October 10, 2025 • 32 mins
Watch Bloomberg Businessweek LIVE every day on YouTube: http://bit.ly/3vTiACF.
US President Donald Trump threatened a “massive increase” of tariffs on goods from China and to cancel an upcoming meeting with the country’s leader, Xi Jinping, citing recent “hostile” export controls Beijing placed on rare-earth minerals.
“I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so,” Trump posted Friday on social media.
The president added that one form of retaliation the US is considering “is a massive increase of Tariffs on Chinese products coming into the United States of America,” adding that “there are many other countermeasures that are, likewise, under serious consideration.”
Markets recoiled at the president’s comments, which portended fresh trade tensions between the world’s two largest economies. The S&P 500 and the Nasdaq 100 both plummeted, with the latter seeing its biggest drop since April 30. Chicago soybean futures also fell, hitting session lows after the post.
Today's show features:
- Bloomberg TV and Radio International Economics & Policy Correspondent Mike McKee on President Donald Trump’s reversal on a planned meeting with China’s Xi Jinping
- Jayati Bharadwaj, Director of FX Strategy at TD Securities, on the global currency market
- Dana Stroul, Senior Fellow and Director of Research at the Washington Institute for Near East Policy on the Israel-Hamas ceasefire deal and President Donald Trump’s planned visit to the Middle East next week
- Bloomberg Intelligence Global Equity Strategist Gillian Wolff on Friday's market selloff
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Episode Transcript
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Speaker 1 (00:02):
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(00:23):
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with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
I do want to bring in Michael McKee, Bloomberg TV
and Radio International Economics and Policy Correspond and he joins
us also here in the Bloomberg BusinessWeek Studio, as we've
been talking about Mike market's lower on fears of an
escalating trade war. You're a macro guy, you're International Economics
and Policy correspond. Is this a rethink of US foreign
of US policy, US trade policy?
Speaker 3 (00:54):
It's just a social media post.
Speaker 4 (00:56):
Yeah.
Speaker 5 (00:56):
I think, well, there's a couple of things going on,
and I think's right that the markets are using this
as an excuse to sell off because we don't know
exactly what's going to happen. Chinese have said that they're
going to put new restrictions on rare earths and super
magnets and things like that that have been under discussion
and Trump are supposed to meet at APEX later this
(01:21):
month and talk about this, and there was thought that
they might reach some kind of deal. Some analysts think
that this is basically the Chinese trying to get some
negotiating leverage, and Trump doesn't want to be back into
a corner, so he's negotiating back in the kind of
language that he tends.
Speaker 4 (01:41):
To use the Chinese. The main body of the.
Speaker 5 (01:46):
Chinese new restrictions wouldn't hit till November or December, so
it's not something that's imminent. And it could be that
this is just all posturing, and one has to hope
that at this point, but that may be why we've
got a two percent fall or roughly two percent fall
and nothing worse. I think if the president had really
(02:10):
come out and said I'm going to jack up these
tariffs to fifty sixty seventy percent, then you would see
a much bigger reaction.
Speaker 6 (02:18):
These comments, of course, are coming before he's set to
meet with Chinese President's Jijienping a little bit later this month.
Have we heard any details about whether that meeting is
still going to be taking place In the wake of
the social media.
Speaker 4 (02:32):
Posts, well, we haven't heard that it's off.
Speaker 5 (02:33):
The Chinese did not mention it's off, and the President
said I don't see any reason to meet right now,
but he didn't say I'm not going to So at
this point I think we just have to wait and
see how this plays out over the next couple of days.
Speaker 4 (02:47):
Maybe he gets it off.
Speaker 5 (02:48):
Maybe he's mad because of the Nobel Prize and instead
of going after Norway, which we all thought he'd do
this morning, he's just taking it out on China for
the time being.
Speaker 2 (02:57):
But he was thanked by the winner of the Nobel piece.
Well yeah, and then he reposted this.
Speaker 4 (03:03):
Yes.
Speaker 5 (03:04):
Basically, she said we're counting on President Trump and our
friends in democracies around the world to continue the struggle
for Venezuela.
Speaker 4 (03:11):
She didn't say thank you, President Trump exactly.
Speaker 2 (03:14):
Well, let's shift gears a little bit. Mike can talk
about reductions in force, the idea of layoffs, permanent layoffs.
RUSS vote earlier today Right House Budget Director saying the
reductions in workforces, the reductions in workforce have begun. He's
referring to the federal government's term for layoffs. Here, do
we know how many? Do we know who do we
(03:35):
know where?
Speaker 5 (03:36):
What we know is that there the White House. Senior
White House officials told Bloomberg News that it would be thousands.
Representative of the American Federation of State, Local and Government
Employees said that they hurt thirteen hundred, but there's no
exact number at this point.
Speaker 4 (03:55):
It does seem to be affecting many agencies. I've heard
as many as nine, and.
Speaker 5 (04:02):
This is obviously going to provoke lawsuits from the federal unions.
The administration and vote say this is necessary because of
the government shutdown, but it's not. They've never done this before.
The workers aren't being paid right now, so it doesn't.
It's just it's also theater now does the administration They
(04:25):
could be setting this up as a bargaining chip, you know,
republic Democrats come to the table and they concede something
and the President says, all right, we won't fire these
people because remember how this went with the Doge thing.
People were on the payroll, off the payroll, on the
payroll again, So this could also be a big smoke screen.
Speaker 6 (04:45):
I'm wondering how you think that kind of impacts what
could be an already weak labor market that we're seeing
we had Governor Christopher Waller from the FED saying job
growth has been negative for the last few months. The
labor market is as big as concern, and of course
that's what we've also heard from Jerome Powell. These firings.
Wouldn't that make the labor market even weaker? Or is
(05:07):
it not quite related?
Speaker 5 (05:09):
There's not enough people getting fired, I mean, is it
terrible for them individually, But it's at this point. If
you said thousands, I mean, there are something like two
million federal employees. So it wouldn't mean that many people
are going to affect the economy, but it does contribute
to the overall sense that the country is not doing well,
(05:30):
that the economy is not doing well, and that may
hit consumer confidence. And the more layoffs you have in
your neighborhood, the more you start to worry about yourself
and then you cut back on spending, and that's how
recessions begin.
Speaker 4 (05:43):
Basically is a confidence matter.
Speaker 5 (05:45):
So it's not good news in that sense, but it's
not something that we will really see in the economy.
What ends up happening with government shutdowns is spending is delayed,
but it's not completely gone. People will get their back
pay in theory. The musicians threatened that too, but the
law says they get paid and then they'll go make
(06:05):
the important payments that they have to make, and I'm
sure they'll use their charge cards for groceries and things
like that.
Speaker 4 (06:11):
In the meantime.
Speaker 2 (06:12):
Well, speaking of getting paid, Argentina is about to get
paid to the tune of twenty billion dollars. Is it
fair to call this a bailout.
Speaker 5 (06:19):
It's fair to call it a bailout, but they're not
really going to get twenty billion dollars from the US. Essentially,
what they're calling it a swap line, which it isn't
exactly either. The swap line is agreement between two central banks.
One that needs dollars sends money to the FED, and
the FED sends the equivalent amount of dollars to them
so their companies in that country can pay their dollar
(06:43):
denominated bills and then they send it back and when
the crisis is over and the FED.
Speaker 4 (06:48):
Sends them back their money.
Speaker 5 (06:51):
This is more like a rescue package along the lines
of what happened with Mexico in nineteen ninety four, where
the US used the Exchange Stabilization Fund and.
Speaker 4 (07:06):
Agreed to guarantee Mexico.
Speaker 5 (07:09):
Mexican bonds that couldn't be sold because there was a
concern about whether or not they would default, and so
the US guaranteed those spot some of the assets.
Speaker 4 (07:18):
They didn't give Mexico.
Speaker 5 (07:19):
Cash directly, and I think we're giving Argentina cash directly,
but it'll be a system set up like that.
Speaker 2 (07:28):
Is it a little different than Mexico back then, though,
because we share a border with Mexico.
Speaker 3 (07:33):
The stability of.
Speaker 2 (07:35):
Mexico's in our best interest because it's such a large
trading partner. At least right now. I mean, Argentina is
a little bit of a different story. It seems more political.
Speaker 5 (07:44):
Well, there's definitely a political angle to it, and it
just kind of depends on what your.
Speaker 4 (07:48):
Cinicenim meter goes up to.
Speaker 5 (07:52):
Argentina is obviously a poster child for bad financial management.
Speaker 4 (07:56):
Owe the IMF billions and billions of dollars.
Speaker 5 (08:00):
They've defaulted something like twenty three times, and you could
argue that it could be a sort of economic domino
in the way we saw things happen in the Asian
financial crisis. But there's also the idea that a lot
of the.
Speaker 4 (08:16):
Hedge funds that.
Speaker 5 (08:20):
Hedge fund leaders who worked with Scott Bessont over the
years have loaded up on Argentine debt distressed.
Speaker 4 (08:27):
Debt because they can buy it at a discount.
Speaker 5 (08:30):
And if the Argentine peso keeps falling as it has
and is predicted to do, if they lose the congressional
elections coming up, then these people lose a lot of money.
And if the US can prop up the payso then
it helps Besson's friends. Now I don't have any evidence
one way or another, but the New York Times is
reporting this. Paul Kruman did a column on it today,
(08:54):
so that is something for I don't think you have
to go as far as a tinfoil hat. Maybe maybe
saran wrap hat, you know, but it could be.
Speaker 3 (09:05):
Maybe it's in the same drawer where you would find
the ten fold.
Speaker 5 (09:07):
Well, and you get you get in these situations, you
get people who are nervous about the impact on American
investors and funds. We saw the same thing happen with Greece,
and Greece was definitely going to default, but it was
handled very gingerly so that it didn't cause systemic problems.
Speaker 2 (09:28):
Well, this coming from the Treachery Department but certainly the
next FED chair might be thinking about the implications of this,
and that's kind of where we want to end with you, Mike.
We learned earlier today some other names that could be
in the running or are in the running. Four FED
chair finalists, Rick Reader, Michelle Bowman, Chris Waller, Kevin Worsh,
(09:52):
Kevin Hassett. What's the timeline here? Is there anyone else?
Speaker 5 (09:54):
SANBC report that they are the final five and that
they would do another out of interviews and then sometime
maybe in December, the President would nominate someone to the
Stephen Myron seat where the term expires at the end
of January, and that person would be essentially the de
(10:14):
facto FED Chair in waiting, and then if j Powell resigns,
they could put Steve Myron back in that seat or
somebody else. We don't have any other outside confirmation of that,
but it certainly tracks with what the President has been saying.
Speaker 4 (10:29):
He's called the Kevins and Chris Waller the finalists for
some time.
Speaker 5 (10:34):
Michelle Bowman might be a little bit of a DEI
here because we know they like her in the regulatory
role that she's in. And Rick Raider obviously has a
good reputation in the markets. It depends on what the
President ultimately ends up wanting in a fed chair. How
(10:54):
much of a splash does he want to make in
a sense of a rock falling in the pond and
sending out, how much does he want to upset the
Apple card and how much can he do without upsetting
the markets.
Speaker 4 (11:07):
So this is going to be something to watch over.
Speaker 5 (11:09):
The next couple of weeks, because once we get to
an announcement, there's going to be a lot of reaction
to that as well. Well.
Speaker 2 (11:16):
We'll certainly be talking to you many times between now
and then. Michael McKee, Bloomberg News International Economics and Policy correspondent,
joining us here in the Bloomberg Business Week Studio.
Speaker 3 (11:25):
Stay with us.
Speaker 2 (11:26):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (11:33):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
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Listen on Applecarplay and Android Auto with the Bloomberg Business app,
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Speaker 2 (11:48):
We are all over markets today. Dollar sliding as President
Trump threatens a quote massive increase in tariffs on Chinese goods. Well,
the greenback is still training on the cusp of its
best week of the year, the president latest tearff salvo
threatening a once promising dollar rally. We've got with us
a j at Bartowage, director of that X strategy at
ted Securities, if she joined us here in the Bloomberg
(12:10):
Business Week studio, JT. We wanted to talk effects We
knew you were the right person to talk to. We've
seen the dollary cover a bit this month. Yeah, until today.
Is this a temporary setback or is it something bigger?
Speaker 7 (12:23):
Thank you so much for having me again. Always a
pleasure to come talk to you, guys. I would say
that interestingly, what's been happening in the last few sessions
at least, is that we were living in sort of
like a US nirvana where we don't know where we're flying.
We're flying blind, we don't know what the US data
is indicating anymore. And the hyper focus that markets had
on path of FED cuts, how much is the FED
(12:45):
gonna cut? How much are they gonna ease next year?
We took a break from that thanks to getting no
US data, and immediately market focus shifted to everything that's
happening elsewhere in the world, which is where you had
elections in Japan and not turn out the way markets
were expecting, you had French election and certainly drag on.
All of this sort of allowed the dollar to behave
like a safe haven again, something you saw only up
(13:07):
until last year. So that sort of gave dollar the
kind of strength it has been used for the last
five years and gave dollar that nice rally. I think
you bring a very good question, is that does that
change the picture meaningful or is it just a bounce.
That's a question that clients have been asking us as well.
But I think big picture, it's unlikely that euro is
(13:28):
going to collapse to the level at where we were
at the start of the year. The US administration policy
uncertainty is still going to live, is still going to
be there for the majority of the next three years.
And if anything, today is the perfect example of that,
where you had headlines come out with China the relationship
there deteriorating, and that's clearly taking a hit on the dollar.
Speaker 5 (13:47):
Again.
Speaker 6 (13:48):
I want to just talk about what you mentioned as
the dollar being seen as a safe haven asset, because
we're also seeing treasuries really rallying today, people piling in there.
How do you kind of pair, which one I guess
signals a weakening outlook for the macro picture. If traders
are piling into treasuries versus the dollar, are there any
(14:10):
signals we can glean from those moves?
Speaker 7 (14:13):
I think that's also like a good debate that people
have had, Like, surely the dollar has had a very
bad year, but you cannot say the same about treasuries
because you've not seen active signs of anyone dumping US treasuries.
In fact, the major holders out there Japan emation central banks,
while obviously they have been clearly buying gold and amping
those reserves up, it's not as if they have deserted treasuries.
(14:35):
But the dollar is relationship with treasuries is broken because
while everyone still wants to hold US assets, they don't
want to hold US assets unhitched. So they are clearly
diversifying away from the dollar. Not from US assets per se,
but clearly there's a shift away from the dollar which
has made that relationship weaker.
Speaker 6 (14:52):
We have to talk about the debasement trade then, because
you had mentioned gold when you came in before the
show started. It's a record high. Bitcoin has been rallying.
You went there, you went to bitcoin, I mean, all
of these other assets. Is this a result of people
moving away from the dollar, the dollar losing its appeal?
Speaker 7 (15:14):
I think definitely yes. So people have always talked about
dollar as a share of reserves collapsing, but that's been
true for the last decade. But I think as we
entered this year, the marginal collapse in people holding the
dollar has amplified because of all of the uncertainty we're
dealing with now.
Speaker 4 (15:32):
Now.
Speaker 7 (15:33):
For the last five years, most of the uncertainty around
the world was housed in the Middle East, you know,
was housed in COVID, which was a supply chain shock,
which was also outside the US. I think this is
the first time in many, many years where US has
become the source and the emanating source of global uncertainty
around the world, Which is why everyone is now even
shyer of holding dollar in their portfolios. Which is why
(15:56):
a lot of the investors and clients we speak to
our are now thinking of diversifying away from US assets,
not marginally, much less so because I'm sure there's still
not a very strong alternative to US equities, as we
can all debate for months on end, but clearly there's
alternatives to the US dollar now where people have shown
a greater preference for the euro, and in fact, at
(16:17):
times euro has been behaving like a safe haven and
the dollar much less.
Speaker 2 (16:22):
If we're talking gold, we got to talk about what
we heard from Ken Griffin earlier this week, was that
this week or last week, I don't even know what
day it is.
Speaker 6 (16:29):
That was this week?
Speaker 4 (16:30):
Okay, that was this week?
Speaker 6 (16:31):
Okay, thank you, and Ray Dalio as well this week.
Speaker 3 (16:33):
Yeah, Ray Dalio as well, you were you at that event.
Speaker 8 (16:36):
Took Energy Economic Forum.
Speaker 2 (16:38):
Okay, So Ray Dalio said that gold is certainly more
of a safe haven. Then you had also Ken Griffin
essentially say if he asked, if he was agreed with
the view of Ken Griffin that gold's rise reflected anxiety
about the US currency. How is gold diversifier now versus
where it was maybe just a few years ago. Should
(16:59):
people be thinking about the position in its portfolio in
our portfolios differently now?
Speaker 7 (17:04):
I think gold has clearly been a very topical point
of late, and that definitely plays into both the fact
that central banks around the world have been diversifying and
trying to hold gold assets. So central banks purchases of
the yellow metal have surged in the last year. In fact,
that's a trend which has going, which has been ongoing
for the last five years, but it has taken a
(17:26):
big amplification up this year. So that is what led
to that massive rally in gold. And then a lot
of the other investors, like who've mostly been on the
sidelines with gold, who've not traditionally seen gold as a
safe asset. Now we've done certainty around the world, with
people now pitching stable coins, now people talking about holding
their debt in bitcoin as well. With all of that,
(17:48):
and with greater uncertainty in the US and greater reliance
on the US dollar acting as the global reserve currency
of the world, there's definitely a bigger shift of investor
preference into holding gold, both as an investment asset but
also as a safety asset, because whatever happens at the
end of the day, it's a physical metal which you
hold in your reserves, which is not linked to any
(18:09):
particular government and their policy, whereas the dollar clearly is
linked to the US administration and its policies.
Speaker 6 (18:15):
I want to end on just the headlines that we're
seeing today, this idea that perhaps trade tensions are escalating
even further now between the US and China. How does
that specifically impact your views on G ten FX just
within the next few weeks.
Speaker 7 (18:32):
Here, I would say that depending upon what kind of
a picture this evolves into. If the outcomes from her
get worse, Let's say, if Trump comes out and again
announces a tariff increase on China close to one fifty
percent or even above that, which is what we saw
at the start of the year, that's again going to
bring back a lot of macro voltility into markets. In fact,
(18:55):
FX volatility has been heading lower. I think a lot
of FX traders were frustrated with the move we saw
in Q three. I think that's going to change. You
will bring back a lot more volatility into the markets.
I think there will be concerns on both sides. Both
countries link to China and Chinese exports, so euro can
take a hit, the Chilean pesto, which is usually linked
to the outlook of copper prices, and China will also
(19:18):
take a hit. The US dollar will also take a
hit at the end of the day, so it will
definitely be a lot more volatility and will hurt currencies
in that way.
Speaker 3 (19:24):
JT.
Speaker 2 (19:25):
Bovoas Director of FX Strategy at TD Securities. Here in
the studio.
Speaker 8 (19:30):
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Speaker 3 (19:49):
We're kind of going all over.
Speaker 2 (19:50):
The place geographically right now because investors have a lot
to think about. Observers have a lot to think about,
including the durability of lasting piece in the Middle e
Israel began the process of withdrawing troops from Gaza, while
the US started the clock on a seventy two hour
window for Hamas to release all remaining hostages. As the
complex process of ending the two year war got underway.
(20:12):
Data Stroll is Senior Fellow and Director of Research at
the Washington Institute for Nearest Policy. She joins US now
from Washington, DC. Dana, good to have you on the
program today. Is this the beginning of lasting peace in
the region.
Speaker 9 (20:28):
Doubtful, but it could bring relief for Israelis and Palestinians.
So what we're going to see over the next seventy
two hours is just the initial phase of this pretty extensive,
very broad, twenty point plan. So we'll see Israeli hostages
hopefully released within the next seventy two hours. We'll see
Palestinian prisoners released from Israeli jails. We'll see the IDF
(20:52):
withdraw out to part of Gaza, but they're still going
to be present in more than fifty percent of Gaza,
and we'll see a lot of humans and tarianaide flow in.
But that doesn't address Hamas's weapons. It doesn't address what
the constitution of an international stabilization force on the ground
and Gaza will be. It doesn't address what the future
(21:12):
governance structure will be. It doesn't necessarily put us on
a path to Palestinian statehood, and of course it doesn't
address everything else that's keeping us from having peace in
the Middle East, like Iran's nuclear weapons program and other
terrorists who still have ballistic missiles and they're firing them right.
Speaker 6 (21:29):
So a lot of outstanding questions. But talk about the
current deal so far. What makes this cease fire and
this hostage deal different from just previous efforts for peace
that we've seen between Israel, and Hamas.
Speaker 9 (21:44):
What's really unique about this time is the convergence of
stakeholders who all decided to pressure all sides. So, for
the past several ceasefire negotiations with respect to Hamas and Israel,
the United States was working with Cutter and with Egypt,
who were then mediating with Hamas. In the United States
was working with Israel. But this time Trump started at
(22:07):
the UN bringing Arab and Muslim leaders together all to
back his plan. And then we saw in these high
stakes negotiations in Egypt, Turkey joined hands with Cutter in Egypt,
all putting tremendous pressure on Hamas. And finally we have
the personal investment and commitment of President Trump, who backed
Israel but then at the final hour told Hamas, I
(22:32):
will guarantee that Israel will not restart this war if
you uphold your commitments.
Speaker 6 (22:38):
Now that that seventy two hour window has begun, what
is the US's role in enforcing the cease fire?
Speaker 9 (22:47):
Well, first of all, it's whether or not President Trump
is going to stay personally invested and that level of
presidential interest and commitment. And secondly, is the US military role,
So Centcom, the head of US military operations in the
Middle East has announced that they'll contribute to this joint
task force to support hostage recovery, and the US military
(23:11):
will probably have a significant leadership role and standing up
this post war stabilization mission in Gaza and bringing others in.
Speaker 2 (23:21):
I'm wondering about the significance of certain people involved here,
especially on the American side, Steve Witkoff for example, Jared
Kushner for example, who doesn't have the same role that
he had in the White House during the president's first administration.
Speaker 9 (23:34):
Well, Jared Kushner has not had an official role in
the second Trump administration, but I think it's fair to
say he's been in the background the whole time, and
you can really see his fingerprints on this twenty point plan.
Kushner has always been a real advocate of economics trade
as part of a path to peace. There's a lot
(23:55):
of the economic angles to the twenty point Plan, and
he clearly wild sitting alongside Steve Witcoff in Egypt and
now in Israel to see the details of this followed through.
Speaker 2 (24:07):
What's the right way to think about what happens in
Gaza if there is lasting peace, that the power vacuum,
who actually comes to power there and what their views
will be.
Speaker 9 (24:19):
That's really TBD. But here's the risk. We get through
this initial phase of the ceasefire and there's a security
vacuum and there's nobody there on the ground other than
Hamas who still has their weapons, or Israel, who's still
present in fifty percent of the strip. What President Trump
would like to see happen is this international multilateral force
(24:44):
with a lot of Arab and Muslim countries contributing. Really
hard to see them going in if Hamas doesn't agree
to give up their weapons. And I think the leaders
of Hamas understand that if all twenty points of this
planet are implemented, that means surrender for Hamas. They have
to commit to peaceful coexistence with Israel. Hard to see
a terrorist organization doing that. And if they leave, then
(25:06):
they're surrendering everything that they've worked all these decades to
build up. So the likelihood is actually more in stability
and more violence in the short term. The hope is
that if this peace plan is implemented, we actually have
a chance at Palestinian self determination in Gaza and also
in the West Bank.
Speaker 6 (25:28):
You noted that Hamas accepted this deal under military and
international pressure. I'm wondering what kind of lessons we learn
from that. Does this mean that more pressure needs to
be applied in order to reach the next stage of
a deal that could lead to lasting peace.
Speaker 9 (25:49):
Well, the Israeli operations in Gaza have received so much
international and regional condemnation and criticism, but I think we
have to be honest here that we wouldn't be where
we are today without some of the Israeli actions in
Gaza which took out all of Hamas's top leadership, have
dismantled a lot of those tunnels and were continuing despite
(26:12):
all of this international criticism. But it's clear that it's
not only military pressure alone, it's this political pressure from
the longtime backers of Hamas. So nearly two well exactly
two years after October seventh, what's clear is that Egypt
didn't want a flood of Palestinians from Gaza coming into
the Sinai Cutter wanted it to be over, especially after
(26:34):
that Israeli strike in Doha that targeted Hamas leadership sitting
in a fancy building and Turkey, who has a long
time connections to Hamas. President Airdowan's top national security aid
was on the ground in Egypt negotiating this, so the
backers of Hamas really pressured it to agree to give
(26:55):
up these hostages.
Speaker 2 (26:56):
Dana, always appreciate you taking the time in joining us,
especially on such a busy Friday. Dani Strul, Senior Fellow
and Director of Research at the Washington Institute for Near
East Policy, joining us from Washington, d C.
Speaker 3 (27:09):
Stay with us.
Speaker 2 (27:10):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (27:17):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five Easter and
listen on Applecarplay and Android autto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (27:31):
I want to bring in Jillian Wolf, global equity strategist
for Bloomberg Intelligence. She joins us here in the Bloomberg
Interactive Broker's studio, the SMB five hundred. Today, it's worst
day going back to April twenty first. You know that
was kind of in the midst of so called Liberation Day.
What was that actor he read the President like went
(27:51):
back on the tariffs. I'm just like thinking in real time.
Right on April the April second was so called Liberation Day.
Speaker 10 (27:57):
That was so called Liberation Day, and then we saw
that big steady drop into around the first or second
week of April, dropping nearly twenty percent. He was clearly
a little bit scared of official bear market territory there
before he finally put the pause on, we fell just
below five five thousand on the S and B five
hundred before the pause was put on.
Speaker 3 (28:16):
Yeah, and look at that.
Speaker 2 (28:17):
You can see the S and P five hundred surging
just almost twenty percent.
Speaker 3 (28:21):
Yeah, back to those just before those April those.
Speaker 10 (28:24):
I mean, this is, if anything, we've had this broader
bowl run. But we've definitely seen and we're likely going
to see increase volatility from this market because of sensitivity
around tariffs. And the three Q earning season is going
to tell us a little bit more about what's happening.
But I mentioned this actually the last time we spoke
that I think a bit of a dangerous precedent had
been set maybe in the first and second quarter on
(28:45):
earnings calls that tariffs weren't really a big deal yet.
We actually we run an NLP model, it's natural language processing.
We determine how positive or negative management is on any
given topic. On earnings calls, and we found that they're
actually getting broadly more positive when they discuss tariffs. I
think right now the message to investors is the worst
case scenario didn't happen. Everything didn't fall apart overnight. But
(29:07):
there is definitely going to be some fragility and skepticism
in a market that's trading at all time highs, at
a very high valuation for any cent of what might
be going wrong with tariffs, especially during the three Q
earning season and going forward. And really what most this
sell off is about today is Trump threatening those higher tariffs.
I don't think the market knows exactly what to think
about this right now, because we had such a strong
(29:29):
one Q and two Q and we're maybe waiting for
the shoe to drop or to see if companies can
actually navigate this.
Speaker 6 (29:36):
How much more vulnerable is the equity market for that
shoe to drop when you start to factor in concerns
around AI spending. I was just at a conference last
week with David einhorn henference.
Speaker 2 (29:49):
It's a different.
Speaker 6 (29:50):
Conference than the one I went to this week, but
he started talking about how he thinks there's going to
be potentially the risk of a lot of just overspending
on AI that even though he bullish an AI more broadly,
some of these companies look like they're just spending too much.
They're not going to see the return that maybe they
expected on that.
Speaker 10 (30:07):
I think we're moving into that phase of the AI
trade of you know, there have been a lot of promises,
we actually want to see companies getting more efficient. I
think one of the problems at least that we're seeing
right now in the market is that a lot of
the games so far from the second half are coming
from AI. It actually is looking similar to what the
market looked like at least the S and P five
hundred in the first half of twenty twenty four, right
(30:29):
before we got a bit of that bout of volatility
in the summer. We're seeing a similar amount of concentration
start to emerge, some maybe more problematically. As we're seeing
that concentration to emerge across the globe now, a lot
of the emerging market trade is also writing on this
AI thesis. And I think in terms of the amount
of AI spending, one thing that maybe getting under underplayed
right now is it's not just about the AI names
(30:51):
that might that could be at risk if the AI
thesis doesn't work out as investors think. It's also the
companies that are investing in its, like financials, things like
even consumer discretionary firms, even though they are not AI furness.
People think, oh well AI only there's really really a
risk for the nvideos of the world the tech space.
Speaker 4 (31:09):
Now.
Speaker 10 (31:09):
The risk is spreading to companies that are investing in it,
and it's risk with potential reward. This could have a
huge upsider productivity. The markets just doesn't know yet, so
it's going to be a little bit shaky anytime there's
good news spiking up, anytime there's bad news spiking down,
because they haven't really sussed it out.
Speaker 2 (31:27):
Jillian Wolf she is going to be even busier than
she usually is next week when bank earnings kick off.
She's Global equity status for Bloomberg Intelligence. We are going
to be speaking to her a lot in the coming week.
Check out her research and more on the Bloomberg terminal,
and you can also find the latest when it comes
to all of that research at Bloomberg dot com as well.
Speaker 1 (31:45):
This is the Bloomberg BusinessWeek Daily podcast, available on Apple, Spotify,
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(32:06):
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(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
I do want to bring in Michael McKee, Bloomberg TV
and Radio International Economics and Policy Correspond and he joins
us also here in the Bloomberg BusinessWeek Studio, as we've
been talking about Mike market's lower on fears of an
escalating trade war. You're a macro guy, you're International Economics
and Policy correspond. Is this a rethink of US foreign
of US policy, US trade policy?
Speaker 3 (00:54):
It's just a social media post.
Speaker 4 (00:56):
Yeah.
Speaker 5 (00:56):
I think, well, there's a couple of things going on,
and I think's right that the markets are using this
as an excuse to sell off because we don't know
exactly what's going to happen. Chinese have said that they're
going to put new restrictions on rare earths and super
magnets and things like that that have been under discussion
and Trump are supposed to meet at APEX later this
(01:21):
month and talk about this, and there was thought that
they might reach some kind of deal. Some analysts think
that this is basically the Chinese trying to get some
negotiating leverage, and Trump doesn't want to be back into
a corner, so he's negotiating back in the kind of
language that he tends.
Speaker 4 (01:41):
To use the Chinese. The main body of the.
Speaker 5 (01:46):
Chinese new restrictions wouldn't hit till November or December, so
it's not something that's imminent. And it could be that
this is just all posturing, and one has to hope
that at this point, but that may be why we've
got a two percent fall or roughly two percent fall
and nothing worse. I think if the president had really
(02:10):
come out and said I'm going to jack up these
tariffs to fifty sixty seventy percent, then you would see
a much bigger reaction.
Speaker 6 (02:18):
These comments, of course, are coming before he's set to
meet with Chinese President's Jijienping a little bit later this month.
Have we heard any details about whether that meeting is
still going to be taking place In the wake of
the social media.
Speaker 4 (02:32):
Posts, well, we haven't heard that it's off.
Speaker 5 (02:33):
The Chinese did not mention it's off, and the President
said I don't see any reason to meet right now,
but he didn't say I'm not going to So at
this point I think we just have to wait and
see how this plays out over the next couple of days.
Speaker 4 (02:47):
Maybe he gets it off.
Speaker 5 (02:48):
Maybe he's mad because of the Nobel Prize and instead
of going after Norway, which we all thought he'd do
this morning, he's just taking it out on China for
the time being.
Speaker 2 (02:57):
But he was thanked by the winner of the Nobel piece.
Well yeah, and then he reposted this.
Speaker 4 (03:03):
Yes.
Speaker 5 (03:04):
Basically, she said we're counting on President Trump and our
friends in democracies around the world to continue the struggle
for Venezuela.
Speaker 4 (03:11):
She didn't say thank you, President Trump exactly.
Speaker 2 (03:14):
Well, let's shift gears a little bit. Mike can talk
about reductions in force, the idea of layoffs, permanent layoffs.
RUSS vote earlier today Right House Budget Director saying the
reductions in workforces, the reductions in workforce have begun. He's
referring to the federal government's term for layoffs. Here, do
we know how many? Do we know who do we
(03:35):
know where?
Speaker 5 (03:36):
What we know is that there the White House. Senior
White House officials told Bloomberg News that it would be thousands.
Representative of the American Federation of State, Local and Government
Employees said that they hurt thirteen hundred, but there's no
exact number at this point.
Speaker 4 (03:55):
It does seem to be affecting many agencies. I've heard
as many as nine, and.
Speaker 5 (04:02):
This is obviously going to provoke lawsuits from the federal unions.
The administration and vote say this is necessary because of
the government shutdown, but it's not. They've never done this before.
The workers aren't being paid right now, so it doesn't.
It's just it's also theater now does the administration They
(04:25):
could be setting this up as a bargaining chip, you know,
republic Democrats come to the table and they concede something
and the President says, all right, we won't fire these
people because remember how this went with the Doge thing.
People were on the payroll, off the payroll, on the
payroll again, So this could also be a big smoke screen.
Speaker 6 (04:45):
I'm wondering how you think that kind of impacts what
could be an already weak labor market that we're seeing
we had Governor Christopher Waller from the FED saying job
growth has been negative for the last few months. The
labor market is as big as concern, and of course
that's what we've also heard from Jerome Powell. These firings.
Wouldn't that make the labor market even weaker? Or is
(05:07):
it not quite related?
Speaker 5 (05:09):
There's not enough people getting fired, I mean, is it
terrible for them individually, But it's at this point. If
you said thousands, I mean, there are something like two
million federal employees. So it wouldn't mean that many people
are going to affect the economy, but it does contribute
to the overall sense that the country is not doing well,
(05:30):
that the economy is not doing well, and that may
hit consumer confidence. And the more layoffs you have in
your neighborhood, the more you start to worry about yourself
and then you cut back on spending, and that's how
recessions begin.
Speaker 4 (05:43):
Basically is a confidence matter.
Speaker 5 (05:45):
So it's not good news in that sense, but it's
not something that we will really see in the economy.
What ends up happening with government shutdowns is spending is delayed,
but it's not completely gone. People will get their back
pay in theory. The musicians threatened that too, but the
law says they get paid and then they'll go make
(06:05):
the important payments that they have to make, and I'm
sure they'll use their charge cards for groceries and things
like that.
Speaker 4 (06:11):
In the meantime.
Speaker 2 (06:12):
Well, speaking of getting paid, Argentina is about to get
paid to the tune of twenty billion dollars. Is it
fair to call this a bailout.
Speaker 5 (06:19):
It's fair to call it a bailout, but they're not
really going to get twenty billion dollars from the US. Essentially,
what they're calling it a swap line, which it isn't
exactly either. The swap line is agreement between two central banks.
One that needs dollars sends money to the FED, and
the FED sends the equivalent amount of dollars to them
so their companies in that country can pay their dollar
(06:43):
denominated bills and then they send it back and when
the crisis is over and the FED.
Speaker 4 (06:48):
Sends them back their money.
Speaker 5 (06:51):
This is more like a rescue package along the lines
of what happened with Mexico in nineteen ninety four, where
the US used the Exchange Stabilization Fund and.
Speaker 4 (07:06):
Agreed to guarantee Mexico.
Speaker 5 (07:09):
Mexican bonds that couldn't be sold because there was a
concern about whether or not they would default, and so
the US guaranteed those spot some of the assets.
Speaker 4 (07:18):
They didn't give Mexico.
Speaker 5 (07:19):
Cash directly, and I think we're giving Argentina cash directly,
but it'll be a system set up like that.
Speaker 2 (07:28):
Is it a little different than Mexico back then, though,
because we share a border with Mexico.
Speaker 3 (07:33):
The stability of.
Speaker 2 (07:35):
Mexico's in our best interest because it's such a large
trading partner. At least right now. I mean, Argentina is
a little bit of a different story. It seems more political.
Speaker 5 (07:44):
Well, there's definitely a political angle to it, and it
just kind of depends on what your.
Speaker 4 (07:48):
Cinicenim meter goes up to.
Speaker 5 (07:52):
Argentina is obviously a poster child for bad financial management.
Speaker 4 (07:56):
Owe the IMF billions and billions of dollars.
Speaker 5 (08:00):
They've defaulted something like twenty three times, and you could
argue that it could be a sort of economic domino
in the way we saw things happen in the Asian
financial crisis. But there's also the idea that a lot
of the.
Speaker 4 (08:16):
Hedge funds that.
Speaker 5 (08:20):
Hedge fund leaders who worked with Scott Bessont over the
years have loaded up on Argentine debt distressed.
Speaker 4 (08:27):
Debt because they can buy it at a discount.
Speaker 5 (08:30):
And if the Argentine peso keeps falling as it has
and is predicted to do, if they lose the congressional
elections coming up, then these people lose a lot of money.
And if the US can prop up the payso then
it helps Besson's friends. Now I don't have any evidence
one way or another, but the New York Times is
reporting this. Paul Kruman did a column on it today,
(08:54):
so that is something for I don't think you have
to go as far as a tinfoil hat. Maybe maybe
saran wrap hat, you know, but it could be.
Speaker 3 (09:05):
Maybe it's in the same drawer where you would find
the ten fold.
Speaker 5 (09:07):
Well, and you get you get in these situations, you
get people who are nervous about the impact on American
investors and funds. We saw the same thing happen with Greece,
and Greece was definitely going to default, but it was
handled very gingerly so that it didn't cause systemic problems.
Speaker 2 (09:28):
Well, this coming from the Treachery Department but certainly the
next FED chair might be thinking about the implications of this,
and that's kind of where we want to end with you, Mike.
We learned earlier today some other names that could be
in the running or are in the running. Four FED
chair finalists, Rick Reader, Michelle Bowman, Chris Waller, Kevin Worsh,
(09:52):
Kevin Hassett. What's the timeline here? Is there anyone else?
Speaker 5 (09:54):
SANBC report that they are the final five and that
they would do another out of interviews and then sometime
maybe in December, the President would nominate someone to the
Stephen Myron seat where the term expires at the end
of January, and that person would be essentially the de
(10:14):
facto FED Chair in waiting, and then if j Powell resigns,
they could put Steve Myron back in that seat or
somebody else. We don't have any other outside confirmation of that,
but it certainly tracks with what the President has been saying.
Speaker 4 (10:29):
He's called the Kevins and Chris Waller the finalists for
some time.
Speaker 5 (10:34):
Michelle Bowman might be a little bit of a DEI
here because we know they like her in the regulatory
role that she's in. And Rick Raider obviously has a
good reputation in the markets. It depends on what the
President ultimately ends up wanting in a fed chair. How
(10:54):
much of a splash does he want to make in
a sense of a rock falling in the pond and
sending out, how much does he want to upset the
Apple card and how much can he do without upsetting
the markets.
Speaker 4 (11:07):
So this is going to be something to watch over.
Speaker 5 (11:09):
The next couple of weeks, because once we get to
an announcement, there's going to be a lot of reaction
to that as well. Well.
Speaker 2 (11:16):
We'll certainly be talking to you many times between now
and then. Michael McKee, Bloomberg News International Economics and Policy correspondent,
joining us here in the Bloomberg Business Week Studio.
Speaker 3 (11:25):
Stay with us.
Speaker 2 (11:26):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (11:33):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (11:48):
We are all over markets today. Dollar sliding as President
Trump threatens a quote massive increase in tariffs on Chinese goods. Well,
the greenback is still training on the cusp of its
best week of the year, the president latest tearff salvo
threatening a once promising dollar rally. We've got with us
a j at Bartowage, director of that X strategy at
ted Securities, if she joined us here in the Bloomberg
(12:10):
Business Week studio, JT. We wanted to talk effects We
knew you were the right person to talk to. We've
seen the dollary cover a bit this month. Yeah, until today.
Is this a temporary setback or is it something bigger?
Speaker 7 (12:23):
Thank you so much for having me again. Always a
pleasure to come talk to you, guys. I would say
that interestingly, what's been happening in the last few sessions
at least, is that we were living in sort of
like a US nirvana where we don't know where we're flying.
We're flying blind, we don't know what the US data
is indicating anymore. And the hyper focus that markets had
on path of FED cuts, how much is the FED
(12:45):
gonna cut? How much are they gonna ease next year?
We took a break from that thanks to getting no
US data, and immediately market focus shifted to everything that's
happening elsewhere in the world, which is where you had
elections in Japan and not turn out the way markets
were expecting, you had French election and certainly drag on.
All of this sort of allowed the dollar to behave
like a safe haven again, something you saw only up
(13:07):
until last year. So that sort of gave dollar the
kind of strength it has been used for the last
five years and gave dollar that nice rally. I think
you bring a very good question, is that does that
change the picture meaningful or is it just a bounce.
That's a question that clients have been asking us as well.
But I think big picture, it's unlikely that euro is
(13:28):
going to collapse to the level at where we were
at the start of the year. The US administration policy
uncertainty is still going to live, is still going to
be there for the majority of the next three years.
And if anything, today is the perfect example of that,
where you had headlines come out with China the relationship
there deteriorating, and that's clearly taking a hit on the dollar.
Speaker 5 (13:47):
Again.
Speaker 6 (13:48):
I want to just talk about what you mentioned as
the dollar being seen as a safe haven asset, because
we're also seeing treasuries really rallying today, people piling in there.
How do you kind of pair, which one I guess
signals a weakening outlook for the macro picture. If traders
are piling into treasuries versus the dollar, are there any
(14:10):
signals we can glean from those moves?
Speaker 7 (14:13):
I think that's also like a good debate that people
have had, Like, surely the dollar has had a very
bad year, but you cannot say the same about treasuries
because you've not seen active signs of anyone dumping US treasuries.
In fact, the major holders out there Japan emation central banks,
while obviously they have been clearly buying gold and amping
those reserves up, it's not as if they have deserted treasuries.
(14:35):
But the dollar is relationship with treasuries is broken because
while everyone still wants to hold US assets, they don't
want to hold US assets unhitched. So they are clearly
diversifying away from the dollar. Not from US assets per se,
but clearly there's a shift away from the dollar which
has made that relationship weaker.
Speaker 6 (14:52):
We have to talk about the debasement trade then, because
you had mentioned gold when you came in before the
show started. It's a record high. Bitcoin has been rallying.
You went there, you went to bitcoin, I mean, all
of these other assets. Is this a result of people
moving away from the dollar, the dollar losing its appeal?
Speaker 7 (15:14):
I think definitely yes. So people have always talked about
dollar as a share of reserves collapsing, but that's been
true for the last decade. But I think as we
entered this year, the marginal collapse in people holding the
dollar has amplified because of all of the uncertainty we're
dealing with now.
Speaker 4 (15:32):
Now.
Speaker 7 (15:33):
For the last five years, most of the uncertainty around
the world was housed in the Middle East, you know,
was housed in COVID, which was a supply chain shock,
which was also outside the US. I think this is
the first time in many, many years where US has
become the source and the emanating source of global uncertainty
around the world, Which is why everyone is now even
shyer of holding dollar in their portfolios. Which is why
(15:56):
a lot of the investors and clients we speak to
our are now thinking of diversifying away from US assets,
not marginally, much less so because I'm sure there's still
not a very strong alternative to US equities, as we
can all debate for months on end, but clearly there's
alternatives to the US dollar now where people have shown
a greater preference for the euro, and in fact, at
(16:17):
times euro has been behaving like a safe haven and
the dollar much less.
Speaker 2 (16:22):
If we're talking gold, we got to talk about what
we heard from Ken Griffin earlier this week, was that
this week or last week, I don't even know what
day it is.
Speaker 6 (16:29):
That was this week?
Speaker 4 (16:30):
Okay, that was this week?
Speaker 6 (16:31):
Okay, thank you, and Ray Dalio as well this week.
Speaker 3 (16:33):
Yeah, Ray Dalio as well, you were you at that event.
Speaker 8 (16:36):
Took Energy Economic Forum.
Speaker 2 (16:38):
Okay, So Ray Dalio said that gold is certainly more
of a safe haven. Then you had also Ken Griffin
essentially say if he asked, if he was agreed with
the view of Ken Griffin that gold's rise reflected anxiety
about the US currency. How is gold diversifier now versus
where it was maybe just a few years ago. Should
(16:59):
people be thinking about the position in its portfolio in
our portfolios differently now?
Speaker 7 (17:04):
I think gold has clearly been a very topical point
of late, and that definitely plays into both the fact
that central banks around the world have been diversifying and
trying to hold gold assets. So central banks purchases of
the yellow metal have surged in the last year. In fact,
that's a trend which has going, which has been ongoing
for the last five years, but it has taken a
(17:26):
big amplification up this year. So that is what led
to that massive rally in gold. And then a lot
of the other investors, like who've mostly been on the
sidelines with gold, who've not traditionally seen gold as a
safe asset. Now we've done certainty around the world, with
people now pitching stable coins, now people talking about holding
their debt in bitcoin as well. With all of that,
(17:48):
and with greater uncertainty in the US and greater reliance
on the US dollar acting as the global reserve currency
of the world, there's definitely a bigger shift of investor
preference into holding gold, both as an investment asset but
also as a safety asset, because whatever happens at the
end of the day, it's a physical metal which you
hold in your reserves, which is not linked to any
(18:09):
particular government and their policy, whereas the dollar clearly is
linked to the US administration and its policies.
Speaker 6 (18:15):
I want to end on just the headlines that we're
seeing today, this idea that perhaps trade tensions are escalating
even further now between the US and China. How does
that specifically impact your views on G ten FX just
within the next few weeks.
Speaker 7 (18:32):
Here, I would say that depending upon what kind of
a picture this evolves into. If the outcomes from her
get worse, Let's say, if Trump comes out and again
announces a tariff increase on China close to one fifty
percent or even above that, which is what we saw
at the start of the year, that's again going to
bring back a lot of macro voltility into markets. In fact,
(18:55):
FX volatility has been heading lower. I think a lot
of FX traders were frustrated with the move we saw
in Q three. I think that's going to change. You
will bring back a lot more volatility into the markets.
I think there will be concerns on both sides. Both
countries link to China and Chinese exports, so euro can
take a hit, the Chilean pesto, which is usually linked
to the outlook of copper prices, and China will also
(19:18):
take a hit. The US dollar will also take a
hit at the end of the day, so it will
definitely be a lot more volatility and will hurt currencies
in that way.
Speaker 3 (19:24):
JT.
Speaker 2 (19:25):
Bovoas Director of FX Strategy at TD Securities. Here in
the studio.
Speaker 8 (19:30):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Apple car
Play and Android Auto with the Bloomberg Business App. You
can also listen live on Amazon Alexa from our flagship
New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 3 (19:49):
We're kind of going all over.
Speaker 2 (19:50):
The place geographically right now because investors have a lot
to think about. Observers have a lot to think about,
including the durability of lasting piece in the Middle e
Israel began the process of withdrawing troops from Gaza, while
the US started the clock on a seventy two hour
window for Hamas to release all remaining hostages. As the
complex process of ending the two year war got underway.
(20:12):
Data Stroll is Senior Fellow and Director of Research at
the Washington Institute for Nearest Policy. She joins US now
from Washington, DC. Dana, good to have you on the
program today. Is this the beginning of lasting peace in
the region.
Speaker 9 (20:28):
Doubtful, but it could bring relief for Israelis and Palestinians.
So what we're going to see over the next seventy
two hours is just the initial phase of this pretty extensive,
very broad, twenty point plan. So we'll see Israeli hostages
hopefully released within the next seventy two hours. We'll see
Palestinian prisoners released from Israeli jails. We'll see the IDF
(20:52):
withdraw out to part of Gaza, but they're still going
to be present in more than fifty percent of Gaza,
and we'll see a lot of humans and tarianaide flow in.
But that doesn't address Hamas's weapons. It doesn't address what
the constitution of an international stabilization force on the ground
and Gaza will be. It doesn't address what the future
(21:12):
governance structure will be. It doesn't necessarily put us on
a path to Palestinian statehood, and of course it doesn't
address everything else that's keeping us from having peace in
the Middle East, like Iran's nuclear weapons program and other
terrorists who still have ballistic missiles and they're firing them right.
Speaker 6 (21:29):
So a lot of outstanding questions. But talk about the
current deal so far. What makes this cease fire and
this hostage deal different from just previous efforts for peace
that we've seen between Israel, and Hamas.
Speaker 9 (21:44):
What's really unique about this time is the convergence of
stakeholders who all decided to pressure all sides. So, for
the past several ceasefire negotiations with respect to Hamas and Israel,
the United States was working with Cutter and with Egypt,
who were then mediating with Hamas. In the United States
was working with Israel. But this time Trump started at
(22:07):
the UN bringing Arab and Muslim leaders together all to
back his plan. And then we saw in these high
stakes negotiations in Egypt, Turkey joined hands with Cutter in Egypt,
all putting tremendous pressure on Hamas. And finally we have
the personal investment and commitment of President Trump, who backed
Israel but then at the final hour told Hamas, I
(22:32):
will guarantee that Israel will not restart this war if
you uphold your commitments.
Speaker 6 (22:38):
Now that that seventy two hour window has begun, what
is the US's role in enforcing the cease fire?
Speaker 9 (22:47):
Well, first of all, it's whether or not President Trump
is going to stay personally invested and that level of
presidential interest and commitment. And secondly, is the US military role,
So Centcom, the head of US military operations in the
Middle East has announced that they'll contribute to this joint
task force to support hostage recovery, and the US military
(23:11):
will probably have a significant leadership role and standing up
this post war stabilization mission in Gaza and bringing others in.
Speaker 2 (23:21):
I'm wondering about the significance of certain people involved here,
especially on the American side, Steve Witkoff for example, Jared
Kushner for example, who doesn't have the same role that
he had in the White House during the president's first administration.
Speaker 9 (23:34):
Well, Jared Kushner has not had an official role in
the second Trump administration, but I think it's fair to
say he's been in the background the whole time, and
you can really see his fingerprints on this twenty point plan.
Kushner has always been a real advocate of economics trade
as part of a path to peace. There's a lot
(23:55):
of the economic angles to the twenty point Plan, and
he clearly wild sitting alongside Steve Witcoff in Egypt and
now in Israel to see the details of this followed through.
Speaker 2 (24:07):
What's the right way to think about what happens in
Gaza if there is lasting peace, that the power vacuum,
who actually comes to power there and what their views
will be.
Speaker 9 (24:19):
That's really TBD. But here's the risk. We get through
this initial phase of the ceasefire and there's a security
vacuum and there's nobody there on the ground other than
Hamas who still has their weapons, or Israel, who's still
present in fifty percent of the strip. What President Trump
would like to see happen is this international multilateral force
(24:44):
with a lot of Arab and Muslim countries contributing. Really
hard to see them going in if Hamas doesn't agree
to give up their weapons. And I think the leaders
of Hamas understand that if all twenty points of this
planet are implemented, that means surrender for Hamas. They have
to commit to peaceful coexistence with Israel. Hard to see
a terrorist organization doing that. And if they leave, then
(25:06):
they're surrendering everything that they've worked all these decades to
build up. So the likelihood is actually more in stability
and more violence in the short term. The hope is
that if this peace plan is implemented, we actually have
a chance at Palestinian self determination in Gaza and also
in the West Bank.
Speaker 6 (25:28):
You noted that Hamas accepted this deal under military and
international pressure. I'm wondering what kind of lessons we learn
from that. Does this mean that more pressure needs to
be applied in order to reach the next stage of
a deal that could lead to lasting peace.
Speaker 9 (25:49):
Well, the Israeli operations in Gaza have received so much
international and regional condemnation and criticism, but I think we
have to be honest here that we wouldn't be where
we are today without some of the Israeli actions in
Gaza which took out all of Hamas's top leadership, have
dismantled a lot of those tunnels and were continuing despite
(26:12):
all of this international criticism. But it's clear that it's
not only military pressure alone, it's this political pressure from
the longtime backers of Hamas. So nearly two well exactly
two years after October seventh, what's clear is that Egypt
didn't want a flood of Palestinians from Gaza coming into
the Sinai Cutter wanted it to be over, especially after
(26:34):
that Israeli strike in Doha that targeted Hamas leadership sitting
in a fancy building and Turkey, who has a long
time connections to Hamas. President Airdowan's top national security aid
was on the ground in Egypt negotiating this, so the
backers of Hamas really pressured it to agree to give
(26:55):
up these hostages.
Speaker 2 (26:56):
Dana, always appreciate you taking the time in joining us,
especially on such a busy Friday. Dani Strul, Senior Fellow
and Director of Research at the Washington Institute for Near
East Policy, joining us from Washington, d C.
Speaker 3 (27:09):
Stay with us.
Speaker 2 (27:10):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (27:17):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five Easter and
listen on Applecarplay and Android autto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (27:31):
I want to bring in Jillian Wolf, global equity strategist
for Bloomberg Intelligence. She joins us here in the Bloomberg
Interactive Broker's studio, the SMB five hundred. Today, it's worst
day going back to April twenty first. You know that
was kind of in the midst of so called Liberation Day.
What was that actor he read the President like went
(27:51):
back on the tariffs. I'm just like thinking in real time.
Right on April the April second was so called Liberation Day.
Speaker 10 (27:57):
That was so called Liberation Day, and then we saw
that big steady drop into around the first or second
week of April, dropping nearly twenty percent. He was clearly
a little bit scared of official bear market territory there
before he finally put the pause on, we fell just
below five five thousand on the S and B five
hundred before the pause was put on.
Speaker 3 (28:16):
Yeah, and look at that.
Speaker 2 (28:17):
You can see the S and P five hundred surging
just almost twenty percent.
Speaker 3 (28:21):
Yeah, back to those just before those April those.
Speaker 10 (28:24):
I mean, this is, if anything, we've had this broader
bowl run. But we've definitely seen and we're likely going
to see increase volatility from this market because of sensitivity
around tariffs. And the three Q earning season is going
to tell us a little bit more about what's happening.
But I mentioned this actually the last time we spoke
that I think a bit of a dangerous precedent had
been set maybe in the first and second quarter on
(28:45):
earnings calls that tariffs weren't really a big deal yet.
We actually we run an NLP model, it's natural language processing.
We determine how positive or negative management is on any
given topic. On earnings calls, and we found that they're
actually getting broadly more positive when they discuss tariffs. I
think right now the message to investors is the worst
case scenario didn't happen. Everything didn't fall apart overnight. But
(29:07):
there is definitely going to be some fragility and skepticism
in a market that's trading at all time highs, at
a very high valuation for any cent of what might
be going wrong with tariffs, especially during the three Q
earning season and going forward. And really what most this
sell off is about today is Trump threatening those higher tariffs.
I don't think the market knows exactly what to think
about this right now, because we had such a strong
(29:29):
one Q and two Q and we're maybe waiting for
the shoe to drop or to see if companies can
actually navigate this.
Speaker 6 (29:36):
How much more vulnerable is the equity market for that
shoe to drop when you start to factor in concerns
around AI spending. I was just at a conference last
week with David einhorn henference.
Speaker 2 (29:49):
It's a different.
Speaker 6 (29:50):
Conference than the one I went to this week, but
he started talking about how he thinks there's going to
be potentially the risk of a lot of just overspending
on AI that even though he bullish an AI more broadly,
some of these companies look like they're just spending too much.
They're not going to see the return that maybe they
expected on that.
Speaker 10 (30:07):
I think we're moving into that phase of the AI
trade of you know, there have been a lot of promises,
we actually want to see companies getting more efficient. I
think one of the problems at least that we're seeing
right now in the market is that a lot of
the games so far from the second half are coming
from AI. It actually is looking similar to what the
market looked like at least the S and P five
hundred in the first half of twenty twenty four, right
(30:29):
before we got a bit of that bout of volatility
in the summer. We're seeing a similar amount of concentration
start to emerge, some maybe more problematically. As we're seeing
that concentration to emerge across the globe now, a lot
of the emerging market trade is also writing on this
AI thesis. And I think in terms of the amount
of AI spending, one thing that maybe getting under underplayed
right now is it's not just about the AI names
(30:51):
that might that could be at risk if the AI
thesis doesn't work out as investors think. It's also the
companies that are investing in its, like financials, things like
even consumer discretionary firms, even though they are not AI furness.
People think, oh well AI only there's really really a
risk for the nvideos of the world the tech space.
Speaker 4 (31:09):
Now.
Speaker 10 (31:09):
The risk is spreading to companies that are investing in it,
and it's risk with potential reward. This could have a
huge upsider productivity. The markets just doesn't know yet, so
it's going to be a little bit shaky anytime there's
good news spiking up, anytime there's bad news spiking down,
because they haven't really sussed it out.
Speaker 2 (31:27):
Jillian Wolf she is going to be even busier than
she usually is next week when bank earnings kick off.
She's Global equity status for Bloomberg Intelligence. We are going
to be speaking to her a lot in the coming week.
Check out her research and more on the Bloomberg terminal,
and you can also find the latest when it comes
to all of that research at Bloomberg dot com as well.
Speaker 1 (31:45):
This is the Bloomberg BusinessWeek Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern, on Bloomberg dot com,
Heeart radio app tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(32:06):
and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
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