Surveillance: Anti-Tariff Pressure Strongest Ever, says Treyz

me to get you up to speed. Tariff Man making a comeback, hitting Argentina and Brazil with steel levies and then retaliating against France's digital tags with a threat to slap tariffs on two point four billion dollars of French goods. France then retaliating, threatening to retaliate against America's threats of

retaliation against France. Are you confused? So am I? It all comes just twelve days from a deadline before the White House hits China with another round of trade penalties, the President telling reporters in London this morning that you might have to wait a whole lot longer for a deal. I have no I think it's better than way to after the election. You want to another truth, I think in some ways it's better than a week or after

the election. Was Joe equity futures dropping off the back of that the SMP five hundred down by a quarter of one percent, Tom Keane, you might have to wait until after. It was really sudden, three headlines in a row, and we've come back a little bit. But I'll tell you there was an immediate reaction to that headline in China.

This was two thirds of the way through this extraordinary press conference that Mr Stoltonberg was there as well of NATO, and he sat and sat and sat where the president went. It was a press conference forty minutes. It lasted that conversation and a whole lot more coming up through the daily So a series of bilaterals between the President and NATO leaders, and trade very much the focus at the moment.

Look out nne M Eastern, the French president and the US leader sitting down together, a bilateral that I think is going to get a whole lot more attention. The key question to me this morning is how much optimism still is baked into the market based on the idea that we would get some sort of deal between the US and China by year end. Because yes, you are

seeing stocks turned negative, but not that negative. And yes we saw a sell off that was the biggest in since October yesterday, but we had been making new highs day after day after day. There still is so much enthusiasm built into stocks. How how far does it have to go to be unwound? At this point, let's bring in Troy as we have Scott Bridys dropping by the studio here in New York, Troit right to see you. How do you digest the last twenty four hours? It's

getting a little bit messy at the Yeah. Well, I think the two narratives that have started to break the first on trade, right, so we've had a narrative develop where you know, phase one trade deal is pretty much done. Obviously well be face saving, nothing like substantive, but but at least it doesn't escalate further. And you know, whether you look at Brazil, Argentina now France and you know the talk of it going past, clearly there is risk

again of its cleaning further. You know. Secondarily, and this is another big narrative, was that global manufacturing was bottoming and starting to look like it was turning. You had the decent data out of China, not so bad data out of Europe, which means you know, things aren't collapsing, which has taken is not so bad news out of Europe. Um. And then the I s M number came out yesterday in the US and that throw cold water on that

as well. So Um. The other point of make at least so you bring this up is the price action has not been that violent, right, and what we think is going on there is in the backdrop rather quietly, as you know, the FET has been dramatically expanding their balance sheet. Um, it's not QUI don't call qi. But the reality is they've added two seventy billion dollars and are on pace to add another you know, six billion over the next call. It's five six, seven months. So um.

You know that arguably is masking downside volatility in the short term. Um. But clearly, if we do get a complete break of China, you can look for three to five more downside. Had a lot of people messaging me in the last four hours word about a repeat of December, and I think to your point, it's the Federal Reserve and the position of monetary policy right now that makes

December very different correct to December. As we go into though, Troy, your conviction tright, Now, what is it after the big run up we've had him risk assets through this year yes. So if you're focused like we are, on developed generating returns to have as lower beata possible and very little duration. Um. You know, we continue to focus on consumer related credit with offset by shorts and high yield and I G. And as we were discussing, you know on tim shows before,

I mean, hedges have been brutal this year. I mean the cost of hedging has been off the charts. But if you think of where spreads and absolute yields are now in I G and high yield, we see much less downside on that side of the portfolio. And then the data for the U S economy continues to be relatively strong with the consumer balance sheet in relatively good shape. Um, that's our favorite setup. We'd say one of the consensus traits for the industry is that your only going to

see the dollar weekend next year. Uh. That's been a widowmaker, so to speak, for quite some time. Uh. You know, the viewpoint is with the FEDS expansion the balance sheet, the dollars finally topped out, um, and if growth slows down further in the US were stabilizers overseas, you could finally see a round of dollar weakness. Is there ever a widower makers we can we can discuss the sexism of it offline. I will say, I want to pick up on the idea of the balance sheet, the Fed's

balance sheet. I'm looking right now contracting contracting, contracting reaching a low at the end of August August, and since then it's at a nearly three hundred billion dollars system most under a told story of the market action we put we focus on the trade headlines. So if the FED continues to build its balance sheet like this, which is mostly coming through the REPO operations, which they say is not quantitative easing, is this going to support risk

assets indefinitely for as long as they do this? Well, remember the goal now is to get the balance sheet from what the FED has said, So take that somewhat with a grain of salt to back ups around four point four or four point five trillion, and that should be complete by the end of Q two. To be clear, it's right now, it's a four point five trillion, that's right, that's right. Yeah, I think thanks for point now. So so there's quite a bit of scope to expand further.

So that's part of the narrative fueling why um many think will have a risk on Q one early Q two, and then from there we get back to the framework we were in the most of the post crisis period was when quis running risk, assets do well. When QUI stops, you have a correction. Bad news becomes bad news, right, And what happened is the seventeen eighteen period UH was much more about the fundamentals of fiscal policy reform out of Washington, and so for like an eighteen twenty one

month period, markets are much more focused on that. And then of course the FED tightening became the driver in Q four and now FedEx engine is once again the primary driver. We think UH in late nineteen going into trigger ask hedge on business the great fear as market

draw down. You're up at a high, you go down and it's not worth keeping the hedge fund going because you sit down so far you can't come back a year after year in this bull market of market draw ups where they just can't catch up, They just can't catch up. When's the shell game over, Tom, It's a it's a pretty tough terve shell game, my friend. But come on, they get Look, I'm an institution, I'm a hammer in aut This year within our squared of one

point oh with costs next to nothing. And I understand you keep the game going, but it's the perceptionist. It's year after year after year when the institutions just say enough. Look, I mean, first of all, fees have come down pretty significant. Industry, you know our way to average fees about one point one and twelve. Well, okay, well what's a game? And if I make a game, are we still no? No? So one point one and twelve. I think the industry is sevent so there's less less than centi fee. But

but the point you make is a good one. I think if any institution looks at the last ten years and extrapolates that out to infinity right along the lines of what you were mentioned with the FED balance sheet, well then there's no reason to do anything. Would be a long equities right. But but the whole point of asset allocation is that you don't know the future. Right, Equities ten annualize the eight percent over a full market cycle.

Guess what this cycle they've been annualizing much higher than that, right, which means by definition, the next five ten years have to be worse. Now we could talk about you know, the tenure going to minus two and my three percent short end rates and what does that mean for assets? But but in a in a zero bound world in the US, everyone knows the future returns are gonna be less. Uh. And the other point that's uh supportive of the hedge industry, um,

is that bonnils are so low. Right, it's very hard to make a living in bonds, right, certainly anything high quality. Uh So so we do think again, we are in the industry, so we're somewhat biased. But if you think of the future, Uh, the reality is if hedge funds can comfortably out perform fixed income, even if they trail equities,

they're still value to be had there. If you have a relatively low data, great to say you thank you, better catch you out, okay, John, For anybody joining the conversation this morning, I want to summarize here President Tenato, we pretty much thought closed meetings, pressers, photo ops in that not and in the five am hour we enjoyed a forty minute plus press conference in the presence of Mr Stoltenberg for to market the focus not on security, the focus on trade, the prospect of a trade deal

before the December fifteenth, line of the sand, that is when tariffs is set to go on a hundred and sixty billion dollars of Chinese imports. The President said there is no deadline. I might wait until after twenty to get this deal done. Equity futures roll over, so we're

doubtned by five tenths of one percent. I think you've got to start the story at the start of the week, at the start of the month, where issue after issue just slowly started to build up, one on top of another, tarifs and Argentina on Brazil retaliation with France, the just a little bit softer tariff man making a big comeback, and the equity market making a move. Love but the Wall Street Journal to my friendly to Republican politics with a scathing editorial today on the president one year run

from terrorists. Lisa mentioned December fifteenth coming up, but there was a lot more in that press conference. Maybe it didn't move markets, but I found absolutely stunning Lisa where he basically stated, he said, I'm gonna I'm gonna get this wrong. I don't ever run of me. I'm the one that has. If it wasn't for me, there would be a war in Asia. Something like that. I thought that just stunning. It highlights yet again he is the one person controlling all of the negotiations and this is

the key. So so really any deal lives or dies on how he feels on any of the day. Henritta Treys joining us now and really important conversation because something has shifted and this is actually uh notable in markets that they have not yet, uh not yet recognized this. Henri to Treys a Veta Partners. Why are we now

talking about escalating trade wars? I think we're talking about escalation because the market had become very optimistic that we're going to get not just a small scale pause, but a robust phase one deal and as I heard from several clients in the run up to Thanksgiving, even an indication that Phase two could be completed. UM. So I don't know where a lot of investors are getting those views, but that was something that ran across my desk several

times um in just recent weeks. And I think that it was this building optimism that we were going to get this major trade deal that we don't see any evidence for um. And obviously the President, in our view, has lost his appetite for tariffs against China, but clearly not against Brazil, Argentina, France, UM. And obviously that does not vode well for let's say, auto tariffs against the EU or other nations. And Rietta, what makes you think

that he's lost his appetite for tariffs against China. Our ongoing conversations with the U s d A, with the manufacturing institutions, with farmers, with Senate Republican Agriculture Committee staff, the pressure on the administration to not impose tariffs is larger than it ever has been, and I think that's serving as a very effective dampener on the President's willingness

to impose additional tariffs, specifically on China. US farmers literally cannot take it, and the manufacturers are very concerned about that escalation threat to and have not factored that into their supply chain expectations and will not septa. You mentioned all times in Europe. Does the same approach apply to

Europe or is it a different approach? We're about to say, this is what's happening right now with the digital tax is entirely different, and interestingly, in extraordinary unifier on Capitol Hill, if you ask any member of the Senate Finance Committee, and so I'll tell you that they absolutely hate when the European Union thinks that they can tax any American company that goes all the way back to Apple in

Ireland so many years ago. So this digital services tax is something that the administration has support for both Democrats and Republicans to rebuff, and I expect that they will continue to. But that's a tiref on wine, keys, et cetera, not on automobile, careful French wine cheese. Don't you know the important things for the important things resting in there and what matters, Henrietta, to your good point, and with your wonderful knowledge of Congress, does Congress believe this president

is acting by himself? Is he alluded to multiple times in this press conference. I think that when it comes to trade policy, that's absolutely the case to me. And he's obviously got a very competent team in USTR, Bob Lifeheiser and he surrounded. I didn't hear them in this press conference. I heard a president said it's me, right of course, And I wouldn't expect him to name anybody unless they're physically in the room with him, and he can sort of pass off some of the pressure on them.

That's historically his tactic. But it would be impossible for President Trump to pull any of these tariffs off without the knowledge and UM ground laying that us t R lifetiser has given to him. And you think that the markets are correct, then being optimistic that we're not going to see the December fifteenth tariffs correct. My odds are that we will see the December fifteen pariffs at some point, which means that I don't think we're going to see

it specifically on December fifteenth. UM, y'all have been reading my research for a while, you know that is very bullish for me. It means that I am not expecting to see the tariffs um overwhelmingly that is own from my odds of s and higher over the summer when the President was very enthusiastic about tariffs. So I think the market's appropriate to assume that the December fifteenth tariffs will not happen that day. As you guys were discussing earlier,

it's a totally manufactured date. It has no relevance to any underlying key deadline. It's just something that USTR life fives are created. As he has for so many of these other tariff lists, So December fifteenth could easily, in my opinion, become February or March or what have you. But that doesn't mean that the tariffs are going to

go on December fifteenth. I'd also like to say to investors, don't expect for whole baskets the tariffs to come off in the next two weeks, which is what I think a lot of investors have been pricing in, and I don't think that's appropriate. What's the tipping point, What's the issue, the pivotal issue that would shift those odds back to something more substantial in favor of the tariffs in December fifteenth.

I would be really heartened if the administration signaled at all to the House or the Senate that they wanted them to stop taking these very poison votes poicsonous to Beijing anyway, votes on Hong Kong human rights and democracy, or the weaker bill that the House is going to pass via unanimous consent after the close this evening, those kinds of small pieces, and the knowledge that Senators Rubio and Kennedy and a whole handful of others are trying

to restrict Chinese investment or US pension investments in Chinese companies, etcetera. That tip for cat. You know, it's not so much one thing as a tiny compendium of so many small things that leads us to have huge concerns about reaching a Phase one deal at all our odds there are only fifteen percent, and those really started to come together attent, you know, very low rates when the poultry deal was reached.

Of course, there were good reasons for the poultry deal to be reached, but having it done separately and outside of the Phase one deal was the first and a string of indicators that pointed in the wrong direction for a Phase one deal in our view. He tries always great to get your view on this program. Vata Parts director of Economic Policy joining us on the lightest and they tried to you. It was a distressing email that came across the other day, which was that the addiction

of Wall Street is retiring. Let me frame this John and you can bring him Mr Gartman. There is an acclaimed single photo of the collapse of Lehman Brothers, and it is the young troops where their backs against the glass wall of that skyscraper and their screens and their Bloombergs are all in front of them, and there's the research capability of Lehman at the time, which was magnificent, and they're in the screen as they listened to. Their fate is the Gartman letter. That is the dirty little

secret of Wall Street. They may love them, they may hate them, but boy do they all read them. And it will end suit and often more than thirty years it will be returned at South they got. I don't believe it, but Dennis Gallama joins us on the phone. Dennis walkers through the decision. Oh well, thank you for the for the nice introduction, Very very pleasant of y'all. It's been a hard decision. But quite honestly, the simply, the simple fact is the getting of information has become

so will ubiquitous. You guys, everybody else are are able to get up the news so much more efficiently, so much more regularly, so much more quickly, and in many respects, so much better than I I started. When I started this thirty five years ago, I used to tell people that I got this China People's Daily mailed to me three days late, and I was still two days ahead of everybody else. Now everybody gets the China People's Daily or the South China Morning Post on their email every morning.

So keeping up with the news and being ahead, and that was always my forte was to try to be ahead of what everybody else understood. Has become almost impossible. And finally, I'm almost seventy years old, after getting up, well, after getting up every morning for thirty five years, in on every business day and writing for five hours, my hands are tired. And then finally having gone from a four handicap to a fourteen, there we go. That's probably

closer to the truth. Well, but Dennis, you raise a really interesting point the speed of markets and how much that's shifted, and how everyone has a glut of information that they're facing an onslaught every morning. Has that made markets better or worse? From your perspective, I think it's made I think it's made it better. I think it's made it more difficult, but I do information is always better there in the old days, years ago, I used to say that my job was to be the sieve

of information. I I read as much as I could get my hands on, read different newspapers, read different news wires, listening to different news broadcasts, and tried to hold out what I thought was the important pieces and say here, look at this, this is what this means. Now there's just so much information and so many people pointing out to the same thing. Here, look at this. This is

what this means. That the competition is difficult, the markets are far more liquid, the markets are far more efficient than they've ever been. It's just a little more difficult to do what I do. And so you know there comes a time, Dennis, one of your great charms as you actually show your recommendations on the back of your letter, and when you go down in flames, you're the first to report it. There detractors reporting it, and as well, you have a dearth of equity wisdom right now, long

or short? Can you give us a game on the stock market into next year? After up this year? It ain't gonna be up next year, that we know for certain. It's probably going to be down, and rather abundantly. I'm afraid the the war that's going on over trade is

already ill and ugly. The same thing is it's probably going to get more ill and more ugly, and and any any inhibitions on world trade foreign trade is going to be delitarious to stock prices, plus people who really have no business trading, no business investing, and our novices. I think that it's so easy to make money and it's not that easy. And when when the novices become

the experts. That's one final question, Dennis. Of course we're gonna have Mr Gartman back here within his retirement, probably from the fifteenth hold of one of the eight golf courses he plays in Republican Virginia. You tear the president to shreds this morning on round two or around five, whatever it is, on tariffs. How can run of the mill Republicans support this guy? If Dennis Gartman, who it's the GOP golf ball, says, this guy is so wrong

on trade, it is difficult, isn't it. He he has the Republican Party has ceased to be the Republican Party, is now the Trump the Trump Party, and and lesser Republicans are fearful of of taking him on. I'm lucky enough to be able to say you're wrong because I don't have to fear what the President has to say other than positions that I put on in the market.

But if I were a Republican senator, I'd be scared to death about what the President might say, because Republicans are supposed to be believers in free trade and and and und deregulated trade, free or trade around the world, and we have becoming a party of regulated trade and and uh protected trade. And sadly that's just not who we are. And and so the Senators and congressmen are running fearful of them, and then are being quiet when they should be loud and saying this is not who

we are. The grind of one am and three am to write the note will end, but Dennis Gartment will be more than visible, particularly here on Bloomberg surveillance. Mr Gartman, thank you, and of course we protect the copyright of our guests. Margaret Botell, good morning. It has been a double digit year. Did you get your fair share? Yes, we did amazingly. Even in the high yield market, double digit returns or were given. So it was a great year all around stocks and bonds. What happens after a

great year in bonds? I would guess our listeners in me eighty nine point seven percent of my focus is on the year after in equities. What happens after a bang up year in bonds? Well, I think they will basically look for just the return of the coupon income and not so much capital appreciation. So mid single digits

kind of the best scenario for two and twenty. So, Margaret, we saw, you know, with the sell off in the fourth quarter last year, it appeared that a lot of people had cash on the sidelines and we're willing to jump back in. If you take a look at the performance in you think that's the case this year. As you talk to your clients, do they have cash and maybe they're just waiting for a pullback in the market that maybe we got like a year ago. Yes, cash

and hoping for that big pullback. I think this is a replay of last year, A big A great time to jump in because the fundamentals are still pretty good. So if I were to jump in, I guess the question is how much risk do I want to take? Do I want to, you know, go into the defensive sectors, whether it's real estate, reads, consumers, staples, or I want to take on a little more risk saying technology or some of the industrials. Well, I think a Barbell approach.

I think the interest rate sensitive sectors like utilities, like some of the reachs are going to do well because we had a little rate push up. I think we'll see rates pushed down against next year. And in the equity market, I think we have to still look for growthy sustainable growth sectors because econed me will be a lot slower next year. Is a dividend growth a yield equivalent? It looks very bond like to me, Tom, because the returns are about where you'll get an investment great bonds.

What do you model for dividend growth? Do you have a collar that you work with, Like, if it's too high a dividend growth, your radar goes up, and certainly if there's not enough dividend growth, you don't like it. Did there a Margie Btel collar to that statistic? No. I like to look at total return, and you know, the capital growth is a dog, and the dividend is really the tale. So I don't like to put much

emphasis on the dividends. A level three exactly, So Margaret appears at the you know, the market's kind of discounting a one rate cut maybe in two. Do you think that's enough to kind of support some of the risk your assets, and you know, the credit side and the equity side. I think the fair having a steady state policy doing nothing. We're making a mild rate cut because rate to do look a little on the high side

compared to global rates and the slow growth. But I think as long as I don't do too much, that will market will be very attractive. Bloomberg Surveillance Worldwide. We bring your margat Patella Wells Capital Management. We await comments by Mr mccrall and Mr Trump. Paul. Sure, Margaret, you know, it's interesting. It's been such a great year for bonds

for equities. You know, it's it's some of the people that we talked to are saying, geez, you really have to moderate your outlook for twenty maybe even kind of a mid single digit return type environment. Is that or in Tom's case, triple leverage cash. What is your sense as to maybe expectations for well I think mid digit returns would be just fine after the returns we've had this year, and with inflation being low and interest rates being low. So if it's a five percent year that

won't be bad. It's still positive and the growth is still positive in the economy. Mark, if we don't speak to you before the end of the year. Thank you so much for your support of Bloomberg Surveillance and your wisdom and perspective on capturing a greater yield. Margat Patel with Wells Capital Management in Boston. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm

on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio