Bloomberg Surveillance TV: April 29, 2025

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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie 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 Bloomberg

Good morning.

Is it too early to expect to see a hit from the policy volatility? Dan in Washington, No, I.

Think we should start to see that companies probably pause on their hiring if we don't know what the outlook is. A lot of companies are quite uncertain about where things are going. It makes sense that they're gonna pause on hiring. And then from the comments that you just read, there's seasonal factors weighing on the print, calendar factors weighing on the print. It makes sense for it to be below one hundred.

Has been described as a random number generator at time in the survey week claims are okay. Does that make a difference to you, No.

Because the seasonal stuff is not really an effect of firing. It's more just timing around the survey week compared to last month there was bad weather. That doesn't mean that there was actual firing, so that shouldn't correlate with the claims data. This is more function of this particular non farm pails print.

Does it matter which jobs end up getting removed or maybe seeing a weak performance in this report given the fact that there has been this ballast of healthcare as well as a couple of other sectors, including the government, that have really driven things over the past couple of years.

Yeah, And I think that's something that we're going to see over the next couple of months, is the parts of the labor market that were really strong should start to slow down. Government in particular healthcare is well, especially since grants are likely to be slowing down healthcare hiring, and then on top of that, you should start to see the cyclical parts of the economy slow down. That one I don't expect for this print necessarily. I think we should see a sort of more gradual slowdown from

You know, this has been a really confusing moment.

On one hand, a lot of people are predicting a lot of pain and potentially a real headwind to growth. On the other hand, you do have companies with drawing guidance. You have others like some of the travel companies cruise liners and hotels increasing theirseph fullier forecast because they see people still traveling, people still want to go around, The consumer is still strong.

How do you pair these two.

Ideas and put them together in some sort of outlook.

I think it makes sense today the economy is fine. There will be something unificant headwinds in the next couple of months unless Trump pulls back the tariffs.

On China in particular in a big way.

So if he doesn't do that in the next couple of weeks, we might be on a sort of unsustainable path towards recession base cases.

He probably pulls down.

The tariffs on China in particular fairly notably in the next couple of weeks, otherwise we might be looking at bare shelves and COVID like environment.

But it was a self inflicted one Stephanie, what's fairly notable in terms of pulling the tariffs down sixty percent?

That still feels like to many people.

In trade of bargo you need tariff rates to be below fifty five percent roughly all in. That includes the fentanyel tariffs, that includes the reciprocal tariffs. And then, by the way, you have to be cognizant that there are three oh one tariffs from the last trade war as well, some of them up to twenty five percent, right, so.

It's a massive cumulative rate.

You said something earlier, you said you don't expect companies to be hiring. They're on pause. Do you expect them to be firing at this moment.

At this moment, probably not.

There's just so much uncertainty, there was so much difficulty hiring in the past couple of years. It probably makes send for them to just pause for a little while.

Later on this morning, we get consumer confidence numbers, and within that you offer to read on attitudes to the labor market, how difficult or hard it might be to get a job. And I think this is really important on taking the temperature not only for that, but also the potential for second round effects when it comes to inflation and price hikes. Now, if I'm worried about getting a job, how likely is it that I'm going to get a pay rise anytime soon, or at least ask for one.

Probably less so, so you're probably going to start to see a little bit of deceleration from our wage perspective. The one thing is the immigration stuff actually has a different implication for the for the blue collar work or the lower end.

So there is a bit of stuff.

Happening kind of under the surface that is quite nuanced. So we might start to see an unusual tightening for blue collar worker, even though the white collar worker might actually be having a little bit more difficulty finding it.

So, just for the record, ask for a pay rise, right, really please? Always?

Okay, So that's you basically, So in some please.

Rachel, this can become self fulfilling, don't you think People start to worry about these things, so they back off, they stop spending, and it takes on a life of its.

Own, which is the reason why I think it's really salient that you mentioned these surveys and how people feel about their jobs, people staying longer, the quits rate. Later this morning, when we get that joelt Stata is going to be key in terms of people's confidence not just to ask for a raise, but to leave their jobs. And as we're talking about this ups and how's his plans? You got twenty thousand jobs this year as a result of.

The Amazon tie up.

You're seeing this on the margins, cost cutting coming more into the floor.

Where is the consumer price tolerance right now going into potentially higher prices, not very high.

So the biggest driver of consumer inflation expectations is past inflation. So today, the extent that consumers are worried about the inflation that we saw this time, they're quite worried about inflation that we're going to see in the future, in which case they're probably going to be pulling back on spending. They're gonna be very attuned to the prices that they're seeing on the shelves. So this is very different than

People weren't really expecting inflation, they didn't really know what it felt like.

This time, consumers field are very very different versus where we were.

Amazon has a different idea of how this might play out.

Right, Amazon, I think is gonna get very political and tru administration is not gonna like this. Punch Bowl says that they're going to add what the tariff rate is on top of the cumulative price. So if you're a consumer and you see something's five dollars and now it's ten to seven, whatever, you see the additional tariff input that is going to I think really irk the administration.

Yeah, the politics of that is going to be interesting for the next few months or so if that's how it plays out. Stephanie's good to see you as always. Thanks for dropping by, Stephanie roth Lair of Wolf Research. Let's turn to a busy week of data ahead and a busy week for Washington as well. The Fed's next rate decision just a week away. Colin Martin of Chiles Swelb writing, while self data has been concerning, the hard data has held up well. If this week's data disappoints,

It'd be pretty disappointing.

I mean, when we look at the labor market outlook, there's all these thoughts and concerns about what can happen as the tariffs are put in place over the next few months, and there isn't too much concern in the here and now opposite, you know, aside from what Wordslock just put out. I mean, I think the consensus estimate is one hundred and sixty five thousand something like that. If we were to see slow down here in April, I don't think that would change the FEDS calculus for next week.

We kind of heard that from a lot of FED officials in terms.

Of no move in May. Maybe it gets pulled up to June. I think it'd be bad for the markets, though, if we got that negative reading this early, this quickly, I think that'd be a pretty bad outcome.

When you see the markets, you're talking risk assets in particular, and what we have seen so far is a real divergence between the front end of the yield curve, which has really signals a great more pain than certainly risk assets, whether it's credit instruments or whether it's equity ones. Do you think that that divergence needs to close to more weakness on the risk side of things, or do you think that people are pricing in an overly large response by the Federal Reserve.

I don't think they are.

If you look at the ten year treasury, for example, I mean, that's been hovering in that four to two to four five range. I think a lot of that comes down to potential confidence dollar concerns, things like that. If you look at the Fed funds futures market, they have been pricing in relatively aggressive cuts.

We somewhat disagree with that.

We don't think we're going to see that slow down as quickly as a three or four rate cut outcome suggests. But it does come down to the labor market. If we see that weakening, we think the Fed over time will react. We're seeing Powell kind of pivotal away a little bit. I think a week and a half ago he mentioned maybe we'll focus on the inflation mandate more than the labor market mandate. That seems to be the minority right now, based on concerns and comments we've heard from other Fed officials.

This is a fascinating moment.

Where a lot of Fi Crui of gold mis Sax yesterday came on the show, and so that he actually prefers credit risk to sovereign risk right.

Now and talking about removing.

From some of the volatility that you're seeing in treasury markets to really go with corporations that are telling you we have no clue, that are one after another saying we can't give you any forward guidance.

Can you reconcile that? Do you agree with that?

You know somewhat, But I guess it depends how much credit risk we're talking about. We're still a little bit cautious on the very low rated parts of the market, I mean junk in general. We're worried that spreads can blow out if we get this prolonged trade war investment creed. We're still pretty comfortable taking that risk. So, whether it's credit on the corporate side, whether it's municipal credit risk, we're okay there because the hard data leading up to

But we're not really taking low credit risk right now.

This is a really tough time to be an investor.

I have to say, I can just begin to imagine there's so many different themes that are kind of overlaid. You've got this question of credit versus software risk, and then you've got a question of just international appetite for US dollars nominated assets, and that has been one of the biggest shifts over the past few weeks, is that

I could say we're talking about it a lot more with our clients than we were a few months ago and over the past few years. When we look at international markets a Schwab, it's not really a big aspect of what we look at I think most US investors from a bond standpoint, are probably under allocated to international debt. With the dollar being as strong as it's been over the past few years, there hasn't been as much of a case because you have that yield disadvantage when you

You talk about the idea of a.

Loss of confidence or sovereign risk. You don't hear about those concerns with some of the higher rated issuers and say Europe for example. So I think it's a decent option, but really just for investors who are probably un are allocated right now versus Hey take all your money out of the US and go into Europe for example.

You said you're talking to your clients about this.

Are they nervous about us losing something like reserve status?

Yes, full stop. I mean that's over the past few weeks we've done.

You've never heard this before.

We get it a lot.

It's a question that it always lingers, especially when you have the idea of rising debts, rising deficits. There's no shortage of concerns about the outlook for the dollar and how investors should be positioned. But over the past few weeks, especially since so called Liberation Day, the client events and requests for communications have been through the roof no supply,

It's not something that happens. I have an eye something that happens gradually, and we have start to say this type place the dollar stats awaken goldsteins to appreciate that's been a story for the last couple of years now. And some of the people would also point to the state of cufs. We've seen this well, less of a willingness to hold the long bonped particularly moments of strengths and equity markets. You're not even seeing sensual signs of this stime to accumulate.

What do you mean by.

Starting to accumulate with foreign investors and nervousness about long term.

Debt, nervousness about holding US assets, particularly a time of stress.

You know, I don't know if it's so much a nervousness. I think it's just a gradual shift away. Hey, there's a.

Lot going on right now. And if you're a foreign.

Investor, and it seems like it might be private investors as opposed to turn for banks, obviously these are negative headlines if you're a foreigner, just the idea of maybe I don't want to hold that asset right now. But John, you hit the nail on the head. It's a long term potential shift This takes years for something like this to happen, and it's not our outlook great now, mainly

And if you've been away for a while and came back and saw de x y A ninety nine, you probably wouldn't freak out.

That's for sure.

Going to see a Colin appreciate it as always, Colin mouse in there of Charles Swam on the latest Savita SUPERMANI but Bank for America writing, the only thing to fear is fear itself. Folks are worried about a recession, so they are acting recession rate speed and achieving policy clarity is healthy essence. Savita joined us now for more Sevita, good morning.

It's good to see it.

I'm morning great to see.

A lot of cuts to outlooks. We're seeing suspensions of guidance repeatedly across the board from Corporate America this morning. What does that mean for you and the team.

Yeah, well, I mean it's not great, It's definitely not good. We're seeing the revision ratio, just a number of cuts to number of raises to earnings approaching all time lows. Guidance is being suspended.

That's a hit.

I mean, we saw the same thing during COVID, probably more so during COVID because there was a much higher level of uncertainty.

And what we found was the companies that continued.

To guide actually traded at the widest premium to the non guiders or the suspenders that we've seen. So I think right now people want transparency, investors want to know, So that's that's one thing we're watching. I think what's interesting is that in the last week we've heard more companies talk about mitigation tactics for tariffs.

Than we did in prior weeks.

So I think that what we're in right now is the environment where corporates are doing what they always do, which is adapt, you know, figure out where they can, you know, kind of change things around the edges. And on top of that, we're seeing kind of a defer of big decisions. So it almost feels like we're in this phase where there's.

No hiring, but no firing.

There's you know, no new capital committed to projects, but projects aren't necessarily being canceled, and I think that's both good and bad.

I mean, this pause.

The longer it lasts, you know, the worse it gets for the economy. But at least we're not seeing just this sort of reactive firing canceling, you know, kind of a downdraft and activity.

This is important for the data that comes on Friday Pace. When you say adapt, then if they're not firing, how are they adapting?

What are they doing?

So what they're doing is they're sort of shifting supply chain. They're thinking about more manufacturing in the US.

I think that the idea that we've seen this.

Movie before, back in twenty eighteen, especially with respect to China, gives companies a little bit more confidence that they know how to negotiate this.

So I think that's a positive.

What's interesting, though, is that you're hearing more weakness around consumer and even in consumer staples. So if you think you can hide in the food stocks and the you know, the defense not necessarily working this time, and I think that's also noteworthy. I will tell you, I mean everything we're looking at really points us in one direction, which

You want to be in dividends. Rustle one thousand.

Value companies have a much higher tether to non discretionary spend, either services or goods.

Think about it.

I mean, if we're in an environment where we're cutting back, we're still going to pay insurance, We're still going to be utilities, heating, et cetera. So I think those types of areas of the market should hold up quite well.

And the value.

Index, the large pat value index has kind of consistently outperformed the growth indexes here, So I think I think that's where you really want to be to sort of cover yourself as opposed to just going pure defense of you know, kind of the old school defense playbook.

Yeah, to your point, some of the consumer staples craft hignds came out in cited worse than consumer sentiment and cut their forecast. Evidently, Oscar Myer Sausages as well as your hines catch up, but not necessarily moving off the shelves as quickly as in the past.

You said you've latched talk about hot sogs.

Yeah, well, I mean maybe that's something else. Maybe that's John in terms of healthcare exactly.

Baby.

You know, if you check your blood and then you check that oscar wedding, that's my boot.

You talk about yields, let's go there.

You have a very non consensus call on what US equity markets are implying about where treasure yields could go.

Yeah, seven percent?

Really seven percent?

So this is this is the analysis we said, Okay, equities and the core sector is actually quite unlevered and unusually healthy when it comes to leverage because all that leverage sits on.

Government balance sheets.

So if you look at the leverage ratio between corporates and the government, complete opposites.

And if you apply the math, so what we.

Found is that investors will pay a higher multiple if leverage risk is lower. If you apply that math to where bond yields are where the US government is it spits out yields around seven percent, it's a much higher level of return that investors need to see in an environment where leverage.

Is so high.

This is following the logic that the math is the same for US sovereign risks. I mean, it's it's the back of the envelope. But this raises this real question, which is, if there is a credit risk component to US sovereign debt, how much does that impede the equity story in the United States? Given that a lot of guests who come on this show say once ten year treasure yields hit five percent, forget about it, you're going to see some losses in equities.

Yeah, I don't necessarily think so.

I mean, let's say we're kind of becoming more like an emerging market. Sometimes emerging market equities do really well, especially when they're unlevered and there's potential for growth.

And I think that's where we are today. So if you look past.

Tariffs and you think about what the administration is trying to do, we're trying to get America manufacturing again. We're already seeing the seeds sewn for that story over the last four to eight years. So I think that the idea that stocks have to implode if yields hit five percent is completely false. In fact, we've looked at a lot of We've looked at this a lot of different ways.

I mean, think about it.

Yields right now are not unusually high. Seven percent sounds really high, but it's you know, we've been there, We've been higher in the past, and stocks have done okay, especially dividend yielding stocks. So I think this is an environment where we have to kind of recalibrate to what's actually going on.

The US government.

Debt levels are at you know, off the grid. We've never seen this before. We're seeing a closed economy. We're seeing signs of a closed economy. We're seeing signs of inflation. We want to see growth in the US. That's what the policymakers are trying to get. And all of that is likely to push up bond yields on the long end.

Yeah.

Right.

The administration, though, is targeting lower yields. If it hit seven percent, does that mean they failed?

I don't know if it's failing.

I mean, I think it's just sort of we're all anchoring to super low rates over the last twenty thirty years, and they've been falling the entire time. But think about where we are now. I mean, rate cycles last for decades. We were in a multi decade period where interest rates were falling, So I just think we should we just sort of gear ourselves for the idea that interest rates rising even from here is not necessarily anathema for stocks from a policy perspective.

I mean, nobody's calling me about, you know, if rates we hire or have we failed?

But I think that the idea is if rates move higher, but growth is accompanying that rate move, that's not a failure. It's actually kind of a more normal boom time economy. And I just think we're so not used to that because we haven't seen that in such a long time.

Why they're high that was important. Is it going to be the boom time economy that takes rates higher or is it going to be something else.

I think it's a whole bunch of things. The good case is positive growth. The bad case is sovereign risk. It's also a lack of demand for US treasuries because the buyers, you know, foreign buyers have left the building the FED used to buy treasuries.

I mean, one could argue.

That if we get to five percent on rates, the FED will step back in and start buying.

But I think even there.

You know, we've got an environment where, you know, again going back over time, we're just all looking at the last ten to twenty years, and we're thinking that five percent seems unsustainable.

Companies aren't geared for it. Companies are actually very geared for a higher rate in vironment.

They've paid down debt, they've locked in very low fixed rate obligations. Consumer balance sheets are pristine. I mean, for the most part, you're seeing you know, you're seeing some frame around the edges. But when you think about what just happened, the government gave the private sector a whole bunch of money. True, right, so what do you want to buy the government or the private sector.

But when I hear you, Suviat, I hear you talking about the potential for earnings, I don't hear you talking about the potential for what people will pay for those earnings. And when you talk about higher solvereign risk. When I start to think about that, when I start to think about what could happen to the self reign, that makes me think that people won't be willing to pay for earnings in the same way they were, particularly foreign investors.

Look, it's yeah, it's it's tricky because I think the S and P today is a very different animal than it's been historically. So saying a fifteen multiple, which is the long term average, you just slap that on and that's what you get.

What you get. I don't think that's fair.

I think that's overly punitive because when you look at the market today, it's you know, higher margin industries with a lot of potential to become even even higher. When you think about old economy sectors that can use a lot of this automation and tools, and you know, little AI sprinkled in to get more asset light and you know kind of improve margins and improve earnings variability. So

So I think by just sort of painting this.

Historical app everything has to trade at the same level. I think we're sort of oversimplifying really important details about.

US corporate bigdose of optimism this morning from Savita Subramani, but Bank for Americas VETA, thank you. Kathy Postchansik of Nationwide, writing, we think the economy out of just one hundred and twenty thousand jobs in April, Kathy joins us now to discuss Kathy, welcome to the program. One twenty we at risk of something much much lower.

Well, good morning, John.

Well, yeah, I do do think the risks are on the downside, but it's a bit early to look for the real negative numbers in payroll or they hit from the government layoffs and the hit to healthcare and even the cyclical sectors.

I think that's going to be a few months from now.

But we certainly have seen businesses just pull in their hiring range. And given that we do see churn in the labor market every month, the fact that you're just seeing companies paralyzed right and not hiring, that does impart a downward bias to the number.

Kathy, are there specifics that you're looking for with in like under the hood of the headline number that's going to be important to see.

Yeah, No, absolutely.

You know, one of the main engines of growth in payrolls has really been the healthcare and a social assistance sector.

Those sectors are.

Very much related and dependent on federal government activity and support. So we think those are areas that we'll start to see, you know, some softening, and then that means overall non farm payrolls you know, start the week, and really if you looked at like kind of what we would call the core cyplical sector, we had already seen the labor market losing some steam, but overall healthcare, education, any even the government sector was boosting the overall headline number.

Katy. We're going to get a host of other data before that, including the Jolts information, which includes the quits rate.

We'll get some more consumer confidence.

As John was just mentioning, I'm just wondering from your vantage point, as you look forward, how you reconcile the gap that we have seen between the soft data and the hard data. Do you agree with some of the earlier people earlier guests on the show said it's probably a four to six month lag before you see a similar type of deterioration in the hard data.

Yeah, I would agree with that.

I mean, maybe i'd say a little shorter, you know, three to six months, but by and large, you know, the movement in the soft data has been so pronounced you really have be careful of shrugging that off. Sometimes it can be a little bit misleading, especially the confidence numbers.

But at the moment we do see consumers also front loading, wanting to get ahead of the tariffs. What does this mean for spending at the second half of the year, Kathy.

So the data very skewed by the terriffs.

You know, you were talking about Mike was talking about the import data.

You know, yes, imporart is going.

To drag on GDP, but consumption is going to keep it elevated more than it otherwise would be.

So it's very skewed.

But that's pulling forward means it's just a lot less consumption in the second half of the year, regardless of what happens on the teriff Fright, Like, even if there was if you bought an auto or a big ticket item, you're not going to be buying one.

In the second half of the year.

So that's certainly going to be a negative for consumer spending in GDP growth in the second half of the year.

John has broughtup this point a lot. If you're going out and you're spending on big ticket items, say a car or some sort of suv, are you actually nervous about losing your job?

Well, it's a great question. I would say no.

I think that you know, buying lads to those are people who are just trying to get ahead of the price increase. I think if you're worried about losing your job, you probably hold on to your current car and just run it as long as you can, or looked to the used car market, which that's also going to feel upward pressure right in prices. We saw that during COVID,

Us thinking mild.

That means the unemploym rate goes up to five percent, that's still overall all historically pretty good labor market. But it's this uncertainty that is really I think killing the economy right now.

Kathy.

As we've seen, the Chairman of the Federal Reserve has chosen to prioritize anchoring inflation expectations. I just wonder from your perspective, how you imagine that might shape his approach the next Week's may think, yeah.

He's going to have to walk a tightrope as many times he does, especially during the press conference, but.

I don't think he'll back away from that.

I know some others have suggest been a little more devish right, some FED officials, but I think he'll maintain this idea the inflation expectations. How the worst outcome for them is it becomes embedded and becomes more persistent. One of the things I worry about is the roll out of the terriffs, Like we're still waiting to see if there's going to be additional sectoral tariffs. The longer that process gets elongated, the more inflation shock can be persistent.

Right.

I'd almost rather have all the terriffs at once.

I mean, it's not good for the economy, but in terms of inflation, it is really hard to gauge.

Then what's you know, transitory verse persistent.

Kathy, what's your take on some of the pressure that's come from the President on the chairman of the Federal Serve? How does that reshape the optics of them trying to ease sometime soon?

You know, I think Chairman Pow would say he ignores that, and they're a political and they're only looking the data, and I think by and large data is the case. I just worry a little bit about the optics for market and investors how they interpret that.

And it could be that you know, they.

Ease for the right reasons, but the market second guesses at and that would be bad, right, And then you get of long term interest rates rising by short term interest rates are lower because of inflation expectations rising, or an extra term premia embedded on the long end.

Kathy got to leave it there, Kathy pill chance it that of nationwide. This is the Bloomberg Seventans podcast, bringing you the best in markets, economics, an giopolitics. You can watch the show live on Bloomberg TV we tendings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app

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