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We start stronging in this hour, joining us Dominique Constant of Missouo Definitive on Wall Street. I got bad news, folks, he's got twenty one considerations for twenty twenty. It's come on, it's entertainment, doctor Constam. I can't do twenty one things and squeeze it in with you, So let me cut to the chase. You're gonna see rate cuts as well this year? Are you and Rashudo on the same page in that the vector is towards short term lower rates?
The people are pushing against you right now? Yeah?
No, I mean Steve is more in the camp that the FED will probably end up missing the whole year. We're in the camp where, yes, power may struggle to get some rate cuts.
But then the new guys shows up.
Where the new guys show up and basically there are a lot of good reasons we think why they will bring down rates, even if inflation risks arising in the mix.
In the three dimensional x y z space of dominant constant back to credits, we should work with Irin Jersey and just for Global Wall Street. This is a conversation of that. They don't tell Matt Miller in Detroit, but you know, I look Dominique where we are, and the answer is, we have a lot of stimulus going Now are we just expecting out the stimulus that President Trump and others have given us?
Well, the stimulus should be seen in the context of the tightening if you like, that came from tariffs. So basically, consumer spending in nominal terms fell well short of its trend during the last year because of when the tariffs hit, and now the consumers are kind of getting that back. This is if you remember one of the problems with sequencing the stimulus before. You know, you kind of wanted it up front before the tariffs hit and you didn't
get it, so now you're getting it. So that kind of in our view, avoids any kind of recession or anything like that. So the economy's fine, but I wouldn't say it's going to meaningfully accelerate in a way that will deliver job growth and acceleration in the labor input to growth.
We have and your Jordan Rochester, I don't know if you're in speaking terms with him, but he's just a killing it with us, with Japan particularly. But when you look at this is an equity market in the United States, it's acting in a responsible way expecting out or is there an anomaly there? Yeah?
No, I think equities are in a pretty good place.
If the FED is biased to either not do anything or if anything cut, then that's fine. The issue is going to come if and when the Fed ever raises rates, But with a new FED coming in, we would say they would even look through any kind of inflation because that inflation rise we actually project in the second half of this year is going to be temporary. The AI is a really big deal for us, and that will mean you'll get disinflation if you like, on the back
of it in twenty twenty seven. So the FED can basically end up kind of not raising rates for quite a long time, and that's pretty constructive for riscasses.
Our Conversation of the Day for Global Wall Street on YouTube. Subscribe to Bloomberg podcast Dominic Constant with us at Missou, I can't say enough about a decades impact on Wall Street in describing the almost the umbrella that we are living in here He's got partly it's two schools in England Oxford, and there's another school here that they've better crew. Alarian was there for a cup of coffee as well. Alexis Christophers with dominic constant.
Let's talk the dollar. I'm curious what your outlook is just for four X in general. But we saw a week dollar in twenty twenty five. Does it continue in twenty six?
Yeah?
Well, in a way, the dollar wasn't nearly as weak as it could have been in twenty twenty five. That's the way I put it, and that was because relatives to the rest of the world, the FED was actually quite restricted. I mean, ironically, you could say that Trump has some justice for sort of complaining about power not cutting rates more because the US was one of the most restrictive major central banks last year and the dollar was weaker, yes, but not as weak as it could
have been. My guess is that this year, as you see a bit more of a divergence across the central banks. Obviously some back central banks are priced to hike. They probably won't end up doing that, but with the US, you know, with the scope to cut, then you probably will see a bit more dollar weakness coming through. And that's uh, yeah, that's going to be the outlook.
Yeah, what about inflation you keep talking about is not really going to be a problem. It's going to be well behaved.
What makes what.
Makes you so inflation is fascinating? Well, we have you know, needle to say, we have a great model on inflation. It's a global model of inflation. And basically the thing about inflation is a lot of lags happen that work through it. So what's happening sort of a year or two ago in terms of money growth and the dollar
that really matters for inflation now. So it's kind of baits in the cake that inflation has been low recently, and it's also somewhat bakes in the cake that it will tend to rise in the second half this year.
But after that is.
A bit of an unknown, and that really depends on the AI think. I think structurally we're going to see a lot of disinflation next year.
Basically I'm going to tee up two disinflations. They got China where their oddities, including the surplus we saw the other day, and you've mentioned AI twice here now Dominique, the view from sixty thousand feet. Talk to Corporate America listening right now. They're going to actually see tangible margin improvement out of AI and out of the Chinese input.
Well, they have massive margins at the moment. I think the idea of AI is it's the roots to cutting costs to maintain those margins because in the K shaped economy, okay, the final demand from the consumer is going to be a bit more challenged going forward.
And sequencing, which is your hallmark Beck then Neil Samson, credit squeeze and sequencing. Are companies going to cut before AI benefit? Are they going to invest in AI before they cut? Well? Any vision there?
I mean unit unit labor costs were basically zero negative in the second half of last year, so I mean they've they picked up it a little bit, but that is effectively the cutting in the end, they didn't need to really you know, five people lay off rates are really low, but they didn't work them so hard in terms of the hour side, and they've definitely cut income strategies.
I mean, I know a stud like you doesn't look at this, but weekly claims came in under two hundred thousand. When was the last time and you looked at claims?
Well, we look at it every week.
Which which is one of my favorites. Okay, stop the shop. Could we stop the show? Did I re choosy get your World Cup tickets? Not yet?
Not yet, I'm waiting for We're working at them right now.
Dominic coustam with us here with Missil. Can't say enough about what Missoo's doing with Stephen Rashudo and Jordan Rochester and the whole combo. And we're just thrilled to have him in here. This morning, you were waiting on Matthew Miller in Detroit, an incredible F one interview. I'm fired up to talk to Matt Miller about maybe later. Alexis christophis here with doctor constem.
What do you do if you're searching for yield? What what are bond investors to do this year?
Well, I mean it's I mean, basically, the main issue is that the yeld curve is going to end up getting a lot steeper in real yields, so we expect real yels at the front end to be super low and real yels at the long.
End to be high. So you know there is going to.
Be yield out there, you know, as long as you go far enough out in terms of the yeal curve. And obviously there are some markets and the US is a relatively high yield yielder and the UK is high, so you know there's something out there. But yeah, I mean, this isn't this isn't the most exciting world in terms of yields outright versus you know, the risky assets. And but you know you should play the curve basically.
I mean, you were twelve years old, but you lived independence of the Bank of England, diaminic constant and the threat to United States central bank independence.
I'm so glad you asked that question.
So when we were in England, we were taught, and most people taught in Europe at the time that there was no such thing as independent monetary policy. You basically, fiscal policy kind of dominated and the central bank setters sort of.
Go along with it.
So in a way, the Federal Reserve Act that gave them their independence in practical the terms, you know, it only really became relevant after the inflation in the nineteen seventies in order to bring down inflational expectations. I think it's a luxury that we enjoy right now, the independence, and they shouldn't be taken for granted at all.
Well, our audience is, particularly the global law street that hangs on your every word. Should they get used to treasury driving central bank monetary policy? Yeah?
I think, and I think that's what's going to happen. And I think the problem is that if you don't have say, inflation expectations per se as a real issue, then basically what is a real issue.
It is debt service.
I mean, you can't have half the budget going and debt service type thing at a time of all this geopolitical tension.
I mean, Stephanie Calton, I know you've read every word. Is Trump really? Is President Trump actually doing modern monetary theory? I mean, is he brought MMT?
Yeah? Yeah, they're going to end up having to do it.
K shaped economy with a eye is going to lead a lot of people desperate. And if you don't have the fiscal latitude to basically bail those people out with basic income and munashit policy is very imperfect tools one interest rate for everyone then you are going to have to sort of think a bit more creatively about how
you interact fiscal with munashit policy. And that really means very low short rates at the front end, and the long end can be a bit high and may even be controlled at some point if necessary.
And creative I think has to mean something other than handing out free money than helicopter money.
Yeah, well yeah, it doesn't help in finish, Yeah, helicopter not yet exactly. I mean, it's got to be targeted at the people you need at most. I mean, it's basically I mean, we are effectively going down the road of basic income. I mean, and if AI is what is supposed to be in five years time, there are a lot of people here who will not be working.
So what is going to be the political response to this among elites and frankly among the broad swathe of America that is joining us enjoying this prosperity.
Well, it's going to be a bit like Greenland. Eventually that they will talk and.
Eventually people will sit down and discuss and think more more creatively about what you do, because you are blowing up so many different things that we have taken for granted.
And need to be addressed.
So I think there will be this acceptance if you like that fiscal policy has to be taken into consideration along with the sort of normal mandates of inflation.
So okay, wise, how do we work out then how do we consider our fiscal mess? The theories you know, all wonderful work by Joe Stiglitz is you grow your way out of it on a nominal or real basis. Do you have a confidence with our technology that we're going to grow our way out of that?
So imagine a world where GDP growth is let's say, running at three percent, and four percent comes from productivity and negative one comes from labor input. You have pretty good growth and you can grow out of it if you have, say, you know, two percent inflation. But of course that world will probably be giving you disinflation if you're not careful, So you kind of need a very
supportive monetary policy as part and parcel of that. But then on and once you get the lattitude on fiscal policy because you are growing yourself out of it, then you can do your redistribution with your basic heat.
But Alexis wants to get in here, I'm being rude. The elasticities have changed. You've got two thirds. I mean, I is Chris Waller, do we have two do we have to our starts? We got on our start for the haves, Yeah, and we got on our start for they have nuts. Do you agree? Yeah?
In a sense there, yeah, that's true. But that can also get reflective or embedded in what will be a very steep, you know, real ilk curve, because the real ill curve when you have this very low real rates at the front end and if the government is funding and more at the fund send, that is how you probably get that fiscal latitude.
I mean, Lisa Mattero just love because she's going to get the surveillance cork to put it in my mouth. I got so many questions as jump in here.
Well I went speaking of fiscal policy. I'm just you got me thinking about fiscal policy in Europe. I mean, it's it's kind of a hot mess, right, And so if you want to look at opportunities outside the US, where are you looking? If you're looking in the EUO, I mean it's growing albeit moderately.
Yeah, well, I mean opportunities and fixed income. I think you know, basically it's you know that they have very relative low rates. You know, they've they've they cut rates much more aggressively relatively speaking. They do have sort of you know, some countries like France obviously have huge fiscal issues they need to deal with a kind of as bad,
if not worse than Italy. So yeah, I mean those are issues that you know, you could argue that maybe we're at a turning point, but I think the poliskal uncertainty there makes that much more risky. You've still got a lot of polistic uncertainty that needs to be working through. So yeah, I'm not sure there's you know, I wouldn't rush off to buy Europe.
Can I get in trouble?
Yeah, well, you know you do sometimes.
So I put out a comment and a fan distribution of probability. Do many custom folks invented fan distributions are now also some market and modern market economics. The certitude here of select FED governors and presidents right now I find absolutely mind bug. How do you respond to academics, schooled quality academics who are just so damn certain ex ante of what they think.
Well, I mean, yes, I mean there's there's been an element of backward looking. I would say group think and taking everything for granted. And I would say they they need to be much more flexible and much more sort
of strategically thinking. And I think it's fair to say that a lot of the criticism leveled at, you know that the current FED and and that sort of you know, you know, previous FED chairs has been that there's too much sort of backward looking playing by with the rule books that they thought would never be ripped up, and yet those rule books have to be challenged.
Thank you so much for getting us started in January. Dominic constems with Miszoo. Folks. I can't say enough I get I'm flooded with people.
Time.
Send me his note, Send me his note. Get it from a zoo. We protect the copyright of all of our guests, even Jordan Rochester, which is tough to Can you get out on LinkedIn? Okay? Everybody else is on LinkedIn? Domini? Can you can you write on LinkedIn?
I could try, you could try, Okay?
Thank you, Dominique constem with Miszoo this morning. Stay with us.
More from Bloomberg Surveillance coming up after this.
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We said good morning, patiently waiting Decked and Van Cleef and Cardier in London. Sri Coacha Gavidian joins us is brilliant at Aberdeen Investments as well. Sri, what is the change in your investment strategy over the last sixty days, given the cacophony, the the buttress scene that we've I've seen out there, of GEOPOLOTEXI in banking as well, have you changed a view.
We've actually taken a very long term view and we've at the end of last year we were very aware of a lot of the geopolitical risks that were ahead, so that would be very much in favor of a diversified portfolio. So as we've seen some of the safe havens, even though they were quite stretched, like gold and silver, they're still doing quite well in this backdrop. So we still recommend hedging with those safe havens. But also if we think about the broader we were just talking about
TSMC earlier. If we think about the broader AI story, one of the recommendations we're making is that looking beyond the big tech names and looking towards broadening out that AI theme towards other regions and perhaps towards real assets, for example, the AI related infrastructure. So I'd say that a lot has happened, but we go with a scenario analysis, and so far we've been Okay, Gold.
And Sex out with earnings. We're going to talk to bank unless three, Coach, you're forgetting you. I'm kidding, three, but three, you know, as we see Gold and Sex come out here with some ginormous numbers equity training. I'm not going to bore you with the details, three, because I know you can't talk about individual stacks. But do you see continent of Europe banking finally as turned a quarter and will begin to show American like results.
Well, I don't have an earnings forecast as such. Yes, of course, outlook for Europe, but the outlook for Europe is still quite quite strong for this year. I'd say that a lot of the if you think about the banking backdrop, moving on from banking and broader as well, you can see that the economic outlook is quite resilient for the rest of the year. I would say that, you know, rates have stabilized. You know, we have seen the end of the easing cycle from the ECB, so
there's some stability there and from the rates section. From the rate side, in terms of margins for banks, we are expecting the ECB to be on hold because inflation is at target, growth is quite stable, resilient.
But at the end of.
This year, towards the end of this year, I think what we'll start to see is a shift in the ECB slightly more hawkish tone, perhaps because we're going to see the impact of fiscal spending filter through into the broader economy, particularly defense in Germany, defense across different countries. But I'd say that that is going to have material impact on the rates outlook as well. So nothing too dramatic, but potentially a hike twenty five basis points at the beginning of twenty twenty seven.
The looks.
Since we're speaking international, just want to get Japan in here, and what we're seeing with the yen now at about one fifty eight to fifty one, eighteen month low. There's been a lot of concern over Japan's fiscal policy. What this is going to mean for the Japanese end. When does that because a problem for global markets?
I would say that for the yen, the global markets are really focused on the carry trade and the carry on wind. We've seen bouts of this in I think it was last year or the year before where we had a big unwind in the shift in the yen. It's those sharp movements that we need to be concerned about. And at the moment, what we're seeing is that the yen is oscillating around that one sixty level, just almost triggering that level. This is the lowest we've seen since
twenty twenty four. Back then we saw a series of interventions from the Ministry of Finance because it was felt that the depreciation of the yen was too excessive. We're hearing that talk again from the Ministry of Finance that the yen has moved away from fundamentals, also from the Bank of Japan. So I would say that it's possible that the yen breaches one sixty. Some hedge funds are vetting on one sixty five. But I would say we've the Ministry of Finance has already started talking. We have
a election coming up. They need to intervene quite soon and I think the election dynamics are going to be really interesting in the next few.
Days, right street, Thank you so much. Stay with us.
More from Bloomberg Surveillance coming up after this.
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Heidi Krebo Redicker joins US now Senior Fellow Geoeconomics at the Council on Foreign Relations. Heidi, you are acclaimed for going beneath the headlines and looking at the silly stuff out there. Let's talk tankers in Russia. What's the dynamic right now of tankers from and to the land of Putin.
So tanker, you know, shadow fleet being the silly stuff is a good way to start. But I think it's it is important when you have a flood the zone news January to kind of look at some other things that are happening. And I think one important move is that the US is finally moving from sanctioning Russian and Venezuelan and Iranian shadow fleets to actually disrupting them, and so you know, we've really had shadow fleets test limits
of sanctions. Sanctions are one of our most important economic tool for uh, you know, it's been a it's been a way to keep us from from from going to kinectic war. But this, you know, we've now seen the US go after some of these Venezuelan ships. It's been high seas, you know, drama on the on the seas, and so you know, it's I think it's important to say this is exactly effective, and the UK and the Baltic States are looking to follow.
I look, Heidi at this and to cut to the simplicity of March or April with the cacophony of news. Is Russia impinged? Does Venezuela have any chance? Can I even stay? Could Cuba collapse? Are? Those are those outlandish statements? So I don't think they are.
I think that we're you know, we're looking at you know, we're looking at at Cuba being very much under stress. But you know, in particular going back to Russia, it's one thing, it's easier to go after the Venezuelan ships, but you know, you have you know, the you know, the UK has watched as the you know, the Russians have been shipping illicit tanker shipments through the through the English Channel, and so that export route is incredibly important.
And if you get the UK and the Baltic States together actually watching the US president, they could actually do a massive shift from from just the passive enforcement of sanctions to actual maritime pressure, and so that is a great way to constrain Russia. The other part of it is Ukraine has been actively taking out Russia's Black Sea shadow fleet, and so they're using drone strikes and they
are taking out tankers in the Black Sea. It's a big shift to direct pressure on the logistics that move Russian oil, and the Russians are not happy about it.
Talk to me a little bit more about what Ukraine's doing, because I feel like it's happening in the background and sort of getting forgotten, right because there's so much other noise going on. So how is Ukraine doing this? And I guess what's the impact, What has the impact been or have we seen it yet in the markets in the price of oil.
So I don't think that this that these hits to Russia's shadow fleet in the Black Sea are impacting oil. Yet you have a lot of other dynamics things happened, what's happening in Iran? Obviously you know Venezuela to a lesser extent, but I do think it's worth paying attention to, not as much for the pressure on commodity prices, but the pressure on Russia to fund its war against Ukraine.
And so this meaningful convergence between the Ukrainian kinetic pressure, I mean literally taking out the you know, they took out the black Sea fleet and the military side, and now they're taking out the black Sea shadow oil fleet. So combining that with the UK and the Baltics possibly doing the you know, closing off the maritime escape roots, this is actually about constraining Russia's ability to fund its war.
Hei Doi, thank you so much. He Criminoretica with a Council on Foreign Relations. Stay with us.
More from Bloomberg's Surveillance coming up after this.
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
We can't have to do this with Lisa. Lisa, when was the last time you had a bagel like you know, I'm thinking two thousand and five.
I make Cottage cheese bagels.
They're delicious. Oh come on, Lisa, are so good nat you have bagel Day. Thanks to Doucy over at Fox for reminding me of this. Einstein Brothers here out. I love this day. Terms and conditions when you go into Einstein Bagels today may not be combined with any discounts, offers of promotions one coupon per customer those of Einstein Bagels as well. The newspapers need to get to it, Lisa mitaol.
All right, let's talk weight loss drugs. You're talking bagels and all that. So we've heard about the drugs affecting restaurants, right, people eating less? Well, who is benefiting? So apparently with more people using DLP ones it could end up saving airlines some big money. This is from Jefferies analyst. Okay, they say the biggest airlines they could save up to five hundred and eighty million dollars in fuel costs this year because people are lighter.
Did you think when you're skinny or it takes less fuel to get you from plane pointe?
Okay, I mean think about it, like they're they're doing everything right now to like, you know, make planes lighter, like they're taking an olive off of a salad. They're removing magazines. You know, they're trying to make the planes lighter. From your martini.
No, they don't do martinis on the planes anymore, No, they don't.
Those those days are gone, just like dressing up to get on a plane. We talked about it yesterday. Those days are gone.
I was on France and the wine. I couldn't pronounce any of them. I just said, you know, do you have to give me Mogan David next? Okay, okay.
A lot of people, you know, they have those those self help people like guru's like Tony Robbins and all these other folks. So people are turning to AI to like solve all different problems. But they're using chatbots as like personal assistants and therapists. So now these self help Google gurus, they're starting to use AI. They're using their making their own AI chatbots, and they're charging subscription process that.
Was coming exactly.
So now people pay a monthly fee to talk to an AI chatbot that is, you know, based off the AI true self help.
What's a chatbot? I don't understand chat.
Pot chatbots when you go in and you can like talk, ask them questions and they chat. Yes, correct, it's like AI, but it's a specific one for yes.
Have you ever been with a business relationship where you've used chat and it's worked? I'm like, oh, for.
Two thousand, I think when I ask for a suggestion. So oh, I asked for a suggestion for a gift idea once and it actually wasn't super helpful. But these are like chatbots for specific people and specific businesses. And should I have a ch targeted to them?
Should you have a chat that?
Would?
You could charge?
We're doing it, make it happen.
Some of these are charging ninety nine dollars a month.
You could you could get something off of this time?
Another stream for Tom Keane, My god, I meant something the kids through college?
Next?
One more? Okay, one more?
Oh, this one's right up your rally. Popular Fenway dive bar is closing after nearly a century.
The Dugout Cafe.
Have you been a frequent visitor?
Tom King, I darkened the door. You go down a little Alias and ken Moore Square there it's legendary with copper fields down the street, Cask and flag, and Saya has been there in the control room, and it's just truly it's a legend that sort of passed it to do today. It's not what it was in I'll tell you what. The kids.
My son goes to college up there and he and his friends have frequented to see Yes, yeah, shocking.
But they're basically transferring their Laker license. It's going to a place called Earl's Kitchen and Bar. It's going to open next year, so that's a big sign. Yeah, it's a shame on baseball fans, sports writers, even players. Famous players.
Have you know lis Ted Williams, Yes, yes.
That's one of the names, Jimmy Fox, Ted Williams.
Do you know who Ted?
I have no clue.
Boston of Michael if you cannot see you, that's fine, and everybody else of Red Sox Nation.
She'll be going into a dark tradation here as they come up.
I'm honest.
You don't let me go back to my break, Okay, yeah, go back to go back to your bagel. It's newspapers with Lisa Matteo. Thank you for that.
This is the Bloomberg Surveillance podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Easter and on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal