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We do want to kick off this hour with Moran. Today's inflation print. US consumer prices rose at the slowest pace.
In four months.
That was in the month of February, offering some reprieve ahead of tariffs that are expected to drive costs higher here in the United States. The BLS saying nearly half of the advance though in the overall measure in February was due to shelter costs, but it is still decelerating from the prior month. So we wanted to get more on the print, and we've got a great person to do just that.
We're back with us as Bloomberg Economics US economist store Paul he joins us here in any Bloomberg Business Week studio a good inflation read. Is there a big caveat here, Stuart that it's came before the tariffs have really kicked in.
That's the first caveat. Yes, they came before most of the tariffs kicked in. We get the big retaliatory tariffs on April second. Of course Trump doesn't want to do it on April Fool's Day. I think that the other thing to keep in mind with this report is that most of the disinflation came from things like core services excluding shelter, some of the supercore services indexes, things like airfares, where there was a big seasonal factor dragging down airfares.
Now we know the demand for air travel hasn't been super robust. We heard guidance from Delta. We also could just see the TSA numbers. But when you have such a big seasonal factor in play accounting for so much of the month to month disinflation, I sort of discount today's reading. And then beyond that, we do have goods core goods excluding autos and including autos boosting inflation both
headline and core. When you have core goods boosting inflation as opposed to providing a minor amount of drag, which it typically does, we should be a little bit concerned. Add on top of that, used auto prices continuing to rise during the month and when you think about auto supply chains and auto manufacturing and tariffs coming against Canada and Mexico, you have to be a little bit concerned. Add on top of all of that.
Final a lot of additions.
I'm just going to point.
Out somehow I go deep into the details and I always find, you know, the opposite of a silver lining. But the one final one that I would point out is that inflation actually became more pervasive. If you count the number of core spending line items that are seeing excessive inflation right now. Disinflation and deflation became less pervasive during the month. So again there are a lot of caveats that we actually have to keep in mind when
we look at this report. It's going to be a really long last mile to the FEDS two percent inflation target.
Is that why initially I think we saw yields back off, but we've moved off. I know we had also had a treasury auction today, but you've got what a tenure right now yielding almost four thirty four point twenty nine, and I'm looking at the sure end of the yell curve. Of course, most sensitive to what we might get from the Fed three ninety seven So is that why.
We are seeing yield high or what's your thinking that.
There was a little bit of a treat in rate cut bets. We did see a full three cuts for the year priced as of last night today after the CPI report, we got just about, you know, sixty eight basis points or just a touch under three cuts fully priced. And I think that that's a part of it. Looking at some of the details of this report, it's not the most inspiring report, and when we had tariffs coming while we have goods adding to inflation, it could be a little bit of a problem.
Was the market reaction to this report incorrect in your view? The equity market reaction.
Look, I mean it's going to be tough for a classically trained economist to say that the market is wrong.
But are allowed to comment.
We're giving you these is that because the market is never wrong.
I the market is never wrung. I think that the retreat in rate cut bets is probably the right move. I think that when you start looking at equities, you have other things that are in play, including earning's guidance and so on.
So is the Fed fed beating next week right second of the year? Is their job getting more difficult based on what you say, all these caveats in the inflation print reminds us that inflation it ain't over. And then you've got tariffs being loaded on.
So are they in a.
Tricky spot At the same time we do see signs of growth slowing down.
Yeah, so the FED is in a tricky spot.
Tariffs make it especially difficult for the FED to achieve its dual mandate because you have two things that are going on. You have upward inflation pressures that are coming from input costs as a consequence of the tariffs. But a sort of rebalancing of the economy that comes with
the implementation of tariffs can be demand destructive. So the extent to which those higher input costs can then get passed the long to consumer prices isn't abundantly clear quite yet, and we know that firms are going to try to pass along those costs. Question is just how much to man destruction there is.
You mentioned the airlines, the disinflation that we saw in the airlines and the numbers today when it comes to airline comes to airline prices. We saw that play out yesterday with the market reaction to Delta and American airlines coming out and updating their guidance because of soft consumer demand. Given everything that we've seen just in the last couple of weeks, in your view, how's the consumer doing?
How is the economy doing?
We do see higher prices weighing on consumers. We do see it in discretionary spending categories. One thing that was especially difficult to judge starting in January was the effect of weather. Consumers did pull back across the board, But one of the reasons why spending was so terrible in the month of January is because auto sales were down. Nobody wants to spend their time walking on auto dealer's lot.
During a polar war.
Attax auto numbers were back up in February, and we can expect to see some improvement in retail sales that'll come on Monday. Still sharpening our pencils, but overall, it does look like consumers are pulling.
Back quite a little bit.
We do see credit card default auto loan defaults all on the rise, and for that reason, we should expect consumers to show a little bit more precautionary savings in the months ahead. And when you see consumer consumer sentiment and buying plans retreating, you would expect that to be reflected in subsequent months and actual spend.
We are going to talk at the end of this hour about the wealth effect, and I am curious if you guys are also you and the team sharpening your pencils over the idea that with all the volatility that we're seeing in the equity markets and stocks pulling back, you know, fairly dramatically here in twenty twenty five, that for those who are the wealthiest sect of our economy, who spend a lot in our economy, there are some concerns about that having an economic impact.
That's right, So of course there is a wealth effect that works in both directions. Right, So for every additional dollar and accumulated wealth, you could expect a few cents of additional spending for those who have the most exposure to equity markets, stocks retreating nearly ten percent off the all time highs. I think that the thing to though, keep in mind is the accumulated wealth since the pandemic. It's still something like fifty trillion dollars and accumulated well
since the pandemic. Yes, what we've seen over the past couple weeks puts a dent in it, and it will make the upper end of the income distribution a bit more cautious in their spending behaviors. Is it the sort of thing that's good? Is that negative wealth effect enough to derail spending completely? Probably not, And there is still plenty of credit that can smooth over any sort of bumps in the road real quickly.
Twenty seconds PPI. What do we need to know?
Keeping an eye really on PPI for airfares, hospital cost, physician services, because that's what ends up going into core PCE spending. But based on what we have right now, fed's favored inflation index, the PCE price Index should have a relatively favorable reading at this point based on what we know about February.
Great stuff as always, Stuart, Thank you so much, Bloomberg Economics US economist Stuart Paul, all right, the latest US inflation print may ultimately cause some relief ahead of US tariffs.
The tariffs are happening tim.
At twelve oh one am this Wednesday morning, President Donald Trump's twenty five percent tariffs on steel and aluminum imports came into force. It triggered concern across export reliant Asia and immediate reprisals from the European Union in Canada as the global trade war enters a rocky phase, Carol. Meantime, Canada announced new twenty five percent tariffs on about twenty point eight billion dollars of US made products, including steel and aluminum.
Yeah.
Indeed, and these retaliatory measures by Canada will also apply to consumer items such as computer sporting goods. They match the US tariff's dollar for dollar, and they're going to take effect at twelve oh one am New York time. All right, so let's get an update on this tariff trade war between the US and Canada as it relates in particular to the metals market in industry back with US as Bloomberg News Metals and Mining Heavy Machinery reporter Jodoe an expert on this space. So all right, not
fifty percent, twenty five percent? How does that change any of the conversation like that we had with you yesterday.
I think it goes back to what most of the market was expecting, what most buyers were anticipating, and what producers were anticipating. And to be clear, none of them wanted this on either side. Well, I mean American steelmakers probably did to some level, but people actually making business decisions are saying, Okay, well, at least we got what we were planning for the past month or so. I
think that's the first part. The fact that the fifty percent did get walked back allowed for people to breathe. I spoke to I spoke to somebody in the market today in the steel market, who said, yesterday it was hectic, but today I'm getting almost no phone calls.
And are they making trades.
Well, they're in the service center space, so they don't trade, but they do supply important end markets in the United States.
Can you just you know?
Fortunately, at Bloomberg, we have a great feature on the terminal where I can go and look at this chart from our bloombergy economics team that has tariffs and when they were enacted and what's expected to That's super helpful for me because I'm having trouble keeping track of all this.
It's helpful for me too.
Okay, remind us why these were imple in the first place, and what the off ramp for these are.
The Trump administration put twenty five percent steeled terriffs and ten percent aluminum terraffs into place back in twenty eighteen as a part of his initial move on trade. In the years since, the United States gave exemptions to various countries and various products for these for these imports for various reasons, and many of them were approved under the Trump administration and others were approved under the Biden administration.
Trump sat down in the early part of his term and probably was even having conversations before he got into office in which the steel lobby and various individuals in the aluminum lobby said you got to get rid of the exemptions because they're no longer having the impact of giving more production and more profit to the producers inside
the United States. So he clearly sat down with his advisors and said, we're going to re implement it with no exemptions, and by the way, we're going to bump up the aluminum tariff to twenty five percent.
But there is there is this related at all to border crossings or fentanyl or is there an off ramp for these in the near future.
Section two thirty two is what he okay.
So they implemented this on security.
Right, So I think a key thing right, and this is a great question, right, is he knew and his administration knew that the Section two thirty two terrifts in twenty eighteen had been tested in the courts and they had stood up because Section two thirty two was implemented under Kennedy right and gives the authority to the President of the United States broad reaching power to implement terriffs
on imports that they deem threaten national security. So under that umbrella, they were able to re implement that statute with the twenty five percent tariff and pull off all the exemptions. That's why this this in particular, had nothing to do with the Mexico Canada across the board tariffs. That's why this one went into effect. And for the most part, people in the markets in the steel and aluminum market said, Okay, well, maybe we're not pumped with this, but at least we know how it works.
Well, do they feel like that's it?
Because the reason I asked you about the trade, and you're right, it was not the right company to be asking. But one of the things that stuck with me from what you said yesterday that the folks that are trading in these markets are free to even make a bet because it's just things change and it's not just you know, weekly changes, monthly changes, it's like hourly changes.
And it's largely because of the President of the United States coming out and saying, unexpectedly, we're putting we're putting tariffs on all imports from Canada and Mexico, right, and then days later saying, actually, we're going to delay that, and then later on coming out and saying we're going
to do something called reciprocal tariffs. These are things that people in my markets that I cover steal on aluminum that is like a totally different component that was not on their radar, that they had to start figuring out what it actually meant to their markets. And as I said to you guys yesterday, the anecdote of the person putting on a copper trade right, that was, oh my gosh, Okay, So he's we think he's going to put import terriffs on a lot of things, and we think copper might
be one of the things. And the President the United States comes out at the end of January and says, steal on aluminum, terariffs are coming back on and by the way, we're going to do copper too. Well, suddenly you see the price of copper go up that trader says, great, that's a good play for us. And then by Monday, the President of United States comes back out and says, actually, we're going to walk a few things back, including copper, which we might have to do a Section two thirty
two investigation on. So it's unclear that we might actually do this.
Oh, go ahead.
So these traders are saying, that's the uncharted territory. We know Section two thirty two for stealing aluminum, but all these other terriffs are new, and they're coming under things like IPA, like trade terrifts that weren't actually put into place the first time around. So the Trump administration this time around has deald even further into books that were dusted off. I mean section two thirty two. I had trade lawyers tell us in twenty eighteen, we didn't know
what Section two thirty two was. We had to actually go back into the stacks to read up everything to understanding in a long time. And listen. I spoke to wilber Ross a month ago and asked him some follow
up questions on this, and he did make the point. Remember, Section two thirty two was tried in the courts and was upheld and he knows that is one tool he has in his back pocket that he can go through with the president does the president of United States, And that's what we saw go into effect last night at twelve o one or this morning.
So essentially, the new tariffs that have been imposed this week, they've been tested in the mechanism, has been tested in the courts.
That's right.
These are in the view of the prop Trump administration. These are safe, These are good to go.
These won't be challenged probably, so that's probably how they feel.
Now.
The question is will they walk some of it back, in other words, will they go into exemptions. That's unclear to me. But we did have reporting in our main bar story yesterday that we knew of a meeting between Alcoa, the CEO of Alcoa, Bill Opplinger, some Rio Tanto officials, and the US Aluminum Association president in which they sat down with the Commerce Department in the past couple of weeks telling the Commerce Department you need to not implement
the aluminum terras on imports from Canada. Now they had the conversation, which at least indicates to the market that they're listening to people. So maybe they end up do giving exemptions. But as of this point, Trump made it
very clear we're not giving any exemptions. And remember, the biggest people who are against exemptions are the US steelmakers, New Core Corporations, Steel Dynamics, US Steel, and Cliffs all came out with a letter on Friday and said, mister President, do not give exemptions because that will just undo everything that we have here.
Don't ever go away.
No, it's just it's a complicated, and as Jim said, we're trying to keep up to date on what's new, what's old, what's on top of each other, because it makes a difference in terms of the implications for the industry, for companies, for costs, for inflation.
For the economy. Thank you, Thank you.
Bloomberg News Medals and Mining Heavy Machinery reporter Jode, who is never going to leave us.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Well.
With a lot continuing to come out of the White House and Trump administration regarding Tariff's, geopolitics and so much more. We wanted to do deep dive into how the United States relationship with the world is changing short term and possibly longer term, and to try and really suss out what President Trump's an endgame and agenda may be when it comes to the global role of the US government. And to that we turn once again to Ed Price.
He's a former British Trade official official now non resident Senior Fellow over at NYU. He has advised members of the European and British parliaments, writes regularly about politics, economic policy and more just tying it all together, and he joins us here in studio.
Welcome, Welcome, Thank you very much, Carol.
You were doing okay, like trying to keep up with the headlines and make sense of it all. And I think we too are all trying to think longer term change. Disruption We talk about it all the time. Can be good and we'll get to that in just a moment.
But you have a recent column he wrote about for Barons, and you get into how President Trump's rise marks the end of a long progressive era in the United States, and you seize on at least you kick it off the column with something that the President said in his recent joint address to Congress, saying he wants the United States to be the most dominant civilization over ever to exist on the face of this earth.
So what is he striving for? What is he in your view?
In my view, he is a good thing for America, the nation, and America the democracy, because everybody's talking about America and the democracy, and we're sitting here doing this again. And he is potentially a very bad thing for the Republic and the Union and the United States. And it might seem strange to make that distinction, because as things stand, we very often think of those things as the same. Right,
we will say USA and we'll say America interchangeably. And as I try to argue in this column, I may be wrong. I think that Trump's absolute structural purpose, is foundational purpose, is to split those two things in half, to get them away from the war from the other.
Explain how he does that and what that means. People might hear you and say, wait a second, these things sound like something that are inextricably bound.
So they're not.
In my opinion, right, seventeen seventy six is the moment that the American nation was born and it was born of breaking the law and defying a king. So that's the rebelliousness, right, that's the flags on the back of pickups. It's great, it's all American. Seventeen eighty nine, when the Constitution is ratified, is the moment that we chose to be legalists and chose to be a republic. Alexander Hamilton in that intereigrament was saying, look, should we have a
king right? And they were arguments about how powerful the president should be. These arguments have never been resolved, and we saw with Nixon, we saw with Kennedy the imperial presidency, because again, we haven't decided as a nation what exactly our republic is fought. So, if President Trump truly wanted to create a presidency with unlimited powers, he wouldn't be able to do it within the existing seventeen eighty nine United States framework.
He would have to somehow.
Appeal to the seventeen seventy six animal spirits to misuse the term of the nation.
So is that where doge comes in?
Doge goodness me?
So Elon Musk is supposed to be a genius. He doesn't realize he's the foe gay right, he's the four guy. He's going to be ousted at some point when DOGE goes too far, which it will probably into entitlements.
Trump will need, which is what they are dealing with, which is what they want.
To do as we speak.
Trump is going to need someone that wasn't affirmed by this confirmed by the Senate to get rid of quickly, and that's Musk. And I think we saw Musk on Fox the other day sweating it a little bit with Kudlog because it looked like he's starting to realize that maybe he's in trouble. His businesses aren't doing very well and so on. So DOGE is the kind of battering ram.
It's like the vanguard that's seeing how far, like a test balloon, how far this stuff can go, and when challenged, must will be quite easy to peel off.
Well, when is I just you know, because I think it's safe to say that some have thought government has gotten really big, and there's some security in that in that you don't move fast and break things that maybe shouldn't be broken. But at the same time, it's very easy to get lazy over existing structure, and waste does get created. And you know whether it's you know, so, what's the balance between good efficiency and disruption, especially.
In a government like the United States.
Well, I guess there's two points. Right.
One is that whether or not the American people want a big government is debatable. That's why we have elections. Whether or not the Americans want an all powerful government was already decided at the aforementioned Constitutional Congress, Right, So I'm very careful to try and prize away an efficient government from the size of the government. Donald Trump wants a smaller government, which he then says is more efficient.
So those of us who are worried, and this is the second point, those of us who are worried about fiscal and debt, will go, Okay, that makes sense, But that's disingenuous because what he actually wants is a more powerful government.
He wants a concentration of power.
Scentration of power.
So Lord Acton famously says that power corrupts, and absolute power corrupts.
Absolutely.
I think power accumulates as well, and this is what we should be watching for.
I want to go back to what you said about Elon and Doge, because I think a lot of people have been proven wrong over the past few months. When they said this is a honeymoon that is going to end badly. These two look pretty.
Close at this point.
And given Elon's status as the wealthiest person in the world, he proved in this election cycle that he's incredibly powerful with helping to elect people.
Mm hm.
And you'll say he might be there longer than I think.
I think I am, yeah, just because he has the resources, and you know, he has said he wants to use these in other parts of the ballot.
So the president with respect has a long and storied history of using and discarding people. And I don't think that Elon Musk rule of his wealth is I.
Mean, there are many books written by those people who want there's ascribe.
There's a library of people that have been have been let down by the president?
Shall we say?
I guess I'm contending. I mean I can see too that maybe the time is something I can possibly forecast. But I think the function of putting Musk into this thing called doge is that he's easy to get rid of. He's easy to point out later and say this guy made these mistakes, not me right, and at that point he's gone.
So when you hear things like Canada and this is something I think we all too are asking ourselves. You know again, what is the endgame here? Do you think in terms of President Trump?
Honestly, I mean I might regret saying this. Okay, maybe this is my last appearance on your show.
I don't know. I think he's serious. I think he's serious.
Canadians are if we if it ever comes off kind of jokey on air, I'll be honest with you.
We've had people reach out and say, hey, this is serious.
We don't think this is a I think it's dead serious.
I think Donald Trump's vision is a big sharpie around the entire of North America, including Greenland, with Trump Land written on it. And I think that there's some strategic sense to this, right because of the world of you know, you look at the Second World War, it was just who can get the biggest load of resources in one place. And if you look at Russia and China, they kind
of have Eurasia on lock. So it would strategically make sense for the America, the North Americans to converge together, if not for the fact that we don't behave like that. And the very reason for this country is law. As I said, seventeen eighty nine. So the seventeen eighty nine edition of the United States cannot annex Canada. It tried,
it failed, It just didn't work. But the sort of pre seventeen seventy six bubbling rebelliousness of the nation might And I feel that he's, as I say, dead serious.
If he's dead serious, are you saying or predicting that he might in fact try to make Canada the fifty first state.
I don't know that he would make it the fifty first state. I feel like that's a meme, but I think he would try to bring heal. He talks about it all the time, and Hue might or be it. I imagine that the Republicans would never be elected again because all of my Canadian friends are pretty liberal. I don't know how that works, right, but I think that what he wants is some control over the North American hemisphere.
It's almost like the Monroe Doctrine is being extended north and being extended north at the expense of these polities that already exist, in particular Denmark and Canada.
If we go along with your thinking, and some others think that he too is not kidding, is it something that could happen without US military action.
Well, I mean at some point the Canadians would not be happy about this, right, I mean, you can't tell us sovereign state you now belong to us. Others have tried that in history, Napoleon, Stalin, Hitler, and it never ends well. So I think that the US military would have to at some point invade. I mean this again, it's like amazing to hate yourself say this on a live stream. So I don't think Canada.
But to be fair, the president has talked about it, So start kind of carrying it out, like how this might happen?
Sure, Sure, I think I think it's not impossible. I mean you could come in from Greenland. We have bases there.
We're Bloomberg. We got to talk market's big picture and the way that they have responded to big picture President Trump's policies over the last few weeks, or what they view as his policies. Do you think it's fair to say that the equity and bond markets have not necessarily been a check on the president.
He said to himself, to him, right, you don't look at the stock market anymore?
Yeah, But I mean he said a lot of things he said, you take that to heart.
I think he's unrestrained. I think at this.
Point he's he's not thinking about popularity in the way that he has previously. Something has changed in his demeanor.
He's not running for reelection, so or.
Well, I mean, let me respect that he's not supposed to.
He's not supposed to run for reelection. Again.
This is whole goes back to this whole thing.
This is this whole thing.
I think he's fundamentally trying to reshape North America. I think Russia is a distraction. We of course, we have to talk about markets race, so I don't want to pivot away from that. Yeah, but the question for me is China. Is he getting ready to hand Taiwan over py Ukraine?
And full credit to our producer Ceci because she said, you know, as we were planning for this about how Trump and his cabinet have signaled that they're content to sit back on Taiwan and China. You have Treasury Secretary Pssent even said he doesn't see China taking action against Taiwan in this term. So what does this messaging tell you is the seating ground on global democracy? Should we feel confident that Trump's presence is enough of a deterrent.
Only got about forty five to fifty seconds.
Democracy is okay because we voted for him. The republic might not be. And this is what I mean. It might be that there's a period of massive populism in this country, including the seating of Taiwan, and democracy in Taiwan is in trouble, But in this country it's doing pretty well. And that's a real head scratcher, right, because we may choose to abandon democratic allies.
But democracy would continue here.
Democracy here, I think for a while.
Yep, I'm going to squeeze in one more question because your column ends with all of this political disruption doesn't necessarily mean the end of an era, but rather the beginning of one.
Twenty five seconds.
Said it before, Trump wants some sort of empire, some sort of imperium. I don't know if you would brand it like that. I don't know if you would be honest like that. But at core, he wants to solidify power, move himself to send to stage, and create some kind of autaki in North America.
Always an interesting perspective in view at Price.
Thank you so appreciate you coming in, Senior fellow non resident at NYU, former British trade official.
Right here on Bloomberg Business Week.
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So much of the.
Focus on tariffs this week has been around what's going on in Canada.
Canada?
Yeah, like a lot.
A lot.
Jo Joe gave us a good update on that earlier.
Back and forth.
Yeah, but let's not forget that earlier this month, the US and post twenty five percent tariffs on USMCA non compliant goods. This information I got thanks to a great Bloomberg compilation of the measures that happened.
Is obsessed.
I was like, Carol, you got to see this thing, and.
Helix stood over me on my desk.
No, no, no, I'm gonna send this to you.
Pull it up, pull it up.
Pay Yeah, it's really helpful. So if you have to check it out on the terminal Mexico for its part.
How do you get it?
I don't know.
Oh, okay, I'll set you'll figure it out.
We'll figure it out. You tweeted out, I was hoping you wouldn't ask me how to get it. Mexico, for its part, will wait until seeing what US policy is unveiled on April second before taking any steps to respond to tariffs. This is for Mexican President Claudia Shinbaum. She said this earlier today. Mexico is the US's largest trading partner, it's the second largest economy in Latin America, and it's
a key focus of this year's Milk and Global Opportunity Index. It's, in the Institute's words, something that explores the economic landscape of countries worldwide, del businesses make investment decisions, and governments identify policies for attracting foreign capital. Maggie sweet Tech is Senior director of Research at the Milican Institute. She's also the lead author of the report. She joins US from
Santa Monica, California. Maggie, did this report and how you went into it change it all given what we've heard from the Trump administration just in the first couple of first few weeks of this administration.
No, it hasn't really so, as you mentioned the top end. As we mentioned in the report, this report really provides an objective benchmark for evaluating developative attractiveness of countries for foreign investors. And so the fundamentals of the attractiveness of the countries hasn't changed. The situation around perhaps this are
very evolving. But the factors that we measure in the Global Opportunity Index, such as the abundance of human and natural resources and other aspects business perception, are the strength of the financial services and financial markets. Those factors really have not been affected by you know, the pivots that have been happening lately.
But what if the difficulty in bringing a product into the United States is affected by this administration and it makes it less attractive to perhaps build a factory in a place like Mexico. If a tariff of twenty five percent will be charged on that good when it does come over the border, doesn't that need to be taken into account.
Well, that does need to be taken into account.
However, what I will say is that again, this report really looks at the fundamentals, what is at the basis, So what will change is capital flows probably and the short, medium, and possibly long term. Now, these countries such as for example,
you were talking about Mexico. Mexico is one of the countries with the highest level of economic openness on our index, and it's economic openness not stems, of course from its strong relations with countries such as the United States, but also from the abundance of international free trade agreements that
has with countries across the world. So while United States is of course very important and the main trade partner from countries such as Mexico, they also have connections across the world and those so far had not been affected by the changing the in trade situation.
Well, and I think Maggie to Tim's point, like just you know, we feel it. We talked to a lot of folks who manage a lot of money, you know, trying to make decisions, trying to make sense, you know, in some cases kind of being in limbo until we understand kind of what policy really what it will amount to, because it can sometimes seem to in terms of conversations or comments out of the White House change from hour to hour, from week to week, from day to day.
So I'm just wondering what that, you know, I think we're trying to get into.
Does the world does the world kind of feel.
That way, whether it's Latin America, South America or elsewhere.
I'm sure it does.
And so what I would say is that because of that precisely is why I would say that all of the information that has been coming out, it's a bit too soon to judge what effects is going to have in the medium and long term. However, what we can look at is again the basis of what already has been established in those countries. As you were saying yourself at the top, there are also the terrors that were imposed last week right now, they do not apply to
USMCA compliant roots. A lot of the lot of the trade that is happening between Mexico and the United States is within those sectors that are.
Compliant with the USMCA.
So again, you know, we really, I think everybody still has to figure out how this will what will actually end up happening in the in the medium term, and how.
This will impact capital enflos.
Now, however, within that framework, the Global Opportunity Index does provide information about what are the potential attractive factors for countries, for countries within Latin America, whether the person could still be strengthened within that region, and so that really provides a little bit more of information that will that should apply in the long term regardless.
Of what happens well, Maggiet with the current trade situation, well, it.
Raises the question though the Trump administration has been very forceful in saying that it wants to make it better for companies to do business in the US and worse for companies to do business outside of the United States. We hear this every day or something along those lines every single day from the President. You focus at the
Milking Institute on global opportunity. Does the global opportunity for companies and for governments decline with an American first policy because America becomes a more attractive place to do business?
Well, so I would say again.
That that whether America becomes more attractive or not depends on multiple factors. There are a lot of the United States is ranked third on our Global Opportunity in Texas here, so it definitely is a country that has a very high attractiveness to investors. It has and that is without saying right, So, how does again, will shape the capital flows across across countries is stough to be seen.
There. It is important to also know that a.
Lot of the factors that are being produced, all of them. A lot of the manufacturing that is produced to the United States is dependent on components that comes from abroad, so a certain level of exchange may still be very favorable to countries. How much production happens within the United States. Of course, it's good to bring production inside the borders, but not everything can be produced within the United States.
No, that's fair, and we've certainly heard that from other folks in this studio.
Maggie, thank you so much. Maggie sweet Tech.
She's senior director of research at the Milcoine Institute, lead author of the report that we were just talking about. She's joining us from the West Coast on this Wednesday.
Mac, Now about you let me drive?
Oh no, no, no, no, this is not a twenty.
Day please, I want to drive.
It's a good question.
This is the drive to the clothes.
Dot Punk for me.
Effect.
Well, Jona Don on Bloomberg Radio, you.
Just heard from Charlie and Bill Maloney the kind of round trip that we saw in the US stocks.
Where was he?
Bill's in New Jersey? I think I don't know where he is. You can never tell with that background. No, but he's allowed to work out of the office.
One day away.
He can do it anyway.
That guy is here by the way, like you know, pre six am or pre five hour.
He really is judgment judgementcall.
You highlighted something really interesting today in our prep you. This is from the Market's Life blog. The word uncertainty is appearing on the Bloomberg terminal at its fastest paced since November of twenty twenty, as global markets are whipsawed by trade wars and recession fears.
I love stuff like this when we go through either earning season and what you know, CEOs are using the most.
And I love the word clouds.
Word clouds right cool. Just you know whether or not it becomes a reality. But sentiment is an important thing in terms of markets.
Hey, let's figure out what Philip Palumbo is thinking. He's founder and CEO and CIO at Plumbo Wealth Management. He joined us from Great Neck, New York. Philip, good to have you back with us. It has been a while since we spoke. What are you hearing from your clients right now? As we've seen market's whips over the last couple of weeks.
Don't use the word perfectly uncertainty. I mean it's a word that everybody's using. Everybody's very fearful of Trump, and is the way he's erratic, and how quickly he's moving forward with all his game plan that he talked about during the campaign. Nobody realized, really thought that he'd move as quickly as as he is moving. And it's scaring a lot of clients.
So do they understand do they buy into this notion and do you buy into this notion that the president is not paying attention to financial markets or does not care about what he sees with financial markets? As he said, Yeah, I don't buy into that.
No, So I think he's got one eye on tariffs and one eye on the overall market. I definitely think it's really important to him to understand the account where the economy's going, where the market's going, because Trump is a scorecard type person and I can't imagine he's not really looking at the markets. And at some point there'll be a Trump put that will be put into place.
So in terms of where you want to put money, then are you trading for maybe future Trump headlines that might undo tariffs and undo some other things like how do you kind of get your head around it? Then fail in terms of if you think that ultimately he's going to look at the markets and maybe, you know, see some of the impact and then will we.
Undo some of the things that he's done already In your.
View, it's a lot bigger than that. It's more about the way I describe it is you have you know, one side of the barbell is the tariffs, and you got the doge, which is the cutting of the deficit, which is really contracts an economy. The other side of it is deregulation and the extension of tax cuts, which actually can improve an economy. And it's his bed. And
you know Besson talked about this last week. You know that they're trying to go from public spending government public spending to private spending, and if they get that right, that's going to be beneficial to the overall economy. So for us, it's not about trading, it's about Okay, you know,
uncertainty creates opportunity, Volatility creates opportunity. And if you look at someone these businesses, I mean, if you want to look at the mag seven and video and Amazon as an example, and these these businesses, they're they're multiple has been cut in half, right, So when they're growing at ten to fifteen, twenty percent or thirty percent or even greater than that. And look at the forward multiple the market trading pretty much where they're trading, and the SMPS
projected to grow this year around seven. So there's always opportunities with volatility. You know, people got to get excited about this opportunity with volatility because it's an opportunity to put money to work with great businesses over the long term. Now just caveat is is can it go lower?
Yeah?
Can we get a bear market? Can we go into recession? You absolutely can. Nobody can time that, nobody can figure that out. You just have to look at opportunities as it comes to you in buying great businesses at a cheap price.
Well, I want to talk about some of those companies that you do argue are great businesses. Some of the stock picks that you sent along to our producer, Paul Brennan, North of Grumman on your radar ticker NOC down three point four percent today, a star war when it comes to Pentagon contracts and government contracts. Why are you bullish on this company in a doge world?
Yeah, Well, we'll think more about all globally, right, So globally defense spending is going to increase. You know, we have to restock from what we gave to Ukraine. All of that is going to be beneficial to no Throb. In addition to that, you know they're winning major defense contracts. You know that will last greater than ten years. So free cast flow estimate's going forward on average and looking at around sixteen percent. So we think that beneficiaries of that.
And if you think about where they're trading today, they're trading around twenty percent below fair market value. You know, So from our standpoint, we think at this level here, if you're a long term investor, we think you can do very well.
The company, though, still gets close to ninety percent of its revenue just from the United States, So if there are cutbacks in the unit, if there are cuts in the United States, that's a really big deal. I mean, very little of its revenue comes from outside the US accordinate to the terminal.
All right, there's good and bed to that. In my opinion, I don't feel that the DOGE is really going to go after defense spending as maybe some people are anticipating. I just think that that's an area you know, especially think about Trump when he's looking for if we want to secure our country, especially all the money we spent in Ukraine and different types of defense that we brought over there. We got to restock and we got to
strengthen our country, and it starts with defense. So we really believe that you will continue to see spending there. We don't see much of a decrease in that area.
You know.
It's interesting though, because we have heard comments from President Trump say, you know, let's cut our military budget in half, let's cut back on defense spending, you know, And I think he has tried and heeds, I guess maybe hopeful all of getting others like President Putin to do the same thing in terms of cutting back or China right in particular.
So I do.
Wonder that if he follows through or makes any progress on that, what does that mean for somebody like Northrop Grumman.
To your point, Pete Hegseth, the Defense Secretary, said the beginning immediately, this was back in February, the Pentagon will pull eight percent, which is about fifty billion dollars from non lethal programs in the current budget. Did you look at that as not affecting a company like Northrop Grumman, because we did see some pullback on companies such as palant Here at that time, and.
That's why you've seen some pressure on the stock. But overall, it's the major defense contracts that they already won that's ten years or greater that's going to add to the bottom line. We don't see them coming back contracts. I mean, they're really important to our country. And you know northroply what they do and especially all the missile programs that they're part of. We don't believe that's going to be.
Cut real quickly. There's two big financials that you like. JP Morgan is one name that you like. It is down about eighteen percent since mid February. We know financials, you know, definitely were riding a high for a while. Certainly coming off the elections. You still think JP Morgan is a bye.
Yeah, So that's exactly right. So it was buying a room to sell on the news, right. So after an orderation day, most of the financials decreased a lot from that point. But at the end, if you think about I think where we're going with the economy, you know, we think of JP Morgan, you know, the large bank in the world great on the commercial side. On the investment bank and side, we do think M and A
activity will pick up. If you look at M and A activity for January was down thirty percent relative to last ed and so we're not concerned about that because we feel like the deregulation hasn't been really embedded in the economy yet. So once some of this black cloud subsides that we think financials would be big beneficiaries, and you're buying him at a lot cheaper price than they were just a couple of three weeks ago.
All right, let's leave it there. There are a couple more stocks I want to talk about, but we're running out of time, so I do want to have you back with us very soon. Philip always good to check in with you. Philip Plumbo is the founder of CEO and CIO at Plumbo Wealth Management.
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