Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch US live on YouTube.
Stuart Kaiser joins us.
He's head of US equity trading strategy at City Global Markets. Stuart, what do you hear on your desk? What are your traders telling you? What are your clients telling you about? What was at its trough at a ten percent pullback in the market, healthy step in an otherwise okay market or something different?
Well, Matth, I think most pms would rather not have that, have that type of healthy step, But yes, I think look at position dee risking, I think is the discussion point you know, around Wall Street over the course of the last month or so. It does seem like that's later innings. You know, clearly there were policy and uncertainty things that triggered that, but the big pullback I think had much more to do about de risking that it had to do or anything sort of.
On the data side necessarily, And one can say that, boy, you insert any kind of uncertainty into a market that was as richly valued as we were at its peak, then a pullback should not be that surprising.
Do we have more to go?
Do you think?
I mean, look, I agree with you one hundred percent. I think coming into the year you would have said, yeah, fundamentals underlying the market pretty solid, but risk reward around those fundamentals pretty poor. So having a pullback of that nature probably not surprising.
Is there more to come?
I mean, I think if you're if you believe that a lot of this was driven by policy out of Washington and the key administrators down there are telling you basically to hedge and that there is more to come, and that they're willing to tolerate some short term pain for these longer term structural reforms, then yeah, it does
feel like there's potentially more more behind this. Obviously we've gotten a couple of days of calm here, which is welcome, but it's hard to think that the headlines that have driven this are are finished.
Within your vast experience, which goes back to the McKinley presidency, Stuart Kaiser, if you have a drawdown like this, juicy, excuse me? Do you see a snap back like in nineteen eighty seven, or is it a more protracted recovery.
Yeah, it's a good question time.
I think a lot of people are citing the late twenty eighteen period where you kind of had to draw down. Then you had a couple weeks of a bit of rally in stability, and then in December of twenty eighteen we sold off again. So that would be your barecase, I think, or your bad outcome, because back then you had a growth scare and you had concerns about a policy ere from the FED. If you just swapped out FED for White House, you'd be a kind of simblard situation right now.
This is brilliant because then Ben Laidler when he was at HSBC called the bottom of the market Christmas even of twenty eighteen. How do you know when to step in?
It's a great question. I think the early stages of when to step in. I think in this case we're going to be driven by price action more about positioning. If you were being very positive, I think you would have said last Tuesday was the data step in because you had tech stocks up in a down SMP tape. Bigger picture, though, I look I think you need to get through the budget and tax negotiations over the course of the next two or three weeks to really be out on Morsolo football.
Well, the thing I'm missing here, remember Stuart Kreiss Kaiser in season two, episode four of Industry, Stuart Kaiser was yelling at the troops and industry, we need, we need.
Actually, yeah, I'm not sure we've seen it, Stuart. I'm looking at the earnings outlook for the S and P five hundred. It's kind of like nine ten eleven percent kind of earnings growth for the next couple of years.
Are you guys comfortable with that? Or is a risk to that? Do you think?
You know, Scott Cronin on our equity strategy side, you'll see some risk over the next few weeks of some downward revisions going into earning season. I would say this, if Corporate America, given all the uncertainty and everything that's happened over the last three weeks, comes out and defends numbers, that's going to read read very very positive. But particularly the part of the market that have a little bit
more of a China supply chain. You know, Scott and team do see some downward pressure on numbers there, so we would expect to see estimates come a bit lower. To your point, very solid growth and very little negative revisions to begin the year. So I think, you know, one keyworness is going to be interesting. If Corporate America
steps in defense, then that's very positive. If they kind of kitchen sink this just just to get any bad news out there, then the market is clearly going to be under a little pressure during earning season.
I knew Scott Coroner when he had an honest job selling my research.
On the West Coast exactly exactly.
So, Stewart, are you finding your clients are kind of going they'd love to buy the mag seven or to the tech socks on a sell off or are they rotating into financials or industrials or something that may be a little bit more safer just from evaluation perspective, Well, I think.
In terms of like the cherry picking or the bottom picking, the focus has a bit more on tech just because that's the stuff that's sold off the most. You know, big picture, do you want to broaden out this market?
Yes?
Are you going to do that at a time when you US economic growth looks a little wobbly you know, perhaps not so I would say the bottom picking or the buying the dip we've seen has been much more in the tech growth and momentum stocks that have sold off the most, because that's where the valuation is rebased, you know. I mean, if you liked you know, Tesla down twenty five percent, you probably love it down fifty. So, you know, I think people are sort of focused on that part of the market right now.
For the by the dip mentality, How do you fold.
An economics now, like if I've got nominal GDP coming in, if i got real GDP coming in, that affects the Stewart kinds of world, doesn't it.
One hundred percent?
And I would say the risks on that side to us are all on the labor side of the economy, you know, I think, Okay, so where do.
You go on a sector basis? I'm running out of times Steward, and I think people want to know, how do you shift your sector trading analysis given that diminished GDP.
Yeah, Look, if you're slowing the economy, then you want to be not in the consumer facing parts of the market in our view. So I think if you're trying to expose their consumer exposed, which a lot of retelling is that's the part of the market want to be the most careful about. Without a doubt, I think US consumer has been the white night of the global economy
for years. If we start to see cracks there, which we are seeing on the confidence side of things, then that to me is the part you want to be the most careful with.
Stuart Keiser, thank you so much, greatly appreciate it.
With City Group, this is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
We're going to go to Dubai right now. Jaman Ebersch joins us now with a great overview of a view from sixty thousand feet on all going on in Gaza, in Yemen, and of course the effect upon her Middle East. Jamina, thank you so much in your evening for spending time with us. I believe in a three day period I have attacks on Yemen, attacks on Gaza. How do the major Middle Eastern powers adapt what does Saudi Arabia do in others?
Yeah, and you're also missing attacks on Lebanon and Syria as well, in addition to skirmishes on the Syrian borders. So yes, there's been plenty going on in the Middle East in the last few days, a real escalation of things since where we were in January nineteen, which is when that seasfire and Gaza kicked in Phase one of the Seasfire. I think it's safe to say at this
point that the seasefire is pretty much dead. There is no evident commitment either from the part of Israelis or from Hamas at this point to want to continue with the seasfire and its current format, and that came to light in the last twenty four hours.
The death toll obviously climbing.
The latest figures from Gaza Health Ministry is showing that more than four hundred people were killed in.
Yesterday's air strikes.
But you did ask about the broader Arab region, and the thing is, let me also just rewind it back to not just discussions that were taking place vis a vis how you move from phase one of Seasfire to phase two, but also those broader discussions amongst the Arab league around the eventual reconstruction of Gaza, and that was in response, you may recall to Trump's Riviera proposal, where the US administration essentially said to Arab states, if you
want to be involved in Gaza, give us your counterproposal. And now it appears to be the case that this is such a remote possibility you can't even think about reconstructing when airstrikes are still a daily feature of the lives of Palestinians, and where Israeli hostages are still being held in captivity by Hamas. So we really seem to have gone back to square zero again with the events of the last twenty four hours and.
Dromana the You know, during the seasefire, the exchange of hostages was taking place, maybe at a slower pace than people would have liked. What happened from the perspective of Hamas to refuse to release the remaining hostages.
What changed?
Yeah, So the initial ceasefire was composed of three phases. The first phase entailed the release of around thirty hostages in exchange for Palestinian prisoners, and that part of the seasfire actually expired a couple of weeks ago, so exactly
seventeen days ago. One of the other preconditions was for the IDF to withdraw away from populated areas in the Gaza Strip, but to maintain a buffer zone, and there was also an understanding that they would start within the middle of Phase one talks around progress to Phase two, where Hamas would.
Release the rest of the hostages.
It is estimated that sixty hostages are still told with Hamas, about half of them still alive, and that Israel would fully retreat from the Gaza Strip. Now, the US said that the discussions between the two sides were not yielding any fruit, so they put forward this bridging proposal which would allow for an extension of Phase one.
While they worked out the details of Phase two.
But the sticking point is that Israel wanted the full militarization and to completely decapitate Tamasi's capabilities in the Gaza Strip.
They didn't want to allow that to happen. To be held back for.
Our audience, particularly waking up in America, good morning, on your commute across America this morning. The fundamental issue whether someone's vision is back to nineteen sixty seven or dare i say back to nineteen forty eight is a completely intractable situation. And the heart of the matter is, I guess I'm speaking as an amateur. You're the pro Where do the Palestinians go? Where would the Middle East like the Palestinians to go?
Well, the Middle East would like the Palestinians to live and thrive within ultimately what would be defined as a Palestinian state. So remember the position from all of the Arab states is that there needs to be a credible path towards a two state solution. The last carrot in the region is Saudi Arabia, and we've talked about this in the past. About before October seven, there were talks going on behind the scenes about a potential normalization deal
between Saudi Arabia and Israel. But given the events of the last eighteen months, Saudi Arabia have held back now and said we're not going to sign on anything unless there is an actual credible plan to get to that two state solution. And even in the response of the Arab community after Trump's Riviera proposal, which I think was quite telling in itself, and that they reconfirmed that they there should be no force displacements of Palestinians out of
the Palestinian territory under no conditions. There has to be a credible reconstruction plan. But then many more moderate Arab states in the region will say they also don't want to see Hamas in a governing position in the Gaza strip as well, So there also is a matter of governance in order for the money and the reconstruction appetite to come in.
Jimta, thank you so much for the time. Today, Jamin and Bartecci're leading all of our Middle Eastern coverage from Dubai.
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Dam Harvey Joints is Professor of Finance at a Fugal School of Business at Duke University cam One of the things we're noticing here in this world of the last I don't know a couple of months and the uncertainty that's been injected into this marketplaces, people still flock to gold here as I guess a safe haven. Three thirty seven dollars per ounce here. What do you make of our friends buying gold here?
Yeah, So this is the subject of my research, and it's kind of interesting that there are two factors. There's kind of a medium term factor and a short term factor. So the short term is the increase in uncertain The medium term factor was what happened after Russia invaded Ukraine and essentially the US dollar was weaponized, so with the sanctions that made it very difficult for Russia to do business because the numerar currency in the world is the
US dollar, and China took notice of this. So China strategically wants to de risk, meaning that they need their own currency to be credible. They cannot continue to rely as they have been on the US dollar. So to ensure or to build the credibility of the Chinese currency, they've been buying gold. And given that there's a limited production of gold every year, like last year was three three hundred metric tons, that increase in demand has been
driving the gold price up. So that is factor number one in factor number two is unraveling today given the uncertainty that has been induced by this new administration, that people are looking for a safe haven, and there's a strong perception the gold is a safe haven investment.
Can you have normal stock markets a bit at an ask with the tumult that we see right now.
Yeah, So it's very interesting. So we are in like a minor draw down. But my research looks at major drawdowns historically and identify nine major draw downs. So these are drawdowns where the market goes down by more than twenty five percent from pete to trough. And it's interesting that in seven of the nine negative episodes historically that gold actually has a positive return. In the other two,
gold has a small negative return. So think about that that the market's down forty percent, gold's down two percent. That's pretty good. So even in the times where it doesn't produce like a positive return, it does far better. So historically it has been a diversifier. However, and this is really important and most people don't fully appreciate the following point. Gold is volatile. So gold is as volatile as the S and P five hundred, So that means
it can have very large straw downs. Also, it means that it's not a safe haven.
For sure.
It is historically a safe haven, but it can have very sharp draw.
Downs is gold? Should gold be a part of the average person portfolio?
We think about the sixty to forty portfolio, and now people talk about alternatives need to be a meaningful percentage of that.
Where's gold in an average portfolio?
Do you think?
Yeah?
So I get this question a lot. So to have a diversified portfolio, you'd have more than stocks and bonds. That's kind of obvious. And if you look at major institutional investors, they almost always have what they call kind of a bucket that protects them from the downside. And that kind of downside protect bucket often includes gold, but it's not just gold, so it's often a diversified set of commodities. It will include treasuries that are inflation protected,
that's important, and perhaps some other real assets. So yes, I think that the average investor, just like the institutional investor, should have a diversified portfolio, and gold certainly does play a role in the diversified portfolio.
Professor Harvey with is Campbell Harvey with us from Duke University. This morning. We welcome all of you on your commute. We welcome all of you Brackodology, and that is it eleven miles between you NC and Duke this Morning on YouTube. Subscribe to Bloomberg Podcast. It's our new digital experiment. We're humbled by the international reach of this. I featured the Mumbai Financial District today and their evening listening as well.
But with Cam Harvey, he's looking at gold here. We should point out as we speak, gold at a number none of us have ever seen before. It's so I can't even find it on the screen. It's so lofty. Are you ready? Three thousand and thirty nine dollars? It's up a pop and thirty three dollars this.
Morning, Kim.
I guess really, over the last couple of months, what's been the key issue driving these markets has been just the talks of tariffs. You get in front of your students, down to Duke, how do you frame out tariffs as an economic policy?
So the first thing to realize is that the US exposure to kind of trade is small. And what I do in my class is like a quiz question if we if we look at trade exposure as exports plus imports divided by GDP, how does the US rank in terms of like one hundred and seventy nine countries in the world, And it turns out that US ranks, you know, one seventy seven, so it's got very low trade exposure. So think of imports as being only fourteen percent of GDP.
So it turns out that other countries have much more serious exposure to the US policy than the US. So the issue, I think is not just the tariffs, but the uncertainty about how the tariffs are going to be applied. So if we knew what the policy was like twenty five percent across the board, we could actually figure out the hit in inflation and the hit and GDP. And it is a hit. It is a negative, but it's
not a large negative. And I think a lot of the problems are the tariffs on, tariffs off and different numbers being thrown out. We just don't know. That creates uncertainty. Investors like uncertainty.
Kim, You've lived in the heart of the collapse of the American textile industry, I mean in the caroline is Maybe I'd also put it into the furniture industry as well. What do you say to the fancy elites at Duke Universe City about all those jobs we lost to Asia?
Yeah, that's so this is globalization, And I think that a number of mistakes were made in the push for globalization, and now we're reversing some of those mistakes. So we have let other countries hold US hostage to critical minerals. So that's the sort of thing that you should not offshore. So we will be reshoring repatriating certain key industries that we cannot afford to let adversaries have influence over us.
So I think that the sort of laysafe, they're blind sort of push to globalization didn't take one critical thing into account that we think about all the time in business, and that is risk management.
So a lot of this.
Restoring is going to be expensive. So it means that to produce it in the US is going to be more expensive, and what that will do in the medium term is be pressure on inflation. But that extra expense is an insurance premium that we should be willing to pay to have these things produced within the US.
What does Mark Karney need to do for your Canada, Professor Harvey.
Well, obviously Carney is highly experienced in terms of both business experience and central banking experience. My country, Canada has effectively been in a recession for the last three years and I say that not because of the headline GDP NUM, but if you calculate, and this is what people should do, calculate GDP on a per capita basis, and given the growth and population in Canada, we've had negative GDP growth.
So we need somebody to come in and change the course because nobody wants to be in recession for years.
So how serious and how much risk do the US tariffs as current currently talked about? What's the impact on Canada? How big of an impact could that be on Canada? How concerned is Canada?
Yeah, so again it's interesting. I said that the US has very little trade exposure overall with imports at fourteen percent of GDP. I also did that calculation where I took the area so Canada, Mexico, and the US put together, and it's amazingly self sufficient. And I think that a better idea for the US would be to kind of strengthen the bond between Mexico and Canada and truly be sort of an area that is resilient to fluctuations that might happen across the world. For some reason, that is
not the policy, and that's unfortunate. So that's going to cost to some extent US growth and Canadian growth. But I do think that many Americans are not aware of the amount of business that the US does with Canada, and it will be painful if those tariffs are imposed.
KEM. Hervey, thank you so much with Duke University in those comments on his at Canada this morning.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple, Corplay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
Right now, A Skyler Montgomery counting with us with Barclays Skyler, is foreign exchange useful now in gleaning tariff dynamics, Like when you look at Looney or you look at pay so Max, can you learn something there.
I think there's very very little to learn in FCS markets. I think there's very little price in terms of tariff premium. And there are a couple of ways you can see that. So one is we have a fair value model for your dollar. We're pretty much.
At fair value on your dollar.
And you could say tariff premium is leaking into rates market, and so it's reflected in some way through fair value through that mechanism, but I still think there's very little price And I'll actually say I think we're the most concern about terra s feeding to growth as prices in the US, So.
I would think i'd see more streams the US dollar given all this uncertainty, But the Bloomberg dollar in next is kind of down like four to zo point two percent from that of early January peak.
What am I missing?
I think this is the issue is that the market doesn't really believe tariffs are coming in in the full forest that Okay, Trump is threatened, and that's totally reasonable assume, but we're pricing very little in general. But teriff risk and the uncertainty has creeped into the US data. So if you look at US economic surprises, they've turned over,
they're negative. That's largely because of the soft data, and that soft data is reflective of the fact that there's uncertainty that tariffs are downtrend on growth in the US, and that is showing up in the dollar in a weaker dollar because we start from such low sentiment elsewhere. So Europe, for example, confidences been low for a while. It's harder to have that uncertainty reflected there. So I think it's priced much more in the US than.
It is elsewhere.
We're trying to get the dollar to parody for Tom Keen and all his European travelers. That did not happen. We're sitting here at euro one spot zero nine. How high can a euro go?
Do you think?
I think you're very limited in how hard you can go from here. I think part of that is fiscal is definitely a game changer, particularly from Germany, but it's largely been priced right as a very you know, quick rule. You can get twenty five to thirty basis points on yields from a one percent GDP fiscal expansion. We're up forty to fifty basis points in European yields, and that's really reflected in your dollars.
Well. The in traditional analysis, do we get Canadian strength or Mexican Peso strength, mech strength it impinges their trade dynamics or is that like micro analysis where it doesn't play it anymore.
I think tariff's overwhelmingly because Canada and Mexico primarily trade with the US. The tariff overwhelms any kind of currency impact you have right, because it very much makes Canadian imports less appealing to us.
So where's your trade this morning? What's your single best idea on a currency peer? I need something aesoteric.
Okay, I think something that I quite like is the yen. The pound as well, but the yen in particular, if there's a number of cross currents that go quite well for it.
Let's mention when there's no one, it's only forty two people listening. Good morning, excuse me, forty four people? Good morning, ninety nine one FM and Washington Yen?
What yen I think versus Swiss or versus the euro?
So why what is going on with Japan?
We didn't talk about Japan forever, Yes, like longer than you've been around. We'd never talked about Japan. Now it's I got Warren Buffett talking about it. I got you people telling them about the yen and all this kind of stuff. What's going on in Japan from your perspective?
So it's both domestic and international. On the domestic front, you have growth that will come in above potential this year, and actually it has one of the highest growth rates we anticipate in G ten. At the same time, you're getting more inflationary pressure, so that means you're going to have a hawkish Bank of Japan. We see them hiking
to one twenty five. At the same time, it's less exposed to tariffs and will also benefit from the risk conversion associated with the uncertainty around tariffs and other US policies.
Skyler, thank you so much for joining us. We're in sky Montgomery Connor Withburg.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Let's go to the newspapers right now. Lisa Mateo with some chestnuts this morning.
Oh Paul, you're not gonna like this story, but okay, bear with me. Okay. The experts are saying, when it comes to setting up your brackets, do not do not pick duke to win. Okay. The reason why, okay, this is within the Wall Street Journal, and the two writers of the article actually do graduates. I just want to put that out there. They said, you should bet against them, they say, undervalued teams. That's who you should pick instead.
Like they say, think like a value investor, right, you bet on the best least popular team against the most popular team. Pick teams like here you go number one seed Houston, another number one seed also value in, number two seed Tennessee and number three received Texas Tech. Really, so that's what they're going with. So I don't know what's on your brath?
Does anybody know? I mean that can be r KT go. Yeah, there's like four people to get it. It's sort of like a Monte Carlo random kind of thing, isn't it?
Just for penciling.
That is what I've done since nineteen eighty ninety. Pencilan duke to win it all and you work back from there, and that's how you do your bracket.
The strategy works five It's worked five times.
I haven't revisited my last morning.
But you never know.
I mean, who won last year? Was it was a repeat? No Connecticut sk Yukon scarlet food killed it?
Yeah, killed it? What do you got?
You never know what can happen? Okay, So I'm going to stick with this March madness theme. Okay, I didn't even realize this. But Warren Buffett's Berkshire Hathaway has this big bracket competition where the winner can get one million dollars.
Okay, well, really setting up right now.
The problem is that no one's won it. But he's trying for nearly a decade to give away this big price. So the Wall Street Journal says that he wants to improve the odds, right, because he says he's getting older and he wants to win, to see a winner when he's still chairman. So he's making it easier to win because in the past you had to you know, be like, had to call the first round perfectly. But now he's
changing it up a little bit. Okay, so this year it can go to someone who correctly picks the winners of at least thirty of the thirty two first round games, so you kind of have a better chance. You know, he's an odds guy, so the odds.
Are a little bit better.
The person with the most correct games can win. You have tie breakers too, the runner up can get one hundred thousand dollars.
So this is like Damien Sah, he's almost like something Damien, Yeah, exactly, he's a player.
But that's it's a big, big, big price.
So I didn't realize it.
It's been doing this for years.
I don't get it.
Next next one.
Okay, sticking with gambling because you see the theme of today, Yes, here we go. Business insider saying, Fan Duel launching a new show about gambling addiction. It's actually called The Comeback with Craig Carton. He's recovering Gamble Addicts airs on YouTube channel. It's streaming network Fan Dual TV.
Extra.
Didn't even know they had that, but they're gonna be talking about their struggles with sports betting. So the company is saying it kind of adds to this mission of promoting safe gambling, you know, with all the news and the headlines for it. But this is something well.
I mean, you're close to this and I am. Don't. They just have to shut down the attics. I mean, that's what you do. They see in their computers that you know, young potatos on the couch addicted to this, and they shut them down.
I don't know how that works.
I don't know how that works, but I mean, just now, all I know is I was having breakfast past Saturday, the local luncheon at and there was a table of maybe four sixteen year old boys and they're talking gambling, what bets their.
That was disturbing to me. Yeah, and I don't know, I don't know.
And they were speaking as if they were pros. They can overhear, they underhear the point that spreads. I'm buying these odds I'm doing you.
Know, Yeah, I don't know.
Yeah.
My daughter's saying they're doing like during class plays bad. I'm like, what's going on.
In the.
Don't it's another level. Yeah, it's a thing.
I don't know how many states have it, you know, thirty eight states or something like twenty eight states.
It's off you.
See update Lisa Mateo. The newspapers thank you so much, greatly appreciate 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