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After the US election, when Wall Street was all in on the prospects of a business friendly President Trump, Peter Berezin was sounding the alarm.
He and his team at the.
Research shop BCA predicted that broad based, unilateral tariffs were coming, and then the new administration's proposals would go well beyond what had been implemented in Trump's first term. He was right, and now he says we've got a long way to go lower before the end of the year. In other words, the worst is yet to come. Peter Berezin is chief of Global Invents, has been strategists at BCA Research. Their
client's managed some thirty four trillion dollars. He's featured and one of the most read stories on the Bloomberg in the last eight hours. He's based in Montreal, Canada. Peter, welcome to the program. You've got a forty four fifty call on the S and P five hundred. We're at about basically fifty one hundred right now, so roughly fifteen percent a client from where we are.
Why are you so bearish?
I don't think the stock market has yet fully priced in recession. I mean keep in mind that up until a couple of years, up until a couple of days ago, the four hundred and ninety three SMP companies that are not the Magnificent seven, we're still actually up slightly for the year. And these are generally cyclical companies that one would expect to go down in recessionary scenario. So we're starting to see that being priced in, but we're not
there yet. To get down to forty four to fifty, which is my target, you don't need to make any wild assumptions. All you need to assume is that the forward PE multiple drops to eighteen and the earnings estimates followed by ten percentage points. That's not crazy at all. On average, between twenty fifteen and twenty nineteen, the P multiple was sixteen point eight, and I'm talking about eighteen
in a recessionary scenario. So, if anything, my target, even though going into this year it was fifteen hundred points below the nearest person, might actually turn out to be a little bit too bullish.
Could we even go lower than that?
We certainly could go lower than that. I think it would require a deepercession. But we could get a deepercession if policy continues to be very unfavorable. And I'm not just talking about tariff policy. We also have kind of this discussion of the Morrow Logo accord, this idea that perhaps holders of treasury bills will be forced to roll their money over into low yielding long term bonds. I mean, this is crazy, right. The treasury market is the ultimate
risk free asset. If we undermine the sanctity of the treasury market, then we're looking at a worse financial crisis than what occurred in two thousand and eight.
This was supposed to be the year.
Wait you said we could, Sorry, Tim, Hey go ahead. I remember living through two thousand and eight. I know you did too, and I just remember you're talking to me. Yeah, I'm talking to you. I mean, Peter, we thought the financial market system globally was coming down. I remember not going to bed because headlines were crossing, and it was like which Wall Street firm was being bought by whom and which one wasn't going to make it, and so on and so forth, and what the government was going
to do. Say that again so that we understand kind of the theft of what you are saying.
The fact that the dollar is weakening now is very, very unnerving because the dollar is supposed to be a risk off currency. You buy treasuries when everything is going to hell, and that requires more dollars, and that pushes up the value of the dollar. The fact that the dollar is weakening now is telling you that increasingly investors are losing confidence in the US financial markets. And you know, President Trump wants a lower trade deficit. The counter the
mirror image of a trade deficit is a capital count surplus. Yeah, foreigners decide that they don't want to hold US assets anymore. That's going to drive down the value of the dollar. That will make imports more expensive, make exports cheaper. That will result in a lower trade deficit. But we're talking about something that will also entail a huge decline in stock prices and probably a financial crisis.
So not exactly making America great again, Not quite.
No, You know, it raises the question about how much damage can be done before you believe that Trump will reverse his policies.
If that is something you believe, well, I.
Think, for one thing, we've already sort of passed the event horizon. I think at this point it's going to be very difficult to avoid a recession just based on everything that's already happened. They kind of wasn't that strong going into the latest escalation of the trade war. In February, real wage and salary income was only one was only up one percent year of a year. The CPI swap market is telling us that these tariffs could push inflation
to well over three percent. We're potentially looking at negative income growth that's going to be very difficult to maintain without the economy weakening significantly, in spending drying up. So I think the outlook is quite worrying at this point, and it's probably too late to avoid recession. And I don't think that Trump is willing to reverse course anyway. He's been very very clearly for like thirty years about how you want to build this protectionist wall around the US.
I don't understand where this group think came from where people were just saying, Oh, it's going to be a negotiating ploy. It's not a negotiating ploy. He wants something that resembles autarchy.
Okay, we're going to pick up on that, but we got to do it.
There's a headline crossing the Bloomberg terminal and I'm going to work it into a question here. I Toro has said to delay it's IPO roadshow amid market volatility. Put that on the list of companies that we've heard from today or have been reported on putting their IPOs on hold, stub Hub, Klarna, ad Tech Group, n m ntn Ensure, Integrity, Specialty Holdings, Chime as well. Are you concerned that we're going to see in financial conditions titan too much right now?
We could start to see some sort of panic or freeze.
Yeah. We estimate that easing financial conditions last year mainly because of rising stock prices, added around a percentage point to growth. The fact that financial conditions have tightened mainly because stock prices have fallen. Credit spreads of widen is based on kind of a very back of the envelope
and back of the envelope calculation. Will shave around half a percentage points from growth, and that's not huge, but the risk is that you get kind of in this feedback loop situation where stocks go down that means people feel less wealthy, that means they spend less, so there's less sales, less profits, and even lower stock prices. That's what we often see during recessions, and I think that's what we're starting to see now.
You know, I'm looking at something I think you either said or shared with MarketWatch, and this was around late March, March twenty first, and that even though you had this outlook for the S and P five hundred this year, forty four fifty by the end of the year, and I think when you compared it to anybody else, it
was the lowest on the street. You did have five scenarios that could boost stocks this year, and you talk about the scident, you know, walking back much of his tariff agenda, kind of caving to pressure from the.
Market, and a few other things.
Do you still believe that there are scenarios where the market could actually rally.
There's certainly scenarios, and you know, I wouldn't be surprised if over the weekend there's some comforting words from the Trump administration, but that's not my base case. I think that probably the trade war gets worse rather than better, because Donald Trump had kind of had this i'd almost say, like naive idea in his mind that he's going to raise tariffs and that's going to force other countries to
reduce their tariffs. Well, there's two flaws without argument. The first flaw is that most rich countries don't actually have very large tariffs against the US, and don't really have very large non tariff barriers against the US. I mean, they have regulations. All countries have regulations, but they're not specifically targeted at US companies. For the most part. There's going to be exceptions, of course, so there's not a lot that other countries can do anyway. And the second thing,
which is more politically relevant. We've seen this is certainly true here in Canada, that retaliation is politically popular. Donald Trump has single handedly resurrected the Liberal Party, which was heading for a huge defeat in the elections, and so people are saying, well, wait a second, if we can
get more votes by retaliating, we'll retaliate. And so we're not going to get countries acquiescing to Donald Trump's demands, We're going to get retaliation and that could very well spark another round of tariffs.
You know.
One of the things I also wonder is that is it possible that.
You know this?
I guess what I'm thinking about is what you said before autarchy, and that is the idea that right the US produces everything.
That we need within our borders.
Is that really you think the goal a present jump, because I think that's one of the things that we've tried to figure out with the R is that what's really his endgame, what's really his mission here?
But do you believe that his.
Mission is to that the US is kind of self sufficient in providing everything it needs for its citizens within its borders and then cut down trade.
I think Donald Trump sees trade as a zero sum game, meaning that if one country is running a trade surplus with the US and somehow that country is exploiting the US, ripping the US off, as he likes to say, he doesn't see trade as something that can lift all boats, which is the way most economists see trade.
Nor does he kind.
Of realize that the reason the US has this trade deficit is because the US has been a very good place in which to invest. Rather than buying US goods, foreigners have been buying Nvidia stock or treasuries. That has been a vote of confidence in the financial system. And yeah, if you force people to not buy you US assets, you leve a week or dollar to lower trade deficit. But is not really what you want.
Hey, you know you mentioned politics a little earlier, at least from the Canadian perspective. Here in the United States, I'm wondering the sort of guardrails that you see on this president and his policies, because we're getting news now that Senator Ted Cruz, who's usually a staunch supporter of President Trump, sounded the alarm on the administration's move to ramp up tariff saying they pose quote enormous risks to the US economy and make Republicans vulnerable to a quote
bloodbath in next year's mid term elections. He said this stuff on his podcast, which was released today. This from our team at Bloomberg News. How do you see the guardrails around this president here?
So I think that's going to be what happens next. You're going to see more and more Republicans abandoned Trump and we're going to have real discord within the Republican Party. But unfortunately, the way the system works is that Trump does have a lot of discretion over tariffs. And unless his popularity plunges and I would say, like it's come down, but it hasn't plunged, he's not going to change direction.
I mean, realistically, if you spend like a month talking about a liberation day and then say, oh, wait a second, the stocks stocks have gone down, just kidding, he can't do that without looking really foolish. And so he's not going to do that unless there's a lot more pressure. We're just not there yet.
Hey, one thing I want to ask you, all right, So if we buy what you're saying about forty four to fifty by the end, and it looks, you know, certainly possible, considering.
What we're going through right now.
Where are you investing or suggesting investors suggest this money? You guys advise a ton of advisors, share your research. Where would you be putting money in this environment? Or is it too late to move anything around right now?
I think it still makes sense to have a defensive bias in one's portfolio. That means holding more cash than one otherwise would hold it means holding more bonds, although there's of course risk around bonds given a large fiscal deficit and a whole moral logochord discussion. But nevertheless, the Fed probably will be forced to cut rates quite aggressively,
more than what the market is pricing in. So you want to have more fixed income, less equity within equities, You want to own more staples, healthcare, these defensive sectors, and you probably also want to own a bit of gold. Now I think that's a true safe haven asset.
What would you say to folks out there who attempted to buy this death.
Listen?
I mean, if you're nimble, you can, of course do it. But I wouldn't bide with the expectation that stocks have bottomed. I think we could get a rally that lasts for a few days, perhaps even a few weeks. Ultimately, if we end up in recession, and I think that's where we're heading, earnings estimates are going to come way down, and that whole dragstocks down with them. So I think it's too early to move to an overweight stance on stocks.
Well, it's like we like to remind everybody, markets don't just go up they don't go in one direction.
They go up and they go down. Hey, Peter, thank you so much. Double duty.
We know you spend some time with our TV colleagues as well. Glad you could also spend some time with us as well. As we said, this story by our Vildana Hirich, it is one of the most right stories on the Bloomberg Peter Bears and his chief global investment strategist at BCA Research joining us from Montreal, Canada.
Peter, thank you so much.
This is the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern up on applecar Play and the Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Liz McCormick is Chief corresponding for Global Macro Markets, joining us from New Jersey. Liz, You've had so much reporting out there. I'm trying to figure out where we want to start, because you know what was interesting is I thought what Alex mentioned about what we saw in the bond market this week versus what we saw in the equity markets. It doesn't match up much more a negative tone in the equity trade. What is the treasury trade telling you today after the week that was?
Yeah, and I was listening to you guys talk and I heard Alex's points. So I think in some ways, like if we look back, remember some days inter days, it was like across the board, each each tenor and treasuries was down over ten basis points. So we had some decent moves. We've kind of come back today. I'll talk a little bit about that later, but I think I was going to say a bigger picture if we
step back, remember how far we've come that. You know, the two year note yield us down almost a percentage point from the high earlier this year. Ten year note it seemed like couldn't crack four percent, and it did. Now it's just trading quite, you know, hovering near there. So I think the treasure market has done it. I mean, if you look at the Ian page for US our indices, the US Treasury index is up about I think the last I looked at yesterday about three percent for the year.
So it's kind of been doing his job. You have seen that flight to haven. It's just the superlatives like you say, in these other markets from stocks to what worries me, even though my main area is sovereign, what I really watch is credit risk, right, and like you mentioned, we have these CDs widening, junk bronze spread widening, all these other things. People pulling deals. That's where I worry that. Like you're saying, it depends if President Trump really ends
up negotiating. But some things you can't put the genie back in the bottle, right, If credit risk keeps going, and then we get this hidden leverage, which is always like something that's lurking. If people start, you know, losing on positions and leverage, things start cracking, you can't fix it, right, So that's what I worry about.
Yeah, I am looking at the Iron page. US aggregate up three point six percent? Is that what you're talking about?
Yeah, I mean, yeah, exactly, Yeah, yeah, Wait, say the page one more time for the Glomberg. Oh I love that page. Iron go easy in Right, it's all our indices and we can look at all the fixed income indicies, and so that's at least good that. You know, if you're in a portfolio, you're talking about your retirement sixty forty at least the bomb side has worked for you, so you have some gains where you're getting crushed in
your stocks. But yeah, I think you know today let's talk a little bit and maybe you have a lot. But about Chairman palell like, he was very calm and I feel like lead with inflation right, Yes, the tariffs are bigger than we thought. Of course you mentioned it would hurt growth, but he seemed very clear that they don't want inflation expectations. Public inflation fears to kind of take off. So he was like very like, we have time to wait.
So he seemed very calm. I mean J Powell was a very measured, mild mannered person. I don't know him personally, but it seems.
Like, oh, come on, you can share. I know that dead concert he went too.
I actually want to go for a bike ride with him, but that's neither here nor there. I think that would be a fun thing to do. But it does make me ask you, is, given his comments earlier today, did you seem like it. Did it seem to you that he was really calm about saying, hey, we've got time here.
Yeah. I want to say that I had a feeling of people I think thought I was crazy that, like even though the market, the let's say the swaps market pricing and FED cuts was really kind of getting over at skis pricing in almost five cuts this year. I said, let's be weary the chairman Pal, because that's his job. He has a dual mandate, right, and like you're talking about everyone's cutting their inflation, I mean their growth forecasts.
Simultaneously they're lifting their PCE forecast, right, So this is, to use that word, this is a stagflationary thing. So in the FED kind of never got I don't want to fold them, but inflation hasn't like sustainably got to their two percent target after the pandemic. They did a lot of great stuff, and it's down. So I think he's very weary because he knows if you let that inflation genie out of the bottle, that's the worst problem for them. So I think that's why he was very
measured and calm. And we will see, Like we've had some yesterday, we had some economists saying no cuts, some saying five cuts. It's like all over the place, so I think they're waiting to see. But Pal was very calm.
Well, one thing I want to ask you too, is you always check in with all the trading desks, the global you know, fixed income bond trading desks around the world. Were people kind of freaking out? Were people saying, yeah, we've got a global recession coming. I mean, it's all interconnected, right, It's not just even if we are pulling back on global trade. I mean, what happens here is going to matter what happens in other countries. I mean, it's it's important.
So I'm just curious. What was the tone, Liz that you were hearing.
Yeah, I would say, like overall for investors, I mean, again, it's a bunch of superlatives. But this, even though we had the stories about Mary Lago and we thought, you know, think Trump will go out of the box. I do think, Carol, many investors feel like this on trade is a seismic change, right, He's trying to re order everything, right, and and he said Trump has said he's willing to take some pain.
But they didn't realize. I think everyone keeps saying to me, list, we knew there would be quote unquote reciprocal, but not by this math that they pulled off, right, you know, that was much higher than they thought. So I think that's what everyone said. It's worse than I thought. I will say, Dan Ivison and Pimpco was kind enough to talk to me today and he's, you know, they've been warning for a while that hey, this tariff is a
risk and just to be cautious. But he said even he said that what President Trump rolled out was a little more hawkish than they even expected. So I think everyone was taken by surprise at how kind of stringent the terrorifts were.
All right, so there is that is there also an expectation list?
I mean, this is a lot of this came up in a lot of our conversations today, is that the expectation is just like we're seeing with Vietnam already, right, Lulu Lemon rallied, Nike rallied, There were names that rallied because there is that expectation that these countries are going.
To come back and negotiate.
Is there in the investment community the same feeling.
Yeah. I mean I had a few say to me, you know, like hope is not a plan and even though they like they hope to see this, and like you said, there was the positive signs on Vietnam, although China kind of came in hard. The EU has said, and we have stories on that that they're hoping to negotiate. So I think there is some hope that this doesn't turn out to be as bad as it seems at the moment. But then we have President Trump coming out on social media kind of saying, hey, my policies are stuck.
So I think people are very kind of on tinderhooks. You know, they're not sure.
But let's play that out for us, Liz a little bit, because I think that is sort of the optimistic view here, that this could be an opening salvough and we could see a sity like we got a little preview of with the Vietnam News earlier today, where we did see stocks balance a little bit off of their lows as a result of that post from the President who said the country is, you know, wants to take their tariffs away.
If that is indeed the case.
It still sets up for quite a bit of uncertainty, and we know that what executives don't like is uncertainty. They want to be able to plan where their next plant is going to go. They want to be able to plan who they're going to hire for the next year. And if these things can get implemented and then pulled on such short notice, I think that could create a challenge for these companies.
Yeah, I one hundred percent agree that. You know, even if there's some negotiation, I don't think also, Tim that anyone thinks that'll be there'll be a wholesale reversal. President Trump wants a more tariff heavery policy, right, so even if the worst of this is dialed back, it's still very different. But I think you're right many companies are saying, how can I put it out a big investment. I
don't want to sell new debt now. I'm not going to add to my hiring all these things because, like we always say, but it's true, uncertainty is the worst thing. And when I was trying to do the coverage right after and we were figuring out what's going on when President Trump gave his speech on Wednesday, the quick thing from a lot of people, even after we got the full chart, is we thought we were going to get full certainty, and now we don't.
You know what I mean.
And I think like even on the negotiation, people don't know, and I want to bring in like you know, I don't maybe You've been talking about this all day too, so sorry if so, but like let's think about there's the tariffs and then there's the wealth effect. Like, yeah, Carol, you were joking about your retirement.
I wasn't joking.
I told Carol, maybe this is a night when she goes and orders the pizza not to get toppings exactly.
I mean, it's real. You start to say, well, or somebody was going to switch jobs. Maybe not, you know, at the margin, I mean maybe this is like soft data, so to speak. But your retirement account is real. And even non retirement, I've got young twenty some kids looking at their portfolios, so I think everyone it feels a little less rich, and that does factor into whether you're
going to buy that new thing. So again, even if slowly some of this gets negotiated down those factors, I don't think the stock market will be jumping away turned and I'm buying all the dips now, right, you know, So I think this is it's a little bit of a longer process. So I and again I hope we don't get things that break. You know, leverage comes out the basis, trade blows up all those things that you know, once that gets going, it creates some more kind of systemic issues.
Well, that's what I think about what's most vulnerable right now? Listen this environment because I do think about right that, you know, the idea of like what stopping something versus starting it up. Stopping it can be easier than getting
it going again. I think about the economy and what could be some of the lasting impacts of this tariff policy, especially as you say, this is something President Trump has been behind for a long, long long time, and it doesn't feel like he's going to roll back so easily. Even if he pulls back a little bit, it's still going to be there. And I do wonder about the longer term impact on the US economy here.
Yeah, And I think these these hidden things are that remember we all through twenty nineteen we haven't had a repo issue liked seismic now, but leverage there's things you know, when people start losing money and you get margin calls on different things, then you start selling things that you can and that stuff you don't know. It's like you don't see coming all the time, right, And that creates issues.
And then like you said, the even like liquidity in markets, when that starts to break down, and that's what the FED is concerned about market structure. But overall, remember we were like, oh, you know, before all this, maybe we're going to get through this with this rare thing of no recession. FED tightened all this way, and now they dial back and no recession. Now, let's say the worst of the Trump tariffs aren't laid out, but like you
both said that still structurally there's tariffs. You know, who is it? Jimmy Morgan saying if this continues, we get a sixty percent odds of recession. It just seems like the recession case, even if it's non in this had aclsmic near depression. People are sometimes saying globally now that that slow down. We thought we'd avoid that, you know, economics recession.
Mate, Yeah, we may have it right, you know.
So that's that's enough to kind of keep the edge off stocks and other things.
We've already seen sentiment, consumer sentiment pulling back, we've seen business spending pulling back. So yeah, just watching all of these indicators. Liz, this was such a great deep dive. Thank you, Thank you so appreciate it. Have a great weekend, Liz McCormick.
You're listening to the Bloomberg Business Week podcast. Catch US Live weekday afternoons from two to five these during the listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch US Live on YouTube.
Just before we came on air, we got the news that President Trump has said that he's decided to extend the deadline for firm Byte Dance to divest TikTok's US operations and give his administration more time to finalize a plan to keep the popular app running in the country. Trump said he will give Beijing, Beijing's bte Dance an additional seventy five days. Remember it was April fifth. Was it going to be the deadline? This deadline?
And let's not forget it. It stopped working for a while, right, It was shut down in the US for just a beat. Then we had to get it back, you know, like Snoopy and Charlie Brown and Lucy. Was it Lucy that always like pulled the football out? That's what I feel like constantly. Sorry, TikTok football.
Go on, go on.
You know, I think you're right. I think you're right.
They were supposed to agree to this deal that US operations to an American buyer and avoid a band that was set to take effect as soon as this weekend.
For more we don't want to bring in.
Michael Sheppard, Senior editor for Technology and Strategic Industries at Bloomberg News. Also, Kurt Wagner joins us. He's Bloomberg News technology reporter. Kurt is also the author of Battle for the Bird Jack Dorsey Musk in the forty four billion dollar Fight for Twitter's soul. Michael, I want to start with you out in Washington, DC, Byte Dance. We got some comments from byte Dance. They've confirmed that the talks
are ongoing as Trump announced this extension. What are the proposals right now that are being reviewed.
Well, the one that seems to be gaining the most favor and is viewed as a leading contender, would actually not completely wipe out Byte Dance as an owner in
this new US app that that the plan would call for. Instead, what you would see is their holdings deluded to below twenty percent, and that would allow it to fit within the parameters of the law that Joe Biden signed last year calling for Beijing based Byte Dance to divest to below a certain point and lower some of the national security risks associated with that, they would no longer have
a controlling stake in it. Instead, you would see investors including Oracle Core, Blackstone and perhaps in recent Horowitz also join in buying up, together with other investors, a fifty percent portion of this venture, and then Byte Dance American investors would buy another thirty percent, and the idea would be that it would be an American operation still with some nominal connection to byte Dance, but that in doing so and allowing this Byte Dance ownership to remain, that
would perhaps make it easier for the company to sign off on the deal and then also win the blessing of authorities in Beijing, which is no small matter.
All right, Wait a minute, Wait a minute. First of all, I don't even know who to ask. I want to ask both of you, Kurt, let me bring you in. Is there even a nomination a nominal connection to byte Dance? Is that even possible if the concern is about any connection with China and potentially the Chinese government, Is that even possible?
So the ownership breakdown that Mike described is possible under the law. I believe Byte Dance could own as long as it's less than twenty percent of this company, that would be allowed. But what would not be allowed and where the sticking point is in my opinion, is on the technology itself and control over the algorithm that people
that is used to show people posts in their feeds. So, under some of the previously reported kind of discussions and plans that have been floated to Trump Bye Dance, even though they'd have under twenty percent ownership, would still control this algorithm, and according to the law, that is not allowed. And so byite Dance doesn't want to give up control of the algorithm. The law says they have to give up control of the algorithm. So to me, it's less
about the ownership here that's the sticking point. And it's probably the technology and who gets to control it that's the sticking point.
Right.
The holy grail that makes TikTok TikTok, Michael come on back in here, is that what's kind of making these negotiations tricky. I'm curious what you guys are hearing from the White House, because it is interesting that it's not like we've just said that's it, TikTok's done. They keep expanding the timeline here and extending it So is that what's holding it up is what's up at the algorithm and who really controls.
It, you know, Carol, it's a good question. You know, we don't have that much visibility into what is exactly happening behind closed doors in these talks. But the algorithm
certainly is a sticking point. The law was very clear about whether ByteDance or any Chinese entity for that matter, could remain in control of this really valuable technology that also allows potentially a window into American users and also a vehicle for perhaps disseminating propaganda in the US, which was another concern cited by US policy makers when this was passed. So that is certainly one of the sticking points, but there are many others too, including Byte Dance for instance,
just overall doesn't like the idea of this sale. They found it objectionable all the way back in twenty twenty when Trump first pushed the idea. Remember he originally signed a ban and executive order banning the app and then set about trying to find a US buyer. Of course, those efforts kind of just fell apart during the pandemic among other things and legal challenges too. But for Bite Dance, This is has from the start been a non starter.
The fact that they're confirming confirming some discussions today is news, and it's really the first we've heard from them saying that they are in talks with the US on this.
Hey, Kurt, who do you think, in your reporting, is the most serious contender to take over by Dance's US operations TikTok's US operations.
Well, I think there's a difference perhaps between who's the most serious and who's the most likely, because I think there are actually a lot of serious contenders, including you know, Frank McCourt and Project Liberty. I mean, they're very serious about wanting to do this. But do I think they're maybe in the driver's seat. I would say probably not.
I think Oracle maybe. To get to the real point of your question, like who's the most likely, I think Oracle is probably the most likely to be involved here for a couple reasons. Number One, we know that they were part of the consortium of investors that was reviewed in the Oval Office on Wednesday by Trump and some of his aides. We also know that they have an existing relationship with TikTok. They already work with TikTok on
cloud services on data storage. And we also know that Oracle chairman Larry Elson is a Trump supporter, a Trump donor, and those Because of those reasons, I think Oracle has sort of taken the lead in terms of who is almost guaranteed to be in a proposal from Trump. Now, again, as Mike pointing out, a lot of this depends on whether by Dance and the Chinese government ultimately agree, which
they may not. But the proposal that Trump puts forward, I think we all expect to have Oracle probably involved.
You know, Michael, one of the things I wanted to ask you is how much of these conversations are also related to the tariffs imposed on China.
I'm just curious if it all kind of folds into one.
Well, you know, in the end, we joke here in Washington that it's all one story, and Trump is certainly tried to connect these two issues. The question is whether officials in Beijing share that view that you can lump these things together. If you're Hi Jinping, for instance, do you think that there is such an easy trade off between you know, this company byt Dance that is considered a local star and then the massive tariffs that Donald Trump has just imposed on so many exports from China
into the US. And you know, is there really something else to be gained here for Xijianping by doing one thing or another? In terms of this with Trump, Trump has reiterated his offer to China of perhaps lowering tariffs in exchange for getting some help and winning approval for a deal. Now, whether she jimping is willing to do that, let's take a look and seem.
Yeah, certainly kind of interesting to see what comes next. Hey, just real quickly, Kurt, Amazon, are they out? Are they even a contender.
To They are considered?
They did submit a bid. It's unclear exactly how serious it's being taken, but they did submit a bid this week, as we reported. If I could just make one final point on this about what's happening this weekend again, because this executive order was signed to extend this deadline, we presume that TikTok will continue to operate. But you may remember that last time around in January when there was a ban, even though Trump said, hey, you guys have
more time. The tech companies that support TikTok, that put TikTok in their app stores or an Oracle's case, that provide these cloud services, they were actually worried about following the law and didn't always take Trump's sort of executive order as being good enough for them to keep working with TikTok. Right, So we have reached out to these companies.
We're asking, hey, do you plan to continue to support TikTok technologically during this time because if your Apple and you're sending there going, Hey, even though Trump says it's okay, a future president could come in and there are massive fines that they could face for breaking this law down
the line if they choose to do so. So I think that's something we're going to be paying attention to, is even though Trump says it's fine, and do their tech partners believe enough in his word to continue to support TikTok and keep it operational. And we'll only know that over the next twenty four to forty eight hours if we see whether it goes offline or not.
All right, So two clocks ticking twenty four to forty eight hours, and then of course we've got seventy five days because of the presence extension to figure out what's next for TikTok and America.
Hey guys, thank you so much. Have a great week.
And Mike Shepherd, Senior editor for Technology and Strategic Industries at Bloomberg News in DC, and Kirk Wagner, Bloomberg News Technology reporter.
He's there in Denver.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five e's during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch US Live on YouTube.
All right, let's get back to the general market environment, business environment, global environment. We've talked about businesses pulling back on CAPEC, slowing global growth here in the US and elsewhere, Tariffs, a global trade war, a global market selloup.
Not an easy macro environment, and on a.
Day like this it is easy, as we talked about earlier, to kind of skip over our US jobs report that showed growth exceeding forecast for.
The month of March.
It was backward looking, so we wanted to get a good gut check on the US macro environment. What he's hearing from companies in the C suite about the labor market and more.
Alan Guarino is back with us.
He's vice chairman in the CEO on board services practice at the executive search firm corn Ferry, joining us from the West Coast. Alan, Nice to have you here on a week that's been a little ectic, to say the least. A lot coming out business leaders, a lot coming at the markets. What are you hearing from the business community about the macro environment?
Well, thanks, Carol, it's always great to come on with you and Tim.
You know what we're hearing is, you know what we've been hearing other than the last forty eight hours or what I think we would all categorize as shock, shock to the system.
And so let's just recap.
So we had a big jobs number on one hand, then we had tariffs on the other in the last forty eight hours. You know, someone could say it's trade war, right, but we had a strong economy going into this, people would argue, and we had low unemployment.
So I think the best thing to describe this is.
That, you know, if I were a CEO today, I feel like I was driving a race car with one foot on the gas.
And one foot on the brake.
Wow.
And I think what that means is that, you know, as much as we'd like to have really solid smart predictions.
I think is to wait and see. And I think that wait and see is probably the window of ninety days.
Will you know, us labor be competitive, should manufacturing be able to return in some measure to our shores.
It's just early times right now.
Listen, one thing I want to get to though, too uncertainty, no doubt about it. You know, I'm looking at a market that is just getting worse, and we've got about an hour and fifteen minutes to go, and we're looking at our major equity averages allan at the lows of this session, something we haven't seen in a long time. S and P five hundreds down six percent, Dow Jones Industrial Average almost twenty two hundred points to the downside, down about five and a half percent. Na's Deek one
hundred down almost six percent, down eleven hundred points. You know that does rattle businesses and leaders. Certainly if you're publicly held, you know, you look at your share price. What does this make you stop to? You know, do what won't you do as a result of all of this?
So Carol, honestly, you know, go back to Adam Smith.
I think he said something to the effect that, you know, understanding history will will empower you as to know what to do. Let's think back sadly to the pandemic. I think we had a thirty percent peak to trough market move within a very short period of time, the market came back. So CEOs don't usually run their businesses based on the stock market. Yes, they run their businesses based on creating the right earnings trying to defend their multiples.
But I don't think thirty sixty to ninety day windows in terms of market reactions to clearly identified outside shocks, is going to change that. You're going to have some CEOs. Let's just say there's job dislocation in this market. I don't think there will be, but if there was, that means that if some companies cutting back, there's going to be a smart CEO who's going to step in and acquire that talent.
Just like Quie.
Frankly, people are going to over the next couple of months, if this market continues to trade lower, are going to step in and start taking on stock positions that they would have liked to take previously.
That they felt were overpriced.
So with all of this, let's call it somewhat chaotic market activity. It doesn't short term change the way CEOs run and make decisions, especially on hiring.
So at this point you're not hearing from CEOs that they need to pull back on hiring, they need to start cutting their workforce, because look, we did get a great number this morning from the March payrolls report. It's backward looking, but if we start to see stress there, that could actually prompt the FED to move rates lower. You're not hearing any of that from the folks you talk to.
We're not hearing.
Anything right now, and I think it's because of the foot on the.
Break and the foot on the gas situation. If anyone says they have enough.
Clarity to make those decisions right now, I would tell you that they know something that ninety nine point nine percent of the rest of the world doesn't know. So I think we'll start hearing that in probably I'm going to say forty five days, sixty days, and again, I think we'll hear it from both sides of the thinking here. Some that may want to cut and others may want to take advantage of the opportunity that this talent is
in the market. But right now, there's nothing shocking happening in terms of employment.
Alan, I want to go back to something that you said about this, these tariff announcements being a shock to the system. Why was this so shocking to the folks you work with each and every day. It was clearly telegraphed by the president when he ran He told our own editor in chief, John mickelthwet that tariff is his favorite word in the English langue, which we knew he was going to do this. Why was it still so shocking to the markets and shocking to the executives.
Deem, everyone's asking that question today. It's a smart one. It's a shock not because of what he did.
I think it's a shock because people were expecting it to be less significant in terms of scale, so in that they had to process, not the idea that we had tariffs. And I'm not going to come in on whether terroists are a good idea, And I'm not an economist, and I don't think anyone knows how this plays out mathematically and in terms of actual market equilibrium. But I think the shock to the system was the scale, and their shocks to the system frequently and people get past it.
Hey, one of the things I wanted to ask you, and here we are again just to remind everybody, since we're so focused on the market, you know, a second day of some extreme selling. S and P down about five point six percent, down down five percent, and the
Nasdaq one hundred also down five point six percent. Allen, the US Labor Secretary, earlier spoke to Bloomberg off of the jobs report that was an upbeat one and said that this wouldn't be the last positive jobs report under President Trump and that companies are now investing billions of.
Dollars in the economy.
We're seeing the selling because there's nervousness because of the US tariffs, a possible trade war, and then that leads to a US slowdown and potentially a global slowdown. So the President has stressed all the money that will come back into the US economy. Do you and leaders that you speak to kind of buy this idea that there will be lots of investment or more investment in the US, that we will see factories built, make things, create lots of jobs, that it will.
Lead to an economic boom.
I know what economists say and what history tells us, but what do leaders that you talk to say this? Do they buy this? This action and this expectation.
You know, again not hearing a lot enough to say, wow, there's a big trend here. But what I do here is, you know, there are places in this country where people could make a reasonable dollar per hour wage that wouldn't be egregious in terms of being competitive and have a terrific quality of life.
And certainly that's not necessarily in the big cities.
But if we bring in a situation where you know, free market of sorts starts to starts to you know, see some green shoots in terms of light manufacturing, right then then yes, the answer is it could be. And by the way, there's another thing to remember it something
in corn Ferry does. It's this notion of upskilling. So you know, as these jobs materialize, if this particular strategy works, then we're going to have people right now that are in let's say, lower order jobs that make less per hour, perhaps get some upskilling and be able to go into a light manufacturing opportunity where they could make more. All this is still speculationause each of us could argue both sides. I quite frankly, don't you know, don't have a particular bias here.
I try to look at it as as you know, measured.
As possible twenty seconds.
Everybody's not screaming recession or stagflation or the end of globalization just quickly.
People are worried about stagflation. People are expecting, you know, recession because we've been respecting recession for twenty years, so you know, And again I think we talk about the market if we look at the market today, I think if you look at the two year S and P today, it's still up thirty five percent over those two years or so.
It's a big number.
So you know, a lot of the money that's theoretically coming off of people's portfolios today is money that they've you know, more than earned in returns.
And again, if you don't sell today, you don't lose.
Anyone, right, all right, Alan Gorrino, thank you so much.
Vice chairman and the CEO on board Services practice at Cornberry joining us from the West Coast.
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