WEBVTT - Bloomberg Surveillance TV: April 9, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify, or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.920 Terminal and the Bloomberg Business App. Chris Harvey of Wells Fargo, writing, 0:00:37.960 --> 0:00:42.239 this growing crisis of confidence brewing. Stop market vigilantes will 0:00:42.280 --> 0:00:44.920 not be that patient or ignored. It probably needs to 0:00:44.960 --> 0:00:48.279 get worse before it gets better. Chris joins us now 0:00:48.320 --> 0:00:49.959 for more. Chris, good morning, Good to see you. 0:00:50.000 --> 0:00:50.720 Good to see you too. 0:00:50.920 --> 0:00:53.400 This is a really difficult one, So let's take a beat. 0:00:53.600 --> 0:00:55.640 Typically we sit here and think about the kind of 0:00:55.680 --> 0:00:58.480 threshold that it would take for a policymaker to step 0:00:58.520 --> 0:01:00.960 in and act as the circuit breaker. Time the policy 0:01:01.000 --> 0:01:03.920 maker is the source of the risk, maybe not the solution. 0:01:04.319 --> 0:01:06.080 How different is this as a moment for you and 0:01:06.120 --> 0:01:06.600 a team. 0:01:07.360 --> 0:01:08.200 It's very different. 0:01:08.440 --> 0:01:10.920 And the issue is, and we go back to green 0:01:10.959 --> 0:01:13.720 Span before the ER four tightening cycle, they said, we 0:01:13.720 --> 0:01:15.880 can raise rates, right, but what we need to do 0:01:15.959 --> 0:01:18.080 is we need to communicate that to you. We need 0:01:18.120 --> 0:01:19.800 to tell you how we're going to raise raids over 0:01:19.840 --> 0:01:21.800 what time periods so you can plan. If you're going 0:01:21.800 --> 0:01:23.600 to buy a house, you can speed up that house purchase, 0:01:23.640 --> 0:01:25.080 going to buy a car, you can speed that up. 0:01:25.400 --> 0:01:28.319 This administration is talking a lot, but they're not communicating 0:01:28.319 --> 0:01:31.399 a lot. This weekend, we had one person saying tarish 0:01:31.440 --> 0:01:34.199 and negotiable. We had somebody else saying they're non negotiable. 0:01:34.360 --> 0:01:37.160 What are they? What's your goal? What you're trying to do? 0:01:37.400 --> 0:01:39.960 What are we handicapping over what time period? You need 0:01:39.959 --> 0:01:42.640 to communicate better. The other thing is the market is 0:01:42.680 --> 0:01:45.080 sending a big signal. It's not a good idea to 0:01:45.120 --> 0:01:45.679 ignore that. 0:01:45.880 --> 0:01:47.760 China sending a big signal right now as well, So 0:01:47.760 --> 0:01:50.200 i'd love your thoughts on that too. Big Taris's coming 0:01:50.240 --> 0:01:53.400 from the US side overnight, China responding with eighty four percent. 0:01:53.720 --> 0:01:55.200 I think at the moment for a lot of investors 0:01:55.240 --> 0:01:57.080 they look at that head down and say, you know, 0:01:57.160 --> 0:01:59.320 what given how little we sell to China, that's not 0:01:59.400 --> 0:02:00.920 much for a big deal. But I think the bigger 0:02:01.000 --> 0:02:03.200 raid across, the bigger raid through at the moment, that 0:02:03.240 --> 0:02:06.200 makes it much much harder to get to the negotiating 0:02:06.280 --> 0:02:09.360 table with this president who's pushed back against China threatening 0:02:09.360 --> 0:02:10.760 to do exactly this. 0:02:11.440 --> 0:02:11.639 Yeah. 0:02:11.760 --> 0:02:14.799 So what people have realized is the weak spot for 0:02:14.840 --> 0:02:17.480 the US, the capital markets, and the economy. If they 0:02:17.520 --> 0:02:20.440 push back, right, we're going to lose and we are 0:02:20.440 --> 0:02:22.079 losing some negotiating leverage. 0:02:22.160 --> 0:02:23.000 What are we talking about. 0:02:23.000 --> 0:02:25.600 We're talking about recession, We're talking about job losses. We're 0:02:25.600 --> 0:02:28.480 talking about the negative wealth effect. We're talking inter recession. 0:02:28.720 --> 0:02:31.520 The deficit goes wider, not tighter. And people know that, 0:02:31.800 --> 0:02:34.600 so they're saying, Okay, fine, if we're going to do this, 0:02:34.880 --> 0:02:36.560 we're all going to We're just going to pull everyone 0:02:36.639 --> 0:02:39.360 down into the mark and what you're seeing is just 0:02:39.400 --> 0:02:40.200 not great. 0:02:40.520 --> 0:02:43.119 Well, I'm looking right now. China also added six more 0:02:43.160 --> 0:02:46.040 firms from the US to the unreliable list at the 0:02:46.040 --> 0:02:48.280 same time that we've seen incredible losses and the likes 0:02:48.280 --> 0:02:50.680 of Apple, which seems to be very much in the 0:02:50.680 --> 0:02:53.560 crosshairs of this. How much does this discourage you from 0:02:53.560 --> 0:02:57.280 going to the multinational companies actually at a time when 0:02:57.280 --> 0:02:59.600 they potentially could be the most exposed. 0:03:00.080 --> 0:03:02.080 Yeah, a Lisa, what we need to do is we 0:03:02.120 --> 0:03:05.160 need to figure out exactly what we're dealing with. And 0:03:05.240 --> 0:03:07.960 because it's a moving target, that's why it's so hard 0:03:07.960 --> 0:03:09.959 to That's why the markets are so fluid at this 0:03:10.000 --> 0:03:12.280 point in time. And you're right, where are the safe havens. 0:03:12.280 --> 0:03:14.560 The safe havens are at the front end of the curve. 0:03:14.880 --> 0:03:17.360 Safe havens are in low vold, they're in defensives, but 0:03:17.440 --> 0:03:20.200 even those are still that's a place where we've like, 0:03:20.480 --> 0:03:22.880 but it's still have it showing some stress, right, So 0:03:22.919 --> 0:03:25.600 it's very difficult to find a safe haven. It's very 0:03:25.600 --> 0:03:28.720 difficult to really preserve your money or your assets at 0:03:28.760 --> 0:03:29.320 this point in time. 0:03:29.440 --> 0:03:29.639 Yeah. 0:03:29.639 --> 0:03:31.760 The reason why is because ten year yields are up 0:03:31.760 --> 0:03:34.040 through four forty you're looking at thirty year yields now 0:03:34.080 --> 0:03:35.960 almost four point nine percent. 0:03:36.520 --> 0:03:38.040 They've absolutely been surging. 0:03:38.560 --> 0:03:40.720 What's going on, I mean, what are you doing with this? 0:03:41.480 --> 0:03:43.200 So there's lots of talk. 0:03:43.760 --> 0:03:48.280 One conversation is that out of Asia that they're selling duration, right, 0:03:48.360 --> 0:03:51.040 So they're selling longer bonds and buying shorter bonds for 0:03:51.160 --> 0:03:53.960 liquidity issues to send a message. There's other talk about 0:03:54.000 --> 0:03:54.680 basis trades. 0:03:54.720 --> 0:03:56.560 There's if you look at. 0:03:56.520 --> 0:03:59.720 What's happening nominals the last time I looked, nominals are 0:03:59.760 --> 0:04:02.400 going higher bud but it's being forced by reels. It's 0:04:02.400 --> 0:04:04.040 not being forced by at least in the last couple 0:04:04.040 --> 0:04:07.240 of days, by inflation expectation. That seems more like a 0:04:07.320 --> 0:04:11.000 liquidity issue, people moving around positions, not so much fundamental 0:04:11.040 --> 0:04:14.200 driven right The other thing is, obviously we've got issue 0:04:14.200 --> 0:04:17.599 INCE coming and there's more and more fear. Even though 0:04:18.120 --> 0:04:21.600 right now inflation expectations or break evens aren't moving, there's 0:04:21.600 --> 0:04:23.560 fear that that will continue in the future. 0:04:23.680 --> 0:04:25.560 Seeing some big moves right now, that's for sure. If 0:04:25.600 --> 0:04:27.840 you are just joining us, welcome to the program. Eighty 0:04:27.960 --> 0:04:31.479 four percent tariffs from China. China raising tariffs on US 0:04:31.520 --> 0:04:35.960 goods to eighty four percent, and the spillover immedia equity 0:04:36.000 --> 0:04:38.359 features down by one point six percent on the S 0:04:38.400 --> 0:04:40.599 and P five hundred, the rustle down by two point 0:04:40.720 --> 0:04:44.480 five the DAX is down by four full percentage points. 0:04:44.480 --> 0:04:47.679 And in the commodity market you're seeing crude rollover as well. 0:04:47.839 --> 0:04:50.599 On WCI and Don Brent were down by six percent. 0:04:50.680 --> 0:04:54.840 Bran CREWD fifty eight ninety eight, WCI fifty five eighty five. 0:04:55.040 --> 0:04:57.520 There will be some individuals in America making a lot 0:04:57.520 --> 0:04:59.480 of noise today off the back of this headline. 0:04:59.520 --> 0:05:02.440 I'm thinking the farmers in a few red states. 0:05:02.200 --> 0:05:05.080 Absolutely, because remember Trump one point zero. The farmers were 0:05:05.080 --> 0:05:07.240 the ones that got hit the worst because they didn't 0:05:07.279 --> 0:05:09.520 have the export market of China to go to, and 0:05:09.520 --> 0:05:11.720 then we the United States, had to bail them out. 0:05:11.720 --> 0:05:13.920 But Jonathan, you started this conversation this morning where you're 0:05:13.920 --> 0:05:17.120 look into policy makers for the answers for the solutions. 0:05:17.120 --> 0:05:20.120 When I asked the President directly the pain threshold he 0:05:20.200 --> 0:05:22.640 was willing to take on for the market, he said, 0:05:22.880 --> 0:05:25.719 sometimes you have to take medicine to fix something. They 0:05:25.760 --> 0:05:28.800 think the tariffs are the medicine. Well, what's going to 0:05:28.800 --> 0:05:31.160 be the solution and the medicine to what is happening 0:05:31.240 --> 0:05:33.120 right now? They'll fallout from these tariffs. 0:05:33.120 --> 0:05:35.760 Some big moves elsewhere as well. Apple's had a difficult 0:05:35.839 --> 0:05:37.880 run of things. That name is down by two percent 0:05:37.920 --> 0:05:39.920 in the pre market at the moment. Apple is down 0:05:39.960 --> 0:05:43.280 before today by more than twenty percent in just four sessions, 0:05:43.320 --> 0:05:46.200 the worst run for that name going back to two thousand. 0:05:46.400 --> 0:05:49.240 The year two thousand, the worst four day run in 0:05:49.360 --> 0:05:52.280 twenty five years for one of the biggest companies on 0:05:52.320 --> 0:05:55.680 the planet. Chris Harvey not to talk about single names exclusively, 0:05:55.720 --> 0:05:58.520 but we can talk about MAC seven. They had a 0:05:58.520 --> 0:06:01.080 difficult moment now and a bigger way than maybe we've 0:06:01.080 --> 0:06:02.600 ever seen for those names. 0:06:02.800 --> 0:06:07.240 So some yes, and obviously Apple is more of a 0:06:07.279 --> 0:06:09.680 focus beca because there the tariffs and what they manufacture 0:06:10.279 --> 0:06:11.440 in China. 0:06:11.680 --> 0:06:12.560 Right the rest of. 0:06:12.560 --> 0:06:15.160 The MAC seven, more of the communication names. They're in 0:06:15.240 --> 0:06:17.440 a little bit better space, but it's not as if 0:06:17.440 --> 0:06:19.880 anyone's in great space. It's not as if you can say, wow, 0:06:20.040 --> 0:06:22.560 this is a perfect spot, this is fantastic for these guys. 0:06:22.800 --> 0:06:23.760 Couldn't be any better. 0:06:24.000 --> 0:06:27.880 It's just relative who's worse, who's better, and who's going 0:06:27.960 --> 0:06:30.440 to get hurt a little bit more? Where's the defensive 0:06:30.440 --> 0:06:32.840 this right now? What we're doing is everything is across 0:06:33.040 --> 0:06:35.520 a risk spectrum, and which one has less risk? 0:06:35.640 --> 0:06:36.320 That's all you're doing. 0:06:36.360 --> 0:06:38.760 What's on your dashboard at the moment to establish where 0:06:38.760 --> 0:06:39.840 a tradable bottom might be. 0:06:39.960 --> 0:06:41.240 Is that impossible right now? 0:06:41.240 --> 0:06:41.440 For you? 0:06:41.440 --> 0:06:41.800 In the scene. 0:06:41.839 --> 0:06:43.680 Oh no, so John, this is what we're looking at 0:06:43.720 --> 0:06:46.000 because we see a setup. We don't see the bottom, 0:06:46.040 --> 0:06:46.840 but we see a setup. 0:06:46.920 --> 0:06:47.080 Right. 0:06:47.080 --> 0:06:49.320 We want to see one Q numbers reset. We want 0:06:49.320 --> 0:06:52.440 to see them cut. We want to see an inversion 0:06:52.920 --> 0:06:54.599 in the front end of the curve between two years 0:06:54.600 --> 0:06:56.600 and fed funds of one hundred bases points or more. 0:06:56.760 --> 0:06:57.560 That tells us. 0:06:57.480 --> 0:07:00.359 That the market's indicating we need to move fast, you 0:07:00.400 --> 0:07:03.840 need to hurry up, and potential monetary policies coming. In 0:07:03.839 --> 0:07:06.919 addition to that, we want to hear the conversation become 0:07:07.000 --> 0:07:09.680 more productive. We want it either to shift from tariffs 0:07:09.840 --> 0:07:14.200 to taxes or the acknowledgement that, oh, yes, everyone knows 0:07:14.480 --> 0:07:17.760 there's going to be pain, but the issue is they 0:07:18.000 --> 0:07:20.440 just don't know that the cure seems to be worse 0:07:20.480 --> 0:07:22.840 than the disease right now, or that's what the market's saying. 0:07:23.120 --> 0:07:25.960 You have to acknowledge that, hey, yes there's going to 0:07:25.960 --> 0:07:27.960 be pain, but there's there's light at the end of 0:07:28.000 --> 0:07:30.400 the tunnel. Here's what we're doing, here's our goals when 0:07:30.440 --> 0:07:31.160 we get there. 0:07:31.320 --> 0:07:33.200 This is what's going to happen in the meantime. 0:07:33.240 --> 0:07:35.920 Delta with Drew, It's guidance for the full year. Walmart 0:07:35.920 --> 0:07:36.920 reaffirmed us guidance. 0:07:37.240 --> 0:07:37.960 What do you do with this? 0:07:39.600 --> 0:07:42.160 So we actually had this conversation yesterday and I've been 0:07:42.200 --> 0:07:44.880 having this conversation a lot. We expect numbers to come down. 0:07:45.480 --> 0:07:47.760 It's going to range some people. We were talking to 0:07:47.760 --> 0:07:50.880 our audio analysts and he would not be surprised if 0:07:51.160 --> 0:07:53.640 there would be a suspension of guidance there. We were 0:07:53.640 --> 0:07:55.920 talking to others saying, and maybe it's going to be 0:07:55.960 --> 0:07:58.720 five percent, maybe ten percent. What we're going to hear 0:07:58.800 --> 0:08:01.240 is the cease going to say, out of an abundance 0:08:01.280 --> 0:08:02.880 of caution, here's what we're doing. 0:08:03.000 --> 0:08:04.480 We're lowering the top end of guidance. 0:08:04.520 --> 0:08:07.120 We're cutting five percent, we're cutting ten percent. Because of 0:08:07.160 --> 0:08:09.480 the uncertainty, we have to remove guidance. So it's going 0:08:09.520 --> 0:08:10.679 to be right across the board. 0:08:11.240 --> 0:08:11.840 And you're right. 0:08:12.120 --> 0:08:14.440 The example of Walmart DELT is a good one because 0:08:14.440 --> 0:08:15.800 you have the two ends of the spectrum. 0:08:16.000 --> 0:08:18.120 This is where we really start the conversation. Where does 0:08:18.120 --> 0:08:20.800 the circuit break come from? Could it come from Capitol Hill? 0:08:21.200 --> 0:08:22.600 It has to come from Capitol Hill. 0:08:22.720 --> 0:08:26.440 You have to hear the administration acknowledge what's going on 0:08:26.600 --> 0:08:29.360 and you have to have them acknowledge and communicate that 0:08:29.400 --> 0:08:32.400 they see it, they understand it, and you have to 0:08:32.480 --> 0:08:35.400 have them start to slow things down. This conversation about 0:08:35.600 --> 0:08:37.840 a thirty day pause, a sixty day pauses, a ninety 0:08:37.880 --> 0:08:41.000 day pause. Something has to happen. You cannot continually walk 0:08:41.040 --> 0:08:44.560 in and have more tarfs and more stress in the system, 0:08:44.600 --> 0:08:47.160 because the more you do that, the faster we go 0:08:47.200 --> 0:08:50.200 to a recession, the faster job losses come, and the 0:08:50.200 --> 0:08:51.560 faster this gets out of control. 0:08:51.640 --> 0:08:52.720 But right now it's just rhetoric. 0:08:52.720 --> 0:08:54.880 Do you actually see Congress pulling back the reins and 0:08:54.920 --> 0:08:57.560 trying to take control, giving less authority to the executive 0:08:57.559 --> 0:09:00.000 branch when it comes to trade policy, Yeah. 0:09:00.040 --> 0:09:03.280 Emory, I think if it continues, you go down that route. 0:09:03.280 --> 0:09:06.000 But that's a much slower route, right and the market's 0:09:06.000 --> 0:09:08.240 going to move much quicker. And this is a question 0:09:08.280 --> 0:09:11.719 of confidence. Does do the markets? Do business folks have 0:09:12.400 --> 0:09:16.200 confidence in the plan? And what's the spill out. 0:09:16.080 --> 0:09:16.560 From the plan? 0:09:16.800 --> 0:09:19.480 And right now the markets are saying we're losing confidence, 0:09:19.480 --> 0:09:20.720 and we're losing confidence quickly. 0:09:20.800 --> 0:09:22.439 So when it comes a circuit breaker, you think it's 0:09:22.480 --> 0:09:24.880 actually Republicans in Congress that could be the ones to 0:09:24.880 --> 0:09:26.440 put a stop to this. You don't see maybe it 0:09:26.600 --> 0:09:29.080 Shijing ping or Donald Trump himself blinking. 0:09:30.240 --> 0:09:34.199 I don't see in the conversation. So a couple things there, 0:09:34.240 --> 0:09:38.840 because that's a big question, right the situation between China 0:09:38.960 --> 0:09:42.359 and US. US appears to think that China. 0:09:42.240 --> 0:09:43.480 Is the existential threat. 0:09:43.920 --> 0:09:46.959 We can have that continue, and likely that does continue. 0:09:47.040 --> 0:09:50.320 But if we get positive news from the EU, from Japan, 0:09:50.400 --> 0:09:54.880 from other places where there is actually progress, then things 0:09:54.920 --> 0:09:59.560 can improve. China is towards the end of my concern 0:10:00.000 --> 0:10:02.360 this point in time. Can we get our allies to 0:10:02.360 --> 0:10:05.160 come on board, can we strike deals? Can we move forward? 0:10:05.240 --> 0:10:08.320 Can we make progress? If we're showing progress, the markets 0:10:08.320 --> 0:10:11.280 will react positively. If we do not show progress, the 0:10:11.320 --> 0:10:12.360 markets are not going to react. 0:10:12.360 --> 0:10:14.959 Possibly, there's a story in the Financial Times about how 0:10:15.080 --> 0:10:17.320 US ports are getting really crowded, that a lot of 0:10:17.320 --> 0:10:20.520 companies are delaying their car shipments and they're just holding 0:10:20.600 --> 0:10:22.720 them at the ports hoping that maybe in a couple 0:10:22.800 --> 0:10:25.760 days these tariffs will be removed. Maybe it'll take four days, 0:10:25.760 --> 0:10:28.120 maybe it'll take five days, and they're about to reach 0:10:28.160 --> 0:10:31.240 capacity at these ports. What will it take for both 0:10:31.280 --> 0:10:34.760 companies and for the markets to realize this is real. 0:10:36.000 --> 0:10:39.400 Listen, it's real, right, So the complexity of this you 0:10:39.520 --> 0:10:41.520 cannot turn around in a couple of days, in a 0:10:41.520 --> 0:10:45.160 couple of weeks, because you've basically tariff or taxed almost 0:10:45.160 --> 0:10:47.920 every single country out there in order to unwind that. 0:10:48.600 --> 0:10:52.120 It's no small feet. The other thing is governments do. 0:10:52.080 --> 0:10:55.079 Not move quickly, right, and because of what we've done, 0:10:55.320 --> 0:10:56.839 people want to protect themselves. 0:10:56.960 --> 0:10:57.880 So they're going. 0:10:57.720 --> 0:11:01.000 To have to talk to their lawyer, to their leaders, 0:11:01.040 --> 0:11:04.120 to their parliament or whoever before they take some action. 0:11:04.400 --> 0:11:07.160 We can have the conversation, but the actual action and 0:11:07.240 --> 0:11:09.840 execution is going to take a lot, I think a 0:11:09.840 --> 0:11:10.640 long period of time. 0:11:10.800 --> 0:11:13.120 What are we seeing in markets? Is this just the 0:11:13.120 --> 0:11:15.400 fear that this is going to have a suppression to 0:11:15.440 --> 0:11:18.160 growth or are we getting actually a sense of what 0:11:18.320 --> 0:11:21.000 markets are repricing as the new normal? 0:11:21.679 --> 0:11:26.000 Yeah, the markets don't really know the end goal, right, 0:11:26.160 --> 0:11:28.720 is it negotiation, is it revenue generation? 0:11:29.400 --> 0:11:31.640 Or is it something much bigger? Right? 0:11:32.040 --> 0:11:34.520 Do we want to change the way we do trade 0:11:34.520 --> 0:11:35.520 throughout the world and for. 0:11:35.480 --> 0:11:38.080 The rest of time. That's a big question. 0:11:38.480 --> 0:11:40.400 So the markets are just trying to figure out what's 0:11:40.440 --> 0:11:42.320 going on, and the markets are trying to send the 0:11:42.320 --> 0:11:45.760 message we need better communication. We need to understand the goal. 0:11:46.000 --> 0:11:47.680 When we get to the goal, what are you going 0:11:47.720 --> 0:11:49.600 to do? And how are we going to do it? 0:11:50.080 --> 0:11:53.720 To start that process, to engineer that supply side response, 0:11:53.720 --> 0:11:55.599 you've got to believe that these are the rules of 0:11:55.640 --> 0:11:59.280 the gang, and we're saying is this a negotiation or 0:11:59.800 --> 0:12:00.920 the rules of the game. 0:12:01.040 --> 0:12:03.360 I love how Chris puts it. The market is crying 0:12:03.400 --> 0:12:05.920 to the White House, we want better communication. Can we 0:12:05.960 --> 0:12:08.319 have a therapist come in here and try to clarify 0:12:08.360 --> 0:12:11.360 what the end goal is? Are we meant to be together? 0:12:11.600 --> 0:12:13.000 Are we meant to be apart? 0:12:13.160 --> 0:12:14.079 Is this therapy again? 0:12:14.240 --> 0:12:16.000 Well, it sounds like a lot of people are trying 0:12:16.040 --> 0:12:17.440 to get into the psychology of the moment. 0:12:17.559 --> 0:12:18.880 What do people say, cry harder? 0:12:21.000 --> 0:12:22.760 I think that that's what we're doing on every single market. 0:12:22.760 --> 0:12:24.200 I got to find some light humor in a moment 0:12:24.280 --> 0:12:26.319 like this one. We're down again by one point four 0:12:26.360 --> 0:12:28.079 percent on the S and P. A special thanks to 0:12:28.160 --> 0:12:41.439 Chris Harvey of Wells Fargo Richard Bernstein. If Bernstein advises 0:12:41.480 --> 0:12:43.840 writing the FED is caught between a rock and a 0:12:43.840 --> 0:12:47.640 hard place. GENP forecasts are being revised downward, but inflation 0:12:47.760 --> 0:12:51.680 expectations seem poised to accelerate. Richard joins us Now for more, Richard, 0:12:51.760 --> 0:12:53.599 welcome to the program. You put it in your not 0:12:53.720 --> 0:12:56.319 Everyone's got a plan until they get punched in the face. 0:12:56.360 --> 0:12:59.439 That famous strategist on Wall Street, my Tyson, how strong 0:12:59.480 --> 0:13:00.440 is that punched this morning? 0:13:01.640 --> 0:13:05.560 I think the punch is a real it's not a jab, 0:13:05.640 --> 0:13:07.360 it's a real roundhouse punch. 0:13:07.800 --> 0:13:08.600 And I think. 0:13:09.880 --> 0:13:11.800 John, look, you've been talking a lot about all the 0:13:11.800 --> 0:13:13.640 different uncertainties and all the different things that. 0:13:13.640 --> 0:13:14.199 Are going on. 0:13:14.600 --> 0:13:17.439 That's fine, but I think one also has to realize 0:13:17.600 --> 0:13:22.520 that we entered the year with investors historically confident, so 0:13:22.640 --> 0:13:27.199 this has a magnified effect on investors' confidence that they're 0:13:27.240 --> 0:13:29.640 being shaken. So that was my point about that everybody 0:13:29.679 --> 0:13:31.439 has a plan until they get punched in the mouth. 0:13:32.360 --> 0:13:34.240 Because everybody had a plan. They thought it was easy. 0:13:34.320 --> 0:13:36.040 They thought this was like, oh, you know, it's just 0:13:36.040 --> 0:13:38.440 buy an index funder, let's buy the mag seven. And 0:13:38.480 --> 0:13:41.240 all of a sudden they're realizing that was the unusual 0:13:41.280 --> 0:13:44.360 period and now we're going back to something that's much 0:13:44.400 --> 0:13:47.559 more uncertain and they're getting punched in the mouth. 0:13:48.000 --> 0:13:51.880 Richard Scott beston Treasure Secretary speaking with Henry our own 0:13:52.440 --> 0:13:55.440 here and saying that this then is not necessarily a 0:13:55.480 --> 0:13:57.280 MAGA problem, it's a mag seven problem. 0:13:57.480 --> 0:13:57.959 Do agree? 0:13:58.000 --> 0:14:00.199 Is that basically what you're seeing right now is the 0:14:00.200 --> 0:14:03.480 wine of an overvaluation of a crowded trade at the 0:14:03.559 --> 0:14:05.520 end of the last year beginning of this one. 0:14:06.080 --> 0:14:09.480 Well, well, Lisa, I understand where he's going with that question, 0:14:09.600 --> 0:14:12.040 But my response would be, why is the Russell two 0:14:12.080 --> 0:14:15.040 thousand and performing so dramatically here? If it were just 0:14:15.080 --> 0:14:18.040 a mag seven point? Why are the domestic the most 0:14:18.040 --> 0:14:24.240 domestically focused companies in America? Smaller companies are underperforming? Right? 0:14:24.440 --> 0:14:24.680 So? 0:14:25.280 --> 0:14:27.960 How is this just a large cap MAGA effect? Is 0:14:28.000 --> 0:14:31.120 clearly it's clearly not our mag seven effects. Sorry, it's 0:14:31.160 --> 0:14:34.240 clearly not the you know, I think this is a 0:14:34.360 --> 0:14:37.160 common The markets are are making a comment on the 0:14:37.200 --> 0:14:41.240 broad economy in the United States, and and you know, 0:14:41.280 --> 0:14:43.440 I think also the notion that this is an orderly 0:14:43.640 --> 0:14:45.240 processed that's fine. 0:14:45.400 --> 0:14:46.600 I would agree with that. 0:14:47.000 --> 0:14:50.400 But the process is not positive one. The markets are 0:14:50.440 --> 0:14:53.120 not giving a positive verdict on that. And that's kind 0:14:53.160 --> 0:14:55.880 of what I think people are still sort of missing here. 0:14:56.520 --> 0:15:00.280 Richard, how do you navigate a situation like this? The 0:15:00.360 --> 0:15:03.000 rules of the world may be be called into question 0:15:03.080 --> 0:15:06.840 over a longer period of time, and acid allocation potentially 0:15:07.240 --> 0:15:09.800 could look very different if the trends that we're seeing 0:15:09.800 --> 0:15:13.480 in markets today would hold. So how are you thinking 0:15:13.680 --> 0:15:16.920 about not just short term investing, but the one year, 0:15:17.080 --> 0:15:18.720 two year, five years ahead? 0:15:19.440 --> 0:15:22.480 Right? So, so, Lisa, I think in the short term, 0:15:23.000 --> 0:15:25.520 you know, you're using the word uncertainty. Everybody's using the 0:15:25.520 --> 0:15:28.120 word uncertainty. I shouldn't personalize it like that. Everybody's using 0:15:28.120 --> 0:15:31.479 the word uncertainty. So what that means is the scarcity 0:15:31.600 --> 0:15:36.160 in the marketplace is certainty. That's what that's what will 0:15:36.160 --> 0:15:39.240 command a premium through time is certainty. What does that mean? 0:15:40.040 --> 0:15:43.520 That means quality, That means more certain cash flows, it 0:15:43.560 --> 0:15:47.000 means dividends, it means near you know, really kind of 0:15:47.000 --> 0:15:51.080 focusing on near term fundamentals as opposed to long term 0:15:51.120 --> 0:15:54.920 growth stories. The second thing is, you know, what do 0:15:54.960 --> 0:15:58.040 you do for three years, five years, ten years, two years, whatever? 0:15:58.680 --> 0:16:01.080 And I think, look, the goal all of what's going on, 0:16:01.440 --> 0:16:05.840 returning industrial processing back to the United States and manufacturing 0:16:05.840 --> 0:16:09.480 back to the United States. I think that's a great goal. 0:16:09.640 --> 0:16:11.560 In fact, we've been talking about it in my firm 0:16:11.600 --> 0:16:14.440 at Richard Percy Advisors for ten years. I wrote an 0:16:14.440 --> 0:16:17.200 op ed in twenty eleven in the Financial Times about 0:16:17.200 --> 0:16:20.320 this topic and how important it was. This is the 0:16:20.440 --> 0:16:23.920 goal is real. However, the method that they're choosing to 0:16:24.000 --> 0:16:26.960 try and get to that goal, what personal opinion here 0:16:27.000 --> 0:16:31.320 for a second, is incredibly ham handed. There are many 0:16:31.520 --> 0:16:33.880 better ways to do with that. Do not place attacks 0:16:33.920 --> 0:16:34.800 on the US consumer. 0:16:35.280 --> 0:16:35.640 Richard. 0:16:35.640 --> 0:16:38.320 We had from one ECP official earlier on this morning 0:16:38.360 --> 0:16:40.800 that said, there's no reason for a rate cut right now. 0:16:40.800 --> 0:16:44.640 I think you refer to fifty basis point cons as ridiculous. 0:16:44.920 --> 0:16:47.520 Mary Daily, the San Francisco FED President, putting out a 0:16:47.520 --> 0:16:49.920 post on LinkedIn saying we have the time and space 0:16:50.000 --> 0:16:53.320 to deliberate our next moves. Lisa, that's what's different about 0:16:53.320 --> 0:16:57.280 this moment. These officials are these central banks on Russian 0:16:57.280 --> 0:16:59.960 to race in Russian to step in and provide support. 0:17:00.200 --> 0:17:02.640 Maybe they would have done a number of years ago and. 0:17:02.760 --> 0:17:05.160 For the correct reasons, which is this is a very 0:17:05.160 --> 0:17:07.399 different type of crisis that is not of the credit 0:17:07.440 --> 0:17:11.080 markets making. This is about policy uncertainty and the potential 0:17:11.080 --> 0:17:14.360 stagflationary shock that comes along with inflation. If you take 0:17:14.400 --> 0:17:17.000 a look at two year break even rates, they've actually 0:17:17.080 --> 0:17:19.240 hit the highest level going back to two thousand and 0:17:19.240 --> 0:17:22.840 two earlier this morning. It's shifting around incredibly volatile markets, 0:17:22.840 --> 0:17:25.200 but the signal it is not so clear in terms 0:17:25.200 --> 0:17:26.959 of how they should act, let alone. 0:17:27.040 --> 0:17:29.760 If Richard, are you thinking about where pockets and leverage 0:17:29.840 --> 0:17:33.160 might be? This has been a really unusual cycle hearing 0:17:33.160 --> 0:17:35.359 the UNATO styce and worldwide because of the support that 0:17:35.440 --> 0:17:38.560 was offered through the pandemic and through the recovery as well. 0:17:38.600 --> 0:17:40.560 When you think about where pockets of leverage might be 0:17:40.800 --> 0:17:42.840 this time around, how do you ask that question? 0:17:43.760 --> 0:17:46.479 So, John, that's related to you and Lisa were just 0:17:46.520 --> 0:17:51.159 hawking about. The FED was spoiled for many, many years 0:17:51.240 --> 0:17:56.119 decade two to two, three decades by globalization. Globalization was 0:17:56.119 --> 0:18:00.879