Welcome to the Bloomberg P and L Podcast. I'm pim Fox. Along with my co host Lisa Bramowitz. Each day we bring you the most important, noteworthy, and useful interviews for you and your money, whether you're at the grocery store or the trading floor. Find the Bloomberg P M L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. The knee jerk reaction is gridlock is good for risk assets?
Is that the right reaction? Leo Groshowski, now joining US chief investment Officer at bny Melon Wealth Management, what's your take on that? Well, I think today we're seeing a relief Rallie and most participants in the markets are aware that UM, a Republican president combined with a divided Congress isn't a bad combination for future market performance. It's not, in a certainly the best, but it's by no means the worst. So I think we're seeing that today. There's
obviously a relief that it's behind us. We've got some certainty and UM, and again, most market participants know that we're in a period both seasonally and for the next couple of years that's normally pretty favorable for the equity market. Do you see any risk to the tax overhaul that past last year, not with the gains that the Republicans picked up in the in the Senate, And I think the market you could see this a little bit in
the bond market today, right. I think this gridlock is good is probably showing up as much in the bond market as the stock market because of what you were talking about in your earlier segment with respect to debt and deficits. Right, the chances of tax cut two point oh or significant significantly diminished, I think, and the bond market doesn't mind that, right. I think it's it's stay the course with the fiscal policy that's been put in place,
but don't necessarily add a lot more. Of course, we did hear from Senate Majority Leader Mitch McConnell that they might work across the aisle on infrastructure spending. Do you think that's lip service at this point? I think that's the big one of the two eyes, right, There's there's infrastructure, and then there's going to be investigation. And I hope there's more talk around infrastructure than there is around investigations.
I think the market would be favorably disposed to bar bipartisan support for infrastructure, the market being equities bonds perhaps not so much correct correct the I think two pims earlier point. You know how we pay for all of this with a trillion three about to be floated right in in bond debt at higher prices. Um. I think that's something the bond market right now is breathing a
bit of a cyber lead for the time being. Any thoughts on trade policy because that seems to be one issue which you could get Democrats and Republicans together and a China bashing trade war that looks like something they both agree on. Yeah, And I think the good news there, pim is is the markets become more prepared for, you know, a longer war of words on the trade front, so that I would put in the positive surprise um um column.
And I also think there's gonna be a lot of focus here towards the end of the month on the G twenty, on the G twenty meeting. Um. So through all this election, right the key drivers for the market, earnings, interest rates, economy, no changes in the b n Y melon view with respect to any of those, and the serious issues that we have to grapple with trade and
monetary policy. Right, they're still they're still with us well, which raises my question going back to the first question, which is is the appropriate reaction to buy stocks here if trade is still the potential concern, that's not something that will get held up by gridlock. I think you're seeing part of the relief rally is I think also a return to a bounce from an oversold condition. I think the market overreacted to fundamentals that really hadn't changed
that much. It was really just the focus on, you know, the Fed policy and this longer lasting, you know trade. I think the underlying market drop backdrop is still, in my view, very equity friendly with respect to earnings, interest rates, inflation. Trade is a cloud that continues to build the longer it goes on, because I learned a long time ago that longer lasting trade and tariffs have an S word
associate associated with them, and that's stagflation. And that's that's an environment that the market likes least as far as the outcome of the election, that's one thing, but we still have all these unresolved issues to investors just kind of shrug their shoulders. What's the biggest question You're getting right now from investors. You know, we touched on it a little bit earlier. UM, we're getting a lot of
questions around debt, debt and deficits. I think in the wealth management business, you know, many of our clients are correctly thinking in years, decades, multigenerational wealth transfer right and so interest thing, as opposed to many market participants focusing on day to day, week to week, quarter to quarter.
If you're really taking a multi year outlook, the debt and deficit picture and how are we going to pay for it and who's going to pay for it is weighing I think more heavily on our client's minds correctly, particularly given the uptick and interest rates. Thanks very much for being with us. Always a pleasure, Leo Groshowski. He is the chief investment officer for b n y Melon Wealth Management. Giving us a take on the results of
the midterm elections and what it means for investors. We've been listening to send a majority at leader at Mitch McConnell address reporters today after the mid term elections, talking about the potential for both parties to work together on infrastructure spending, as well as tackling what he called the healthcare crisis. Here with us to talk about what we just heard and what it might mean for both sides of Congress going forward. Steve Dennis joins US Now Center
reporter for Bloomberg News. Uh, Steve, what was your big takeaway from that address? You know, I think that was a very happy Mitch McConnell. There was a lot of nervousness the last few weeks that the Democrats would be able to maybe even pick up a seat or hold serve and and and the fact that Republicans are now looking to expand their majority by several seats is Uh, it's huge for for everything that he cares about, but especially the judiciary. If there's another Supreme Court opening, it's
gonna be a cakewalk. It's not going to be this excruciating battle where Susan Collins and Lisa mckowski had to be on board and and uh and his members got beat up for months. Uh, you know, and so you know, as far as actually the agenda, I thought it was interesting he came out and said that he's all he started discussing an infrastructure package with Nancy Pelosi, and he also said prescription drugs might be an area where there
could be bipartisan agreement to save money. Now that's not necessarily what you want to hear if you're in the pharmaceutical industry. You know, they were pretty happy they knocked off Claire McCaskill in Missouri. She had been a thorn in the side of the big pharmaceutical companies. But you know, we have a huge deficit issue. That's one thing that he didn't doesn't think that there's gonna be much bipartisan
agreement on dealing with the deficit anytime soon. But if there's one area where they seem to have both sides saying we need to save some money for the taxpayers and for people, it's gonna be prescription drugs. Um. So it is a very happy miss McConnell. I mean, this is this is about as good a result as you could have mapped out with a president who is unpopular
enough to lose the House. You know, the fact that they're winning, uh looks like you know, there's still some votes out, and but they're winning Florida, they're winning Missouri big, they're winning Indiana big, they're winning a North Dakota big. These are not small victories. And if they hold on on Arizona in Montana. Uh, and this Florida recount looks like it's you know, Nelson's behind by forty votes. It's not likely to to change this. This has long you know,
Miss McConnell is all about the long game. If they actually get to fifty four fifty five seats, it's almost impossible for the Democrats to come back and take back the Senate in you know, even if they take the presidency, Mitch McConnell might be staring right there preventing them from doing all the stuff they want to do. Um, and maybe even blocking Supreme Court justices that they want to put up. So Uh, this is a this is a very big, very happy Mitch McConnell. This morning, you mentioned
the deficit and infrastructure spending. How is anyone going to pay for this? You know, that's always been the rub, right. You know, every once in a while you can find stuff under the cushions of your couch. Uh. You know, I remember there's always ideas on infrastructure spending. Nobody ever wants to raise the gas tax, right, I mean every once in a while. I mean last year Trump said, for a hot minute, said maybe he'd consider raising the gas tax, but it's the most unpopular tax and generally
people don't want to raise taxes. So maybe you can find things like oil drilling revenue, you know, uh, can can you give Republicans something like energy resources or sailing off land or something, and you give the Democrats what they want, which is roads and bridges and transit and and all that stuff. So, uh, you know, there there are ways to reach these biparson deals if you don't care about the deficit as well, you just do what
they've been doing the last two years. You know, the deficit has been expanding dramatic medically under a Republican watch. Part of it was the tax got a huge part of it. Where these bipartisan spending deals where they basically took out the credit card and said, we're going to increase spending by a hundred and fifty billion a year, and you know, our grandkids are gonna pay for it. They didn't say, oh, here's our it's gonna get more
expensive because interest rates are going up. And and it's gonna get more expensive because interest rates are going up. You know, you could see where it's a very good chance, especially if interest rates keep going up, uh that we're gonna have a trillion dollar deficit this fiscal year and one point one next fiscal year. And you know, voters so far have not been willing to come in and say, hey, we care about that issue. Good luck trying to find
that trillion dollars in the cushions of the couch. Thanks very much, Stephen Dennis, congressional reporter for Bloomberg. Appreciate your work. Looking forward to more. We are awaiting comments from President Trump addressing the nation after the midterm election results. Rolled in joining us now to talk about what we've been seeing and what to expect from the speech. Billy House joins is now congressional porter for Bloomberg, as well as
Tolu alorinipa White House correspondent for Bloomberg. We have both of them in the flesh here in our eleven three oh studios. It is very exciting. Billy. I want to start with you, how long do you think this is going to go? Because the last time President Trump held a conference like this it went for more than an hour. I suspect it's going to go fairly lengthy. He's got a lot of things to say, including bashing already Democrats for what he was describing as an intended reign of terror,
of investigations that'll take up a lot of time. Yeah, alright to lou And the President likes to change the narrative. The narrative right now is that he lost the House and that he is seen as an unpopular president, and this press conference is an opportunity for him to use the bully pulpit of the White House, which he uses on a regular basis, to change the story. He may talk about the elections and try to put a positive spin on it, but I would caution the listeners to
get ready for other topics to come up. He may want to talk about North Korea. You may want to talk about his weekend trip to Paris this weekend when he's going to be meeting with Vladimir Putin. Possibly there are a number of different issues that the President may throw out there. He may talk about getting rid of some cabinet officials or announced a new U n ambassador, anything to change the story, change the narrative, get it on a positive message for the president, and have fewer
people talking about all these investigations. It's the penis that
are going to be flying around because he lost the House. Billy, what kind of issues do you think that House Democrats can present to the President and to Republicans that they would rather not be presented with that Republicans would not well, Uh, Jerry's kind only a congressman from Northern Virginia whose chair of the Subcommittee on Oversea Government Oversight, says it's going to seem like Democrats are drunk crazy with subpoenas, but
he points out that that's in comparison to Republicans that Democrats say basically gave the Trump administration a pass. So everything from um Trump's border policies to his family financial ties with Deutsche Bank to uh everything on immigration. Uh, a whole gambit as Democrats take over all these committees that have been from democ where Democrats been frustrated by chairman Republican chairman refusing to issue any subpoenas on anything.
To Lou, I want to pick up on something that you were just talking about, which is that right now, the narrative is that this is a loss for President Trump. Is that narrative correct? I mean, yes, the Democrats did flip the House, but the Senate actually got even more Republican majority, and this is really the outcome that people had expected, if not, frankly a little bit better than expected in the Senate for the Republicans. Now, yeah, this was a mixed result in both sides have something that
they can capitalize on. And I think that's part of the reason you're seeing the President come out and do a press conference. He wants his narrative to get out there. You're probably going to see more from the Democrats. Nancy Pelosi will probably be doing a press conference of her
own where she gets out her narrative. But it's we can't underestimate the impact of having the House flipped to the Democrats, having Democrats in power in the House for the first time in eight years, and all of the various investigatory powers that they're they're going to have as a result of having the chairmanships of various committees, having the subpoena power, having the ability to call Cabinet secretaries up before Capitol Hill and change the narrative and dominate
the media with that subpoena power, and with that ability to u change the national conversation. It's something Democrats did not have when they were out in the wilderness. They were in the minority in the House and the Senate and the governor's races. Now that they have won a number of these races in the House, they have much
more power to shape the national narrative. And that's probably what we're going to see later today with this, with these dueling news conferences, Billy, the narrative, though having to do with judicial appointments, doesn't seem to have changed. Indeed, we spoke earlier with Steven Dennis of Bloomberg and he said, it's like it's it's possible that you can get Mitch McConnell. He'll be he could be standing up there in five years saying the same thing about other Supreme Court or
appointees to the federal bench. Absolutely. Uh. And so while that uh will likely be continued winds in the views of many Republicans, UH, they will cast what the House
Democrats are doing is harassment of the administration. Talu. I wouldn't just zoom out a little bit and talk about what sort of message the Democratic Party can take from this election, because frankly, it showed that there wasn't really as big of a blue wave as many people had expected, and that just sort of hatred for Donald Trump among people who swing left wasn't enough to give them a majority in both how both sides of Congress. I'm just wondering what does this say for who people will look
to pick for the presidential election. Yeah, there's a lot of the Democrats are going to have to do a lot of soul searching, in part because they put out a number of different types of candidates, diverse candidates, progressive candidates, more moderate candidates, and it's hard to really get a clear message in terms of who one. We did see some of the progressive candidates win, but not a large number of them. A number of them ended up going down.
We also saw a lot of the moderate candidates either go down trying to win in Trump districts, districts that were heavily Republican and just not being able to pass that margin. So, uh, We've seen the Democrats try a number of different strategies and in this race, and in some cases it worked, I think, uh, having women run and ended up being successful for them. There's gonna be a record number of women in Congress, and that may be something they look at in and trying to increase that.
When the margin with the women's vote, which was pretty impressive for Democrats this time around, in part because President Trump is toxic to a lot of female voters. That may be something they try to hone in on, But trying to convert other Trump voters to Democrats was not something that they were very successful at, and that's part of the reason that they had trouble. Uh, and they
lost a number of seats in the Senate. Billy Well, Aside from presidential aspirants, I would have to say that the party generally is looking to tiptoe around those larger questions of impeachment that many of outside Congress are demanding they pursue. Uh. So whild Republicans are stirring the pots saying that's what this Democratic House is going to do,
and other witch hunts. Uh. You already see Nancy Pelosi and her lieutenants insisting that they're gonna wait for the Special Council Robert Bohler uh and not shred into territory that maybe he won't even find or even report. Well, as we wait for President Donald Trump to give a post election news conference, do you believe that there will
be anything done during the lane duck session? Between now and when the next Congress takes its seats, well in terms of just figuring out the leadership of both parties in the House, UH, even before you get to policy and in the in the short time they have UH, it's assumed Nancy Pelosi will be the House Speaker, but she UH is going to have to do some maneuvering. Obviously, some of the newly elected incoming freshman members have said
they would not support her. And with her caucus going to UH number anywhere from to to eighteen to nineteen to twenty nine, I think at twenty two now, she can't go to the floor to be elected speaker unless she secures two in eighteen votes. So even before we get to that, they've got to resolve their leadership thing. On the other side, Kevin McCarthy is the majority leader. He's the number. He's lost the majority. I mean, roral Republicans really like the majority leader who lost the majority
as their new minority leader. Who have to wait to see you know, I wanna Talu talk a little bit about turnout because I know that in my district there was a line out the door at six twenty a m. And I saw photographs on social media and elsewhere of lines that were similar around the country. Do we have a final tally of just how big the turnout was for this particular midterm election. Yeah, this is a record turnout election in terms of the number of people who
turned out to vote. The earliest numbers official totals that I've seen has turnout above hundred and eleven million Americans, and that's compared to I think about eighty four million. Can you give us a sense though, of the proportion of the population, because, I mean, the population is rising, so you expected, Yeah, that is, that is true, but it's a it's a huge jump, almost thirty from and uh, even though we've had population growth, we haven't had it
at that rate rate, so definitely a higher number. I think there's still numbers coming in, So I don't want to say specifically what the turnout rate was, but you have to remember, Ineen, we were at historically low turnout in the you know, thirties and forties and a number
of different states. I think we're going to be well above fifty in several states, places like Florida saw a huge turnout in the high fifties and the in the sixties and some counties, uh turn out that you don't normally get during a mid term, not necessarily presidential level um turnout, but definitely really high turnout. And not only turn out among Democrats. We saw a number of rural
voters turn out very high high rates. Normally people think that high turnout is better for Democrats because you have new voters, you have younger voters, you have a more diverse electorate. And in this case, we saw a number of Trump supporters, a number of rural voters turnout in very high numbers, and that was able. That was part of the reason that the Florida race ended up being so close, and part of the reason why the Republicans
are favored to win in those races. Do the results, Billy, just to echo the fact that the divisions in the country remain so deep, I think they do. I think the large turnout actually was reflective of excitement among the extremes. And therefore, for instance, in the House, some of the moderates are moderate more moderate Republicans Carbello in Florida and Leonard Lance New Jersey, they fell. So what was known as the Tuesday Group Tuesday Lunch group of moderates is
now down to basically a snack. And uh, I think that is one of the the offshoots of a high voter turnout. The extremes turned out so to lou just looking forward here, I mean, one thing that's really striking to me is that the nation appears more divided than I believe I have ever seen in terms of district by districted. So you just really can't make overwhelming characterizations. People are going more left, people are going more right,
people are getting more extreme here. Is there anything that is sort of a unifying issue that kind of emerges from this entire election? I would say healthcare. Even though healthcare is one of the most polarizing issues that has caused so many fights in the Congress, we did see people come out and candidates come out and talk about defending and protecting pre existing conditions. Uh, that's a Republican issue. Now,
it's a Democratic issue. It's part of Obamacare. And even though Republicans voted multiple times to repeal Obamacare and actually get rid of those pre existing conditions protections or roll them back in significant ways, this election, in which healthcare turned out to be one of the top issues, ended up being a situation where both Republicans and Democrats agree read that covering people with pre exact eisting conditions, forcing insurance companies to cover those people at the same rate
is something that they can agree on. Now there is going to be a discussion about how to actually make that happen and how to actually craft legislation that can achieve that goal. But the idea of repealing Obamacare and getting rid of those pre existing condition protections is an idea of the past. Right now, we are, of course a waiting President Donald Trump giving a news conference to discuss the mid term elections and their results, and of
course many other topics. To lou just to follow up on on what you said having to do with healthcare. It doesn't seem as though economics or the economy was in the election this year, or did I miss something. Yeah, if you look at the economy, you would not expect there to be a multiple seat lost by the party in power in the House. I mean, this is an economy with three point seven percent unemployment. We have waged growth at least nominally that's higher than it's been in
several years. And the economy has been you know, working and firing on all cylinders. For for the last couple of years, definitely continuing the trend that was started under the previous administration. But President Trump said it very transparently on the campaign trail that he thought talking about the economy was boring and he thought that, you know, talking about things like immigration and the migrant caravan in Central America was much more of a motivating factor for his supporters.
And that calculation was made. It helped in the Senate, it seemed to have hurt in the House, and that's what the President decided to do. And I'm sure we're gonna hear during this news conference that he believes that that was a positive and successful strategy. Billy, real quick, I just want to get a sense was there any foreign interference in this election or is that something people are talking about. There was, There's up to the this
time been scant evidence of that. I mean, there's certainly obviously probably was were attempts, but there has not been any.
Of course, we learned about much of the last and true should late and this fact, and we are starting a forty five day clock under an executive order signed by President Trump that will force the intelligence agencies to decide and and confirm whether or not there was any foreign interference and report that to the President, and if that happened, we will all know about it and there
will be sanctions in the results. Something that is new during this election that there is a forty five day period the intelligence community will let us know sometimes sometime before the end of the year, whether or not there was foreign interference. Thank you, gentlemen, very much to lou Alaripa, he is our White House correspondent, and our thanks also to our congressional reporter Billy House, much appreciated. Joining us now in our Bloomberg Interactive Broker Studios is Amanda Albright,
our municipal bond reporter for Bloomberg News. Amanda, as always a pleasure to have you with us. Across the United States, US voters approved more than twelve billion dollars in bond sales to support school construction, water infrastructure, as well as upgrades to a variety of bridges and roads. Tell us about this ballot busting initiative and what it means for infrastructure spending. Sure, so, we've already seen the number of
bonds approved um rise up to twenty billion. We're still seeing results coming in UM California, which is a big issue in state. We're still seeing results coming in there, so UM we definitely expect that this will be another big year for bond measures approved by voters UM. Interestingly enough, it's actually been kind of a mixed year for bond ballot measures. UM. We saw Colorado voters UM vote down
over nine billion and two different bond measures for transportation projects. UM. In California voters actually UM did the rare thing of voting down UM over eight billion in bonds for water infrastructure UM that would have helped with like drought conditions and and things like that. So it was a really interesting year and we're still kind of parsing through what it all means. Well, yeah, I'm just wondering how much
this indicates that voters are concerned about paying more. Right, So, I think it is a really interesting dynamic, and the way that I like to look at it is state by state. So UM. New Jersey had one measure that I was very focused on because obviously New Jersey voters are worried about their taxes, UM, they're worried about the state's finances. But New Jersey voters actually agreed to UM five million in bonding for schools. Um. But you go to a place like Colorado, UM, and voters you know,
shot down these transportation measures. UM. Maybe a little bit of concerns about property taxes rising there. Sort of interesting. Maybe it's the reason that people aren't concerned in New Jersey. Perhaps is the reason why they have a fiscal situation, and that is that is the way that it is, Pam. Let's talk about just one state, North Carolina for a moment. This is in Wake County. Voters approved a half billion dollar, more than a half billion dollars in school construction bonds. Yeah.
So we've seen a lot of school measures, um. You know this basically the high amount of bond measures that we're seeing, you know, just across the board. California is always a big one, Um, Texas is a big one, But places like Wait County in North Carolina not necessarily one where you'd see like a chart topping bond measure UM. There. So what this really says is that, you know, states and cities across the country are getting a little bit more comfortable with taking on debt UM, which kind of
speaks to where the economy is right now. So moving aside, from moving a little bit away from the actual ballot measures that would approve bond issue in Are there other measures that were voted on that you think are interesting and could affect the credit worthiness of different states? For example, I was speaking with one investor who said that the legalization of marijuana in Michigan actually improves the state's finances because they'll get more revenues. Right. So, Michigan is a
state that I definitely have my eye on. Um. That's a state where fourteen out of eighteen school passed bond initiatives there. Um, they passed, you know, the marijuana initiative. Um. They've also just elected a Democrat as governor. And this governor is very friendly towards infrastructure. She ran on a plan of um, fixing the roads, um, and you know,
outlined a very detailed proposal on infrastructure. So for Michigan at a state where maybe you could see debt increase, which would be a credit issue, but if voters are willing to raise taxes to pay for it, then, um, you know, maybe they can handle that increase in debt. How about affordable housing? How did that turn out? The variety about initiatives, I think there was one in California. UM. Yes, And in Oregon, voters approved over six hundred million in
bonds for affordable housing. UM. That's something that you know, bondholders actually worry about affordable housing because they worry about this idea of UM seeing out migration from communities where rents get too high and um, you know, flight from really high housing prices. UM. You know, one investor actually emailed me today and said affordable housing is one of his top concerns. UM. And he's based Georgia, so he's
talking about other communities. But that just gives you an idea of how important affordable housing is from a credit perspective. So just overall taking a step back, is it just hard to generalize when it comes to municipalities acting or voters voting on things that are good for the bottom line or bad for the bottom line. It's just this sort of locality by Yeah, I mean, the thing that's kind of um struck me this year is just on infrastructure.
It's a really really complicated year. So you're seeing people be more bullish on infrastructure policies federally, um, but on the local level, with this Colorado measure failing and the big California measure failing. We've also seen voters in Missouri and Utah reject gas tacks increases. It's really really hard to generalize about how people are feeling about infrastructure. It might have something to do with the way that the measures were advertised to them on TV or you know,
how the measures were written on ballots. UM. But it's kind of fascinating the way that there are these like nuances between different communities. And just quickly there were a couple of ballot initiatives changing state laws having to do with whether they were going to increase taxes. Right, Yeah, that affected my home state of North Carolina. So voters they're agreed to cap the maximum possible personal income tax
rate UM. North Carolina is an extremely low tax state. UM. It's triple A. So this isn't going to change UM their credit rating. But if there is a recession scenario UM, a lot of liberal groups in the state, we're a little bit worried about that. UM. In Florida, they passed a supermajority requirement on tax hikes against Florida's triple A. So not necessarily a credit rating changer, but definitely something that could crop up. Later on down the line and
create pressures. Well, Amanda, we're gonna let you go get some rest because I understand you were here all night. So thank you a million times over for your coverage on all levels. Amanda Albright, Star Muni, reporter for Bloomberg News, joining us here in our eleven three oh studios. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at a full podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm
on Twitter at pim Fox. I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio