Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple car Play or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
John Stolfus APCO, We're thrilled that he could join us today. What are you writing this morning? I mean, my head is spinning over the last forty eight hours. Just give us a summary of the Stolfus. It's cast in stone, it's in granite out. What are you writing this morning?
Well, actually we're not writing yet because I'm sitting here. But I can tell you what we have done this year thus far is we have not made any changes on our outlook for the year. We continue with an eighty one hundred target for the S and P five hundred.
Our favorite sectors continue to be information technology, communications services, consumer discretionary industrials, and financials, all of which have been hurt over the period of the year since the market hit the top I think it was in January twenty seventh, and we think that we're going to get back to business here. That said, we have to say that you know.
This is we've been at many different points in the history of this country since we boomers have been around, when it looks like pieces in the Middle East and that it doesn't actually come to fruition or it is very tentative. I think the markets remain sensitive to the news flow on a day to day basis, but overall, I think this today, what we know, at least for today is certainly calls justifies a rally, but we think, you know, it's like John McLaughlin the guitar and his
acoustic album once set a thousand years ago. My goal is beyond.
Our goal is.
Beyond as intermediate to longer term investors. So that's why with all that occurred, we keep looking ahead and we have to think that this situation in the Middle East is so extraordinary that it had to be dealt with in some fashion, and the fact that there's a different play in terms of the allies. If you consider Saudi Arabia, Arabia, the UAE, of a variety of very major players in the Middle East that are on our side here and have been attacked by around this is a very different situation.
They always say, be careful when you say this time is different, but I think in so many ways, the way we were is no longer the way we are today.
Believe it or not, we're going to get back to some fundamentals next week, whether we like it or not. Earnings are going to start here again. What are your expectations? What do you think we're going to hear from companies? Is they try to navigate this uncertainty. They've kind of navigated terrorists. That was the last year's story. Now it seems like war is going to be this year's story. You know.
I think it will, and I think in many cases, what we'll likely see is how technology and the experience of solid managements being able to have over the last eighteen years, gotten over the financial crisis, COVID, the variety of intensity and supply chain disruptions. I think we'll actually hear some very positive things from many companies. The initial I think only seventeen companies are reported thus far, But if you look at the EA page, it's a little wild.
I mean, the growth looks so good in some areas and others it doesn't, but overall it's.
Very good so far.
I think we'll get plenty of positive surprises. I do think. You know, we've always got to remember, just like with the non farm payroll number, the one prior to this one was a negative one. There's all is volatility. It'll be a mixed bag, but I think overall it'll be positive. I think we continue with good growth.
Have you ever seen in your arched career, Glen back to Les Paul, have you ever seen a decline in multiple like we've enjoyed in Microsoft?
You know, not that I can think of off of the top of my head, because I wasn't prepared to answer this question without taking a look at the multiple going back over the years.
Let's go prominent.
Company, whatever done twenty one, I would have to say, I don't think so. It is extraordinary. And what I find that in many ways today, and it might have to do with social media, is the large s that is given to all kinds of negativity and projections on companies and what has what has hit that company? For example, when when you think about how powerful their position is and being deeply embedded in the lives of both business
and the consumers and their financial standing. The idea that companies that are investing large sums of money in AI have to be profitable on those investments immediate. It gives me the question of where were they? When were these people born? I mean, profitability usually takes time to come around.
John stulf is with us and we will continue a headline we have anticipated. I'm sure the Secretary of Defense is anticipated as well. This from Iran state television. First ship passed through Harmez since cease fire. We'll see what that does to the market. We haven't really seen that
tone yet. We need confirmation of that, of course, but there it is a tentative lift to the market here at futures up one hundred and seventy eight points down, features up one thousand, two hundred and sixty six points two point seven percent. Good morning across America. We continue Paul Sweeney with John Stolphus of OpCo.
John, what'll be doing in the bond market here these days? I mean people are clipping some nice coupons just in the treasury market. Do they need to take credit risk here?
Do you think? You know?
I have to think when it comes to the bond market, the bond market, within the community, within the bond market, the trades there tends to be an obsession with keeping durations shorter rather than longer, and that seems to us
to be the right thing. With stickier than expected inflation, plus the exasperation that people are feeling related to higher oil prices, that are likely to take longer to work out of the system than one would like to see, but at the same time probably getting resolved sooner than the skeptics and the most parish would expect to be.
But we'd have to think, you know, when it comes to fixed income, our take is we are overweight equities in our position in the portfolios, but with fixed income, we see it as a great diversifier and means to get current income other than simply dividends, and you just have to watch your duration. Is the quality the opportunity and tax frees still look very attractive? Does in high tax vicinities?
How about the It doesn't look like the Fed's going to give us any help this year. I mean, I'm just looking at the Bloomberg terminal and the warp function. They've at market priced taken away and maybe any any rate cuts this year. Can a market still work in that kind of environment?
I think so based on what we've come to see. I mean, we've we've been living now for two years in succession with just three cuts after what eleven hikes and fourteen pauses at the higher end of that. And the economy has shown remarkable resilience. Job growth has shown remarkable resilience, even though it's slowing somewhat it could be expected, but that we think that the operative word remains resilience here. Don't look for robust things, but look for resilience is key.
What are you hearing from upgo? Your research has been so sophisticated over the decades. There's almost a calmness there. Are they calm or is there some sweat going up? Well, I'm flattered what you just said. Thank you. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Apple Karplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Golder Mountavali is our definitive reporter on her Persia, her around, and we're thrilled that she could join us from Queen Victoria Street this morning. Golnar, there is Revolution Square, there is Freedom Square, there are roads where there are protests hiding from security, there are protests often from the rooftop. What can you guess is the mood in your Tehran?
From what I'm hearing from people, there's I think, a real mood of relief. I think a lot of Iranians, particularly those in the urban centers like Tehran, like Sfahan, cities like Tabres, that were seeing a lot of bombardment from US and Israeli air strikes. I think from what I heard, particularly towards the end of this period, right now that we have coming off of this tentative ceasefire
is exhaustion. I think even if there was a sense in the beginning that people, some people, all large numbers of the youth, welcome the air strikes because they are exhausted with the regime and they really want a change in the leadership, I think the extent and the breadth and the scale of the bombings caused a kind of a change in attitude amongst many. And while I think that opposition fundamentally to the theocratic system still holds, I think people just don't want or they don't want to
be attacked again like this ever again. And I think while there's a sense of relief, I think there's going to be a lot of realization of the damage that's taken place and what they now have to do to repair and recover emotionally as well as economically, which is going to be difficult for Iran obviously because it's so heavily sanctioned.
Goner. We have a widely read morning note from Mike Allen at Axios. This is Neil Rothschild folks this morning in Axios, and the key data point that they report on Gonor Montevali is that the Supreme leader, we believe injured out of the picture, clearly had instructed the negotiators for the first time since the war began to move toward a deal. With your reporting and context, would you suggest that the architecture of traditional leadership is still in place.
That's a very interesting question. I think the scaffolding is still there. But I think what has happened with the killing of the previous Supreme leader, Ali Harmenee, and with the fact that his son has succeeded under extremely difficult circumstances during war, it's kind of put the country generally in a force majeure situation over the past six weeks and the leadership structure that has had to change in
response to an extraordinary set of events. We've seen a kind of this so called mosaic structure of leadership where personalities like Ali bath have become very important and very powerful. Earlier,
before he was killed, Ali Larajani was very influential. I think we might see elements of this stay because moj Taber Harmonae, the current Supreme Leader, he hasn't been seen, he hasn't been heard, and already there is a sense that the office of the Supreme Leader itself is not the same type of office and doesn't have the same level of authority perhaps that it did while Harmonae the Elder was still alive. So that points to possibly in the future, fundamental changes in the way that the regime
itself is structured in terms of its leadership. But not on the question of whether the regime is going to remain in place, I think it's going to stay where it is. I think it's going to stay firm. That there may be an internal evolution as a result of this war.
Conard, given that uncertainty as to perhaps the leadership structure, how far do you think the Iranians can go in terms of negotiating peace with the US? Can they can they meet the US demands? How much leverage do you believe that they have given maybe some of the uncertainty in their government.
I think right now, the feeling, or at least the impression that the hardline leadership in terror wants to give to the Iranian population, to its own loyal base of supporters, and to the world more broadly, is that they're on the front foot, that they're the party in the war that has managed to get concessions out of Trump in
the way that this ceasefire or was agree to. Whether that's true or not tactically strategically is a separate question, but I think on the ground they feel emboldened by what has happened because they have managed to extract significant major shifts, especially in terms of how the strator formals is managed.
Gonner One final question here, and this goes to the heritage of Matthew Winkler, the founder of Bloomberg News, and John Minchleswade, our editor in chief. We try to stay out of the debate, and Paul and I folks are killing ourselves trying not to insert our thoughts at this historic moment for America, for Israel, for Iran Goner, I'm absolutely flabbergasted by the lack of coverage of Israel in
the last forty eight hours. How is Israel perceived, not by the theocracy, not by the military, how is Israel perceived by the people of Persia.
That's a complicated question. As you know, Historically there was a relationship between Iran when it was under the Shah, when it was under the monarchy, and Israel. At the same time, I think I think the Shah also criticized Israel quite heavily for its policy towards the Palestinians, and I think he was unofficially not happy with the way that Israel conducted itself, particularly in the nineteen seventies following
those wars. The examp Republic we know, has almost its foreign policy has been completely defined by a strong hostility towards the very existence of Israel, and a lot of that has been based on also the fact that Israel occupied Lebanon and that Iran helped fund and established and train Hezbolah in the very early nineteen eighties. But that's very much the political perception of the establishment in the Islamp Republic. I don't think ordinary Iranians feel that way.
I think many many ordinary Iranians would like to see not just a normalized relationship with the whole region, but they want to see themselves. They want the world to see their country as a normal country in quotes whatever
that may or or may not mean. But I do think that I think this war, Before this war, I think there may have been a sentiment, particularly amongst younger educated Iranians who maybe have more experience traveling overseas, of friendship or just a sense of neutrality and openness towards Israel.
But I don't know with this bombardment, with the past six weeks, with the extent of the air strikes and the types of targets that have been hit, I don't know whether that has changed, whether it has gone backwards again. I think that's something that's too early for us.
Generous with your time here on an historic day for Iran. Glenor Montevali reporting from Queen Victorious read in London. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch US live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch US live on YouTube.
Max Kattner joins US chief Multi asset Strategists at HSBC. Max, again, here's just another day of the twists and terms of geopolitics inserting itself in financial markets. Here, give us just a sense of some of the conversations you've had with your institutional clients around the world over the last six weeks.
Yeah, there's the big question. Those nations that we had really, i would say in the last week week and a half, and that is when you really realized that not only sentiment, not only what people would telling you, but the actual positioning was getting much, much, much lighter. So in terms of our positioning framework, where we track around twenty five different indicators, short term indicators across systematic and discretionary positioning as well, that has now become as light as it's
last been around Deliberation Day SAGA last year. And that of course is then allowing these s reps that we're seeing this morning.
So Max, I guess one of the questions for a lot of folks, is just what is safety are? What are safe havens here? How do you think about it in these times?
Here?
I think the US dollar overall, right, the green bag has really demonstrated that, even though that was coming from the US and even though you could argue, well, does it maybe call into question the institutional credibility of the dollar?
You could have.
Made that case maybe, yeah, But even there then actually the US dollar really really worked the best as pretty much the only safe haven there was in an environment where it's pretty much liquidation across the asset classes, which we have seen in four to five days in March, where gold sold off, where treasure is sold off, where equities sold off, credit em everything except for the US dollars. So the US dollar as as a safe haven still reigned supreme.
You know, Max heritage here of the Hong Kong and Shanghai Bank is a research combine. You know. I can't say enough Paul about this of Ben Ladler years ago and David Bloom in Mexican or and all the rest of them. You guys nail global correlation like no one. Are the markets correlated now? Are they vibrating in a constructive way?
I would say well, today they are in a constructive way. I think today is the kind of day where no one will complain about positive correlations. If you own rates, if you own em if you own equities, if you you know your own gold, even everything goes up. Now that of course can go the other way, like we've seen in the last six weeks, and that is the really, really tricky thing. So I think in terms of correlations, it is as you've said, when you are pressing in
a higher likelihood of stagflation. Stagflation is the poisonous pill for financial markets because there is nothing where you can really hide out except for cash in the green back, in US dollar, but everything else, from gold, from precious metals to equities, to credit to em everything sells off in light of rates selling off, in light of rates volatility going higher, and that really spreading pain across the
asset classes. So in that light, correlations still are unfavorably and uncomfortably positive.
Max.
How about geographic here we had seen in twenty twenty five certainly pretty much all boats lifting with the type, but particularly markets outside of the US doing even better. How do you think about maybe the US versus rest of the world, world.
Here still very much preferring the rest of the world right now, tactically, I think I want to be buying most Europe and Asia. I really want to, you know, start to pay what we've seen in the last five six weeks that you want to buy into Japan. Think about how often have you guys talked in the last six weeks about the fiscal story in Japan, about the aftermath of the Japanese election, Like not not that I'm going to put words in your mouth, but I guess
the answer is not at all. How often have you talked about, you know, the really really strong earnings growth story earning career career's got one hundred and seventy percent twelve month forward earnings growth. Right we're talking about valuations of a twelve month formerd P below nine. Those things have completely been forgotten.
This is this a bullish max retur I think it is. Explain Europe, Explain Europe, Max ken Her.
I mean, Tom, I would say I wouldn't characterize myself as bullish. We've we've shifted about three and a half weeks, we've shifted to maximum bullish and equities, so I cannot be more bullish than I am right now there is I can't even write by the dip anymore because I don't have capital left. I'm as bullish as it can get now. In Europe, look look what we are saying today. We are seeing guilts rally. We are seeing front end guilts rally, the most front end European government bonds ECP
pricing really really reversing lower. That s deepens the curtain. What does that help them? Helps the European banks, whether it's UK banks or Eurozone banks. The story around europe infrastructure, stimulus, capital goods, defend spinning. None of those stories are going away. So it's the banks, it's the industrials. Really, those two things that in Europe have been so forgotten I think in the last month and attending like it doesn't exist. Next, I think that's the stuff you want to buy again.
Next sounds like Dick Van Dyke and David Tomlinson and Mary Poppins railways to India. Right next? Kenner never change. Thank you so much. He is with HSBC. Stay with us More from Bloomberg's Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am Eastern. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
If Daniel Di Martino Booth joins us right now with wonderful and not skeptical, but gently like, what's the BS factor on our FED policy? Daniel Di Martino Booth is chief strategist QI Research. I got to do an audible to private credit as we heard that headline. Mister Diamond wrote about it this Annuel letter in the Daniel Di Martino Booth Annual Letter. How big a mess is private credit?
Well, I think we're learning it.
It's a pretty darn big mess because it's got tentacles. And if you don't understand the conduit of non depository financial institution loans, which goes straight back into the conventional banking system. It's the conventional banks that are making loans to the non banks, then you don't have a full grasp of the situation. And then on top of that, you can weave insurres into this whole private credit mess. And these headlines are coming a mile a minute. If
I pull up my Bloomberg on my phone. The first thing that he knows I'm going to search for is private credit news.
So from your mind, is it systemic?
This risk?
Here?
Are they cockroaches?
I think that there is a risk that it could be systemic because there is blowback into the banks. We do know that there's been multiple pledging of the same collateral. Remember they started back with our Kagos, but we saw it with first Brands, we saw it with MFS, we saw it with Tricolor.
And that is you have to stop and say, wait a minute.
If one investment banker had a light bulb go off over his or her head, was that across the street?
Was there a lot of multiple pledging of collateral?
Paul, let me interrupt and say standard and pour five hundred Future's legout new strength up one hundred and eighty nine points.
I look at the WRP function on the Bloomberg Tournament, Danielle I failed a reserve, I mean completely hands sitting on their hands. Is that what they should be doing here for the rest of the year.
It is what they want to do for the rest of the year, certainly until the good Senator till Us allow the pathway forward for Kevin Walsh. And I think that there's there's a chance that they can look they've got a new We know that gas prices go up very quickly and that they're very sticky on the way down, and so even though it's going to be a supply shock, so to speak, you could have kind of this entrenched
mindset that FED officials can allude to. And by the way, if they want to reinvent the wheel today with the minutes and say that some people were contemplating hiking rates, that's what we got the last time we were on a Wednesday FED minutes was a big surprised.
When we weren't distracted. Daniel. What I want to to talk to you about is in the zeitgeist, and I think, folks, you'll see a lot of this into the weekend reading if we have OMG high inflation, if problems solved, we swing to one of two things, a disinflation, a lesser inflation, or outright that fear of deflation.
Which will it be well.
I think that that is where there's the greatest risk right now, because we're seeing an acceleration in the downside, whether you're talking about rents or home prices, and that is it's very very slow on the way up, but once momentum is gained on the way down, Oftentimes in history, policy makers have a hard time getting a hold of
that disinflationary impetus from the shelter side. And we already know that the gasoline prices have squeezed away discretionary services, inflation and discretionary goods.
Information you're spending on the essentials we have, mister and Governor Myron.
Can a central bank get out front of a disinflationary tendency?
Probably not?
I love to buster Chucks.
Probably not. This is central bank. Again.
I refer back to the good Senator Tom Tillis, and again there is a pathway for there to be more than the potential for one rate cut in twenty twenty in twenty twenty six, But right now it is an institution that is plagued by paralysis.
How do you think this is going to play out?
Just for the listeners and viewers out there, fetcherim and j Powell is going to step down in theoretically theoretically how she says there's.
Only a twenty eight percent possibility that he's gone by June.
Wow, So I mean, who blinks? Here is at the White House? Is it Senator Tillis. I mean it doesn't seem like I.
Don't think Tillis is blinking. You throw anything at him.
To cease fire, doesn't joke in the morning, Yes, no, no, I think separtcies fire at the Eccos billet between the Ecchoes building in the White House.
So they need to get how much you figure something, how.
Much of a problem could it be if they don't come to some resolution and we've got some paralysis that we don't know who the Fed Chairman's going to be.
Well, but we do know who the chairman of the Federal Open Market Committee's going to be because j.
Powell has been elected for the full calendar year.
So some might characterize our president as occasionally impulsive, but he could end up seeing Chair Powell behind the podium through the December meeting.
Okay, but the reality is the market.
Functioned, Yes he is.
I mean yesterday was completely about you know, adjusting this, making the markets go. Clearly, his golden ear of the Middle East has to do with S and P futures up one hundred and sixty four points. Give us you your Danny take. I mean, where are the buying vigilantes right now? And my answer is they're in full force.
You know they're in full force.
Tom.
But you have to remember what brought us to the situation with Iran in the first place. It was the Friday that the ten year Treasure's your year yield close to three point nine to six percent because there was so much concern about private private credit at the time. We forget this was just a few weeks ago that this happened. But there was downsiding yields because there was concern about private credit and the White House needed a great,
big distraction and they got one. So I would say downsiding yields is much more problematic and worries.
So you're this is I have to question you on this. I mean, by a journal, you're linking domestic financial challenges to mister Trump's foreign policy.
I actually just did that, yes, okay, So I would link anything any behavior in the standard and Poors five hundred to any behavior out of the White House that is a known barometer.
How about for the Fed, it's thought on just the labor market here, because we got a strong labor print last Friday when everybody was taking the holiday. What did you take away from that and how do you think the fed took that data point.
Well, we've only had fourteen consecutive months of negative revisions in real time. Okay, so I say dot dot dot T be determined. Let's see what happens with revisions.
I got headlines. I gotta go. Daniel di Martino, QI Research, thank you so much their look for her work. We protect the copyright of all our guests. Look for her work at QI at Research.
This is the Bloomberg Surveillance Podcast, available on apples, 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