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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordert. 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.
So here's the latest this morning.
The President remaining positive on negotiations, as Tehran says there has been no tangible progress. Overnight, clashes between Israel and Hesbel are complicating talks, as Lebanon's president says a ceasefire with Israel could begin within twenty four hours. Joining us now round the table, the State Department spokesperson Temmy Figure. Tommy,
you're the man this morning. Good morning to you. Tell us we're making some progress, because I can tell you on Wall Street this is the number one story that people don't want to talk about right now. Are we moving forward?
Well, look, we're moving forward. And achieving the President's objective. I mean, you started saying mixed messaging on Iran, but the President's been clear from the beginning what is primary objective is here the Ranian regime can't have a nuclear weapon. So we saw Operation Epic Fury, the decisive outcomes from that. We're seeing in Lebanon and Israel, those talks being separate from these talks regard in the nuclear issue, but the
highest level talks since nineteen ninety three. Progress being made there. The President's not going to be rushed into a bad deal. He's going to make a good deal for the American people, and he's indicated we're seeing some movement here from the Iranian side.
The President yesterday talked about a ceasefire. We talked about this a little bit earlier, saying that that basically means shooting in a more moderate manner. That's what the ceasefire is. What would it take for this administration to say the ceasefire is off.
Well, look, I think what we're seeing here regarding this is defensive actions. Of course, saw Operation Epic Fury, decimation of their defense industrial complex, their missile complex, their navy, for example. But of course We're going to take defensive action to protect US interest in US troops. That's a common sense approach. We also have in this context economic theory that are a blockade, that we have a raniing hips are Ragni imports, So there's leverage the president has.
He has all the cards here and what.
We saw the Secretary describe before Congress, as we are seeing the Iranian regime talk about many of the things that they refuse to talk about for months, but the President also being clear he's going to see the subjective be fulfilled one way or another.
The Ranian regime cannot have a nucular weapon.
The Wall Street Journal reporting overnight that Trump told his aide that he won't resume in all at war with Iran unless US troops are killed. Is that going to be the line where potentially we could see more offensive attacks.
Well, look as the President saying again, we're going to take defensive action to protect US troops, US soldiers. I'm not here to predict the future about what the President may decide, but of course we're going to take that defensive action.
Of course we are.
That's a common sense approach if we see threats against US interests US troops. We're going to be acting and the President the DOW has done just that.
Why isn't the International Atomic Energy Agency involved in these talks?
Well, I mean we see the President talking about a role for the IAEA in terms of the destruction of the nuclear dust. The President this has been a longstanding concern for the entire world, the threat that the Ranian regime having the new the weapon could have. It's the President who has taken action to actually address this.
Well, the IEA came out overnight with a report where they said that the risk of Iran developing a nuclear weapon right now is higher than it was a number.
Of months ago.
We're raising concerns that they don't have access to oversight and saying that they would like to be more involved in these negotiations. Do you have any understanding of where they are in this and the urgency to get them in to be able to surveil what's going on.
Well, again, part of the discussions we're having here, as the President has indicated publicly, is regarding the destruction of the enriched uranium uranium that was enriched beyond the point of any sort of peaceful purpose. The IEA the President indicating would play a role within that regarding where the
Ranian regime is. As the Secretary discussed before Congress, they were attempting to develop a conventional weapon shield which they could act with basically impunity to develop a nuclear weapon. The President taking clear, concrete action to decimate that conventional military shield. So the President taking action to prevent the Ranium regime from having a nuclear weapon consistently from the beginning of this administration.
How afective is the blockhite Bean.
We've had this blinking contest for a while trying to work out at what point will we breach storage capacity in Iran. Have you got anything to share with this morning about how effective that blockchite is been.
Well, it's been incredibly effective in terms of blocking revenue from going to the Iranian regime. Hundreds of millions of dollars a day being blocked from the Iranian regime. This is also the broader context of that maximum pressure policy. We're actually continuing to take action at the State Department of Treasury Department to target entities that are trying to evade US sanctions that are designed to deny the regime the funds they need for their Malian activities. We saw
actions as recently either yesterday or earlier this week. Those actions have continuing, so this economic fury is continuing. We're seeing in terms of the effect hundreds of millions of dollars being denied to the Iranian regime.
Secretary Rubio was in front of the Senate for Our Relations to committee as well this week, and he said that Iran has laid very large parts straight overmosse with minds have any of them been cleared? How much of the strait is still mined?
Well?
The President indicating that we're taking operations to see that d mining of the strait. I think this also shows the difference here the Ranian regime trying to close the Straight of Horm Moves and say that we should be able to control who goes to the Straight of Horm Moves. That's why we saw this blockade of our Rani and ships in Iranian ports. We're not going to be in a situation where we're going to accept a country deciding, you know, laterally who gets to use an international waterway.
That's not going to happen. The President and the Secretary both indicating.
That Tomy, can you see why people on Wall Street right now are slightly frustrangted with some of the communication coming from the White House. And I give an example. The President sent the straint with reopen back on eight posse seventeenth. The strength did not reopen. It feels like we get in the same headlines recinncled every week. Can you see the frustrangtion right now for people on Wall Street track in this story?
Well, look, I think fundamentally the president's a deal maker. We saw the action he takes, the action he needs to take. We saw it with Operation midn at Hammer. We saw it with He's not making the day lit See.
Well, I think he's working on that deal.
I mean we're seeing him make more progress than anyone's ever made in terms of this addressing this issue, in terms of the real results we've seen from these operations. The President wants that diplomatic approach, but fundamentally they're regime Canada of nuclear weapon that would have been an untenable threat to the region, the entire world.
That was being address. That has been addressed. That has been addressed.
Stay with us more Bloomberg surveillance coming up after this House for investors bracing for the May payrolls report you out tomorrow. The Dallas FED president Lori Logan, signating optimism that AI will boost labor demand.
There are a number of data centers that are either in the planning stage or in the construction stage, and that's creating significant demand for labor. We're seeing wage growth in those particular areas.
Joining us now to discuss Bessie Stevenson of the Ford School of Public Policy at Michigan University, Betsy, welcome back to the program. So it's good to hear from you. There's a great debate on the future of this labor market given the technological revolution we're working through right now. Betsy, how are your thoughts evolving on that mat.
Set well, I mean, I think what we've just heard her say is we're going to see a lot of construction workers as we build data centers, but that's not a solution to the challenges for white collar workers as AI starts to increase efficiency. I mean, I think what we're seeing right now is a lot of companies that are still doing really well and able to grow, and
that's why we're not seeing a lot of layoffs. But we're also not seeing a lot of hiring and so what they're doing is they're trying to take these gains in terms of increased productivity so that they can increase their output, but they can do it without hiring workers. And that I think is I think that's the best way for technology to work through the labor market is to do it in a period of growth, so that people don't lose jobs, but the people who have jobs
become more productive. The challenge for the US right now is that it is such a low higher, low fire environment that the people who do need to enter the labor market, either they lose a job or they've been out of the labor market and need to re enter. They're the ones struggling, and that's why we're seeing the rate of long term unemployed increasing.
Betsy's really hard for us to judge at the moment just how tight this labor market actually is. As you reflect on there, we've had this negative supply shock to the labor market. We haven't had the entrance come into the supply polls, so to speak, because of these tights of regulations around immigration and the enforcement of the southern border. Betsy, with that in mind, how do you gauge how loose source supply how loose or tight this labor market actually is right.
Now, you know, I think it's actually a labor market where we want to look at the particular skills that workers have to think about whether it's loose or tight is going to depend on exactly the market that you're in and.
The skills that you have.
So I think of it as a time of great reshuffling. You might find that you're in actually quite wee labor market given your skills and where you're at, and that might mean that you need to skill up with something different or relocate. So that's part of why I think we see it as both. Wait, it's a weak labor market. No, it's a tight labor market. I think it's because it's both, and it really depends on exactly where you are and what.
Set of skills you have.
Betsy, where are we in what you referred to before as the white collar recession?
Well, I don't think we're in a white collar recession, but I do think that we're not really prepared for a lot of white collar workers to need to make some transitions. Now, there are some good things. One is that white collar workers have developed a lot of skills around how to learn and develop new skills. So that makes them actually really well positioned to make changes as their company says, hey, I don't need you to do this anymore, but we might need you to do this
other set of tasks. Learn how to do them, can you scale up? And I think historically we have seen that many workers are able to do this. And you know, one of the other things with AI is that it is disproportionately going to impact women's jobs. Jobs held by women, and women have historically been a bit more flexible around WHOA I need to change what I'm doing because my
old job isn't there anymore. So I have a lot of optimism that we're going to have a lot of ongoing demand for human workers, and we have workers who are able to have the flexibility needed to make changes. But I think we should understand that any period where people are having to make changes, where there's uncertainty, is going to be a period of weaker consumer confidence and anxiety around for the public.
So if you push this through the FEDES response mechanism, A lot of people are looking at the Lave of Market report tomorrow as a guide to whether the lave of mark it can be some sort of indication of weakness that could leave the FED on hold and definitely
or even remaining with an easing bias. Do you think it's an appropriate stance for the FED to be a bit more dubvish with this type of backdrop, or do you think that they should prioritize inflation because of the uncertainties around the labor backdrop.
Look, inflation isn't good for workers either.
I think you know.
Jerome pal said that a few press conferences ago, and it really stuck with me because I think it's important to remember that workers don't want unemployment, but they also don't want inflation, and so then what the FED has to do is look at what can they be more certain about right now. Unfortunately, they can be more certain about inflationary pressure than they can about a weak economy.
Right we still see a GDP now forecast for Q two of three percent, where we saw jolt job openings actually rise in April.
I don't think we.
Should overinterpret those as the economy is really strong, but I do think that they make it hard for the FED to justify cutting rates at this moment.
But Betsy, this inflationary pressure is coming from a conflict and its energy driven. Isn't the FED historically haven't they been taught to look through this?
I really I love this. I feel like I was like in my econ macro class and a student was like, Hey, we're supposed to look through this. You're one hundred percent right. But there's one problem. We had high inflation in twenty twenty one, and we have a public that is on tender hooks worried about inflation. What that means is that inflation expectations may not be as well anchored as we need them to be in order to look through a
brief period of inflation. So what the FED has to be looking at is you're absolutely right, not what is the transitory inflation that's going to pass through very quickly, but what's the potential for that transitory inflation to become sticky, either because it takes the conflict a while to resolve, or because inflation expectations are not well anchored.
Stay with us. More Bloomberg Surveillance coming up after this. We begin this now with stock setting lower after broadcome results call off the record breaking run for chip makers. Tracyman Miller of wels Farco with a year end target on the S and P of seventy five hundred, expecting no fed rate moves, a better economy, and increased M and A activity through to year end. Tracy joins us now for more Tracy a rinkle this morning, and good
to see you, and that wrinkle comes from Broadcome. What's the lesson from the price section this morning?
Good morning, John. So the lesson is that after such an amazing run like we've seen in the AI names, there is still some room for disappointment. So we have overweighted information technology, but we're telling investors not to chase those names at these prices right now, and that there are probably better opportunities in some other sectors like industrials or utilities or even financials.
We've liked financials. That's been a high conviction coll and Tracy hasn't been working. Why hasn't it been working a while with that change.
Yeah, so it hasn't been working because of the steepening yield I'm sorry, the flattening yield curve and the private credit issues. And we think that going forward we are going to start to see that yield curve steep in some Right now, there are a couple of price rate hikes priced into the markets. We think those are going to come out by the end of the year, and we also see some additional potent upside and rates on
the long end. M and A activity You mentioned that as well IPO activity both really good for investment banking. So all of those things we think support financials.
We were talking about concerns around private credit. We're getting another headline this morning the Blackstone Private Credit fund plants of cap investor redemptions at five percent. This comes amid a slew of different information that we've been hearing and including from the Swiss Partners Capital we were talking about earlier this morning. Does this give you pause or do you think that this is noise given a duration mismatch, and not necessarily a broader signal about the market.
Yeah, so we think that that is not necessarily a broader signal about the market. We're watching spreads in the public markets that are at near record tights, and so we don't see broad concern in the fixed income markets. That said, there are some pockets in the private credit market that obviously investors are starting to worry about, and so we would tell investors that it's important to keep that diversification within a fixed income portfolio, with some potentially
in private credit if that fits their risk profile. But in the public markets we are just not seeing that strained.
There's also an issue of consumer spending with their wages not really keeping pace. We just saw credit card balances hit a record one point two eight trillion dollars. On the margins delinquencies picking up.
Do you see.
Signs that consumer is getting tired?
Does that give you pause?
Yeah, so definitely there is a component, a segment of the consumer that is starting to get stretched, get tired, if you will. We've talked about, you know, the higher prices that they are experiencing, and so they continue to spend, but some of that spending is now coming from saving, some of it's going onto credit cards. And I think the positive here is that it's not all consumers, and we are continuing to see you know, some firming in the labor markets. And as long as consumers have jobs,
they can continue to spend. And really all we're expecting from the consumption part of GDP this year is maybe a modest improvement because most of our GDP expectation is coming from cafets.
Christy, what do you think about the energy space right now. I notice in your note you said you want your investor's portfolios to trim energy equities and commodities. But we just heard from almost Hawkstein who basically said, we're living right now globally on a buffer, and when that dries up, you know, we could see tremendous upside when it comes to energy prices.
Yeah, so we are telling our investors that it is a source of funds for some other areas of the market where we see better valuation. So we're not necessarily the fact that almost a billion barrels of oil have been lost through this conflict, and that there are going to be some pockets of the global economy that are going to start to experience severe shortages if we don't
get oil flowing again. That said, though, we do think that when oil spikes that it is an opportunity for investors to reposition because we don't think this is a long term supply issue. It's a supply shock.
Is this basically investors needing some capital to allocate elsewhere maybe with some upcoming IPOs? Where else do you see investors moving money around to make sure that they are getting in on that AI race.
Yeah, so we definitely think we see that happening. We have seen the mag seven starting to underperform, we've seen crypto underperforming, and so we think it's some of those higher beta areas of the market where investors are pulling funds, raising cash, so they will have us that cash available as these big IPOs come to market through the summer.
This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, a geopolitics. 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 app.