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Seth Carpenter joins us right now, global head of macro research at Margaret Stanley as well. I think I mentioned once this morning, Seth that there's a FED meeting. I think Ellen Beson, Zetner and others would say, you know, at Morgan Stanley they're going to pause or this or that, but what's the Morgan Stanley nuance forward when you research our Central Bank?
Yeah, I mean, I think, to be quite fair to the set, they're in an extraordinarily difficult situation. If you look at the aggregate spending numbers are coming in pretty solid, and then you look at the employment numbers and the non farm barrels numbers are coming in really really soft, and that combination is pretty a historic and so they have cut rates several times over the past call it six months or so. They're trying to figure out how
close are they the neutral. They're trying to figure out, is the soft labor market the signal or is it the noise? Is the strong spending the signal or is it the noise? And judging from the commentary across the committee,
there is not a single view. When I worked at the Feed, as you know, Tom, I was there for fifteen years, one of my bosses would say the SEC are nineteen people that don't agree on the color of an orange, and right now they've got every right to have a disagreement in terms of the outlooks of the economy given the noise, and so I think that's where they are. I think they will be pausing this week.
I think sure Powell will have a very difficult messaging job to do at the press conference, both because it's a tricky macroeconomic situation and because every single journalist is going to be asking him about, you know, the political side of things, which I suspect you will want to stay far away from.
So this is like when you roll at Princeton.
I mean, did you see the pony put in there about the color orange? And some people would allude that to the President of the United States. I mean, you can't get through a meeting at Morgan Stanley without a Seth carp illusion upon Seth.
You know, we think about twenty twenty five and the US equity markets performed very very well, but with a lot of the performance in the rest of the world was superior to that of the US. Here, what's that US non US outlook for twenty twenty six in your mind?
Yeah, no, I think that's that's right. You know, at Morgan Stanley Bradley, we're still pretty bullish on the outlook in the US, but also globally, we think US equity's probably unperformed. And my colleague Mike Wilson, who's our chief equity strategist, is really constructive and he's pointed out that in times where we don't have a recession, where interest rates are looking like they're going to come down a little bit, you don't usually have too much in the
way of multiple compression. And so even though a lot of people have commented on how stretched multiples are, the macro backdrop, if everything goes according to plan, seems like it's favorable. Moreover, part of what's looking stretched to the index overall is the top end, the hyperscalers especially, and so if we have a broadening of growth in the economy, then maybe the rest of the equity market gets to catch up a little bit. So in that regard, we're
pretty pretty constructive. Now again, I said, if everything goes according to plan, the assumption was that all of the uncertainty about tariffs were in the background, all of the uncertainty about geopolitical risk, we're going to start to fade. I think that question remains to be answered, judging from the news cycle over the past couple of weeks, in.
The time we got less seth we got to go to some breaking news here given the storm and all. But doctor Carpenter, your thoughts on what's percolating over the weekend. It's less about the Japanese yen and it's more about gold at fifty one hundred, the phrase dollar debasement DXY and the Bloomberg Dollar Index coming down.
Is it a new week dollar trend? And what does that signal for the nation?
Yeah, So we have been actually here at Morgan Stanley pretty much consistently calling for the dollar to weekend over time coming into twenty twenty five. So we'd go back a year ago, we were the outliers saying the dollar was going to sell off. Everybody else was looking for a dollar rally with the prospect of tariff and that sort of thing, and so, you know, we were right. First half of the year, we got about ten percent or so depreciation in the dollar broadly, we were looking
for a little bit more. It didn't come down quite as much as we thought. The US economy held up just a little bit more. The Feds sort of pushed off just a little bit more. We do think there's some fundamental reasons though, why you should see a little bit more in the way of a dollar weakening. I think the yen cross is just one specific, you know, special example, and the sharp moves that we saw at the end of last week were notable. But for all, we do think there's room for continued correction.
Let's go Neurder Good, Damian Sasa or with this later. But I do think Seth, this is important to mention because I take great umbrage about it. I really disagreed with the allusions to the Plaza Accord this weekend.
I just don't see the out of.
Whack in twenty twenty six that we saw forty years ago in the Plaza Accord of the Louver Accord.
Am I right on that.
Yeah, I guess I'm sympathetic to your view. We think there's some very fundamental market driven reasons for you to get a bit more depreciation in the dollar, sort of a persistent, consistent, coordinated move because there's a fundamental disconnect in the world sort of trading order. I think that's a little bit more open to interpretation.
So one of the things we're dealing with over the weekend and certainly here in early trading is the US dollar the yen here. What's your thought here as we think about currencies here in this January morning.
Yeah, I mean, so we have thought, especially for the dollar yen cross, we have thought that on fundamentals, there was room for the end to strengthen against the dollar. The sharp moves that we saw again at the end of last week were you know, a bit very very striking obviously, and they made headlines. Everyone paid attention to it. I think directionally, it makes sense to us exactly how we get from point A to point B. That's going
to be the tricky part. I think the Bank of Japan right when they're looking at things, they've been more comfortable perhaps with gradual moves in the end. So they haven't been raising industrates aggressively.
To revalue the end.
In that regard, remember after twenty five years of essentially stagnant's nominal GP growth that they're building in this cycle of reflation, and so softer yen at the margin can help them a little bit. But once it goes too far, especially if we're to move quickly, then it starts to have domestic repercussions in terms of important food and energy. So I think the dollar yen is a very special case of the dollar situation.
More broadly, doctor Carpenter, thank you so much.
Seth Carpenter, Glove ahead of Macro Research, and Morgan Stanley.
Stay with us.
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One of the best best photos in the history of the Republican Party is younger Bush George Bush, where a kid who couldn't shave. I don't think Patrick behind me when he first was photographed with Bush could shave twice a week. He has gone out to a sterling career, twenty years of public service and he's still holding at forty nine years old. Joining us this morning the former Chair House Financial Services and all of his duties to the Grand Old Party.
Patrick mckenry Carson, Good morning.
You have no better introduction.
Thank you, well, it's good to have you with us.
How fractured is the GOP this morning, given the events of Minneapolis.
Quite Look, this is a Trump's stance on immigration was his greatest political strength, and given what has happened in Minneapolis in the last two weeks, it's become a weakness. And so there's great concern about the specifics, the loss of life in Minneapolis, the care and training that those ice officers have for the population, and the overall tactic here.
But let's step back.
The concerning Congress is the implementation of the laws. Congress needs to step in and actually change the immigration laws. I think that's what the Trump administration is trying to draw out, and that's what we've seen in this shifting debate over the last two weeks.
In fact, I have the.
Clearest memory of a real effort to change our immigration laws. Were Senator Kennedy and others. The Republicans went down in flames. I'm going to say a long fifteen to twenty years ago. Now, does the Senate block a rational immigration strategy because so many people, including in the Carolinas, say we've got the power in the Senate, we're not changing.
In fact, yes, because both sides think that they have a poltical advantage on immigration, and therefore you haven't seen a compromise.
It's a serious problem.
The Congress over twenty years has attempted immigration reform three times in a major way. The last time was during the first Trump administration, and we had a bill, two bills in fact, that almost made it out of the House by very very narrow margins lost on the House floor, but that was the last go of it. In fact, we have a mess of an immigration policy, and the substance of our immigration policy is unpopular with the people.
Enforcement is very popular with the people if broadly done and focus on the criminal element, the most egregious criminal element in our society. When you're picking up random people and having rough ups with protesters, it becomes far less popular and far more questioned by the average voter.
You know, I think what's surprised some people is a lot of people don't care. I just I don't see the uproar coming out of Minneapolis. Here. Some people trying to equate it to Kent State. I don't sense that out there. Is there in the halls of Congress. Is there sense that this is a significant issue.
The questioning of Congress is around the training of ice officers and the tactic of going into specific localities for major enforcement action.
The Congress and I think Republicans broadly.
In fact, Democrats would like the focus to be on the criminal gang element and the border.
Those things are very, very popular.
But these desktops with average, everyday citizens, that's the stuff that gets questioned across society.
Patrick McKendry with us with his public service to the Grand Old Party. He's a contributor to Bloombergers. Thrilled he could give us perspective here given the uproar, I got eight ways to go here. I'm going to always call you a congressman. I got eight ways to go congressman in no time. So let me talk about this. You know, very publicly you've taken funds of different re election bids from the national Rifle Association.
We have a bedrock.
Idea in this country of the right to bear arms. We have someone dead up in Minneapolis, with or without Again, I don't want to get into the debate, folks, but tell me how we juxtapose our colonial mythology with the idea of what we see in Minneapolis. What is the next step beyond in this emotion of a Second Amendment.
Oh, well, this is where the left has come out in defense of Second Amendment rights because the activist here was a liberal and had open carry and many Minnesota has an open carry law, and so you know, then we have some on the rights saying well, because he had a weapon, that was justification for the for the actions of the ice officers. So both sides have flipped on when it comes to Second Amendment rights in this exact circumstance, and it tells you help polarizing Donald Trump
is to the body politic. I don't mean polarizing. I mean he is the most influence over every political discussion right now. And if Trump's on one side, then the Democratic Party must be on the other side. The left must hold strong even if he agrees with him on certain issues. It's quite an atmosphere we have right now.
Congressman, we saw many Minnesota CEOs they're seeking de escalation after the border police shooting. Is there a role here, a meaningful role for corporate America to play a role in some of these debates.
Well over the last ten years when they've done this, it's been a huge mistake for them. Then you stay out of politics. What you saw with these Minneapolis and Minnesota CEOs as they said we need to de escalate, They're not getting into the substance of it. They're just saying, we want calm in our city and we want peace in our city. That is a message not just to the President or to ICE or the Border Patrol, but to the mayor and the governor. The cooler heads need
to prevail here. The governor stands to say, well, actually, we just need Ice out of our state is an absurd one within forced federal immigration laws. But both sides should be actually able to come to the table and have a rule of law approach here that cools the populace and restores order.
Patrick Mahinry, thank you so much for joining Bloomberg Surveillance, and this morning you're forty nine and holding the youngest member of Congress just a few.
Few years ago. Stay with us.
More from Bloomberg Surveillance coming up after this.
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Bilski finally with a series the Chief Executive Officer and CIO Humillis investment strategies. Brian earnings just seem to be obscured and I don't buy it for a minute. Does double digit earnings mean by the bid ear in the market.
I think this is thank you so much for having us.
I think the market is going to be having a hard time transitioning from this really momentum multiple driven upside that we've for all intentsive purposes seen since the fourth quarter of twenty twenty two, when the current bull cycle started. Our work shows historically that earnings driven markets are still positive,
but they're not as positive as multiple driven markets. I think that's why this week is such a huge week, because we see some of the biggest tech companies come out with earnings number one, number two We've had tremendous performance and outperformance the last week or two weeks from the small MidCap area, which we've been talking about for
a couple of years. We were pretty early, but at the end of the day, we think of broadening out of the market to more small midcaps is actually quite positive for the longer term breath and positive nature of the overall secular bull market that we continue to call for.
Paul, that's a Nasdaq up eighteen percent one year, SMP up thirteen percent one year, down up eleven percent one year.
I believe that's double digit performance.
Double digit performance. Brian Thomas has calling out some solid returns for US equities. But and you think about twenty twenty five, and even to start here at twenty twenty six, rest of world, other markets have done a lot better outside the US. How do you think about the US versus rest of world?
It's a great question, Paul.
You know, twenty twenty five was a snapback year, principally because I think a lot of political side of things in the fear trade leaving the United States. Then you also have the currency weakening, and then you've had the currency strengthening in other areas. And we do think that the value proposition, certainly of Europe and some merging markets was an attractive play. And then you talk about our.
Brethren in Canada with yall.
Canada had its greatest net out performance on a local currency basis since nineteen ninety relative to the US, mostly because of gold. But even though gold gets a lot of headlines, the banks in Canada really rocked it in twenty twenty five, especially considering the reserves that they had been quite frankly building over the last several years. So I think the Canada trade is going to be tougher this year. I think in terms of the other markets,
I think it's going to be tougher. I think we're going to have a little bit more balanced across all markets, especially given the fact that now we need to see fundamental growth going forward for emerging markets, that going forward for Europe, and it's not just going to be all about the materials and the energy side.
And look, Brian, at the makeup here.
I want you to talk to people in their four oh one k you know, like me, it's stumbled into decent returns over.
The last number of years.
Should they reallocate, should they rebalance or is it just static.
Keep it the way it is.
Patients forward, Patients forward has always been our line. We're not the we're not the smartest person on this call right now, by the way, or on this on this broadcast.
And I know Michael just entered the room. Yeah, well then there you go.
But at the end of the day, we have a report coming out today on our website under our new moniker called Belski Briefs, and we talk about the importance of remaining longer term invested. If you missed the best days in the market, then you try to trade the market out. Since nineteen ninety, the average and your return
is eight point six percent. But when you missed the best days of the market, which typically, oh, by the way, follow the worst days in the market, your annual compound ary growth rate in terms of your portfolio is me four point five percent. So just it sounds mundane, but be invested.
But what we think is you.
Want to broaden out what you're owning Tom in your four oh one k Let's call it more value, more small MidCap, more dividend growth, not at the expense of selling the meg seven. And we still think you need to have some exposure in tech, and we're equal weight tech in our work. But at the end of the day, you want to be invested US stocks. Now is not the time to run away based on fear or rhetoric, and especially with respect what's going on in terms of politics.
Ran, how about the bond market here? The two year treasure yielding three spots sixty here, that's a nice living there for a lot of folks. But should we be taking some credit risk above and beyond that?
You know, we think the bonds still remain an important part of anyone's longer term portfolio. I think the bond market has really been kind of a forgotten asset. We're thinking and talking more about private equity. I like the bond market here, especially around this his own and we've been talking now for the last two or three years that this three p fifty to four fifty range, it's a wide range, but that is returning to more normalcy that we've seen in markets for the last thirty years.
And I think that's where we're going and within that range, Paul, I really think that's an area where we should own bonds.
Brian Belski with this with Humillison, of course, You've got a Segui here into the reality as.
Well, Brian. I mean, there's no one we speak to.
It was more attuned to the ability of Sam Darnold to come over his shoulder and pop that puppy down forty yards. I mean, you go back to when the Vikings lost him to Seattle. You go back to Seattle winning twenty six to zero against the Vikings this year.
Brian Belski on Donald and the Patriots.
Oh my gosh, well, I'm going through the rosters here of the ex Vikings in the Super Bowl, which is kind of you know, like so you think about Stefan Diggs and the Patriots and Sam Darnold, who obviously in Minnesota Sports Radio, which we'll be listening to on the on these interweb things www Dot thing. It's gonna be crazy in Minnesota sports radio today because you know, we're a bunch of massacrests in Minnesota sports. So I'm sure that people are going to be mad that Seattle is
in Super Bowl. I think it's amazing on what Sam Darnold's been able to do, and they played a great game yesterday.
They did they moved down the field like nobody Brian Belski, thank you so much, and I must really editorialized, folks. He has said that great study, classic Good Morning, Capitol Guardian.
Trust in Los Angeles.
If you miss the ten top days in the market, you don't get a trophy at the end of the day.
Brian Belski, thank you so much. With you Millist, 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 Otto with the Bloomberg Business app, or watch US Live on YouTube.
Joining US now we mentioned a wonderful snow removal above ground, there is beneath the ground well on the bus as well.
JOHNA.
Lieber joined us now MTA share and CEO here in New York City, Johnald, I remember years ago in Boston the snow of the salt the slush drifted down and basically shut down the large system of Kenmore Square. Are you and your team worried about major breakdowns just because of the harshness of this or is it just an emergency as usual?
You know, Tom, It's an interesting point Rob was talking about the advances in forecasting. The advantage of that is it allows us to do a ton of preparation and fifteen thousand MTA workers labored over the weekend and into today to make sure we could put on service. And we were able to maintain bus and subway and Metro North in Long Island Rover commuter service right through the storm, with delays, with imperfections, but we were able to operate, which is not always the case in the past, and
that's because of preparation. And you know, our concern now is we're operating a full Monday morning commute, which is amazing, but you know, the obviously with a risk of thaw and icing, that presents new problems. So we're moving on and how we manage the impacts of the storm.
Just as you suggest, Jenernal give us the status of the subway and the bus system as it is right now and kind of how do you think it might play out over the next twenty four hours.
Well, here at the bottom line is we're operating service on all subway lines, on all bus lines. There are some delays because partly because we have crews that live in New Jersey and they're not able to get in because New Jersey Transit is out of business for today.
Shave there to New Jersey a little.
Now.
Listen, everybody's different.
We were able to survive this storm with I guess I said fifteen thousand people doing a ton of work. But the bottom line is we're running. We're running every line. Metro North is running, you know, five hundred and fifty trains today, Long Island Road running seven hundred and fifty trains, both of them on kind of robust holiday schedules or weekend schedules. Check your if you're listening MTA Commuter, check your train time app or your MTA website MTA dot
info for specifics. But we're running service and we're ready to We're ready to keep that going as we go forward.
In the week.
Jennal, persistent cold is in the forecast here here from Rob Carolyn. Maybe for the week, maybe two weeks of well below average temperatures. How does that impact your system?
Yeah, listen, you know when your ice is a is the enemy of good service on rail, right, so you have to have run your de icing trains constantly, make sure that the switches don't actually freeze up We have maintainers literally standing by our major switches, our major interlockings to constantly de ice. But we got all the snow by running service yesterday right through the system. We got
the snow off of the third rail. We've been maximizing our use of diesel engines on the commuter rails which don't depend on the third rail, and we're going to keep at it. So those are their new challenges brought on by icing, especially for the bus system, which is one hundred percent chain that all the wheels are chained.
But we're going to keep managing through. Can I ask one non storm question?
Sure?
Yeah. What is so fascinating is you've been very vocal in.
Your support of our new mayor, and you've also said that we need a lot of study of free buses. Give us an update on how close we are to free bus service of the MTA.
You know, today is today's really about the muscling through the storm, honestly, Sean. But but you know, I'll just say this is that they the new mayor, Mam Donnie is very pro transit, and I welcome that. I've also made clear that, uh, you know, if we're going to talk about something as radical and as impactful as making a whole section of our system free.
We need to do a.
Ton of study and it's not a flip the switch type thing. So well, I'm sure that you know the governor who is leading uh you know, the with her state of the State message, making a lot of investments, but also mindful of the We've brought the MT eight back to financial stability under Hocal's leadership, and we don't want to mess with that. So we'll be moving methodically under Governor Hockle on addressing this idea amid the storm.
Thank you for the conversation. For general, Lieberg is with the MTA chair and CEO as Will.
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