Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecarclay, and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
John Tucker sitting in for Alex Steele. I'm Paul Sweeney. We are live here in our Bloomberg Interactive Broker Studio in New York City. We are streaming live on youtubees ahead over to YouTube dot com search Bloomberg Podcast Live, and that's where you'll find if we get some economic
data today on the inflation front PCE. The smart folks look at that core PCE index month to month up zero point three percent, right in line with expectations on a year of a year basis two point six percent, again right in line with expectations in a little bit lower than last period. That's the number, you know. It's one of those numbers that the Fed would like to see closer to two percent, So maybe a little bit more work to do. They're pre Misery Joints, Fixed and Come.
Portfolio Manager, JP Morgan Asset Management. What did you make of the inflation data. More importantly, how do you think our friends at the Federal Reserve are going to view this data?
So I think the Fed realizes that inflation is above target. They like it to be closer to two percent. It's a two point six year over a year, so there's still more room for it to come down. But when we look at the details off the PC report, we are seeing improvements across the board. There are a couple of components that are high, but they're heading lower. So I think it's good news came and kind of as expected.
It tells us that the Fed is in no rush to cut rates and they're going to stay on hold. We're actually I think the market's focus is moving away from inflation now more to growth and all the policy uncertainty. But at least it was good news in the sense that it didn't pick back up, which was a concern late last year that inflation may be reaccelerating. I think we can put that fear aside now. I think the fears are shifting to the growth side.
The Atlanta Fed GDP now tracker of Q one GDP growth now forecast at negative one and a half percent. I mean that's recessionary territory.
Your take on that, you know, I think today's trade deficit came in so much weaker than people were expecting. We've heard that the gold imports from the rest of the world is one of the factors. So I'd say it's less about like a big slowing in growth if it's all driven really by trade. But you know, I think the market is reacting to the fact that there is policy uncertainty. There's tariffs. We know tariffs are a stack creationary shock. What is doage doing? So I think
there are growth fears. I would put aside some of the Atlanta fed recession fears. I think the hard data so far tier one data, and we're going to get a lot of it next week. We're keeping a very close watch on the labor market. Particularly the hard data has been Tier one data has been still strong. I think where the concern is some of the intimate data. Business uncertainty indices are picking up, you know, I think does this way on business investment, business hiring? That's the
question market. I think the market's pricing in that side of the distribution, the growth risk side of the distribution, which I think the market was not really concerned about the last few years. That's picking up, But I would ignore the Atlanta fat I think we're not close to a recession. Let's see how the actual data is turning out. You have to do the seasonal adjustment, make sure you're accounting for what's happened with the LA wildfires. Let's look
at the actual data when it comes out. I would say the economy is okay, but there are downside risks that are building. And that's why I think you're seeing the rates market react the way it has the last few weeks.
Yes, we've seen rates come in here. So for your portfolio, what kind of changes, if any, have you been making recently?
So we were leaning long duration closer to four and a quarter. We actually think duration looks fair. Now if the Tier one data starts to show things weakening further, then that you know we may be looking to go long duration. I think rates look very fair here. What we've been doing, though, is moving up in quality. So within our credit spectrum, trimming a little bit of high yield,
moving up in quality investment grade. Just because with uncertainty, maybe it stays in the uncertainty mode, risk premium should be higher. And we should get paid to take that extra risk, which we don't think you're getting paid necessarily in every segment of the market. So we're looking at the portfolio, particularly the credit part of the portfolio, very closely, moving up in quality, making sure that the companies, the sectors we own are less sensitive to some of the
headline risks that's out there. So just doing more of that credit work, but staying with it. I think we're in a soft landing and so you know, when the tenure was closer to four and a half, it was attractive to own duration. I think at this point we can be neutral duration and be careful with the spread product that we're buying.
The administration is talking about tax cuts. Can I ask you how how much in tax cuts can this bond market stand.
I'm glad you bring that up. I think the expectations of tax cuts were much higher, you know, a month ago, and I think the market realized that the administration has a constraint both politically as well as a market constrained, and I think expectations of those tax cuts have come down. You see the House past bill, Let's see what the Senate does with it. But I think the expect. Our expectation is all we'll really get is an extension of
the twenty seventeen tax cuts. That's not net new stimulus. Now, that does increase the deficit, but I think that is priced into the bond market, so we're not expecting and I think the market's priced for not a whole lot more in terms of tax cuts. I think we're going to spend all year trying to find those pay fores, making sure that you know, we can at least just extend that twenty seventeen tax cuts. I don't think we're getting any more because to your point, the bond market
is going to push back. And we know the president, you know Secretary Best and they care about the tenure. They realize that the tenure impacts the economy, it impacts risk assets. So I don't think they'll be able to get much because it's going to be tricky. Where do you get to spending cuts to offset just the extension of the TCJA is four trillion in deficits. So I think all we get is that extension, and I think that's in the market.
All right.
Prea, thank you so much for joining US Pria Israel. She's fixed in come portfolio manager over there at JP Morgan Asset Management, joining us from a New York City.
She'd just say, I'm not getting a salt text deduction, Raist.
I think that's still on the table, but I don't know. We'll have to say. That's a lot of the tri State lawmaker said, we're not voting for anything unless that solvet thing back in here to some degree.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecarclay and Android Otto with the Bloomberg Business app. Listen on the and wherever you get your podcasts, or watch us live on YouTube.
John.
As you know, the White House, as for every president, puts out a daily schedule for the president, what meetings here he has, and so on and so forth. He'll be jetting off to mar Alago this afternoon.
And I would do the exact same thing.
I mean, it's cold, go down to Florida, man, why not? I mean, I played that golf course way way way back in the day. It's pretty good, so why not go down there and play some golf, jump into the water. I would do the same thing, particularly if I had a jet in my disposal like Air Force one.
Why wouldn't you.
Well Truman called it the Winter White House down at Florida.
Okay, very good, Yeah, I don't know. All right, let's check in on what's happening down in DC, because again, mister Zelenski is scheduled to be at the White House this morning, right now as we speak, speaking with President Trump. Doctor Aerol Cohen joins us he's a senior fellow at the Atlantic Council. A. Realistically, if you're mister Zelenski, what are you hoping to achieve?
I try to get as much or as many.
Security guarantees from the United States and also put on the table the following in order to keep Russia at bay. If they go to a ceasefire now or maybe eventually to a.
Peace three, they will need about ten brigades of peacekeepers in Ukraine, well armed and potentially backed up by the nature nuclear umbrella.
This is a conversation that needs to happen in the Oval right now. Anything short of that, Zelensky is giving Trump something which is very vague about critical minerals rare earth.
We don't know where they are.
Some of these rare earth are under Russian occupation in the eastern Ukraine called don Bas. And in the end of the day, the market for rare earth a three point five billion. Sixty five percent of mining is dominated by China, eighty five percent of processing is dominated by China.
So we're not talking big bugs.
If on the other hand, Trump tells his audience, his electorate, look, I got this wonderful agreement. Now we need to back Ukraine. That is a Trump political domestic achievement. And if that's where he's going, more power to him. But in the end of the day, the long term American interests do
not change based on who's in the White House. We the United States have an interest in keeping Russia out of Europe, keeping Europe from being dominated by one hostile power, being Nazi Germany or Kaiser's Germany, or the Soviet Union or Russia. And as long as mister Trump keeps that in mind, he can run with a policy and do whatever he wants.
Is there a historical precedent for getting something like a mining deal or whatever it is metals deal in exchange for yeah, we'll protect you now sounds a little like extortion.
I did not hear the language of exchange for protection.
What Trump is saying, it's kind of implicit.
No, No, the United States, Trump says, gave Ukraine assistance. There's a huge debate how much. Trump said five hundred billion, then he's a three hundred billion. The Europeans did the calculation, said it's more like maybe one hundred and twenty billion.
And the Europeans are saying they gave us much.
But Trump is trying to recoup that assistance with his deal in a thousand years that that particular deal is not going to provide the US with this one hundred twenty billion. And Trump is not talking about security guarantees. The president I'm thinking about is Franklin Delan Ruslot, by all accounts, one of the greatest propagists, maybe the greatest prategists sitting in the White House since.
George Washington and Thomas Jefferson. In nineteen forty.
When Britain needed these naval destroyers, gave them fifty naval destroyers from World War One older ships in exchange for nine naval basis in the Caribbean and Newfoundland.
So it was basis for destroyers deal. The destroyers were not for free, and this was the beginning that was sort of too pleasley.
Isolationists in Congress, wasn't it. It wasn't.
Well, we have isolationists in Congress right now.
Yes, And the MACA electorate America First is the same slogan they had back in nineteen forty.
Ariel, if you're President Putin, how do you think he views what's unfolding a in the United States White House? With President Trump coming into office and then you know the need for peace at some point, how do you think where's mister Putin these days?
It's a great question.
Puts In always puts up this, you know, gamer face, poker face, and says, oh, Russia is winning, We're doing so great.
In reality, there are reports now that.
They're sending soldiers and crutches back into frontline.
They're using some donkeys instead of trucks. I don't know how true that is. They try to use North Koreans. We saw this as not going any place.
They're reaching out to Nepalese and the Cubans to send to be killed in the frontline. They're not gaining a lot of Ukrainian territory, although Ukraine population wise is what five times smaller than Russia economy wise, maybe seven times smaller than Russia. So Ukraine is putting up the heroic fight,
but the fight is not about Ukraine. The fight is about European security and ergo, therefore the balance of power in the world, and to keep that balance of power to keep hostile powers such as Russia.
And China away from Europe. This is an American interest, but it's also in.
Our interest that our European allies start putting their big boy pants on and paying up. Because the Europeans were not sustaining their fair share in native defense. Barack Obama and Joe Biden kept telling them that Donald Trump has a different spot.
What kind of shape is NATO in right now?
NATA is not.
Having fun because the European and the American military industrial production is matching what our needs are, and our needs are not only Ukraine but potentially China. Therefore, the defense stocks we're doing very well and probably will continue doing well, not only because of Ukraine but also because of the Pacific.
The Europeans need to gether act together.
NATO needs together their act together, and once they think and Trump wants them to think, that we're pulling out Britain, Germany and France should find their way to manage NATA in Europe and to lead both on the military industrial front and on the manpower on personnel front.
Can they do it? That is the sixty four billion dollar quash.
Arial Cohen, thank you so much for joining us, Arara Coon. He's a senior POLM at the Atlanta Council. Joining us from Washington, DC.
Via zoom you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or live on YouTube.
Like most investors, I think we're all just trying to, you know, kind of shift our way through all the news that's out there, particularly coming out of Washington, fast and furious, and what does it all mean for markets when you try to find the stuff that really matters. We had some economic data today, we have earnings of course finishing up, but we've got a lot of news coming out of Washington in other parts of the world. Peter Cheer, he's had a macro strategy. He tries to
do this as well. He's at Academy Securities. Peter what do you tell your clients on kind of how to navigate through a lot of the noise that's out there in the marketplace?
You know, I think we're one trying to figure out what's the theme that's coming out of this administration that's still a little bit unclear, and then okay, what can we ignore and more and more. I think where we're getting stuck at is basically, even if you believe we're going to have good outcomes, or you might believe we'll have bad outcomes, I don't see how we don't go
through a bumpy patch first. So that's kind of my current view as everything that's going on is going to lead to a slowdown in the economy, either because we do things to the economy or because of the threats of what we might do. It slows the economy down as people kind of put themselves on wait and see. So I'm now a little bit burish on the economy, and I think market's because of that.
Lisa just gave us the bitcoin quote. It's right now what down three tense about It's around eighty four thousand per token, which is kind of a precipitous drop from the high. What if any risk does crypto pose to stocks my stock portfolio.
I think it has been posing a greater risk than it used to. One there's always the wealth effect, so I think the wealth effect is real. So if crypto continues to go down and all the oar coins which.
Have been hit particularly hard, you'll have a wealth effect.
But the other thing is I think really since the advent of the ETFs, you used to have people who are in crypto and they held it, say in cold storage, or maybe they held it at coinbase. Now they might have it in their you know, Adellay Schwab wherever you do your brokerage account, and it's mixed in. So I think when they see their crypto ETFs go down, it makes them respond and possibly sell everything. So that's one part that's very different from even a year ago. And
the second part is that mstr itself. One, they become even more wet.
And tied to crypto.
Right every single day they talk about their victy yield whatever that is, how much crypto they have, so they become very tied to that. And they got included in the Nasdaq one hundred, so they're only about one point four percent waiting about the fiftieth stock in the Nasdaq one hundred, but it is now a direct tie into the nas BACK one hundred, So I think the correlation
and the linkage is higher. And I don't like what I'm seeing in crypto and I think that's going to continue to drag on stocks for the next few weeks.
So, Peter, we've had a little bit of a pullback here from the peak, call it four percent here.
Do we have more to go?
Do you think, at least in the short term, until maybe the market gets a little bit more comfort with this administration in some of the economic policies.
Yeah, I do think we have more to come. You know, we might get a little bounced today. We might get some good news out of Zelenski. You know, Trump might say that delivering the cartel prisoners to the US gets Mexico and other stay of execution on teriffs. But I think we are going to go back almost across the board to pre election levels. You've already seen that hit certain cryptocurrencies. I think Ethereum is back to levels from before then. It hasn't hit Bitcoin yet. I think that's coming.
In the stock market. The rustle two thousands back pre election levels, We're not there in the S and P five hundred or Nasdaq one hundred yet, but I think that's where we're headed.
Unfortunately, let's talk fed two cuts I believe are priced in right now, if the markets are correct, Is that enough.
I'm beginning to think not.
I would say start of the year, I was thinking one to two cuts. I did not think we make much progress on the deficit. I'm so not sure we will make much progress on the deficit. Having said that, I do think the economy is slowing faster. And again, you know, we just talked about some of the issues with tariffs and how I think we go through a bumpy patch. When you look at what dog is trying to do. It's going to cut some spending that's going
to hit immediately. Whether some of it was inefficient, fine, maybe that doesn't have an impact.
But to the extent they trim.
Anything that was efficiently being allocated, that hits. And then the jobs, even if people get laid off are able to find jobs, which I'm questioning because I don't think the market's that great for jobs. It is still going to be this transition period, so I think we're going to see economic data hit across the board, and we're starting to watch delinquencies rise across the board. I think this economy is much more susceptible to pull back than we,
you know, have talked about for a while. So I think we're going to see three to four cuts this year, and we're going to start hearing the recession word rear it's head again in the next few weeks.
Interesting.
Interesting, all right, given that backdrop of Peter fixed income? How do you how you playing the bond market these days?
You know?
And I was buried in the bond market. I thought we could get to four eighty wasn't aggressive, and we've been trying to time it.
I've capitulated on that.
I think the bond market, you know, four to four and a quarter percent on tens, mostly because I really capitulated on the state of the economy. I thought we'd have a smoother transition with Trump. I think there'd be more clarity. It's the lack of clarity that's kind of confusing me. So I think yields are going to be okay.
I think credit spreads start widening. I do like the municipal bond market for a lot of our clients on the retail side of things when we talk about it, but as a whole, I think credits can be okay. I am, for the first time in gosh, probably a year and a half, a little bit nervous about credit spreads, so I've been very calm about credit spreads. I think we're going to see some widening if I'm right on what's going on in the economy, and further pullbacks in stock market.
Peter, thanks so much for joining us. I really appreciate it. Peter Cheer, He's had a macro strategy at Academy Securities.
Here.
This is the Bloomberg Intelligence podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.