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You're looking at a market that's actually turning around, an unbelievable move.
It's similar to what we saw yesterday.
Also, the NASTAC now up by five tenths of one percent, joining us as Henry to treas Managing partner and director of Economic Policy at Beta Partners, Henrietta. What the market seems to want to understand is if tomorrow's going to be a clearing event or the end of the beginning before the next phase here of turmoil.
Yeah.
I mean that's obviously the critical question. I see no indication that this is going to be a clearing event.
I'll give you a couple of reasons why.
Number one, we know that today the President instructed almost three months ago, the.
Federal Trade agencies.
USTR, Commerce and Treasury to provide him with about fifteen or more different reports about different components of our trade landscape, trade relations, with twenty different countries, Not a single one of those reports has been publicly released yet, So the background to justify the forthcoming tariffs is something that you would expect to see publicly released, formalized and a Federal
Register update. We're even discussed with the media in advance of a publication, should be all laid out if this is going to be clear.
Cut and ready to go tomorrow.
So the disarray that we're seeing, the sort of knives out reporting we're seeing for Howard Lutnick at Commerce, and the general disarray and lack of cohesiveness from the White House around this suggests that while we're going to get a lot of tariffs announced tomorrow and implemented at midnight, there's still going to be a substantial amount of uncertainty.
I'm especially concerned about India additional Section three h one investigations, what it means to pull out of the Phase one trade deal with China, declare them in violation, and how that impacts the tariffs will see on China and obviously Canada and Mexico, which is maybe the most discomforting of all the tariffs, especially to the auto manufacturers right.
Now, Henrietta, maybe it's just me but I haven't heard a whole lot from the US Congress either house about their views on trade policies and potential changes and potential tariffs. Is that unusual.
It's not unusual, but it is, you know, certainly notable, and I think should be relatively embarrassing for a chamber that used to pride itself on having authority over you know, tax policy and trade policy and has been seating those controls to the.
White House since the seventies, if not before.
However, I will say they are going to hold a vote as early as this evening on the AIPA tariffs against Canada, and there are a number of Republicans in the Senate who are telegraphing that they're going to cross party lines and vote against the President's declaration of national emergency against Canada, including Senator.
Collins of Maine.
I wouldn't be surprised if Obviously Ram Paul, who's a co sponsor of the legislation from Kentucky, will be there, Chuck Grassley. Obviously, the farm state senators are the most exposed here. We know that the USDA is already talking about another bailout for farmers as we head into a global transformation of trade that will hurt them substantially.
Do we get the sense that if there is a short term pain for US companies that the administration is going to help subsidize it, which is really what we saw with farmers back in the first time of administration.
And is that kind of.
What the tax bill will be or is it going to be something more beefy.
No, the tax bill should not be considered subsidization because it's an extension of the status quo and it's so expensive already four point six trillion dollars just to keep things where they are that you should not expect additional subsidization or tax cuts for either businesses or individuals. That is a point blank declaration from Senate staff that I
speak with on Capitol Hill. I would go a little bit further and say the endeavor they they endeavor to cut the deficit by one and a half trillion dollars. My expectation is they ultimately come in at around four hundred to eight hundred billion dollars and more.
Paid lip service to deficit reduction.
But you cannot call it deficit reduction when you'll simultaneously writing off a four point six trillion dollar extension of the existing rates. So unless you consider, like many staffers do, the idea that providing certainty and permanency for individual tax rates constitute stimulus, there will not be stimulus in this tax bill. So these TIFFs are coming, they are tax hikes. There are not tax cuts coming.
Henriette, can you explain to politics of this tariff thing here? I mean the markets, you know, stock markets down nine to ten percent, the dollars trading lower. The markets are just don't like the uncertainty, I guess more than anything else. And the concern is it may slow down in this economy, may push it into a recession, may cause some inflation. Historically that's not been good politically, it's the economy stupid.
What's the political call here? On behalf of President Trump and the administration.
The view from the White House is that they have a mandate. They have the House, the Senate, and the presidency. They won the swing states, and they have successfully come back from a loss in twenty twenty. So they are going as if this is something that all of America and certainly their voters, are fully behind.
The polls suggest that that's not the case.
The lowest amount of support for President Trump comes on his tariff's strategy. The American public is very aware that tariffs are not tax cuts, as the President has proclaimed, and they do not.
View tomorrow as liberation Day.
They view it as a scenario where we're going to see more tariffs and taxes, mostly because, of course, that is what is coming, and you can see it in the pull forward purchases at auto sectors, for example, or auto sales.
So you have a.
Pretty material disconnect between what the White House things that does a mandate for, and what voters are suggesting they support. But on Capitol Hill, as you point out, the Senators and the House members, the best that they can do, given President Trump's stranglehold on their voters and the incredible popularity that he shares, is that they have to go along with this now. And the best they can do is expect that the uncertainty is really the problem here.
So once we get past tomorrow, you'll hear folks say eighty percent of the whole market downturn is because things are uncertain. It's much more likely that once we get past tomorrow, things will calm down, and then they're very optimistic that some of these tariffs on especially Canada and Mexico will start to come off over the summer in time for a turnaround going into the twenty twenty six midterm elections, which is about eighteen months away.
Is there any real data that points to the fact that that could happen.
Well, there's no real data on anything except for what's in Trump's.
Mind on what could come and what might come off.
But there is very real concrete data that I think keeps being ignored, which is that the president has imposed twenty percent tariffs on nearly five hundred billion dollars worth of goods coming in from China and twenty five percent tariffs on all trade coming from Canada and Mexico on
about forty percent of imports. There's also an underreported narrative that I think we'll hear about in the coming months, which is that the disruption at the border is incredibly widespread and underappreciated because you have no one to go to at USTR that you can get recourse for if you want to explain that you are USMCA compliant or seeking an exclusion.
So there's these.
Backlogs and confusion at the border taking place right now. The most concrete example would be when the president be executive order changed the deminimous rules and created such a logjam we had to pull it off. That's actually occurring
at the border right now. It's being underreported, I think in part because businesses are still trying to get exclusions and they're not able to speak with anybody that they don't want to rough feathers in the anticipation of hopefully being able to get an audience in the months ahead.
All Right, it's not just terifs. At some point, Congress has got to fund the government and do all that kind of stuff. How should we think about the to do list for Congress in the coming days and weeks.
There's so much there, Okay, So first things.
First, I would say, the Senate budget that they're working on right now, I understand, is going to include a five trillion dollar hike to the debt ceiling.
Now, that is an exorbitant figure.
The last time we hiked the debt ceiling by any dollar figure, it was one point two trillion dollars.
So five trillion is shocking.
This belies the reality that current policy baseline accounting for extending the existing.
Tax rates is not free. It does matter to the Treasury.
They do need a five trillion dollar increase in the debt ceiling, and by the way, that's only to get through the.
Twenty twenty six midterms.
That's not for Trump's full term, which is what I originally anticipated when I heard that number a month ago.
So first things first, we have to deal with that.
I expect it to be in the budget that we should see from the Senate as early as tonight.
That'll come due in July.
Secretary Bessett will give us an update on that in May, and then, as you point out, we do have a government funding bill that's going to be due September thirtieth, and I think that's where we're going to see the farmers bailout, housed aid to California wildfires, and depending on the scale and scope of this tax bill, it could be where you see an expansion of the child tax
credit and extension of the ECA subsidies. The reality is you need probably ten to twenty Democratic votes in the Senate for any bill to keep the government open, and we all saw what happened to Minority Leader Schumer last go around, so I expect that September period to be really fraught with negotiations and a lot of tension, much of which we'll see play out as a result of
the elections in Florida's sixth and first districts tonight. So that'll be a fascinating precursor to how this will all play out.
All right, Henrita, thanks a lot. We really appreciate your analysis, Henry A. Trist Managing partner and director of Economic Policy of Beta Partners. Which then raised the question too, and we talk about a clearing event with all that in store, how could anything be a clearing event.
That's a great point.
Yeah, at this point, yep.
So I mean you're going to have tomorrow some terrors. Hopefully that will provide a little bit of clarity for some members of the marketplace.
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Right now, let's go to Tim Fiori break it down the He's the chairman of the Manufacturing Business Survey for the Institute for Supply Management. Tim talk to us about this im data. The manufacturing headline came into forty nine, below the consensus and below last month.
Yeah, I think we disappointed here, but there's no huge surprise to this. I think the important thing is after I look through all the data, I had to step back and say what am I seeing here? And essentially what you got here is we're not sure what to do and we're so confused. So if you look at the three elements, outputs, demands, and input, this PMI is being supported again by the input strength, which is really being driven by the terriff issue.
So if you.
Remove that out, this month would have been about a forty eight three, just like last month would have been a forty eight three. Our demand is still non existent really because we're waiting to make investments. But I think the biggest the biggest story here in this month's report is that revenue is down this month. We're continuing to d staff and it's all being driven by the uncertainty around the near term the moderate term market development as
tariffs get deployed. The good thing is tomorrow should shed a lot more light.
Yes, well maybe tim to that point. If this uncertainty persists, what's the end result to that, like is it more destocking, is it more layoffs, is it less investment, or is it just deferred.
Well, so you know our inventory number will drop because we're probably trying to get two or three months with the inventory in hand here to avoid the first hits of the of the tariffs. But I think it's becoming clear now that these things probably aren't going to go away. So what's going to happen. Happening is is that it's
going to limit our willingness to invest in capital. We are investing in inventory, as you can see, we're not investing in capital goods to replace capital, to expand capital, R and D capital. That's really all on hold here until this whole thing settles out. Here, we are one day before a major day and we're still not sure of the details, So a lot of uncertainty here. You know, the market manufacturer does not like uncertainty. We're in the middle of the uncertainty here. Going to need a little
bit more time to see where this goes. But in the meantime, you think this would have been a forty eight to five forty eight three if it was denormalize for a normal behavior here, which right now we don't have, so we did disappoint I think we underperformed forty nine. I think the average was supposed to be forty nine
to five. Not a huge difference. You know, we're not collapsing here, but we're still reducing our revenue and reducing our head count, which in a moderate term may not be good in any kind of recovery cycle.
All right, Tim, thank you so much for joining us. Tim Fury, chairman of the Manufacturing Business Survey the Institute for Supply Management. Again the ICE in headline data, manufacturing data came into forty nine. The consensus was forty nine to five, so anything below fifty means a contraction into manufacturing economy. The ICE prices paid search the sixty nine
point four, well above where folks were looking. And employment remains weak and actually weaker than expectations, so some issues there in the manufacturing sector as well.
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We cover all the top news and business, economics and finance through a lens of our Bloomberg intelligence folks. They cover two thousand companies and one hundred and thirty industries all around the world, and we also like updating you on the view outside of Bloomberg. Sarah Ponzik is financial officer at UBS Private Wealth Management. She joins us now
from Boca Raton, Florida for her take on the market. Sarah, you have private wealth, so your clients are in this for the long term, but uncertainty can last for quite a long time. How do you rethink of portfolio to take advantage of upside but also protection in this weird.
Time, uncertainty can last for a long time. And what's interesting is, although you can say ever since we entered the new year, ever since the new administration took over, there's been uncertainty, really hasn't been that long. It's only been a couple of months. But I think we can all agree it feels like a lifetime. And we have certainly seen it affect sentiment in sentiment surveys and also
in you know, sentiment from our clients as well. Plenty of calls, plenty of emails are having conversations every day. But as your question Alex of how do you think about this in terms of long term portfolios and rejriggering portfolios, I think at the end of the day, we all have to understand volatilities here today.
It's not going away.
It's not as though tomorrow is Liberation Day. We're going to find out exactly what's happening with tariffs and all of a sudden it's going to be the sailing from here. That's not the case. There's still going to be a lot of back and forth, a lot of ups and downs in markets, a lot of inter day volatility, and
we have to get used to it. But something that I do think is very important for people to understand here is that in the past ten percent corrections, which is just about where we are on the S and P five hundred, have been great entry points into the stock market.
And yes, you have to.
Have a very strong stomach to be able to weather the volatility.
As it continues.
But if you look at if you what have you know, phased into the stock market at a ten percent correction on average throughout history, you would have been well off into the future.
What are your clients doing sir, are they going to cash, are they buying the dip? What are they doing?
So we've had some clients ask about going to cash, but that's not necessarily our recommendation at this point in time.
One.
I also think it's important to point out if you're you know someone who's an investor, and you are well diversified, you're also diversified in high quality bonds, some private investments like private credit, private equity. You're not only invested in tech in the market. Yes, it might be a significant part of your portfolio, but that's not your only investment.
I think a lot of people might be surprised to understand that if you look at your portfolios your to date, you're maybe flat to down two percent.
We really have not.
Seen big moves yet to the downside that would really qualify as something extremely scary or extremely extreme. So when you think about the flip side, if you're going to go sell investments that you've held for a long time, go to cash. One, you're probably going to be facing a big tax bill next year because you're going to be taking realize gains at the end of the day, and know you don't want the tax to tail to waighl the to wag of the investment dog.
You don't want to be the only reason you don't do anything.
But it's more so investors and clients of ours who have had cash on the sidelines and who have been waiting for an opportunity. It's more so you take advantage of the stock market. You take advantage of this volatility, You get your cash to work slowly, and you also, you know, do assessment. If you're someone who sees your portfolio down two percent year to date and you're freaking out, maybe you have too much risk in your portfolio, that is a reason to do risk.
It's such a good point.
The other side of it is if we see rates a little lower, a little higher for longer, and there's obviously a debate for that, because we're seeing a big bid into the bond market. Goldman Sachs now sees three cuts for the Fed this year. But if we don't get that because there is inflation and it's stickier, you need to diversify more into higher yielding products.
Well, it gives you the ability to honestly sit in cash or buy bombs for longer and lock in interest rates. I know so many people have been talking about you know, locking and cash rates, locking and cash rates for really the past year and a half because the expectation where rates were going to come down and rates just didn't come down as quickly as expected. They've been, you know,
pretty tough in staying where they are. So if you're an investor who still has plenty of cash, it's giving you this opportunity to lock and yields further into the future by quality bonds and make sure you do lock yields before rates come down. Our economists are of the view that, you know that Chair Powell has said that he expects any inflationary pressures from teriffs to be more so. I don't want to say transitory, because everyoney's that word.
Now after a couple of years ago you put, you know, not long standing, and that if there are more so pressures on growth on the economy, if there are concerns about the teeriating growth in a recession, than our economists are of the view that the FED, even with tariffs in place, would probably start to cut rates at that point in time too.
So dividends are they important in the UBS kind of equity allocation?
They are I would say dividends are certainly important, especially if you are an income focused investor. I think the problem with solely focusing on dividends, you know, there are some investors who just think, Okay, I want to focus on equity income. I'm only going to invest in stocks that give me the highest dividend rates. A lot of times both stocks, as you know, are value companies, and.
What's happened over the past five ten.
Years, frankly, as if you've only invested or focused on that part of the market is you haven't been invested in the very companies that have driven much of the games over the last five to ten years, being big tech and growth companies. So yes, I think having you know, value in your portfolio is important, especially if you're an income oriented investor looking for different ways to get income in your portfolio and not just from the bond market
is very important. But I think you also want to be very careful in not focusing too exclusively on evidents, because if you had done that, you would have underperformed the S and P five hundred pretty significantly, you know, over the last.
Cycle, with the exception of the last three months, or value actually being with the extend.
Over the last three months.
But you know, I'm still not counting growth out, in counting chech out. We still see the long term growth potential of tech and growth or we don't think that. What we've seen over the last couple of months is you know, a death now to these megacap tech companies. Oh my gosh, they're no longer what they were. We'd rather see this as an opportunity to write size exposure if you've been under exposed all these years.
Yeah, Sarah, great stuff. Really appreciate it. Thank you so much. Always good to get your perspective.
Sarah Ponzik, Financial Advisor, ubs A Private wealth management.
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Let's stay on the topic of global auto Steve Man joins US Global Autos and Industrials research channels for Bloomberg Intelligence. Steve, what are you telling clients about the impact we may see tomorrow from President Trump and tariffs on the global auto business.
I've been telling clients that.
I think we're pretty much done for all terriffs for now.
I think the big big thing that's going to come up next is really on how parts are going to be taxed going forward, and you know, it's it's a big chunk. We had a report out there today. You know, Tesla even though they make cars, a lot of cars here, but about a third of their parts actually are imported
from elsewhere, mainly low cost country like Mexico. And surprisingly Ford does build Ford Motor Company does build a lot of companies here, a lot of cars here in the US, but they only have some thirty percent content that's actually based in the US. So lots to come on on the auto parts section of the tariffs.
Yeah, so let's just understand that a little bit more so you have the actual whole imported car versus the car part, and the whole imported car stuff should happen tomorrow or Thursday, whereas the car park is amazing? Am I getting that relatively correct?
Yeah, that's right. So it's it could be really huge. For example, we talked about I was just talking about Ford, right, anything that comes in from Mexico, for example, the Machi which they're losing tons of money on already comes from Mexico. And then you know, if on top of that the parts are actually coming from Mexico or any other low cost country, that could actually lift the price of the vehicle even even higher.
So are the US automakers is this going to benefit them? And if so, how on to what degree? I'm not I'm unclear here.
Well, I mean it's philosophical, there's I think debate on both sides. Uh, you know, automated, but automobiles are high value products. There's no argument against that. And you know, the design of the vehicle, the production of the vehicle, the manufacturing of the vehicles creates a lot of jobs in the US in the manufacturing alone bym you know, quoting some economists, every job that manufacturing creates, it creates another point four jobs, you know, peripheral jobs for that
to support that manufacturing. So it does create a lot of jobs. It does create a lot of innovation. Example, you know, we just had Rivian on a lot of these peer plays like Rivian of Tesla.
Uh, they make a lot of the high value components in house and in the US already, and that has created a lot of innovation around cars.
And around how to.
Make cars as in a cheap way a less expensive way. And you know, I.
Think there's debate right a lot of the likeas the automakers have you know, outsource that manufacturing to low cost country and maybe that's why they're facing a lot of the competition around the world where they can ain't really built cars cheaply to the masses.
Is it possible that some of the winners are actually going to be other foreign companies, Like we're talking about Paul just at least a hybrid that was built either in Ohio or what was it, Virginia? Some US based so but it's a Honda. You can make the same argument for Toyota, like are those cars actually going to be the bigger winners here?
It could be like Japanese if you look at you know, potentially increasing prices for consumer from an automaker's perspective, you know, I think the Japanese are in a better position because the there's huge still a lot of demand for their vehicles. Their inventory is relatively low, around thirty days to forty days of sales versus the average industry is like seventy days.
Some automakers are over one hundred days. So in terms of pricing, I think the consumers will be willing to pay a little bit extra, and so Honda and you know examples of Honda and Toyota may be able to get the consumers to absorb some of the higher tear of costs.
Have we heard any US auto manufacturer announced plans for new factories or they're going to add jobs. What have we heard from the US manufacturers?
Not yet? Not yet. I think there's a lot of discussion on you know, can we you know, with Trump about not taxing parts certain parts auto parts, but there we haven't heard of restoring. But you know, we've also had a lot of analysis. We've done a lot of analysis on restoring. It's going to be a huge cash flow headwind for the automakers, you know, if they have to if the automaker have to build a green field plant back in the US, that could cost upwards of four
billion dollars just for one plant. So that's that's humongous.
So we haven't heard.
I think I think the automakers are hoping that these terrorists don't last forever.
But you know, it's you know, I'm sure in the boardrooms they're thinking about the contingencies around how to manage that cap ax and probably asking the administration for financial support if they do have to bring back a lot of that manufacturing into the US.
All Right, we really appreciate Steve. Thanks so much.
Steve Mann, Bloomberg Intelligence, Senior autos Analyst.
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