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Michelle Hossein is with us. She flew in to go to a quiet White House correspondence dinner, despect to Pig Field of the American Express definitive in the United Kingdom where they work at the BBC, and of course the host of the Michelle Hussein Show across all of the Bloomberg platform. We're thrilled she could pick up the pieces for us on this Monday morning. Michelle, I think we've all seen the video, seen the tape, relived it. I
don't want to do that. What Americans want to know of every persuasion is how does the unit did Kingdom have less violence than we have? I guess it goes back to a horrific event in the nineties, But what is the legislative parliamentary courage that your nation has that we just can't do?
Good morning, tom Good morning, Paul. Wow, you are really putting me through my paces right at the beginning of this it's so good to be with you from DC, And yeah, it was a really dramatic event. I will say that, you know, there was this sense of anticipation, a real sort of freesaw around this particular dinner because
the president was coming. But as I was crouched under the tables for those minutes, it took before the room was cleared of the VIPs and it appeared that the person was dealt with and we kind of emerged back into putting our heads above the parapet as it were. In those moments, I was thinking, as an outsider to the United States about the nature of gun culture in this country, how different it is in the UK. And I will say that you have a long running history
where you know the right to bear arms. It is there as part of as part of your history for such a long time. The UK never had that for starters. But in nineteen ninety six there was a horrific school shooting at a primary school in Scotland and that did lead to the licensing of firearms regime that we continue to have in the United Kingdom and which some people continue to criticize as being too lax. But essentially the framework is that licensing of firearms is done through your
local police force. So every local police force in the United Kingdom knows who is licensed to bear arms within their community. That's the hallmark of it. So Dunblane, that town in Scotland became the tourists for a school shooting. But the culture, the environ, the trajectory, the rights are very different in the United States. But yeah, all of this was going through my mind as I was under that table on Saturday.
Night, Michelle, Another big day in Washington, DC today is the King and Queen of England arrive here. What do you think the agenda is for the King and Queen?
You know, this visit was already complex for a number of reasons, primarily because of tensions between the US and the UK governments over the Iran War. The difference of opinion, the fact that British ministers and the Prime Minister openly refer to this as being President Trump's war. That has been a real disappointment to the President, who would like the UK to be firmly on side. The UK position is that British bases are only to be used for
defensive action against Iran so that was complex. The fallout from Jeffrey Epstein already made that complex. That's what the King is flying into today. But then I was with Britain diplomats on Saturday night. They were amongst the guests in the room, Bloomberg's guests and the guests of other news organizations, and of course they were immediately thinking and we immediately started to think about any review of the arrangements for this particular visit. So there has been a
last minute review of security. Some arrangements perhaps have been changing around the margins, but this is a tight itinery in DC, in Virginia, in New York in the coming four days. And basically the King's mission is going to be to use his lifelong diplomatic skills to try and to try and improve the relationship. And really that means the relationship between the Prime Minister and the President, which is not as the UK would want it.
In the way they're going to improve. This is up Massachusetts Avenue. Michell Hussein with us with Bloomberg again the Michelle Hossein Show, and we continue with her this morning. Now, Michelle, I want to cut to the chase. It's the Royal Garden party ending it is well, if I went, can you see me in the Lack and Company London black beaver furfelt at it's thirteen hundred dollars? Could I pull off the top? At Michelle?
The dress code, I'm sorry to disappoint you, is I think going to be more ordinary. We've actually been told hats are not encouraged, whereas if you go to a Buckingham Palace garden party it's very much hats encouraged for the guests. So there's going to be a different vibe. But this is one of the first engagements that the King and Queen will have here in the United States.
It'll be in the beautiful setting of the British Embassy, just you know, about fifteen minutes drive away from where I am, the incredible Edwin Luttein's designed residence, So that's the setting. The King, with his interest in gardens, will no doubt be looking around the gardens very carefully. So I think the hope will be that it sets a tone for the visit and therefore for the next few days, and again this sense that perhaps the King is the one who can sort of smooth over the troubled waters.
I mean, let's face it, the most likely scenario is that God willing, everything goes well for the next few days. The President says nice things about the UK, the King says nice things. We know he will about the United States. There's a lot of there'll be a lot of talk about America at two fifty. That is the reason for this particular visit. Most likely things will go back, but too after they leave.
I got to get to sim Michelle David Charter over at the Times of London. This is the heart of the matter. A royal visit after a presidential shooting. It's nineteen seventy six all over again. Your visit is changed, is it not.
Yes, no doubt. There's you know, that evidence that we had on Saturday night of just how inflamed the political climate is in the United States. That's going to be in everyone's forefront of everyone's minds. The fact that this hugely important state visit comes less than forty eight hours
after that White House correspondence dinner. I think, you know, from the British hope and expectation will be that the King sort of elevates that situation, that there's something about his presence that makes everyone around him rise above politics, and that will have been the hope for the UK US bond at this particular moment in time. Maybe even it's got something to offer the United States domestically as well, a reminder that there are conversations that happen like above
and beyond the political phrase. So perhaps that's what he brings with him as he flies in today.
Michelle, thank you so much with her coverage here of the visit of the King and Queen. Stay with us. More from Bloomberg Surveillance coming up after this.
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I have three words when I speak to Cherubs and I talk about concision. I talk about acuity. I talk about avoiding conflation, which is something that you conflate two ideas together and you get in trouble. You are the queen because the queen's visiting in Washington. You are the queen of acuity, and you walked in the studio having a full Patterson tantrum over sovereign wealth. Funds beware, Yeah, what do I need to know about the rich guys country to country?
So I think one of the biggest underappreciated risks right now for US financial markets and especially this tech rally, is the possibility. I'm not saying it will happen, but there is a probability that's not zero, that some of the golf sovereign wealth funds, particularly I think Saudi and UAE, if this war lasts a little longer, are going to need cash. They're going to need it to shore up defenses,
to shore up damaged infrastructure. And right now the sovereign wealth fund cash is largely We're the biggest single recipient going to the US, and it's going fairly concentrated to technology and through a handful of financial intermediaries. Now I'm not saying it'll stop coming, but if that flow is cut by a third even it would have a material impact on the US. So that is a risk I'm
watching carefully. Saudi Arabia has a pretty big budget deficit, so it's not like they have a ton of cash sitting around they can easily tap.
Interesting just in the small little world of professional golf, we're starting to see it. There's reports out there, widely reported that they may withdraw their financial support of the Live Golf tour to the tune of a five billion dollar number, and that caught everybody by surprise, and I think in some of their discussions they were suggesting, Hey, is the pressure from the war, we need to rethink some of our investments. That ties in, yeah, exactly with.
It and PIF, which is the Saudi main sovereign will fund. There's about thirteen big ones in the Gulf countries the GCC. But PIF, even before the war in December, came out with its five year plan saying it wanted to be more efficient, more and more domestically focused with its investment. So I just think we need to be thoughtful on assuming that capital just keeps coming to the same degree it has.
And I'm not sure what that says about that whole region of the world, which was the money was just flowing.
In there for years and years.
Every financial firm in the world was setting up an office in that part of the world, and that was expected to be maybe a new financial globe, the.
Capital of capital exactly right, that's what they wanted to be. So after I mean it's been going on for a while. But twenty fifteen, twenty sixteen, you guys remember oil prices crashing in that period, partly because US fracking took off and the Middle East had an Aha moment and they said, wait a second, we need to double down on diversifying our economies. Of that was the sovereign wealth funds making these big strategic investments and attracting US money to them.
So it is a quid pro quo. And they've built up tourism, they've built up high value manufacturing, they've built up tech and finance, of course, but can it last? Partly it depends how long this war goes. Is it just temporary damage or is it something bigger?
I get an email coming in here in anticipation of Rebecca Patterson being with his threads down in Durham. First of all, I'd love to go down just to see the Durham Bulls play in the stadium. But they got a new arena which is still a jewel, very nice. It's right downtown and you know, good morning down in North Carolina. And he is an absolutely brilliant question which
goes back to your time at Best in your trust. Okay, We have been schooled that for certain our actual assumption of equity returns will be single digit, two hundred beeps above nominal GDP. We all studied the test, drank the kool aid, and it's just been wrong, wrong, wrong, for years. Fred wants to know who's right this equity market are single digits subsided equity returns? Which is it?
I mean the equity returns we've had over the last call it, fifteen years or so have been fueled by I think three main forces. Unusually large fiscal stimulus. Some of that was pandemic related, and some of it was national security economic security related, monetary policy. Remember it wasn't that long ago that we had zero and even in some countries negative interest rates that fueled equity assets. And
then the structural tech trend. And I think those three things combined help explain the differential between the economy and the equity markets. Now going forward, are we able to continue this or do we go back to something more in line with historical averages. With bond yields at four point three one this morning, and the FED in my view, unlikely to go back to a zero world or something close to that anytime soon. Because inflation is structurally higher.
I think it's going to be difficult to continue the ride we've had with stocks. I mean, again, this year, we're only up four percent year to date. It's funny, everyone's like an all time high, all time high. It feels like it should be more. It's only four percent. Right, If you had your money in Japan, you'd be up twenty percent already this year.
Are you surprised though, that when we did have that sell off with the beginning of the war.
I think a lot of.
People were surprised the veracity of the snapback one hundred percent.
One hundred percent.
I mean the fact that we have oil prices at one hundred and seven hundred and eight dollars I'm looking at Brent crude, that we have higher bond yields, that we have a worsening fiscal position, we have a K shaped economy with those lower end consumers hit harder by high energy and high food prices. It is and job markets that aren't worsening but have stalled. The Fact that stocks are here and it rallies so hard is striking
to me. I think investors have been conditioned in recent years to expect that we will have a resolution quickly because it's a midterm election year and it's not in the GOP's interest to have a prolonged war that could hurt voters. And they've been conditioned to expect that buying the dip pays. It worked in pandemic, it worked in Liberation Day. But I think you have to be really careful about that.
You know. Rebecca's people called me up this weekend, stop me on the street, I should say, rather, and they said, Tom, if you don't plug the Council for Economic Education, she's not coming back. This is a cool event you got. Jan Axi is showing up of Goldman Sachs and I've done this years ago. I think this is your diamond Gala event. Yep. And is it like with the King and Queen Meat, is it like you know, tuxedos and all that.
You No, we don't force tuxedos. We let people show up in their work clothes. And you all are obviously invited as guests to my table if you can be free on a six. But the SEED Council on Economic Education is focused on making sure K through twelve students finish high school understanding the basics of economics and personal finances. It's getting more traction. In recent years, we've seen state
legislatures wake up. We now have thirty nine states in the US that require high school kids to take at least one personal finance class before they graduate. So thirty nine is a huge step forward from where we were, but it's not fifty, which is crazy because this is so fundamental. If we want a strong economy, if we want strong stock markets, we have to have financially healthy consumers. So you can talk about the moral arguments for this,
the ability to narrow that opportunity gap. But at the end of the day, if I'm an equity investor listening to this conversation, this is in my interest.
Interesting my daughter has. They just added that course a personal finance and it's an AP course, so advanced placement, yes, which is an incentive for kids to take it. And I was still happy to see that.
Yeah. So we've just partnered with the college board on that course, and we agree if you can get kids focusing on this, they're going to have a better time in college, and they're going to have better prospects going ahead. They'll understand what the credit score is, how to borrow how to save those are.
Great to the thirteen colonies, but you got to know how to also bounce the chess and what compounding.
Means ob comparedison. Thank you so much, Thank you, I appreciate it. With the Council on Foreign Relations, and again the CEE the Council of Economic Education with their event in early May. Stay with us. More from Bloomberg Surveillance coming up after this.
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Nancy Tegler joining US Chief Executive Offer Cio Laffer Tanglar Investments this morning. My deepest sympathies. You're joining Webbush and then Nutcase Dan Ives. Why pray tell you're dressed in black. That's not allowed it web.
Bush, I know, I know, but it's the shoes for me, and you can't see those on radio.
They saw your track record, which is the classic Nancy Tanglar. Just shut up and be optimistic and be in the market. I'm not going to go to the numbers now. We don't have time. But you are the definition of excellence. How did you do it well?
Discipline? I mean, that's what it takes tom as you know, and you actually have to anticipate and be willing to go against the crowd. So we called for a bottom on April sixth, April fourth. Really we were in buying on April seventh, and that's how you make money in the market. We did the same thing with deep Seak. The naysayers, the hedge funds, they're always short, fast quick. We're investing for the next two to three to five years.
We're going to get a big, big week of tech earnings this week. What are you looking for for some of those big names.
Here, Molly, If you haven't beat beat and raised, you've gotten slaughtered in this mart And even some companies that did beat, beat and raise, it wasn't enough. So what we're going to look for is the same thing everyone else is looking for. We're going to look at guidance. Margins are at historic eyes, so we want to see if that can sustain. And then we're looking at you know,
implementation cases for AI. So if you look at ge Veranova, they are benefiting from the AI craze, but on their call they were talking about how they were utilizing AI to improve margins.
It seems like the we did have a rotation late last year coming into this year out of some of those growth names, some of those high multiple names, into some more cyclical. But now it seems like that that's just reversed. Here is that how you're viewing it here? Back to what has been driving this market, which is some of that growth in that.
Sex You have to have technology work in order for the market to work, and so that's why we were in buying things like adding to Micron at three sixty six just three weeks ago, Stocks at four ninety six. We were adding to a number of the software names. As contrary as that may seem, like pound here, Microsoft.
How do you view that risk because we did have one of like you software is one of those groups that sold off because perhaps it's going to be you know, really the competitive aspect visa the AI is not going to be favorable to some of these software nows.
How do you view that? Well, we got out of some of them in anticipation of that. So we're out of Adobe, we're out of Salesforce, the seat model doesn't. I don't think isn't going to sustain. And we're hearing rumblings that Salesforce is pivoting away from seats, But we were adding to names like Microsoft, which we think will be a winner. We actually and this is very controversial. It goes up and down like a Yo yo, but we're actually adding to service now selectively. We do think
it's a winner long term. And then of course the cyber names, so.
Something like a Salesforce dot com whichsen had been such an extraordinary story, right, but the revenue is subscription by seat, right. Is there another way for those types of companies to go.
Yeah, Actually they've purchased recently. One of my clients runs a software company that they measure volume, and so that I think will be one of the things that will shift sort of more of a platform model, which you've seen many of the software companies shift to. Margins may get compressed some, but we'll see going forward. I think AI will drive margin growth.
The heart of the matter on the arc of a decade or two is people are scared stiff, and we have climbed in a bull market. A wall of worry is the wall of worry psychologically I mean you have a huge advantage. You're out in Arizona, where the minimum age is forty five. You can't enter the state unless you're forty five. I mean, break the breakfast club in Phoenix. No one's under seventy years old, okay, and then the
avocado toast is nine dollars. The fact is, the wall of worry is still there, the wall of money, the wall of werry. I'm scared, stiff, I'm not going to be in the market. That's the heart of this discussion, isn't it.
Yeah, And that's why you got to hire somebody like us to do it. Let me do the worrying, because it is a brutal business and the goal is us to manage all the money for the Bechdel Corporation and the family. And I said once that investing was about being mostly right. And you could hear an audible gas from all the engineers who are building bridges and buildings
all over the world. But it's a tough business. As you know, Tom, We've been through it, and I think experience matters in markets like this instead of just reading the history books.
Okay, looks like one word, it looks like we're gonna get a new FED chair. Do you care about that kind of stuff? Are you folcusing just on the fun America stocks?
We were so critical of FED chair Powell. I'm actually pretty excited about some of the things Kevin Moore said, so I do think it will matter for investors.
Nancy Tendler, thank you so much, greatly appreciated this morning. Would laugh for Tangler Investments. I can't say enough about the numbers. Stay with us. More from Bloomberg Surveillance coming up after this.
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Right now, we need to reset on this market. It's been an exceptional set of headlines driving the fear and the optimism out there. Lori Calvesina had a US equity strategy RBC Capital Market with a Monday brief flor what did you write this weekend for publication to RBC Capital clients this Monday?
So thanks for having me on as always, tom So, I would say it was a little bit of a Hodgepodge. In the weekly, we gave our of our first take on reporting season in terms of what we read last week, which was the first week we really had some sector breadth. We also talked a bit about the US non US trade and why we think that still has room to run. We just saw a new high in the US relative
to non US. And then we had a quick little comment on fun flows, where we're seeing financials starting to look a bit better, energy and industrial starting to degrade a bit, and also growth flows getting this negative, which we all think makes sense from evaluation, earn growth perspective. So it's a busy week. It's going to get even busier this week. I'm hoping, you know, we we sort of gave our take on reporting season so far. I'm
hoping we're going to get more clarity. There's still a lot of fog out there right now.
I tell you where there's not a lot of fog, it seems seems to be some momentum. And that's in the Philadelphia stock a semiconductor index eighteen days of gains here. What do you make on what's going on in the tech trade these days?
So you know, when we look at semi specifically the rate of upward revisions, which is our gauge. Some people call that earning's breadth. We call that earning sentiment. But when we look at that sector or that industry rather across the Russell three thousand, we're at extremely high levels. It's really buying the tech sector and that also, in turn is really giving some resilience to the US equity
market's earning story. Now, I'm a little bit of a contrarian by nature, as you both know, so we often get a little bit nervous when charts are up at that level. But we have looked back over a time and seeing that when semi upward revisions are at past peaks, they can often linger there for quite some time. So we're looking for a slowdown in that chart. If it or we're where we're monitoring for one, I should I should say we're not forecasting one, and if we get it,
we'll react, but we're just not seeing it yet. And I would I just add, you know, as I look back on the themes, last week's strength and data centers in the AI story is still one of the biggest bright spots in the US earning story.
Nancy Tagler was in earlier wonderful investment performance over the last number of quarters. Are people participating in this market, LORI, or are there a lot of people behind going into Memorial Day in the summer.
It's a great question. I don't have a fantastic sense of that right now. I have heard my smallt yeah, and I'm just trying to I've been out on the road seeing people, and I would say, you know, my last trip, I felt like there was just sort of a state of disbelief about where markets are. That we hit new highs on the S and P. I do know a lot of my long only managers have been up the quality spectrum. That's not because they suddenly turned defensive.
It's just how they tend to invest, especially in the small cap space. So we do know during kind of the March drawdown that a lot of them were doing okay and higher quality was, you know, kind of doing better in that environment. My small cap managers have been the ones complaining the most to me lately, which probably
means they're not doing well. But you've started to see both in their world and on my factor data, low quality outperforming within small calf, which can happen in big rallies off bottoms, so I would imagine that Cohort is not doing so well right now.
Hey, Lourie, at the beginning of this war, we had I guess, a fairly predictable and ten percent draw down in the market. But boy, the market is snap back with a vengeance here, and I think that's probably surprised a lot of people.
What do you make of that?
So, you know, I learned something important with tariffs last year when we had that eighteen point nine percent draw down, we bounced back pretty fast. And you know, we kind of did that all in April. And I remember being out on the road in June and talking to some of my long only clients, just very very smart people, and they were basically of the opinion we paid the price for whatever economic damage is coming from tariffs, profitability damage,
whatever that is in twenty twenty five. We paid the price for that on April eighth, and we're looking ahead to twenty twenty six, and I remember just being really taken aback by how forward looking they were being and how done with twenty twenty five they already were at the middle of the year, and I'm not hearing the conversations about twenty twenty seven yet, But I have thought a lot about that example and kind of what that moved to minus nine point one percent represented, and that
is really the depth of a pullback you should do if you are not worried about a recession post GFC. If you start to be worried about a recession, you're going to fall fourteen percent or more. And I never really heard that. As worried as people are about the Middle East, I never heard that from equity investors. You're hearing that from the energy community, but you're not really hearing that from equity investors. So much so, I think
we paid the price for some damage. I think if a growth scare, a recession scare comes back, you know a bigger pullback is on the table. But I'm just not hearing that from the investors right now.
Laurie, I don't care. The only reason you're on Are you going to be in the RBC box at the Bell Center game six May one Lightning Canadians? I mean, are you going to be I'm not that important.
I'm a big hockey fan, but I'm a Ranger fan, and they know.
That at all.
They know that I get invited to those things.
Can we just stake that on? What is it? TNT whatever it is? The Henrik Lundquist. Every time he talks, I learned something. Yep, there you go. He's like a color announcer, you know, between periods he horbles gaily. He's phenomenal. He's like, who's the guy Tony Romo? Yeah, every time Tony Romo talks, I'm a dummy. I learned something. Every time Lundquist talks, I learned sots a winner. I'm trying to say something nice about the Rangers. There's nothing nice to say. Look, not this year.
My family is very disinterested in watching those games this year. But I'll tell you Tom, when my husband and I used to have season tickets to the Rangers. We don't anymore. We're too busy now. But it was during it was it was right at the beginning when I started going, when Quist, you know, started playing for the Rangers, and so that was sort of my heyday of Ranger phantom. So I always am interested in what he has to say.
Amy Wi Silverman just email me. She has tickets in the RBC box for me Game six. Laurie, thank you so much, greatly appreciate it. Laurie, Calvisina out talking to people about the secuity market, which is way more than what we do in our hermetically sebled studio.
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