April 14, 2025 • 31 mins
- Peter Tchir, Head: Macro Strategy at Academy Securities
- Nela Richardson, Chief Economist at ADP
- Henrietta Treyz, co-founder and Managing Partner at Veda Partners
- David Ellison, Portfolio Manager at Hennessy Funds
Peter Tchir, Head: Macro Strategy at Academy Securities and ADP's Nela Richardson discuss the outlook for equities and potential for further market volatility amid uncertain tariff policy from the Trump administration. Henrietta Treyz, co-founder and Managing Partner at Veda Partners, discusses President Trump's tariffs and the GOP tax plan. David Ellison, Portfolio Manager at Hennessy Funds, reacts to Goldman Sachs earnings.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and a Marie Hordern. Join us each
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(00:33):
Bloomberg Terminal and the Bloomberg Business app. Pina Cheer of
Academy Securities, writing for the first time in weeks, I'm
optimistic about the outlook for the economy and for markets,
but it is tempered slightly by all the measures it
took to get here. Pete joins us now for more
peak and Morning Morning. Where's the encouragement come from?
Speaker 3 (00:51):
Well, first, I wrote that like at nine am on Sunday, So.
Speaker 4 (00:55):
I'm buying not quite.
Speaker 5 (00:56):
As encouraged as I was.
Speaker 6 (00:58):
For me.
Speaker 3 (00:59):
What I would really like to say see is a
true pivot towards domestic growth. Right, Let's get the chipsacked
money out there, you know, last Thursday at the cabinet meeting,
a couple of the people talked about shipbuilding. I think
we have to spend some money do some things domestic growth,
long term contracts. Either with shipbuild there's something to you know,
that we can really get our hands around and grow,
(01:19):
build up manufacturing without necessarily having to fight with the
rest of the world.
Speaker 5 (01:23):
Do you think it slightly We'll see that.
Speaker 3 (01:25):
I'm increasingly dubious. I did not, like, you know, all
the mixed messaging we got on tariffs over the weekend,
right from Friday night, no exception exemptions to more exemptions.
And I think I'm a little bit worried about bond
yields as a whole. Partly I do think foreigners should
be selling. I think you can get better yield than
your own country. There's all this talk about, you know,
potentially fees on foreign holdings mar Alago Accord. But beyond that,
(01:48):
if you just take away, I think we missed three
things last week. The budget for the military. Trump wants
to do a trillion instead of eight hundred billion. That's
going to add to the budget. We just had very
large debt ceiling raises that gives them the opportunity. And finally,
dose the Thursday More Cabinet meeting basically said they're targeting
one hundred and fifty billion for this year instead of
a trillion, and places like the Wall Street Journal things
are reporting that they can't even come up with one
(02:09):
hundred and fifty billion. So we are not on the
right track on the deficit, which I think was everyone's
big hope. So I think bond yields lead US lower
across the board right now, until we do something domestic
to help.
Speaker 1 (02:19):
Growth, bond yields lead US lower.
Speaker 6 (02:21):
Can you elaborate on that?
Speaker 1 (02:22):
By the way, coming out and saying that you're optimistic
and then this litany of negatives really is just you know, yes,
which gives you a thing change so quickly things are
so what are you?
Speaker 3 (02:34):
And I was very, very very so I was thinking,
you know, we were like heading towards twenty percent down
from here, it feels like it might be more controlled.
I will watch very closely today this. You know, when
we went through the GFC and even the European debt crisis,
one thing that always struck me as key when we
moved to a new leg of the problem was you'd
get the announcement you were hoping for, so in this case,
tariff exemptions, and if you don't last a full day
(02:55):
on the rally, it tends to mean the market's now
looking through that and saying, Okay, yeah, these exemptions whatever,
let's what we actually have on the table. And it's
a lot of problems out there. And the other part
that makes me a little bit nervous that I think
we'll see is if we stick to tariff deals. I
think teriff deals are easy. I think we're going to
go after trade deals, and to me, trade deals will
require import quotas something like that on behalf of these
(03:15):
other countries and possibly restrictions on what they can do
with China. I don't think that's going to be that
easy for them to digest. So I think we'll learn
a lot more in the next coming this week about deals.
Tariff deals, I'm comfortable with it goes down trade deals,
I think we take another leag lower.
Speaker 1 (03:28):
You know, I've seen somebody notes where people talk about
how exhausted they are and how stressful this period is,
and I was thinking about why, and there's this flood
of information and it's hard to understand what structure to
even put them in. What have we learned versus just
tidbits of information that are coming in at you in
rapid fire. Have we learned anything from the turmoil of
(03:49):
the past week. Are we passed peak uncertainty and heading
into something that we can more concretely hold.
Speaker 3 (03:55):
So the biggest thing for me that I can't quite
figure out, and I think is really critical, is did
China get sucked into being more aggressive on tariffs by
how we play this out. Did we make it look
like it was the US versus everyone China was more
aggressive and now regrets it, Or did we learn that
China really doesn't care, that China spent four years preparing
for this and is really ready for the fight.
Speaker 4 (04:14):
I lean towards the ladder.
Speaker 3 (04:15):
I will give the people who talk about, you know,
out of the deal in forty chess, that it could
be the former, and I it's the former, that's great
because China will have to back off.
Speaker 5 (04:23):
It was the ladder.
Speaker 3 (04:24):
We're not really prepared for this at all.
Speaker 2 (04:25):
And place you went there is there any sign that
China's coming to the tango? Do you see an I
think it's so no.
Speaker 3 (04:30):
I think you know we have to go back and
we're about fifteen percent of China's exports, and you know,
I think they exempted twenty five percent, whether it last
or not, but I think that's also looking at it
on the raw dollar value. I think from a profit margins,
you know, we exempted probably China's most profitable things that
they export to US. I don't see them come to
the table. I see the rest of the world talking
(04:52):
to them. We've been so, you know, which is very dangerous.
And again, if you're in that part of the world, you.
Speaker 5 (04:57):
Probably have to play nice with China.
Speaker 3 (04:58):
Their military is there, their nave growing, It's unclear what
direction Trump wants to go on some of that, and
the rest of the world I think is very tired.
The uncertainty doesn't do well, and everyone knows it's going
to take years to rebuild manufacturing, which is why I
go back to I'd be much more optimistic if we
started doing things domestic. Maybe we buy ten billion dollars
of navy ships, but they have to be built in
the US shipyard, and that's going to be ten years
(05:21):
of delivery, but it can start that process.
Speaker 2 (05:23):
We've talked a lot about the pressure that it's put
on Europe, and it's push Europe to do things that
is good for Europe. And I just wonder if this
pushes China to do things that is good for China
in line with what the President would actually like to
say from China, which is a rep banasy the economy
towards domestic consumption.
Speaker 5 (05:37):
Are you hopeful?
Speaker 3 (05:38):
No, I just don't think Chinese consumed the way we do.
I think, like quite frankly, no one consumes the way
the US does. We consume a lot, and that's another
concern about the economy. Right We're seeing some delinquencies tick
up with all this uncertainty. I think China's going to
try and do what they do trade with the rest
of the world, trade with us, and we're going to
figure out where they have the opportunities. Again, they've spilled
the last ten years building up ninety percent of rarest
(06:01):
and critical minerals are refined in China. We can get
them anywhere. I think that's not the hard part, whether
it's cost justified to get it anywhere, it's the refining,
and again that's going to take years. So China is
putting all this pressure on us. And again, this was
ridiculous five years ago. When we talked about this at Academy, Securities,
the number of things that are really critical to military
equipment that we are getting from China when we were
having all this friction with China was insane. So bringing
(06:24):
those back makes sense. But we've done it in such
a way that I think we've left ourselves vulnerable in
the meantime.
Speaker 1 (06:29):
So it seems like we haven't really gotten much clarity
when it comes to understanding the off ramp between US
and China negotiations.
Speaker 6 (06:36):
We do have a sense.
Speaker 1 (06:37):
Though, of what that off ramp looks like for President
Trump to cater to a market, specifically the treasury market.
Speaker 6 (06:43):
And I want to go back to something that.
Speaker 1 (06:44):
You said, which is that you think that the bond
market is going to lead the rest of the market's
lower from here. Have we learned something about where that
Trump put is in terms of what kind of levels
of bond heals get him nervous.
Speaker 5 (06:59):
A little bit?
Speaker 3 (07:00):
But I think it was very easy with all the
noise last week to talk about this as being foreign selling.
This basis trade unwinding, right, So you know, FED said
they would you know, incur, you know, they would protect
the bond market, which I think they will, they'll buy
some here there. I don't think we're going QE, but
I think it was very easy to think of this
as a temporary thing. If the conversation starts turning as
I think it might, that our deficit isn't going away,
(07:20):
dose isn't being as successful as we wanted, we are
not being spendthrift. I think that starts putting even domestic
pressure on yous and people saying, well, maybe even with
inflation coming down, we're not at the right level. So
that to me would be a bigger problem, right, and
it'd be hard them. So what can he do? I'm
not sure at that point.
Speaker 1 (07:37):
Okay, so if you get to like four seventy five,
if we get to five.
Speaker 3 (07:42):
I think they're begging to come up with structure.
Speaker 6 (07:44):
I don't know.
Speaker 3 (07:44):
I think they're begging the FED to work for And again,
a lot of this happened overnight last time.
Speaker 6 (07:49):
If it starts happening more and more.
Speaker 3 (07:50):
During the day, that's where I think the fear comes out.
But I don't know what he can do other than
go keeping flip flopping on tariffs. And it feels like
they're kind of tired of flip flopping. On TARRAF And
the other part is with the sole deficit. Right, we
were at one time and it was always confusing how
much of that was going to be the case. But
tariffs are going to help reduce our deficit. Well, if
that income's not really coming in, where are they going
(08:11):
to get other income? And I think they're going to
target foreign holders of treasuries again, there's talk about, you know,
delisting some of the Chinese ADRs.
Speaker 4 (08:18):
I don't see what.
Speaker 3 (08:19):
That really does at this point, but you know that
probably triggers yet another response from China. And I just
keep thinking that we expect China to make these simplified moves,
and we've talked about this before. She has learned something
Trump one point zero. She was the first one tomorrow lago.
Every time Trump said tariffs, they raise their hand trade delegation.
They have played this very differently. So just like Trump
(08:40):
administration has had four years to plan this, China has
had four years to plan this.
Speaker 5 (08:44):
And it's beginning to look.
Speaker 3 (08:45):
Like China spent a lot more time and money planning
this than the US did.
Speaker 2 (08:48):
It doesn't look like a negotiation right now. In fact,
at least when I were talking about this, yesterday. It
looks like the US is negotiating potentially, but itself of
the moment, you're not hearing much back from China.
Speaker 5 (08:57):
I wanted to finish on one final point with.
Speaker 2 (08:58):
You, because you've been very consistent about this, is we
work our way through learning season.
Speaker 5 (09:03):
You've ready ready rised the.
Speaker 2 (09:04):
Flag about the damage being done to the American brand,
not about the attractiveness of US assets, but the attractiveness
of US goods, US services. How much damage has actually
been done.
Speaker 3 (09:14):
I think we are going to see some of that,
and it's this first wave is going to be a
little bit difficult to tell whether it's just because of
global economic weakness that foreign sales sell down, or you're
going to have to start looking is there an indication
that's ay Cadbury, for example, starts doing better than some
of our brands overseas, and that I think will be
the real key. Try and figure out pairs where Okay,
here's a European or other brand and are there sales
(09:36):
declining or changing relative to the US brands. And I
think that would be a big shock to the system,
because I do think people believe and you can see
it in some of the price action today that there's
just this huge demand for our brands globally and it's
only being affected by tariffs. I think we've diminished that
as part of this overall trading strategy, and that's going
to be harmful, and I think we may even see
(09:57):
some companies talk about it. I think it's too early
this quarter, but as this goes on, I think that
becomes an issue for the rest of the year.
Speaker 2 (10:03):
Interesting want to watch, Peter, it's going to see you.
Thanks for dropping by bitter chair there and Academy Securities.
If you look at for stability in the bond marketing,
you've got it. At the moment, we're down across the board.
Here across the curve, we're down six or seven basis
(10:23):
points at the front end on a ten year maturity,
the yield is down six to let's call it four
forty three. Let's turn to the economy. US consumer sentiment
falling to its second weakest reading on record, while inflation
expectations saw to multi decade highs Nita Richardson of ABP, writing,
inflation has made consumers cautious, but rising incomes can help
cushion any tariff driven price increases if they come neither
(10:46):
joined us now for more need a good morning. Let's
just focus on the data and get away from the politics.
Or income is still rising, you.
Speaker 7 (10:53):
Know, we're seeing that when we look at payroll at ADP,
they're certainly rising, not as fast as they were two
years ago, but at a healthy clip, faster than before
the pandemic. There's also a different source of income that's
really important to think about, which is the housing market.
We get housing starts this later this week. Home equity
for home owners is up almost nine percent from a
(11:15):
year ago. So no, it's not the highest home equity
we'd seen on record, but it's close. It's like the
third highest, and so that's another level of question.
Speaker 6 (11:24):
I don't mean to be.
Speaker 7 (11:25):
Too polyann on a Monday, but I also want to
give a real data reality check to all the uncertainty
that's out there in the market.
Speaker 6 (11:33):
I was just going to say, you're not complying with
the narrative. I love it.
Speaker 1 (11:37):
I think it's great, and I think it's good to
push back against it because there's so much gloom and
doom about companies who are frozen, who aren't going to
be hiring, They're not going to be firing, but job
mobility just isn't there. You're still seeing just some signs
the consumers are maintaining resilience through other means, even with
the stock market that may be rallied last week, but
certainly didn't feel like it, and even with the idea
(11:57):
that it might be harder to get a raise.
Speaker 7 (12:00):
I don't discount the sentiment because sentiment usually triggers certain behaviors.
And you see downbeat sentiment with consumers, with homebuilders, with CEOs,
everywhere you go. There is a pessimism in the outlook.
But then when you turn to the raw data, this
week is super important. Why this is the reference week.
This is the week that the BLS will start counting
(12:20):
the number of people who got paid for their employment report,
and this is the week the ADP will report in
of two weeks to talk about the labor market.
Speaker 6 (12:29):
And if you look at this week and you.
Speaker 7 (12:31):
Compare it to March, what you're seeing is that hiring
is still solid. And if you look at one area
of sentiment that is holding up worker sentiment, we're actually
going to produce a worker sentiment index tomorrow, publish it
at adpresearch dot com. What you'll see is that while
consumers are downbeat, workers are highly engaged.
Speaker 6 (12:52):
They're plugged in.
Speaker 7 (12:53):
Maybe it's because they're cautious about their job loss, but
they're showing off the hair or engaged, and they are
productive and they're doing so because they want to make
sure that they keep those jobs as they move into
the rest of the year.
Speaker 1 (13:04):
So qui quitting has died basically is what you're saying,
which is actually.
Speaker 6 (13:07):
Pursueing really welcome. That's fantasting less.
Speaker 1 (13:10):
I'm curious you say that hiring is remaining solid. Is
it in specific industries they give you a sense of
contentially whether this is a resilience factor or whether this
is people getting old and needing to cater to them
of getting fatter.
Speaker 7 (13:22):
Yeah, that's a great question, because we really do see
a good news bad news scenario there. We're seeing hiring
across firm sizes. That's good news, especially if you look
at small businesses who are price takers in the global
input market. We're seeing solid hiring across the board, but
not every industry. In fact, if you look at consumer
(13:42):
facing industries or somewhat discretionary like leisure and hospitality, it's
been weaker. If you look at retail also weaker, so
we're seeing hiring and ironically manufacturing. So we don't know
if that's pull forward hiring they get ahead of some
of these tariff and trade changes, or if this is
a real rebound and we're seeing it in B to
B services but not so much in consumer facing. In
(14:05):
the series, that is a sea change, and it's tied
directly to consumers and how they're feeling about the economy.
Speaker 2 (14:11):
You talked about the importance of expectations. Let's talk about
how consumers are feeling about this economy. You med Channel
Friday consumer sentiment almost three year low, inflation expectations, multi
decade highs unemployment expectations the worst since two thousand and nine.
Are you seeing anything in the hard data to validate
consumer confidence that week? That poor that we saw on Friday.
Speaker 7 (14:34):
On the labor market, now, layoffs are at a two
year low. They continue to hover around those two year
lows in the private sector. Different for the federal government,
but in the private sector, we are not seeing that
kind of upturn and upheaval and pause and hiring that
is being projected or picked up in the sentiment. Now,
things can change rapidly I'm not saying that the outlook
(14:57):
that we're seeing right now is going to be consistent
six months from now. But if you're looking at the
starting point in the baseline, you're seeing, and I think
Chair Pal said this and his recent remarks, a labor
market that is solid and continues to perform.
Speaker 2 (15:11):
Still this massive, massive sprint lace of bestween the soft
and hot data. I keep going back to that headline
from you, Mitch. To see unemployment expectations down at the
worst levels we've seen since two thousand and nine is
pretty staggerant.
Speaker 6 (15:24):
It was funny you were mentioned that. In the past
couple of weeks.
Speaker 1 (15:26):
Lori Cavasina put that out in a report, saying that
in all of the earnings calls also, corporate executives have
been talking about how this reminds them of two thousand
and eight, This reminds them of twenty twenty, This reminds
them before that of the two thousands.
Speaker 6 (15:40):
You see that in the.
Speaker 1 (15:41):
AAII sentiment survey as well. So at a certain point,
have we really reached a new paradigm shift though, where
suddenly the soft data has not been predictive of the
hard data. Are we going back to something more normal
where you would normally see a correlation there.
Speaker 2 (15:55):
So the Federal Reserve is not blinking and Native the
Federal Reserve will be meeting in early May. That meeting
and Cluthes, we'll get that decision on May seventh. What
you make have kind of navigated things so far and
what would you expect to see in a few weeks time.
Speaker 7 (16:06):
I think the Fed is navigated the way Main Street has.
They're waiting and watching. There hasn't been any big money
moves that we can identify, and I think it's too
early on the policy front to make any firm movements.
And that's what you're seeing from the FED. But it's
also what you're seeing from small businesses and medium sized
businesses who can't change operations on a dime. Consumers can't
(16:27):
change spending patterns on a dime. So what you're seeing
is an economy that started from a solid baseline in
wait and see mode, just like the FED.
Speaker 1 (16:35):
You know, there is this discussion that we had and
it was off air, about whether this FED is going
to be really just targeting dysfunction in the treasure market
or whether they actually were going to be looking at
levels we're not going to close the spreads until the
spreads get too wide, and then we're going to close them,
akin to maybe what the ECB has been doing. I
am curious about this theory that Neil Koshkari put out
over the weekend saying that we at the FED have
(16:56):
no ability, zero ability to affect that destination of your
yields as investors try to get some sort of price
discovery here. Do you believe that or do you think
that there is a level at which they do step in.
Speaker 7 (17:09):
Well, I think this comes to your sentiment momentum distinction.
I mean, the FED operates at the short end of
the curve.
Speaker 6 (17:17):
That is their mandate, and.
Speaker 7 (17:19):
So I think if you take the literal interpretation of
the Fed's actions, yes, they are not responsible for the
longer end of the curve. But we know that the
FED has a huge sentiment role in all of us
in itself, and just by their forward guidance, they can
change the way the bond market reacts. So yes, and no,
pardon thoft, we're still back in that distinction.
Speaker 1 (17:40):
So I guess to sum it all up, do you
see the unemployment rate rising quickly enough to get the
FED engaged in terms of cutting rates or having some
sort of stimulative effort in the near term, in the
next two weeks, the next three weeks before, or the
next two months, right before the economy really can turn.
Speaker 6 (18:00):
Not in the next month.
Speaker 7 (18:01):
No, we have not seen the transmission mechanism multiply to
an effect that it hits the real economy in a
way that you would see the kind of staggering job
loss that would justify on its own a rate.
Speaker 6 (18:16):
Moved by the Fed.
Speaker 7 (18:17):
The labor market is still holding up two hundred and
nine thousand private sector jobs created according to the federal
government last month. That's not going to be a downbeat
measure by anyone's estimation.
Speaker 2 (18:29):
NATA, it's going to say, as always, thanks for dropping
by NATA. Riches in that of IDP, go to surround
a Tengo here in New York, Hendrida Trice.
Speaker 5 (18:45):
If I had to promise Hendra go to see you.
Let's just get to this.
Speaker 2 (18:49):
I'll be allowed exemptions or not do they exist?
Speaker 8 (18:51):
I mean under the AEPA tariffs that went on that
are already at twenty percent, there are no exclusions except
in the case of like if you're giving a donation
from a religious and the semiconductors are tariff, the pharmaceuticals
are tariff. Everything coming in four hundred and ninety eight
billion dollars is effectively tariff.
Speaker 6 (19:07):
So it's just going to get worse from.
Speaker 2 (19:08):
Here with similar with all these different buckets. Speaking of
getting worse sectoral tariffs, what would they look like and
when would they be announced?
Speaker 8 (19:16):
So I think that the two two tariffs are the
most pernicious kind that we can get, and in the
twenty twenty five environment, thirty day comment periods are pretty much.
Speaker 6 (19:24):
All we should expect.
Speaker 8 (19:25):
We saw with the auto investigation back in twenty nineteen,
was it that they don't even necessarily release the investigation
after it's confirmed.
Speaker 6 (19:32):
You know, they're just putting these tariffs on.
Speaker 8 (19:33):
So I think for pharma and for semiconductors, the worst
case scenario is that sometime in this thirty sixty ninety
day window, the tariffs go on, the comment period happens,
and the tariffs are on.
Speaker 6 (19:42):
Before the summer.
Speaker 1 (19:43):
What's the strategy here, That's a great question.
Speaker 8 (19:46):
I mean, they want pharmaceutical manufacturer back in the United States.
We know that that takes five to seven years to
get the various approvals for even opening the facility, let
alone having the workers come in and actually do the
manufactur on those kinds of products. I think that the
semiconductor space is exactly the same. When I'm on calls
with investors, they're talking about, Thank goodness we had the
(20:08):
investment from the last administration into semiconductors, from the Chips
and Sciences Act of Bipartison.
Speaker 6 (20:13):
Build it passed years ago.
Speaker 8 (20:15):
To keep providing any kind of support to the industry
because it's going to get slamed from the tariffs.
Speaker 1 (20:19):
I'm just asking, because the complications here are pretty dramatic.
Trying to keep track of which tariffs have gone on.
Where is a gold task when you try to talk
about what the actual effective tariff freight is, let alone,
how you plan for the future and what that could
be with additional rounds of tariffs coming on.
Speaker 6 (20:35):
What are people telling you?
Speaker 8 (20:36):
That's the stories that I hear the most are the
anecdotal data points. As you were talking before about connecting
the soft data to the hard data. The bankruptcies that
they're expecting, the seizing up at the ports, the manufacturers halting, hiring,
halting production, keeping their products on ships.
Speaker 6 (20:54):
In cargo ships.
Speaker 8 (20:55):
There's a lot of reminiscing about covid era when the
ships were just in the port. We're going to have
to all go back to like monitoring the Pacific Ocean
and see what.
Speaker 6 (21:03):
Kind of fleets are out there.
Speaker 8 (21:04):
That's what folks are talking about now and anticipating seeing
in the hard data in the next couple weeks.
Speaker 2 (21:08):
It just got a message from a Limbug subscriber. This
sounds very chaotic. The market seems to have price peak,
chaos is behind us.
Speaker 5 (21:15):
What are we missing? What are we missing?
Speaker 8 (21:17):
I don't think the stories have come out yet about
how this is going to impact actual domestic manufacturers who
rely on foreign imports. You were mentioning critical minerals before.
How are you supposed to make your windshield wiper sensors
if you don't have the magnets that go into it.
So if you stockpiled enough in the last couple of
months to get in around that, you have some certainty
(21:38):
for a couple of weeks. But it's not a sustainable situation.
I think the hard data is going to come out
next for the next couple of weeks and months, and
these tariffs are not going to come off, especially if
they're done during under two thirty two, those are the
most pernicious.
Speaker 6 (21:51):
Three oh one is pernicious. I mean these have real
standing power for years, and.
Speaker 2 (21:55):
Then we need some relief taxes. What's changing with the
tax push at the moment?
Speaker 8 (22:00):
Man, You know how I feel about this. The tax
component they're now President Trump is talking about is tax
cuts and deregulation. You are not permitted to pass deregulation
via reconciliation instructions, and Democrats will not be working with
Republicans on a crypto bill or any other deregulatory legislation.
Speaker 6 (22:16):
So unless you like the emission standards.
Speaker 8 (22:18):
Components which are going to get produced in a what
seventy five dollar barrel oil situation, you're not going to
see a deregulatory push anytime this year, and certainly not
until you get certain agency officials seated in their positions.
Speaker 6 (22:30):
In the first place.
Speaker 8 (22:31):
And then the tax bill I think is going to
take until the end of July, and as you know,
it includes four trillion dollars in deficit increases and very
little in the way of new stimulus. So I think
there's a disconnect between the narrative and reality.
Speaker 1 (22:46):
Given that is there a loss of power that Trump
is having or a loss of a clutch over the
Republican House Caucus.
Speaker 6 (22:53):
I don't buy that argument.
Speaker 8 (22:55):
They passed the budget vote last week, and I think
that was the biggest hurdle. The next step is are
you going to vote for tax increases on every single American?
Speaker 6 (23:03):
Or are you going to vote for this bill? And
that's a cut and dry. The whip is easy. All
members are going to support that.
Speaker 1 (23:08):
There is a theory that if things get chaotic enough,
and if some of these proposals are outrageous enough, there
is going to be the ultimate check, which is going
to come by congressional action against some of these tariffs
or potentially a court action. Do you see any pathway
to that or are people just wishful thinking?
Speaker 9 (23:25):
No?
Speaker 8 (23:26):
I see no path for that either. If you can
get six or seven Republicans to join on to a
Senate bill, that is wildly insufficient. I think that President
Trump needs these members through this budget vote that happened
last week, and now through you know, let's call it
Memorial Day or July to pass this tax bill, and
then he doesn't need them at all, and no legislation
is going to pass.
Speaker 6 (23:43):
There will be no Reconciliation Authority. There will be no
more legislation, which.
Speaker 8 (23:47):
Is, by the way, the playbook from the first term,
where we got a tax bill initially and then spent
the next three years doing tariffs.
Speaker 6 (23:53):
And that's what I expect here.
Speaker 2 (23:54):
Just quickly we have the point where they're all quote
saying treasury yields to each other down on campbel Hill.
Speaker 5 (23:58):
No way, not that yet.
Speaker 6 (24:00):
I'm not sure we'll ever be there. I wouldn't expect that.
Speaker 2 (24:03):
I hope we never get that, because if we get that,
we've got major problems.
Speaker 1 (24:06):
Yeah, at one level, I kind of hope that they
do pay attention because it does actually matter suddenly, if
you have a fifty basis point increase in tenure yields,
that increases by billions of dollars the.
Speaker 6 (24:16):
Amount of the United States is paying. So I hope
they do quote those treasure yields.
Speaker 1 (24:19):
Congress Members, if you are listening, please get a Bloomberg
termin'll take a look at that ten yure yield, take
a look at a thirty year yield.
Speaker 2 (24:25):
That's a sales pitch. I'm right there with you, and
please get that Bloomberg terminal. Clearly, the President was looking
very closely last weekend coming into the trade and weak.
Speaker 1 (24:33):
Yeah, I got yippie people got a little nervous. But
he dealt with that in one statement, and that's what
he said. The issue is, do we have a true
sense of where that Trump put is.
Speaker 6 (24:43):
Do we have a sense of what level, what type of.
Speaker 1 (24:45):
Chaosk potentially end up dealing with some sort of response
from this administration.
Speaker 2 (24:51):
Henry answer, it's good to see you. Thanks, thanks for
dropping by. Thank you, Henry to trace their evde upon visit.
Dorman Sachs adding to banking optimism after posting a record
revenue hall from its equity trading unit.
Speaker 5 (25:12):
The stock is up by two percent.
Speaker 2 (25:14):
To discuss some place to say is David Edison of
Fannessy Funds. David, Welcome to the program, sir, appreciate getting
some time with you. We've heard from Jape, Morgan from
Morgan Stanley from Goldman. How would you grade the quarter
so far?
Speaker 9 (25:26):
Well, the quarters were great. I think the industry is
showing that they have done a great job of dealing
with credit and liquidity and capital managing the buybacks. So
I think the you know, it's like that's all in
the past, unfortunately, but I do think the industry is
in great shape to weather what's ahead. I think your
(25:47):
conversation with Gerard Cassie this morning sort of put it
in focus. But I think the industry is in great shape.
Doesn't mean the stocks are going to double or triple
or go down fifty percent, but I think as an
industry they're ready for whatever happens in Washington.
Speaker 2 (26:02):
I think let's talk about that as a portfolio manager,
just how defensive do these names trade in growth scares?
And how has that changed over the last decade.
Speaker 9 (26:11):
Say, well, I think since you know, two thousand and eight,
we've been worried about a credit cycle, worried about a
rate cycle.
Speaker 4 (26:17):
We've had an inverted curve.
Speaker 9 (26:19):
So the financials have been, you know, frankly not the
place to be for ten or twelve years, and I
think the color of my hair shows it. So I
think the hope is that as we go forward here,
there's going to be a you know, a little less
pressure on them as they you know, in a sense,
the terrorists are not attacking financial services products.
Speaker 4 (26:41):
They're attacking physical goods, and so.
Speaker 9 (26:44):
I think people maybe are going to be more worried
about the physical good traders and makers than they are
about the financial guys. So we'll see. I mean, Wall
Street finds a way to make money in all environments.
People need to lend money to grow. The economy is
not going to go to zero, and so I think,
you know, these companies could be the safe harbor that
(27:04):
they haven't been for the last ten or twelve years.
Speaker 1 (27:07):
David, the narrative around banks has shifted. At the beginning
of this year, it was the growth stock, given the
fact that there was supposed to be a wave of
deregulation as well as a boom in mergers and acquisitions
and all sorts of deals. Now it's a defense stock,
where suddenly banks are buying back their own shares and
pretty large quantities. We just heard about a forty billion
dollary purchase from Goldman Sachs.
Speaker 6 (27:29):
Which is it? Is it defense or offense?
Speaker 9 (27:34):
Well, when you sort of have one guy deciding what
the world trade environment's going to be and a bunch
of other stuff, I think, you know, you look for
defensive names, and that means you look for a good
balance sheets, You look for capital, you look for liquidity,
and you look for good managers. And I think the
banks have that and so you know, this weekend was
(27:56):
pretty quiet on the Washington front. So the market's up.
So I think the general move of the market, I
think is, you know, the market generally wants to go
up in my view, and it's being held back by
sort of one guy making decisions about how the world's
going to function, and that I think will calm down
and we'll I think we'll be okay.
Speaker 4 (28:14):
On the other.
Speaker 1 (28:15):
Side, another way of sort of approaching the same question
is which banks are best positioned for the next phase
of whatever is to come. Is it the ones who
are going to benefit from volatility and markets trading revenues,
some of the potential other opportunities there, or is it
going to be the lenders the Bank of Americas They're
(28:35):
going to go out and actually be able to create
credit at a higher rate based on where the treasure
yield is right now.
Speaker 9 (28:44):
Well, I think one of the concerns I think that's
coming up on the analysts that I've talked to and
the companies that I talked to prior to earnings was
that is this disruption going to really hurt small business
and therefore hurt the lending of the traditional banks that
we haven't heard from.
Speaker 4 (29:02):
Yet, but we will in the next in the coming weeks.
Speaker 9 (29:06):
I think the big banks, you know, they have the earnings,
they have the in the sense network effect of having
a lot of customers and a lot of data inputs
about what's going on. But I think the overriding thing
about this industry is that we need new products, we
need innovation, and we need companies to do transformative acquisitions
to kind of get them back on a growth path.
(29:28):
They've lost so much share on the lending side to
private equity and private debt and other sources of income
that the loans just don't grow anymore, and so they
need to do other things to get out of that
box that they're in. And hopefully that will happen as
we move forward with the new administration.
Speaker 2 (29:47):
We've had lots of people say the same thing, that
we're expecting consolidation, particularly between the regionals and the smaller lenders. David,
what are you anticipating for the year ahead on that front, Well, it.
Speaker 9 (29:58):
Started off pretty good. I think that, you know, I
don't think that's.
Speaker 4 (30:03):
Going to stop.
Speaker 9 (30:03):
I don't think whatever the administration is doing now is
going to stop that. I think at the end of
the day, the smaller banks know that they're losing share.
They can't invest in technology, it's hard for them to
compete with these new platforms that seem to be popping
up every day. They're competing for deposits and loans, and
so they need to get bigger. And that's, you know,
(30:27):
sort of the process that you see that in the marketplace.
The bigger companies have the higher valuations and the smaller
companies are going to being left behind. So I think
the market is telling you something and hopefully the managers
are hearing that and seeing it.
Speaker 2 (30:41):
David, appreciate your time. Tricky moment for you all, I'm sure,
David Allison of Fantasy Funds. This is the Bloomberg Seventans podcast,
bringing you the best in markets, economics, antient politics. You
can watch the show live on Bloomberg TV weekday mornings
from six am to nine am Eastern. Subscribe to the
podcast on Apple, Spotify, or anywhere else you listen, and
(31:02):
as always on the Bloomberg Terminal and the Bloomberg Business
out
Speaker 3 (31:09):
Mm hmm.
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and a Marie Hordern. Join us each
day for insight from the best in markets, economics, and
geopolitics from our global headquarters in New York City. We
are live on Bloomberg Television weekday mornings from six to
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or anywhere else you listen, and as always on the
(00:33):
Bloomberg Terminal and the Bloomberg Business app. Pina Cheer of
Academy Securities, writing for the first time in weeks, I'm
optimistic about the outlook for the economy and for markets,
but it is tempered slightly by all the measures it
took to get here. Pete joins us now for more
peak and Morning Morning. Where's the encouragement come from?
Speaker 3 (00:51):
Well, first, I wrote that like at nine am on Sunday, So.
Speaker 4 (00:55):
I'm buying not quite.
Speaker 5 (00:56):
As encouraged as I was.
Speaker 6 (00:58):
For me.
Speaker 3 (00:59):
What I would really like to say see is a
true pivot towards domestic growth. Right, Let's get the chipsacked
money out there, you know, last Thursday at the cabinet meeting,
a couple of the people talked about shipbuilding. I think
we have to spend some money do some things domestic growth,
long term contracts. Either with shipbuild there's something to you know,
that we can really get our hands around and grow,
(01:19):
build up manufacturing without necessarily having to fight with the
rest of the world.
Speaker 5 (01:23):
Do you think it slightly We'll see that.
Speaker 3 (01:25):
I'm increasingly dubious. I did not, like, you know, all
the mixed messaging we got on tariffs over the weekend,
right from Friday night, no exception exemptions to more exemptions.
And I think I'm a little bit worried about bond
yields as a whole. Partly I do think foreigners should
be selling. I think you can get better yield than
your own country. There's all this talk about, you know,
potentially fees on foreign holdings mar Alago Accord. But beyond that,
(01:48):
if you just take away, I think we missed three
things last week. The budget for the military. Trump wants
to do a trillion instead of eight hundred billion. That's
going to add to the budget. We just had very
large debt ceiling raises that gives them the opportunity. And finally,
dose the Thursday More Cabinet meeting basically said they're targeting
one hundred and fifty billion for this year instead of
a trillion, and places like the Wall Street Journal things
are reporting that they can't even come up with one
(02:09):
hundred and fifty billion. So we are not on the
right track on the deficit, which I think was everyone's
big hope. So I think bond yields lead US lower
across the board right now, until we do something domestic
to help.
Speaker 1 (02:19):
Growth, bond yields lead US lower.
Speaker 6 (02:21):
Can you elaborate on that?
Speaker 1 (02:22):
By the way, coming out and saying that you're optimistic
and then this litany of negatives really is just you know, yes,
which gives you a thing change so quickly things are
so what are you?
Speaker 3 (02:34):
And I was very, very very so I was thinking,
you know, we were like heading towards twenty percent down
from here, it feels like it might be more controlled.
I will watch very closely today this. You know, when
we went through the GFC and even the European debt crisis,
one thing that always struck me as key when we
moved to a new leg of the problem was you'd
get the announcement you were hoping for, so in this case,
tariff exemptions, and if you don't last a full day
(02:55):
on the rally, it tends to mean the market's now
looking through that and saying, Okay, yeah, these exemptions whatever,
let's what we actually have on the table. And it's
a lot of problems out there. And the other part
that makes me a little bit nervous that I think
we'll see is if we stick to tariff deals. I
think teriff deals are easy. I think we're going to
go after trade deals, and to me, trade deals will
require import quotas something like that on behalf of these
(03:15):
other countries and possibly restrictions on what they can do
with China. I don't think that's going to be that
easy for them to digest. So I think we'll learn
a lot more in the next coming this week about deals.
Tariff deals, I'm comfortable with it goes down trade deals,
I think we take another leag lower.
Speaker 1 (03:28):
You know, I've seen somebody notes where people talk about
how exhausted they are and how stressful this period is,
and I was thinking about why, and there's this flood
of information and it's hard to understand what structure to
even put them in. What have we learned versus just
tidbits of information that are coming in at you in
rapid fire. Have we learned anything from the turmoil of
(03:49):
the past week. Are we passed peak uncertainty and heading
into something that we can more concretely hold.
Speaker 3 (03:55):
So the biggest thing for me that I can't quite
figure out, and I think is really critical, is did
China get sucked into being more aggressive on tariffs by
how we play this out. Did we make it look
like it was the US versus everyone China was more
aggressive and now regrets it, Or did we learn that
China really doesn't care, that China spent four years preparing
for this and is really ready for the fight.
Speaker 4 (04:14):
I lean towards the ladder.
Speaker 3 (04:15):
I will give the people who talk about, you know,
out of the deal in forty chess, that it could
be the former, and I it's the former, that's great
because China will have to back off.
Speaker 5 (04:23):
It was the ladder.
Speaker 3 (04:24):
We're not really prepared for this at all.
Speaker 2 (04:25):
And place you went there is there any sign that
China's coming to the tango? Do you see an I
think it's so no.
Speaker 3 (04:30):
I think you know we have to go back and
we're about fifteen percent of China's exports, and you know,
I think they exempted twenty five percent, whether it last
or not, but I think that's also looking at it
on the raw dollar value. I think from a profit margins,
you know, we exempted probably China's most profitable things that
they export to US. I don't see them come to
the table. I see the rest of the world talking
(04:52):
to them. We've been so, you know, which is very dangerous.
And again, if you're in that part of the world, you.
Speaker 5 (04:57):
Probably have to play nice with China.
Speaker 3 (04:58):
Their military is there, their nave growing, It's unclear what
direction Trump wants to go on some of that, and
the rest of the world I think is very tired.
The uncertainty doesn't do well, and everyone knows it's going
to take years to rebuild manufacturing, which is why I
go back to I'd be much more optimistic if we
started doing things domestic. Maybe we buy ten billion dollars
of navy ships, but they have to be built in
the US shipyard, and that's going to be ten years
(05:21):
of delivery, but it can start that process.
Speaker 2 (05:23):
We've talked a lot about the pressure that it's put
on Europe, and it's push Europe to do things that
is good for Europe. And I just wonder if this
pushes China to do things that is good for China
in line with what the President would actually like to
say from China, which is a rep banasy the economy
towards domestic consumption.
Speaker 5 (05:37):
Are you hopeful?
Speaker 3 (05:38):
No, I just don't think Chinese consumed the way we do.
I think, like quite frankly, no one consumes the way
the US does. We consume a lot, and that's another
concern about the economy. Right We're seeing some delinquencies tick
up with all this uncertainty. I think China's going to
try and do what they do trade with the rest
of the world, trade with us, and we're going to
figure out where they have the opportunities. Again, they've spilled
the last ten years building up ninety percent of rarest
(06:01):
and critical minerals are refined in China. We can get
them anywhere. I think that's not the hard part, whether
it's cost justified to get it anywhere, it's the refining,
and again that's going to take years. So China is
putting all this pressure on us. And again, this was
ridiculous five years ago. When we talked about this at Academy, Securities,
the number of things that are really critical to military
equipment that we are getting from China when we were
having all this friction with China was insane. So bringing
(06:24):
those back makes sense. But we've done it in such
a way that I think we've left ourselves vulnerable in
the meantime.
Speaker 1 (06:29):
So it seems like we haven't really gotten much clarity
when it comes to understanding the off ramp between US
and China negotiations.
Speaker 6 (06:36):
We do have a sense.
Speaker 1 (06:37):
Though, of what that off ramp looks like for President
Trump to cater to a market, specifically the treasury market.
Speaker 6 (06:43):
And I want to go back to something that.
Speaker 1 (06:44):
You said, which is that you think that the bond
market is going to lead the rest of the market's
lower from here. Have we learned something about where that
Trump put is in terms of what kind of levels
of bond heals get him nervous.
Speaker 5 (06:59):
A little bit?
Speaker 3 (07:00):
But I think it was very easy with all the
noise last week to talk about this as being foreign selling.
This basis trade unwinding, right, So you know, FED said
they would you know, incur, you know, they would protect
the bond market, which I think they will, they'll buy
some here there. I don't think we're going QE, but
I think it was very easy to think of this
as a temporary thing. If the conversation starts turning as
I think it might, that our deficit isn't going away,
(07:20):
dose isn't being as successful as we wanted, we are
not being spendthrift. I think that starts putting even domestic
pressure on yous and people saying, well, maybe even with
inflation coming down, we're not at the right level. So
that to me would be a bigger problem, right, and
it'd be hard them. So what can he do? I'm
not sure at that point.
Speaker 1 (07:37):
Okay, so if you get to like four seventy five,
if we get to five.
Speaker 3 (07:42):
I think they're begging to come up with structure.
Speaker 6 (07:44):
I don't know.
Speaker 3 (07:44):
I think they're begging the FED to work for And again,
a lot of this happened overnight last time.
Speaker 6 (07:49):
If it starts happening more and more.
Speaker 3 (07:50):
During the day, that's where I think the fear comes out.
But I don't know what he can do other than
go keeping flip flopping on tariffs. And it feels like
they're kind of tired of flip flopping. On TARRAF And
the other part is with the sole deficit. Right, we
were at one time and it was always confusing how
much of that was going to be the case. But
tariffs are going to help reduce our deficit. Well, if
that income's not really coming in, where are they going
(08:11):
to get other income? And I think they're going to
target foreign holders of treasuries again, there's talk about, you know,
delisting some of the Chinese ADRs.
Speaker 4 (08:18):
I don't see what.
Speaker 3 (08:19):
That really does at this point, but you know that
probably triggers yet another response from China. And I just
keep thinking that we expect China to make these simplified moves,
and we've talked about this before. She has learned something
Trump one point zero. She was the first one tomorrow lago.
Every time Trump said tariffs, they raise their hand trade delegation.
They have played this very differently. So just like Trump
(08:40):
administration has had four years to plan this, China has
had four years to plan this.
Speaker 5 (08:44):
And it's beginning to look.
Speaker 3 (08:45):
Like China spent a lot more time and money planning
this than the US did.
Speaker 2 (08:48):
It doesn't look like a negotiation right now. In fact,
at least when I were talking about this, yesterday. It
looks like the US is negotiating potentially, but itself of
the moment, you're not hearing much back from China.
Speaker 5 (08:57):
I wanted to finish on one final point with.
Speaker 2 (08:58):
You, because you've been very consistent about this, is we
work our way through learning season.
Speaker 5 (09:03):
You've ready ready rised the.
Speaker 2 (09:04):
Flag about the damage being done to the American brand,
not about the attractiveness of US assets, but the attractiveness
of US goods, US services. How much damage has actually
been done.
Speaker 3 (09:14):
I think we are going to see some of that,
and it's this first wave is going to be a
little bit difficult to tell whether it's just because of
global economic weakness that foreign sales sell down, or you're
going to have to start looking is there an indication
that's ay Cadbury, for example, starts doing better than some
of our brands overseas, and that I think will be
the real key. Try and figure out pairs where Okay,
here's a European or other brand and are there sales
(09:36):
declining or changing relative to the US brands. And I
think that would be a big shock to the system,
because I do think people believe and you can see
it in some of the price action today that there's
just this huge demand for our brands globally and it's
only being affected by tariffs. I think we've diminished that
as part of this overall trading strategy, and that's going
to be harmful, and I think we may even see
(09:57):
some companies talk about it. I think it's too early
this quarter, but as this goes on, I think that
becomes an issue for the rest of the year.
Speaker 2 (10:03):
Interesting want to watch, Peter, it's going to see you.
Thanks for dropping by bitter chair there and Academy Securities.
If you look at for stability in the bond marketing,
you've got it. At the moment, we're down across the board.
Here across the curve, we're down six or seven basis
(10:23):
points at the front end on a ten year maturity,
the yield is down six to let's call it four
forty three. Let's turn to the economy. US consumer sentiment
falling to its second weakest reading on record, while inflation
expectations saw to multi decade highs Nita Richardson of ABP, writing,
inflation has made consumers cautious, but rising incomes can help
cushion any tariff driven price increases if they come neither
(10:46):
joined us now for more need a good morning. Let's
just focus on the data and get away from the politics.
Or income is still rising, you.
Speaker 7 (10:53):
Know, we're seeing that when we look at payroll at ADP,
they're certainly rising, not as fast as they were two
years ago, but at a healthy clip, faster than before
the pandemic. There's also a different source of income that's
really important to think about, which is the housing market.
We get housing starts this later this week. Home equity
for home owners is up almost nine percent from a
(11:15):
year ago. So no, it's not the highest home equity
we'd seen on record, but it's close. It's like the
third highest, and so that's another level of question.
Speaker 6 (11:24):
I don't mean to be.
Speaker 7 (11:25):
Too polyann on a Monday, but I also want to
give a real data reality check to all the uncertainty
that's out there in the market.
Speaker 6 (11:33):
I was just going to say, you're not complying with
the narrative. I love it.
Speaker 1 (11:37):
I think it's great, and I think it's good to
push back against it because there's so much gloom and
doom about companies who are frozen, who aren't going to
be hiring, They're not going to be firing, but job
mobility just isn't there. You're still seeing just some signs
the consumers are maintaining resilience through other means, even with
the stock market that may be rallied last week, but
certainly didn't feel like it, and even with the idea
(11:57):
that it might be harder to get a raise.
Speaker 7 (12:00):
I don't discount the sentiment because sentiment usually triggers certain behaviors.
And you see downbeat sentiment with consumers, with homebuilders, with CEOs,
everywhere you go. There is a pessimism in the outlook.
But then when you turn to the raw data, this
week is super important. Why this is the reference week.
This is the week that the BLS will start counting
(12:20):
the number of people who got paid for their employment report,
and this is the week the ADP will report in
of two weeks to talk about the labor market.
Speaker 6 (12:29):
And if you look at this week and you.
Speaker 7 (12:31):
Compare it to March, what you're seeing is that hiring
is still solid. And if you look at one area
of sentiment that is holding up worker sentiment, we're actually
going to produce a worker sentiment index tomorrow, publish it
at adpresearch dot com. What you'll see is that while
consumers are downbeat, workers are highly engaged.
Speaker 6 (12:52):
They're plugged in.
Speaker 7 (12:53):
Maybe it's because they're cautious about their job loss, but
they're showing off the hair or engaged, and they are
productive and they're doing so because they want to make
sure that they keep those jobs as they move into
the rest of the year.
Speaker 1 (13:04):
So qui quitting has died basically is what you're saying,
which is actually.
Speaker 6 (13:07):
Pursueing really welcome. That's fantasting less.
Speaker 1 (13:10):
I'm curious you say that hiring is remaining solid. Is
it in specific industries they give you a sense of
contentially whether this is a resilience factor or whether this
is people getting old and needing to cater to them
of getting fatter.
Speaker 7 (13:22):
Yeah, that's a great question, because we really do see
a good news bad news scenario there. We're seeing hiring
across firm sizes. That's good news, especially if you look
at small businesses who are price takers in the global
input market. We're seeing solid hiring across the board, but
not every industry. In fact, if you look at consumer
(13:42):
facing industries or somewhat discretionary like leisure and hospitality, it's
been weaker. If you look at retail also weaker, so
we're seeing hiring and ironically manufacturing. So we don't know
if that's pull forward hiring they get ahead of some
of these tariff and trade changes, or if this is
a real rebound and we're seeing it in B to
B services but not so much in consumer facing. In
(14:05):
the series, that is a sea change, and it's tied
directly to consumers and how they're feeling about the economy.
Speaker 2 (14:11):
You talked about the importance of expectations. Let's talk about
how consumers are feeling about this economy. You med Channel
Friday consumer sentiment almost three year low, inflation expectations, multi
decade highs unemployment expectations the worst since two thousand and nine.
Are you seeing anything in the hard data to validate
consumer confidence that week? That poor that we saw on Friday.
Speaker 7 (14:34):
On the labor market, now, layoffs are at a two
year low. They continue to hover around those two year
lows in the private sector. Different for the federal government,
but in the private sector, we are not seeing that
kind of upturn and upheaval and pause and hiring that
is being projected or picked up in the sentiment. Now,
things can change rapidly I'm not saying that the outlook
(14:57):
that we're seeing right now is going to be consistent
six months from now. But if you're looking at the
starting point in the baseline, you're seeing, and I think
Chair Pal said this and his recent remarks, a labor
market that is solid and continues to perform.
Speaker 2 (15:11):
Still this massive, massive sprint lace of bestween the soft
and hot data. I keep going back to that headline
from you, Mitch. To see unemployment expectations down at the
worst levels we've seen since two thousand and nine is
pretty staggerant.
Speaker 6 (15:24):
It was funny you were mentioned that. In the past
couple of weeks.
Speaker 1 (15:26):
Lori Cavasina put that out in a report, saying that
in all of the earnings calls also, corporate executives have
been talking about how this reminds them of two thousand
and eight, This reminds them of twenty twenty, This reminds
them before that of the two thousands.
Speaker 6 (15:40):
You see that in the.
Speaker 1 (15:41):
AAII sentiment survey as well. So at a certain point,
have we really reached a new paradigm shift though, where
suddenly the soft data has not been predictive of the
hard data. Are we going back to something more normal
where you would normally see a correlation there.
Speaker 2 (15:55):
So the Federal Reserve is not blinking and Native the
Federal Reserve will be meeting in early May. That meeting
and Cluthes, we'll get that decision on May seventh. What
you make have kind of navigated things so far and
what would you expect to see in a few weeks time.
Speaker 7 (16:06):
I think the Fed is navigated the way Main Street has.
They're waiting and watching. There hasn't been any big money
moves that we can identify, and I think it's too
early on the policy front to make any firm movements.
And that's what you're seeing from the FED. But it's
also what you're seeing from small businesses and medium sized
businesses who can't change operations on a dime. Consumers can't
(16:27):
change spending patterns on a dime. So what you're seeing
is an economy that started from a solid baseline in
wait and see mode, just like the FED.
Speaker 1 (16:35):
You know, there is this discussion that we had and
it was off air, about whether this FED is going
to be really just targeting dysfunction in the treasure market
or whether they actually were going to be looking at
levels we're not going to close the spreads until the
spreads get too wide, and then we're going to close them,
akin to maybe what the ECB has been doing. I
am curious about this theory that Neil Koshkari put out
over the weekend saying that we at the FED have
(16:56):
no ability, zero ability to affect that destination of your
yields as investors try to get some sort of price
discovery here. Do you believe that or do you think
that there is a level at which they do step in.
Speaker 7 (17:09):
Well, I think this comes to your sentiment momentum distinction.
I mean, the FED operates at the short end of
the curve.
Speaker 6 (17:17):
That is their mandate, and.
Speaker 7 (17:19):
So I think if you take the literal interpretation of
the Fed's actions, yes, they are not responsible for the
longer end of the curve. But we know that the
FED has a huge sentiment role in all of us
in itself, and just by their forward guidance, they can
change the way the bond market reacts. So yes, and no,
pardon thoft, we're still back in that distinction.
Speaker 1 (17:40):
So I guess to sum it all up, do you
see the unemployment rate rising quickly enough to get the
FED engaged in terms of cutting rates or having some
sort of stimulative effort in the near term, in the
next two weeks, the next three weeks before, or the
next two months, right before the economy really can turn.
Speaker 6 (18:00):
Not in the next month.
Speaker 7 (18:01):
No, we have not seen the transmission mechanism multiply to
an effect that it hits the real economy in a
way that you would see the kind of staggering job
loss that would justify on its own a rate.
Speaker 6 (18:16):
Moved by the Fed.
Speaker 7 (18:17):
The labor market is still holding up two hundred and
nine thousand private sector jobs created according to the federal
government last month. That's not going to be a downbeat
measure by anyone's estimation.
Speaker 2 (18:29):
NATA, it's going to say, as always, thanks for dropping
by NATA. Riches in that of IDP, go to surround
a Tengo here in New York, Hendrida Trice.
Speaker 5 (18:45):
If I had to promise Hendra go to see you.
Let's just get to this.
Speaker 2 (18:49):
I'll be allowed exemptions or not do they exist?
Speaker 8 (18:51):
I mean under the AEPA tariffs that went on that
are already at twenty percent, there are no exclusions except
in the case of like if you're giving a donation
from a religious and the semiconductors are tariff, the pharmaceuticals
are tariff. Everything coming in four hundred and ninety eight
billion dollars is effectively tariff.
Speaker 6 (19:07):
So it's just going to get worse from.
Speaker 2 (19:08):
Here with similar with all these different buckets. Speaking of
getting worse sectoral tariffs, what would they look like and
when would they be announced?
Speaker 8 (19:16):
So I think that the two two tariffs are the
most pernicious kind that we can get, and in the
twenty twenty five environment, thirty day comment periods are pretty much.
Speaker 6 (19:24):
All we should expect.
Speaker 8 (19:25):
We saw with the auto investigation back in twenty nineteen,
was it that they don't even necessarily release the investigation
after it's confirmed.
Speaker 6 (19:32):
You know, they're just putting these tariffs on.
Speaker 8 (19:33):
So I think for pharma and for semiconductors, the worst
case scenario is that sometime in this thirty sixty ninety
day window, the tariffs go on, the comment period happens,
and the tariffs are on.
Speaker 6 (19:42):
Before the summer.
Speaker 1 (19:43):
What's the strategy here, That's a great question.
Speaker 8 (19:46):
I mean, they want pharmaceutical manufacturer back in the United States.
We know that that takes five to seven years to
get the various approvals for even opening the facility, let
alone having the workers come in and actually do the
manufactur on those kinds of products. I think that the
semiconductor space is exactly the same. When I'm on calls
with investors, they're talking about, Thank goodness we had the
(20:08):
investment from the last administration into semiconductors, from the Chips
and Sciences Act of Bipartison.
Speaker 6 (20:13):
Build it passed years ago.
Speaker 8 (20:15):
To keep providing any kind of support to the industry
because it's going to get slamed from the tariffs.
Speaker 1 (20:19):
I'm just asking, because the complications here are pretty dramatic.
Trying to keep track of which tariffs have gone on.
Where is a gold task when you try to talk
about what the actual effective tariff freight is, let alone,
how you plan for the future and what that could
be with additional rounds of tariffs coming on.
Speaker 6 (20:35):
What are people telling you?
Speaker 8 (20:36):
That's the stories that I hear the most are the
anecdotal data points. As you were talking before about connecting
the soft data to the hard data. The bankruptcies that
they're expecting, the seizing up at the ports, the manufacturers halting, hiring,
halting production, keeping their products on ships.
Speaker 6 (20:54):
In cargo ships.
Speaker 8 (20:55):
There's a lot of reminiscing about covid era when the
ships were just in the port. We're going to have
to all go back to like monitoring the Pacific Ocean
and see what.
Speaker 6 (21:03):
Kind of fleets are out there.
Speaker 8 (21:04):
That's what folks are talking about now and anticipating seeing
in the hard data in the next couple weeks.
Speaker 2 (21:08):
It just got a message from a Limbug subscriber. This
sounds very chaotic. The market seems to have price peak,
chaos is behind us.
Speaker 5 (21:15):
What are we missing? What are we missing?
Speaker 8 (21:17):
I don't think the stories have come out yet about
how this is going to impact actual domestic manufacturers who
rely on foreign imports. You were mentioning critical minerals before.
How are you supposed to make your windshield wiper sensors
if you don't have the magnets that go into it.
So if you stockpiled enough in the last couple of
months to get in around that, you have some certainty
(21:38):
for a couple of weeks. But it's not a sustainable situation.
I think the hard data is going to come out
next for the next couple of weeks and months, and
these tariffs are not going to come off, especially if
they're done during under two thirty two, those are the
most pernicious.
Speaker 6 (21:51):
Three oh one is pernicious. I mean these have real
standing power for years, and.
Speaker 2 (21:55):
Then we need some relief taxes. What's changing with the
tax push at the moment?
Speaker 8 (22:00):
Man, You know how I feel about this. The tax
component they're now President Trump is talking about is tax
cuts and deregulation. You are not permitted to pass deregulation
via reconciliation instructions, and Democrats will not be working with
Republicans on a crypto bill or any other deregulatory legislation.
Speaker 6 (22:16):
So unless you like the emission standards.
Speaker 8 (22:18):
Components which are going to get produced in a what
seventy five dollar barrel oil situation, you're not going to
see a deregulatory push anytime this year, and certainly not
until you get certain agency officials seated in their positions.
Speaker 6 (22:30):
In the first place.
Speaker 8 (22:31):
And then the tax bill I think is going to
take until the end of July, and as you know,
it includes four trillion dollars in deficit increases and very
little in the way of new stimulus. So I think
there's a disconnect between the narrative and reality.
Speaker 1 (22:46):
Given that is there a loss of power that Trump
is having or a loss of a clutch over the
Republican House Caucus.
Speaker 6 (22:53):
I don't buy that argument.
Speaker 8 (22:55):
They passed the budget vote last week, and I think
that was the biggest hurdle. The next step is are
you going to vote for tax increases on every single American?
Speaker 6 (23:03):
Or are you going to vote for this bill? And
that's a cut and dry. The whip is easy. All
members are going to support that.
Speaker 1 (23:08):
There is a theory that if things get chaotic enough,
and if some of these proposals are outrageous enough, there
is going to be the ultimate check, which is going
to come by congressional action against some of these tariffs
or potentially a court action. Do you see any pathway
to that or are people just wishful thinking?
Speaker 9 (23:25):
No?
Speaker 8 (23:26):
I see no path for that either. If you can
get six or seven Republicans to join on to a
Senate bill, that is wildly insufficient. I think that President
Trump needs these members through this budget vote that happened
last week, and now through you know, let's call it
Memorial Day or July to pass this tax bill, and
then he doesn't need them at all, and no legislation
is going to pass.
Speaker 6 (23:43):
There will be no Reconciliation Authority. There will be no
more legislation, which.
Speaker 8 (23:47):
Is, by the way, the playbook from the first term,
where we got a tax bill initially and then spent
the next three years doing tariffs.
Speaker 6 (23:53):
And that's what I expect here.
Speaker 2 (23:54):
Just quickly we have the point where they're all quote
saying treasury yields to each other down on campbel Hill.
Speaker 5 (23:58):
No way, not that yet.
Speaker 6 (24:00):
I'm not sure we'll ever be there. I wouldn't expect that.
Speaker 2 (24:03):
I hope we never get that, because if we get that,
we've got major problems.
Speaker 1 (24:06):
Yeah, at one level, I kind of hope that they
do pay attention because it does actually matter suddenly, if
you have a fifty basis point increase in tenure yields,
that increases by billions of dollars the.
Speaker 6 (24:16):
Amount of the United States is paying. So I hope
they do quote those treasure yields.
Speaker 1 (24:19):
Congress Members, if you are listening, please get a Bloomberg
termin'll take a look at that ten yure yield, take
a look at a thirty year yield.
Speaker 2 (24:25):
That's a sales pitch. I'm right there with you, and
please get that Bloomberg terminal. Clearly, the President was looking
very closely last weekend coming into the trade and weak.
Speaker 1 (24:33):
Yeah, I got yippie people got a little nervous. But
he dealt with that in one statement, and that's what
he said. The issue is, do we have a true
sense of where that Trump put is.
Speaker 6 (24:43):
Do we have a sense of what level, what type of.
Speaker 1 (24:45):
Chaosk potentially end up dealing with some sort of response
from this administration.
Speaker 2 (24:51):
Henry answer, it's good to see you. Thanks, thanks for
dropping by. Thank you, Henry to trace their evde upon visit.
Dorman Sachs adding to banking optimism after posting a record
revenue hall from its equity trading unit.
Speaker 5 (25:12):
The stock is up by two percent.
Speaker 2 (25:14):
To discuss some place to say is David Edison of
Fannessy Funds. David, Welcome to the program, sir, appreciate getting
some time with you. We've heard from Jape, Morgan from
Morgan Stanley from Goldman. How would you grade the quarter
so far?
Speaker 9 (25:26):
Well, the quarters were great. I think the industry is
showing that they have done a great job of dealing
with credit and liquidity and capital managing the buybacks. So
I think the you know, it's like that's all in
the past, unfortunately, but I do think the industry is
in great shape to weather what's ahead. I think your
(25:47):
conversation with Gerard Cassie this morning sort of put it
in focus. But I think the industry is in great shape.
Doesn't mean the stocks are going to double or triple
or go down fifty percent, but I think as an
industry they're ready for whatever happens in Washington.
Speaker 2 (26:02):
I think let's talk about that as a portfolio manager,
just how defensive do these names trade in growth scares?
And how has that changed over the last decade.
Speaker 9 (26:11):
Say, well, I think since you know, two thousand and eight,
we've been worried about a credit cycle, worried about a
rate cycle.
Speaker 4 (26:17):
We've had an inverted curve.
Speaker 9 (26:19):
So the financials have been, you know, frankly not the
place to be for ten or twelve years, and I
think the color of my hair shows it. So I
think the hope is that as we go forward here,
there's going to be a you know, a little less
pressure on them as they you know, in a sense,
the terrorists are not attacking financial services products.
Speaker 4 (26:41):
They're attacking physical goods, and so.
Speaker 9 (26:44):
I think people maybe are going to be more worried
about the physical good traders and makers than they are
about the financial guys. So we'll see. I mean, Wall
Street finds a way to make money in all environments.
People need to lend money to grow. The economy is
not going to go to zero, and so I think,
you know, these companies could be the safe harbor that
(27:04):
they haven't been for the last ten or twelve years.
Speaker 1 (27:07):
David, the narrative around banks has shifted. At the beginning
of this year, it was the growth stock, given the
fact that there was supposed to be a wave of
deregulation as well as a boom in mergers and acquisitions
and all sorts of deals. Now it's a defense stock,
where suddenly banks are buying back their own shares and
pretty large quantities. We just heard about a forty billion
dollary purchase from Goldman Sachs.
Speaker 6 (27:29):
Which is it? Is it defense or offense?
Speaker 9 (27:34):
Well, when you sort of have one guy deciding what
the world trade environment's going to be and a bunch
of other stuff, I think, you know, you look for
defensive names, and that means you look for a good
balance sheets, You look for capital, you look for liquidity,
and you look for good managers. And I think the
banks have that and so you know, this weekend was
(27:56):
pretty quiet on the Washington front. So the market's up.
So I think the general move of the market, I
think is, you know, the market generally wants to go
up in my view, and it's being held back by
sort of one guy making decisions about how the world's
going to function, and that I think will calm down
and we'll I think we'll be okay.
Speaker 4 (28:14):
On the other.
Speaker 1 (28:15):
Side, another way of sort of approaching the same question
is which banks are best positioned for the next phase
of whatever is to come. Is it the ones who
are going to benefit from volatility and markets trading revenues,
some of the potential other opportunities there, or is it
going to be the lenders the Bank of Americas They're
(28:35):
going to go out and actually be able to create
credit at a higher rate based on where the treasure
yield is right now.
Speaker 9 (28:44):
Well, I think one of the concerns I think that's
coming up on the analysts that I've talked to and
the companies that I talked to prior to earnings was
that is this disruption going to really hurt small business
and therefore hurt the lending of the traditional banks that
we haven't heard from.
Speaker 4 (29:02):
Yet, but we will in the next in the coming weeks.
Speaker 9 (29:06):
I think the big banks, you know, they have the earnings,
they have the in the sense network effect of having
a lot of customers and a lot of data inputs
about what's going on. But I think the overriding thing
about this industry is that we need new products, we
need innovation, and we need companies to do transformative acquisitions
to kind of get them back on a growth path.
(29:28):
They've lost so much share on the lending side to
private equity and private debt and other sources of income
that the loans just don't grow anymore, and so they
need to do other things to get out of that
box that they're in. And hopefully that will happen as
we move forward with the new administration.
Speaker 2 (29:47):
We've had lots of people say the same thing, that
we're expecting consolidation, particularly between the regionals and the smaller lenders. David,
what are you anticipating for the year ahead on that front, Well, it.
Speaker 9 (29:58):
Started off pretty good. I think that, you know, I
don't think that's.
Speaker 4 (30:03):
Going to stop.
Speaker 9 (30:03):
I don't think whatever the administration is doing now is
going to stop that. I think at the end of
the day, the smaller banks know that they're losing share.
They can't invest in technology, it's hard for them to
compete with these new platforms that seem to be popping
up every day. They're competing for deposits and loans, and
so they need to get bigger. And that's, you know,
(30:27):
sort of the process that you see that in the marketplace.
The bigger companies have the higher valuations and the smaller
companies are going to being left behind. So I think
the market is telling you something and hopefully the managers
are hearing that and seeing it.
Speaker 2 (30:41):
David, appreciate your time. Tricky moment for you all, I'm sure,
David Allison of Fantasy Funds. This is the Bloomberg Seventans podcast,
bringing you the best in markets, economics, antient politics. You
can watch the show live on Bloomberg TV weekday mornings
from six am to nine am Eastern. Subscribe to the
podcast on Apple, Spotify, or anywhere else you listen, and
(31:02):
as always on the Bloomberg Terminal and the Bloomberg Business
out
Speaker 3 (31:09):
Mm hmm.
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