June 23, 2025 • 34 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Iran fired missiles at a US air base in Qatar after promising it would respond “proportionately and decisively” to President Donald Trump’s weekend airstrikes on three of its nuclear facilities.
There were no reported casualties in the attack on Al Udeid base — the biggest such US facility in the Middle East — amid signs Iran gave advance notice of the strike plan. Qatar said the missile barrage was intercepted and the base had been evacuated in advance. Oil plunged on relief that Tehran’s limited response didn’t target energy supplies. The salvo marks another widening in the conflict that began 10 days ago when Israel attacked Iran, targeting nuclear and missile installations and military leaders. Iran has responded with several days of missile strikes on Israel, and the war threatened to escalate after the US joined the campaign with a bunker-buster bombing raid.
Iran’s move “looks like a largely symbolic retaliation,” saud Ziad Daoud, Bloomberg Economics’ chief emerging-market economist. “Plenty of warning was given — Qatar shut its airspace and the US issued warnings to citizens.”
Trump said the nuclear sites struck by the US were totally destroyed, and vowed to meet any Iranian retaliation with force “far greater” than those weekend strikes. He also hinted at the possibility of “regime change” in Iran, though US officials stressed that isn’t their aim. Defense Secretary Pete Hegseth said the strikes had the “limited” objective of eliminating Iran’s atomic program. Officials have said it’s too early to definitely assess damage.
There was no immediate indication of how the US will respond to Monday’s Iranian missile launch. The administration was anticipating that Iran would retaliate, and doesn’t want more military engagement in the region, CNN cited a senior White House official as saying.
The attack included at least six missiles fired toward Al Udeid — the regional headquarters for US Central Command, which oversees the American military in the region, and home to several thousand US service-members — according to a person familiar with the matter.
Today's show features:
- Bloomberg News National Security Team Leader Nick Wadhams on potential Iran retaliation and security back in the US
- Ariel Cohen, Senior Fellow at the Atlantic Council on Geopolitical Tensions in Middle East
- Torsten Slok, Chief Economist and Partner at Apollo Global Management
- and we Drive to the Close with Megan Horneman, Verdence Capital Advisors CIO
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
Well Iron fired missiles at a US air base, and
Cutter after promising it would respond proportionately and decisively to
President Trump's weekend air strikes on three of its nuclear facilities.
Cutter said the barrage at Aluded Base, the biggest such
US facility in the Middle East, was intercepted, and that
there were no casualties.
Speaker 3 (00:51):
Carol.
Speaker 2 (00:51):
For a look at US national security in the US's
role in global security, We're going to bring in Nick Wadams,
Bloomberg News National Security Team leader. He joins us from
our Washington DCA.
Speaker 4 (01:00):
Hey, Nick, good to have you here. I know it's
been a busy week and a busy day. We're trying
to understand a little bit what feels like military choreography,
maybe on the part of the US and on the
part of Iran. Right, missile strike on Cutter was telegraphed
and had been expected by the US and its allies,
according to a person familiar. And it's also you know,
you've got President Trump. He was telegraphing it's going to
(01:21):
be within two weeks. And so did that give Iran
a warning? You understand this world? Help me understand how
military works today?
Speaker 3 (01:30):
Right?
Speaker 5 (01:30):
I mean, so choreography is a really good word here.
There is a sort of delicate dance going on. After
the President telegraphed his plans well in advance and then
sort of tried to gauge what the potential reaction would be.
US carried out those strikes, and then afterwards had a
bunch of US officials go on TV and say, hey, listen,
(01:51):
this was a limited strike. It was aimed at the
nuclear program, not against Iran. Writ large, then Iran feels
it needs to retaliate, and then it wants to sort
for its domestic audience portray this as a very big,
overwhelming response. But then the indication we're getting from Cutter
and elsewhere, As you mentioned, this was telegraphed well in advance.
(02:13):
It targeted a base that had been largely evacuated of
valuable US military assets, So a symbolic show of force,
but it looks like when you dig a little bit. Actually,
the Iranian desire was not to cause too much damage,
So the interpretation there is okay, now they want to
push toward a potential new conversation with the US. They
(02:34):
want an off ramp. Two complicating factors to that. One noise,
of course, that Iran and Israel are still engaged in
tit for tat exchanges, so that conflict hasn't ended. The
other is, which we don't know, is this the end?
Is Iran planning further attacks? They haven't issued a statement
to say, hey, we're done here, let's move on.
Speaker 3 (02:52):
Right.
Speaker 2 (02:52):
That's a really good point. I mean, they did say
proportionately and decisively, this doesn't seem proportional to attacks on
three of its nuclear facilities. I think it doesn't take
a nuclear scientist to make that conclearsion. Nick, You know,
I was thinking about this over the weekend. Other presidents
have had the opportunity to strike Iran's nuclear targets. Did
(03:12):
they avoid it because of fears of retaliation?
Speaker 3 (03:16):
Yeah?
Speaker 5 (03:16):
I mean I think there were a lot of questions there.
The reasons why they avoided it. I mean, it was
seen as too risky potentially in terms of retaliation by Iran.
The other question is a matter of efficacy, and one
thing we don't know about these strikes how much they
actually obliterated the Iranian nuclear program, as President Trump claimed.
So there is a potential unintended consequence which as you
(03:39):
drive Iran's nuclear program deeper underground, both figuratively and literally.
So does this produce the outcomeing you want? The other is, obviously, well,
what are the third, fourth, fifth order consequence consequences of this,
the unknown unknowns that we don't know about. You look
at the Iraq War two thousand and three. Folks thought, okay,
we were going to be greeted as liberators when US
(04:01):
troops went in there, and then you look at what
a mess everything became, the rise of the Islamic State,
et cetera.
Speaker 3 (04:06):
So the question is is.
Speaker 5 (04:08):
This something Trump can just do and then get out
or does this lead to a whole new conflict the
likes of which we just can't imagine right now.
Speaker 4 (04:17):
Well, Nick, on a global security basis, I mean, what
are the implications and kind of optics of the US
actually getting involved, right. You know, that's one thing that
they're behind the scenes and helping out and supporting, But
they're involved.
Speaker 5 (04:31):
Right, and you know they're the first order consequences the
issue of what the potential Iranian retaliation might be in
the future, what this actually does to Iron's nuclear program.
But then you have the other element, which is the
United States just attacked a sovereign country even though the
US intelligence community assessed that there was no imminent threat
(04:55):
to the US. So you could call this deterrence or
a preventive strike. But is it you know, was it
too precipitous When you have a country like the US
that essentially says, hey, we're going to uphold this global
order and then condemn a country like Russia for an
attack on a sovereign country ie Ukraine, What does that
(05:18):
do to US legitimacy and questions around US authority when
it goes after a sovereign country like Iran. You know,
there's a concern that it's essentially opening up a Pandora's box, right,
and maybe opening it up to other countries doing the
same thing.
Speaker 4 (05:31):
All right, good to check in with you, Like I said,
I know you guys all there in DC are super busy.
Nick Wadams, Bloomberg News National Security Team leader, joining us
from our Washington d C burea.
Speaker 6 (05:40):
Nick, Thank you.
Speaker 2 (05:41):
Okay, So look at how US government is thinking about
potential retaliation from Iran. For more on how Iran navigates
after the US bombings over the weekend, we turned to
Arial Cohen, non resident Senior Fellow at the Atlantic Council's
Eurasia Center, also a member of the Council of Foreign Relations.
He joins us from Washington d C. Doctor Cohen, good
to have you with us this afternoon. I have a
lot of questions about proportional retaliation, but I want to
(06:04):
know what, in your view, Iran is actually capable of
right now? What is the state of Iran's military, it's
armed forces right now? What are they capable of?
Speaker 6 (06:15):
I believe that in a short range missile such as
the missiles that they fired against US based and Kutar
potentially US based in Iraq.
Speaker 3 (06:27):
And Syria, we may see more attacks.
Speaker 6 (06:33):
The main news here is that Iran went through sort
of kind of performative retaliation.
Speaker 3 (06:41):
This was not mother of old.
Speaker 6 (06:44):
Retaliations because a they signaled and b they use the
systems that were intercepted, and they knew that US and
Cutter could intercept their missiles. So what does it tell me?
Tell me that they did not throw the caution out
(07:05):
of the window. They probably had intervention from China because
China is a major customer poor Iranian oil. Up to
fifteen percent of Chinese oil and even more so of
Iranian oil goes to China and the Golf States, because
(07:27):
Qatar is a member of Golf Corporation Council, so is Amad.
Speaker 3 (07:32):
If they try to block the Strait of Horrormus, they.
Speaker 6 (07:36):
Would need to do it in the Omani waters, that's
where the passage is, so they would be in conflict
with all of the Golf Corporation Council, which is Arab
of course and Sunni. And then you could couch this
conflict in the in terms of Arab versus Iranian, Sunni versus.
Speaker 3 (08:00):
They did not want to do it.
Speaker 6 (08:01):
They're not there yet in terms of are they going
to do more retaliations. It really depends on the balance
of power in Tehran. We see reports that Ayatola is
in hiding and nowhere to be found. That Ayatola has
to sign everything, so I do believe that once the
(08:26):
elite in Tehran digests the severity of the blows both
Israeli and American, there will be massive changes in the regime.
Speaker 3 (08:38):
My sources are saying more than sixty percent.
Speaker 6 (08:42):
Chances that the Ayatollah will not stay here by the
end of this year.
Speaker 7 (08:48):
Regime change, wow, okay, better.
Speaker 6 (08:51):
Internal internal, not US imposed, not Israeli posed.
Speaker 3 (08:56):
But things will shift.
Speaker 6 (08:57):
And we know for years that i RGC, the Islamic
Revolutionary Guard a corn the.
Speaker 3 (09:06):
Fifth of the regime, is not happy with the rule
of the clerics. They want to run the show. They
want to control all the goodies.
Speaker 6 (09:15):
They are aware that the Iranian economy was run into
the ground by the clerics and the Iran is very isolated.
And as usual, they're different wings. They're more anti Western wing,
more radical wing, and more pragmatic wing.
Speaker 7 (09:29):
I have a couple questions. First of all, regime change.
Speaker 4 (09:34):
Will be for the better or we don't know, like
who is in the wings waiting to take over.
Speaker 3 (09:41):
Let's let's go down the list.
Speaker 6 (09:42):
I mentioned IRGC, and I mentioned that there's a split
within IRGC.
Speaker 3 (09:49):
This is the military wing of the Islamic regime.
Speaker 6 (09:54):
In addition, there's a regular army, which is less idea,
less ideological, less politicized. They are a separate body. Some
of these officers were officers back in the day, even
under the shop. Now of course that generation is gone.
Then they're liberals or technocratics in the regime. Then they're
(10:17):
the monarchists. The crown Prince of Iran, Reza lives about.
Speaker 3 (10:25):
What five miles from where I live in Potomac, Maryland.
Speaker 6 (10:28):
Yeah, And then they're the Mujahiden, the Marxist wing that
was fighting desperately with this regime.
Speaker 3 (10:38):
These are atheists and.
Speaker 6 (10:42):
Once violent. Some people call them terrorists. That's another far
left which so you see the spectrum and what the
islamister are doing. Them are monopolizing power. They're not transitioning
that pretty sophisticated modern society into some semblance of a
(11:04):
democratic machine that could balance the interest of different groups.
Speaker 4 (11:09):
So, doctor Coni dosick, if we do see a regime change,
or largely a regime change, is it better is such
a poor word, But is it better on the other side,
for the people of Iran, for Iron's role in the region,
and maybe even you know, globally.
Speaker 6 (11:28):
Look, this is a highly opaque situation, very difficult to predict.
I would say that if the system opens up, if
the system avoids a civil war, which is a possibility
also not necessarily a high possibility, but a possibility, if
the system brings more participation from the society.
Speaker 3 (11:51):
Imagine they have the urban.
Speaker 6 (11:55):
Dweller, the city society that is educated, a lot of
people whose college education. A lot of people are looking
towards the West, not towards China, not towards Russia to
model their society, and they're aware that women fifty percent
of the population are abused and severely.
Speaker 3 (12:16):
Oppressed by that regime.
Speaker 6 (12:19):
We saw nine hundred plus nine hundred and eighty two
people I believe in twenty twenty four killed. We see torture,
we see execution of gays, we see all kinds of brutal,
barbaric behavior that a lot of city dwellers, educated Iranians
are totally rejecting. There's a lot of sympathy towards the West,
(12:43):
towards the United States, and even towards Israel. And the
fact that the Israeli intelligence and other intelligences so effective
is because there is a lot of corporation by the
Iranians with Western intelligence services.
Speaker 2 (12:57):
That is fascinating to hear before even the possibility of
talking about a different regime in Tehran. I think there
are some questions now that Americans in the US military
and the President wants the answers to, For example, where
is the enriched uranium now? If it left fourdoh? Do
(13:21):
we have any idea?
Speaker 3 (13:22):
Absolutely, we don't know if it left fourdo. But I
can tell you one thing.
Speaker 6 (13:27):
That uranium is enriched to sixty percent, which is twenty
times more.
Speaker 3 (13:33):
Enriched than what they need for the.
Speaker 6 (13:36):
Civilian nuclear reactor for electric power generation. That was a
step before enriching to eighty ninety percent for the bomb.
They have enough uranium, according to open sources, to eight
or nine bombs. They could have taken that uranium at
sixty percent as they have it currently, package it into
(13:58):
regular explosion with regular explosives, containerize it and blow it
up in Israel, in the United States, in Europe, you
name it.
Speaker 3 (14:07):
So it's a clear and present danger.
Speaker 6 (14:10):
And I disagree with the intelligent community assessment and with
the gentleman who spoke before me, your security desk chief,
because no country builds a ballistic missile arsenal with long
range missiles that could reach Europe and are reaching Israel,
(14:30):
and all you need to do is add one more
stage to that missile to make it an ICBM.
Speaker 3 (14:37):
And Iran already is building.
Speaker 6 (14:39):
That capacity because they're putting satellites in space. So with
sixty percent enrichment, that a step just before putting it
in a warhead. And they can get the warhead technology
from North Korea, Russia, from China, from Pakistan. So they
are at a threshold country. And what the United States
(15:01):
and President Trump did was absolutely correct for the interest
of the United States.
Speaker 3 (15:06):
We do not forget that.
Speaker 6 (15:08):
Since ninety seventy nine, for forty six years, every Friday,
these people are chanting death to America, death to Israel,
and they killed over a thousand Americans, the tortured American officers,
military officers, the killed American servicemen in the Cobar towers,
et cetera.
Speaker 3 (15:25):
They are a hostile power and they what.
Speaker 6 (15:28):
Trump is trying to do is to put them down
a peg and possibly consumed doctor Villain Freeman.
Speaker 2 (15:35):
In your view, did the US go far enough with
the bombing campaign on Saturday evening into the early hours
of Sunday, or does the US need to do more.
Speaker 3 (15:46):
I think we went as far as we could.
Speaker 6 (15:49):
We used cutting edge technology, the heavy bunk bunker buster bombs,
and we need to do a damage assessment. Once we
have a damage assessment and it will be classified, I
won't know it then Trump, he said, Chief of Joint Chiefs.
(16:12):
The Head of Joint Chiefs will reassess it with the
National Security Council, with the intelligence community, reassess it and decide.
Speaker 3 (16:21):
But I think President Trump is trying to de escalate now.
Speaker 6 (16:25):
And I think what this attack is telling me that
the Iranians are playing ball. They want to walk away
from this situation because they realize they're kind of crazy.
Speaker 3 (16:38):
But they're not, you know, they're not stupid.
Speaker 6 (16:41):
They're trying to They're realizing that more bombing campaign, both
from Israel and from the United States may signal the
end of that regime.
Speaker 4 (16:51):
AH many more questions I'd love to ask you. Can
I just ask you thirty seconds? Does China, being somewhat
a lot allied with Ron, complicate things.
Speaker 7 (17:00):
Very quickly if you could?
Speaker 4 (17:01):
Like twenty five.
Speaker 6 (17:02):
Has a four hundred billion dollar investment agreement.
Speaker 3 (17:07):
I think it's twenty five.
Speaker 6 (17:08):
Years stretch, and they are buying a lot of Iranian.
Speaker 3 (17:13):
Oil, and they're doing a lot of other.
Speaker 6 (17:15):
Things the Chinese do infrastructure, roads, airports, etc. The Chinese
do not want that agreement to be destroyed. And I
would recommend to anybody who is engaged in Iran tell
the Chinese, don't worry, your investment is safe. Same thing
as we should have done with the Russians in Iraq.
Speaker 3 (17:35):
I advocated that back in.
Speaker 6 (17:36):
Two thousand and three, and the Bush administration did not
listen and we turned Russia against US.
Speaker 3 (17:43):
Now the Russians are being very cautious.
Speaker 6 (17:46):
The Russians had that defense agreement with Iran, but it
did not include mutual defense, mutual military activity. And the Chinese,
again it's very opaque. We do not know what they're supplying.
Possibly some miss cell technology too. Iran came from China,
we don't know.
Speaker 3 (18:06):
That for sure.
Speaker 6 (18:07):
But the Chinese are very very cautious because they don't
have the power projection capability in the Gulf like the
United States.
Speaker 4 (18:15):
Very interesting, Thank you so much, so appreciate your time today.
Eryl Cohen, non resident Senior Fellow at the Atlanta Council's
Eurasia Center and a member of the Council of Foreign Relations,
joining us from Washington, DC.
Speaker 1 (18:27):
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Speaker 2 (18:41):
Well against the backdrop of the war in the Middle East,
that the US is now involved in an ongoing tariff
trade war, we're just a few weeks from that July deadline,
rising oil prices, Carol, potential disruptions, and chipping through the
crucial strait of horror moves. The macro economic background is
certainly complex. There's a lot for investors to wade through.
Speaker 4 (18:59):
Yeah, absolutely, although risk go on in today's straight Torston's
Lack is chief economist partner of at Apollo Global Management,
joining us from New York. Tourston, you did send, first
of all, welcome, welcome, good to have you here. You
sent a note out this morning that included data for
ship crossings in the Strait of Hormus. It's Bloomberg data.
It does show decline in traffic both.
Speaker 7 (19:19):
West to east, east to west.
Speaker 4 (19:21):
Is this your main macroeconomic concern when it comes to
what we are watching in the Middle East? And the
potential for even further escalations escalation, and.
Speaker 7 (19:30):
I guess not just escalation, but a longer duration of conflict.
Speaker 8 (19:34):
I think the bigger picture really here is that we
already have an economy that is experiencing techflation. We have
terms higher means, higher inflation, lower GDP growth. We also
have restrictions on immigration, many deportations. Meaning if you lower
the labor falls at the moment, the administration has the
stated goal of lowering labor falls but about a million people.
Speaker 9 (19:55):
And of course if you do that.
Speaker 8 (19:56):
You would also begin to have more upward pressure on inflation,
specifically wa inflation, and of course also downward pressure on
employment and therefore economic activity.
Speaker 9 (20:05):
And if we add to that the risks here to
oil prices.
Speaker 8 (20:07):
Yes, I do understand that oil prices are now going
down and.
Speaker 9 (20:11):
Some special reasons for that.
Speaker 8 (20:12):
But the fear of course here is that if the
oil price increase that we've seen since the beginning of June,
if that is continuously hanging at the current levels or
even goes higher, of course that will also be staflation,
meaning putting up our pressure on inflation and downward pressure
on GDP.
Speaker 9 (20:28):
So, in summary, adding everything together, where we stand.
Speaker 8 (20:31):
At the moment, We just have that the economy is
hit by a number of shocks that have the same characteristics,
namely high inflation and lower.
Speaker 2 (20:39):
GDP Trsten, You've been beating this drum for a while,
and I was surprised because I read the notes that
you send. Perhaps I was surprised to hear j. Powell
essentially say last week that everything is okay, there are
no issues starting to form anywhere. That was the takeaway
I got. Maybe we'll hear something different tomorrow and Wednesday
(21:00):
when we hear from the Fed chair on Capitol Hill.
Do you think that the Fed chair is incorrect with
his assessment of the economy?
Speaker 8 (21:07):
Tim this is really really important because what's also very
interesting is that last week Chris Waller began to talk
about rapcut in July, and today we had Mickey Bowman
first talk about rapcot also now in July, and now
we also have goals by talking about that, Well, the
dust may have been cleared in the air and maybe
there's no room for cutting rates. That's very interesting. When
Japal last week very clearly said word for word, we
(21:29):
expect a meaningful increase in inflation over the coming months,
so it's telling you that this rise in inflation that's
coming as a result of oil prices already haven't gone up,
this as a result of tariffs already having of course
gone up, and also as a result of potential up
by pressure on wage inflation, that the FED is deciding
to almost look through the coming rise in inflation and
focus more on the worries about growth slowing down. So yes,
(21:52):
FED watching here at the moment is very interesting simply
because the dual mandate is torn in opposite directions.
Speaker 9 (21:59):
On the one hand, when inflation is going up, the
fetch would be hiking. On the other hand, where he
grows is slowing down, the fetcher be cutting. So where
do they put that weight? And the last few fitzpeakers
have clearly said, including.
Speaker 8 (22:08):
Today Will Goalsby and Bowman, that the focus should be
on growth slowing down. So that's why we are probably
moving more towards more rate cuts coming faster than what
the marker was pricing just even a few days ago.
Speaker 4 (22:19):
I just want to add in one caveat from Austin
Gooseby towards him where he said, of course, Federal Reserve
Bank of Chicago President Austin Goolsby. He says the Central
Bank could resume interest rates cuts if the inflation hit
from tariff's remains subdued. Don't we have to kind of
wait a few months to see because ultimately we're going
(22:40):
to find out hopefully very soon in terms of what
the tariffs really are and how they play out. But
at any rate it is going to be higher than
it was before. There will be some cost pressures potentially.
Speaker 8 (22:52):
Absolutely, And that's why what's really interesting in Harold about
this issue and this debate is, of course this difference
between what Jappal said Wednesday and now we've had three
speakers since then that go out and basically say something
a little bit different. They are all of course conditioning
on saying if inflation is not a problem, then we'll
be cutting.
Speaker 9 (23:11):
But here the key question becomes what does a problem mean?
Speaker 8 (23:14):
If I on my Blueberg screen side ECFC go and
I start looking at the consentuous forecast to inflation, you
will see that the expectation is inflation will go up
from two point six in this quarter to three point.
Speaker 9 (23:25):
Three by the end of the year.
Speaker 8 (23:26):
That's a fairly significant expected increase in invlation. And is
the fit just going to ignore that rise and say, hey,
we're just going to cut interest rates and ignore inflation
is going up. That's why it still remains to be
seen with the next FROMC meeting what they actually are
as a committee thinking, because it's very clear that these
individual members that are moving in a direction of more cuts.
You're right that there are more nuances as both Gostby
(23:49):
was also pointing out his speech, but definitely also in
contrast to what Jpal was saying last week.
Speaker 4 (23:54):
Yeah, it's amazing how fast and furious it's coming. Having
said that, so then the idea of stag vers, I mean,
I know we've talked about it, We've talked about it
a lot here at Bloomberg.
Speaker 7 (24:03):
Is that still a high possibility?
Speaker 8 (24:06):
I still think that it's a high possible at least
this is what the consensus is expecting. If I do
look at that Bloomberg screen that shows you the consensus
expectation again ECFC go, then it will tell you that
there is the expectation inflation is going up.
Speaker 9 (24:18):
And this was also m GDP growing down.
Speaker 8 (24:19):
This was also what the Fed did last week and
the CP in the forecast that the Fed published, they
raised inflation. This year to three percent by the end
of the year, and they lower grows.
Speaker 9 (24:29):
One point four percent.
Speaker 8 (24:31):
That means quite uncomfortable for investors scenario, because should I
put weight on inflation going up on growth slowing down?
In terms of what the FED will do, And now
the Fed seems to be leaning, at least with the
lateste from symbombers towards saying, hey, we're just going to
ignore the rise in inflation is probably just temporary, and
then we're.
Speaker 9 (24:47):
Going to cut rates.
Speaker 8 (24:47):
But that is where the debate needs to be again
more clear in terms of what is it that they're
saying today reads it to what Jip how actually said
last Wednesday.
Speaker 2 (24:55):
You know, I'm curious because look, you're an economist, you're
you're you're not going to tell us what stocks to
buy or you know what equities or what assets to own.
But you do work for an asset manager, and the
idea is that you advise people there about what to do.
What should investors be doing in a situation like this,
because by the sound of it, it seems like maybe
(25:17):
you think the equity market has it wrong right now.
Speaker 9 (25:19):
I do think the public equity market has it wrong.
Speaker 8 (25:21):
So here's the answer to your question, what you'ld investors do,
they should do three things. The key outcome of everything
we're talking about here is that interest rates will be
higher for longer, meaning we're not going down to zero
interest rates or to dramatically low interest rates. Yes, the
market is pricing somewhere between one and two cuts this year,
but that's not much.
Speaker 9 (25:40):
That means that the level of interest rates this year
will still be high and next year.
Speaker 8 (25:43):
The Fed also just published their forecast saying that interust
rates will be high.
Speaker 9 (25:47):
And what should you do when interest rates are higher
for longer? You should be up in.
Speaker 8 (25:50):
Quality opt ecology and credit and private credit. That means
first lean seeing as secure a top of the campus
structure to get the best protection you can get against
the risk of a sharper slowdown. But it must be
high quality assets, high quality credit to make sure that
you're protected against the downside risks that comes with this
risk of growth slowing down. At the same time, the
second thing that's interesting, Yeah, two more things, Carol. Thing
(26:12):
that's interesting for investors is, of course, as the things
that comes with dislocation funds. That means secondaries in pe,
that means these location funds also in when it comes.
Speaker 9 (26:21):
To the broader entry point for private credit and for markets.
Speaker 8 (26:24):
And the last thing that's interesting is of course thematic
investing things that as five ways, so you can get
from the trade wall, so that will be infrastructure, data center, inergy, sensation,
climate thinks, the long duration assets that have nothing to do
with in near term outlook.
Speaker 4 (26:35):
All right, fifteen seconds on a tenure? Is five percent
not even a consideration in your world?
Speaker 7 (26:42):
Or could it happen?
Speaker 8 (26:44):
I absolutely think that long term interstrates are going up.
So solter interstrates are going up because of inflation. Long
ter interstrates are going up because of partly inflation, but
also because of the fiscal challenges. So there's upward pressure
on the whole yield curve for these different reasons.
Speaker 4 (26:57):
Even five percent, yes, sir, no, real quick? Yeah you
think you said yes? I think I saw them say yes.
Speaker 7 (27:01):
It's touristed.
Speaker 4 (27:02):
Yes, thank you, Turstan slack Over at Apollo Global Management.
Speaker 7 (27:05):
This is Bloomberg Business Weekdaily.
Speaker 1 (27:09):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 3 (27:29):
Mac.
Speaker 1 (27:30):
I'll a beout.
Speaker 8 (27:30):
You let me drive.
Speaker 3 (27:31):
Oh no, no, no no, this is not a toy.
Speaker 6 (27:33):
He's going to honey.
Speaker 3 (27:36):
Please how the gravel? Listen? I want to drive.
Speaker 8 (27:40):
It's a good question, good time.
Speaker 3 (27:47):
This is the drive to the clothes dot Com for me.
Speaker 9 (27:50):
Thing well dri Jona don.
Speaker 3 (27:52):
On Bloomberg Radio.
Speaker 7 (27:53):
All right, TikTok everybody.
Speaker 4 (27:54):
Yeah, we got about just under seventeen minutes. Are going
to we wrap up the trade on this Monday. It's
been an interesting one, maybe not as expected. We've seen
the markets kind of all over the place, and right
now we are hovering near our highs of the day.
Speaker 7 (28:07):
So we're up almost eight.
Speaker 4 (28:08):
Tens of a percent on the S and P five hundred,
up seven tens of a percent in the Dow Jones
Industrial Average. More than three hundred point moved to the
upside for the Dow NASTEQ one hundred up almost two
hundred points. Tim good for a gain of about nine
tens of a percent, But keep in mind we were
lower when the initial strikes by iron on cutter, and
then I think the perception was that it wasn't as
(28:32):
maybe big as it could have been, or as devastating, I.
Speaker 7 (28:36):
Guess, yeah. And so we saw markets bounce off in
a big way. Oil has been down.
Speaker 2 (28:41):
You know, I think what I found pretty shocking just
being and this is the day when you want to
be a fly on a wall in a newsroom, because
we're following the headlines. The markets are moving with the headlines.
At twelve thirty three pm Wall Street time, we saw
stocks fall because the Wall Street jonnel reported that Ron
moved launchers for a possible attack on US forces. And
(29:04):
then less than an hour later we get this headline
Cutter says, it's successfully intercepted Iran missile attack. We see
a breath of relief in the markets, and we start
to see them move higher.
Speaker 7 (29:16):
Yeah, exactly.
Speaker 4 (29:17):
If I'm going back to crude futures, which we're up
more than six percent at they're high. Today they're down
almost seven percent as we speak. I go back to
our conversation with Dick Wanham's about the choreography, like I just.
Speaker 7 (29:28):
There's you know, we'll see, we'll see where this all lands.
Speaker 2 (29:31):
I want to see what Megan Horneman has to say
about this. She's chief investment officer at Burden's Capital Advisor.
She joins us from Hunt Valley, Maryland. Meghan, I want
to let everybody know that in the notes that you
sent out today, you make the point that you are
market specialists, not political experts. So we're not going to
ask you about the politics of this. We're going to
ask you about the market reaction. It's been muted on.
Speaker 3 (29:52):
The equity side.
Speaker 2 (29:53):
We saw oil go up, now oil go down. Why
a muted reaction to a military operation and esc adding
conflicts such as this.
Speaker 10 (30:03):
So I think coming in this morning and we can
talk about equities first. When we came in this morning,
it was it was it was a muted reaction. Equity
futures were actually up before the market open, and then
it was relatively you know, positive, but not by much.
And I think that markets were just awaiting what was
going to happen next. And I think the surprise you
know that that Qatar had was being you know, Iran
(30:24):
and launched missiles against Qatar. This the markets reacted to
the fact that this was a better than expected I
guess reaction from Iran. So what we saw was you know,
the markets down when the news broke that they were
going to attack guitar and then them come all the
way back now sitting here near record highs as the
markets seeing that, hey, that this was not that big
(30:46):
of a move. So I think the market's just celebrating
the fact that there hasn't been anything major yet and
the retaliation efforts that Iran has taken thus far haven't
been that detrimental.
Speaker 7 (30:57):
Are you surprised? I mean, I think, you know, we
came in and it felt.
Speaker 4 (31:01):
A little quiet, and then of course the headlines you know,
started around midday in terms of what's going on and cutter,
but it just felt like an uneasy quiet. Certainly this
morning we were surprised by the market reaction or what
does it tell you, maybe more longer term or maybe nothing.
Speaker 3 (31:19):
Now.
Speaker 10 (31:19):
I was a bit surprised this morning that it was
so quiet. Even the VIX index really didn't move much.
I mean, it was more than less than half of
what we saw in the during the liberation spike, what
we saw in volatility. So I was a bit surprised
that the equity markets relatively muted. I'm a bit more
surprised that oil futures have sold off so much. I
don't think that's behind US. I do think any disruption
(31:42):
in the Middle East can have an impact on oil prices,
so I'm a little surprised at how quickly they decline.
I mean, we're down on the day, you know that.
That's surprising when we're looking at such a dramatic impact
that we saw over the weekend in Iran.
Speaker 4 (31:55):
I think we're still up though about I want to say,
about four percent since that initial Israel attack on Iran.
So I think we're still up. But you're right today,
you know we're down a lot. We've seen actually a
pretty big swing. So what do you do for clients
right now?
Speaker 10 (32:12):
Well, first of all, we have to not be complacent.
We have to realize that, yes, we haven't seen any
major retaliatory impacts from Iran. It does look like we've
weakened them in some respect. But don't be complacent either.
We still do have a conflict in the Middle East
and that can have impacts on the market. And what
we've seen with history, if you look at any of
(32:32):
the different military actions the US has taken, they tend
to see some weakness, but positive equity markets in the
long term. So that's what we're telling clients right now.
We're focusing on the long term. We're not going to
get emotional and just sell everything because of this conflict. Instead,
we're going to look at long term fundamentals us economy.
The FED still is on the table to be able
(32:53):
to cut rates this year. The economy is weakening but
not completely falling off a cliff, and we're seeing that,
you know, consumers, The confidence has been very weak, but
consumers still are out there, So there are some positives
to note. Don't forget. There's several things though, coming up
in the next couple of weeks where we also don't
want to be complacent. We have earning season picking up,
(33:14):
and then we still have that July ninth deadline. From
a tariff perspective, don't be complacent on some of these
other risks that are out there. So don't sell into this.
But I wouldn't necessarily be buying into this either, which what.
Speaker 2 (33:25):
Changes your view though, what makes you either run for
the hills or says, Okay, we better strap in for
the long haul here.
Speaker 10 (33:34):
I think if the if we start to see this
intensify and broaden out beyond just Iran and Israel. If
other countries get involved, that obviously wouldn't.
Speaker 2 (33:42):
Make anathy like the US did over the weekend.
Speaker 10 (33:45):
Well, the US again has been trying to get Iran
to the negotiating table for many many months, and this
has failed and failed and failed. And it's not just
you know, this has been many administrations. So again the
US did get get involved in this. The US has
also said this isn't a declaration of war. The other countries,
where we get China, Russia, some of these other big
(34:06):
powerhouses involved, that's going to be a concern for me.
If it does escalate beyond just these missiles that are
going into Israel that are being intercepted by their dome,
that's a concern as well because they are one of
our key allies.
Speaker 7 (34:18):
Meghan, thanks so much. Megan Horneman.
Speaker 4 (34:20):
She's chief Investment Officer of at Vernon's Capital Advisors, joining
us from Maryland on this Monday.
Speaker 1 (34:26):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
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(34:47):
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(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
Well Iron fired missiles at a US air base, and
Cutter after promising it would respond proportionately and decisively to
President Trump's weekend air strikes on three of its nuclear facilities.
Cutter said the barrage at Aluded Base, the biggest such
US facility in the Middle East, was intercepted, and that
there were no casualties.
Speaker 3 (00:51):
Carol.
Speaker 2 (00:51):
For a look at US national security in the US's
role in global security, We're going to bring in Nick Wadams,
Bloomberg News National Security Team leader. He joins us from
our Washington DCA.
Speaker 4 (01:00):
Hey, Nick, good to have you here. I know it's
been a busy week and a busy day. We're trying
to understand a little bit what feels like military choreography,
maybe on the part of the US and on the
part of Iran. Right, missile strike on Cutter was telegraphed
and had been expected by the US and its allies,
according to a person familiar. And it's also you know,
you've got President Trump. He was telegraphing it's going to
(01:21):
be within two weeks. And so did that give Iran
a warning? You understand this world? Help me understand how
military works today?
Speaker 3 (01:30):
Right?
Speaker 5 (01:30):
I mean, so choreography is a really good word here.
There is a sort of delicate dance going on. After
the President telegraphed his plans well in advance and then
sort of tried to gauge what the potential reaction would be.
US carried out those strikes, and then afterwards had a
bunch of US officials go on TV and say, hey, listen,
(01:51):
this was a limited strike. It was aimed at the
nuclear program, not against Iran. Writ large, then Iran feels
it needs to retaliate, and then it wants to sort
for its domestic audience portray this as a very big,
overwhelming response. But then the indication we're getting from Cutter
and elsewhere, As you mentioned, this was telegraphed well in advance.
(02:13):
It targeted a base that had been largely evacuated of
valuable US military assets, So a symbolic show of force,
but it looks like when you dig a little bit. Actually,
the Iranian desire was not to cause too much damage,
So the interpretation there is okay, now they want to
push toward a potential new conversation with the US. They
(02:34):
want an off ramp. Two complicating factors to that. One noise,
of course, that Iran and Israel are still engaged in
tit for tat exchanges, so that conflict hasn't ended. The
other is, which we don't know, is this the end?
Is Iran planning further attacks? They haven't issued a statement
to say, hey, we're done here, let's move on.
Speaker 3 (02:52):
Right.
Speaker 2 (02:52):
That's a really good point. I mean, they did say
proportionately and decisively, this doesn't seem proportional to attacks on
three of its nuclear facilities. I think it doesn't take
a nuclear scientist to make that conclearsion. Nick, You know,
I was thinking about this over the weekend. Other presidents
have had the opportunity to strike Iran's nuclear targets. Did
(03:12):
they avoid it because of fears of retaliation?
Speaker 3 (03:16):
Yeah?
Speaker 5 (03:16):
I mean I think there were a lot of questions there.
The reasons why they avoided it. I mean, it was
seen as too risky potentially in terms of retaliation by Iran.
The other question is a matter of efficacy, and one
thing we don't know about these strikes how much they
actually obliterated the Iranian nuclear program, as President Trump claimed.
So there is a potential unintended consequence which as you
(03:39):
drive Iran's nuclear program deeper underground, both figuratively and literally.
So does this produce the outcomeing you want? The other is, obviously, well,
what are the third, fourth, fifth order consequence consequences of this,
the unknown unknowns that we don't know about. You look
at the Iraq War two thousand and three. Folks thought, okay,
we were going to be greeted as liberators when US
(04:01):
troops went in there, and then you look at what
a mess everything became, the rise of the Islamic State,
et cetera.
Speaker 3 (04:06):
So the question is is.
Speaker 5 (04:08):
This something Trump can just do and then get out
or does this lead to a whole new conflict the
likes of which we just can't imagine right now.
Speaker 4 (04:17):
Well, Nick, on a global security basis, I mean, what
are the implications and kind of optics of the US
actually getting involved, right. You know, that's one thing that
they're behind the scenes and helping out and supporting, But
they're involved.
Speaker 5 (04:31):
Right, and you know they're the first order consequences the
issue of what the potential Iranian retaliation might be in
the future, what this actually does to Iron's nuclear program.
But then you have the other element, which is the
United States just attacked a sovereign country even though the
US intelligence community assessed that there was no imminent threat
(04:55):
to the US. So you could call this deterrence or
a preventive strike. But is it you know, was it
too precipitous When you have a country like the US
that essentially says, hey, we're going to uphold this global
order and then condemn a country like Russia for an
attack on a sovereign country ie Ukraine, What does that
(05:18):
do to US legitimacy and questions around US authority when
it goes after a sovereign country like Iran. You know,
there's a concern that it's essentially opening up a Pandora's box, right,
and maybe opening it up to other countries doing the
same thing.
Speaker 4 (05:31):
All right, good to check in with you, Like I said,
I know you guys all there in DC are super busy.
Nick Wadams, Bloomberg News National Security Team leader, joining us
from our Washington d C burea.
Speaker 6 (05:40):
Nick, Thank you.
Speaker 2 (05:41):
Okay, So look at how US government is thinking about
potential retaliation from Iran. For more on how Iran navigates
after the US bombings over the weekend, we turned to
Arial Cohen, non resident Senior Fellow at the Atlantic Council's
Eurasia Center, also a member of the Council of Foreign Relations.
He joins us from Washington d C. Doctor Cohen, good
to have you with us this afternoon. I have a
lot of questions about proportional retaliation, but I want to
(06:04):
know what, in your view, Iran is actually capable of
right now? What is the state of Iran's military, it's
armed forces right now? What are they capable of?
Speaker 6 (06:15):
I believe that in a short range missile such as
the missiles that they fired against US based and Kutar
potentially US based in Iraq.
Speaker 3 (06:27):
And Syria, we may see more attacks.
Speaker 6 (06:33):
The main news here is that Iran went through sort
of kind of performative retaliation.
Speaker 3 (06:41):
This was not mother of old.
Speaker 6 (06:44):
Retaliations because a they signaled and b they use the
systems that were intercepted, and they knew that US and
Cutter could intercept their missiles. So what does it tell me?
Tell me that they did not throw the caution out
(07:05):
of the window. They probably had intervention from China because
China is a major customer poor Iranian oil. Up to
fifteen percent of Chinese oil and even more so of
Iranian oil goes to China and the Golf States, because
(07:27):
Qatar is a member of Golf Corporation Council, so is Amad.
Speaker 3 (07:32):
If they try to block the Strait of Horrormus, they.
Speaker 6 (07:36):
Would need to do it in the Omani waters, that's
where the passage is, so they would be in conflict
with all of the Golf Corporation Council, which is Arab
of course and Sunni. And then you could couch this
conflict in the in terms of Arab versus Iranian, Sunni versus.
Speaker 3 (08:00):
They did not want to do it.
Speaker 6 (08:01):
They're not there yet in terms of are they going
to do more retaliations. It really depends on the balance
of power in Tehran. We see reports that Ayatola is
in hiding and nowhere to be found. That Ayatola has
to sign everything, so I do believe that once the
(08:26):
elite in Tehran digests the severity of the blows both
Israeli and American, there will be massive changes in the regime.
Speaker 3 (08:38):
My sources are saying more than sixty percent.
Speaker 6 (08:42):
Chances that the Ayatollah will not stay here by the
end of this year.
Speaker 7 (08:48):
Regime change, wow, okay, better.
Speaker 6 (08:51):
Internal internal, not US imposed, not Israeli posed.
Speaker 3 (08:56):
But things will shift.
Speaker 6 (08:57):
And we know for years that i RGC, the Islamic
Revolutionary Guard a corn the.
Speaker 3 (09:06):
Fifth of the regime, is not happy with the rule
of the clerics. They want to run the show. They
want to control all the goodies.
Speaker 6 (09:15):
They are aware that the Iranian economy was run into
the ground by the clerics and the Iran is very isolated.
And as usual, they're different wings. They're more anti Western wing,
more radical wing, and more pragmatic wing.
Speaker 7 (09:29):
I have a couple questions. First of all, regime change.
Speaker 4 (09:34):
Will be for the better or we don't know, like
who is in the wings waiting to take over.
Speaker 3 (09:41):
Let's let's go down the list.
Speaker 6 (09:42):
I mentioned IRGC, and I mentioned that there's a split
within IRGC.
Speaker 3 (09:49):
This is the military wing of the Islamic regime.
Speaker 6 (09:54):
In addition, there's a regular army, which is less idea,
less ideological, less politicized. They are a separate body. Some
of these officers were officers back in the day, even
under the shop. Now of course that generation is gone.
Then they're liberals or technocratics in the regime. Then they're
(10:17):
the monarchists. The crown Prince of Iran, Reza lives about.
Speaker 3 (10:25):
What five miles from where I live in Potomac, Maryland.
Speaker 6 (10:28):
Yeah, And then they're the Mujahiden, the Marxist wing that
was fighting desperately with this regime.
Speaker 3 (10:38):
These are atheists and.
Speaker 6 (10:42):
Once violent. Some people call them terrorists. That's another far
left which so you see the spectrum and what the
islamister are doing. Them are monopolizing power. They're not transitioning
that pretty sophisticated modern society into some semblance of a
(11:04):
democratic machine that could balance the interest of different groups.
Speaker 4 (11:09):
So, doctor Coni dosick, if we do see a regime change,
or largely a regime change, is it better is such
a poor word, But is it better on the other side,
for the people of Iran, for Iron's role in the region,
and maybe even you know, globally.
Speaker 6 (11:28):
Look, this is a highly opaque situation, very difficult to predict.
I would say that if the system opens up, if
the system avoids a civil war, which is a possibility
also not necessarily a high possibility, but a possibility, if
the system brings more participation from the society.
Speaker 3 (11:51):
Imagine they have the urban.
Speaker 6 (11:55):
Dweller, the city society that is educated, a lot of
people whose college education. A lot of people are looking
towards the West, not towards China, not towards Russia to
model their society, and they're aware that women fifty percent
of the population are abused and severely.
Speaker 3 (12:16):
Oppressed by that regime.
Speaker 6 (12:19):
We saw nine hundred plus nine hundred and eighty two
people I believe in twenty twenty four killed. We see torture,
we see execution of gays, we see all kinds of brutal,
barbaric behavior that a lot of city dwellers, educated Iranians
are totally rejecting. There's a lot of sympathy towards the West,
(12:43):
towards the United States, and even towards Israel. And the
fact that the Israeli intelligence and other intelligences so effective
is because there is a lot of corporation by the
Iranians with Western intelligence services.
Speaker 2 (12:57):
That is fascinating to hear before even the possibility of
talking about a different regime in Tehran. I think there
are some questions now that Americans in the US military
and the President wants the answers to, For example, where
is the enriched uranium now? If it left fourdoh? Do
(13:21):
we have any idea?
Speaker 3 (13:22):
Absolutely, we don't know if it left fourdo. But I
can tell you one thing.
Speaker 6 (13:27):
That uranium is enriched to sixty percent, which is twenty
times more.
Speaker 3 (13:33):
Enriched than what they need for the.
Speaker 6 (13:36):
Civilian nuclear reactor for electric power generation. That was a
step before enriching to eighty ninety percent for the bomb.
They have enough uranium, according to open sources, to eight
or nine bombs. They could have taken that uranium at
sixty percent as they have it currently, package it into
(13:58):
regular explosion with regular explosives, containerize it and blow it
up in Israel, in the United States, in Europe, you
name it.
Speaker 3 (14:07):
So it's a clear and present danger.
Speaker 6 (14:10):
And I disagree with the intelligent community assessment and with
the gentleman who spoke before me, your security desk chief,
because no country builds a ballistic missile arsenal with long
range missiles that could reach Europe and are reaching Israel,
(14:30):
and all you need to do is add one more
stage to that missile to make it an ICBM.
Speaker 3 (14:37):
And Iran already is building.
Speaker 6 (14:39):
That capacity because they're putting satellites in space. So with
sixty percent enrichment, that a step just before putting it
in a warhead. And they can get the warhead technology
from North Korea, Russia, from China, from Pakistan. So they
are at a threshold country. And what the United States
(15:01):
and President Trump did was absolutely correct for the interest
of the United States.
Speaker 3 (15:06):
We do not forget that.
Speaker 6 (15:08):
Since ninety seventy nine, for forty six years, every Friday,
these people are chanting death to America, death to Israel,
and they killed over a thousand Americans, the tortured American officers,
military officers, the killed American servicemen in the Cobar towers,
et cetera.
Speaker 3 (15:25):
They are a hostile power and they what.
Speaker 6 (15:28):
Trump is trying to do is to put them down
a peg and possibly consumed doctor Villain Freeman.
Speaker 2 (15:35):
In your view, did the US go far enough with
the bombing campaign on Saturday evening into the early hours
of Sunday, or does the US need to do more.
Speaker 3 (15:46):
I think we went as far as we could.
Speaker 6 (15:49):
We used cutting edge technology, the heavy bunk bunker buster bombs,
and we need to do a damage assessment. Once we
have a damage assessment and it will be classified, I
won't know it then Trump, he said, Chief of Joint Chiefs.
(16:12):
The Head of Joint Chiefs will reassess it with the
National Security Council, with the intelligence community, reassess it and decide.
Speaker 3 (16:21):
But I think President Trump is trying to de escalate now.
Speaker 6 (16:25):
And I think what this attack is telling me that
the Iranians are playing ball. They want to walk away
from this situation because they realize they're kind of crazy.
Speaker 3 (16:38):
But they're not, you know, they're not stupid.
Speaker 6 (16:41):
They're trying to They're realizing that more bombing campaign, both
from Israel and from the United States may signal the
end of that regime.
Speaker 4 (16:51):
AH many more questions I'd love to ask you. Can
I just ask you thirty seconds? Does China, being somewhat
a lot allied with Ron, complicate things.
Speaker 7 (17:00):
Very quickly if you could?
Speaker 4 (17:01):
Like twenty five.
Speaker 6 (17:02):
Has a four hundred billion dollar investment agreement.
Speaker 3 (17:07):
I think it's twenty five.
Speaker 6 (17:08):
Years stretch, and they are buying a lot of Iranian.
Speaker 3 (17:13):
Oil, and they're doing a lot of other.
Speaker 6 (17:15):
Things the Chinese do infrastructure, roads, airports, etc. The Chinese
do not want that agreement to be destroyed. And I
would recommend to anybody who is engaged in Iran tell
the Chinese, don't worry, your investment is safe. Same thing
as we should have done with the Russians in Iraq.
Speaker 3 (17:35):
I advocated that back in.
Speaker 6 (17:36):
Two thousand and three, and the Bush administration did not
listen and we turned Russia against US.
Speaker 3 (17:43):
Now the Russians are being very cautious.
Speaker 6 (17:46):
The Russians had that defense agreement with Iran, but it
did not include mutual defense, mutual military activity. And the Chinese,
again it's very opaque. We do not know what they're supplying.
Possibly some miss cell technology too. Iran came from China,
we don't know.
Speaker 3 (18:06):
That for sure.
Speaker 6 (18:07):
But the Chinese are very very cautious because they don't
have the power projection capability in the Gulf like the
United States.
Speaker 4 (18:15):
Very interesting, Thank you so much, so appreciate your time today.
Eryl Cohen, non resident Senior Fellow at the Atlanta Council's
Eurasia Center and a member of the Council of Foreign Relations,
joining us from Washington, DC.
Speaker 1 (18:27):
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Speaker 2 (18:41):
Well against the backdrop of the war in the Middle East,
that the US is now involved in an ongoing tariff
trade war, we're just a few weeks from that July deadline,
rising oil prices, Carol, potential disruptions, and chipping through the
crucial strait of horror moves. The macro economic background is
certainly complex. There's a lot for investors to wade through.
Speaker 4 (18:59):
Yeah, absolutely, although risk go on in today's straight Torston's
Lack is chief economist partner of at Apollo Global Management,
joining us from New York. Tourston, you did send, first
of all, welcome, welcome, good to have you here. You
sent a note out this morning that included data for
ship crossings in the Strait of Hormus. It's Bloomberg data.
It does show decline in traffic both.
Speaker 7 (19:19):
West to east, east to west.
Speaker 4 (19:21):
Is this your main macroeconomic concern when it comes to
what we are watching in the Middle East? And the
potential for even further escalations escalation, and.
Speaker 7 (19:30):
I guess not just escalation, but a longer duration of conflict.
Speaker 8 (19:34):
I think the bigger picture really here is that we
already have an economy that is experiencing techflation. We have
terms higher means, higher inflation, lower GDP growth. We also
have restrictions on immigration, many deportations. Meaning if you lower
the labor falls at the moment, the administration has the
stated goal of lowering labor falls but about a million people.
Speaker 9 (19:55):
And of course if you do that.
Speaker 8 (19:56):
You would also begin to have more upward pressure on inflation,
specifically wa inflation, and of course also downward pressure on
employment and therefore economic activity.
Speaker 9 (20:05):
And if we add to that the risks here to
oil prices.
Speaker 8 (20:07):
Yes, I do understand that oil prices are now going
down and.
Speaker 9 (20:11):
Some special reasons for that.
Speaker 8 (20:12):
But the fear of course here is that if the
oil price increase that we've seen since the beginning of June,
if that is continuously hanging at the current levels or
even goes higher, of course that will also be staflation,
meaning putting up our pressure on inflation and downward pressure
on GDP.
Speaker 9 (20:28):
So, in summary, adding everything together, where we stand.
Speaker 8 (20:31):
At the moment, We just have that the economy is
hit by a number of shocks that have the same characteristics,
namely high inflation and lower.
Speaker 2 (20:39):
GDP Trsten, You've been beating this drum for a while,
and I was surprised because I read the notes that
you send. Perhaps I was surprised to hear j. Powell
essentially say last week that everything is okay, there are
no issues starting to form anywhere. That was the takeaway
I got. Maybe we'll hear something different tomorrow and Wednesday
(21:00):
when we hear from the Fed chair on Capitol Hill.
Do you think that the Fed chair is incorrect with
his assessment of the economy?
Speaker 8 (21:07):
Tim this is really really important because what's also very
interesting is that last week Chris Waller began to talk
about rapcut in July, and today we had Mickey Bowman
first talk about rapcot also now in July, and now
we also have goals by talking about that, Well, the
dust may have been cleared in the air and maybe
there's no room for cutting rates. That's very interesting. When
Japal last week very clearly said word for word, we
(21:29):
expect a meaningful increase in inflation over the coming months,
so it's telling you that this rise in inflation that's
coming as a result of oil prices already haven't gone up,
this as a result of tariffs already having of course
gone up, and also as a result of potential up
by pressure on wage inflation, that the FED is deciding
to almost look through the coming rise in inflation and
focus more on the worries about growth slowing down. So yes,
(21:52):
FED watching here at the moment is very interesting simply
because the dual mandate is torn in opposite directions.
Speaker 9 (21:59):
On the one hand, when inflation is going up, the
fetch would be hiking. On the other hand, where he
grows is slowing down, the fetcher be cutting. So where
do they put that weight? And the last few fitzpeakers
have clearly said, including.
Speaker 8 (22:08):
Today Will Goalsby and Bowman, that the focus should be
on growth slowing down. So that's why we are probably
moving more towards more rate cuts coming faster than what
the marker was pricing just even a few days ago.
Speaker 4 (22:19):
I just want to add in one caveat from Austin
Gooseby towards him where he said, of course, Federal Reserve
Bank of Chicago President Austin Goolsby. He says the Central
Bank could resume interest rates cuts if the inflation hit
from tariff's remains subdued. Don't we have to kind of
wait a few months to see because ultimately we're going
(22:40):
to find out hopefully very soon in terms of what
the tariffs really are and how they play out. But
at any rate it is going to be higher than
it was before. There will be some cost pressures potentially.
Speaker 8 (22:52):
Absolutely, And that's why what's really interesting in Harold about
this issue and this debate is, of course this difference
between what Jappal said Wednesday and now we've had three
speakers since then that go out and basically say something
a little bit different. They are all of course conditioning
on saying if inflation is not a problem, then we'll
be cutting.
Speaker 9 (23:11):
But here the key question becomes what does a problem mean?
Speaker 8 (23:14):
If I on my Blueberg screen side ECFC go and
I start looking at the consentuous forecast to inflation, you
will see that the expectation is inflation will go up
from two point six in this quarter to three point.
Speaker 9 (23:25):
Three by the end of the year.
Speaker 8 (23:26):
That's a fairly significant expected increase in invlation. And is
the fit just going to ignore that rise and say, hey,
we're just going to cut interest rates and ignore inflation
is going up. That's why it still remains to be
seen with the next FROMC meeting what they actually are
as a committee thinking, because it's very clear that these
individual members that are moving in a direction of more cuts.
You're right that there are more nuances as both Gostby
(23:49):
was also pointing out his speech, but definitely also in
contrast to what Jpal was saying last week.
Speaker 4 (23:54):
Yeah, it's amazing how fast and furious it's coming. Having
said that, so then the idea of stag vers, I mean,
I know we've talked about it, We've talked about it
a lot here at Bloomberg.
Speaker 7 (24:03):
Is that still a high possibility?
Speaker 8 (24:06):
I still think that it's a high possible at least
this is what the consensus is expecting. If I do
look at that Bloomberg screen that shows you the consensus
expectation again ECFC go, then it will tell you that
there is the expectation inflation is going up.
Speaker 9 (24:18):
And this was also m GDP growing down.
Speaker 8 (24:19):
This was also what the Fed did last week and
the CP in the forecast that the Fed published, they
raised inflation. This year to three percent by the end
of the year, and they lower grows.
Speaker 9 (24:29):
One point four percent.
Speaker 8 (24:31):
That means quite uncomfortable for investors scenario, because should I
put weight on inflation going up on growth slowing down?
In terms of what the FED will do, And now
the Fed seems to be leaning, at least with the
lateste from symbombers towards saying, hey, we're just going to
ignore the rise in inflation is probably just temporary, and
then we're.
Speaker 9 (24:47):
Going to cut rates.
Speaker 8 (24:47):
But that is where the debate needs to be again
more clear in terms of what is it that they're
saying today reads it to what Jip how actually said
last Wednesday.
Speaker 2 (24:55):
You know, I'm curious because look, you're an economist, you're
you're you're not going to tell us what stocks to
buy or you know what equities or what assets to own.
But you do work for an asset manager, and the
idea is that you advise people there about what to do.
What should investors be doing in a situation like this,
because by the sound of it, it seems like maybe
(25:17):
you think the equity market has it wrong right now.
Speaker 9 (25:19):
I do think the public equity market has it wrong.
Speaker 8 (25:21):
So here's the answer to your question, what you'ld investors do,
they should do three things. The key outcome of everything
we're talking about here is that interest rates will be
higher for longer, meaning we're not going down to zero
interest rates or to dramatically low interest rates. Yes, the
market is pricing somewhere between one and two cuts this year,
but that's not much.
Speaker 9 (25:40):
That means that the level of interest rates this year
will still be high and next year.
Speaker 8 (25:43):
The Fed also just published their forecast saying that interust
rates will be high.
Speaker 9 (25:47):
And what should you do when interest rates are higher
for longer? You should be up in.
Speaker 8 (25:50):
Quality opt ecology and credit and private credit. That means
first lean seeing as secure a top of the campus
structure to get the best protection you can get against
the risk of a sharper slowdown. But it must be
high quality assets, high quality credit to make sure that
you're protected against the downside risks that comes with this
risk of growth slowing down. At the same time, the
second thing that's interesting, Yeah, two more things, Carol. Thing
(26:12):
that's interesting for investors is, of course, as the things
that comes with dislocation funds. That means secondaries in pe,
that means these location funds also in when it comes.
Speaker 9 (26:21):
To the broader entry point for private credit and for markets.
Speaker 8 (26:24):
And the last thing that's interesting is of course thematic
investing things that as five ways, so you can get
from the trade wall, so that will be infrastructure, data center, inergy, sensation,
climate thinks, the long duration assets that have nothing to do
with in near term outlook.
Speaker 4 (26:35):
All right, fifteen seconds on a tenure? Is five percent
not even a consideration in your world?
Speaker 7 (26:42):
Or could it happen?
Speaker 8 (26:44):
I absolutely think that long term interstrates are going up.
So solter interstrates are going up because of inflation. Long
ter interstrates are going up because of partly inflation, but
also because of the fiscal challenges. So there's upward pressure
on the whole yield curve for these different reasons.
Speaker 4 (26:57):
Even five percent, yes, sir, no, real quick? Yeah you
think you said yes? I think I saw them say yes.
Speaker 7 (27:01):
It's touristed.
Speaker 4 (27:02):
Yes, thank you, Turstan slack Over at Apollo Global Management.
Speaker 7 (27:05):
This is Bloomberg Business Weekdaily.
Speaker 1 (27:09):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 3 (27:29):
Mac.
Speaker 1 (27:30):
I'll a beout.
Speaker 8 (27:30):
You let me drive.
Speaker 3 (27:31):
Oh no, no, no no, this is not a toy.
Speaker 6 (27:33):
He's going to honey.
Speaker 3 (27:36):
Please how the gravel? Listen? I want to drive.
Speaker 8 (27:40):
It's a good question, good time.
Speaker 3 (27:47):
This is the drive to the clothes dot Com for me.
Speaker 9 (27:50):
Thing well dri Jona don.
Speaker 3 (27:52):
On Bloomberg Radio.
Speaker 7 (27:53):
All right, TikTok everybody.
Speaker 4 (27:54):
Yeah, we got about just under seventeen minutes. Are going
to we wrap up the trade on this Monday. It's
been an interesting one, maybe not as expected. We've seen
the markets kind of all over the place, and right
now we are hovering near our highs of the day.
Speaker 7 (28:07):
So we're up almost eight.
Speaker 4 (28:08):
Tens of a percent on the S and P five hundred,
up seven tens of a percent in the Dow Jones
Industrial Average. More than three hundred point moved to the
upside for the Dow NASTEQ one hundred up almost two
hundred points. Tim good for a gain of about nine
tens of a percent, But keep in mind we were
lower when the initial strikes by iron on cutter, and
then I think the perception was that it wasn't as
(28:32):
maybe big as it could have been, or as devastating, I.
Speaker 7 (28:36):
Guess, yeah. And so we saw markets bounce off in
a big way. Oil has been down.
Speaker 2 (28:41):
You know, I think what I found pretty shocking just
being and this is the day when you want to
be a fly on a wall in a newsroom, because
we're following the headlines. The markets are moving with the headlines.
At twelve thirty three pm Wall Street time, we saw
stocks fall because the Wall Street jonnel reported that Ron
moved launchers for a possible attack on US forces. And
(29:04):
then less than an hour later we get this headline
Cutter says, it's successfully intercepted Iran missile attack. We see
a breath of relief in the markets, and we start
to see them move higher.
Speaker 7 (29:16):
Yeah, exactly.
Speaker 4 (29:17):
If I'm going back to crude futures, which we're up
more than six percent at they're high. Today they're down
almost seven percent as we speak. I go back to
our conversation with Dick Wanham's about the choreography, like I just.
Speaker 7 (29:28):
There's you know, we'll see, we'll see where this all lands.
Speaker 2 (29:31):
I want to see what Megan Horneman has to say
about this. She's chief investment officer at Burden's Capital Advisor.
She joins us from Hunt Valley, Maryland. Meghan, I want
to let everybody know that in the notes that you
sent out today, you make the point that you are
market specialists, not political experts. So we're not going to
ask you about the politics of this. We're going to
ask you about the market reaction. It's been muted on.
Speaker 3 (29:52):
The equity side.
Speaker 2 (29:53):
We saw oil go up, now oil go down. Why
a muted reaction to a military operation and esc adding
conflicts such as this.
Speaker 10 (30:03):
So I think coming in this morning and we can
talk about equities first. When we came in this morning,
it was it was it was a muted reaction. Equity
futures were actually up before the market open, and then
it was relatively you know, positive, but not by much.
And I think that markets were just awaiting what was
going to happen next. And I think the surprise you
know that that Qatar had was being you know, Iran
(30:24):
and launched missiles against Qatar. This the markets reacted to
the fact that this was a better than expected I
guess reaction from Iran. So what we saw was you know,
the markets down when the news broke that they were
going to attack guitar and then them come all the
way back now sitting here near record highs as the
markets seeing that, hey, that this was not that big
(30:46):
of a move. So I think the market's just celebrating
the fact that there hasn't been anything major yet and
the retaliation efforts that Iran has taken thus far haven't
been that detrimental.
Speaker 7 (30:57):
Are you surprised? I mean, I think, you know, we
came in and it felt.
Speaker 4 (31:01):
A little quiet, and then of course the headlines you know,
started around midday in terms of what's going on and cutter,
but it just felt like an uneasy quiet. Certainly this
morning we were surprised by the market reaction or what
does it tell you, maybe more longer term or maybe nothing.
Speaker 3 (31:19):
Now.
Speaker 10 (31:19):
I was a bit surprised this morning that it was
so quiet. Even the VIX index really didn't move much.
I mean, it was more than less than half of
what we saw in the during the liberation spike, what
we saw in volatility. So I was a bit surprised
that the equity markets relatively muted. I'm a bit more
surprised that oil futures have sold off so much. I
don't think that's behind US. I do think any disruption
(31:42):
in the Middle East can have an impact on oil prices,
so I'm a little surprised at how quickly they decline.
I mean, we're down on the day, you know that.
That's surprising when we're looking at such a dramatic impact
that we saw over the weekend in Iran.
Speaker 4 (31:55):
I think we're still up though about I want to say,
about four percent since that initial Israel attack on Iran.
So I think we're still up. But you're right today,
you know we're down a lot. We've seen actually a
pretty big swing. So what do you do for clients
right now?
Speaker 10 (32:12):
Well, first of all, we have to not be complacent.
We have to realize that, yes, we haven't seen any
major retaliatory impacts from Iran. It does look like we've
weakened them in some respect. But don't be complacent either.
We still do have a conflict in the Middle East
and that can have impacts on the market. And what
we've seen with history, if you look at any of
(32:32):
the different military actions the US has taken, they tend
to see some weakness, but positive equity markets in the
long term. So that's what we're telling clients right now.
We're focusing on the long term. We're not going to
get emotional and just sell everything because of this conflict. Instead,
we're going to look at long term fundamentals us economy.
The FED still is on the table to be able
(32:53):
to cut rates this year. The economy is weakening but
not completely falling off a cliff, and we're seeing that,
you know, consumers, The confidence has been very weak, but
consumers still are out there, So there are some positives
to note. Don't forget. There's several things though, coming up
in the next couple of weeks where we also don't
want to be complacent. We have earning season picking up,
(33:14):
and then we still have that July ninth deadline. From
a tariff perspective, don't be complacent on some of these
other risks that are out there. So don't sell into this.
But I wouldn't necessarily be buying into this either, which what.
Speaker 2 (33:25):
Changes your view though, what makes you either run for
the hills or says, Okay, we better strap in for
the long haul here.
Speaker 10 (33:34):
I think if the if we start to see this
intensify and broaden out beyond just Iran and Israel. If
other countries get involved, that obviously wouldn't.
Speaker 2 (33:42):
Make anathy like the US did over the weekend.
Speaker 10 (33:45):
Well, the US again has been trying to get Iran
to the negotiating table for many many months, and this
has failed and failed and failed. And it's not just
you know, this has been many administrations. So again the
US did get get involved in this. The US has
also said this isn't a declaration of war. The other countries,
where we get China, Russia, some of these other big
(34:06):
powerhouses involved, that's going to be a concern for me.
If it does escalate beyond just these missiles that are
going into Israel that are being intercepted by their dome,
that's a concern as well because they are one of
our key allies.
Speaker 7 (34:18):
Meghan, thanks so much. Megan Horneman.
Speaker 4 (34:20):
She's chief Investment Officer of at Vernon's Capital Advisors, joining
us from Maryland on this Monday.
Speaker 1 (34:26):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
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