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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amerie 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 Terminal and the Bloomberg Business app.
We'll begin this hour with stocks rising as traders increased risk appetite ahead of the Fed's rate decision. Christian Nolting of Deutsche Bank Private Bank Writing giving Given the positive macro environment, we expect twenty twenty six to be another constructive year, albeit with continuing market volatility. Christian joins us. Now, Christian, wonderful to see you, Thank you so much. So let's talk about twenty twenty six. Yes, continued volatility. Is there
a c change and where the leadership comes from? Akin to what we heard from ed Yard Denny or suddenly big tech doesn't cut it for leadership.
Everyone is a tech company.
Well, I would say we still count on tech and that tech delivers earnings. We do, though, expect that earnings growth is coming down a little bit, which I think is really healthy. But of course earnings will be very important, and those companies won't deliver earnings in twenty twenty six will certainly get say punished, and that could cause volatility
in the market. It's, by the way, one of the reasons why we are saying, probably for twenty twenty six, let's not be complacent and just expect the same really positive performance we've seen so far this year and likely to get into the end, I hope. So from that perspective, that's something to watch. But I still think THATAI is not a bubble. I think it's still a boom and a structural change, and that's why we are constructive for next year as well.
Do you think that the United States is still the epicenter of that constructive change? That was also a big part of edyr Danny's call is that the US has benefited disproportionately to this point and that is poised to change.
Well, I still look very easily at productivity, and that's the highest in the US and honestly, I don't think that's massively changing next year. Look at Europe, for example, productivity is far behind the US. Hopefully that's getting better with the fiscal policy here, but to be seen. But the thing to catch up on the US productivity is very, very tricky, at least in the short term. So longer
term maybe, but it's a long way to go. And from that perspective, I think we have seen this year the five but then with the investments coming in, I would say that's continuing.
You make a good note in your research about how the government stimulus we're going to get from the United States when it comes to one big beautiful bill is going to be timed after three Fed interest rate cuts. So Christian, looking at next year, do you think the Fed needs to cut anymore?
Well, I think if you look at the APPS level, I wouldn't be surprised if we see three cuts, So starting probably this week is the first, and then two more into next year. If you look at a twelve months time horizon, I think that could be justified because although there is physical spending, yes, and increasing, but I would say at this point in time, and you rightly said, we don't have all data yet, but I think the
US is a bit in a weaker spot. On the other end, something I think very important we also say in the outlook is inflation. So if you look at the ten year use treasuries, we think they could be four fifteen like exactly where we are right now in twelve months time, because inflation remains a topic. So we don't see inflation to substantially come down, but even go up to slightly from two point eight to two point nine. That's our forecast.
You also think that policy will deliver a cycracal impulse in Europe. What kind of policies are you looking at, because Europe at the moment, especially seeing the data out of China, is struggling.
That's correct, But of course I look at the largest economy, Germany, not because I'm obviously in Germany at this point time, but so far it was roughly not growing, so zero percent, and I do think it could go to one point three to one point five nixt year because not of monetary policy of the ECB. There we do expect the ECB to stay steady at two percent for the whole year next twenty twenty six, but it's fiscal policy, and that's why we see that government spending which is coming now.
It was a bit delayed, I have to say, but now we see that really happening, which is good news.
Christian.
How much is your constructive outlook next year really predicated on this idea of fiscal and monetary support from the United States in particular, but also globally, well.
It's a major source of growth absolutely, ba in the US. We do see Germany especially doing something. It's a lot of fiscal policy, but then the center winks as well. I think Bank of Japan, of course, is different. We expect two hikes there. But otherwise, if you look at monetary policy, we counted more than potentially eighty cuts of global sen I think that's quite a constructive environment, perse I would.
Say, which is probably the reason why if anyone has a deal to announce, let's announce it.
That seems to be the mood of the morning, the mood of the week, the mood of the month.
We've certainly seen that from the likes of Netflix and Warner Brothers.
We've seen that with the debt.
Issue, and from the likes of Oracle, which reports earnings this week, as well as Meta, as well as a whole host of the other tech names. I'm just wondering, at what point you think that it's going to become too much for debt markets to finance, given some of the concerns about the structural changes in this industry.
Yeah, I think there's a lot of discussion about this, but I think it's a normal development. We've seen this in other major structural trendships that companies started at one point in time to use also debt because free cashlow was not always enough. I think I've not seen really
some bond auctions struggling at this point in time. There's a lot of demand, and I think given all the discussion about sovereign debt, which is there because of all the fiscal policy, people look at also corporate bonds and if there's an attractive of course they will go for this, especially if it's investment grade, which we still recommend, or those spreads are quite low. So if I don't see a recession, which with all the fiscal policy is quite unlikely,
I think then it's still an interesting investment. And again I've not seen any bond auction struggling at this point in time. But of course it's something to be watched.
Just heading into next to your Christian what's your highest conviction trade?
I would still say is gold on the one hand, to be very honest. On the other hand, what I just said, corporate bonds looks very interesting. On the equity side with all that fiscal policy, I would say could also be constructive, but don't expect the same double digit performance. I would be okay if it's like single digit, high single digits, say eight to nine percent, that would rather be our forecast.
Stay with us. More Bloomberg Surveillance coming up after this. We'll let you got to go.
Through a process see what happens.
So Netflix a great company and they've done a phenomenal job. Ted is a fantastic man. I have a lot of respect for him. But it's a lot of market share. He's done one of the greatest jobs in the history of movies and other things that He's got a lot of interesting things happening. But it is a big market share. There's a question, but it could be a problem.
Here's the latest President Trump weighing in on Netflix, this seventy two billion dollar deal to buy Warner Brothers Discovery, saying it could face difficulty being approved due to antitrust worries joining us now as KEITHA Ron Knath and of Bloomberg Intelligence, Keith that we talked about this last week. This was going to be in albatross to get through the regulatory hurdles. How much bigger do they get over the weekend?
It definitely got a whole lot bigger With President Trump. I mean there was first the school from Lucas Shaw which seemed to suggest that Netflix had ted Surroundos had actually met with President Trump before the deal, and then of course you have him kind of weighing in. This is going to be a very very long road, Lisa, there is no doubt about it. We're going to get
a whole lot of noise. There is the constant question looming about the two services, the Netflix platform with over three hundred million subscribers, HBO Max with over one hundred, two hundred and thirty million subscribers. I mean that pretty much makes up over half the market, and so you know the question is going to be whether Netflix is going to be forced to divest HBO Max down the road.
But expect a lot of noise, and that's kind of reflected in the five point eight billion dollar termination fee, one of the biggest fees that we've seen so far in the history of media deals.
Yeah, and a question of how this is all going to get financed. Keith roganath and a Bloomberg Intelligence stay close, will be catching up with you throughout the day and week ahead. Robert Fishman of Maffat Nathanson writing, Ultimately, we think the likelihood of approval comes down to how successful Netflix will be in defining the market beyond the traditional media landscape.
Robert joins us.
Now, Robert, this is one of the most fascinating deals because it's at the cross section of politics and frankly a deep transfer of the media space. How do you expect Netflix to spin this to indicate that they're not quite as dominant as the potential four hundred and fifty million dollars million subscribers might suggest.
Yeah, thank you.
So, when you look at the market, it really comes down to how you define it. And when you look at the streaming market, Netflix is actually number two right now to YouTube. That's something that not a lot of people really.
Know out there.
So when you think about YouTube and the size and scale of a free platform, that's how Netflix is thinking about this in terms of the share that they get on the total streaming not just streaming, but the total viewing platform. And that doesn't even include other short form content like TikTok and Instagram, and so really, when you define what the marketplace is, that's how Netflix is going to look to take this to the regulatory approval process.
I think most people think that they're just going to talk about Amazon's Prime Walt Disney when it comes to streaming, so that likes of TikTok and YouTube make this a little bit more interesting. Do you think it's going to work with the regulators?
I mean, time will tell, but I do think Netflix clearly has a points right when thinking about who they're competing against and what the long term view of the media landscape looks like. YouTube is that biggest media player out there. That's what my colleague Michael Nathanson has been writing for a long time now. So we can't ignore YouTube and thinking about Alphabet and these other large digital
players when defining the market. So, yes, within streaming and subscription streaming, I should say Netflix.
Clearly has dominated and won that war.
But when you think about the broader market overall, I think you have to factor in these other players.
I think we also have to factor what the President United States said last night, Robert He said that this would be a big market share could be a problem. After our colleague Lucas Shaw reported that the co CEO of Netflix left the White House and apparently Trump had said Warner Brothers should just sell to the highest bidder. Do you think the President of United State, it's getting intimately involved in this deal potentially mean problems.
Yeah.
I mean there's a lot to still play out here. I think something that we're quitely very focused on right now is Paramount Skydance really done, And so I think that there's a lot more noise that could come within this whole bidding war. Clearly Netflix has won in terms of the announcement and moving forward with this regulatory process.
But what we're most interested right now is Paramount Skydance going to come back with a either more aggressive bid or are they going to take their bid and go hostile towards the shareholders.
Wellert, this feels existential, and I'm not sure who it's more existential for. It was thought to be more existential for Paramount Skydance, but suddenly there's a real question that maybe for Netflix it's equally existential. What do you think, I mean, who sort of guy has the bigger motivation to make this happen.
So I think Netflix has looked at this as an opportunistic, you know, rare opportunity. I think what was there was their words they used in terms of what this asset and these multiple assets and all of the premium ip that comes with it, thinking about the Warner Brothers studio, both theatrical TV studio and of course let's not forget HBO and all all of the premium content that comes out of that.
So from Netflix the standpoint.
They also have a lot of amazing data that they've gotten from Warner Brothers Discovery over the years of licensing that content and seeing how it performs on their platform.
So for them, they.
See this as clearly a very unique opportunity that they have to monetize this content, increase engagement and really you know, grow the assets some in some direction that they think that they could do a much better job of under their own platform than Warner Brothers Discovery could do with a subscale platform. Yes, it's clearly a big platform compared to some of the other competitors, but Netflix just takes
it to a different level. For the other guys, and you mentioned Paramount, Skuidance and even Comcast and what they're looking to do for Peacock, it does become some sort of an existential question because those are the platforms that need this content, we would argue even more to really help fix and define where their future is going in terms of how they're looking to compete with the Netflix's,
Disney's Amazons of the world. So for them, we do think that ultimately they need it more than Netflix does.
Just quickly here, Robert was looking at Cinemark shares on Friday down eight percent, AMC down almost three percent.
Are movies dead in the movie theater?
I definitely wouldn't call them dead, but this is a new threat.
Have been through definitely some some difficult years and have gotten through a lot of that and most of that on the other side.
This is this is a new one.
And in terms of what this means for theatrical releases, Netflix has already indicated that they plan to keep the business operations you know as as it currently stands today.
That means theatrical release releases for Warner Brothers Discovery, but clearly given Netflix's own strategy with theatrical releases, it raises questions in terms of what that ultimately means for how long the window is going to be for for the Warner Brothers Discovery releases that the Warner Brothers releases, and what Netflix will look to do with that with their own with their own content. So lots of questions that
this raises. So far, Netflix is saying status quo, but I think investors, as you point out, have some skepticism around that.
Stay with us Multpleinberg savannas coming up off to this.
Joining us now is it?
Patrick McHenry a former House Financial Services Committee chair, Patrick, great to have you.
Thank you so much for being with us.
What do you make of some of the noises coming from inside the White House about some controversy about how to message affordability issues?
Well, it is the driving issues, the driving issue that brought President Trump back to the White House one year ago, and it's a driving issue for voters at the last election. That message is very clear to the White House, and they have their best economic messenger, Scott Bessett, out there delivering what is a distinct message for this administration.
They're going to address it.
They believe that they can conquer it and they can actually get to a prosperity message rather than just conquering the price of things. But it's going to be it's going to be a tough effort because the stickiness of inflation has impacted fed policy. It obviously impacted and the last administration was unable to do anything.
And substance about it.
But the president believes they have a very good economic message. They have to just deliver on the regulatory relief and the tariff negotiations that are foremost with this administration.
Do you think the president himself needs to really look at the words he uses when he talks out affordability. There's this Wall Street Journal article that a lot of AIDS seldom needs to calibrate his message because remember during the Biden administration, they would tell you the economy was doing so well, but people weren't feeling it because of how high prices were.
Well, look, the Biden administration was, don't believe you're lying eyes. The economy is fantastic, Do not believe what you actually feel.
That is not a winning message.
It's a very bad message for politicians at every level to tell the voters that they're dumb and they don't know.
What they're thinking.
So you see a few things that the president floated, that this was a really partisan initiative to talk about affordability, it.
Was coming from the left.
I think you're going to see that dialed in in the coming weeks and coming months.
And I think the clear message.
Here came from Scott Bessett this weekend going out with really what is a honed economic message they had deeply contemplated.
Patrick, with all due respect, you say that it was a losing message from the Biden administration. Do you think that affordability is a hoax a winning message coming from the White House currently?
No, not at all.
And so what I'm saying is that the President is going to hone a message that is distinct as he does, and we're all going to watch his aides are going to watch how he hons it, but no one's going to control his message. They didn't do it the first term, they're not doing it the second term. And Scott Besson is out with a very honed, very focused economic message.
That's the person we have to dial to. We'll see what Kevin Hassett does this week, and whether they've doubled down on the Besset message that is actually a much more winning message than what President Trump rolled out, which was an echo of what Biden Biden did in his final year or two.
Patrick, do you think that messaging is enough or do you think that it's sort of imperative on this administration to deliver two thousand dollars checks or deliver other kinds of more significant measures that make people feel immediately like they are getting some sort of immediate benefits.
No, the immediate benefit has to come from the regulatory really, if they're driving the agencies, which takes time for it to be felt. The tax bill that was signed into law in record speed, six months earlier than they did in the first term, those things will have effects. But the big driver here and the big drag on the economy are tariffs. The cost of things come in the United States are more expensive because of tariffs. That does have an impact on the economy. It does have impact
on people's lived experience. Getting that right is the biggest economic delivery this administration could have. That is far better than any words that any politician can utter.
Patrick, do you think we're going to see some sort of reconciliation from Democrats and Republicans on what to do when it comes to healthcare. This week we should have a Senate vote on the enhanced Obamacare sub season. I'm just wondering if we're barreling once again, maybe on January thirtieth, to another government shutdown.
I think that's the most likely scenario, is that we're going we're barreling towards no extension of healthcare policy and then breaksmanship when it comes to government funding.
These things have not been resolved.
The Democratic Party is offered not what they said they would offer, which was a one year extension. They're asking for a three year extension of policy. They're unseerious. Republicans have had this problem for a very long time on healthcare policy. It's not that they lack a plan, it's
that they have too many plans. And so we're seeing this offering on the Senate floor this week, where you have multiple Republican proposals, none of which will get sixty votes, and then we see a unified Democratic Party on a singular approach, which is continuing subsidies.
I think this is.
Headed for your train wreck rather than a compromise.
This is the Bloomberg Survendons podcast, bringing you the best in markets, economics, antiopolitics. You can watch the show live on Bloomberg TV weekday mornings 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 Amp