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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and a Marie Hordernt. 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. Here's a few
on Wall Street this morning. Julian and Manuel, I've ever course saying it's not yet the time to parle in right in the following, A pullback is our base case, given the parabolic move already and the risks from tariffs and policy to the economy. Judy had joined us now for more. Julian, good morning, good morning. Aha, we take a beat. How's it feel the last quarter? What was that like for you?
Look?
Incredible in many respects.
So the market actually did what it was supposed to do. Okay, you had this incredible surprise reaction to something where we were completely not used to what we were seeing, which was a tariff schedule, you know, higher than smooth Holly. And then you got what you actually didn't get at the bottom in October of twenty twenty two, a volatility event, an actual capitulation that really presented the buying opportunity very
very clearly. And from our point of view, the surprise is the unrelenting speed with which the market continues the advance.
Massive move twenty percent plus off the lows on the S and P thirty percent something like that in the last nine one hundred. I sait here, and I wonder looking out twelve months now, can you say with confidence the outlook for runnings is getting better or worse?
At this point it's it's definitely getting better, okay, because basically what has happened is you've had this adjustment from tariffs, and now that there is this presumption that you are going to get and we can talk about the effect on interest rates later or what have you, that you're going to get some form of stimulus that is going
to be more favorable to the twenty twenty six picture. Obviously, the twenty twenty five picture remains in flux, and we're going to find that out in a couple of weeks when the earning seasons start. But in general, the whole narrative of the economy having avoided a recession is a reasonably positive backdrop.
Let's put the one big beautiful bill on the side for one second and just go to the tariffs, which you mentioned are still at the highest going back to the nineteen thirties and haven't fully been priced in yet. When it comes to whether it's consumer prices, whether it's companies absorbing it in the profit margins, what makes you think this isn't going to show up in earnings and a material hit to profit margins for a significant number of companies.
Well, so, the work that we've done was the expectation that roughly it be a fifty to fifty split. You know, larger companies will will shoulder less, smaller companies will will shoulder more of.
The tariff hit.
And yes, it definitely will fall into earnings. But again there is this presumption that it is the one time hit and that there will be this transition period, which obviously for the market began in the spring, but we're already sort of pricing through that. And again, what it points to is the resilience of corporate America, the ability to adapt, the ability to move supply chains, and the ability to figure out what a correct pricing strategy is.
We're putting an economic narrative to a market story, to something that really is big tech names that continue to innovate in a technological boom that is trickling out into other companies at the same time that there are these independent factors that are very real that are affecting other asset classes. And we talked about the dollar that might be some of the vigilantes are going, or this question of where the marginal buyer is going to be, how
the market responds to negative news in the economy. How much are we making an economic argument for something that is now increasingly divorced from the economy.
Well, again stepping back the story of this year, and in large part from our point of view, the reason that the advance off the April bottom has been as unrelenting as it's been is because we are now finding that corporate America is understanding how to use AI constructively across all industries, not just for cost saves, but for revenue enhancement well as well. And this is something that we think is going to continue to proliferate, and when
you think about it, is part of the reason. Look, we're uncomfortable with where multiples are, which is why we think that you're likely.
To have a pullback.
But on balance, it is something that supports higher multiples x ANTI than what we've seen.
I'll pull back when though, because you talk about a FOMO driven melt up.
What if you missed that?
So, look, it could be going on right now, but from our point of view, there's enough policy uncertainty out there that I would equate this more to the sort of FOMO that we had in and around the election. Remember a lot of froth there, you know, led by crypto names, led by names that were tied into the Trump administration. And I think we're seeing a lot of the same thing now. But again, the actual activity supporting
a more prolonged period of FOMO hasn't materialized yet. We do think you need to get less policy uncertainty to get to that period.
What uncertainty unnerves you the most? Lisa mentioned tariffs. Right now, we have this debate on the one big beautiful bill, but no one thinks it's not going to pass. It just might be an absolute slog and it's probably not going to come on July fourth. What's the uncertainty that makes you nervous to really want to add more to your exposure?
So I think it's a what the response is going to be in and around July to ninth. That's the you know, the tariff story. But again this other idea that you know, we're seeing the resilience on the corporate earnings front. But if you go back to last Friday, it was really the first indication with the inflation numbers higher than expected and the income and spending numbers weaker than expected. GDP revised down that yes, in fact, this theorized pass through.
From tariffs might actually in fact be dding. What's the best outcome for July ninth?
Ask this question? Yes, and I, as an extended pretend keep the Guschett and go ten percent and move on. What's the best outcome for you?
I think it's I think, well, you'd like certainty. I mean, if you just went to ten and said that's it, that would be fine.
The market would embrace that.
But something leads me to believe that it isn't quite going to be that simple.
In negotiation, You're not alone, by the way, And I think this is interesting that the market is just sort of happy, and I think it was happy several months ago with the idea of a ten percent universal tariff. Move on to other things.
Then companies can actually price it in, they can re raise your supply chains, and like Julian said, the adapt adjusts wi you see in so many different companies is what we've already seen with respect to half being absorbed by them, a little being absorbed by them, and maybe just a small marginal one time price increase.
And to your point, Jonathan, the market was happy.
I was there. It was rallying when.
The President got up in the rose garden said here's a ten percent across the board tariff. It only started to crater when they came out with the massive billboard of the reciprocal tariff rates that were extortioned for some countries an kittsult to the extreme.
And now we're happy with ten percent, and apparently even the EU is now happy with a ten percent universal tariff.
With carvauts in sure, whatever, that's not what we're going to get because we also have sectoral tariffs and you've got countries that are waiting for the two through twos.
These countries aren't arguing about the ten percent universal tariff. They're not even debating it with the US at all, which goes the.
Question of if you anchored the extreme, is that the way to get people to all accept something that would have been extreme?
It's a massive You turn to when I was in the Netherlands last week and they said they would not accept a ten percent across the board tariff. Now a week later, okay, fine, walk ccept ten percent. We need some help on stealing autos.
What's the relationship between your outlook for the equity market and what's been happening in fixed income?
No, it is definitely a mystery, There's no question about it. And it almost makes you wonder as if there might be a time where, let's say this bill passes and then we wake up and yields start moving higher by a reasonably significant amount. But at the end of the day, if you look at it, the yields have been going
sideways for two years. Okay, literally somewhere between four and four and a half for two whole years, And frankly, that's perfectly fine for the equity market, because again that removes part of the uncertainty.
Well, okay, they say the same, but the backdrop has been very different.
Economically.
People went from a.
Very high benchmark industry understanding of the world that was high inflation to one that now if you put all of the other potential tariffs and other disruptions out of the picture, we would be looking at pretty much close to two percent inflation rate. We're looking at basically mission accomplished. So is this highlighting a new premium that will ultimately challenge US valuations and risk markets in a way that has not fully been appreciated.
Well, there's certainly an element to that. However, the countervail to that is that we are likely to get a new FED chairman sometime next year that is going to be let's say a little bit more accommodating in terms of ringing infrastrates down.
Let's say that they are accommodating and taking sharpie messages of the world's interest rates and saying, okay, we'll cut three percentage points in this meeting, regardless of what happens.
What happens the long end, that's true, you.
Will get a yield curve steepening the likes of which most investors do not remember that twenty years ago and so on, twos tens was more in the neighborhood of one hundred and fifty over rather than fifty over. A very rapid steepening. And frankly, when we think about what the risks to the equity market are, ten year yields going through five percent far and away at this point are the most significant risk.
What can that happen?
Again?
It just the psychology right now is telling you it doesn't seem likely, you know, because as John pointed out, you know, counter to expectations, and really the same way the dollar. This is counter to the expectations of people that thought.
Tariffs would be bullish to the dollar.
It really just takes a turnaround in psychology that we don't see. But I would suggest that if the inflation data continues to firm, at the same time we get more sort of pushback on the direction of tariffs, that's the mix that.
The dollar move. I think Julian speaks to exactly the
risks you describe. Just go through the scenario. You face a situation where you do get a fed chair, let's say it's more willing to drop interest rates regardless of what's happening gaswag, you get the curve stinkning you describe, you get all the debt issued at the front end with a Federal Reserve cutting interest rates, then it's precisely one of the reasons you're seeing the dollar strength has been developingly so over the last several months.
What is the fear that this is going to be a FED that's going to try to monetize the debt that's going to try to essentially print money to offset this by having rates at a very low level and then just printing money at that level. And how much does it take at this point to create dollar strength, given that that fear has been embedded in the overall investor base.
It's in the President actually arguing for that right now over the last several months, almost explicitly saying that he wants the Federal Reserve to drop interest rights so they can issue that at the front end and get lower interest rates.
He's saying there is a direct connection between the FED rate policy and what the US pays and interest payments. And then Scott bess And came out and said, yeah, we're not going to turn out the debt, We're going to focus on the front end because right now the term premium is just too great. So you put those together, and that is to your point explicit explicitly calling for the FED to help the country lower its interest payments.
In the sharpie black and white, you have cost the USA a fortune and continue to do so. He's talking about the net interest we are paying on our debt, which has basically toppled the entire US budget higher than Defenseman.
Quick found of word dollar witness how much for a tail whend does that for the S and P five hundred.
It's definitely been significant, and it has definitely contributed, among other reasons for the large cap our performance over small cap In general, it tends to be a positive, but again there's always sort of until it isn't. And I would suggest, and it's not our base case, that there are going to be issues around getting this bill passed. But if we start getting towards August and again not our base case, chill, that is where you run into problems.
So many reasons for dollar weakness, which I think makes the pain. Try to Q three dollar strength, that's going to be the pain. Try to Q three dollars strength. Who's position for.
That I couldn't agree more. I was thinking, people say that there's going to be a stimulative effect. No memory would agree argue with this from the one big beautiful bill, Let's say that plays in with better than expected earnings and economic data.
What does a dollar do?
Jitdy, and it's gott to say you s thanks for dropping by, thank you doning in to mind We that of evicle as we kick off the second half of twenty twenty five. Up next the former NEC Deputy director Evera Eisenstadt as the EU comes to the table for trade talks plus Your Moves with Danny Berger the latest on Tesla.
In case you missed it on the opening trade, I.
Think we could go to say one forty, that's that's right, one one four zero absolutely, that's.
Where at one fourteen right now?
Well one fourteen yeah, yes, yeah, yeah. This is the scale of moves over what time for it? This could be within one or two years, that's the that's first. That's fast. Absolutely, yeah, yeah, yeah. I mean if you look at how fast the dollar fell from two thousand and two to two thousand and four, it was similarly large as this. To me, it's not out of the realm's possibility.
So I'm just sitting.
I can't quite Yeah, So take us to the US economy. I mean, does the underlying state of the US economy matter in that trade? It seems as if interest rate differentials in the state of the US economy may be pushed to the sideline by this border big picture narratives.
That you describe.
Absolutely. Yeah, the normal cyclical dynamics much less important with this type of structural change.
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Welcome to the second half LI from New York City this morning. Good morning, Your scores look like their secretary feature is negative by two tenths of one percent on the SMP, following back to back all time highs on a benchmark in the United States. We're coming into Q three on a three day winning streak. Come then, that's that one hundred after a major rally off the lows of April, we're down just zero zero point three percent with threeans until the opening bout. Let's get you some morning.
Movers, henri to trace us at the papers.
Of the House.
We'll roll over and accept the Senate's more material deficit increases. Henrietta joins us. Now for more, henri to welcome back to the program. Just describe what's taking place in the Senate right now and whether you believe we're pretty close to getting this done.
Yeah, it looks like we're enforce it mode. We've got jd Vance going up to the Senate clearly indicating with some muscle that he's there to break a vote if he needs to and be the holdout. But I want to just emphasize one thing here. Him having to vote for the bill now means that over the last seventy two hours, the trajectory of this bill has actually lost
a Senator along the way. So his vote was not needed for the motion to proceed on Saturday night, and now it is, and that's not necessarily that's how not a good sign. And I think a big part of that could be the distributional tables that were released by the JCT at about two o'clock this morning, which show the top bracket is going to see twelve five hundred dollars when this bill has passed, and the lowest bracket
is going to see one hundred and fifty bucks. So that's really the fallout here, that's what's got Alaska flipped out. We've got some problems.
Still, Henritta.
Is it when it comes to the Senator of Alaska Lisa Murkowski? Is she the one that Majority Leader Johnson has to flip?
She's essential to the package. What we always watch, and you know it's been decades now is the combination of Collins and Murkowski. And let's not forget that Dan Sullivan is one of the Alaska Senators that's actually up next cycle. So when you get thirty five percent of the Medicaid recipients in Alaska that are under risk of seeing their cuts or their healthcare lost, that's a material problem for the state. But then we still have the IRA issues that are critical to Maine and a whole host of
other states as well. So I think we actually have a little bit longer to go before this is all nailed down.
In your note, you think that in the end the final passage will get Moretowski and Senator of Collins vote. But Senator Collins had an amendment earlier this morning when it would give more money to rural hospitals in lieu of raising the tax rate on those making twenty five million dollars more, and that was struck down. So is she a no now given her amendment went down in flames?
You know, in my experience, that's more of a messaging document. You're not going to get Republicans to vote for tax increases for any individual brackets. Even President Trump tried to do that earlier on in the year and the party killed it pretty quickly. So I see that more of as a message and you know, pretty serious signals to Senator Collins, who was also upper reelection next cycle, that she has another workaround. But the fact again that Vance
is there means she might be a no vote. And she made it really clear during the motion to proceed on Saturday night that she was only voting to proceed she did not have support for the underlying bill. So Vance being there suggests that they have lost the senator from the process.
Alone, Henrietta.
Then this goes to the House and you think the House just accepts it, although we're already seeing some housemen come out the Salt Caucus. I don't like what they did to tweak what happened with the salt cap. You have the House Freedom Caucus saying, actually, this raises the deficit. We're going to be increasing spending. Why are you so short? The House is just going to take this on the chin.
Yeah, and I'm.
Sorry, it's been a long night, but I got to say the Salt caucaus has to sit down. I mean, they've gotten enough of their carve out. They got a forty k cap, They've got it up to five hundred thousand dollars for an income bracket. So they've gotten what they're going to get. That's why the distributional tables are so bad. I would really expect that the Murkowski Earnst Grassley bill on the IRA or the amendment has to pass in order to satiate the House IRA supporters, of
which there are anywhere between eighteen and thirty members. To me, that's a bigger caucus than the Salt Conference, who's already gotten as much as they can ask for, much more than I anticipated, indeed, so I think that they need to sit down and we need to move into the IRA place. We haven't even gotten an amendment vote on that bill yet, so we need to see that happen.
We're getting closer. Hanretta, Thank you. Hanretta tries the Aida Pomas. Let's turn to the bond market and the federal serve. Colin Martin of the Swap Center for Financial Research righting expectations for the number of federright cuts this year continues to increase despite the relatively stable labor market. Colin joins us now for more. Colin, good morning, good morning. Can you explain that then, why's not happening?
Well?
I think it has to do with the idea that inflation actually continues to move lower despite the fact that tariffs are in place.
If we take away.
The tariffs, which we can't do, of course, but absent the tariffs, the Fed probably would have cut already. And if we look at what's going on in the inflation data right now, we're still seeing that dichotomy between services and goods, and we are seeing a slight pick up in the goods inflation, specifically things coming in from China, but we're seeing a lot of disinflation, maybe even deflation
on the services side. So the inflation data said just that they could be cutting absent those tariffs, but the labor market's still holding up.
I mean, maybe that starts to change soon.
But what I think is really remarkable is if you look at that unemployment rate four percent to four point two percent, that very narrow range, for thirteen straight months.
It's expected to increase a.
Little bit when we get the report on Thursday, but if it doesn't, if it's four to two, that's fourteen straight months.
The labor markets holding in.
We're seeing you know, the low hiring, low firing, but that's okay for the economy to kind of continue to chug along right now.
So that's doing okay.
I think you're the concerns in the second half of the year, now that it is July, is what happens next and will we start to see the weakness in that labor market. Given that the tariffs have to have an impact somewhere. If they're not passed along to the consumer, does that impact margins, which therefore might impact the labor market. So right now we're kind of stuck between the rock and a hard place, But all signs are suggesting we get read cuts later this year.
If we rewind to April. Second was the tariffs will cause the inflation rate to surge and deficits will ignite bond vigilantes with their pitchforks to never buy us bonds ever. Again, are we saying both of those things are not true?
Well, on the tariffront, that's the confusing part right now. If you look at FED expectations, even though there is kind of some vocal members who think we can be cutting soon, if you look and dive into the FED projections, the medium projections suggest inflation should increase. And even if you look at that range, the lowest expected inflation core inflation rate by the end of the year is still two and a half percent. So there's still an expectation that it should increase prices.
We just haven't seen it yet.
So there's this idea that maybe people imported goods early in advance to this they haven't chosen to pass it through. We think there has to be some sort of impact at some point. Of course, not the full effect of the tariffs, but some of it should get passed along, especially when you add in the fact that the dollars decline, so you have that working against you as well. On the bond vigilantes, they don't care right now. We've long held that jets and deficits are not a key driver
of the direction of long term industries. We've always focused on monetary policy and growth and inflation expectations. We dialed that back a little bit recently just because our debt continues to grow and there doesn't appear to be any interest in Washington to fix the situation.
Okay, hold on a second, I'm sorry to jump in here. So deficits don't matter. People could just keep on printing money until a point and then they do matter. We've been talking about this all year.
When do they matter?
I mean, this expanding right now and no one seems to care. Bond deals are actually lower on the day.
Yeah, we don't have the number for when it matters because there just hasn't been the relationship. So how we've been framing it is because we get this concern from our clients at Schwab all the time. We hear about it, especially with everything going on in Washington. Is this going to send long term meals significantly higher? And we say they're not. We don't expect the tenure to get to
six seven eight percent anytime soon. What we have thought, and which actually hasn't been the case over the past handful of days, is.
That maybe it keeps them elevated.
We thought maybe the ten year goes to that five percent range, or maybe hovers between four and a half to five percent, so instead of falling in line with potential rate cuts late later this year, maybe the fact that debt needs to continue to rise, we need to attract new buyer survivos, maybe that just kind of keeps them where they are. But that's been proven wrong over the past couple of days as well.
Would the bond market pushback on a FED chair that they don't see as credible, an extension of Trump, extension of the White House?
You know, that's we've been talking about that a lot.
What happens if we get what the administration has been hinting that they could do in terms of, you know, shifting their issuance from coupons to tee bills or a huge drop.
In the FED funds rate.
I mean, we've heard things from two hundred basis points to three hundred and fifty basis points. That would pull short term rates a lot lower, I would think, But I think that could weigh on the long end.
We might see long term.
Yields fall initially just based on that supply demand imbalance.
But I'm not talking about what the new FED chair might do next year. I'm talking about the fact is this person seen as credible to the institution.
Yeah, that concerns us.
We worry about a lack of FED independence, and we know that can have bad impacts if the FED share and the Committee as a whole are doing things that are more based on short term goals that the administration wants versus what their dual mandate suggests, price stability and maximum employment. We do worry that that can have an effect on the treasury market, specifically long term treasuries the dollar market. We could see the dollar continue to decline
if that were to happen. So that is a worry of ours, and it could send long term meals a little bit high.
Haven't They totally, unutterly failed to hit the price stability side of that Joe mandate For the last several years.
They have we're moving in the right direction though.
Directionally yes, But isn't that the ultimate criticism of them and this FED chair. I know that he celebrates it a lot on Wall Street by economists that work on Wall Street, but ultimately he's full and short, or rather full and a buff where it should be for a long long time now. And if you go back a few years ago when he delivered that speech at Jackson Hole eight minutes of pain, then there wasn't any pain, and everyone celebrates it. I'm not sure why they celebrates it.
Inflation never went back down to target. It was never mission accomplished, was it.
Yeah, well, technically no, you're right. Definitionally we have not gotten two percent, if anything, though, that calls for the rate to stay where it is, or arguably higher, and that's I think where you get the lack of confidence in the market, because you're right, we're not at that two percent goal. Yet they're projecting it to continue to move higher at the end of this year if the tariff in fact plays a role, and yet there.
Are these calls for rate cuts.
So you know, it is tough, and I think if we were to get a FED, a newge FED share or just the committee as a whole, and they start cutting rates and we're still above target.
I think that's a risk.
That's the ultimate issue, which is why the criticism, to your point, is kind of misplaced at this feder Reserve that cut rates one hundred basis points. Last year, rates went up in the long end, so did mortgage rates. That's the thing you need to get your teeth into, Bob Michael JP Morgan is talking about the same thing earlier this morning.
And it might be the consequence of cutting certainly as
much as President Trump would life. It really goes to this question of how you trust data, because remember last year, the sum rule was triggered and it was a headfake, and the Fed took that on its face and it cut rates significantly, and maybe in retrospect, Veder doesn't think it was a mistake, but it raises a question, what data do you follow to understand that dual mandate when you're looking at inflation at a fuzzy moment and when you're looking at the labor market at a fuzzy moment.
The chairman of the Federal Reserve about thirty five minutes away, alongside some of its peers, including the ECB President Christine Thegard and the Bojvovna away to look out for that. A little bit later, Colin mont and a Charles Swat. Thank you, sir, I'm going to see you. Colin, appreciate it.
Thank you.
Joining us now to talk about it right now is Blarina Ricci of t RO Price. Blarina, let's talk about it. The low cha dynamic that Lisa just gave a nod to. How much longer can we stick in that kind of situation, that kind of dynamic.
It's a very interesting dynamic the US economy right now. When you look at the flow of data up to date, you really see the labor market has loosened a lot, and that's come at the back of slowing demand for workers.
I am not too concerned We're not seeing a big pickup in the unemployment rate, but it does tell you that if the Fed were to base monetar policy purely on the progress made on inflation so far and the cooling in the labor market, I think they would be much more comfortable signaling cutting interest rates later this year. But the key here was what Mike McKee was alluding to earlier, that the outlook has changed so much, and most of the risks point to upside to inflation, and
so the FED has come so far. I think they're very reluctant to undo all the progress we've made and cut prematurely. And again, what matters for the economy and for the long end of the curve is if montrepolicy is appropriately set or not. And we saw that in last September when the FED cut interest rates by fifty bass points, but the long end went higher, and that was basically telling the FED that, wait a minute, the
economy is resilient, why are we cutting interest rates. I think this is not setting us up for success for the risks going ahead, and I think the FED wants to avoid that situation.
This year, there's been a tone shift, though, and John alluded to it when he started talking about the Goldman Sachs note that came out Yon Hansis and the team that brought forward rate cuts and see a greater number of them this year. FED members themselves are saying it looks as though the inflation impact from the tariffs will be a more of a one time shock than they
will some sort of protracted inflationary impulse. And you aren't seeing any kind of inflationary read through from the labor market that is cooling, if not maybe even showing signs of cracks. Are you also coming around that kind of conclusion where it seems to make sense for the cut for the FED to cut more and sooner.
So my baseline for the FED this year is two cuts, two twenty five basis point cuts starting in September. I think the market has fluctuated between one and a half to three cuts at different points of the year. The question is, can the Fed bring forward interest rate cuts to the July meeting. I think that's something that the market is not really prepared for. I don't think we have enough time to see a deterioration in the data
that would push the Fed in that direction. So then what would make the Fed and the market price let's say three or four cuts for this year. I think we would need to see a pretty big increase in the unemployment rate. Otherwise, even though the labor market is not a source of inflation right now, if you have a one or two timeshock two inflation, even though it's not supposed to be persistent, it candy anchor inflation expectations.
So I'm looking at the unemployment rate here, because that's the only way that you get the labor market to push the FED of the fence. And when I'm thinking about the unemployment rate, there are two components that matter. One is labor demand and hiring and firing. I think labor demand has cooled significantly, but we're not seeing mass firing yet. And then I also think the break even rate of employment has come down a lot. The break even rate of employment is that which keeps the unemployment
rates steady. It doesn't go up, it doesn't go lower. It's come down a lot because net migrant flows have decelerated in the last twelve months or so, and so with quaker labor supply, is much harder to get the unemployment rate to increase a lot unless you have mass firing. So I think we're here at an uneasy equilibrium, and so for me, it makes a lot of sense for the FED to tread carefully. So I feel comfortable with keeping two interest rate cuts in my outlook for this year.
What's the potential for upside surprises later in the year, particularly once the One Big Beautiful Bill has passed and once people have more certainty around what the tariff outlook looks like.
So in terms of inflation upside surprises, I see two pivotal moments in the next two to three CPI reports. I'm looking for signs that we're getting significant passed through to consumer prices from higher tariffs. What we see so far is import prices have not budged, So that's telling me that exporters into the US are not adjusting prices. So then that leaves domestic firms and consumers as the agents that are going to bear the brand of the tariff increases. We also have a weeker dollar, so the
currency is not helping us on the inflation front. So I'm looking at the CPI reports for upside risks, and that's the one off shock that everybody talking about. But then we have the one big, beautiful bill. I think there is a real chance that this stimulates demand in the near term. So then the next risk that I see to inflation is in twenty twenty six from fiscal policy. I think we learned our lessons from the supply chain disruptions and from the fiscal bill post COVID that they
can push inflation higher. I don't think the size of the shocks right now is as big as it was back then, but I do think it's realistic to expect some upside to inflation.
Laurio Ritti of turo Prise, Thank you so much.
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