convention was that this 0:19:40.400 --> 0:19:42.760 is really Trump's party, So a lot of the rank 0:19:42.800 --> 0:19:45.960 and file are officially sort of sideline. At this point, 0:19:46.280 --> 0:19:48.920 the party has changed, the mood has changed, and so 0:19:49.280 --> 0:19:52.160 it'll be a lot of folks that have ideological similarities 0:19:52.160 --> 0:19:52.560 with Trump. 0:19:52.600 --> 0:19:57.720 Part of the grid arm is on your Rezumi, director 0:19:57.760 --> 0:20:01.080 of capital budget and economic deve development point the City 0:20:01.080 --> 0:20:03.600 of New York, it means it gets great Yankee stickers. Yeah, 0:20:04.240 --> 0:20:06.960 not that that means anything, Monica. Just to cut to 0:20:07.040 --> 0:20:12.040 the chase with the immigration shock of this election, how 0:20:12.080 --> 0:20:19.000 do we deport exit remove a migrant immigrant from say 0:20:19.040 --> 0:20:21.960 New York City or Chicago, doesn't really matter. How do 0:20:22.000 --> 0:20:25.400 you actually budgetarily affect that. 0:20:25.400 --> 0:20:29.520 It's going to be greater funding towards the Department of 0:20:29.520 --> 0:20:31.560 Homeland Security. That's gonna be the first place that they 0:20:31.640 --> 0:20:34.080 that they increase spending. We think that that's going to 0:20:34.080 --> 0:20:38.320 be underneath a national defense uh and security budget line. Now, 0:20:38.359 --> 0:20:41.040 if we're thinking about the actual practicality of it state 0:20:41.119 --> 0:20:41.960 by state. 0:20:42.000 --> 0:20:43.359 Right state by state, it's. 0:20:43.240 --> 0:20:45.720 Going to be an issue. You're going to have New 0:20:45.800 --> 0:20:49.200 York you know, fight to keep people you know safe 0:20:49.200 --> 0:20:52.440 for you know, a sanctuary, especially in sanctuary city structures. 0:20:52.680 --> 0:20:53.760 That's going to be a problem. 0:20:53.880 --> 0:20:56.120 That's going to be an Albany issue in the case 0:20:56.160 --> 0:20:58.440 of New York, not a New York City issue. 0:20:58.680 --> 0:21:01.080 New York City could get involved, but Albany is going 0:21:01.119 --> 0:21:04.200 to probably be leading the charge. Now, the thing that's 0:21:04.240 --> 0:21:07.800 important here is that the states that are friendly to 0:21:07.880 --> 0:21:10.960 these policies, you know, will open the doors and allow 0:21:11.080 --> 0:21:14.000 for a smooth process. Doesn't mean that the DHS and 0:21:14.000 --> 0:21:16.880 the federal government doesn't have jurisdiction in parts of New York. 0:21:17.080 --> 0:21:19.200 I'm not the expert on that, but I can tell 0:21:19.240 --> 0:21:21.760 you that the legal battles in the Blue states that 0:21:21.880 --> 0:21:26.200 especially take their sanctuary city responsibilities you know seriously, that 0:21:26.280 --> 0:21:28.719 could become, you know, a real problem for the administration. 0:21:28.880 --> 0:21:31.320 Thank you so much to you in the Morgan Stanley 0:21:31.400 --> 0:21:33.600 for your perspective on this. We'd love to have you 0:21:33.640 --> 0:21:37.680 in as this debate continues into two thousand and twenty five. 0:21:37.760 --> 0:21:41.800 Monica Buerra is head of US Policy for Morgan Stanley. 0:21:41.960 --> 0:21:46.240 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:21:46.320 --> 0:21:49.520 starting at seven am Eastern on applecar Play and Android 0:21:49.560 --> 0:21:52.439 Auto with the Bloomberg Business app. You can also listen 0:21:52.520 --> 0:21:55.639 live on Amazon Alexa from our flagship New York station, 0:21:56.040 --> 0:21:58.760 Just Say Alexa playing Bloomberg eleven thirty. 0:21:58.920 --> 0:22:02.520 Jackie Bowie Sarah partnered on YouTube. You can see that 0:22:02.640 --> 0:22:07.200 Jackie Bowie is esconced in this November with the Red Poppy. 0:22:07.640 --> 0:22:10.960 Tell our American audience you have a jeweled red poppy. 0:22:11.000 --> 0:22:14.320 It is lovely tell us of the British and World 0:22:14.359 --> 0:22:16.760 War One and November eleventh and the red poppy. 0:22:17.320 --> 0:22:19.720 Yeah well, I mean it's such a big day for 0:22:19.840 --> 0:22:23.119 us in the UK where and whilst the poppy is 0:22:23.160 --> 0:22:27.159 to represent also the poppy fields after the war ended, 0:22:27.600 --> 0:22:31.560 the celebration and recognition on the eleventh of November is 0:22:31.600 --> 0:22:34.320 really through all the wars and people who've given their 0:22:34.320 --> 0:22:38.400 lives for their country. So yeah, we take it very seriously. 0:22:38.760 --> 0:22:41.680 You can buy lots of different types of poppies now 0:22:41.880 --> 0:22:44.879 and obviously all of that the nation goes to the 0:22:44.960 --> 0:22:47.120 Royal British Legion for the veterans. 0:22:47.359 --> 0:22:50.199 Very good. Let us talk about the loneliness of the 0:22:50.280 --> 0:22:54.200 United Kingdom. We have a left government, a labor government, 0:22:54.480 --> 0:22:58.120 Tories or Trance. John Burns Murdoch has a fabulous chart 0:22:58.160 --> 0:23:03.000 today showing the crater the Tories versus Italy versus Trump 0:23:03.040 --> 0:23:06.080 in the election here in the United States. How lone 0:23:06.280 --> 0:23:09.520 is the United Kingdom right now? Within G seven. 0:23:10.640 --> 0:23:14.600 Yeah. Well, it certainly feels like some of the political 0:23:14.640 --> 0:23:16.200