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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. So here's the laces.
This morning, the US of around exchanging fresh strikes with the White House, saying little progress has been made towards a deal. General Karen Gibson of Academy Securities, writing, I suspect and hope negotiations may be more advanced than either side is letting gone, at least publicly, despite the rhetoric and in many ways the action too. General Gibson joins us now for more. General, welcome to the program. Where do you suspect we have made some progress?
Well?
I think that if we had a complete lack of progress, we would be seeing more aggressive actions on the part of the United States, whether that was additional significant sanctions or strikes beyond the ones we've been doing. I maintain that the ceasefire, while fragile, is still holding despite the
strikes that we've had over the last three days. What characterizes these strikes is that they are very narrowly specific to aggressive actions that Iran was alleged to be making in and around the Strait of Hormuz buonder a boss, whether that was vessels laying minds that would potentially constrain navigation and traffic, or one way drones. And it's important to remember that even under a ceasefire, you do not
lose the inherent right of self defense. So if we were not making progress in negotiations, we might see broader strikes further somewhere else in Iran that more clearly violated the ceasefire. But I think these are very defense related, self defense related, and within the balance of the ceasefire.
If these are defense related, then is the United States doing anything in terms of deterrence when it comes to Ron.
Well, I think our presence acts as a deterrent as well. I mean the fact that if Iran were to out of the blues strike some kind of golf infrastructure or civilian targets or something else that was in the broader golf region against one of our partners. I think it would be certainly I would expect the United States to
take some broad action, probably additional punishing air strikes. And Iran knows that we can do that and that we're prepared to do that, won't hesitate to do that, and that in itself is a form of deterrence.
Given these recent clashes, do you understand where the red lines are in terms of kinetic warfare between Iran and the United States.
Yeah, so, again, you'd never give up the right of self defense, even under a ceasefire. And so these were activities that were identified that looked as though they would threaten navigation or directly threaten our naval assets and air assets that are there right off the Strait of Hormus.
That's permitted.
I think that's an important distinction. And even Iran's counter strike in which they launched assets towards Kuwait, they claim to have shot down one of our predators. I don't believe it. It's always kind of a given that they're going to exaggerate for their own domestic audiences, those are I think probably within the bounds of the seasfire. I'd make
two more points there. One, if we were striking dual use military civil infrastructure elsewhere in Iran that wasn't directly related to the navigation in the straits, that's probably not within the bounds of the ceasfire. Again back to if Iran were to strike say Fugyra again in the Emirates their port outside the Strait of Hormus, that would probably not be within the bounds of the seasfire. But the last point I'd make is that a ceasefire is not
a real physical thing. It's a construct that's developed between the two negotiating sides by policymakers or leaders, and it's really up to them to decide that a ceasefire is no longer holding, whether it's because of a single shot across the bow or something far more extensive.
Don't know. You said something there that I thought was really important that Iran it obviously exaggerates for its audience. The US also trying to job oon markets, and this is one reason why markets.
Have tuned out.
Who are the respective parties trying to speak to and how is that muddying the message.
That's a terrific point. I think, you know, both in both sides in probably any conflict, I think the leaders are speaking, particularly in Iran, to their own domestic audience. They need to appear strong. They need to make the United States look weak. They want to make it look as though we are the ones that are about to give an and concede something. You know, that strategic narrative is actually also an area where we're competing. They are
speaking directly to their domestic audience. Our president is speaking to our domestic audience. But there are also broader market audiences that both are speaking to. And I think we have to be really careful about taking literally everything that's
said by a spokesperson from either government. There's often truth within it, but then there will be other things that are said that are hyperbolic or again intended to calm or influence markets, to shape public opinion, and to influence the other side.
Stay with us. More Bloomberg surveillance coming up after.
This Across Some cool news for you, the Treasury Department launching the Trump account app today in collaboration with b NY and Robin Hood. The partnership between the public and private sector, aiming to expand access to long term investing for American families. Robin Vinz, the BNY CEO, writing, we're bringing together the Administration's vision and leadership, Robin Hood's digital accessibility,
and bn wise infrastructure. Robin and place to say, joined the SIN Studio for more, Robin and Monarch, It's great to be with you. This is a very cool day. So let's spend some time on this. So you do the back end and Robin Hood does the front end.
Yeah, with a financial manager, and Robinhood is bringing all of their expertise in the front end as you point out the app. And don't forget the National Design Studio as well, because they've partnered with the Treasury Department, with BNY, with Robinhood to make sure as part of the administration's push to make services more accessible and easier to use in the US.
What are sign up's like right now? Ahead of this?
So five million accounts people indicated interest in the IRS form forty five forty seven, So that was the first step you had to actually register interest. And once you've done that, you can go to trumpaccount dot com, which will actually then take you to the app Store, and then as the app store rankings grow, you'll see it easily pop up on the app stores, and then you can download the app, and then you can actually register and actually put the rest of the information get up
and going. Now, the actual program for investing the money does actually launch until July fourth, So these are ready set moves ahead of the full go of July fourth.
What does this mean for the future of B and Y. Will you make money off of this or this is solely for the public good?
Well, we believe in the program.
I think that's really if you step back from this whole thing, what is the public policy? So the administration really deserves a lot of credit President Trump, Secretary Bust in particular the leadership of the Treasury Department in driving this forward. That actually creates the framework to be able to have everyone in America be able to participate in growth. And so we provide as a company a bunch of
different services to the US government. We do it at the state level, the local level, and at the federal level. And so for us, we're frankly just proud to be able to participate in this. Of course, as part of providing the service, we're doing a bunch of different things, So a robin hood, but it's the public policy that we are most focused on.
Here.
What else have we done well?
We were the first financial firm to actually offer matching in to the program.
So remember how it works.
Everyone get who kid who's born in America, the parent or guardian get to be able to put a thousand bucks in if they want it's matching, or they can put additional money. The government's going to put a thousand bucks in. Employers can match. We've matched with the program, and then we're really leveraging the power of compounding. And
this is the magic of the program. Just let's do the math for a second two thousand bucks in right at the beginning, a thousand bucks from the government, and let's take the example of a B and Y employee, a thousand bucks from us. Now you've got two thousand bucks. You compound that with the historic rate of return in the stock market over the past thirty years. Compound that for the next thirty years, and in thirty years that
kid will have forty thousand bucks. Now if the parent added just another ten bucks a week into the same program, ten bucks a week that they're putting into that same account, Now you'd have one hundred and forty thousand bucks at the end of thirty years. Now that's real money. That's participation in the American Dream. And I think that's the program vision that the administration and the Treasury.
Sounds like almost an incentive to have a child in America at this point. But when you think about post Trunk twenty twenty eight, does this have longevity? Will it continue? Say a democratic president won?
I think great public policy.
And again, stepping back from it, what is the policy the American Dream? And what a time to be thinking about this, the two hundred and fiftieth of America. The American Dream is one of the things that's fueled this country over the course of the past two hundred and fifty years. But we have a problem, which is not
everyone is participating in the American Dream. And so now you're talking about taking the forty percent of people in America who have zero stake in the equity markets and actually making them stakeholders in the American Dream and doing it from birth. So the ability to do that, to be able to grow, compound, participate, learn how to invest, learn how to be part of the capital system that we actually have. That's a really important piece of public policy,
and so none of us can predict the future. But this has been a bipartisan effort from the start. There have been folks on both sides of the aisle who've joined into this. There have been wealthy philanthropists like Michael and Susan Dell who said they're going to match employers
like us are matching. I'd encourage all employers in America who are able to do so, to be able to offer matching to that initial seed investment, and collectively, if we can increase this participation, we're really growing participation in the American dream. And I think that is why it's a great piece of public policy, and so I really hope that to see it be able to continue.
It also potentially improves the delta between people who feel really disenchanted by Wall Street and feel like Wall Street's.
Really let them down.
As a number of people get very wealthy and they aren't necessarily getting wealthy. I just wonder what the guardrails point. Yeah, so try to say that, well, you can participate too.
Absolutely, what sort of American dream is that if we have a bunch of people who aren't participating in it.
I just wonder the ideal versus the reality. When I think about a robin Hood account, and then I think about a teenager or some kid who has access to it, I think about my own experience, which is essentially it's very high end gambling, but essentially gambling, right, I mean it's essentially turning into trying to pick winners and losers. How do you know that that's not going to be leading to people going and saying we're going all in on gamestap here's your future.
Well, I think this is the key to the design if you step back and think about what is it the Secretary Berston and the Treasury Department. When you actually get into the brass tax of how it works. You're talking about custodial account. So for the right to start with, the kid can't touch it until after they turn eighteen, so there's no opportunity to be able to take the money out and go and spend recklessly.
Not once they become eighteen.
As the law of the land, they become they own their own future to some extent. Gives up by the way, but up until then it's primarily about index funds. So that initial investment will be index funds only, so people aren't having to make choice about individual stocks. They're participating in the US stock market, They're participating in the growth of the economy.
And that's actually the design principle at work here.
You've got to acknowledge where the yellow trade comes from. The yellow trade comes from this idea that they're not participating, that the only way to benefit from this economy because they feel frozen out from the gains, is to take these high stakes risks. So in some ways, this is a long term goal to do something about the kind of thing that you're complaining.
About and potentially equalize people who feel completely less about and are earning minimum wage as other people do nothing and watch their money grow and create income. And this is sort of the gap that you need to bridge in order to create a little bit more of you know, the market and the economy can move a little more together.
Rob and I just feel like we're losing the argument at the moment. The arguments on the left and the more populist argument seem to be winning this moment. We see this in our UK, the shift towards the left and the politics of labor. More recently, we see it here in New York City, the heart of capitalism, and a socialist mayor got elected in this city. What else needs to be done to counter some of that, to make sure that people recognize the benefit of free markets
and capitalism. The very idea that we've seen this mass affluence in this country's free because of those things.
Well, I think it is about inclusion ultimately and having people be able to participate. So let's go back for a second to this concept of the American dream and let's define it. What actually makes up the American dream. I'm an immigrant into the US. I've lived here for twenty five years and like very excited to be able to be part of this. And if you think about folks here in the US, what do they aspire to.
They aspire for a great life for their family. They want to be able to have a great education, they want to be able to grow, they want to be able to have their own home. And so what I think Trump accounts represent is one piece of the American dream, which is the ability to have a stake in the country, a stake in the capitalist system. And so to your point, it helps to include that forty percent of people who today don't but there are more things. It's not by
itself the solution. Financial education matters a lot. That is actually part of the app if you actually look at the Trump account app financial education, because we've got to recognize that saving investing, starting.
Early, compounding.
You were just having that conversation the value of money over time and the value of what it means if you start early does make a difference.
But housing matters as well.
Owning your own home over the past fifty years has really become part of what a lot of people define as owning the America, being part of the American dream, and being able to enjoy that. So as a company, we've taken a step in that direction. About a month ago, we announced a new program at BNY which is to
help people get that first step on the ladder. If you work for us and you earn less than one hundred thousand bucks, we will actually give and you're buying your home, first home, we will give you the equivalent of five thousand bucks after tax to be able to help you with your down payment. The average home in America median price about four hundred thousand bucks. Our largest office is actually in Pittsburgh. The median price is about
two hundred and fifty three hundred thousand bucks. We've got a huge at one of our largest growing offices is down in Florida. There the medium price about four hundred thousand bucks. The average down payment for that type of home call it about thirty thousand bucks. Now, are there government assistance programs for first time owners that are available? And so depending on where you are, that might be teny, fifteen, even twenty thousand bucks assistance, but you're still left with
a gap ten fifteen thousand bucks. So for us, that five thousand dollars is bridging either fifty percent or a third of their gap for the prospective homeowner, so they can get their step on the property journey of the American dream. So those things really matter. Now we're doing that with Bank of America, who's our partner. They're providing subsidized mortgages to our own employees.
He's figure on this, I know he is.
And he's also leading on this point, which is leaning into the topic how can we actually help financial education? So if you can give people through the Trump accounts a staking capitalism over time so that they're part of it and don't want to have to throw stones at it and you give people a leg up on the property dream. Now that's include and bringing people along the journey. And I think again back to America two fifty, What a time to be focusing on this.
Stay with us. More Bloomberg surveillance coming up after this.
We begin this hour stocks edging lower as investors grow cautious over and enter the war. Kady commits give out for simplex writing. Despite the recent rally inequity markets, there is clear fatigue over the continued conflict in the Middle East. Katie joins us. Now for more, Katie, welcome to the program. Let's just dissect the bond market sell off, the individual drivers of it. What's been driving your tire?
Well, this is a good question because what we have really seen, and I want to point this out, and I really liked what Lisa said, is that you've seen the bond market get ahead. So the bond market has been selling off pretty aggressively since the geopolitical risk sort of got into the market. We have seen some retracement more recent in terms of yields coming back down. So people thinking that some of this inflation uncertainty is going away.
But today just sort of reiterates that it's not gone yet, so we're kind of seeing that come back again today. So you can see that right in the chart that you yields have gone up substantially on inflation concerns, but that hasn't dissipated yet.
Do you think we're overestimating the potential for yields to fall on a resolution in Iran? Is there more to this move up than just the Middle East?
That's a good question.
I think the positioning of the FED relative to other central banks is also important. So if you look at where the US is sitting and how much higher US rates are, that matters.
But also the fact.
That other markets outside the United States is pricing in things like hikes that does complicate sort of the relative positioning of the US FED and sort of add on top of that sort of a.
Changing FED dynamic.
So I do think it's not just inflation, it's also figuring out how monetary policy is going to be set in a new FMC.
This is a great point, Katie. How much is a move that we're seeing in bonds in the United States have more to do with Japan and Europe frankly than it does the United States.
I think there's a mix.
I mean, just given how much bond moves have priced outcuts and moved towards a higher chance of hikes. If you look outside the US, for example, the ECV or Japan, even also Australia, you start to see a much bigger shift globally towards a potential for hikes. And that means that overall, across all regions, that there's more of a chance of hikes, which could put pressure on the FED. But remember US rates are higher, so that means that we have less need to move as quickly as other regions.
You follow trends, and you follow some of the momentum that we're seeing in different technical readings across the market, and I wonder how much we've seen a breakdown between yields going up and stocks responding in any way, shape or form. I mean, how to course is this relative to history when the common mantra was when yields went up, stocks went down, risk assets used to wabble, especially if it was coming with some mixed readings on a consumer appetite.
So I love that you asked this question, because we look at short term correlations between stocks and bonds and whenever inflation is the key driver of stock bond movements, you tend to see positive COO movement or positive correlation. And we have seen consistent positive correlation between stocks and bonds since March.
It is not unprecedented.
We've been seeing that since particularly twenty twenty two. And it's just the point that stocks and bonds or bonds basically do not provide a hedge during periods when inflation is a persistent risk, and geopolitical risk is a key driver of inflation uncertainty. So I think for now bonds are going to be much trickier for investors to deal with. And until we see this inflation pulse go through and we figure out how much oil pigher oil prices change.
Is the inflation dynamic. You can't count on bonds when things are tough. At some point though.
Well what's going on in the conflict, and the inflation driver start to hit equities at all.
It should at some point, because how I see geopolitical risk is that initially it becomes an inflation impulse, which is a stressor to bonds. But at the point where we start to see that we need to have tightening, we need to have we start to see an effect on growth, that's when you start to see that the
equity markets will react. We have seen the equity markets react to higher yields this month, so that might be an indication that there is starting to be some concern about higher yields actually being a negative driver for equities.
At Lisa Johnathan talking about all morning, likely we're going to see the FED remove the easing bias. Would that be something that could be a catalyst for this equity market Maybe it's to go to be softer or is it already baked in?
I mean, I think I would kind of assume that it's somewhat baked in at this point.
I do think it is.
It's very interesting that they haven't removed it, just given where we are in the current geopolitical landscape. I mean, just the idea that you could cut rates in a period where you have a huge oil spike. It just kind of already puts the FED in a neutral stance already.
So I think some of it is already baked in, But there's always room for surprise where you could actually see that maybe this conflict accelerates more or you have sort of more of a chance that that could be even less of a case that you are going to have a resolution that could be more negative for bots.
This is the Bloomberg Survendment's podcast, bringing you the best in markets, economics, antient politics. 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.