Thank you so much for joining us on this special edition of Bloomberg Daybreak. US markets are closed for the Memorial Day holiday. I'm Nathan Hager, and coming up this hour, we'll look ahead to earnings from one of the so called Magnificent Seven in videos out with its quarterly report on Wednesday, we get a preview with Ban Deep Saying, Global head of Tech research at Bloomberg Intelligence. Plus bitcoins
back at record levels. We'll ask Bloomberg Intelligence Senior commodity strategist Mike mcgloon where he thinks the crypto currency is headed, and p JIM Fixed Income Chief US economist Tom Porcelli will join us with his thoughts on how long the FED can stay on hold. But we want to begin with a look at the stock market. After a turbulent few months, stocks have basically recovered their losses since President
Trump's Liberation Day tariff announcement in early April. So we thought now would be a good time to bring you a special roundtable on equities, and for that we're pleased to welcome Invesco Global Markets strat just Brian Levitt and Barry Ritholts, the founder of ritt Holt's Wealth management and host of Bloomberg's Masters in Business podcast. It is great to have the both of you with us. Barry, I'll start with you.
Is this just.
A Washington dependent equity market at this point?
Well, no doubt, Washington policy decisions are having an big impact on the market's expectations for the economy and corporate revenue and profit. Look, the President calls himself tariff man, says tariff's are the most beautiful word in the dictionary. We know what he did in the first term, and so the consensus seem to have been pre April, Hey, we'll get some ten percent tariffs here and there, and
that's already built into our models. But when you suddenly and unexpectedly drop one hundred percent tariffs on one hundred and eighty two countries plus penguins in the Antarctica, the market has to stop and say, oh, we failed. You know, this is a failure of our imagination. We did not anticipate tariffs this large. This is going to take ten twenty percent off of corporate revenues. And profits always fall faster than revues. Maybe this is twenty thirty percent off
of corporate profits four quarters from now. We have to adjust our prices down and what will you off like fourteen percent twelve percent? When the ninety day pause came in, that was on the way to going much lower as a discounting mechanism. The pause gave everybody some help that all right, maybe our original assessment was correct, but it's still very much up in the air.
Brian, I'll turn it over to you. Has the market sort of shaken out where the policy direction is going now? Have we adjusted to the second term of President Trump?
Not entirely. Barry makes a great point about it.
I mean, we remember we had a tarif rate that was quite low a year ago, and now we're talking about fifteen eighteen percent average effective rates. So, yes, we've had a pause. Yes we've seen tower freights come down on countries such as China, but it's still not entirely clear where this is ultimately heading. Now, what's good for the market, or what the market is at least expecting, is that things are going to get incrementally better from
here on the policy front. There's no guarantee, but that seems to be the market's expectation and does seem to be the modus operandi of President Trump. I look back to the twenty eighteen environment. If you remember the fourth quarter of twenty eighteen, stocksfell twenty percent during the US China trade war, you got a ninety to eight pause.
You did not get a Phase one China trade deal for really another year, but the markets continued to perform well amid expectations that policy was going to get better.
We are under a ninety day pause, as you mentioned, we're heading toward what I think a lot of lawmakers in Washington are hoping to be a big tax and spending cut bill around ninety days or so from now. Is July turning into a pivot point for the equity market?
Berry?
Maybe you know I love to do the compare and contrast with how the FED communicates changes in policy with how this White House does. You know, before the Fed says we're going to shift our regime, and now we're either raising rates or cutting rates. You get to notice six meetings in advance, three meetings in advance. Hey, we're
tracking PCE and CPI. The month before the meeting, all the FED governors and presidents fan out and they speak at the Petroleum Club of Houston and the Economic a Club of New York and everywhere else, and so when the change happens, it's not a shock. You don't surprise the markets. I think part of the problem here is not just the policy itself, but how completely shocking and
surprising it was to markets. As it turns out, mister market doesn't care for surprises, and that's something that I wish the White House would take a page from the Federal Reserve's communication strategy.
Yeah. Look, the S and P five hundred, as everyone knows, is overvalue compared to its long term average, driven primarily by a handful of names. Other markets are not as overvalued, particularly non US markets obviously value in disease MidCap stock. So it's one of these times where it may make sense. It probably does make sense to lower the valuation of the portfolio as we nab gate this period of policy uncertainty and as we grapple with higher interest rates.
We're speaking with Brian Levitt. He is the global market strategist at Invesco, and Barry Ridtholtz is with us as well, founder of Ridolts Wealth Management, host of Bloomberg's Master's in Business podcast. Barry, we have had a lot of attention on the bond market particularly with the yields going up in response to what's happening out of Washington, d C. Where do you see the bond market going and could it potentially pose a headwind for equities going forward?
Sure, always the bond markets are the adult in the room. But let me throw a little bit of a curve ball at you. I think Carvel was right in the nineteen eighties and the nineteen nineties. Once the new millennium started, it seemed like leadership in terms of influencing DC policy moved to the equity mark mart So let me give
you just three quick examples. I have a vivid recollection of FED Chairman Ben Bernanke testifying in October eight to Congress, and after a few fiery speeches, they voted down money and authority to the FED. Market sold off really hard. By that Friday, everybody reconvened and they gave the Fed everything they wanted. So ten twelve thirteen percent gets DC's attention. I love what happened in March twenty twenty during the pandemic.
Republicans and Democrats couldn't agree on renaming a library in Washington, DC. Talk about something with so minor Then the NBA canceled the schedule after a thunder Jazz game where the center tested positive for COVID. Once the NBA canceled their season, the dominos all began to fall. And it was a week or two later we passed the single biggest fiscal stimulus as a percentage of GDP since World War Two, the Cares Act. And now we see the same thing
that took place in April twenty twenty. The bond market has certainly been driving the debate about the dollar and fiscal policy and deficits, But it was the stock market sell off hey down five percent, down five percent, down five percent, three days in a row that got the White House's attention. And that's when the President called uncle, not rising yields, but falling equity prices. I want to be reincarnated as the stock market, not the bond market.
Yeah.
I mean that raises the question the whole idea that the president uses the stock market as a scorecard for how his policies are going. So, Brian, as we head into the second half, where do you see things going for the stock market? Could it sway what happens in Washington, DC.
Yeah. Our leading indicators of the economy are still pointing to below trend and lower growth, and the inflation momentum is picking up, So that's a little bit of a more challenged environment.
You're not there that often. Most of the time. You're more in a recovery expansion or slow down field in which stocks can do quite well. So in an environment where leading indicators are pointing lower, you tend to want to be a little bit more defensive, expect more volatility in the markets. I think you're right, and I think Barries right that ultimately we will get a better policy response. Ultimately as the economy weakends, Federal Reserve will be able
to lower interest rates. When that happens is probably not as soon as people think, and the administration will likely continue to move away from its worst impulses on trades. So you could be in a channel lenging short term period here, because typically when you're leading indicators are rolling over, you need a policy response, and for the first time in a very long time, it's going to be a challenge in the United States to get that policy response.
On the other side, in Europe, China, the UK, you will be getting that policy response, which is why you're starting to see or you have been seeing momentum pick up in non US assets.
And Barry, are you looking for a challenging environment as well. I mean, we've heard from the likes of Jamie Diamond and JP Morgan Chase saying he can't take stagflation off his table into the second half.
Well, well, Jamie reversed his views. Not too long ago. He had said, Eh, you know, tas will be fine, We'll work a way through it, before we had that big surprise. My expectations really are dependent on who is the potus whisperer, Who is the last person that the president here before he goes into making a key decision. If it turns out that the majority of the times, the last person to influence President Trump is Treasury Secretary Scott Besson, well we'll be fine. He's a Wall Street guy.
He understands how markets, dollars, bonds work. I'm comfortable with him as the potus whisperer. If, on the other hand, it's Peter Navarro, who is you know, one and only one economist who seems to think that tariffs are a fantastic idea. Hey, that little smooth holy thing, all right, that was a one off. That didn't work, but we
should try it now. If he's the most influential advisor that the president listens to, well, then you know the worst case scenario is, yeah, we're gonna get rate cuts, but it's going to be in response to a stagflationary maybe even a recessionary environment.
To be a fly on the wall in Washington, d C. Thank you for this to the both of you, Berry Ridtholtz of Ridtholtz Wealth Management in Bloomberg's Master's and Business podcast, and thanks as well to Investco Global market strategist Brian Levitt. Up next, we're going to preview earnings this week from Nvidia. Bloomberg Intelligence Global head of Tech Research Mandeep Sing will join us as the special Memorial Day edition of Bloomberg
Daybreak continues. It's twenty minutes past the hour. I'm Nathan Hager. This is Bloomberg. Welcome back to this special edition of Bloomberg day Break. US markets are closed for the Memorial Day holiday. I'm Nathan Hager. Wall Street gets back to work this week with a key earnings report on the docket. On Wednesday, after the close of trading, we get the latest quarterly numbers from Nvidia, So what should we expect from the AI chip giant. Let's bring in man Deep
Singh for se mencers in that regard. Mandeep of course, as the global head of Tech research at Bloomberg Intelligence. Man Deep, it's great to have you on with us. And you know, Nvidia investors have kind of gotten used to blowout results quarter after quarter, So is that the expectation this time around?
I think there are a few variables to keep in mind. So the first one is on the demand side. Everything really looks strong when it comes to the commentary from hyperscalers that we've heard around CAPEX. I mean pretty much everyone raised their CAPEX slightly. They had positive outlook on even the early twenty twenty six view. So the US hyperscaler spin really strong. The one area that obviously will
be a slight head wind is the China exposure. And we know in Nvidia wrote down about fifteen billion dollars of their inventory of H twenties because of the restrictions. So the most likely scenario right now is they may not be able to sell to China anytime soon, even if they come up with a different variant. I think chances are they'll find it hard to overcome the restrictions,
so that's a negative. At the same time, they had new sovereign deals in the Middle East a couple of weeks back, UAE and I think Qatar, and just overall, the sentiments seems to be improving when it comes to sovereign demand outside of China. So there are different sort of variables driving the demand side, but overall, look, the market is still undersupplied and in video chips are still the most performant when it comes to accelerators that you
need for AI. So from that perspective, I mean in Nvidia still has that mode when it comes to the AI accelerator market.
Yeah, to your point, it really has been a busy quarter leading up to these results from Nvidia, a lot of headlines coming out for the AI chip company, and including some headlines from the CEO himself, Jensen Wong. He was at the computechs AI event in Taipei last week unveiling his latest raft of technologies aimed at keeping the AI demand boom going. Here he is talking about the latest in Vidia accelerator chips. Let's listen.
In this year in Q three will upgrade to Grace Blackwell GB three hundred. The GB three hundred will increase. Is the same architecture, same physical footprint, same electrical mechanicals, but the chips inside have been upgraded.
So what kind of further commentary could we get from from Jensen Wong on the GB three hundred when we get these earnings this week.
Yeah, the big thing that the street is focused on is what does the GB three hundred do in terms of the gross margins, because remember in Vidia's gross margins have come down slightly with this Blackwell launch compared to the Hopper architecture, which was the prior architecture, and the expectation is that gross margins go back to mid seventy percent.
This quarter there'll be more like seventy one seventy two percent, but in the second half everyone is expecting those gross margins to go up, primarily diriven in by GB three hundred.
Ass your clip just noted so clearly. You know they are talking about bigger scale of these compute architectures that all the hyperscalers are looking to use, and the reasoning models, which really I think took off post Deep Seek earlier in the year, do require much more compute than the you know, the previous sort of way of using AI when it comes to just giving in your prompt in
chatbot and getting a response. So the reasoning models have driven up the consumption of compute and that will be a key driver of the outlook that Nvidia is going to give in their earnings report.
And we're speaking with man Deep Singhy's the global head of Tech research at Bloomberg Intelligence as we look ahead to in Vidia's latest earnings report coming up later this week. You mentioned the importance of Nvidia broadening its market beyond the hyperscalers, these deals that we saw in the Gulf in recent weeks in Saudi Arabia, the United Arab Emirates. How important is it for Nvidia to capture that market those sovereign investors into the A boom.
Yeah, I mean, I look at it this way. When you look at the five hyperscalers here in the US, they are growing their capex by about forty to forty five percent this year, and Nvidia's data center revenue is expected to grow about fifty five percent this year. So you can see how Nvidia is still so much exposed to the hyperscale capex growth.
Now.
You know, there are obviously buyers of Nvidia chips outside of hyperscale, the US hyperscalers, but you know, you need bigger entities. We're talking about a company that is almost going to do two hundred billion dollars in revenue this year, and for that number to keep growing even at a twenty five to thirty percent clip, you need to find those large incremental buyers. You can't just have, you know, enterprises with five to ten million dollars of IT budgets
spending on GPU compute. You need much bigger because we're talking much bigger numbers now, and so sovereigns do kind of come across as entities that can spend big on capex and they can spend for a few years. It won't be just a one and done sort of thing. And so from that perspective, it's huge that you know,
Nvidia is exposed to these sovereign buyers. I'm more curious to see what sort of llms or products come out of the spend from the likes of Saudi Arabia or UAE who plan to spend big on Nvidia accelerators, because at the end of the day, you have to have something unique then what OpenAI or Gemini is offering in terms of chatblock functionality.
Yeah, and I guess you have to wonder as well whether those sovereigns can come through on some of the pledges they've made around the deals that were announced in recent days. I mean, we've been talking about multi hundreds of billions, if not multiple trillions of dollars in announcements coming out of that event.
Yeah. Absolutely, I mean the numbers are big, and these are multi year commitments, as has been the case even in the US. We know about the project's target. You know, even Apple has talked about investing up to five hundred billion dollars here in the US. I'll be curious to kind of learn more about what Apple plans to invest on because so far, Apple has been the one large tech company that has not invested big when it comes
to the GPU and the accelerated compute infrastructure. So that could be a positive for Nvidia if Apple comes in as another hyperscaler who wants to stand you know, this big GPU infrastructure. But clearly that hasn't happened, and that's why, you know, you need the bigger entities like the four or five existing hyperscalers to come in to sustain this revenue growth that we've seen out of Nvidia.
Do you see Nvidia sustaining the growth of its valuation given the news that's come out in recent months, We've been talking about the deep Seek breakthrough in China, so much competition in the space. Now, can investors continue to drive up the value of this company into the next few quarters.
I Mean, the good thing for Innvidia is it's been growing nicely into its multiple, so it's never really traded at a crazy multiple. And that's still the case because you know when a company is growing over fifty percent, I mean you know, it's almost doubling its revenue in less than two years, So clearly you know it's growing
nicely into the valuation. And look, when it comes to Nvidia, like they have a very successful mode in terms of having the most performant chip, they have the scale, they have, the high margins, I mean gross margins in excess of seventy percent is something desirable for any company, and they're doing it as a semiconductor company. So there are a
lot of things that are working well for them. And if AI is this secular trend and I think everyone sort of agrees on that this is a you know, a fifteen to twenty year trend and videos is still most exposed to kind of growth in that AI infrastructure. Is just a question of can it happen in a sustainable, you know, twenty five to thirty percent every year growth type of scenario from here on or will there be you know, peaks and troughs in terms of a capeic
digestion period and then you know, things picking back. So that's the sort of question that everyone is trying to grapple with. But there is no doubt that Nvidia has almost got a monopoly when it comes to training work cloths, and even on the inference side, they continue to have a dominant chare right now.
Yeah, and I wanted to ask you if you think Nvidia maintains that monopolistic position that mote when you know it's facing competition from the likes of Advanced micro Devices and you know so many other competitors that want to chip away at this chip giant.
Yeah, look, there is competition from AMD or Google's TPUs or even now we've started hearing Huawei being a potential competitor. But when it comes to price, you know, performance as well as you know the power aspect of their chips. They are still way above everyone else, and that's why you know, these AI workloads are pretty demanding when it comes to the floating point operations that are required and
the power efficiency that's required. Nvidia has so far managed to say at least you know, a year or two ahead of everyone else in terms of what they are able to offer versus the competition. And then they also have this software mode that others are still developing when it comes to their chips. So I do think their mode, at least for now, seems sustainable. But you know, we're talking big numbers, and when everyone is fixated on this
multi year opportunity, there will be workarounds. And their customers are also potential competitors. When you think about the likes of Google and Amazon. I mean, these are the biggest customers of Invidia chips, but they're also developing their own chips. So clearly there is that threat that over time they'll try to reduce their dependency on Nvidia, and I think
it will happen. It's just a question of how long will it take them to develop their own chips so that you know they can completely move out of that Nvidia dependency.
Well, we don't have too long to wait for those latest numbers on in Vidia's latest quarter. We get the results Wednesday after the close. Thanks for the preview ahead of it, Man Deep Saying, the global head of Tech research at Bloomberg Intelligence. Up next, the big move to the upside for bitcoin. We look ahead at what's a head for crypto with Bloomberg Intelligence Senior Commodity strategist Mike mcgloone. It's thirty seven minutes past the hour. I'm Nathan Hager,
and this is Bloomberg. Welcome back to the special edition of Bloomberg Daybreak. I'm Nathan Hager. The US stock market course is closed for the Memorial Day holiday, and much like the stock market, the trajectory of bitcoin has reversed over the past couple months and taken off. It was just over a month ago the crypto currency was trading under seventy seven thousand. Last week it surged to a
record well into six figures. For more on where the original digital token go from here, we are pleased to welcome Blueberg Intelligence Senior Commodity strategist Mike mcgloon Mike, it's good to have you with us. I mean, we've had some bullish crypto investors talking about lots more upside from here. Where do you see bitcoin going?
I guess that's part of the problem, Nathan. It's had a very good run, but now it seems like the consensus for bullishness to be complete. Certainty is what really scares me. So that you know, so bitcoin's a new record, that's a wonderful thing. It's very impressive, but it has basically Pilon effect kicking in now, and I'm concerned that one thing it did prove in Q one certainly to that bottom in April when the stock market went down, it went down with it what it knows it neally does.
It went down a lot harder. Now we're at the situation a lot of people says it's people say it's not as highly correlated to the stock market, it's an alternative, but it's proving it actually is more correlated to the stock market than things like gold. So for on the year, gold is still way up performing bitcoin. Questions can Bitcoin catch up? And I think a key pre vacuu is requisite for bitcoin to outperform gold this year. The old rock is US stock market properly probably has to go higher.
So at this point, from the last sixteen quarters, the correlation with bitcoin the S and P five hundred I use sixteen quarters because bitcoin works in a four year cycle, is about point seven. That's almost the highest ever. Yet the correlation of bitcoin to gold is about zero. So I like to say some points bitcoin is digital gold and some kins it's leverage beta, And so far this year is proving its leverage beta. But the good news is so far it's way out perform a stock market
in just sense. I have a sense that there's just so much just complete certainty it's going to go higher. This one I have to pull back into a bit of a contrarian.
So are you thinking then that bitcoin isn't quite the mature asset that some might think it's at least trying to be now with so much more institutional interest in cryptocurrency.
It's actually more the latter it's become. It's gained so much maturity. Last year was a benchmark year for bitcoin. The ETFs and those of us who were in the space were a long time waited for for ten years finally launch, so that brought in you know a lot of those type of investors we had the having and the major, most significant pivot was the Trump and mistation President candidate Trump at the time switching over his narrative to being favorable.
I really liked.
Writing bulls things about it when most of the masses hated it like a first Trump administration. They were not noticing what was happening in crypto dours and the base layer being the door and a lot of crypto stable coins investing in US trasure traasies. Now they do. And here's one big problem, Nathan, is the animal spirits are in the space. In the past, there was maybe a
couple thousand, couple up to a million cryptocurrencies. Now on coin marketcap dot com there's sixteen million cryptocurrencies listed and that can be traded for me. It's the example of the broomsticks that Scott Present uses from the Fantasia where Mickey Mouse creates the spell and then you can't stop it, you know, the Sorcerer's Apprentice. This is the situation now. I see in cryptos we have an unlimited supply of
dependence on bitcoin going higher. So bitcoin, yes, it has that limited supply factor, but now we have so much leverage in this space. There's a story on the Bloomberg terminal on this week that sat and pointed out that we have people leveraging forty to one to get long and they put in stops. And the unique thing about the space is those of us who've traded in the past is a lot of times you can run through stops on gaps, meaning when markets are closed when they're open,
but bitcoin never closes. So I think what that does is incentive ives is as sentitizes many people to use a lot x of a lot more risk than they should be. So I'm very concerned at these levels. I'm concerned that the US stock markets are going to roll over for that recession we didn't have in two thousand and twenty three. And that's somewhat that can the views of Ona Wong or chief economists in Jena, Martin Adams,
or senior equity strategist. And the key thing I'm pointed out for a while is that bitcoin to gold ratio, the amount of gold ounces equal to one bitcoin right now is about thirty three now that was first traded in twenty twenty one. So I'm really concerned that you know this, this space has got to become very mature. It's got the masses in it. And now we have a lot of lambs. Look at me. I can make
money too. Who are doing things that I've heard about in nineteen twenty nine in the stock market, and I remember in nineteen eighty nine in Japan, in nineteen nine, in ninety nine US And I'll just mention that unlimited supply and then a lot of these things, like the eighth largest cryptocurrency is dogecoin. It's worth only thirty six billion dollars and it's basically a joke, attracts nothing. Some of that stuff I'm just waiting to get purged out and then I can get really bullish again.
So are you concerned? Does your concern build when we're seeing, you know, some of these regulations looking like they're going to be loose, and particularly around the stable coin legislation that was just move forward in Washington, d C. You know, feeding into some of those animal spirits.
Well, there you go, exactly. That's the key phrase. I think the key nomenclature animal spirits have been released. The key thing I find about stable coins is number one, the technology is awesome. The ability that's The most enduring bull market I like pointing out in twenty eighteen when it was quite the bare market, was the increasing market campalisation of stable coins. At that time, it was only tether,
it's only about two billion. Now Tether is about one hundred and fifty billion, and there's about two hundred and fifty billion tracking stable coins and they're all invested in treasuries. This is good for the US. The thing about that I think that's disconcerning for me is it's that tokenization process. Once we begin to extract or expand this tokenization, we can tokenize and trade assets on chain like treasuries and stocks. I think that's going to put things like dosee coin
that are just silly, expensive speculative excesses as shortbait. So right now, overall the government's going to finally figure this out. But just that we realize the technology that uses a US dollars a base layer and track things like stable claims is awesome.
It's quite the market to watch and really good to get your insights on it. Mike, thank you for this. That's Mike mcglohon, senior commodity strategist at Bloomberg Intelligence. We now turn our attention to the economy. We're just over three weeks away from the next FED decision. What will j Powell and company do in June? In light of uncertainty over tariffs? Let's ask p Jim Fixed income chief US economist Tom Porcelli, Tom, what will the FED do? They haven't done much this year.
I think they're going to do much of what they've done, but wish just to say not much. Yeah, I just you know, I see, I see very limited scope for the FED to really do much at this juncture. I mean, I think that there are a couple of challenges sort of lingering in the air for them. So one is that inflation is still above target. Two is that inflation expectations are starting the process of becoming unanchored. In three, we're waiting for the the you know, the the inflation
related to tariffs to kick in. So so all of that means that the Feed is on the sidelines now. We don't think that they will be on the sidelines the entire year. We do think that they will cut rates, but I think for at least the next you know, call it two or three meetings, I think it's going to be incredibly challenging for them to do much.
Where do you see inflation expectations going? As you mentioned, they do look like they're starting to become unanchored. Do they become fully unanchored?
So here here's the Here's I guess the thing that we all need to keep in mind. It's it's not that what the consumer says is going to happen to inflation ever really materializes, right, I mean, I think that's an important idea. But but but I think you know, the sort of the rhythm of what's happening matters. You know, they're braced for higher prices, So I don't think that you know them looking for you know, four or five percent inflation, which you know, depending which measure of inflation
expectations you're looking at. You know, that's what some consumers are thinking. We don't think it gets even remotely close to that high. I mean, we think you could drift, you know, sort of closer to three percent, which in
fairness is not far from where we are now. But having said that, the reality for the consumer is if the consumer is already being pinched right by already higher prices, and you're going to layer on higher prices on top of these already higher prices, and you have real incomes that are starting the process of slowing down, especially relative to real consumption. You know, that for us really suggests that, you know, economic activity is going to continue the process
of slowing as the year progresses. I mean, I think that to me is the right sort of channel through which you need to think about higher prices.
We've heard the FED thinking about waiting for clarity around where trade policy is going to go before they act. But can we paid out a scenario where the Fed could at least game out something of an impact from tariffs based on the idea that they're not going to be at the same levels that they have been in the past.
Yeah, Nathan, I think we have to consider that we may never have a period of total certainty as it relates to trade. I mean, we you know, we keep on moving the goalposts, we keep on kicking the can down the road, and I think even when we finally do get to the goalpost, I can see the threat of terraffs remaining in place. And if that is true, then the uncertainty, right, I mean, how many times it
will we all use the word uncertainty. Then I think that then I think the uncertainty sort of dynamic will also remain in place, you know. So so let's just you know, let me paint a very quick scenario. Let's say that, you know, we settle on ten percent you know, across the board baseline tarrafs. Right, let's just say we
settle on that. But if the threat of tariff remains over then, you know, called the next three and a half years, then I think what that does is it pushes corporations to the sidelines as it relates to capex, and it pushes the consumers to the sidelines as it relates to going out and spending. And I think that's the real risk. And I would I would add this very quick idea for anyone thinking, oh, well, you know that that's like a you know, that's a theoretical idea,
it's actually not. It's entirely practical. Just look back at what happened during Trump one point zero, when we had tariffs put on, even in the face of corporate tax cuts that were also put on right around the same time, KAPEC slowed down. I mean, companies like certainty and uncertainty is sort of you know, gonna gonna thrust them to the sidelines.
And as far as the t tariff impact, do you see tariffs as sort of a one off in terms of what they do for inflation or could they have more of a longer term inflationary impact.
It does tend to represent a one time shift tire in the price level. That's a that's an important idea now again for you know, an economist lingo, you know that one time shift tire means that you'll get you know, the sort of the acceleration in the in the inflation rate will we'll linger for about a year. Once you get beyond that year point, then the inflation rate will fall back to where it was. But in main street parlance,
it doesn't matter. Prices will be higher. You'll have that that that that permanent shift higher in the price level. And that's what matters to most most of main street, most of everyone.
So as we get to this next FED meeting, what would you say, just to button this up, are your expectations for June?
I think very similar to what you know you heard from him, what you heard from Powelling company at the main meeting. I think it's you know, they're in this wait and see mode. They want to see how things are going to unfold, and that you know they're not going to be you know, in a rush to engage in any policy action until it's necessary.
Always good to get your thoughts Tom again, thanks for being with us on this holiday. That's Tom Porcelly, chief US economist at p JIM Fixed Income. Thanks as well, Mike mcglohon and the sing of Bloomberg Intelligence, Brian Levitt and Invesco Barry Ridtholtz of Ridtholts Wealth Management in Bloomberg's Masters in Business, And thanks to you as well for taking time out to join us on this Memorial Day. I'm Nathan Hager.
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