February 19, 2025 • 24 mins
One month in, Wall Street’s view on Donald Trump is evolving. Guest host Nancy Cook, Bloomberg’s senior national political correspondent, speaks with chief Wall Street correspondent Sridhar Natarajan and finance reporter Hannah Levitt about how finance executives are feeling now.
“There is still broadly this palpable optimism,” says Levitt, “but it’s a bit more caveated.” Levitt and Natarajan explain those caveats, discussing what the likelihood of higher volatility throughout Trump’s second term means for the bottom lines of big Wall Street firms and unpack why a deregulatory agenda might have unforeseen consequences.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio NEWSOM. I'm Nancy Cook, a
senior national political correspondent for Bloomberg News, in for Stephanie Flanders.
This week, Welcome to trump Anomics, the Bloomberg podcast that
looks at the economic world of Donald Trump, how he
(00:23):
has already shaped the global economy and what on earth
is going to happen next. So this week we're bringing
the focus back from Europe and the Middle East and
asking a question that centers around the mood on Wall Street.
Our bankers still celebrating Trump's return. What does the way
Wall Street is moving money tell us about their feelings
with me from our offices in New York. Are our
(00:44):
two star reporters from our finance team, schreidhar naderin our
chief Wall Street correspondent. Welcome Stree. I thought of you
as soon as I wanted to do this story because
we had so much fun together at the Democratic National
Convention in August.
Speaker 2 (00:58):
And how different was the mood back then. I think
I remember we were tripsing through that convention floor with
all the balloons falling down. Unfortunately for the Democrats, that
mood did not carry over into November.
Speaker 1 (01:08):
You are so right. And then Hannah Lovett, who covers
JP Morgan and Morgan Stanley and has been speaking with
a lot of executives in the last few months. Welcome Hannah, Hey,
thank you for having me. Of course, so it's probably
worth remembering. We got an early read on how bank
executives were viewing Donald Trump's return to the White House
at the World Economic Forum in Davos this year. They were,
(01:29):
for the most part elated about the prospect of fewer
regulations and more deals. The consensus was a market focused
deal maker was at the helm of the US economy
and that would present a new era of opportunity with
money to be made. So here we are, roughly one
month later, and how to finance executives feel now and
(01:50):
what can we learn beyond the rhetoric and more the
actual trades. Sree, why don't we start with you?
Speaker 2 (02:03):
If you want a good proxy for feelings and vibes
on Wall Street, I think the best indicator is obviously
the stock price for those individual companies and their firms.
And if you look at what's happened since November fifth,
since the night of the election, we've pretty much had
a consistent charge up on some of the major stocks
Goldman Sachs all time high, JP, Morgan all time high.
(02:23):
The private equity stocks have also been climbing since November.
So the feeling there at least the immediate reaction to
the result has been this will be good for big business,
This will be good for big Wall Street. One of
the points you just mentioned was deal making. We've so
far had about five hundred and sixty billion dollars worth
of deals announced globally quarter to date, which is a
(02:46):
decent number. But if I go back to Q one
twenty twenty four, that number was nine hundred and sixty billion.
That explains why. When Wall Street executors were talking at
a major financial services conference last week, one of the
questions that analysts kept asking them was, you've all talked
about this pickup and deal making, Why has it not
really materialized. It feels slower than it should be, And
(03:08):
the answer was truly, yes, it is slower. We're having
a lot more conversations. A lot of these dealmaking discussions
are at the five yard line. They've just not converted.
You could have the gusher open anytime. But it does
go back to the idea that yes, there are a
lot of things about the Trump administration and the way
they talk to big business and about big business that
(03:31):
automatically generates this sense of enthusiasm and hope for these companies.
But there is also the Trumpian policy uncertainty that they
have to deal with. When you have all the questions
about tariffs and it attacks policy changing one day to
the other, and Trump's attention span going from his one
favorite subject to perhaps something else the next day, and
(03:52):
not showing which one will come through and which one
will fall by the wayside. That does create a little
bit of an obstacle for business, and they'll have to
figure out a good way to navigate it.
Speaker 1 (04:02):
On that, Hannah, you've been talking to a lot of executives.
I wonder how they're feeling about that point that Tree
brings up about the tariffs. You know, I know that
they are excited about the possibility of lower taxes and
less regulation. But the tariff policy, my reporting shows it
is really uncertain, And I wonder how executives are feeling
about that.
Speaker 3 (04:21):
Yeah, totally, So, I would say to Shred's point, there's
still broadly this palpable optimism. Various bank executives have described
it as animal spirits and all of that. But it's
a bit more CAVEATD today than it was a couple
months ago and even a few weeks ago before inauguration,
and that really stems from just kind of all the
(04:44):
uncertainty and some of these executives, you know, whether it
be bank executives or you know, CEOs of companies that
they bank and things like that, they need more certainty
before they move forward with these strategic actions like you know,
deals or IPOs and all of that. And the tariffs
are an element of that. You know. I covered JP Morgan,
(05:08):
as you said, and Jamie Diamond, the CEO there, said
last month that tariffs, if they're properly used, can be
effective to resolve things like unfair competition, national security things
like that, but they can also do damage if they're misused.
And he's described Trump as a negotiator and said that
tariff talk will get people to the table. But I
think there's a bit of a wait and see attitude
(05:30):
as far as how all of that shakes out now.
On the market side, though, the you know, these banks
have these huge trading desks, and it spells more of
an opportunity on that, you know, market moves, volatility, you
know that that translates generally into banks making money on
those trades. So that has continued. We saw some of
that in the fourth quarter, and it seems like that's
(05:52):
continued into the first quarter.
Speaker 2 (05:54):
And if I could quickly jump in and thinking back
to the time when Hannah and I started working together
about seven years ago, now there was this predominant concept,
you know, when we talked about volatility in markets and
how it impacted the trading desk, the markets businesses of
these big banks. The talk was always around whether it's
good volatility or bad volatility. Funnily enough, I think in
(06:15):
the last couple of years, especially with a lot of
changes that have been made, banks have gotten themselves into
a position where and look, if there is a massive
market correction, yes, they would also be affected because they're
in the business of buying from one party and selling
to another party. So if there are massive moves, they
will be affected. But the businesses have been structured in
a way that it's almost their ability to make money,
(06:39):
their ability to transact and the revenue is almost dependent
on the volume and less so on the direction of markets.
And upmarket obviously helps so in general, if you look
at this idea that you will have a higher uptick
in volatility over the next few months, next few quarters,
or perhaps throughout Trump two point zero, that will generally
(07:00):
be good for a lot of these trading businesses. And
for the biggest Wall Street firms, that is a big
source of revenue, That is a major source of earnings
for them.
Speaker 3 (07:08):
Absolutely, And I would just say JP Morgan, which has
the biggest trading business on Wall Street, they had their
highest fourth quarter trading revenue ever when they reported in
mid January. And so that's the level of momentum that
executives have since described as continuing. And I was speaking
to a bank executive earlier today actually who said market
(07:29):
movements are generally good for Wall Street unless it's a shock.
So I think that really sums up, you know, ratifies
what she was saying.
Speaker 1 (07:35):
And then I'm also curious, sort of who are the
Wall Street whispers in the Trump White House. I know
a big complaint of the Biden White House was that
they did not have a lot of connections to Wall Street,
and so I'm wondering what you're hearing about those two things.
Speaker 2 (07:50):
Let me first start with the second part of your question, Nancy, So,
I think when we think about some of the key
characters in the Trump orbit, Susie Wilds played a massive
role in sort of the campaign and now at the
White House. She is perhaps one of the few people
in that immediate Trump circle, in that immediate group of
decision makers and Trump world, who's not that well known
(08:13):
to Wall Street. She doesn't really come from that background.
Not a lot of people have had time to build
connections with her. But if you move past Susie Wills,
you look at the cost of other characters, Howard Lutnik,
extremely well known to Wall Street, Scott Besson creature of
Wall Street, extremely well known to all the major players,
that even folks like Doug Bergham have been like big
(08:33):
clients of firms like Goldman Sachs over the years. So
there are enough folks in that orbit that you're very,
very unlikely to hear the same complaint about this administration
as you heard about the Biden administration about not having
someone in there who would take their phone call, who
would take a meeting with them. That's not going to
be a problem in terms of what these folks are doing,
(08:56):
what these players are doing. I was just thinking about
a few memes. Hannah and I were swapping over the
last couple of days about Jamie Diamond going down to
Capitol Hill, and you know, folks wanted him to comment
on the dismantling of the CFPB, I think, and he said,
no comment, and then he pulled out this chart that
he carries with him, his famous spaghetti chart that shows
(09:17):
this wide area of regulators and the oversight they have
over JP Morgan. That has been Jamie Diamond's pet pee
for a long time. And it's funny that it almost
has a printed outslide that he carries with him every
time he goes from New York to DC. In fact,
I know Hannah has some interesting color on the backstory
of this chart.
Speaker 3 (09:37):
Well, yeah, he does bring it with him, and it's
funny because it was actually originally in his twenty eleven
letter to shareholders, so you know, it's more than ten
years that he's had this with him. They call it
the spaghetti chart kind of informally, and it has all
these agencies and what they oversee and all the kind
(09:58):
of interconnecting lines, and you know, I'm looking it right now,
it's quite clear why it's called the spaghetti chart. But yeah,
you know, the complaint on Wall Street over the years
has been that there are too many cooks in the
kitchen basically on Wall Street overside. And so yeah, when
they went, when the bank CEOs went to DC last week,
it is not surprising to me at all that Jamie
(10:18):
had this chart with him.
Speaker 2 (10:19):
Yeah, that's one thing that I would like to think about.
And it's something that maybe too if you can weigh on,
is I think the biggest firms on Wall Street, the
biggest banks, for instance, had gotten used to Jamie Diamond's
ten year old beef a side with the regulatory agenda,
had gotten used to this idea that they had to
(10:40):
invest a lot for the regulatory needs, for the regulatory requirements.
But effectively what they did was also build this wide,
deep moat because most other people cannot come in and
play on your turf. They if the cost of entering
that business is prohibitively high. That has helped especially and
(11:02):
I think about like the key trading businesses and some
of the other key businesses that are two, three, four
top players. Everyone else sort of sits outside that mode.
So they've benefited greatly from that. So if you have
a rapid unraveling of the regulatory agenda, doesn't it in
some way backfire for these biggest players.
Speaker 1 (11:22):
That's a wonderful point, Hannah. Do you have any insight
into them?
Speaker 3 (11:25):
The way that I've heard it described over the years
is kind of death by a thousand cuts from the banks,
which is perhaps a bit dramatic, but basically, if you
go business by business, there are companies, non banks that
have been able to play in that realm in a
big way, but not you know, there haven't been new
entrance to the kind of full on big bank systemically
(11:48):
important category. So yeah, I think it's kind of tbd
how that all shakes out, you know, in a world
where there's a lot of deregulation, which you know, lets
the banks do more but also lowers those barrier centry.
Speaker 1 (12:01):
That's a great point. And just from where I sit
in Washington, you know, having done a lot of reporting
in the last week on elon mus stoge efforts, so
much of that group is staff by you know, tech
people who I think do want to you know, less regulation,
but they also want to sort of upset establish business
and the status quo, and so that is quite interesting.
I think that you know, just the idea that it
(12:21):
would make it easier for other companies to come in.
One of you brought up Scott Besson, who is a
former hedge funder and who is now Treasury Secretary. That's
going to be such a key role this year as
I think about cutting taxes again, I wonder how his
tenure is being viewed so far by by finance executives.
Speaker 2 (12:39):
I think so far they have no complaints. Scott Besson's
proved to be exactly what they thought he would be.
They see him as a bit of a moderating influence
in Trump World. Of course, that might not really win
you a lot of kudos and Trump World itself, and
Scott Besson will perhaps have to do more to prove
himself in Trump's in a circle, make sure he's spending
more of his weekends now mar Lago instead of back
(13:01):
at home in South Carolina. But for Wall Street and
for markets in general, Scott Bessen was a choice that
they all cheered, that they all welcome. They realize this
is someone whose business focus, whose markets focus, and they
could get behind this pick. Scott Pasant in that position
is good for Wall Street, And when you think about
(13:22):
the key proposals about taxes, lowering tax rates. Yes, Scott
Bessand will champion that. The question though, is is it
going to be Scott Besant who makes sure that the
tax cut policy actually makes its way through Congress. I
don't know how much of a say in power he
will have that, especially when you consider a Congress where,
especially in the House, the Republicans have a very very
(13:44):
slim majority, and you've already seen that there are various
factions today's GOP. There half the times they're battling the Democrats,
but most of the times in America, majority of the
time they're battling their own different factions within the GOP.
And they have to figure out a way to put
forward a unified front. And that is important for Wall Street.
(14:04):
I was just looking at some numbers before coming on here.
When you look at pre tax earnings that a Goldman
Sachs at a Morgan Stanley, that's about twenty billion dollars
a year. Let's say you can cut corporate tax rates,
their effective tax rate can go down by five percent,
you know, just making up a scenario which a nice
round number like Donald Trump would prefer, that's about a
(14:26):
billion dollars in savings. A billion dollars in savings is
you could have a twenty thirty forty percent slow down
in deal making and therefore the fees that they make
from that advisory business that you know, one of the
key components they've been talking about when they talk about
this turbocharge deal making environment. You could still have a big,
massive slow down there, and yet that savings from the
(14:48):
tax cuts could offset that. That's how important the tax
cut agenda will be for these big banks. So they
would hope that Scott Besson could work his magic. More importantly,
they would pray for unity within GP ranks for that
to come through.
Speaker 1 (15:02):
Howard Lutnik is the Commerce Secretary. He wanted to be
Treasury Secretary, but Trump passed him over. He has given
him a powerful perch where he's in charge of all
the tariffs. Howard Lutnik is a very familiar character to
you all because he ran Canter Fitzgerald. But what should
Washington d C. Know about the way Howard Lutnik operates
as he sort of takes over a huge portfolio here.
Speaker 2 (15:24):
The most interesting dynamic about Howard Lutnik was how he
almost Dick cheneyed himself in the leading the hunt for
the Treasury secretary, only to say maybe I would be
the best Treasury secretary. So the first few weeks, especially
during the transition months, a lot of the talk in
town was about this warring dynamic between Scott Bessant and
Howard Lutnik. That's obviously not a good look in an
(15:45):
administration that's so focused on these items of tariff's, tax's,
deregulations and whatnot. You know that this person in the
Commerce seat and the person in the Treasury seat have
to work hand in hand. They've even been given this
mandate of figuring out how to create this sovereign wealth
fund that also involves a lot of Scott Beson and
Lutnick working together. And I think Kevin has it involved
(16:06):
there as well. So more than how he operates on
Wall Street, which again he will say and do things
that are generally appreciated by Wall Street. He is from
New York. He's an old time fixture. He knows everyone
in the city, so he knows all of Wall Street.
That all works just fine. In fact, much like Trump,
he was also a one time Hillary Clinton fundraiser and
(16:28):
now he's Team Trump. Much like Donald Trump is now
Team Trump after once being a Hillary Currenton fundraiser. But
the fact remains that Wall Street will have no issues
with Lutnick. It's more whether Lutnik can navigate the dynamics
of getting along with everyone in Team Trump, especially someone
(16:48):
like Scott Beson, to be able to push through the agenda,
the ambitious agenda that they need to push through, in
a way that does not rattle markets, in a way
that also is fiscally responsible. You know, they talk about
the ballooning debt burden, but when you think about the
deregulatory agenda and the massive tax cuts that they're trying
to push through, that will have an impact on the deficits.
(17:11):
So how do you offset for all of that? It
will require a lot of careful planning with the rank
and file of the GOP in Congress, with the various
administration members, and with the various cabinet members. That's the
dynamic that Lutnik will have to be focused on, because
that will be a difficult needle to thread.
Speaker 3 (17:27):
Steve Minuchin was Treasury Secretary in Trump's first term, and
Wall Street executives liked him then, and they looked back
fondly on his tenure. You know, he was there the
whole time. He was seen as kind of a steady
presence in that world, and it's someone who they recognize
and that goes a long way. And so I would
say that with both Bessen and Lutnik now it's a
(17:50):
similar dynamic.
Speaker 1 (17:52):
I'm so curious to see how Lutink fares because just
as a political reporter, he made a bunch of Trump people,
you know, on the politics side of things, quite angry
during the transition when he sort of ran roughshot over
things and put his own name up for Treasury secretary.
So I am I asked, because I am really watching
sort of how he operates in a political environment. One
final question, and Hannah, I want to go to you first.
(18:14):
I am curious. You know, there's so much political geo
instability right now. You know, we are trying to figure
out what's going to happen with the end of the
war in Ukraine. As Trump thinks about that, it's very
uncertain what his relationship with Heran will be like. He
has said that he wants all the Palestinians to leave Gaza.
There's just a lot of big foreign policy questions right now,
(18:37):
and I'm wondering if that concerns the finance executives that
you speak to at all and just sort of how
they're factoring that into their plans for the next year
or so.
Speaker 3 (18:46):
Yeah, it absolutely does. I think the way that that
translates to the business side of things, or one of
the ways that that translates is, you know, when you
look at deals like M and A and the cross
border aspect of that, are cross border deals getting done.
And we were talking earlier about the post election euphoria
that continued, but I was speaking to a bank executive
(19:06):
last week who was describing it as US firms are
waiting for the dust to settle. So you know that
euphoria hasn't been immediately translating. But in Europe there was
apprehension immediately post election that has turned a bit more
into how can we get in on US economic growth?
And then you know in Asia, especially China and Hong Kong,
there's a sense of it's not as bad as it
(19:27):
could have been in the early days and weeks. So
I think that as you're looking across kind of the
different regions, there are different expectations and then reactions to
you know, the things that are happening as they happen,
but it is there is still broad sense that it's
early days in this administration. People are kind of waiting
to see how things shake out.
Speaker 2 (19:46):
I would go back and look at the world economic
order and say, perhaps since the two thousand and eight
financial crisis, if you look at different parts of the world,
Europe massively struggled. Africa is still a growth story but
has now not hit the breakout phase. Middle East has
been a bright spot. That have been strong emerging economies
in Asia, which have had their stumbles once in a while,
(20:08):
but in general, over the last decade or so, the
American growth story in some ways has been unparalleled. And
perhaps that leads to this assumption that America has an
island onto itself and what happens in the rest of
the world doesn't necessarily affect the country, And you could
assume that in a America first focused administration that is
(20:32):
the predominant thought. But I feel that the world is
way too interconnected that you can't just overnight snap your
fingers and say, you know, each one to himself. That
will be very difficult. So from that perspective, when you
think about how the geopolitical situation is playing out worldwide.
(20:53):
If you have a scenario where your enemies remain your
enemies and you turn your allies into your enemies Que Canada, Q,
European Union and the big speech from JD Vans or
the Munich Security Conference over the weekend, she suddenly start
to distance all of those players who've been your allies,
who've been part of you know, enabling helping your growth story.
(21:18):
Then it does reach a situation where it starts to
worry markets, it starts to worry the big investors, and
it starts to worry the big films. That is one
reason why Jamie Diamond's almost been like a broken record
for the last half a decade talking about how the
geopolitical risks in the world today are the biggest risk
faced by the world. To an extent, it almost feels
(21:39):
like he's been talking about these dark clouds on the
horizon without any real follow through on that. But he's
not wrong. Not a lot has to go wrong for
things to turn in the absolute wrong direction, and that
will be a cause for worry. And at that time
you can forget about the cheering on of dealmaking and
tax cuts and deregular. You have much scarier things to
(22:02):
worry about.
Speaker 1 (22:04):
What's one thing that you think the listeners should know
just about Trump and the Wall Street relationship that we
haven't talked about yet.
Speaker 2 (22:10):
He lives and dies by the market. He judges himself
by how the markets performed. So he might be wedded
to a policy, but it almost feels like if the
market gives it a veryative negative reaction, the sense is
that Trump will backtrack.
Speaker 3 (22:27):
And that is something that Wall Street executives have almost
been taking solace in, you know, in recent weeks, and
probably will continue.
Speaker 2 (22:35):
To do so, maybe almost taking it for granted. Let
me caveat that by saying that is the assumption on
Wall Street in the second Trump administration, where it seems
more untethered from prior norms. It's not entirely clear to
me that that still will remain his guiding philosophy, but
at least Wall Street things and hopes and beliefs that
still remains the guiding principle about Donald Trump when they
(22:58):
think about Donald Trump.
Speaker 1 (22:59):
That's a great point. I do think this stock market
was sort of his primary form of polling in his
first term. But I think you're right I think he
is a more self assured leader now and fairly confident
in how he's moving. And so you're right, I'm not
sure sort of if that if the stock market and
how it's performing will be a checks and balances on
him this time. Shre thank you so much for joining us.
(23:21):
This was wonderful to have you.
Speaker 2 (23:23):
Always great chatting with you.
Speaker 1 (23:24):
Nancy and Hannah, thank you so much. It was great
to speak with you from New York.
Speaker 3 (23:28):
Yeah, thank you for having us.
Speaker 1 (23:34):
Thanks for listening to this week's trump Andomics from Bloomberg.
It was hosted by me Nancy Cook. I was joined
by shridehar Nojeron and Hannah Lovett. Trump Andomics is produced
by Summer Saudi and Moses Andam with help from Chris
Martlou Special thanks to Dashel Bennett and Jared Rudderman. Sound
designed by Blake Maples. Brendan Francis Newman is our executive producer.
(23:57):
To help others find the show, please rate and review
wherever you listen to podcasts.
Speaker 2 (24:07):
Mhmm
Bloomberg Audio Studios, Podcasts, Radio NEWSOM. I'm Nancy Cook, a
senior national political correspondent for Bloomberg News, in for Stephanie Flanders.
This week, Welcome to trump Anomics, the Bloomberg podcast that
looks at the economic world of Donald Trump, how he
(00:23):
has already shaped the global economy and what on earth
is going to happen next. So this week we're bringing
the focus back from Europe and the Middle East and
asking a question that centers around the mood on Wall Street.
Our bankers still celebrating Trump's return. What does the way
Wall Street is moving money tell us about their feelings
with me from our offices in New York. Are our
(00:44):
two star reporters from our finance team, schreidhar naderin our
chief Wall Street correspondent. Welcome Stree. I thought of you
as soon as I wanted to do this story because
we had so much fun together at the Democratic National
Convention in August.
Speaker 2 (00:58):
And how different was the mood back then. I think
I remember we were tripsing through that convention floor with
all the balloons falling down. Unfortunately for the Democrats, that
mood did not carry over into November.
Speaker 1 (01:08):
You are so right. And then Hannah Lovett, who covers
JP Morgan and Morgan Stanley and has been speaking with
a lot of executives in the last few months. Welcome Hannah, Hey,
thank you for having me. Of course, so it's probably
worth remembering. We got an early read on how bank
executives were viewing Donald Trump's return to the White House
at the World Economic Forum in Davos this year. They were,
(01:29):
for the most part elated about the prospect of fewer
regulations and more deals. The consensus was a market focused
deal maker was at the helm of the US economy
and that would present a new era of opportunity with
money to be made. So here we are, roughly one
month later, and how to finance executives feel now and
(01:50):
what can we learn beyond the rhetoric and more the
actual trades. Sree, why don't we start with you?
Speaker 2 (02:03):
If you want a good proxy for feelings and vibes
on Wall Street, I think the best indicator is obviously
the stock price for those individual companies and their firms.
And if you look at what's happened since November fifth,
since the night of the election, we've pretty much had
a consistent charge up on some of the major stocks
Goldman Sachs all time high, JP, Morgan all time high.
(02:23):
The private equity stocks have also been climbing since November.
So the feeling there at least the immediate reaction to
the result has been this will be good for big business,
This will be good for big Wall Street. One of
the points you just mentioned was deal making. We've so
far had about five hundred and sixty billion dollars worth
of deals announced globally quarter to date, which is a
(02:46):
decent number. But if I go back to Q one
twenty twenty four, that number was nine hundred and sixty billion.
That explains why. When Wall Street executors were talking at
a major financial services conference last week, one of the
questions that analysts kept asking them was, you've all talked
about this pickup and deal making, Why has it not
really materialized. It feels slower than it should be, And
(03:08):
the answer was truly, yes, it is slower. We're having
a lot more conversations. A lot of these dealmaking discussions
are at the five yard line. They've just not converted.
You could have the gusher open anytime. But it does
go back to the idea that yes, there are a
lot of things about the Trump administration and the way
they talk to big business and about big business that
(03:31):
automatically generates this sense of enthusiasm and hope for these companies.
But there is also the Trumpian policy uncertainty that they
have to deal with. When you have all the questions
about tariffs and it attacks policy changing one day to
the other, and Trump's attention span going from his one
favorite subject to perhaps something else the next day, and
(03:52):
not showing which one will come through and which one
will fall by the wayside. That does create a little
bit of an obstacle for business, and they'll have to
figure out a good way to navigate it.
Speaker 1 (04:02):
On that, Hannah, you've been talking to a lot of executives.
I wonder how they're feeling about that point that Tree
brings up about the tariffs. You know, I know that
they are excited about the possibility of lower taxes and
less regulation. But the tariff policy, my reporting shows it
is really uncertain, And I wonder how executives are feeling
about that.
Speaker 3 (04:21):
Yeah, totally, So, I would say to Shred's point, there's
still broadly this palpable optimism. Various bank executives have described
it as animal spirits and all of that. But it's
a bit more CAVEATD today than it was a couple
months ago and even a few weeks ago before inauguration,
and that really stems from just kind of all the
(04:44):
uncertainty and some of these executives, you know, whether it
be bank executives or you know, CEOs of companies that
they bank and things like that, they need more certainty
before they move forward with these strategic actions like you know,
deals or IPOs and all of that. And the tariffs
are an element of that. You know. I covered JP Morgan,
(05:08):
as you said, and Jamie Diamond, the CEO there, said
last month that tariffs, if they're properly used, can be
effective to resolve things like unfair competition, national security things
like that, but they can also do damage if they're misused.
And he's described Trump as a negotiator and said that
tariff talk will get people to the table. But I
think there's a bit of a wait and see attitude
(05:30):
as far as how all of that shakes out now.
On the market side, though, the you know, these banks
have these huge trading desks, and it spells more of
an opportunity on that, you know, market moves, volatility, you
know that that translates generally into banks making money on
those trades. So that has continued. We saw some of
that in the fourth quarter, and it seems like that's
(05:52):
continued into the first quarter.
Speaker 2 (05:54):
And if I could quickly jump in and thinking back
to the time when Hannah and I started working together
about seven years ago, now there was this predominant concept,
you know, when we talked about volatility in markets and
how it impacted the trading desk, the markets businesses of
these big banks. The talk was always around whether it's
good volatility or bad volatility. Funnily enough, I think in
(06:15):
the last couple of years, especially with a lot of
changes that have been made, banks have gotten themselves into
a position where and look, if there is a massive
market correction, yes, they would also be affected because they're
in the business of buying from one party and selling
to another party. So if there are massive moves, they
will be affected. But the businesses have been structured in
a way that it's almost their ability to make money,
(06:39):
their ability to transact and the revenue is almost dependent
on the volume and less so on the direction of markets.
And upmarket obviously helps so in general, if you look
at this idea that you will have a higher uptick
in volatility over the next few months, next few quarters,
or perhaps throughout Trump two point zero, that will generally
(07:00):
be good for a lot of these trading businesses. And
for the biggest Wall Street firms, that is a big
source of revenue, That is a major source of earnings
for them.
Speaker 3 (07:08):
Absolutely, And I would just say JP Morgan, which has
the biggest trading business on Wall Street, they had their
highest fourth quarter trading revenue ever when they reported in
mid January. And so that's the level of momentum that
executives have since described as continuing. And I was speaking
to a bank executive earlier today actually who said market
(07:29):
movements are generally good for Wall Street unless it's a shock.
So I think that really sums up, you know, ratifies
what she was saying.
Speaker 1 (07:35):
And then I'm also curious, sort of who are the
Wall Street whispers in the Trump White House. I know
a big complaint of the Biden White House was that
they did not have a lot of connections to Wall Street,
and so I'm wondering what you're hearing about those two things.
Speaker 2 (07:50):
Let me first start with the second part of your question, Nancy, So,
I think when we think about some of the key
characters in the Trump orbit, Susie Wilds played a massive
role in sort of the campaign and now at the
White House. She is perhaps one of the few people
in that immediate Trump circle, in that immediate group of
decision makers and Trump world, who's not that well known
(08:13):
to Wall Street. She doesn't really come from that background.
Not a lot of people have had time to build
connections with her. But if you move past Susie Wills,
you look at the cost of other characters, Howard Lutnik,
extremely well known to Wall Street, Scott Besson creature of
Wall Street, extremely well known to all the major players,
that even folks like Doug Bergham have been like big
(08:33):
clients of firms like Goldman Sachs over the years. So
there are enough folks in that orbit that you're very,
very unlikely to hear the same complaint about this administration
as you heard about the Biden administration about not having
someone in there who would take their phone call, who
would take a meeting with them. That's not going to
be a problem in terms of what these folks are doing,
(08:56):
what these players are doing. I was just thinking about
a few memes. Hannah and I were swapping over the
last couple of days about Jamie Diamond going down to
Capitol Hill, and you know, folks wanted him to comment
on the dismantling of the CFPB, I think, and he said,
no comment, and then he pulled out this chart that
he carries with him, his famous spaghetti chart that shows
(09:17):
this wide area of regulators and the oversight they have
over JP Morgan. That has been Jamie Diamond's pet pee
for a long time. And it's funny that it almost
has a printed outslide that he carries with him every
time he goes from New York to DC. In fact,
I know Hannah has some interesting color on the backstory
of this chart.
Speaker 3 (09:37):
Well, yeah, he does bring it with him, and it's
funny because it was actually originally in his twenty eleven
letter to shareholders, so you know, it's more than ten
years that he's had this with him. They call it
the spaghetti chart kind of informally, and it has all
these agencies and what they oversee and all the kind
(09:58):
of interconnecting lines, and you know, I'm looking it right now,
it's quite clear why it's called the spaghetti chart. But yeah,
you know, the complaint on Wall Street over the years
has been that there are too many cooks in the
kitchen basically on Wall Street overside. And so yeah, when
they went, when the bank CEOs went to DC last week,
it is not surprising to me at all that Jamie
(10:18):
had this chart with him.
Speaker 2 (10:19):
Yeah, that's one thing that I would like to think about.
And it's something that maybe too if you can weigh on,
is I think the biggest firms on Wall Street, the
biggest banks, for instance, had gotten used to Jamie Diamond's
ten year old beef a side with the regulatory agenda,
had gotten used to this idea that they had to
(10:40):
invest a lot for the regulatory needs, for the regulatory requirements.
But effectively what they did was also build this wide,
deep moat because most other people cannot come in and
play on your turf. They if the cost of entering
that business is prohibitively high. That has helped especially and
(11:02):
I think about like the key trading businesses and some
of the other key businesses that are two, three, four
top players. Everyone else sort of sits outside that mode.
So they've benefited greatly from that. So if you have
a rapid unraveling of the regulatory agenda, doesn't it in
some way backfire for these biggest players.
Speaker 1 (11:22):
That's a wonderful point, Hannah. Do you have any insight
into them?
Speaker 3 (11:25):
The way that I've heard it described over the years
is kind of death by a thousand cuts from the banks,
which is perhaps a bit dramatic, but basically, if you
go business by business, there are companies, non banks that
have been able to play in that realm in a
big way, but not you know, there haven't been new
entrance to the kind of full on big bank systemically
(11:48):
important category. So yeah, I think it's kind of tbd
how that all shakes out, you know, in a world
where there's a lot of deregulation, which you know, lets
the banks do more but also lowers those barrier centry.
Speaker 1 (12:01):
That's a great point. And just from where I sit
in Washington, you know, having done a lot of reporting
in the last week on elon mus stoge efforts, so
much of that group is staff by you know, tech
people who I think do want to you know, less regulation,
but they also want to sort of upset establish business
and the status quo, and so that is quite interesting.
I think that you know, just the idea that it
(12:21):
would make it easier for other companies to come in.
One of you brought up Scott Besson, who is a
former hedge funder and who is now Treasury Secretary. That's
going to be such a key role this year as
I think about cutting taxes again, I wonder how his
tenure is being viewed so far by by finance executives.
Speaker 2 (12:39):
I think so far they have no complaints. Scott Besson's
proved to be exactly what they thought he would be.
They see him as a bit of a moderating influence
in Trump World. Of course, that might not really win
you a lot of kudos and Trump World itself, and
Scott Besson will perhaps have to do more to prove
himself in Trump's in a circle, make sure he's spending
more of his weekends now mar Lago instead of back
(13:01):
at home in South Carolina. But for Wall Street and
for markets in general, Scott Bessen was a choice that
they all cheered, that they all welcome. They realize this
is someone whose business focus, whose markets focus, and they
could get behind this pick. Scott Pasant in that position
is good for Wall Street, And when you think about
(13:22):
the key proposals about taxes, lowering tax rates. Yes, Scott
Bessand will champion that. The question though, is is it
going to be Scott Besant who makes sure that the
tax cut policy actually makes its way through Congress. I
don't know how much of a say in power he
will have that, especially when you consider a Congress where,
especially in the House, the Republicans have a very very
(13:44):
slim majority, and you've already seen that there are various
factions today's GOP. There half the times they're battling the Democrats,
but most of the times in America, majority of the
time they're battling their own different factions within the GOP.
And they have to figure out a way to put
forward a unified front. And that is important for Wall Street.
(14:04):
I was just looking at some numbers before coming on here.
When you look at pre tax earnings that a Goldman
Sachs at a Morgan Stanley, that's about twenty billion dollars
a year. Let's say you can cut corporate tax rates,
their effective tax rate can go down by five percent,
you know, just making up a scenario which a nice
round number like Donald Trump would prefer, that's about a
(14:26):
billion dollars in savings. A billion dollars in savings is
you could have a twenty thirty forty percent slow down
in deal making and therefore the fees that they make
from that advisory business that you know, one of the
key components they've been talking about when they talk about
this turbocharge deal making environment. You could still have a big,
massive slow down there, and yet that savings from the
(14:48):
tax cuts could offset that. That's how important the tax
cut agenda will be for these big banks. So they
would hope that Scott Besson could work his magic. More importantly,
they would pray for unity within GP ranks for that
to come through.
Speaker 1 (15:02):
Howard Lutnik is the Commerce Secretary. He wanted to be
Treasury Secretary, but Trump passed him over. He has given
him a powerful perch where he's in charge of all
the tariffs. Howard Lutnik is a very familiar character to
you all because he ran Canter Fitzgerald. But what should
Washington d C. Know about the way Howard Lutnik operates
as he sort of takes over a huge portfolio here.
Speaker 2 (15:24):
The most interesting dynamic about Howard Lutnik was how he
almost Dick cheneyed himself in the leading the hunt for
the Treasury secretary, only to say maybe I would be
the best Treasury secretary. So the first few weeks, especially
during the transition months, a lot of the talk in
town was about this warring dynamic between Scott Bessant and
Howard Lutnik. That's obviously not a good look in an
(15:45):
administration that's so focused on these items of tariff's, tax's,
deregulations and whatnot. You know that this person in the
Commerce seat and the person in the Treasury seat have
to work hand in hand. They've even been given this
mandate of figuring out how to create this sovereign wealth
fund that also involves a lot of Scott Beson and
Lutnick working together. And I think Kevin has it involved
(16:06):
there as well. So more than how he operates on
Wall Street, which again he will say and do things
that are generally appreciated by Wall Street. He is from
New York. He's an old time fixture. He knows everyone
in the city, so he knows all of Wall Street.
That all works just fine. In fact, much like Trump,
he was also a one time Hillary Clinton fundraiser and
(16:28):
now he's Team Trump. Much like Donald Trump is now
Team Trump after once being a Hillary Currenton fundraiser. But
the fact remains that Wall Street will have no issues
with Lutnick. It's more whether Lutnik can navigate the dynamics
of getting along with everyone in Team Trump, especially someone
(16:48):
like Scott Beson, to be able to push through the agenda,
the ambitious agenda that they need to push through, in
a way that does not rattle markets, in a way
that also is fiscally responsible. You know, they talk about
the ballooning debt burden, but when you think about the
deregulatory agenda and the massive tax cuts that they're trying
to push through, that will have an impact on the deficits.
(17:11):
So how do you offset for all of that? It
will require a lot of careful planning with the rank
and file of the GOP in Congress, with the various
administration members, and with the various cabinet members. That's the
dynamic that Lutnik will have to be focused on, because
that will be a difficult needle to thread.
Speaker 3 (17:27):
Steve Minuchin was Treasury Secretary in Trump's first term, and
Wall Street executives liked him then, and they looked back
fondly on his tenure. You know, he was there the
whole time. He was seen as kind of a steady
presence in that world, and it's someone who they recognize
and that goes a long way. And so I would
say that with both Bessen and Lutnik now it's a
(17:50):
similar dynamic.
Speaker 1 (17:52):
I'm so curious to see how Lutink fares because just
as a political reporter, he made a bunch of Trump people,
you know, on the politics side of things, quite angry
during the transition when he sort of ran roughshot over
things and put his own name up for Treasury secretary.
So I am I asked, because I am really watching
sort of how he operates in a political environment. One
final question, and Hannah, I want to go to you first.
(18:14):
I am curious. You know, there's so much political geo
instability right now. You know, we are trying to figure
out what's going to happen with the end of the
war in Ukraine. As Trump thinks about that, it's very
uncertain what his relationship with Heran will be like. He
has said that he wants all the Palestinians to leave Gaza.
There's just a lot of big foreign policy questions right now,
(18:37):
and I'm wondering if that concerns the finance executives that
you speak to at all and just sort of how
they're factoring that into their plans for the next year
or so.
Speaker 3 (18:46):
Yeah, it absolutely does. I think the way that that
translates to the business side of things, or one of
the ways that that translates is, you know, when you
look at deals like M and A and the cross
border aspect of that, are cross border deals getting done.
And we were talking earlier about the post election euphoria
that continued, but I was speaking to a bank executive
(19:06):
last week who was describing it as US firms are
waiting for the dust to settle. So you know that
euphoria hasn't been immediately translating. But in Europe there was
apprehension immediately post election that has turned a bit more
into how can we get in on US economic growth?
And then you know in Asia, especially China and Hong Kong,
there's a sense of it's not as bad as it
(19:27):
could have been in the early days and weeks. So
I think that as you're looking across kind of the
different regions, there are different expectations and then reactions to
you know, the things that are happening as they happen,
but it is there is still broad sense that it's
early days in this administration. People are kind of waiting
to see how things shake out.
Speaker 2 (19:46):
I would go back and look at the world economic
order and say, perhaps since the two thousand and eight
financial crisis, if you look at different parts of the world,
Europe massively struggled. Africa is still a growth story but
has now not hit the breakout phase. Middle East has
been a bright spot. That have been strong emerging economies
in Asia, which have had their stumbles once in a while,
(20:08):
but in general, over the last decade or so, the
American growth story in some ways has been unparalleled. And
perhaps that leads to this assumption that America has an
island onto itself and what happens in the rest of
the world doesn't necessarily affect the country, And you could
assume that in a America first focused administration that is
(20:32):
the predominant thought. But I feel that the world is
way too interconnected that you can't just overnight snap your
fingers and say, you know, each one to himself. That
will be very difficult. So from that perspective, when you
think about how the geopolitical situation is playing out worldwide.
(20:53):
If you have a scenario where your enemies remain your
enemies and you turn your allies into your enemies Que Canada, Q,
European Union and the big speech from JD Vans or
the Munich Security Conference over the weekend, she suddenly start
to distance all of those players who've been your allies,
who've been part of you know, enabling helping your growth story.
(21:18):
Then it does reach a situation where it starts to
worry markets, it starts to worry the big investors, and
it starts to worry the big films. That is one
reason why Jamie Diamond's almost been like a broken record
for the last half a decade talking about how the
geopolitical risks in the world today are the biggest risk
faced by the world. To an extent, it almost feels
(21:39):
like he's been talking about these dark clouds on the
horizon without any real follow through on that. But he's
not wrong. Not a lot has to go wrong for
things to turn in the absolute wrong direction, and that
will be a cause for worry. And at that time
you can forget about the cheering on of dealmaking and
tax cuts and deregular. You have much scarier things to
(22:02):
worry about.
Speaker 1 (22:04):
What's one thing that you think the listeners should know
just about Trump and the Wall Street relationship that we
haven't talked about yet.
Speaker 2 (22:10):
He lives and dies by the market. He judges himself
by how the markets performed. So he might be wedded
to a policy, but it almost feels like if the
market gives it a veryative negative reaction, the sense is
that Trump will backtrack.
Speaker 3 (22:27):
And that is something that Wall Street executives have almost
been taking solace in, you know, in recent weeks, and
probably will continue.
Speaker 2 (22:35):
To do so, maybe almost taking it for granted. Let
me caveat that by saying that is the assumption on
Wall Street in the second Trump administration, where it seems
more untethered from prior norms. It's not entirely clear to
me that that still will remain his guiding philosophy, but
at least Wall Street things and hopes and beliefs that
still remains the guiding principle about Donald Trump when they
(22:58):
think about Donald Trump.
Speaker 1 (22:59):
That's a great point. I do think this stock market
was sort of his primary form of polling in his
first term. But I think you're right I think he
is a more self assured leader now and fairly confident
in how he's moving. And so you're right, I'm not
sure sort of if that if the stock market and
how it's performing will be a checks and balances on
him this time. Shre thank you so much for joining us.
(23:21):
This was wonderful to have you.
Speaker 2 (23:23):
Always great chatting with you.
Speaker 1 (23:24):
Nancy and Hannah, thank you so much. It was great
to speak with you from New York.
Speaker 3 (23:28):
Yeah, thank you for having us.
Speaker 1 (23:34):
Thanks for listening to this week's trump Andomics from Bloomberg.
It was hosted by me Nancy Cook. I was joined
by shridehar Nojeron and Hannah Lovett. Trump Andomics is produced
by Summer Saudi and Moses Andam with help from Chris
Martlou Special thanks to Dashel Bennett and Jared Rudderman. Sound
designed by Blake Maples. Brendan Francis Newman is our executive producer.
(23:57):
To help others find the show, please rate and review
wherever you listen to podcasts.
Speaker 2 (24:07):
Mhmm
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