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Alex Steal here alongside Paul sw We need this Bloomberg Intelligence Radio and everybody. We made it to Friday, but not to disappoint the headlines keep coming that you mish data coming out as paulishes talking about long term inflation expectations hitting a thirty two year high.
You're looking at one.
Year inflation expectations jumping a four point nine percent. Joining us now as Joanshue, University of Michigan Surveys of Consumers Director, joining us, Joanne, what is behind the rise in inflation expectations?
Very clear? Consumers are really worried about the impact of these policy changes, particularly these tariffs that are changing on a daily basis, kind of policy going in circles. Consumers are really worried this is going to pass through to the prices that they see, and they're concern this is going to be something that's going to affect not just the short term, but the long run as well.
So, Juane, give us a CeNSE here, I mean the University of Michigan sentiment. The headline number came in at fifty seven point nine, consensus was sixty three. Prior period was sixty four point seven. Give us a sense of how rare is a rate of change like we're seeing here this month. How rare or how common is that?
So what we saw this month was an eleven percent drop that in itself may not be notable, but what is criticals that it follows two other months, two previous months of pretty strong declines. We're now down twenty two percent from the very beginning of the year. That is a pretty long sustained drop and it reverses six months of increases that we were seeing at the end of twenty twenty four. So consumers are really concerned that we
are headed for a downturn. We saw deteriorating views of about unemployment, about stock markets, about personal finances.
Across the board.
Consumers are seeing a lot of downside of risks in the years ahead.
Joanne, Before we let you go, how split is it among party lines?
What we saw was a decline and sentiment across Republicans, Independence, and Democrats. This is not something that's being driven only by people who are not fans of Trump. Across all three political groups. We saw declines and sentiment.
All right, Jient, Thanks Lott.
We really appreciate Joannshoue, University of Michigan Surveys of Consumers. Director love getting you on on This is so so important.
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Alex Deal and Paul Sweeney we are live with you here Bloomberg Interactive Brokers Studio in New York City. We're also streaming live on youtubeesetever, YouTube dot com and search Bloomberg Podcast Live and that's where you'll find it.
Is the PGA Tour.
Is it Punt de Vidra Beach, Florida for the Players Championship this week? A lot of folks call it the fifth Major. I believe our next guest may also be in Punt de Vidra and I'm going to put the two together and assume there's a Morgan Stanley event down there. Kathy and TWISLM, Managing Director, Morgan Stanley Private Wealth Management and joints us here. Kathy, what are the conversations you're having with your clients over the last couple of months.
I mean two months ago, socker market was all time high. Everybody's feeling good. A little bit different here today.
Absolutely, the conversations have definitely been more challenging. There's a lot of anxiety and fear about the markets. But part of our job is to walk them through it and talk them through it and also talk about positioning and maybe taking advantage of some of the market volatility to reposition what we have in order to get on board for the next phase of the market.
What is the next phase of the market?
Yeah, well, the.
Next phase of the market is basically trying to think about who the new winners are, where the new opportunities will be going forward. Also what type of you know, whether it's on the equity side, you know, corporations, companies that we're investing in different cap sizes, you know, large companies, small companies, and mid companies if they're value or growth. We like the mid growth area of the market. We
like the large value area of the market. We like what we call it que GARB, which is quality growth at a reasonable price. And we also like we're going to start bringing in some of the duration a little bit more based on where we are with the rates.
Kathy's I mean, we've just got that University of Michigan data came out today and obviously the sentiment much lower than forecast, inflation expectations much higher than consensus forecasts. Do you get that sense when you talk to your Morgan Stanley private wealth clients.
Yeah, I think this is not going to be an easy year ahead. I think there'll be a lot of bumps and volatility and a lot of sideways trading. So it's more about understanding where are managing expectations and looking just for the opportunities to make those shifts. Clients are definitely more worried, you know, this year, especially in the last couple of weeks. I've gotten a lot of phone calls. We've had a lot of conversations, and we are just
for my clients personally. We're walking them through the process and the markets and reminding them of all the times we've had these kind of downturns and that they're very normal. It's very normal to have a ten percent you know, drop in the market every twelve.
Months, but the whippy headlines are not normal.
So how do you then filter the noise from the reality.
Yeah, again, it's it's looking at the metrics and the numbers. You know, there's two different sides to the equation. There's the pure quantitative side, the numbers and statistics and our history and what we can think, you know, sort of look forward to with knowing those numbers. And then there's
the qualitative side, the emotions and the challenges. So part of our job is to take the qualitative side out of it, take the emotions out of this and look at it purely from where are the opportunities and how can we keep our clients invested in the markets, Because if you take your money out, you have the potential to pay cap gain taxes. You also have the potential to not know when the right time is to get back in. So if you're positioned well and you're invested
in the right companies, that will turn around eventually. And it's a patience game.
How does fixed income fixing fit into the discussions these days? You're having kathy with your clients because they could sid it a to your treasure. You can get about four percent if you want to take creditists, they can get a little bit more than that, and maybe in an inviolable market that's not the worst thing. So how do you talk about fixed income?
Yeah?
Absolutely, So what we do is when we're talking about fixed income, I've got an allocation for most of my clients in municipal bonds in their taxable accounts and corporate bonds in their retirement accounts. And they know that it's an asset class that is typically non correlated to the equity market. When we have volatility in the market, this will be what keeps them up.
You know.
It's like their portfolio up and buffered and a little bit more on the conservative or safer side. And they're getting in the same time, tax free income. And if you're getting yields that are tax free, the taxicquipment meals are higher than the four percent that you're talking about with the treasuries.
What about in the corporate credit market. So there's a lot been made about how equities are reflecting that recession sentiment, but the high yield market has not been, but we just started to see kind of spreads widening a little bit.
But investment grade still seems a little protected.
What do you think, Yeah, I've been giving my clients an investment grade. I think it's just smarter. At this point, you're not really getting paid the difference that you would need to get paid to go for the high yields. And I come from a time when we had a lot of corporate de folds back in the eighties, so I am very reminiscent of that, and I want to stay away from any risk in my client's portfolios. They've won the game. There's no need to take more risk
in something that's supposed to be a little bit more safer. Conservative.
That said, though, I hear a lot of registered investment advisors, Kathy that talk about alternative investments as something their clients really want allocation to it, and it's not just five or ten percent, it can be twenty thirty percent. What kind of the discussions you have with your clients about alternative investments.
Yeah, we've been using alternative investment investments in our client's portfolios as long as it's appropriate for them and they qualify for it. But it's very interesting because that again is non correlated. We do expect, for example, on the credit side, you're talking about fixed income. On the credit side, in alternatives, you can get higher yields, and some of those can have some tax advantages to them if they are involved in sort of you know, read or something
along those lines. So al terms, that are a great way to get the diversification. Typically, I am looking to get my clients invested twenty percent on average in alts, depending on the size of their personal portfolios. And also
we're doing it over time. We're not doing all usually in like one fell swoop, although now Evergreens, I'm sure you guys are familiar with the evergreens, where if they have more liquidity, they're more aligned with an investor's time frame and goals, and so you can get more invested without capital calls that way, which is really a nice way to get clients invested in this part of the market.
All right, Kathy, thanks a lot. We really appreciated.
Kathy and Whistle, Managing director at Morgan Stanley Private Wealth Management. Enjoy that weather in Florida.
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Okay, let's go back up to the colder weather in Canada. Jessin Trudeau officially out Markcarney officially in this is a different change now for the Canadian government. Creates an opening for that government to reset its relationship with the US and President Donald Trump.
But will it.
Brian Platt, Bloomberg d and Government reporter joins us. Now, Brian, first, before we get to the inner workings, do we even know what a Carneie Trump relationship is before Carney took the helm.
No, we have not had a chance to put this question to Carne yet. I mean, Mark Carney really has not done very much media. We're expecting a news conference this afternoon, and I suspect he will be asked that very question. So you know, whether they have any pre existing relationship at all is one of the biggest questions
that I have right now. But I do think in general, Carney is approaching this as a chance to ideally reset the relationship that had become very tense and very even hostile between President Trump and Prime Minister Trudeau.
Is there a sense that I mean, seeing this thing seems to go one of two ways. Either you kind of accept to a very large extent, the terms that President Trump is offering as a release to tariff's or you fight it, as it appears that Canada had been doing perhaps more aggrestively than than anybody else out there. Do we have any sense how mister Karney wants to move that forward.
Well, he has said already he's not taking off Canada's retaliatory tariffs until the US fully commits to you know, a free, free and fair trade relationship. So that probably means until the US lifts all the tariffs that it is put on Canada. Because you know, I I was dealing aluminum just recently, and there were other tariffs in place from earlier March. So at the moment Carney has promised to keep Canada's retaliation in place. I will also
say he's constrained by public opinion here. Canadian public opinion is demanding retaliation and in fact probably wants even harsher retaliation. So I will be very surprised if Carney softens too much on this. But you know, if you can get into a negotiation here, maybe there's room to adjust how Canada is responding.
Yeah, when I was down and who's in Texas at Sarah Week, which is in a global energy conference. When I was speaking off the record, people are like Canadians are just mad, like full on mad. When we take a look at the ability of the government in and of itself to respond, there are many territories that have free They all have free reign. The provinces can do what they want. We saw that with Ontario. So what's the coordination between say Carnee and the individual regions.
To some extent, provinces have free rein I mean this is a you know, Canada's of federation, just like the US is where states have certain powers in general on international trade, it's the federal government and so most of the tools that you retaliate on our federal tools. The provinces have certain things that they can control. In Ontario's case, it was the electricity system. So the province of Ontario had briefly put in an export tax essentially on its
electricity trade with the US. But most when you talk about count tariffs and things like that, that's all in the federal government. Jurisdiction. The provinces are just looking at some of the other things they can do. One of the biggest things we've seen is provinces control their own liquor distribution systems, and so quite a few provinces have taken all American made liquor off the shelves until the
US lifts its tariff. So you do see some smaller, sort of more targeted responses like that from the provincial level.
Brian, can you educate us as to when an election may happen in Canada?
The most likely scenario is very soon. I think the end of next week is what I'm looking at, and that's sort of the conventional wisdom right now. So Mark
Karney will be sworn in today. I believe we've reported he's about to go on a short europe trip to France in England, which I will kind of be a Monday Tuesday thing, I think, And then I suspect by the end of the week, maybe even on the weekend, he calls a staff election, and so in that case, you're looking at an election date of late April or early May.
And what are the polls showing now.
Well, they're changing. It's fascinating. The Conservatives in Canada under Pierre Pauliev looked like they were cruising to a majority government. They were up by twenty five points for most of last year. It's we're now entering a dead heat, I mean, and it's essentially because of Donald Trump's threats. Trudeau's resignation has led to that as well in Carney's ascent to the leadership. All right, but it's Trump's tariffs.
Yep, very good, Brian, Thank you so much for reporting. We really appreciated Brian Platt, government reporter Bloomberg News. He's in Ottawa. Talk about boots on the ground, folks. Get that fantastic reporting. We'll stay on top of that election that may come as soon as a week or two.
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One of the headlines today is that Gold broke three thousand dollars an ounce.
I remember covering Gold when it wasn't even one thousand dollars and outs.
So this is like for US gold nerds and gold bugs, this is like a moment of balloons and stuff, and that question becomes like how long can this last? Mike mcloon, Bloomberg Intelligence and your commodity strategist who was also covering gold before it was even one thousand dollars nouns. Hey, Mike, if I had told you twenty years ago gold will be at three thousand, what kind of economy would that have represented?
Yeah, it'd be there's significant inflation or severe deflation. I think the key reason gold's rallying now is because it's anticipating the deflation, significant potential deflation if US risks as its most noted stock market continues to can either say go down or mean revert because it went up so much the last few years.
I think that's what's happening now.
The gold market's anticipating stock market going down. Okay, that was been the best place to be along with cryptos for decades now, along with high bond yields, and now gold's starting to understand that, oh that rally.
Might be over.
And you're seeing that flows ETFs had outflows of four years in a row, and they're really kicking in this year, they're up about four percent, which would be the most since twenty twenty.
And Alice, when I first met Mike years ago, when we were first talking about him coming to Bloomberg, and he said, Hey, Mike, put your commodities call, buy gold, sell everything else.
I mean he's pretty.
Much always been right on that one. Already care at that point, what's that?
No?
Okay, so that's all maybe already?
Yeah. So hey, Mike, how do you get a senseor how of gold traders? I'm not sure if people trade gold or they investing goal, but how did they feel about valuation?
Like at some point people.
Say, oh, this this stock.
Has just gotten too far ahead of itself. Do we ever say that about a commodity like gold?
Well I, Paul, I love how you go there, because we know you're an equity person in valuations in your brain in commodities. The main lesson you learn commodities is they go down because they went up. That's why Crudell's at sixty five.
Dollars a barrow. It went out too much. The big difference is gold. The big difference is gold.
The key thing is, oftentimes you're trying to find a cost of production is evaluation. We usually goes to what's happening. What's different with gold. It's the only commodity that really goes up over time continuously, partly because the supply can only crease on average two percent forever, and it's harder and harder to produce, and it's monetary value.
So that's what's the significance of gold.
Gold is up about sixty five percent since February of twenty and twenty that's when the announcement between of the unlimited French rate friendship between President and zeeing President Putin, and it's continuing now. The key thing it's looking forward is we're seeing deflationary forces in China potentially kicking over in this country.
And I'm really worry now.
I don't want gold to stay above three thousand, but I think it will, particularly because of the reasons I'm worried about. Is the US stock market having a bit of a normal correction now ten percents, nothing compared to what usually happens when you have a major shift, which we're having a paradigm shift. And what's happening in the US, maybe how about twenty or thirty percent in stock market
That means gold continues higher. So I'm worried at these levels, but I think it's going to continue rally for reasons that are going to hurt most investors unfortunately.
Is it also to do with this idea that maybe the government could mark to market their gold reserves and then confiscate gold in order to use that and sort of ramp up the federal the Fed's balance sheet.
Now many individuals are going to roll their.
Eyes at this and say, oh my god, Alex, seriously, but no, seriously. Could this also be driving some of the last minute buyers.
I think that's part of it, Alex.
What we're seeing is a major shift of gold coming to the US because the disparities and US COMEX traded gold versus what trades in London. That's usuly indicative of bull market. That whole scenario, I think is part of it. Seems kind of odd to me. Whatever you have the price on the books or not, is it's still US still has about eight thousand tons of gold.
It's on it the books at forty two.
Dollars an ounce. Okay, it should be marked the market. Why not market? I'm just not the accountant, so I don't really get why that's going to matter for the price of goal.
It's a global commodity, and I always one thing I've always enjoyed in.
The space of gold bugs is a estate it's manipulated like in the US.
Like well, it's a global commodity.
It's kind of hard to manimplate something you can trade around the world, and people in India and China hoard it for a good reason historically and particularly Turkey. But I look at that is gold has a good reason to keep going up. And that's particularly because what's just start. One key fact is at the end of last year the US stock market captain GDP was about two x. Now it's going back downward. It's down about six trillion dollars this year. That's twenty percent of GDP. I mean,
that's a ten. And what really matters for deflation if that continues, that's what pressures bond yields lower, pressures the FED to ease pressure's inflation, and makes gold go higher. To me, that's the ten that matters in gold. And then there's all those little nuances in between that you see in a normal bull.
Market outside of gold.
What looks good to you in your space your commodity space.
Well, what's been oddly looking really good is copper, and I'm really not on board that trade. Fundamentally, US trade of copper's bumping up against the highest price ever, which was forty four in February of twenty twenty two. I mentioned that month earlier, actually March, and it keeps bumping up, but it's for the wrong reasons. It's because of that disparity between the price that trades on the CME, which is right now about four hours and ninety cents, and
price that trades on the LME in London. It's because US terraces, but generally means that will be offset, money will flow, the arbitrage will kick in. It doesn't, so I look at industrial metals as a whole indication copper is a bit of a nuance. Industrial metals versus gold are showing severe global deflationary potential forces gold going up and dustrial metals not going up as much.
Copper just doesn't seem like.
It can stay up this level levels too much unless China really kicks in. And yeah, they're bouncing, but I don't really see it. With tariff's just starting to accelerate.
Oh, such a good point.
Such a good point if those deflationary forces are going to drag down copper as well. Mike's super great. I didn't do a year butt for you. I agree, but everything you said, all right, Mike, thanks a lot. Mike Maglow and Boomberg Intelligence senior commodity strategist joining us on gold.
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