Bloomberg Surveillance TV: April 25, 2025

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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and am Marie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the

Oh, this is this is a completely different world one as you read our view as the global growth this year and next year are both going to be much weaker, but even beyond that, it's deeply structural and I think we felt that this week during the Bank Fund meetings. The US has been the center of the system for decades, and now the US is standing up and rejecting in

They're the near term effects and they're the longer term ramifications. In the near term, all of the finance ministers and central bankers are saying, we need the dollar to be the reserve currency. How much do you expect that, though, to change longer term? And are they questioning that in private conversations with you.

I think that's one of the leading questions that I'm hearing is what about the dollar's role over the medium belong run as reserve currency? But even if we extrapolate out five to ten years, it's still not clear that there are really any real challengers for the dollar in that role. And I think most say, well, you know, we're kind of stuck with the dollar. But then the

Speak, which goes to the question of weakness, and if there is some sort of downturn in the United States, what is the fiscal impulse and the ability for the United States to borrow into weakness at a time where we have near record deficits as a per percentage of GDP and you have.

The structural shift going on if we have a downturn, and that is a very reasonable, plausible scenario. Many people have that as their baseline forecast. If we have a downturn in the United States, the implications for the US fiscal deficit or grim. We could be again easily knocking on the door of ten percent fiscal deficits. And in that environment, do I think the Treasury can issue I do, but again at what price? What do those yields look like?

The President this morning speaking to Time magazine saying that he didn't get the yips.

The bond market got.

The yips, but it wasn't the reason why he came out with that pause, even though everyone is saying that was the Trump put in action.

Do you think that it is this bond.

Market that is putting pressure up against this administration to come out and tweak and change policy.

I think the bond market has been front and center in this. I think it's the financial markets more broadly. But I also think gets the discussion with CEOs and what he's hearing, and I think it's political reality. So I think there was a lot of pushback to this tarift policy, and I think the upshot of that is that we've officially now moved, it seems, from the phase of announcing tariffs to the phase of negotiating what these tariffs are ultimately going to look like. And maybe that's progress.

When it comes to China, one hundred and forty five percent is unsustainable. Everyone continues to say that, But even if we go to sixty percent, which was what the President talked about in the campaign trail, is that still in essence a trade embargo between Washington and Beijing.

One hundred and forty five percent tariff is prohibitive. And I argue during the election that a sixty percent tariff would be prohibitive. It would destroy many supply chains and mean a lot of shelves at various stores were empty. So absolutely sixty percent. We're going to still see sharp declines in imports from China with negative ramifications throughout the economy.

We've seen some pill forward and Sunday. We've seen that in retail sales, and we're probably going to see that in invantries too. I want to understand from your perspective how much time we actually have here. It takes somewhere between twenty to forty days to got a shift from China to the United States. Taris went on an April second. How close are we?

This is another issue that we're debating in real time. My view is that the second quarter is likely to be okay, that we've seen the soft data fall off, but the hard data are lagging and they're going to continue to lag as people continue to front load inventories and probably certain types of consumption. But the third and fourth quarter could be pretty ugly. How can that's the heart of darkness?

How convinced are you and the tame that that'd respond quickly? The Federal Reserve being thy to any sign of weakness.

The FAT is in a very tough place here where the bond market is equally focused, if not more focused on what's going to happen with inflation, and so what the FED has got to do is make sure that the inflation expectations are well anchored, and once that's achieved, then they can pivot to rate cuts. And I do expect by the end of the year will be seeing ray cuts, but it could take us a few months and it may not be a conferred side of weakness.

And that could mean a lot of hand in this market stone account absolutely could nice and it's going to say thank you, sir nice and shakes that of sisy. Here's a take from a man who's seen it, or the former Deputy Treasury Secretary Wally Otama writing, the only way we can address the China problem is by working with other countries. But for many of them, they're still waiting to hear while the US even wants while he joins to snaf for more. What a good money. So it's good to see you, Good.

To see you here, Thanks for coming to Washington, DC.

You've been in the room of the Chinese many times. How difficult is it to negotiate with them? Just set the scene? What is it like?

The reality for the Chinese is they are very systematic in trying to find your weaknesses by both talking to you directly but also talking.

Around you to other people.

So when you are negotiating with the Chinese, you have to be very clear about what you want. You have to repeat it over and over. You need to tell your friends and your allies in the hopes that you'll get fifty percent of what you want in that conversation. And it's always about how do you make progress rather perfect than perfection with the Chinese.

You refer to the China problem. What is the problem and what you make of the approach so far?

The reality is and over the course of this week, in addition to getting to see you, I've gotten to see a number of my former counterparts. And the thing you've heard from our closest allies is just disappointment because they all face the same challenge, which is that China takes steps to subsidize their industries and export access capacity

Let's look at Europe. Are they speaking with one voice?

We had the Spanish Finance minister in the room here yesterday and John picked up on something he said, he called it China an ally and we have seen the Prime Minister Pedro Sanchez go to Beijing three times in the past two years. It feels like they're playcating to China and actually not coming on board with the United States.

So I think you're right that's part of the challenges that Europe doesn't speak with one voice, because today, if Europe did speak with one voice, they'd be in a better position to negotiate terms. Europe is the third largest economy in the world. If they were willing to work together to do things like put in place the free trade agreement they have with countries like with other countries, and to go and work with the TPP countries, they'd have the ability to dictate more terms.

But today, because they're unwilling to.

They're caught between China and the US, and that's the most important thing for the Chinese. They're concerned that if they don't find a way to dial back this, they're going to end up in a place where countries like Europe, or regions like Europe or other countries will choose the US over them. But unfortunately the approach the Trump administration has taken as instead of bringing Europe closer to US, put them in a place where they're up to for debate.

Are we allies with China?

And then Rachel Reeves in the UK and along the sidelines to the IMF is saying things like Trump is right, China does need to rebalance their economy. How difficult was it for you and Treasure Secretary Jadet Yellen to get that message across to China. You have to start rebalancing your economy.

And this is not a new message, Secretary Pulson center to the Chinese Secretary Geidner, Secretary Lou Secretary Yellen, and I know that the current secretary is sending it as well. The truth is that China is only going to respond if they feel pressure, and it's not just going to be from the United States. They've got to feel it from the UK, they have to feel it from Europe. And the best way to do that is to work

In lots of ways, has alienated the world.

The hope over the next few weeks is that a Secretary Bessett and the President are going to be able to work with our allies and partners to find an approach that works, because the people who are going to suffer most from this are American consumers.

You can see their bills go.

Up by three thousand dollars, and that's not just the statistics. You've heard all of the CEOs who've been doing earning calls who have said that they're going to have to raise prices, and they've all said that they had great first quarters because the economy is doing quite well. So we're in a place right now where if the United States doesn't get into a posture of working with our

Is it too late to.

Really create that alliance and go after China, as China already made inroads in terms of making alliances, whether it's with the stains of the world or even in Southeast Asia.

So the interesting thing I've heard over the course the last few days here is that people are equally as nervous of American tariffs as they are of Chinese access capacity. So the people who live in Southeast Asia, the people in Europe are worried that all those goods that were headed to the United States, that we're hurting our industrial base, are heading to a port near you, and that China's

There was a story in the Financial Times and on Bloomberg about how Apple was moving all of its iPhone production away from China into India hopefully by the end of next year. This hopefully for them. That is the projection they put out there is that how this is going to work from what you hear that essentially India is going to be the big beneficiary from a lot of the tariffs, particularly on China.

That's how it's worked the entire time since basically the Obama administration, a number of companies have been moving to a China plus one strategy, where they build for China in China and they build for everybody else somewhere else. That's been Vietnam, Malaysia and India but the problem has been Chinese companies have taken a China plus one strategy too. They've moved away from the terrorists they put in China by setting up shops in Vietnam, Malaysia and probably now

Well, I've got thirty seconds left. Is there anything you wish you'd done differently with regards to this topic.

I think the reality is that the thing you always hope that you could do is get to a deal with your allies and partners that confront the Chinese. But the other thing that I think is clear is that terrorists work when you use them strategically.

They don't work when you use them in.

A broad based way, because what that does is it causes more pain for your consumers and your allies.

And the thing that's worried me a.

Great deal is talking to asset allocators around the world, and for each one of them, they've been overweighted the United States for a long time because of the exceptionals of our economy. But today each one is talking about

Wale, it's going to see us a great to see nice bit of this. So let's just talk about particularly the deficit. I'm let to talk about that with Wally at another time. They FOMA definitely try to resacretrate Wale out of YMI. We begin this SA with this week's rally on Hold as Chinatown place progress in trit and negustiations. Jason Thomas of Carlia, writing, if treasury yields do not decline when stocks sell off, investors may discover they've been

Thanks for having me.

I'm pleased you've picked up on that piece, because I want to pick up on it with you as well. This em type dynamic that started to take hold of US assets dollar denominated assets. What's behind it? One? And do you think it's sustainable too?

Well?

I think, first of all, we have to remember that bonds are volatile in a way that cash is not so. At the start of this month, if you had a one hundred dollars invested in money markets, it was yielding four point three percent the ten year treasury at the time four percent. A week later, the cash was still at poor as it always is, the bond was down at ninety six. And so in the past there's generally been, of course, a term premium to compensate for the volatility

That worked very well.

Some years, stocks down twelve percent, those leverage bond positions up fifteen percent. Now I think we're in a somewhat different world. Partly, of course, that's the external sector wondering about being over allocated to the US. That's stocks, that's bonds. I think, more broadly, the deficit. When you think about how large the deficit is this year, treasury net issuance is consuming over forty two percent of US private savings that is, the savings of the household sector, the free

So fill signe that that process is underway. Where can our way through it? Without doubt? You can say on the screen and the price sanction of the last several weeks, I want to want to stand from your perspective, how investors should now manage that risk. They've got very used to having this ballast in the portfolio. The treasuries typically provide where do you go now?

Well, of course I would recommend that people go to private assets, particularly private credit, but I think that the general portfolio thoughts have to be re examined. There's talks that you know of a fifty to thirty twenty portfolio, but in general it's that what has worked, what works so well in that decade after the GFC, is not going to work today.

So whatever your.

Solution is, there needs to be a rethink. And I think that again it's been so ingrained that treasuries are supposed to rise in value when stocks fall. There's no mathematical law that that's supposed to occur. And again, the return correlation with stocks and bonds was positive in the nineteen eighties and nineteen nineties, so this is not entirely new.

Yet.

There is a larger consequence here, though. I'm thinking through as you're saying this, and if you're talking about a clearing price, it's different for treasuries to account for that additional res risk premium.

We could be talking.

About five five and a half percent on ten your treasury is pretty easily based on your calculations, which would have a massive effect on private aid valuations.

Which would have a massive effect on.

Stock valuations, which just kind of really speaks to this question of whether it's a sell America trade.

Well, I think that again, it's if I were thinking about exposure today, it would be short duration. I see a lot of duration risk in the market, and I think it's a generally investors have not had to worry about duration risk. It's again, and the mindset is, whenever we get into trouble, there's going to be another round of QE and they're going to drive down longer term yields.

I think that the issue right now.

Also, the Treasury is funding twenty two percent of the outstanding stock of debt in the bill market.

In the money.

Market, there's of course a desire to turn that out, but there's a of course a hesitancy. You want to write wait for the right time. I think people were hoping that the tenure would fall below four percent, then let's turn out some of that debt, and by waiting they might be in a situation where they have to turn it out at much higher yields.

So it's certainly a concern.

And I think you know, as was mentioned earlier, if you do have a downturn, if you have a decline in tax receipts, if you have an increase in transfer payments, that just the scale of debt issuins and now it's go from forty percent to fifty or sixty percent of private savings being concerned.

So again, I think it's.

Taking the short term assets. You know, sometimes the credit spread on that is less risky than the duration spread of holding longer dated assets.

As this dynamic removed a lot of the power from the Fed Reserve to really address downturns, and I say this at a time where potentially if they drop rates right now, that will only lead to a furthering of this trend of yields in the long end going up.

It's a great point, but we have to remember the FED is an extremely dubbish institution. I mean, you know, and of course they say that's because of the dual mandate, but I mean, think about nineteen ninety eight, the US economy and real terms growing of four percent, employment to population ratios at all time highs, the enthusiasm of the stock market.

This is two years removed from.

Alan Greenspan's irrational exuberance speech, and they cut rates by seventy five basis points because the hedge fund failed. When you think about twenty twenty, the way they did the autopsy the last ten years and the statement for policy goals going forward, they said the big mistake in the decade of record monetary accommodation was hiking too fast and twenty fifteen, So the FED is going to cut this year. I mean, it's funny that this is like controversial or oh,

But how much has the pandemic actually hit them hard in terms of wanting to make that mistake again. Governor Waller said that to Mike McKee, that idea of being transient. He's even nervous to say that word out loud.

I think that this is what Chair Powell has made clear, is they can't do preemptive cuts.

They have to wait.

They have to see preemptively cut before the election.

Well, I think there was certainly a strong case for raid cuts in September now whether they needed to cut by one hundred basis points in just over three months. Again, this is sort of the dubbsh nature of the institution coming to the foe. But I think that this is a sit situation where if you are cutting as tariffs are first taking effect in terms of the increase in the price level, you could accommodate a spiral. So they have to have to wait. But we're talking about waiting

You said a lot of things that require some real date thought, this one thing that scans me typically in an economic downtnd bonce rally, and that allows a government to act counca cyclically. A developed market government am of course, fights a very different dynamic. And you saying that if we come into a downs end a long end doesn't rally.

I think that the rally is going to be muted.

And so again if we think, I think the fat will be more cautious this time, of course, but imagine that we have base rates in the three sixty five range.

Well, well, these yields actually might.

Be appropriate given the risk premium, the term premium that that is required. You know, maybe you get down to something closer to four percent. But again, I think the important thing as investors think about the next five years is that if bonds do not rally in this scenario, that on our prospective basis, when the economy recovers that they're going to need to target much higher yields that compensation for the bond price volatility that doesn't exist in cash.

Jason, this is an important exercise, and please you drop by this morning.

Thanks so much for.

Having me, Thanks for being here, Jason Thomas. That of call up Nastak hoping to provide stability in this volatile environment, and the nast neax see a. Dana Friedman joined us now for more day of Good morning, good to see you.

It's great to see you, great to be here.

Can you describe the last month for us if you can, just how busy have things been, described, the volume, the activity coming through your business.

Well, thanks, thanks for having me.

First of all, we just announced earnings yesterday, so I think that shows a little bit.

Of what we've been what we've been working with. We had twelve and a half percent revenue growth.

We had double digit growth in each of our three divisions, and a couple of highlights. One is within our Capital Access Platforms division, our index business screw twenty six percent in the first quarter because of inflows. We had twenty seven billion dollars of inflows in the quarter, very strong futures volumes as well in our nas like one hundred franchise.

Grow into April.

The first ten days of April we had five of the top six trading days ever in US equities, four of the top six trading days ever in options, and in one of the days, like our we also measured message traffic because that's how how many messages our systems handling during a given day. On the peak day, which was April seventh, we had five hundred and fifty billion messages flow through our systems on that single day. So it has been an incredible period of time from a trading perspective.

And the one thing to note talked about this earlier.

You know, you don't get necessarily credit for this, but the fact is that the plumbing within the markets, all of the markets has done really, really well, hyper resilient. I think we've all been able to manage this volume extraordinarily well. We're very proud of that at NASAC, and I can tell you that, you know, our markets have done quite well in this period of heightened volatility, and we.

Don't thank you when it goes right, but we'd be very quick to criticize you when it goes wrong. That's for sure. You've handled a lot of volume. Volatility good, when does holatility become bad?

Well, I think the one thing to recognize is volatility in short term volatility that then can resolve itself. I think that's something that we've seen, frankly multiple times over the last five years. I think the concern is, of course, is if we cannot have some certainty in the markets. You know, investors like certainty, and right now it's a very uncertain environment, so they tend to take a.

Risk off and attitude about that.

And as we know, we are hoping to see more companies go public this year. We did have forty five IPOs in the first quarter, raising five billion dollars. One little side fact also, as we had seven companies switch from New York to NASACK in the first quarter, and we crossed three trillion dollar threshold of companies that have switched to NASSACK since we started our switch program twenty

That was a very subtle but well placed shot over.

At the New York Sack Exchange. I'm sure that they will be listening.

I am curious about what that pipeline looks like now and how much smaller it is now in terms of IPOs than it was earlier in the year. You know, there's this big question how much of deal's been sort of put on hold and how much have they just been scrapped altogether.

Do you have a sense of that. I think there are more being put on hold.

I mean, we have not seen companies suddenly decide they're not going to go public.

It's really a matter of they've gotten.

Themselves ready, They've gotten approval, all the approvals they need. It's really now a matter of just having a wait and see attitude. And they should be, you know, in terms of thinking about how can they maximize value for their shareholders, how can they make sure that they're entering the markets in an environment that's welcoming and that could be you could find windows and pockets of time throughout the year to be able to do that, and we did, as I said, still have forty five IPOs in the

Do you see companies trying to decide or having a harder time deciding whether to IPO in New York or in the United States and the deepest markets of the world versus somewhere else base the turmoil that we've.

Seen, Well, we are really the home to global companies as well as American companies. The conversations continue to be very constructive, robust. They're they're very interested in coming and tapping the American investor and frankly the global investor race.

I mean the United States. We are the most liquid markets in the world.

We have the most the most variety of investors.

We have the deepest fools of liquidity.

I think those things are you know, constant attractions in terms of companies who want to go public. Again, it's really more a matter of timing than it's more a matter of when than if they want to come into the public.

Public markets in the United States.

I was here during Trump's inauguration while you were speaking to John and Lisa over in Davos, and you were very constructive on the incoming administration when it came to the excitement around IPOs, also deregulation. You're pushing for this regulation overhaul. Are you seeing what you were expecting back in Davos from mis administration now in their first one hundred days.

From a regulatory perspective, we are very excited about the fact that we can work constructively with the regulators that are coming into with the positions. With Chair Atkins coming into the SEC, he has deep understanding of the markets. He has a deep understanding of US capital.

Markets and also the need for.

Companies to have a good public company experience and how important that is in terms of giving citizens access to the growth of our economy. So we are looking forward

How big is the tone shift from the Biden administration in Gary Gensler to chair Atkins.

Well, he just came into office, so we are going to introduce ourselves to him. We actually do know him from when he was a commissioner many years ago, but reintroduce ourselves to him and we'll look forward to engaging with him as he gets going in his new seat.

You've been through a lot of different market right, James, how would you describe this one? How unique is it?

Well, you know, it's funny.

I have actually been part of many, many market events. I've been at NASAC started in as like thirty two years ago, so I've seen a lot and this is every single one of them is different. I have to say, there's no two situations where you see a lot of relative that are exactly the same.

In terms of the causes of volatility.

What we've seen in terms of the reactions from investors is pretty consistent. You know, when they know the thing, as I mentioned before, is that they the thing that they like the least is uncertainty, and in any period of time where you suddenly have a big moment of uncertainty, they take the same attitude, which is a risk off attitude. I'm going to take take someone positions out of the market.

Actually, over the last thirty.

Two years, Sidney Sol's unique this moment, that's for sure. Data, thanks for dropping by, Thanks you all the times. Thanks for beam with us a Data Fredmen. They're the chair and CEO of Nasdaq. This is the Bloomberg Survenance Podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV weekday mornings

Mm hmm.