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A discussion with someone where all of global Wall Street loans forward. Ian Lincoln is the demon capital. And of course on the bond markets, you got Belski's optimism on equities. You know all that Ian lingoln on the percent effect right now, Ian, thank you so much for joining. Do you have a vector in place as you did six months nine months ago, of a ten year yield that will slide below four percent?
Yes, I still see the path of least resistance fourteen year yields being lower, not higher. And I think that the decision about the Treasury Secretary has been appropriately read as a net positive for the bond market. I think that this particular move does have a little bit further to run. But I don't see tens going to five. I see us going below four percent.
Four point two nine percent right now is a handle on ten year yield exactly.
Tom So in how do you think this fed is going to perceive here, proceed here with this December meeting coming up here, given some of the economic data that we've seen already, we're going to get some PCE data later this week on Wednesday. How do you think this Fed's going to move here?
Well, I do think they're going to cut twenty five basis points in December. They also going to offer a new updated dot plot, and I think that that's the biggest risk, and that's because the debate in the market at the moment is whether or not terminal should be revised higher simply because of the results of the election. The FED has told us that it's too soon for such a change, and so I suspect that the market will get a cut if nothing else.
How about going forward here? I mean again, as you mentioned, the election has had a material impact on this market and on the economic outlook of a lot of participants in this market. How do you think the election may or may not impact kind of where this FED goes?
Well, at a minimum, the FED has already acknowledged in the process of normalizing rates, and there's a very big difference from the Fed's perspective between normalizing and easing the economic data is unreasonably strong footing, so they don't have any urgency to move back to neutral. However, it won't be until the second half of next year that any potential policy change could come from the FMC based on
what Trump does early in his presidency. And it is worth noting that there's tariffs are one off increases and they're not the type of demand inflation that the FED worries about.
Lee In the heartier note, it's the densest node on fixed in come on Wall Street to claim by all buried in it is looming month, Then bond demand is it foreign appetite, is it domestic? Is it Fidelity or Blackrock need to touch up their portfolios? What do you mean by looming month and demand? Price up, yield down?
Well, it was a refunding month, and so that means that we'll have new bonds being added to the benchmark index, which implies that even someone who wants to be neutral on duration is going to need to buy in into the month. That's true for real money domestic players, and that's true for any overseas buyers that are based off of a benchmark. As a theme, though we do tend to think of looming month and demand being more of a domestic affair as opposed to being a strong overseas story.
So stepping back here, what was your take when you see the nomination of a Scott Bessant for treasury secretaries is as simple as well, there's an adult in the room and maybe take more measured you know, look towards Tariff's kind of what do you think the market's discounting here?
I think that that was the knee jerk response, and the perception is that he will be a more balanced, methodical, thoughtful Treasury secretary then might have otherwise been at risk. And there's also this observation that he's already made about taking a gradual approach on the tearff side, and if he's successful in being able to orchestrate that, that could take a lot of the shock and a lot of the tension out of the process as we recalibrate on the global trade stage.
Link your tone of price up yield down with Belski's tone of a solid equity market. Is it just ian our underestimation of continue to ample real GDP and surprisingly good animal spirits is signaled by nominal GDP.
Well, I think that the case for outperformance of the equity market can be made, and I'm on board with Belski's expectations. If we're going to be moving to a familiar doesn't have to be particularly lower rate environment. But if we don't have a spike in ten and thirty year rates, then equities can can continue to grind higher from here. My biggest worry for risk assets is that we do see a spike in term premium, a spike
in break evens and more reflationary anks. That gets us to an October twenty twenty three moment where we saw that correction lower in stock.
See how Ian did that? I mean Brian, you know, for next year he's only going to be called Belski. It's like share exactly. It's just like Belski. Yep. It's just one one word iling and thank you so much. What a team it is at being capital markets and there are many different parts the Bank of Montreal cours Pemo capital market.
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am. Easter Listen on Applecarplay and Android Auto with a Bloomberg Business app, or watch us live on YouTube.
I love doing seminars with Francis Donald of the Royal Bank of Canada. She writes a very terse note, always wrapped around the core function Y equal C plus I plus G plus export import dynamic. She darkens the door today visiting us from Montreal as well. Nominal GDP to me, has been the great miss call this year. Can you, with your K shape theme, with American exceptionalism, with the bascent Treasury Secretary celebration, can you model nominal GDP about five percent twelve months forward?
Oh well, that'll depend on the size, scope, timing and sequencing of a whole lot of policies that are going to come down delight or the ability be delayed. And you know, in my almost two decades of doing this, I know that I can't rely on Washington probabilities to dictate my economic forecast. What we do know is the direction of a lot of policies that are going to
come in and maybe skew our forecasts. And problematically, tom some of them are growth positive deregulation, corporate tax cuts, and some of them are growth negative things like tariffs or even and we don't talk about it enough immigration
policies and the risks to lower labor supply. So at the end of twenty twenty five, depending on the sequencing, we could very much have an economy that's doing quite well, the where animal spirits have helped lift confidence in small business confidence which I'm acutely focusing on, and the FED we'll have to be thinking about hikes not cuts. The flip side of that is, if the sequencing is different, we could see us trip this soft landing and have
a FED that continues to focus on cuts. And that's not me not having conviction in a forecast refusing to make a call. It's me acknowledging that the tails around our calls are much fatter, and every corporate, every household, every market participant has to take a look at a broader set of scenarios now than they were a couple of months ago.
What's some hindsight here to the labor data. What has the migrant influx of people into this country over the last several years. What does it meant for the labor market and our economy, because now it's front and center yet again, but maybe on the other side.
This is such an important question, and thank you for asking it. Because I'm frankly more focused on immigration policy than i am on tariffs. Okay, tariffs are a price level shock. We got a playbook for tariffs. We generally know what happened. Every economist with their salt knows a ton about washing machines from twenty eighteen. But that's not what's going to keep an economistep at night. That's a one time in fla shock. What worries us is labor
supply shortages and persistent wage growth. That's the type of more nefarious inflation that creeps in and requires much higher interest rates. And we are heading into a period where we expect to see well, no, we've already seen record retirements, record retire We have three retirees for every one new entrant looking for work in the United States. It is really sweat.
Why it is that? What's the why on? It's stunning statistics.
It's just demographics, Tom, People get older and they retire.
They do.
Really, that's what happens. It's hard for us to accept, but no, it's demographics. And we you know, my whole life. Demographics is something that we thought about as being relevant over a five, ten, twenty year horizon. It is relevant in twenty twenty five. It's also why that unemployment rate is staying very low. It's mechanically pushing down and it puts pressure on the Fed.
Paul Dow up four hundred and fifty points, Nasdick up, rather SPX up seven tents of a percent. Just Apple is one model up two and a half dollars. We call that two and five eights.
Okay, and talk to us about this K shaped economy. What does it mean to you and how problematic is it for the broader economy out there?
Well, it depends who you are. But one of the big challenges over the past year is if you were running any type of model based off of a data point like the ism or consumer confidence, which waits every participant in that survey equally, you and I get the same weight, it looked recessionary. And that's because small businesses and low income households have been in a very real recession. It's not just sentiment. It's not just that they have
bad expectations. But any data point that actually captured the economy as a whole, that was in real dollars looked just fine. And the trap was focusing on those standard indicators that weighted everybody equally, because high income households and large corporations, they are the drivers of what happens next. If you're the FED, this is a problem though, because you really would need two monetary policies to help those who are struggling and require much lower rates. And then
the resilient CEOs, the large households. They actually are large companies, they actually could probably merit rates around four percent or above. So if that's going to have to make a choice, does it target the aggregate of the economy and let one element lag behind more significantly than it has in the past, or does it say we actually need to be a little bit quote unquote fairer in the way
that we look at this. I think the challenge is that inflation runs off of the aggregate, not the individual. This is going to continue to muck up a lot of our statistics and a lot of our models, But at least now there's more of a general realization of why standard economic models hasn't worked for us in the past year or two.
Scott Bessant, nominated to be Treasury Secretary, that the markets seem to like it this morning. As an economist, do you read anything into it. Are you kind of thinking more just bigger picture?
All I want is less uncertainty. We are still in a massive uncertainty shock. Even though we know the outcome of the election, we still don't have a good sense of what the next one to two years is going to look like. So this is one of these weeks We're getting a huge amount of economic data and I almost don't care because I'm looking for clarity. Oh whoa, whoah, whah, whoah.
Don't say that we need people to tune in at least through Wednesday.
Go you don't care, well, listen, I care about PC. I care about where are we stating right now, because we do want to know is inflation already too hot? That'll be really key for the Federal Reserve. But broadly, the focus now turns towards what is the path for the next one to two years. I did not anticipate a few months ago that we would be talking on our teams about twenty twenty five rate hikes. That is not our base case, but we are now having to discuss.
We've got, you know, a vision for what rate cuts could look like and a vision for rate hikes at the same time. Two sided risk to a lot of economic forecasts right now. So any clarity I get is welcome clarity, and I think clarity for markets as well.
Help me here with the Canadian elections. I don't want to get you in trouble with the General Counsel of OURBC, but is there a Trump valent and the Conservative to go after the Trudeau politics of Canada.
Well, there is an anticipation that there will be a new election in Canada at some point, so it hasn't been called yet, it has not been called.
There's crazy British yep.
Exactly, but at any point, again, we're looking for more certainty for what will happen next. And just a reminder, Canada is not in the same shape as the United States. Productivity is really severe, they've cut immigration. We're actually going to see population declines in Canada in the next few years. That is a very weak economy on the prespit of recession and a big Canada that's probably heading down to two percent. So those factors are going to be the
dominant stories in Canada. Election are no election, just keep winning. Well, there's some good things going on.
You're right, that's right. Is tell me about like Vancouver in British Columbia. I mean you fly out there, what every second week or so?
Well, here's something. Taylor Swift is ending her concert tour, the Heiress Tour, in Vancouver, also known as the Emerald City, so they'll get a little bit of a boosting. Me too. I got to experience it in Toronto. But we're proudly Canadian getting the last Taylor Swift airs tour.
And now, folks with Francis Donald and Lisa Matteo, we brief you on Wednesdays, mowana too, Are you going to are you taking the offspring? To?
No question? Why not have children except to bring them to the movies you really want to see but can't go alone to Ye?
Okay, you think so, Lisa.
She makes up a great point because you don't want to go by yourself and just say like, hey, I'm watching an animated movie. Your kids are the excuse.
Really, I didn't know that.
You know how far back I go? Like Cinderella. Oh yeah, it's like ancient street They did it by hand. Now it's all raze, kung fu pan.
You're not taking a soldier of the guy, are you?
You're not gonna.
Can't get them, Francis Donald, thank you so much with RBC Capital Markets.
These Here's the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on applecar Play 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 playing Bloomberg eleven thirty.
Joining us now William Lee Chi for Kindamist Milkin Institute. Bill. This could be a three hour conversation. Let's cut it short. What do Trump tariffs mean for Beijing?
Oh, it's going to mean a change of life from where it was for the last four years. One of the things we have to remember, Tom, is that the make America Great objective has really one ultimate objective of maximized domestic employment and income.
Right.
That is the feature that we have to keep in mind, and Beijing really realizes that. Up till now, President Biden has been emphasizing getting everybody together in trade packs, multi level trade packs.
Some difficulties negotiating them.
But Donald Trump is a deal maker and he goes for not only bilateral deals with countries, he goes for bilottle deals with companies. So I think Beijing is preparing himself for a whole bunch of company specific deals, sector specific deals, and I think that gives him flexibility. You can read tailor you know that same industry. You can negotiate with the Korea and you negotiate with Taiwan on
semiconductors and have two different deals that try to benefit right. So, I just came back from a meeting in South Korea not so long ago, and they were really excited about having more and more US trying to trade tensions because they.
Trade with both sides. Okay, let them do that.
You're on the IMF desk as you were for years. What about magnitude Lightheiser and Trump want magnitude large tariffs? The Treasury Secretary designate does not. Does it make a difference if if Billy gets a marginal or a massive tariff regime?
Well, tom As you know, as a deal maker, the one thing you never negotiate is your final position, and right now the opening round is massive prohibitive tariffs. In fact, we had heard him say if it takes one hundred percent, great, If it takes two hundred percent, I'm going to put them in.
But that the.
Negotiating open employ and what the objectives had said before is the restructured trade routes, restructured trade packs, and restructure the US manufacturing base in a way that replicates more supply chains domestically and French shoring.
And these tariffs are one way of negotiating that.
Remember, Tom, restructuring America is both the democratic and Republican objective right to maximize domestic income and employment. And I think President Trump is going to be using trade policy as a tool. As you know, Tom, I come from the tradition of Bob Mundell and Carlos from Vegas, and you know Mo Calvo where in a distorted world and Kelvin Lancaster's world the second best where you don't have free trade, putting on tariffs or negotiating industrial policy can
make countries better off. Because we come in a distorted world where there is no free trade, there is no perfect competition.
So where is the concept of free trade? What was it ever a reality? And is it now gone for the foreseeable future?
If you go back to days at Alexander Hamilton, right, he already put the stake in the heart of free trade when he said we've got to build up US industries. We cannot depend on the UK for manufactured goods. That alone, I think goes to show that we never had that world of free trade. It was only taught by people like me when in international economics and undergrads to give you a baseline model for where it is that we
can dry for. But I think the minute you hit graduate school, you learn about the world at the second best where in a world's distortions, adding on at the story can actually make the world better off than before. And I think Donald Trump has been saying that all along, and President Biden has been on too, the Chips.
Act and the.
Subseas that we've been giving to build plants in Arizona for TSMC to come here was the lesson that we learned from COVID that we cannot depend on one source of supply chains. My former boss, Jane Alexander Jane Fraser said at a military meeting, you know, the problem with ESG is that we're missing some essays. We need some
stability and safety and soundness to our supply chain. And I think that's something the hard the message of the heart of the message that President Trump is also trying to emphasize.
Is there, how valid is the argument that tariffs are inflationary on the US consumer?
Well, Paul, I guess I hate to be the e contectory again. But a tariff, even with retaliations, the step wise increase in price levels right in order to get inflation would need continuous increases in the price level. And so we can have higher prices but not higher inflation due to tariffs unless we have repeated rounds of retaliation.
Doctor Lee. And I'm gonna get a little nerdy here, folks. The people that invented this again out of Columbia was Borrow, Professor Barrow and a guy named Xavier sally E. Martin, who were the bright you know, Lis or Dan Ives got the sport code. Thing though, is the sport codes of sally E Martin and their work. Is that in America the people hammer by trade converge towards where the better part of America is. Now we have a trump of grievance, a trump of so many people in America
have missed the boat on free trade. Is that academics Bill Lee still in place or is it a new regime after Barrows silt E Martin.
I think we combine both of those elements, because one thing that we also have to remember is there's technological change and shaping technological change is one way of converging trade theory and growth theory. Technology gives us the opportunity to produce. As Mike Milkon once told me, you know, bill is cheaper to produce sneakers in Atlanta than it is in China if you have the right technology in place.
And so I think one of the things that we're going to see is the use of technology to drive a lot of the industrial policy that both President Biden and President Trump want to do, which is to say, reshaped supply routes don't depend on single sources where they're their efficiency comes at a cost, and at a cost not just the US, but to Europe as well. And I think Europe and the United States are trying to
replicate the supply chains. If I were China, I'd be more afraid of the European tariffs that they're gonna be putting in to protect their auto industries and their industrial base, their pharmaceuticals than the United States tariffs, because I think President Trump is much more willing to negotiate. You bring jobs in the United States. You invest the United States
and you can circumvent our tariffs. If you don't do that and try to insist on competing with our strategic industries, you'terated with not just fifty but one hundred percent tariffs.
We went too long, Billy, don't be a stranger. We'll do this again soon with the milk in the institute.
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 watch us live every weekday on YouTube and always on the Bloomberg terminal.
They look at the front pages of Lisa Matteo our Lisa, what do you have?
Okay? It was a little bit of slow day today. I was struggling, but I did find some good ones. This is in the Wall Street Journal. It's a growing trend among couples. They're buying the house now and they're getting married later. So that is the recent trend. Twenty twenty three, five hundred and fifty five thousand unmarried couples said they bought their home in the previous year, and that's up forty six percent from ten years earlier, so more people doing it.
But yes, there's the risk.
What if you break up? You know, what if something happens to the other partner. So family law attorneys, they are busy, they're getting all these questions about it. You know, prenup cohabitation agreements can cost like three grand. So they're saying, people surely have to.
Consider this is the question you sell the house before you get divorced.
See, those are questions you.
Have to ask, you know, Like I think the big issues I don't know how young people afford Yeah, I mean home affordabilities out of control. The prices are high, interest rates, mortgan rates are high. You know, I never saw I haven't seen a correction in the housing market. I'm not sure where.
And that's why they're going for the home instead of paying for the wedding. Like what goes first the wedding or the homes?
And then there's a destination. He does a great cartoon.
This, Oh oh yes.
About the destination wedding. Oh, I've had a couple recently, and you gotta be kidding me.
It's tough because you as the guests, have to fork about this.
Money for people who got kids is sort of. You know, one guy wanted to have it intuition it's a city in Southeast Asia or so next.
Oh, yes, we talked about it. Wicked, Gladiator too. Write the box office? How much it did? One hundred and seventy million between both of them. Okay, not close to the two forty five that you know, the Barbenheimer brought in, but it's still brought in a significant amount. But what the New York Times was interesting is that they talked about the money behind it, like the big marketing cost, how much Wicked's universal one of the largest marketing campaigns
in Hollywood history. I mean they started back in February at the Super Bowl, and you're going to see more Wicked at the Thanksgiving Day Brandon Macy's on others, you know, so brand partnerships. I mean you saw the Wicked dolls, the drinks at Starbucks, the Wicked lego sets, Wicked Cardigan's at Target. I mean, it's unbelievable. Even Gladiator too, they put a lot of partners.
Miss Russell Crowe cut to the chick.
Oh I did, I did? The new guy was good though. The new guy Mescal I think is his last name, but he was really good. Yes, he was really good, and Denzel was phenomenal.
Wicked Part two is scheduled for release next year. So excited.
This is like I can't remember Game of Zones or whatever. They make two of the movies at the same time.
Is that what they did here?
I think that's what they do, so they.
Can probably save the Sunny Man. Yeah, yeah, but that's a bunch.
It's huge.
Gladiator too, cost at least three hundred and fifty million dollar to make and market, so that's that's a big note.
How do we count for one hundred million dollars of Areaana grande, you know exactly? Prancing around?
Don't know?
I mean, this is an expense deduction.
I don't know. One of the questions I have is how are these things going to play in China, if at all? Because that had become a market right in line with the size of the US market, and Hollywood made a lot of money over the last twenty years in China. I'm not sure if that's still the case next it's a big thing.
It's okay, so you mentioned China, Yeah, well, so we'll switch there. China no longer made source of US imports, but tariffs really haven't slowed America's demand for foreign goods. I mean this was really in the Wall Street Journal too. Mexico took the top spot last year. And it's a shift started in twenty eighteen, Like we saw it starting to change there with then president President Trump and now with his promise to impose another round of tariffs. What
type of goods are we talking about? Smartphones one of the big things South Korea, India, of Vietnam forty two percent increase from six years earlier. Then the value of laptops tablets imported from Vietnam Taiwan, that's also on the rise too.
John Micklethwaite with his interview with the President elect Trump in Chicago before the election, and Trump talked about the magnitude of tarriffs to force jobs to America. But Paul, that's not what we're hearing from Secretary of Biscent. According to Henrietta Trace, he wants tenC ween see terriff increases.
Yeah, it's interesting. I mean, the debate and the numbers don't lie. Last year, products coming from China made up fourteen percent of all important goods. That's the lowest share in nearly those A few decades. I mean, but many of the goods arriving from factories in Mexico and Vietnam, they still include components that originate in China.
Exactly. How is like twenty five percent of what they output comes to America? Now, yep, it's it's complex, would be my answer, folks, do you have anything else?
I do?
I do your gi answer?
Bark play of the eagles?
So please?
That was very sad okay Chinese fash fashion retailer in the spotlight. So parents, are you know if you're getting stuff for your kids? A lot of sometimes they turn to these cheap retailers like Tamu, like I'll express like shean. But the government of South Korea putting out this warning, Hey, these clothes can have toxic substances. So this is what they're putting out the warning work They tested twenty six pieces of children's winter wear. Yeah, and seven of them
contain these toxic substances. But they're saying one of them, I mean, there was this jacket from Tamu six d and twenty two times I legal limit of toxics?
Can I do this with fend?
Can you tell that it's not gonna work?
Not gonna work.
Well, Lisa Mateo, thank you so much for the newspaper Sick.
This is the Bloomberg Surveillance podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Eastern 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