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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
Terminal and the Bloomberg Business App. Mohammad al Erin of Queens College, Cambridge staying focused on the bond market and writing some label twenty twenty four as US brink in the return of bond Vigilantes. This greater focus on debt and political stability is likely to continue into twenty five, as will the extent of dispersion between the United States,
the Eurozone and Japan. Please to welcome a good friend of all of ours, Muhammad al Aerian Muhammad, Good morning, Good morning John, and a happy new year to years. The final Derby Concerts January tenth, So say it, oh there, Rose of Bloomberg Survivance Mohammed. Are the bond virgiliancies back and if so, what's changed? Why are they back?
They're back because of three issues, as you know, John, One is consistently stronger than expected US economic data. Two is the understanding that inflation will be sticky, and three is as we needed focus now on debt and deficits. Put these three things together, the US leads a global bond sell off, and then what that sell off does. It picks vulnerabilities in the system and weaknesses, and it
wouldn't have been good afternoon Britain. Would have just been afternoon Britain because they are facing the combination the emerging market, combination of higher yields and lower currency, which is really bad news for them right now.
How much of that is in their own control.
Some of it is in their own control, and it is a golden opportunity for this government to redouble or westart is economic approach, which has lost its way a little bit in the last few months. But they will be looking at the US jobs report and critically the CPI coming up. You know, it's not so long ago, Lisa that we used to say, okay, forget about CPI. Inflation's under control all that matters the jobs report. Now suddenly we've realized that both are in play, inflation and the employment spot.
So when we say afternoon in Great Britain, because no one's saying it's particularly good right now, what is better for them an upside surprise to labor markets or downside surprise at a time when potentially that could spur some sort of risk off move, at a time when even in the United States people really questioning the sustainability of what's going on.
Yeah, and that's the if in the US you really want an upside surprise, if we had the choice between the two, you take an upside surprise. If you're in Britain, you take a downside surprise. Yields have got to stabilize otherwise you're risk triggering these dynamics that can really hurt. So they would look, they would hope for a downside surprise that brings yields down here and puts down the pressure on their yields.
When you talk about bond vigilantes and how they find the most vulnerable spots, how long is it before they find the United States particularly vulnerable? And this sort of goes to the heart of the question that Torsten Slock raised, which is, it is highly unusual to see the long end yield rise by one hundred basis points after a series of one hundred basist points are very cuts from the Federal Reserve. Do you have a sense that maybe the US is one of those vulnerable spots at this
point in relative terms? No?
You know, you've heard me say over and over again, the good, the bad, and the ugly. The good is the US, The baddest China, and the UK is Europe, including the UK. The ugly is Europe, including the UK. So US, China, Europe, including the UK. They'll focus on the ugly first and then they'll creed pop.
The US has.
A particularly a good spot because higher yields here associated with stronger growth. That is not the case in Europe.
So why do you think the Federal Reserve is so confused? At least they sound confused by some on these conference back in December.
How much time do we have?
We've got enough time to get through it all.
Okay, So they've been confusing their analysis, they've been confused in their communication, they've been confusing their approach. When you're data dependent and you're just looking at the future through the lens of the past. You will get more and more confused as we go through these changes. And we haven't even talked about policy uncertainty, which adds is the reality is right now we could solve at different levels
of employment and inflation. Whatever scenario you had for recession, soft landing, no landing, whatever probabilities you had, now each of them is associated with different levels of inflation, and that is new. So the Fed, and you've heard me say this for a long time, has got to get more strategic in this approach and has has got to stop being excessively data dependent.
They say this word, this phrase that you use policy uncertainty, and when I hear it, I just think Donald Trump. Well they actually mean to say it's Donald Trump. And you saw that in the minutes, and I think we heard that in the news conference with Chairman Poal. I'm struggling to understand this, and I'd love your opinion on this. Why some officials on the Federal Reserve are willing to preemp policy changes and factor that into their observations and
their forecasts, but unwilling to do so. When it was Biden in the White House and he was pushing through massive fiscal stimulus into a supply constrained economy, and they sat there and let inflation rip. What explains the difference between the behavior and response and the approach to two different presidents.
No, you've got to ask them. We thought we understood what the FED. How the FED approached this when Chapau said, quote something along lines that we don't speculate, we don't predict, and we don't assume anything about policies. So everybody assumed, you know what, let's wait and see and what we're hearing from the FED does not incorporate forecasts about policy changes. And then the whole thing got modeled, and now some do, some don't.
You're not quite sure what.
And I think this is part of a bigger issue, which is FED communication has gotten really confused. Bill Dudley had a really good piece in Rumor Opinion about this. And it does matter because the FED is supposed to reduce volatility, not contribute to volatility, and for the last few years the FED has contributed to volatility.
How do they not contribute to volatility when they are facing off with policies that offer up profoundly different contours of inflation and growth?
So first of all, they've got to either take the approach of this is what we think the baseline is, we are gonna check it every single day against more signs out of DC. Alternatively, we're not incorporating any new policies. Sometimes you need a top down, you need the chair to say this is the approach we're going to take for now, because the muddled middle causes all sorts of spillover effects that are not helpful at all to them.
So let's talk about the spillover effects. We've talked before about how their at risk of maybe allowing inflation to creep higher than have to hike rates later, the idea of not recognizing inflation enough. There's the other side of things. If they hold rates too high for too long, they could cause a deterioration and dramatic iteration in the economy right now, which is the bigger risk.
So the only reason we talk about the inflation risk is because we compare it to an arbitrary target that I'm willing to bet if we were to set today, we would not set at two percent. We'd set at two and a half to three. Every other indication of inflation suggested inflation expectations are stable. It just was structurally happening here and in the rest of the world, means that you're going to run the economy for now at a higher equilibrium inflation rate than before, and it's not.
So.
The reason why we're getting in this whole thing is because we are judging ourselves against a target that itself is not only arbitrary, but would not have been the target we would have chosen today. I don't worry, honestly about inflation until I have evidence that inflation expectations are the anchored, and there's no evidence of that at all. I do worry that if the FED truly believes that it has to achieve two percent and wants to do it,
it's going to have to hike rates this year. And if it hikes races this year, it's going to pull the rug from under US growth. It's going to pull the work from under US investment. This is how important it is. So my expectation is that fudge they'll say, we continue to pursue two percent, but down the road they'll stick with a two and a half percent target forecast for now, saying on the way to two percent, but we will basically be living with a high inflation target.
Mohammed, We're lucky to have you. I'm Marie joins Us now from Washington with admires of Raima James Amory.
I would see a good morning, Jonathan.
The clock is literally ticking for TikTok and today they're going to have their day at the Supreme Court to try to combat this bill and they will either be banned unless they divest away from Byteedance, this Chinese company.
What do you think happens ed I think on January nineteenth, TikTok ceases to exist here in the United States. I think the wild card here is that under the law, the President of the United States has an ability to extend one time for ninety days. So the question that I have is, come January twentieth, the next day, does Trump activate that ninety day extension and is there a deal worked out?
It sounds like he's going to because he's flip flopped since his first time in office in the Oval Office when he talked about the security concerns of TikTok that now he thinks actually, in an interview with my colleagues over the summer, talked about the fact that we if you don't have TikTok, then Meta is too big, and he understands a lot of individuals get their news from there. It seems like he wants to keep it around. So what are the options even if there's an extension.
So after the ninety days, one of the things we went through the statute at Raymond James yesterday published a report about this, and ultimately it is up to the president to declar that what has happened with the divestment or for foreign ownership has met the needs of the law. And so as long as the president declars, it's okay. The problem for Trump, though, is that if there is not a divestment, a five thousand dollars per user fee
gets kicked in. And I don't think the app stores at Apple or Google or Oracle's hosting of this wants to exist because when you look at the number of users, I add that up to about an eighty five billion dollar fine. And unless you change the law or you have this divested, it will cease to exist, assuming it is upheld by the Supreme Court.
Who can buy this. This isn't even like Elon Musk buying Twitter. This is an incredibly expensive company.
I assume the money would be there.
The bigger question for me is will the Chinese government allow it to be sold, Because ultimately, if you yeah, because you can open up the hood, you look in in everything that the national security folks have said about keystroke capture, about geolocation, about the algorithm potentially manipulating the users of TikTok, all of that will be very apparent, and we will know even more of how the Chinese have been spying on Americans using a very popular app.
Trump will also be breaking with his national security advisor and a secretary.
Of State, and I mean like Trump will break with his administration whenever he wants. I do think it's important that you highlight the kind of animis that he's had towards Meta and towards the potential benefit to Instagram. Because of this, it does look like some of that animis might be reduced over the actions by Meta by Mark Zuckerberg in recent weeks trying to get him okay.
Concerns grow on a daylight today when CNN comes out and says that Chinese hackers breach Siphius in December, not really as surprise, as Jonathan said, because we do know that there was Chinese hackers breaching the Treasury Department, but isn't this doesnes has become even more of a national security concern And what's going to be the response from Trump two point zero to Beijing.
Yeah, I mean, I think it is a extraordinary act that we knew that there were Chinese hackers that access Treasury. It was downplayed by Janet Yellen recently, but for them to have hacked into Siphius, the Committee on Foreign Investment into the United States, there was a deal that was pending me Bon Steel trying to buy us steal. We're looking at all of the potential national security concerns about
that me Bon's operations within China. For them to be looking for exactly what was happening at Cyphius at that time is a huge concern. And that's why I've always said almost everything in DC related to China is bipartisan. The only place you'd don't want to be is being seen on being on China side.
Well, except for potentially one we are waiting for a Commerce Department to come out and this was a bloomberg scoop.
But I know you've been.
Writing about it for months about Ai chips from Nvidia and all roads really lead to China when it comes to wanting to make those export controls tougher.
Correct.
Yeah, So as early as today, and it's going to happen between now in January twentieth, there's going to be a final export control rule that comes out from the Biden administration. This is going to be focused on the number of AI chips that are going to countries that we have concerns about. Now we've blocked almost everything going
to China or to Russia. We're going to allow everything to continue to go to our closest allies, but there's going to be a tier two company or country list where we're going to put caps on how much can the Middle East get, how much can Southeast Asia receive. Now, generally speaking, I would have expected this to be bipartisan, but you have Ted Cruz tweeting out last night strong opposition. You have Nvidia coming out with strong opposition. So the question I.
Have is as going to allies or because the time.
No, because they're going to restrict it going into some Southeast Asian in Middle Eastern countries. The real issue here is almost all of our export controls usually deals with the physical location. But when you're developing data centers and you can access that via the cloud, it might not matter if that AI chip can't go into China. If you build that data center in Malaysia or you build that data center in the UAE, if they have that
cloud access to it, they've essentially had that technology. So the chips are going to be limited, and there's going to be new rules related to data centers to make sure that they are certified and verified that they're not giving this technology to China.
So if you have Republicans already coming out and saying we don't want to see this happen, Biden administration is doing it on literally their final days in office. Does Trump reverse it?
I think it's going to be hard for him to reverse. What they're going to do is it's an interim final rule DC speak to It goes into effect immediately, but there's an opportunity for the Trump administration to put the final tweaks on that. If the caps are too low, look for foreign governments to be very transactional. I think Saudi Arabia will put a lot of pressure that if their cap is too low, Other Gulf countries, other kind
of parts of the tariff conversation. This could be a tit for tat hey, I'm willing to do X, Y and Z to avoid tariffs, including trying to remove these these AI caps. Is actually going to give Trump a new tool in his negotiations globally in terms of what does the US have someone that these other countries want.
I just want to finally end on this point. You're talking to everyone on the Hill about the process of how his agenda gets accomplished. The bond market, though, is focused on the price.
What do you think we're going to.
See in terms of how big this bill is going to be?
Yeah, So I put the over under as it relates to both an extension of the tax cuts and if we do an immigration energy defense bill at one point point nine trillion, why do I do that? Because that was the cost of the American Rescue Plan. I don't see Republicans doing a bill bigger than build back better for Biden, and so I do think that we're on the under of that.
But extending the tax cuts is yes.
Ten years of the tax cuts is four point six trillion dollars. Four or five years of the tax cuts is about one point five trillion. What would you do? I probably see it goes to four or five years. The original was eight. You say, hey, we did about half as good in trying to get those other things. People have been too focused on the ten year extension. I think it ends with a much shorter extension.
Ed Mills, thank you so much for joining me in the studio this morning. From DC Jonathan a long list of issues that the incoming Trump administration is going to deal with, TikTok, export controls, and of course trying to get this agenda through which ed Mill says could be under true trillion dollars.
I might a freie time thank you with this amount of tybe with Stephanie Roth the Wold Race, said Stephanie, and wanted, that's quite a number.
What you might here is I mean, first of all, it is quite a number, but average early earnings were point two eight. So this is kind of a goldilocks type of report, and this in a way, of course, markets are training it as a hotish print, but the reality is that wages are growing at below four percent, even with job gains running the strong.
So we don't have to stop talking about interests, right hikes anytime soon at the Federal Reserve.
I don't think we have to be talking about hikes, but we have to start thinking about when is the FED going to be pausing?
That's in the real question.
Well now, I think that that's what people are saying, right, they're on pause period.
I think the question is where they're going to revive.
I want to go to the point that you're making about inflation and that this does sort of question just how much inflationary pressure is under the hood of some of these gains. How accurate I have the average hourly earnings actually been when it comes to inflationary pressures. Because ultimately, if people have jobs, they have been shown the willingness, particularly of millennials and paying premium form seats on airplanes
and other things. I mean, there still is the impetus to spend if you have a job.
Yeah, I mean it all comes down to the labor market. If the labor market remains healthy, then people are going to go out and spend. The thing is that wage growth is still running, you know that four percent, which given where productivity is, the FED can kind of accept something like that. So, and the FED has said this a couple of times that they don't believe that the
labor market is really causing significant inflationary pressures. So now the question is just that can the fence they stay on pause from here or can they cut one.
Or two more times.
So Wednesday's ADP numbers on earnings showed a difference between four percent wage increases for those who are on the same job seven percent for those who are changing jobs. And the question becomes, if we continue to create so many jobs, if vacancy is awaited a six month high, at what point do earnings become the lagging indicator? At what point do earnings respond to what's happening in terms of the quantity of jobs.
Yeah, and that's that's the trend that we saw, you know, in twenty twenty two and twenty twenty three, and the labor markets are to heat heat, heat up. Is that there was that d differentiation between job switchers and job stayers, and that is something to keep a close eye on.
But as of now, the you know, the wage data have been fairly contained and if we didn't see a a wage price spiral on twenty twenty two and twenty twenty three, it's very unlikely we'll see at this time around that was the the real strength in the labor market, and it didn't really unfold into something that was out of controlled wage inflation. So this time I don't anticipate that will be the case. To get to your your your question earlier, how accurate is is the wage data from month to month?
Not great?
This this probably was had some calendar effects that pushed down some of the data, but on a year of a year basis, it's in line close to to what the ECI is saying, which is kind of the gold standard anyway, So I would say, y, you know, yeah, maybe it was uh artificially depressed by some of the calendar effects, but the reality is wage growth is running a something close to four percent, which is somewhat tolerable.
For the FED.
So how confident can we be that we don't get these second round effect because some economists will tell you it's not surprising. We didn't get it two twenty twenty three because people had no memory of inflation, so they didn't think that they needed to adjust. Now three years later, people have a fresh memory of inflation. So can we be as confident that it's just one off? We don't get the anticipatory wage demands. We don't get anticipatory price increases, I mean.
And that's gonna be the challenge for the Fed of just probably why they're going to have to sort of wait this out for a little while. And with tariffs, of course, that makes it a little bit more challenging. But I think at the end of the day, we'll see that the inflation is probably gonna, say, sticky somewhere between two and two and a half percent. But I don't think we're risking three four five percent like we
saw last time. So I think this challenge is the narrative that inflation is gonna easily get back down towards two percent, but something that we saw the last time has to be driven by supply chain issues, which we currently don't really have.
If you want just join, I guess welcome to the program. Just moments ago, a big upside surprise on a pay roaster pull coming in at T fifty six the estimate one to sixty five unemployment drum them back as well, to four point one percent from four point two. Off the back of that, some big moves in the bond market, particularly the front end of the curve. The two year up by double digits. Off the back of that, as you might expand some dollar strength. Euro dollar getting closer
and closer to break in one oh two. And if you check out the equity market, equity features down across the board on the S and P five hundred, down by point eight on the rustle of small caps, negative by one point seven percent. We'll see if all of this sticks. We are on five percent watch on a thirty eight yield Lisa. The higher the session four ninety nine eighty one, and.
We're pushing back the potential for our first rate cut of twenty twenty five from the federal Reserve to at one point October. Now we're back to September, but really pushing it back. This is where we start to wonder, particularly the small cap area, how much this becomes restrictive for a small subset of companies. And I think about housing, I think about mortgage rates and how much that can remain dissonant from the rest of the strength from elsewhere.
Before you know it actually calls into question some of these dynamics.
Joining us now is Jeff Rosenberg of Blank Rock. He's got thoughts on this market, and I'm sure Jeff first the votes you, Sarah, and welcome to the program. Your reaction to that number you from twelve minutes ago.
Yeah, well, clearly it's a strong number, and that's the that's the market reaction. That's the first point. Second thing is the retail component here. It's worth kind of like thinking about what's going on here. So it's it's having kind of an effect in two parts of the report. The retail numbers are underlying are stronger because of the shift between November being negative because of the lateness of Thanksgiving and Black Friday, so you're seeing a little bit
of a flattering on the headline number. The other thing is that that average hourly earnings which your last guest was talking about, which is kind of like the oh, it's maybe not so strong.
We don't have to worry about inflation.
Because it's you know, a weaker average hourly earnings print. You gotta be careful. And the question was, you know,
how reliable is it on these monthly payroll reports. The problem is the mixed shift really can mess with that number and the boost to retail this month, maybe factoring in those tend to be lower paying jobs, and so it may be actually understating the average hour of the earnings, which if you didn't have that mixshift, this may actually be even a stronger picture, which is then the third point. You know, this is just financial conditions tightening because it's
less need for the FED to cut. You know, we priced out most of that, Most of that shift happened in the FOMC December meeting. But this is even further pushing it along the way. Now, Jonathan, you asked, you know, does that mean, you know, when do we start talking about the FED having to high rates?
No?
No, no, this is pricing out any need for the FED to be cutting and pushing on my long standing you know refrain every time I come on the show. It's just financial conditions are really undermining the fed's view that their policy is really that tight, and so they don't need to be worried about.
How tight their policy is.
And so this is pricing out some of those future cuts for twenty twenty five, not that we had that many priced in to begin with.
Jeff, you've asked and answered most of the questions we had, So I do want to go to this question of what do you do with this?
Right?
I mean, are you does this make you more bearish on equities or does it actually make you more bullish, because ultimately you're not going to find the value in fixed income. It is going to come from the growth and the strength that we just saw reflected. Yeah.
Yeah, and you touched on it as well.
You know, it's a good report, and Muhammed's first point was like, hey, this is good news. Is American exceptionalism. This is a strong economy. You know, that should be good for stocks and risky assets. And I think that ultimately is the case. I think the market and the valuations have to get over the idea that you're facing some higher interest rates.
I think from the fixed income lens.
The higher interest rates are actually bringing value relative value back to fixed income. You know, we've really shifted the pricing of how much do we need the FED to support. You talked in the earlier segment about the asymmetry. I very much agree with that that the asymmetry is now kind of more in favor of fixed income in terms of how much war rates can go higher versus the potential.
For them to go lower.
And we priced out a lot of that expectation of the support from the FEN. I think that's helpful to the pricing of the bond market and the kind of the selloff that we're seeing here in the front end, you know, leading, I think that has reinforced the attractiveness of yield in the front end of the yield curve.
Jeff, it seems that we're very comfortable with the notion that this pushes back whatever weight hikes, who weight cuts we're going to get and we're going to get fewer, et cetera. But the minute someone mentions a weight hike, everybody gets really really uncomfortable. So no, no, no, we're not there yet. What does it take to get there? I think it takes a lot to get there.
I mean that's a very big swing, and obviously what it takes to get there, Muhammad, And you know this is it's inflation, and not just like the somewhat unease of sticky inflation, but a complete change in the narrative that for all the forecasting of the underlying opponents and the imputed data and our understanding of inflation, that we've just gotten that so wrong. And there's a reacceleration in inflation.
I think you have to have a reacceleration, not the slowing in the movement to two percent, to shift the FED and the markets expectation that this goes to tightening, I think it's a very high bar to get there, and we're really just pricing out the last few expected cuts.
In twenty twenty five.
Well, Jeff, let me put it another way, then, how high is the boun to cut again given what we've just seen over the past few months.
Yeah, you know, I don't think the bar to cut again and to change the expectations on cuttings that high either. I mean, look at what we went through last year in terms of the swings in market expectations on what the FED would do and the FED zone forecasting on what it would do, and the extreme data dependence here. So the bar to more cutting is we're seeing that stabilization in inflation, not the risk on inflation, and for
whatever reason, obviously not the story today. You're seeing that slow down that the FED is feared in the labor markets, and a couple of data points on labor markets again, now what we're seeing today sub one hundred, you know, pictures increases in unemployment rates. You get two reports in a row of that, you can very quickly shift the narrative back to O, the Fed's got to cut two maybe three because of this extreme data dependence that we have the FED driving market expectations.
I see Stephanie Ross nodding along. I do want to just point out that briefly the thirty year yield did hop above five percent before coming back down, but it's right now four point nine up there, it is five percent. Once again, you're shaking your head. Do you agree with what he's saying?
Yeah, I agree. The Fed's been data dependent, but like very much on every data point right, So to the extent that we have another couple of prints that are a little bit softer in the beginning part of you know, in the next couple of months, then the narrative can shift to some extent. We've seen every three months in the market has been swinging from soft landing, the hard landing to no landing, and realistically you're probably somewhere in between.
So base case at this point is that you know, the narrative is gonna continue for a while, then you're gonna have the Q one inflation seasonality problems again. So it's probably gonna be towards the middle part of the year when the when we could start talking about potential cuts again.
So Stephanie said, the data. The FED is data dependent, not only overall, but every single data point, which of course power would push back on you and say no, no, And that makes us all data dependent, right, and it makes us all add volatility to a market because we all we get swung around. Doesn't that bother you? Doesn't it bother you that everybody has become so data dependent.
It does.
Nobody should be caring about the unemployment rate to three decimals and averagellit yearning to the same kind of thing. I just had that conversation with Tom Keane earlier. It makes us uncomfortable, but we all have to We all are in this, in this environment, even though they're trying to steer us away from that. In theory, the FED continues to get swung around by every data point, So then we all have to focus on the same thing and figure out every new once within every single print.
The retail thing is a good point in the sense that it was minus twenty nine last time and now it's jumped back up forty three. Realistically, that drove some of the strength and you know, you probably should smooth that out but we're in an environment that it's going to be tough, and by the way, next print, we're gonna be impacted by all of the fires, and that's going to be a really messy data point as well.
Do you think of any fed that got swung around as much as this feed is getting swung around? I mean, I think back of the financial I mean I think back of so many bigger episodes.
To go post pandemic, post pandemic. This Federal Reserve allowed the administration of the time to come out with huge fiscal plans and the supplying constrained economy and just say.
We'll look through it.
We'll look through it. They weren't dated data dependent. Then they waited the change in behavior on the f WEMC. I hear a lot of economists present company excluded a lot of economists who are more keen to defend the institution that provide critical analysis of it. That's really problematic
for me. For economists on Wall Street who are held bent on making sure that their friends at the FMC still give them access to have conversations at NAPE, etc. They're actually just calling things out for the way they see it. This Federal Reserve has behaved very differently under Biden, and it's changed when Donald Trump has come into power. They've opened the door to those accusations themselves with that news conference back in December, without a doubt.
Do you agree, No, I agree that now we have a FED that's navigating two things, the monetary policy landscape and the political landscape.
It's not navigating one thing anymore. It's not navigating two things.
And we just have to keep.
That in mind.
Why wasn't it navigating the political landscape two three years ago? Well, it's clear that fiscal policy was in the driving sea.
I think two three years ago they were asleep and the worsh to call inflation transitory. Ignoring the policy side, ignoring all the uncertainty was a big mistake. And because of that, they became extremely data dependent and they don't even want to look forward anymore. And it's ironic because we're dealing with markets that are supposed to be looking forward. We're supposed to be discounting the future, right, and yet we've all become completely dependent on what's just happened.
It's absurd, but that is what happens.
When the institution, with the printing press in the basement decides that it will become excessively data dependent. It turns us all into extreme data dependence.
They may again at the end of this month, we'll get two more data points before then. CPI is one, the inauguration is another. What's this news conference, this mating rather going to look like at the end of this month.
Yeah, I mean I.
Think we're going to well, let's first talk about maybe CPI, because that we're looking for something that should be a little bit more soft, something Z point two four percent on core, which you know should should be Okay, I don't think it's going to change anybody, especially after this print. This print made the CPI a lot less important. And then we're going to have to see from the Trump administration, what are we what's going to happen in terms of immigration.
That's going to be one of the biggest things that's going to happen, probably right off the bat. How M how much or how M how how aggresive are they gonna go? It's probably gonna be at the uh A Y a lot of a lot of you know, I'll bark at the beginning, and then realistic, we're not gonna see that much deportations because that's gonna require funding that they don't have, and it's probably just gonna be people rolling off the humanitarian parole uh in TPC. But that's
gonna be a big thing to watch out for. And then the second is what a w what's gonna happen? From a tariff perspective, we haven't really heard much specifics. Uh, you know, we're we're we're l we're winding back to the announcement on Canada and Mexico. Are we gonna get more of that? Probably not, and we're not hearing much of it. But those are the two things we're looking out for most from him tariffs and uh uh tariffs and uh what we're h hearing from integration perspective.
Jeff, as an investor who has to take a longer term view, how do you remain independent from the successive data dependence? So we were just talking about how do you have any conviction with calls at a time where people are talking about how much the parameters could change based on whether it's CPI or whether it's Jan twentieth and the inauguration.
Yeah, it's really recognizing, you know, the things that you think you can forecast and recognizing the things.
That are just not forecastable.
And we have a little saying if you can't forecast, and I would put all of the policy uncertainties that were just described in that category, then you have to observe. And so you just kind of like know what you can kind of control, and know what you can't control, know what you can forecast, know what you can't forecast, try not to overreact to every data point. But on the fiscal policy, I mean that is that is basically the story for the twenty twenty five outlooks is uncertainty
and unforecastability. So we're gonna have to kind of recognize that and we're going to sit back, We're going to be patient, We're going to observe, and then you know, as the information becomes more clear, that's when you can take action in your portfolio.
Is to try to do it ahead of time.
I think you just have to recognize that it's a very difficult exercise both forecasting what is going to be the policy and equally forecasting what is going to be the market reaction to that. Getting both of those rights very unlikely. So you're going to have to sit back and wait for the data to reveal itself.
Hey, Jeff, appreciate your time, sir. As always, Jeff Rosenberg, there at blankrupt will take a step back and a big deep breath and look ahead to see PI next Wednesday, as well as some bank earnings too.
Mohamma.
Just a final thought around the table. We came into twenty five thinking about US exceptionalism and global divergence. And Lisa and I've been talking about this for a number of days now, number of weeks. The extent to which we can keep stretching that rubber band, how far can we take that, How much oxygen is left in that story before we get these negative feedback loops and things start to move in the other direction.
I mean, that's a great question, and I'm not sure I can answer that, but I can tell you that the theme of dispersion is really important because there's a limit to how long you can run a system with significant dispersion. And we have two main discerssion issue US visay the rest of the world. The hope is the rest of the world comes up to the US. The fears of the rest of the world drags the US down, and then within our economy, low income versus the rest.
Low income is the struggling right now. We must not forget that, and these numbers cannot make us not also consider what's happening at that end, because at some point that we can can migrate up. So the theme we're going to be talking about a lot is forget about averages, look at sectors, and that is in the marketplace. We've gone from a market focus to a theme focus, and now it's going to all be about individual names.
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