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Right now, what we're going to do is get to the economic data at Greg Boudele with us here to wrap around it on the mathiness and derivative moment. This weekend, all financial publications will tell the American public give up the upside hedge, taking a higher income when you hedge, and you'll be happy. You're the pro at this. Should we be doing that? Should we be giving up upside potential in bringing in a premium income to goose our dividend to goose so sure, buyback.
That's certainly how we feel about things.
In the short run.
We titled I Not Yesterday tariff fatigue. The market is starting to look a little bit tired. Some of the imbalances in position in which we think drove the extent of this rally have started to become worked through a little bit, and we think we are in an environment where it would be easier for the market to tread water. When we look at the options complex, there are places where we think it is better to extract premium and others where we think it is better to own that optionality.
So if we think the markets are going to kind of tread water a little bit, am I writing options these days? Is that what people are doing?
So?
I think like one of the kind of oldest option strategies out there is the covered core boom owning the equity selling some upside against that. What you're basically doing is giving up some of the right tail of the distribution the short term in exchange for some income.
See I paid attention in Futures and Options class Cam Harvey. Yeah, I paid attention. There are people what do they feel like in terms of the risk, Like, if I want the I some protection here, is it expensive relative to historic levels or where are we?
So it kind of depends what you're looking at. If we're talking broad US indices, then it's way off the highs. Things got very expensive post Liberation Day, but we are not back to those pre Liberation day levels. You know, the equity market is we've been touching distance of all time highs, but equity optionality is still a little bit more elevated from where it was, particularly on the downside.
So yeah, if you're just going and buying US index hedges, you have to be careful because it's not cheap.
If you're buying individual stock edges, do you partition it between fancy stocks where you could get crushed, taking in premium where they take off like Microsoft this month of May or and then there's four to eighty three other stocks that you really can grab a premium. Is that how it works? Yeah?
I think you have to think about what are the risks that you are worried about. What are you trying to hedge. Is it more eosyncratic stock specific or are we looking for more macro hedges. We've been talking more about looking at macro hedges, but going a little bit out the term structure, out to say the September expiry where we think some of the macro weakness could start
to manifest a little bit more. I think the smaller midcaps, so the Russell IWM is a part of the market which I think looks attractive to use to hedge.
Greg boutle ready for those compliance of BMP Perry, but they don't even speak English in New York, it's in French. They're even more ergus O mon dieux, Greg Bottle on naked short selling.
Go so, I think that if you want to be naked short the market, then you have to be willing to accept the risk that comes with it. For us, we think there is better risk world profile and putting on hedges on the downside owning optionality than there is naked short selling.
That was like road compliance. Yeah, that was really that was a plus, say Greg Bodles answered that question before. Naked short selling, folks, is not to be tried. Don't do this at home. It's really really hazardous. You'll be right four or five six times and boom and it doesn't work out right. Be careful out there. Let's talk to Paul Sweety about option you know, how to not lose money in the or the de Jerrians one of the two. I'm just going to make it as clear
as I can. I got economic data with some revisions here. I got a sweet PCI year over year of two point one percent, signaling some disinflation. I got a revision showing personal income is better, and it doesn't care because the president just tweeted yep, I mean, basically, there's no dynamic with an SMP futurest Greg battle they're negative twenty, they come up a little. In defense, they come up negative twenty out of negative twenty five up the negative twenty.
Do we misjudge the American economy? Is that the issue for people cautious on the equity market potentially?
I think the question about the data is when is it going to start to matter? At the moment, what we see is backward looking data that maybe is starting to capture the first impacts of the tariffs. But what matters as much more as when we move through June July, does the data stay very resilient case that's going to create question marks for the bears. I think the consensus is that the data will start to soften as we
moved through the summer. So I think at the moment it's very hard to get a positive risk signal or more clear from data.
This is really important to continuing claims breaking out. Yesterday Veronica Clark mentioned it's the end of May. We don't have a clue except we said that at the end of December.
Lie exactly exactly as well.
Here we go.
So given that uncertainty, Greg do you find your clients. Are they coming to you and say, I want to have more protection around my portfolio than typically or are they just saying I can't worry about this stuff.
I think people are more defensively positioned. We look at this through quantitative lens where we aggregate a lot of the flows in the equity market, and we've produced this composite equity positioning indicator and it scales from zero to one hundred, so it's pretty easy to read we are euphoric levels at the end of last year almost ninety seven hour of one hundred. Things got very washed out post liberation, and now we've made our way back into
this more neutral territory. That indicator sits in the mid forties, so points to a market where people are more defensively positioned. But we're not as barishes as we were from a positioning landscape a month ago.
Ninety seven reading I kind of remember those days. It was like we have in an administration that's going to be pro growth, you know, less regulatory and boy times have changed.
Six months ago, but it feels like a lot longer than it does it does.
What's kind of the smart trade you've somebody's come up to you with recently when your clients are called gym say hey, we like to do this, and you're like, really.
I think the things that people have been doing have been more nuanced. As we were discussing earlier, it is looking at ways to fun trade. So if you're looking at the optionality complex and like, I do you think maybe there's value in owning some of that September optionality where the data starts to matter a little bit more through the summer. It's looking at smart ways to try and finance that. So you know, one of the things that we were talking about in our tariffy yesterday was
how to fund those hedges. So we think looking at things like cover calls and things like the energy space is probably probably an interesting way.
So what's a covered call in the energy space?
Like that?
So a cover call is simply if you are long the stock and you are selling optionality against that such that you are not nakedly short that option. And in terms of the energy space, that could be one of the energy ETFs such as Yahoo or some of the some of the large energy stocks. It's a very benign strategy, but a way to eke out a little bit of yield that we think you can spend on hedges.
We got a great set of people. Robert from uh I think it's it's up and it's colder than Union College. He was upset at our Union College discussion of D one hockey with Pat Haskell Blackrock. Robert comes in and says Hamilton College is destined D one hockey. He notes Paul the complete return of the trade deficit. It is a spring back from a negative one six zero, stunning back to negative nine zero. That's not I wonder if the President will bring that up at the press conference today.
Our policies are working. We're getting rid of the trade deficence.
Awesome, that would be the promise than with Italy with the purchase.
Wait a couple of weeks. If you're gonna have a trade deficit, you're gonna be on the Spanish steps and you looked out that's that. You look down that street, a gauntlet of stores. It's it's it's Lisa, what's it called its avenue tradio deficit? You o something like that? Greg, thank you for coming in, Thank you for the explanation there and getting through the compliance moment un naked naked you know you nailed it, Greg Botle, don't be a stranger.
Thank you. With b MP Perry by just wonderful through some of the sous on VMP Perry BA has had a really really excellent, uh excellent moment there, I should say as well, again when we set this up and Eric did a great job with the interns, we wanted a broader view. Even Devid can give that to us right now. She has been wonderful, particularly with a transatlantic view. All of that important into the President's press conference today.
Ifan Devid joins us from Manetta. If and what are you writing into the month of June.
Excellent question.
I think we're going to see a continuation of this type of volatility. We're obviously going to see getting close to drop dead dates and some of these tariffree negotiations. We'll see how the negotiations actually play out. We're going to see more and more clarity in terms of the actual impact of tariffs on prices. We've only seen really sporadic clarity up to now, and we're probably going to see more resolution in terms of the legality of these tariffs.
We're going to this day now that's been placed on the Court of Trade decision. There should be an appeal and we should see the outcome of that. So lots going on. It's not going to be is silly in the quiet summer.
Are Europeans returning to American investment, leaving American investment? Are they waiting for Paul's arrival in Rome? Which is it?
I'd say at this point there is not a net increase in US investment. There has been an overweight to the US for the most part. It has played out very well. The strong dollar has worked very well for them. Right now it seems that the US investment story is losing a little bit of its charm, its cachet. The
weaker dollar is the course affecting that. And then we're hearing just about this anti perhaps foreign student movement, the lack of travel into the US, perhaps the sense that there might be a revenge that was a headline today. So all that all adds to the uncertainty. And I would say, now there is often taking and timing back.
I mean, Paul, think about it ending to give in school where kids are like I got to get up and go to thermodynamics, and I got to put up with all this protest and angst and passports and all that. Why don't I just go to Trinity College Dublin. I mean, you know, Boom, you're there.
I'd be right there. They would love me there. Even where do we go here? I mean, Tom's been long bitcoin and just laughing all the way to the bank. But how about for the rest of us? How much risk are your clients feel like they need to take these days? Or it's just too much noise out there?
It's an excellent question.
There definitely is not sort of satisfaction with sitting in cash right now. We know that cash is not a drag, but there's still that that four between four and five percent, it's still not great. After inflation, there's a real sense that inflation is going to be with us for a very long time and that we will have to invest in growth assets. So where are clients comfortable taking risk.
They're still quite comfortable in the equity markets, and that's a good thing because that will have to be their engine of growth for some time. They're increasingly more comfortable in the private segments, private equity, private credit. They're not as comfortable in real estate as before. Perhaps there is a little bit of muscle memory or even trauma around previous downturns and something like infrastructure or income generating.
That's really something for the institutions.
It's not something I see a ton of interest among private wealth clients in Interesting would on Frenday College seven Trendy College, telln is an excellent place to visit.
Ephan Devin, stay with us, please Interesting Friday Morning across a nation. Good morning from the early morning Left Coast out there and Android Auto Apple car play Major. Good morning to Sirius XM Channel one twenty one, huge distribution for US ninety nine one FM in Washington, ninety two nine FM in Boston, and Bloomberg eleventh three to zero in New York. We say good morning on YouTube building every month. Paul and I just dumbfounded by the success
of Bloomberg podcast. Thank you so much for your attention there, particularly your global attention. The evening of the Pacific at RIM, futures are negative twenty five off the President's tweet. They come up a little bit off buoyant personal income spending quite essent inflation at the margin. Futures go negative twenty five up the negative twenty.
If and you mentioned private equity, private credit I'm surprised that at the level of exposure that a lot of family offices and their clients have to alternative investments. What do you think is a reasonable allocation because there's so many opportunities now, hedge funds, private equity, now private credit has become such a big market opportunity. What's your expertise, I'd.
Say, depending of course on the size of that family office. But we're seeing anything from fifteen to thirty percent in alternative assets. Certainly would lower be lower at the dipping the toe in the water stage, and you have five percent ten percent, I'd say less than five percent, it's not really worth the extra work and due diligence involved and this sacrifice sub liquidity. It's important to really understand
the segment all about relationships. You're in there for the long haul, and I have to be a meaningful allocation. But between five and fifteen absolutely normal, and if you really have high conviction going higher.
And that again, if we saw a movement of capital investment capital out of the US earlier this year, when the uncertainty was maybe at its peak around tariffs and economic impacts, was that just a short term trade or as you talk to your clients, do they feel less likely or less confident investing in the US markets?
Yeah, definitely, there is I'd say a wariness around having too much in the US right now, and our clients have always had global exposure, and that global piece was a little difficult to defend recently, especially in the last over fifteen years under performance that is definitely by definition
difficult to defend and with a strong dollar two. Now that some of those movements have reversed, our clients are taking are quite confident now in their non US holdings, and I would say that the non US story it tends to get crowded out a lot by some of the flooding of the zone that occurs in the US, and that the Trump administration the US developments are on everyone's lips no matter where you are, particularly in Europe.
But behind US and Europe there is by stealth. I would call it a steady growth of investment in the sector, in the industrial complex, really coming back from rock bottom in terms of confidence.
And just innovation and a lot more focus of that.
I think we have to start looking beyond some of the noise in the US.
Ivan Devid, thank you so much for the brief from Minetta this morning. Here in a Friday where we set up conversations to get you into the month of June features negative twenty five lift to negative nineteen, the Vics nineteen zero point five to one dead tape two hours ago. The President with a tweet makes it more sprightly here with angst about China, Paul, you gotta believe China responds in some way towards the Asia Monday opening of seven PMSH.
Yeah, you know, I'm not really sure what the president's referencing in his tweet here as it relates to discussions with China, but obviously he doesn't like what he sees and maybe hears from China. But it just kind of brings back into the discussion and a little bit of heightened trade uncertainty, which seems to be the background.
I'm going to go by to the Peterson Institute and the iconic work of William Klein here the idea of bilateral or unilateral discussions. It's a multilateral world joining us right now on the short term bond market where he is world acclaimed. Ira Jersey just off testimony to I believe the House of Representatives joins us this morning, driving all a fixed income at Bloomberg Intelligence. I rate just simple into June. Is you and your team right, do you have like a theme or are you as confused
as everyone else? Yeah?
Well I think the theme is confusion. Uh, And you know certainly that we're going to continue to probably have these headlines right like we're trying to and the market is trying to find where the endgame is likely to be in terms of all of these policy actions that
the president's doing. And of course, when you have court decisions that seem to you know, are going to might force the president to backtrack, and some of these tariffs unwined because there's an overreach of executive orders, that again
puts another layer of confusion into things. So I think what that means is that you're not necessarily going to see a whole lot of directional moves in the rates market in particular, right, So the treasury market will probably just be kind of range bound, but you're going to see a lot of volatility within that range, and that that's certainly what you've seen the last two months.
We got some inflation data today core pc E n X a month to month zero point one percent on an annualized basis two point five percent. That's right in line with expectations. It doesn't seem like some of these tariffs are impacting inflation yet. I guess, how's your market kind of digesting this?
Yeah, So certainly that the yet is what matters in that sentence there, Paul, because if you look at the durable goods, like if within the PC data you can break out durable goods and non durable goods, which are things like consumables and the like, and then services. What you saw is it was actually a decline in prices for both of those goods sectors, but a three point three percent increase in prices month on month for for the services sector. So you still have services driving inflation
at the moment. And the continued fear is that with a significantly lower amount of imports coming in that eventually that's going to go through prices. So as inventories are drawn down, you're going to see, you know, new prices for what the imported goods were. So look at the trade number. You know, I haven't heard you in the last couple of minutes anyway talk about the trade data.
But twenty percent draw down a twenty percent decline in imports is pretty significant, right, and you know that this is only for one month, and the first month where tariffs were imposed. It might be even worse as we get the May data, right, and so when we end up getting higher prices than in the future. For that the rates market, though, you know, you look at inflation break evens right now, they haven't moved very much, right
tenure inflation break evens two point three three percent. Even though you might have an uptakeing inflation briefly, the market certainly doesn't think it's going to be very sticky.
Well, thanks to Bob a professor up at Hamilton College for that mentioned in the trade deficit really came back as mister Jersey mentions the interest rates as well. Ira Jersey, did you buy we're talking UNI bonds earlier? Did you take a position in the two hundred million dollars of Georgia's Fayette County Development Authority bonds to build the new headquarters for the US Soccer Federation.
So I did not, but I am very excited to have a home for US Soccer that's in a single location. I think Atlanta was an interesting place because we do have a lot of players going over to Europe, so easier to have something in the East Coast than in the Central or West Coast time zones for a lot of those players when they come back to play for their national teams.
IRA one final question sliding into June July fifth. It's called the sold out Stadium. I mean it's every content there, I mean, lamars sold out. Are you going to go to Back to Beginning? I mean, this is like a huge deal for the United Kingdom. This is like a massive fund raise. Are you going to be there?
Ira, So I I I plan on it. Yeah, I'm going to take it. We're in the middle of our semi pro Socra season that we're in right now, but I'm going to take that that long weekend off to the jet set over there and uh and go watch some Black Sabbath and uh and a few other for Pinterra.
Sure, Okay, there you go, Lisa, there's your road trip. You know.
So I just never got into metal.
It's up North. It's up North. Okay, it's the Land of Metal. Okay, Yeah, it's it's a huge deal. It's called Back to the Beginning Villa Park, Ira, Jersey, be there and this is in support of huge causes for Birmingham, including the Birmingham Children's Hospital and the Acorn Children's Hospice, as well serious stuff by Black Sabbath and all the metal heads up there. Futures going negative twenty five to negative seventeen. It's well the next.
Nineteen point high a Jersey metalhead, I never would have picked that.
We you know, that's what happens when you read Fobosi.
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.
Seema shop chief Global strategiest of principles. She has been wonderful about a persistent view on the market. Seema. Do you have to rewrite your view this weekend or is it even possible?
Hi?
Tom No, I think look yesterday's news, it didn't change anything for us, the tariff story. This is absolutely not the end of the road. I don't think President Trump would permit it to be the end of the road. So I think it's been really important for inverses, for everyone to really try and look away from some of that noise, some of it is meaningful, some of that is going to be sustained. Per Certainly, the news from this week is not something that is changing our views.
You just metten out with a note she's up at three am this morning. You see that she's so productive all night. Right, Seema shot SMB five hundred, up six point two percent. If we close out the month and this huge advance, what do people do who didn't participate, What do you do with cash? With an equity outlook right now?
Yes, we have still a slightly positive view for the rest of the year. The reason is is that we're not anticipating recession. And so even if you just have slightly modest positive growth, so expecting one and a half percent growth for this year, that is still a scenario where you can get positive earnings growth. And if you've got postive earnings growth, you should see the equity market
still get positive returns. The thing is it's not going to be They're not going to be significant positive gains, nothing like what we've seen in previous years. And it's important for investors remember there will be a ton of noise. We're expecting volatility to stay fairly high over the coming months, and so it's going to be important that if you aren't invested, to get invested, but also once you're invested, stop looking at every single headline because that could be very, very disruptive.
So siman, just looking back on year to date, I mean it's been a glass half full, glass half empty. I mean we had that twenty percent sell off in the marketplace, but then we've retraced most of that coming back higher. What are the markers that you're looking at the to really give you a sense of how this market might perform for the rest of the year. What should we be focusing on.
Yeah, this is a really important question. So when we're talking about the horizons, we're seeing that there is a bit of a difference coming through. So over a three month horizon, there is a lot of concerns. We do think there are a number of potholes that are coming that you could start to see a couple of market pullbacks come through. If you're looking at a twelve month horizon, it's a slightly more positive outlook where we do see
those positive returns coming through. So within the next three months, the things that we can be looking at for is of course can be the economic data. At the moment, the market has been I think inspired by the fact that the hard data has remained really strong. It will likely slow down in Q three, So that's potential pothole. And the other thing is of course going to be inflation.
We're anticipate painting a spike in inflation again in Q three, and I think at that point there'll be some discussions around the FED is going to do, and that's where you start to see a few potential disturbances to the market.
The heart of the matter, and Seema we're hearing is from a lot of people, is if we get this redo and inflation PC today folks on a Friday, a lot of economic data for you at eight thirty and at ten o'clock as well. But Seema, if we get it, then we get a nominal GDP pop. Do you just pull that indu sustained earning surprises to the upside?
I mean, I think so. I mean, I think to some extent there was so much negativity about a month ago, so there's still some upgrades to go in terms of where I think a lot of people are pricing in for earnings and you know, inflation, it can be positive, of course you talk about the normal growth side, but it can have it's certainly its negative impact in terms
of margins. So when we're thinking about earnings, when we're thinking about forward guidance, that's really the key thing that we're looking at is how much pricing power do these companies have. Are they able to pass on those price increases or are they having to absorb themselves? And that, to me, I think is one of the key things that we're going to be looking out for over the coming months and quarters.
Sima, we just kind of got through earning share we had. We've kind of finished up the earning season on a pretty high note with Nvidia giving some some good numbers out But still I think there are concerns out there in the marketplace that earnings estimates out there is still maybe too high. How do you think about the earning story out there?
Well, I think it's also worth keeping in mind that on a general annual basis, you do see this continuous down grade to earning forecast as the year progresses. This is going to be no different for this year. The question is, are even from that perspective, are earning still a little bit too optimistic? Given if you kind of think through the agrads that are likely in a normal seasonal fashion, I think there is still some negativity to come, but I don't want to exaggerate that.
Then.
I think it's going to be really important that you think about in terms of which are the pockets, which are the sectors which are going to be most exposed, because there will be our areas of opportunity. I mean, the ones that we like from sectoral perspective are going to be the financials. We're going to like utilities, and we like energy. So there's still a lot of good
news from a deregulation perspective. It's just that maybe in the near term there could be some disappointment which can then ideally be reversed as you get through to the second half of the year.
Journalist this morning, Sea Michelle. We do continue with her with principal asset manager, who welcome all of you to cross the nation and your commute. I was run again had a driver, you staid the Bentley was in the garage? Ye serious? Xam is normous? Is It's like like, cy help me out in the control rooms? I wake up. I know you're up with the Nick slate. Serious Exam is a big deal. It's a big deal. It's like very general, enormous Channel one Good Mornings, I Serious Exam
for June. That's going to be my focus here in our wonderful distribution. You mentioned we're on Bloomberg Originals. Yeah. Absolutely, this is TV like Roku.
If you got like a Samsung Smart, the Smart TV's time where you don't even need cable or anything like that.
They just got the soft and watches in the United Kingdom.
You just search Bloomberg original look at that.
It's amazing on YouTube. Good morning. Subscribe to Bloomberg Podcasts, curring each and every day. Really excited. Can we do a shout out Tracy and Joe. Sure, they're killing it on outline. They're really helping out Bloomberg Podcasts. Thank you to odd Lots for all your support. There. Seema show with us with futures at negative three.
In the fixed income market here, I look at it to your treasury, I'm getting close to four percent here. That's a that's not a bad way to make a lit there. Do I take credit risk on top of that? How do you guys think about that?
Yeah?
I think you can take a bit of credit risk. Erny. As long as we're not anticipating recession, then defaults they're going to rise likely, but they're not going to spike. We would be focused a bit more on the high quality part of the market because we are expecting an economic slowdown. And if you're looking across the treasury curve, like where do you want to be focused, it's probably in the short duration side.
You know.
Thelongside is where you're continuing to see and I don't think it's going to disappear. Some of those fiscal concerns continuing to come through, and we think that's going to be a persistent narrative. So for us, it's that short duration and the high quality segments that we're most interested in from a credit and from a treasury curve perspective.
Seman, what does big tech look like from London? I mean, I think it's just like this American thing. We're all mental about Apple and Paul and I drive by the Apple store at Central Park, South Central Park, and yeah, Central Park and Fifth Avenue every day. But Sima, what does mag seven look like from London? You've got a nice distance to it.
I think we're just as obsessed with it as the US is when you're you know, when we're talking to investors in the UK, it's the same kind of questions. They're obsessed with the big tech trade. They want to know which is going to persist or is it something which has maybe run its course. But if you're looking at it again O for a longer term perspective, you don't see that investors are losing much interest. They're just
looking for what is a buying opportunity? When can we really buy the dip if there is going to be another.
Dip so sima.
Earlier in this year, when we had the you know, maybe the peak volatility in the US markets around the terrace, we still have a pronounced shift of capital out of the US to other parts of the world, most notably European equity markets. Is that still the trade here? Do people feel like Europe is a good place to move money visa the the US?
Well, I think that trade has lost a bit of it shine in the last couple of weeks. What we're seeing is that investors really questioning. They know that there is maybe a potential upside, but they almost at the point where they're saying, show us some money when is Europe really going to start to outperform on is it really going to start talking about deregulation? And only at that point can they start to think about the increase in potential growth rate for Europe. So it is a discussion.
It's certing more a different discussion than it was in prior years. But I think in the last couple of weeks you are studying to get to that point where investors are becoming a little bit more skeptic and they want to see that Europe is realistically going to come through on some of the plans that people have been talking about.
To me, the great divide of may Sey Mischa has been the mood of retail in America versus institutional Wall Street. Do you see the same thing in the city.
Yeah, I think so. In a way, it's been interesting because the retail money is the money that's been really smart. They stayed invested through the last couple of months. They didn't come out of their trades when things got a little bit rocky. So I think there is a divide in the behavior. And certainly if you know for institutions that they're trying to get back into the market if they did exit it was retail to State Investige.
Seema Nixer Pacers.
I'm going to say, Nick, look at.
That right on top of it. Thank you, Semashawe really appreciated.
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.
We really wanted the tax of brain folks. You went through the rolodex and said, okay, who can spouse connected the Pat Askell joins us right now. Municipal bonds. We really Paul's been on fire about this, taking advantage of tax free bonds right now. Our airport bought you your union college. It's connected the years ago before a lot of years, a few years ago before. Help me here
with airport. It's is there an opportunity with all the gloom about airports aviation, our municipal bonds of LaGuardia or o hair A vailue. Now, yes, we like the airport sector.
You know, the financials, the planes are full, the off the off putty contracts like the there's a lot of opportunity there. I mean, you look at LaGuardia, it's a beautiful project. Now that it's done, JFK is going through the construction. You know, other airports in the country are going to continue to uh to be the opportunities for us.
Can a little guy buy those bonds? Can I go out and say, hey, the uber pick up at LaGuardia was actually pretty good. I want to buy ten thousand dollars at Laguardian. Yeah you can do that. Yeah, sure you can.
You can definitely do It's easier to do it during the new issue process because the bonds tend to get put away, but sure, mom, pop can still buy me any bonds. It's it's easier, you know, to to buy manage products on those kind of denominations. But certainly you can do it.
Pat the minisial bombs just going at the the on the Bloomberg I end go function, Bloomberg index browser underperforming the US agg pretty substantially this year.
Underperforming this year, outperforming in the last month, so you know, pretty good relative value coming into April when we had VAUL kick up in the beginning of April based on due to the post Liberation Day market moves, communis underperformed since then have done very well. And I think there's really three things. The relative value that you pointed out
to other fixing a masset classes the technicals. We're going into a positive technical as we go into the summer, as supply as supply wanes, and some of the policy concerns we had out there as we have the tax bill was first come out of committee in Congress. Looks like unions are relatively unscathed.
That's the key point, because that was a I guess it's always a point. I guess what I've learned from new municipal guys is every administration comes in, you always have the risk that the tax deductibility of municipal bonds may be reduced or eliminated. And that's true in this administration, but.
True in the Obama administration. True and Trump one point oh, true and Trump two point oh. That at least it gets discussed, and I think at the end of the day we get back to the same thing at all times. There's very few things that pull well on both sides of the aisle in our country. One of them's infrastructure.
This is the market that we build most of our infrastructure in our country, and the exemption to keep the borrowing costs or state local governments stays in place to keep that borrowing cost lower.
Why would anyone call, by full faith in credit taxable over a certain income level. I just don't get it. I mean, the yield pickup inural state, I mean a black crop is there's no debate. No, the yield pickup is stunning.
The when you think about investment grade municipals on a tax equivalent yield basis behind six percent and a high yield municipal basis behind nine percent.
It's they offer incredible value.
I mean, this is the first time we think about it since pre financial crisis. Will we be able to get this level of yields embedded in portfolios with the exception of a few times of crisis you go back to seven?
Yeah, what's the credit outlook out there for municipalities? Because I know during the coming out of the during the pandemic, I thought, oh my goodness, we're going to have the first left and right. But there's so much liquidity pumped in by the government that that did not happen.
The rough numbers are you know, state and local governments came out of the pandemic short about one hundred and forty billion through a variety of federal programs to airports, universities, and local governments. The feds gave the muni sector about three hundred billion, so that we really came out of the pandemic in very good stead and that continues to
be the case. I mean, you know some of the noise you have around universities right now, on some of these flagship universities, even if they were downgraded, they're triple A to double A, right, you know they're going to have instead of seven times coverage, they're gonna have four point seven times coverage, right. And I think we'd all agree on most of the universities that are in the press, the demand from a student perspective pretty and elastic.
I'm looking at the black Rock, New York State municipal buying front. It's had a really rocky one year two year in twenty twenty, it was like world class performing ninety fifth percentile? Is that how your world roles where there's a challenge in a churn and you know you make your coupon and reinvest it or whatever, and then there's one big year where you really get the total return.
Now, I actually think most people buy our products for income.
I would take it the other way. They take the coupon.
Yeah, where they want, they want the coupon. I mean, you know, in general terms, I always say, when the fixed in fixed income is larger, it's more attractive, it makes better.
Ballast in the portfolio.
So we we don't try to hit home runs in terms of total return in any one given year.
What's total what's the new issue market look like, what's the calendar look like?
It's it's busy that you were going to have another Last year was a record year. Last year is a record year. This year it could be like, Yeah, last year was north of five hundred billion. It looks like we're going to come in around five and a quarter to five thirty this year. That's what it's looking like
right now. And it's it's it's being absorbed in a better orderly fashioned again, with the exception of the two weeks you know, kind of following Liberation Day, where markets all over the globe war we're in fuegos so, but it's been relatively well received.
So to get back to airlines. Say Atlanta Hartsfield, they're doing a big building project, it's empty million. Do they make four phone calls to Blackrock Fidelity in the rest or? Is it distributed like the old days? It's it's distributed, you know.
Look, it's the retail or period is not as dominant as it was in the in the old days that we're going to go back kind of seventies and eighties. However, there still is a retail or period, and it's you know, an issue like Hartfield, for example, that'd be out there and you know they would be doing a rango for two or three weeks and they'd have one hundred investors in the book.
You're committed to one of the great schools in America. Full disclosure, My uncle was a professor there years ago. Union College Connected in New York. It's rated top forty schools in the nation for value as well.
There.
Yeah, it's the new engineering. It's such our ci. It's a one after thoughts. Friends got into RPI and you know it's great. How'd the admission season go? You guys prospering in all this education turmoil, you.
Know, it looks small, smaller Upstate universities are. You know, in New England, universities are are an intense competition for students. Union is doing well, but it's just like all its counterparts, you know, the you know, you bring up R P I, R I T a lot of the schools that we
know about their excellent institutions. But because there's that demographic waste they're going through right now where there's a few less students out there, there's a lot of competition that they and they don't have, you know, the really really significant endowments to some of the college.
So your selling point is it's warm. Schenectady is warmer than Rochester is.
At the selling point, we're warmer than Rochester. We're getting a new hockey rank. We're excited about school rink, not the Hasspital rank, but the might be involved a little bit.
But the I'm afraid to ask cowmedy. See, so you keeping it under.
Ten thousand, they were keeping it under ten thousand. This is gonna this is gonna be a really cool addition. Downtown Schenectady has gone through real boon in the last twenty years. As ge he has come back very cool. I didn't know that it's exciting to.
Watch, which is a remote in the fall. I promise I'd learned how to spell D one. Hockey is like an addiction, isn't it?
College hockey with these smaller five days and you're right on top of the ice.
It's exciting, it really is. Now, Pat Haskell, thank you so much from Union College. Also by way of black Rock as.
Well, 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, economis of the year last year, Lindsay Pigs that joins us on chief economists at Stefel and Lindzie with great respect, let's go short term. My head is spinning looking at the Eco co screen all the different things in Michigan to come on. One year inflation seven point one percent, five to ten year inflation four point six percent. How are you framing out? A Q three Q four call at Steefel? Can you count up the American economy? Right?
No, Well, we have to be careful when we're looking at the soft data. The soft data seems to be pricing in more of a worst case scenario, consumers vocalizing all of this concern. But as we saw this morning, in the hard data, the consumer is still out in the marketplace spending, so there seems to be again more of this erosion of confidence than an actual change in behavior. We see that on the court side as well.
So what's your number forward? I'm sorry, what's your number forward? You're real GDP?
I think GDP in the second half of the year is going to recover to about a one and a half one point seven percent pace, So positive, we're back in positive territory, but certainly nothing to write home about.
But again I think against that backdrop of almost two percent growth upside risk to inflation, the conversation for the FED is going to shift dramatically from where it is right now, as FED officials are saying we're well positioned or they're looking for potential justification for additional policy easing.
So do we have have we taken recession off the table? Lindsay, because say earlier in New Year, when people were trying to run their models in there thinking about one hundred and plus percent tariffs in various countries. That was very much the talk of the town. But is that off the table now?
Well, remember recession was never in our base case scenario. We were looking for a slowdown in momentum, and we certainly saw that come to fruition in the first quarter, but by Q two we are looking for a return to minimal positive growth. So yes, that does remove the near term fear of a recession. Now again, things can change, so recession is not necessarily off the table, but our base case says that the worst of the brunt of that anticipation, that concern around tariffs has already been felt.
January to March.
Lindsay, we've seen a lot of risk assets, particularly the US equity markets, bounce back nicely. Big exception is the US dollar. What's your view there, Well, there's.
Going to continue to be a lot of volatility, I think as the currency market is trying to gauge, just like investors broadly are trying to gauge what the endgame for tariffs is going to be. Now, of course, this back and forth that the most recent disappointing news in terms of trade talks with China, This is going to continue to put pressure or at least volatility on the US dollar, and I think this is going to be a storyline that we're not going to be able to shake maybe through the year end.
Helping here with the asset move, we're going to see if we have tariffs up and Lisa Mateo's reporting the gap is having some challenges. They go from twenty eight to twenty three right now on stock price. Do we just see lindsay in your world and asset erosion due to well stagflation sense.
I think stagflation is the biggest concern because again, as we talk about our forecast for growth in the second half of the year, while moving back into positive territory, a one and a half percent growth rate is is well below the bare minimum. Let's say that you should expect for a developed economy one percent from productivity gains one percent from population growth, so two percent is really the minimum, and we're expected to fall below that, so
it's essentially a non accelerating economy. Then you layer on the upside risks of price pressures, which I do think will filter back in as tariffs become more solidified in terms of their implementation, and stagflation is going to be a very real scenario when you think about what keeps you up at night, it's not the recessionary scenario.
There we get the.
Recovery boomed, but the stagflation scenario limits the impact of market policy on either side and could be a lingering scenario for years to come.
This is a major May insight, folks. Is this new rewaighting of modest or if you're gloomy, tangible stagflation. She's recovering from primes right now with the market opening here, don't stop believing, Lisa Matteo, Lisa, what do you got it?
And we've got a lower open. That's what we have right now. This is the last trading day of the month.
S and P five hundred down two tens a percent, fourteen points, five thousand, eight hundred ninety seven, the Dow off two tens of percent eighty five points forty two thousand, one hundred twenty three, and the NA deck down about two tens percent fifty five points and nineteen thousand, one hundred and twenty taking it to the two year yield three point nine four percent, that's little change, and the yield on the tenure four point four two percent, that
is little change. We'll check in with commodities. We have spot gold down about six tens of percent, three thousand, two hundred and ninety five dollars an ounce. Over to oil Brent crude down three tens of percent, sixty three dollars a barrel, WTI crewed sixty dollars a barrel. The Bloomberg dollars Spot Index up about a ten to percent, and Bitcoin down half a percent at just above one hundred five thousand. That is your Bloomberg opening Bell report.
All in, Tom, thanks so much, Lisa, greatly appreciate that. Again, negative one twenty six on the Dow Vix, not out your twenty but getting there again. The presidential press conference with mister I guess I'm calling it a press conference. I think it's okay. With Elon Musk, we'll see that at one thirty. An important tweet here in China an hour an hour and a half ago. Maybe we'll get more. Lindsay piigser with us here. Lindsey a lot of and I sort of like the chart. It's an elegant chart.
Continuing claims reach out to a new worser, going back to the pandemic, going back to twenty twenty two, twenty one. Is there a significance at once twice three four five On the six try we break through nineteen hundred on claims.
I think the claims data wall well, very volatile, has been more indicative of this slow loss of momentum in the labor market. The second part of the labor equation, fears about losing one's job, is not overly robust at this point, and when we look at the job creation component, that's still relatively positive as well, again down from an
earlier more robust pace. We're talking about second derivative decline here, But overall, the labor market picture is still very solid, and that's the component that continues to support the momentum of the consumer out in the marketplace. This thesis of resilience on the part of the consumer, it's coming from these ongoing solid conditions in the labor market. So I'm not overly concerned about the volatility of the continuing or initial jobless claims data.
So the consumer is resilient. But we keep hearing about a bifurcated view of the consumer. The higher ends doing fine, maybe even better than fine, and the lower ends really facing the challenges out there, how sustainable is that?
Well, we are facing challenges. I don't want to over sell the strength of the consumer. The average American, the average household is feeling pain from higher prices over the past years, higher borrowing costs, the resumption of student debt payments, and now you layer on the fear of changes to trade policy or additional tariffs.
There absolutely is.
Pain being felt, and we see that in that loss of momentum. But nominally, across the board, consumers are still spending. Now you're right in the middle and the upper end of the income spectrum, we see consumers benefiting more from this massive run up in household net worth thanks to an accumulation of asset prices which the lower end is
largely precluded from enjoying. Just statistically speaking, they're less likely to have a stake in the equity market, less likely to own property, and so again having enjoyed this run
up in household net worth that many Americans have. But when we look where consumers are spending, even those at the lower end are still benefiting from that more organic growth in income from the access to additional short term spending options such as buy now, pay later four oh one K hardship withdrawals an intergenerational wealth transfer, so there are still a number of inorganic factors supporting consumers. But even at the lower end, income growth component is really a positive notion.
I hate you. I've got eight more questions in no time, Lindsay Pigs, thank you so much, Chief Economists and Steve O my Economists of the Year. Last year, her optimism on the economy really measured. She was just really, really, really good job day to day, grinding out the view for the crystal ball and this American economy.
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 something different right now.
Philip Deal joins as president of US Money Reserve. Also Tory duty at the US men is public service to the nation. Showed he could join us here. It's on gold and you know the usual krugarands. Yeah, you know that, Philip dial Just to cut to the chase, what's the biggest misconception Lisa Matteo, and I'm keen about the US Mint.
About the US Mint, well, it's a fortune five hundred sized company has a marketing and and manufacturing component, but it also protects the gold at Fort Knock, so that's one of its major claims to fame.
Is a penny going away? Excuse me?
Yeah, that's a good question, I think.
Phil, What do you think about?
Mean?
Come on, I had a coin collection. Did you have a coin collection? Phil? Did you have a little punching blue things on the floor?
Director of the United States meant then I did.
Ye, not a big coin collection. What is happening with the US penny? Do we have any We have a conclusion there.
Yes, US penny's going away by executive order. The President has ordered the penny production to stop. The penny is going to continue in circulation. It's not being demonetized, right, but I think a period of a few years it's going to it's gonna wind its way out of the economy and right be an item of the past, just like the halfpenny.
Is you Phil? I'm gonna cut to the chase. The whole thing with gold, the perception as well as a bunch of flakes. You're not a flake, You're like an actual adult with real world experience with this. What's the most efficacious way to acquire tangible gold? Now, like my mother bought Kruger rans a million years ago.
Well, of course, being a former director of the United States meant I like American Eagles the gold coin of the United States, and it has been you know, it dates back to the mid nineteen eighties. And my company US Money Reserve sells eagles and that's our biggest seller, but we have a wide range of products as well. But the Eagle is legal tender of the United States and it's back by the full faith and credit of the United States for its purity of gold.
Philip, why has gold been on such a tear recently.
Well, there's a lot of history behind gold, of course, about three thousand years history of being wealth insurance essentially. And the story begins the day after the Harmas attack on Israel, and that really illustrates one of the main drivers of gold prices over decades, hundreds of years, and that is war and great economic uncertainty. And as the war spread through the Middle East, then gold really began its ascent. The second major factor was in November of
twenty twenty three. About a month later, we got the first report good inflation report from the Department of Commerce, and with that report began that the Fed would began lowering interest rates, and gold immediately responded to that. And I'd say, there are other factors, but the other major factor is central banks have buying gold hand over fist for the last three years. Yes, and that has been a major driver.
So one more question. I think it's really important, and Paul's been much better at this moment. I go Mental filled deal like Texas A and m Mental. He said, we got another valmore. No, I don't know what that's about it, Phil, I go Texas A and m Mental. When people tell me bitcoin is a gold equivalent, how do you respond, is a former head of the Mint, you're actually an adult in the gold coin business. When somebody tells you bitcoin is a gold eagle equivalent.
Yeah, I try to be more civil about it.
But my reaction, my intern reaction is like yours.
I mean, it's sort of ridiculous because gold is you know, for hundreds of thousands of years, has been held and today is being held by central banks and individuals as a store of value, which means you can count on its value. And can you do that with bitcoin? I mean, what over the last several months it's gone up and down thirty So no, it's not competition for gold at all. And people who would put it in I mean, you can't put it in your IRA, but it's not included
in federal government policy. But even if you could, I mean, you'd have mighty disappointments, unlike with gold. I mean, so what we've had with gold is sort of the best of both worlds. Gold I've been seen for forever as bad news investment, but it's been performing extraordinarily and good times.
Your political hitter down there in Texas, phil Deal, I need a and m longhorns Thanksgiving Day. That's what we need to return here, Philip Deal with us money Reserve of bustin Texas. Thank you for the time there.
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