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Joining us is Billy House, Bloomberg Congressional reporter. So we've seen a lot of reports this morning about eroding support for President Biden on Capitol Hill, and we also saw the governor as the Democratic governors come out and basically kind of back him up a little bit. So I'm not sure if we have stacis, but is there a catalyst that might be looming on this, Billy Well.
I think what we're building up to our several public events that the president is set to take part in, including an ABC interview in time on Friday and some other public events. I think those are going to be the big tests for all these to shore up support from all these wavering congressional members, rank and file Democrats who are saying, you know, they wonder if he should just leave step down and let somebody else run for president.
So the next few days appear to be critical ones, even as Biden is publicly saying he's not resigning.
Billy a wise man once told me, if you can measure it, you can manage it. We get the Morning Console poll, the Bloomberg Morning Console Poll, I think Friday morning. If there is an erosion in support in the polling data for the president, does that necessarily move the needle? Do you think?
Well, it's interesting you say that because the Biden campaign itself anticipating some erosion, sit to Democratic members of Congress today a memo saying, hey, there could be a dip in the next few days and some of these polls, but that's just a snapshot in time, and overall it remains within it. He remains within the margin of error. It's still competitive, and and ask them sort of to keep their powder drt.
So there are a number of possible outcomes here. The president could could decide to stay in office but not run. He could also resign. He could resign inside health or or something like that. And is the compromise maybe that he doesn't have to resign while he's in office. He just serves out this term and then says that he believes he might be a little too old to run again, and then the Democratic National Committee could could find, you know,
someone to run, like Kamala Harris or or whatever. Are you hearing anything that might indicate which of those two are more likely?
Oh, I think I think the idea that he would stick it out for the rest of his term is far more likely. I think the issue is whether he would withdraw from the presidential race. And I think that in discussions, and we don't know, we're not in the private discussions, but there are discussions about whether his vice president would be the party's choice to replace him on
the ballot. I think that he is angling, although he's not saying he's going to leave that if he does decide to leave, that he wants his vice president at the top. That's anything but a given. As you suggested, there's a lot of differences within the party about Kamala Harris.
What do we know about the other camp, the Trump camp? And I was reading the other day that he is now delaying the announcement of his running mate until he sees how the dust settles out on the Democratic side. Is that right?
Yeah?
Well, I don't think he wants that buried so much that he that's his little jewel to unveil pillback, so also doesn't want to interrupt what has been at least first glance, good news for him. Though you got to wonder if, really, if the polls show him beating Biden, whether in the long run a replacement is necessarily good news for the former president.
What would be the process for if President Biden decided to step aside, or was in effect forced to step aside. What would be the process then for having a race to see who would be on the on the nominee position.
That's all over the board, and it's not certain there is a set process. I think some in the Biden camp just want him to be able to pick probably Harrister on Others want a sort of a mini primary. However that would be held, and whether it be at the convention in August or it'd have to be way before then. Somehow, there's really no set pattern for how to do this, and I think that's part of the confusion and what Biden is kind of waiting into if you met does decide to leave Billy.
A lot has been written, as you know, on the influence that the family has over the president. Is that what we really need to pay attention to. I mean Jill Biden and the immediate family members and maybe some very very close advisors.
I think that's absolutely correct. Maybe not so much Hunter Biden, though he is described as being in the room nowadays with the president. But Jill Biden, I think does carry a great amount of weight and what he does obviously, and I think that she is also helping to guide the potential paths ahead. We'll have to wait and see, but I think there's no doubt that she's been very instrumental in some of the discussions taking place.
You know, if we were to look forward and talk about some sort of competition between Kamala Harris, maybe Governor Newsom from California, Wes Moore from Maryland, and Gretchen Whitner in Michigan, what do you hear from people? I mean, are there you know, sort of in back room discussions. Are you hearing that anyone sort of stands at the top.
Well, I think Biden's favored obviously as his vice president, But there is polling no matter whose opinion is. There has been some polling about a backup candidate, and it does show kind of a resurgence or of Harris popularity that might surprise some. But Boodagij Whitmer knew some more from Maryland, others there in there too, So I think that focus would become greater on each of these potential candidates if something were to break.
Billy, thank you, Billy Howes Bloombergy, Congressional reporter. Adrian Zerker, CIO and head of Global Asset Allocation at UBS Global Wealth Management. Adrian, thank you for coming in the studios. I think I heard your heart start to be faster when I mentioned we'd be talking about President Biden and what's happening with that whole saga at the moment. I'll give you a few moments to maybe anticipate a question there.
Let's talk first about the Fed.
It seems like now and this was not reflected in the minutes because that was last month, but it seems like now there is recognition that you are seeing growth moderating and we are seeing this inflation kind of take hold. Do you agree and you expect that the Fed will alter its commentary soon.
Well, it's a very good question, and I think we have seen Powell or her Powell in Cintra talking relatively dorbishly, much more dorbash than doing the FMC meetings, and that's a reflection. I think what the FED has done over the last couple of months. They were looking in the rare mirror and driving straight forward and the rare mirroad. Looking at data that are coming from the past that still showing inflation pressure has been probably a bit misleading.
If you look at most of the economic models that the FED is actually looking at, they only should cut interest rates, and therefore I think it's just a matter of time until some certain factors like shelter particular oeer rents or inflation is actually coming off. Then we had some eadiosyncratic factor like car insurance, but that has now peaked out. It's rolling over an ear ear basis and also on amounts on months basis.
So I think we get this evidence.
Of inflationy pressure or this inflationary pressure that will open up the room for cuts to lie. Probably too early, let's see what's coming out of the non vae pay roll. But I guess JU lies too early. But September definitely life.
Speaking of being too early, I'm wondering if it's too early to begin anticipating how the market may react to a Trump presidency. Tax cuts, tariffs. I mean that would be both of those I think would be a huge negative for the bond market, wouldn't you agree.
It's a very complex mix at the moment.
Clearly can see that there's pressure also on depth sustainability. But we also think Trump is very aware that inflation has been a key factor he actually got elected. I think mister Biden is probably a very unpopular president because inflation, if you look at the employment rates, very very low, the economic.
Factor is actually relatively strong.
So the key factor for Trump to get elected is the inflation factor, which is definitely a huge headwind. And so increasing tariffs, spending a lot will create more inflation, and that's probably something even mister Trump will anticipate, and therefore we are not sure how quickly it will happen. So the risk is definitely for higher rates, but we will have to see until he really gets elected and then also how the Senate looks like.
Adrian, do you feel that President Biden is wrongfully maligned for inflation?
In one hand, yes, I mean go back in twenty two any we had an unprecedented situation, and to get out of this unprecedented situation, you had to print money. You had to throw everything on this economy that you actually were able to put and that's what they did. And the Fed was very data dependent. There are four hundred PhD economists haven't seen what's happening to inflation. It's
sky rocked. They were behind basically the inflation pattern. They had to increase interest rates very aggressively, but it came too late, and that's a reflection. So it's difficult to blame Biden. But we also have seen fiscal deficit is still extended, and so it's a mix of course that we have to take into account.
Would you be betting Adrian that we're going to see a lot more in the way of dollar weakness right now or is there too early to make that call.
So it's quite a tricky situation. We think the dollars should weaken. We actually do think the Fed will cut in September and they will also cut in December. I think we get more indication even from the labor market looking.
At the latest Charles data.
But then mister Trump could be actually positive for the US doll at least temporarily so purely macroeconomic environment, we think the dollar is too expensive, it will weaken. The FED is basically the last major central bank that will cut interest rate, which is quite unique, and therefore there should be weakness coming through. And then we have a political situation which might give temporary support for the wist dollar, but probably not a long term support.
So here we are in a situation where we're about ready to see a change in government in the UK, possibly in France, and quite possibly in the United States. On the one hand, that makes me nervous if I'm in the market, and the other end, we just had Dan Ives and Gene Munster on the program, just lauding the prospects for artificial intelligence, which one of those themes will dominate markets more over the next year too.
Well.
I do think usually political markets are quite short lived, have short legs. That's a quick pricing in. I think the UK election, even the French election, will be more temporary concern for the markets we have seen. Trump is
a different story, particularly the trade war situation. Of course, we'll have to see how aggressive Trump will be eventually, how quickly he will act on that part, so that might resonate a little bit longer, but I do think that the AI story is definitely one of the key aspects.
And looking a bit more shorter and we going.
To earning seasons, we have still seen very strong AI KPAX related kpax basically over the last couple of months. We actually do think that this could drive markets higher. We see the fat probably cutting interest rates more evidence for that. So I do think we actually have a relatively solid market environment until we get a bit closer to the November.
Before we let you go, can we get your view on Japan the PBOC, the degree to which they may be behind the curve a little bit and bog I'm sorry, and the degree to which they really need to make a decision this month in July to Titan.
Well, looking at the macrocanomic environment, inflation where it coulds going, there's no real pressure for the BOJA to actually increase interest rates and to increase interests. Therefore, we also see the Japanese yet and still suffering, going above one hundred and sixty and maybe even heading to one hundred and seventy.
So it's a cheap currency.
But the macricanomic environment, there's a lot of structural changes that are coming through, but currently in this cycle, we actually don't really see the BOHA has a huge pressure to increase interest rates, and therefore there's probably more weakness in the store for the Japanese yet.
And because the PBOC is also in the news, I got to ask you about that and borrowing bonds from several key banks. Do you like that plan to perhaps so way in to kind of keep to you know, shore up and get in front of the rally.
I do think the people actually should cut interest rates, should become more aggressive, probably even going down sort of the power of what Western central banks have done doing QE to reactivate basically the economy.
We're going to plan them.
I don't have a big expectations, but I do think they actually should lower interest rates and not stabilize them.
Yeah, it makes it. It's a little easier, isn't it. Adrian, thank you for joining us. Adrian Zirker, cio and head of Global Asset Allocation at UBS Global Wealth Management. Let's take a look at markets here with Chris Carey, portfolio manager, Carnegie Investment Counsel, Carnegie as we would say in the States, and Carnegie as yeah exactly. Yeah, good to have you
here on the program. Well, I'm kind of all ginned up here on AI because we just had Dan ives Gene Munster on allotting the prospects and we didn't have a rebound in in Nvidia. The thing is, we haven't had any negative warnings from in video or Broadcom, and we haven't had anybody really talking about channel checks that were disappointing. So is it still all systems go? Or should we be careful here?
I still think for the meantime it's all systems go.
You know as well.
As anyone that the next stage of this is really going to see. You know, they made all this investment, how are we going to be able to actually monetize this? And you know, we've start to see some examples of that, but that's probably going to be you know, hopefully we'll get a hint of that in this coming earning season, which should kick off, I believe, beginning next Friday. But I think that the level of exuberance and enthusiasm is is well warranted.
Yeah, it's interesting. I remember reading some research a short while back talking about the degree to which AI could transform the financial services industry, the banking industry. I mean there could be significant job losses here as the result of artificial intelligence. But let's talk more broadly about the banks. They do kick off earning season. We know what the rates environment looks like these days. How do you think the banks will come out in earning season.
I think that the guidance is going to be something that we'll really like to see. Again, we have rates still at five percent, so these guys are earning net interest margins that are, you know, above what is usual, and you know that's why it pays to own the best of breeds banks like JP Morgan for instance. That's
where we are positioned. And it's going to be interesting to see the commentary, especially with regards to any any comments on an activity, as well as any further updates we're seeing on that corporate real estate side.
And I guess the eight hundred pound gorilla in the room really is is what happens with the presidency. Is that something that has the potential to play big into markets or are you sort of in the camp that says, you know, we'll get by either way.
I'm I'm in the camp of what the data says and the data never lies, which is that regardless of what president is in office, the market does all right. It doesn't matter if you're a Republican or a Democrat. At the end of the day, these America still runs on a capitalist system. These corporate America is very good at making sure that they can maintain their margins. And you know, we're investing in the biggest and best companies within you know, the S and P five hundred and
so it doesn't really concern us. Are there going to be certain sectors that will rally or falter as a result? Sure, there always are, you know, private prisons were we're doing well after Thursday's debate. But for the average investor, for how we think about allocating our funds, you know that we invest for the decade. So this really is just you know, short term, short term noise.
Really okay, but maybe there's a little bit of signal here when it comes to the possibility of tariffs and tax cuts. I mean both of those, Well, the tariffs issue would point to rising inflation. Tax cuts. The bond market is not going to like a worsening fiscal situation, So this could play out in the bond market.
Yeah, and you know, we saw today that the ten years are nicely and it's America's birthday tomorrow, but today is the second birthday of the your cut curve and version, and where finally looks like we're seeing a bit of steepening, which is which is good. But you know, you're right, the fiscal deficit problem in the United States is one that is becoming harder and harder to ignore on our service for cost for servicing, the debt is geting much higher than it is for you know, our defense budget.
And this is something that even you're seeing j Powell start to even though citizen weigh in on fiscal policy, he's trying to He talked about that in Portugal the other day, where it's becoming more and more of a concern. And I think that you know, this is probably problems getting harder to ignore, and it it will have to be addressed by either administration whoever happens to get into into power.
In the short term, we're about to head into a period where there are going to be some that worry about a rapid falloff in growth versus the others who think this is a comfortable moderating Where do you sit on that?
I think I'm more in the in the camp and it's a we're in a comfortable, moderating place. But I'll admit I'm a bit purtued by the Federal Reserve and they're you know, hesitance still to want to get more data. They are slaves to high frequency data. Every time we hear them, it's like, oh, we need more data, Oh we need more data. But the fact is that, you know, the unemployment rate has climbed to you know, four percent, that's that's up point six percent since April of twenty
twenty three. We're seeing the core inflation has called if you look at inflation as a whole, we've had twelve months stretch under four percent. That's great if you consider why we were previously. And you also have the fact that the labor market is starting to cool down. If you look at a beverage curve, how much more can we let the labor market call before we see unemployment start to climb. I think that the Fed is really needs to wake up.
And you know, J.
Powell himself said that you can't really pull a significance from the US economy from a twenty five basis point cup, So why not start now?
Chris? Thank you. Chris Carey from Carnegie Investment counsel. Well, the pressure on Joe Biden to drop out of the US presidential race has intensified. Let's get to Ed Baxter in San Francisco with the story.
Ed.
Yeah, that's right, Brian. The drum beat for the Democratic Party to find its path forward has increased today, as you say, and it appears to be moving in two directions right now. We'll go through it and get some context. The latest says a governor's meeting with a president. We have several governors coming out saying, like Governor Wes Moore Maryland, he says president is in in a to win it.
Minnesota Governor Tim Wall saying the president is fit. Joining us live is Christian Hall Bloomberg, Government Congressional reporter, Christian, thank you so much for being with us. Does that seem what governors Waltz and more are saying? Does that seem to be the consensus of that meeting coming out?
Look, I mean, I think we have to realize that the stakes are very high for President Biden right now after that meeting with the governors, his top goal is to project confidence and ensure that you know, he can continue the job as president. But the stakes are incredibly high for him right now. Over the next couple of days.
He's going to have to make sure that his appearances over the next few days are very strong, and he has to really instill in lawmakers key donors that he has what it takes to run again.
Yeah, at good points. And the governors are not directly involved in the down ballot race is as closely as House members and what we've been seeing bloombergo all day, and I know you're seeing it and reporting it. It's a bit of a different drum beat coming out from from Congress, isn't it.
Oh?
Absolutely. I mean we are now seeing key lawmakers in the House who are saying that President Biden should step down. I think that, you know, President Biden wants to see the debate. It's just, you know, a bad performance. But there are a lot of questions from lawmakers whether or not he has what it takes to move forward. And they would prefer for the president to be honest. Some
of them feel that they've been blindsided. They would prefer for him to be honest and straightforward, letting them know where he's at right now and whether or not he can do the job.
Yeah, now and the congressional races down ballot. There are two very interesting things going on too. Two congressmen coming out publicly, and then there's a letter that apparently has been drafted by a dozen or so other congress people. What do we know about that. It's not been released yet.
It hasn't been released right now. I think that what we're seeing right now is, you know, the folks up on the hill, they are trying to Democrats on the Hill are really trying to come together and present this kind of unified, you know, stance on what the next steps should be. At the end of the day, we can't forget that President Biden is the leader of the party right and we are just a few months out
from November, so the stakes are really high. I think that they're going to try to make sure that whatever decision that they make moving forward is in the best interest in defeating President Trump in November. Yeah.
Now, there's an interesting piece up on the Bloomberg saying, to be very hard if Biden is not going to be the choice for the Democratic Party to turn its back on Kamala Harris so that she's actually polling better. Now, what do we know there.
Well, I think that's a very good point. It would be very difficult for Democrats to kind of overlook Vice President Kamala Harris should she become, you know, the person that would step in line to be the nominee for the Democratic Party, especially when it comes to black voters. I mean, the weight that black voters will have in this selection is significant. I mean they help President Joe
Biden enter office in twenty twenty and defeat Trump. So it's very important that the Democratic Party kind of looks at those key demographics within the party seeing you know, what those voters want to see if Joe Biden is not the Democratic nominee.
All right, Christian, thank you so much for your time, really appreciate it. That is a Bloomberg's Christian Hall Bloomberg Government Congression Report. I want to just add one other note here, putting a little more impetus on having to make there's some kind of firm decision. There are some deadlines living Ohio, for example, as I believe August eighth is to get a Democratic name on the ballot.
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