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We're up on CPI. I can think of no major economic report that I've ignored the last number of days like this important inflation study. Greg Bottle of BMP, Perry Bob will be with us. Tiffany Wild will really give us direction her wonderful work at PIMCO. But first, with his incredible schedule, we had to squeeze in your Patrick Armstrong, He's plurring me wealth for years with Templeton in Toronto,
which is a magical place for me. Patrick Armstrong in the United Kingdom, thank you so much for joining us today. Are we at a point where the foreigners won't buy American stocks and bonds? Is something radically changed here? I don't you.
Say won't, but I do think the winds are pushing against it, and Trump's tariffs are going to carve out some economic winds in the short term because Europe isn't going to respond immediately. To the tariffs that have been put on them. But they it is a risk for the United States that you've got global trade xus and it turns into that kind of thing. And there's going to be really strong rhetoric from the White House because they know that's a real risk that they just get
basically disintermediated and their dollar becomes disintermediated. Is the global reserve currency if you push things to extremes. So I do think there's risks for this. I'm confident Trump is going to carve oute some economic wins from this, but I think the consequences maybe far greater, and it may be a sort of backhanded win for Europe and the rest of the world.
Even let's get out of the front of Tiffany Wilder. We want to talk to you Patrick. After this inflation report, the Jobs Economy analysis waits for May or June. Does this CPI report a current measure of inflation?
Well, it's last month, and we're in a different world, and some months go by and nothing happens. Some days go by, and months and years happen, and that's where it feels like we are right now. The one thing the CPAI may be able to do is it may
give Powell an excuse to cut rates. He'll view transitory inflation as transitory, and he does have inflation probably on a downward trend with this print, so it may give him the impetus if he wants to to cut a little bit more aggressively, where his hands may be tied later in the year if we do have stagflationary consequences.
Patrick, where are you on the risk profile here? We've had just such a volatile number of days, capped by yesterday's big, big rally, but boy, we had to vix it close to sixty just a couple of days ago. Where are you going to risk profile these days?
So I don't think it's a time to be a hero, but it was the time to incrementally increase equities. We decided on Monday, So we had a bad Tuesday when we added it, but had a really nice bounce yesterday. And anytime you're buying equities after a twenty percent sell off, you're skewing the odds to your favor. And what we looked at the VIX when it was at sixty, we said, the only two times it's been like that before was the COVID crash, and the financial crisis and the VIX
at sixty on Monday. This was a man made crisis and we knew and about turn could be not the end of the crisis, but really diminished the risks there. And that's why we felt a little bit confident to add risk. We actually started shorting a VIX in our macro fund on Monday with that premise.
Patrick Armstrong with us here for one more good question, Patrick, just to cut to the chase. If I see the shock of a negative statistic ONCPI, is that China exporting deflation there?
Actually I hadn't thought about it, but for that one month there may have been a big jump in Chinese imports at lower prices. Is China wanted to get them into the US buyers wanted to get them in the head of tariffs, and that may have been a bit of a disinflationary and deflationary impact that's come out of it. Powell's going to treat it how he wants to treat it. It may give him the excuse to cut a little
bit more than he would have otherwise. So I think if you are an equity bull, you'll welcome this news.
I mean, it's interesting see Patrick, one final question. We can do this, folks when we're coming to your commercial free has ede done at Tottenham? I mean Tottenham is not going to be relegated, but I mean it's pretty ugly. What do you think.
I'm a Man United fan and that's the only team that's doing as poorly as we are, so right, yeah, I can't throw stones when I live in a glasshouse.
Comfort is Man United and Tottenham go down in flames this year. Patrick Armstrong, thank you so much from London. We'll get him on again for a much longer discussion. Now to the economics of the moment. Greg Bodill, be MP Pariba with it, cinemam of a Tiffany wild of Pimco was a Tiffany month over month? Is that negative statistic? Simply this crazy tariff driven wall of unit import volume.
Well, just having a quick look at some of the details, it actually looked like the services side of the goods basket, or of the consumer price basket was was what was weaker in this report. And I think that that just really speaks to the broader uncertainty that we had, you know, even before these latest news. This latest news, So travel
services categories hotels, airfares. You know, people are There's been a lot of anecdotal reports about how you know, folks that were thinking about traveling to the United States are canceling those plans.
Yeah.
So I think it's it's a little bit of a calm before the storm, and you had heighther uncertainty that was reducing demand for services in the US.
The tape improves. The VIX was up three big figures now up to thirty five point five to three. The futures of negative seventy seven, they were a negative one hundred here a bit agoes, So a little better tape. Is that because Tiffany this gives talking points or chat for Jerown Powell to ease rates without the pressure from the president.
Yeah, well, I mean we still think there will be a price level adjustment that will have to happen. On the good side, you know, there will be some pass through from this, and I think the question is just how big will that be?
You know?
And then the other question on that is is how much weakness do you see on the services side of the economy as a result of these actions, you know that are impacting the prices of goods and you know, maybe what this CPI suggests is that you will have a weakening economy on the services side that will contain some of this inflationary pressure that obviously will allow the Fed and make it less awkward for the Fed whenever they're cutting interest rates.
Tiffany, have you guys over there go taking down your GDP forecast for twenty twenty five.
And if so, why we think there's a fifty to fifty chance of recession. You know, and even with this latest reprieve. You know, if you just take a step back, the effective tariff rate in the United States, just assuming that imports stay unchanged, has gone back to levels that we have not seen since the nineteen thirties. And that's even with this ninety day reprieve. So you have a very big tear off shock that is impacting the US economy.
And we do think there will be some disruption on that, you know, over the near term, and that will slow growth quite dramatically. And again we think there's kind of a fifty to fifty chance of recession here. We think growth grinds to a halt later this year.
One of the great distinction here, folks, and I think in the chaos that we're living. I need to partition this. Tiffany Wilding is with specific investment management company PIMCO, and a responsibility is to a broad asset manager versus a market economists and frankly, derivatives expert like Greg Boudele. So we get two different not views, but two different mandates. Here from BNP Perry Bay with us in a bit, and right now we stay with Tiffany wild Here we
welcome all of you across the nation. Frankly, futures worsened out off the joy of twenty of five minutes ago. I got the vix out two point seven seven figures thirty six point thirty nine. Tiffany, if you've seen it, and I don't want you to give away the secrets of PIMCOH But is it sort of steady as she goes as they listen to you, the managers, or is this a time for a radical reset of PIMCO.
Well, you know what I think that we have. You know, we have been arguing. I think we've been on the right side of the recent volatility, you know, because we were arguing like late last year that the markets just you know, weren't focused enough on the sort of radical changes that the Trump administration was taught about, you know, and I think that they've been actually quite clear about
what they're trying to do. And I think everybody was just focused on various constraints, whether political, economic, or even legal constraints that would maybe impin their ability to implement their policy. But they've just blown through all those constraints and you are seeing the president basically do what he said he would do on the campaign trail. You know, we think the ten percent tariff across the board, you know,
that's that's sticking, higher tariffs on China is sticking. I mean, we are you know, they are very effectively trying to decouple the US economy from China. And that's exactly what they said they would do, you know, And so I think, you know, take them literally.
So Tiffany, I mean, we report a lot of stuff from China and a big tariff there. What does that mean for inflation for the US?
Do you think?
Yeah?
I mean, we do think there's going to be a big price level adjustment that happens as a result of this, you know. Now, I think from the CPI report this morning, you know, one thing that it does suggest is that even if you're getting getting goods prices that are being set higher as some of the cost at least is passed on to consumers, the services side, you know, might be weakening at the same time offsetting that. So I think it's you know, again, how much price level adjustment
we get here? I think is the key question for the next you know, call it six months and in.
Folks, unfair question Like if you asked me this question, you saw me, you know, having a beverage of my choice, and you said Tom when I'd say, I don't know. So let's as Tiffany Wilding. When Tiffany Wilding, when does the slow down of tariffs at Walmart, tariffs at Duke's bookstore? When we got to we gotta text, somebody said, stop talking about Duke. We're double in the Duke conversation right now this morning, Tiffany Wilder, When for the consumer, does all this agony click in?
Yeah?
I mean, you know, I think it's clicking in for businesses already and they're trying to figure out what to do. And I think that you will have, you know, you will have to have businesses that are raising prices at least somewhat. It will be you know, there will be margin compression, there will be and there will be price increases and that will hit the consumer because they will their real incomes will just go down as a result of that. So so I think you will see consumers
that are are getting hit from this. You know. The other thing is just it's creating a lot of uncertainty. You know, people could be more fearful of their jobs and things like that, and that could just result in more of a general pullback and consumption as well.
Good morning Montreal. Major shout out to Bears and the team at Bank Credit Analyst. It's like ed your Danny CJ. Lawrence with Edheiman years ago. B c A is venerable and Paul they had a chart on labor yesterday yeh out of BCA that was just shocking the rapid deterioration. Tiffany Wild, thank you so much. Great to talk to you on this day of CPI. The tape was a VIX was up three big figures. We had a little bit of a Paul would say, quiescent move here. We've
given it back a little bit. The VICS thirty six point four or five future is now back negative one hundred. This is standard in Poores futures negative one hundred. John Farrell tells me the Dow futures negative six oh eight are worth noting as well. Even bitdog down one thousand, down twelve hundred points rather eighty one thousand. There's a little bit of tension here to say the least. We welcome all of you on YouTube worldwide, including in Paris
Bloomberg Surveillance. It's brought to you by ibk R. Well the US consumer Sentiment Index. Will it exceed seventy in April twenty twenty five at IBKR forecast Trader that yes, was recently at twenty nine percent. Start predicting today at ibkr dot com slash forecast. Last trading day for this contract May thirteen. Thank you IBKR for your support this.
I've really anticipated this because Greg Battle takes equity strategy, folds it into the derivative space, wraps it around a true international view for the bank Pariba is that like the French way to say it, They'll come closer.
My French isn't outstanding.
If I'm honest, they have the best lunch in Manhattan, is what I know. Please advise us here how you prepare for a Monday research note. A completely unfair question. It could change three times. But how are you framing the tone of your weekend note?
Well, I think you have to be prepared to write to it and then rewrite it three times in between now and then. So I think the thing that which one I do is put in context some of the moves around, some of the flows, and then think about some of the headline risks. But then ultimately, how does that translate into what we're going to see over earning season?
Okay, earning season, it's tomorrow, right, ye, indeed, come out. We don't have I guess we sort of do on this earning season, but there'll be no guidance.
Right, No, So I think like the backwards looking data, whether it's this we've just seen payrolls from last week or the earnings prints themselves, hold little value I.
Think at this point.
But any qualitative read commentary tone from management is going to be looked at very closely.
So what did you see on your trading desk? What did you hear from your clients over the last I don't know twenty four to forty eight hours, because yesterday it was just crazy. The bond market the night before was just incredible.
Do you know you can't get hired at BMP Periba unless you know all the Greek letters Gamma, that's what I want, the row derivative, sam, the whole thing.
So we think some of those Greek letters were certainly responsible for some of the magnitude of the moves yesterday. So obviously the move itself is triggered by the headline of the tweet, but the magnitude of that move is driven by the fact that we do have a short Gamma complex in the market. What this means is that there's rehadging needs for when the market moved both lower and hyer.
I opened the show this morning on this people got to go out and rehatch folks. You and I are not you know, and we're trying to pay the rent. But in the institutional space, people are protecting themselves and now it's so expensive to protect yourself you really can't reheedge Kenya. How you doing that? Well?
I do you think there are opportunities to use the optionality complex? We look at the headline levels of the vics and certainly where it peaked and they got incredibly elevated but one anecdote that I would give you, Please, at the close yesterday, you could look at the Nasdaq and the market options implied probability of it getting back down to yesterday's lows by the end of next week was more than a ten to one payout. So I think there are interesting asymmetries that you can find.
So where where did you see on your desk yesterday the buying or where did you see the activity yesterday?
There were different pockets, so we have an active positioning indicated the tracks institutional positioning, and it got to absolutely washed out levels before yesterday, So institutional position is very clean. But what we have seen is just consistent dip buying more from the retail complex. So if you look at net ETF flows in the US yesterday, you saw more than ten billion of inflows on the day. At the same time, some of these rebalancing flows that we've talked
about have been a dominant force in the market. So we think there was more than fifty five billion driven purely from the short gamma complex yesterday.
Short gamma. We have seen institutional capitalization in positioning. I've been trading for forty years. I have no idea what that means? What does that mean?
Yeah, So in terms of capitulation in positioning, you know, we track various metrics. Some of the systematic funds are easier to track, things like CTAs. We know that those funds moved to a net short position volatility target that manage capital based on the levels of volatility have become extremely de risked. But you can also look at things like hedge fund positioning. You can use things like the safetyc Future's data. You can see that there has been a massive degrossing.
Okay, there's been a massive build degrossing. Okay, great, But the answer is where's the blood in the streets? Without getting it. I don't want to mention names here, that's not appropriate. But when somebody has the cliche there's blood in the streets, where do you and B ANDP Bury boss suggest there's been some real DiMAGE.
Well, I would say that actually, like when we think about the US equity market, and particularly the volatility market, it has been maybe a little bit more orderly than it seems on the surface. So when we look at our positioning indicator, it had been trending down a long way prior to the tariff announcements, and we think about this announcement. Nobody was expecting the magnitude of the moves, but this was an unknown in terms of a catalyst
that we do think people will hedged for. So when you look at the Thursday move, I think that's quite indicative of actually a calmer options market than you would expect. We got a big move higher in the VIX Thursday, but what we do is we look at the size of the VIX move relative to the size of the S and P move, And in normal calm markets, what you see as the VIS go up one and a half points for every one percent decline in US and
Peer and that's actually what we saw on Thursday. You compare that to other pockets of risk, and that move is much more explosive.
You and folks stay with us here on this. There's a little bit of jargon we're doing here, but we're thrilled bole bmp periba with us. You were cautious in the bull market emotion of the recent year or two or three, and now we've got the market back to a Greg Boudle level. H do we now have an equity value in the market where we're now where you always thought we'd be, or do you need to see some catharsis here to really step in long I.
Think it really depends on ultimately, what do you think the growth outlook is. So if you believe that this volatility and this newsflow in terms of tariff isn't going to derail the growth outlook, then a twenty percent correction, which is where we got kind of highs to lows, is it the extreme of what you get without a recession. However, when we start looking at where do we think earnings could be this year, if you've got a two to fifty five number four S ANDP earnings, that's a five
percent year of year growth that's not overly bearish. Put that on an eighteen times multiple that would get you around forty five hundred. So I'm not sure that there's a really obvious value case to make for US equities here.
Do you have a belief in European equities?
So I think one of the things we saw at the start of the year before this episode of volatility was that there was undoubtedly rotation starting to happen from US into the rest of the world. Now, clearly what has happened in terms of trade and tariff has derailed that in the short term. If we do get back to a more stable market, then I do think there is potential for that rotation to continue, but not whilst we're in a volatility environment such as this.
All right, Greg, Tom, I if we take the Bloomberg surveillance show over to London, do we do a day trip to South End on Sea?
I think it would be extremely What do we do there? I think you would take a walk down the seafront. Maybe you go and try and catch a game, have a bear a.
Great south it's on the estuary, Tom, it is on the Thames yesterday, Thames River.
It's out past Charles Dickens place.
I think so. I mean it looks great. I'm look at it right here and that's where it great's from. So I figured we'd ask a local here, take a.
Walk down the pair.
You ever met to Dickens House? Righteous the one that you haven't loved? I haven't. It's supposed to be magical. It's over extent of what Dickens was when he was there in eighteen sixty, eighteen seventy.
Okay, have you ever finished the castle park?
Have you ever finished a full Charles Dickens or did you use the United Kingdom cliff notes?
Wow, maybe I listened to the audio book.
Yeah, Greg, thank you so much really, and congratulations on the work the derivatives base her folks, the French and this goes back hundreds of years. There's exquisite mathematical integrity out of the French banks just gets them into trouble sometimes. But good morning to the Paris banks for all that they do, particularly using the Bloomberg and derivative equity measurement as we did from mister Boutele as well.
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 Otto with the Bloomberg Business app, or watch us live on YouTube.
Our interview of the day on fixed income with our question. Ian Lingen is with Bemon Capital Market. He writes the densest, tightest, most in depth. Note Paul and I were talking about it. You get a paragraph from Ian Lingen and like you're lucky you get through it at lunch. It's so intelligent. He's won just in the II surveys, folks. I think he won eleven consecutive years. It's like Juan Soto and walks right. I mean, you know, Ian just keeps doing
it with Bemon capital markets. And on the inflation report, you're brilliant quote this is the lowest in over four years. Is it a one off pre Trump tariffs or can this disinflation continue? Well?
I do think that what we're seeing is that they FED was reasonably successful in finally getting inflation back to or at least toward where they would like to see it. It does set up a good departure point for absorbing the incoming price increases that we are sure to see. So, if anything, today's report suggests that we won't retest the pandemic highs and inflation simply based on the trade war.
I can't say not, folks about the holistic work of the Bank of Montreal within your entire team, Ian and with your leadership here. How many FED rate cuts? What's the degrees of freedom the chairman Powell has?
Well, the events of this week I bought him a little bit more flexibility. I think that we are going to see two rate cuts this year, one in September and one in December. The only way that we actually see something in June or earlier, is if we see a re escalation of the trade war that pushes equity prices even lower.
So I what did you see in the bond market over the last thirty six hours, because boy, we had some big moves there, And what did you see in a treasury market?
So in the treasury market, we saw a very sharp re steeping in of the yield curve because there was a lot of concern that the trade war would lead to a buyer's strike in the ten year auction. And the fact that we had such a strong sponsorship for the ten year auction really bodes well for the treasury market as an asset class. And I think that that speaks to why we are stabilizing here with ten year yields well below four fifty and certainly no concern of retesting five percent anytime soon.
We had a dash to the ian ling and lower yields thee and you've been way out front on a vector of lower yields with this turmoil in Washington. I guess when it's over, do we reaffirm your disinflation, lower yield, higher price environment.
Yes. I actually think if anything, the turmoil in Washington increases the chances of a consumer led economic slowdown, and a recession is disinflationary on a forward basis. Once we absorb all the tariff increases, I think we'll have a consumer that is in a much different, much less compelling place than it was during the pandemic. And so I'm worried about disinflation in two thousand and twenty six and beyond recession?
Is that in your call in?
It's not our baseline scenario, but the events of the last two weeks certainly have increased the probability from let's call it ten percent to thirty five or forty percent.
You know, you know Belski once told me he reads every word. I mean, it'll help us out here. I in, if we get you know, a three percent ten years three point x percent ten year yield, we get disinflation. And that is that good for Brian Belski in equities or not?
I think that it depends on the departure point for the equity market at the moment. If we come into the event with the S and P five hundred at forty seven hundred, that's going to be a net positive and stocks would rally into the end of the year, if we're at the peaks and the market comes to the realization that we're going to be facing an economic slowdown of some magnitude, then that will initially be bad for stocks until the FED gets involved.
And how do you think the FED kind of looks at all the news coming out of Washington, DC, all the tweets, all the the side press conferences, the little gaggles and things like that, which kind of really really move the market on an intra day basis. How does a FED deal with that?
Do you think?
Well, it is a pretty challenging environment for the FED, to be sure, but it's not the first time the FED has had to absorb and react to social media posts and announcements, so it isn't as dramatic as it
was during Trump's first presidency. However, I do think that Powell's stance of wait and see has only been reinforced by the developments this week, because if we don't know what the tariffs are ultimately going to look like, it's very difficult to base any money terry policy decisions on the what ifs, And that's what Trump or Powell is struggling with at the moment.
In its nine o'clock hour, with the market opening here in twenty minutes. We welcome all of you on your commute across the nation. We welcome you on YouTube. Thank you so much in your office at your home, subscribing to Bloomberg Podcast, your interest growing each and every day. Good evening on the Pacific RIM and over to India as well. Just humbled by the South, particularly Southern Asia.
You know, I mean in Japan as well. I've had some anecdote, but really, thank you so much in the South Asian India, in Malaysia, Singapore Evening greatly, greatly appreciate your attendance. Paul Sweeney and Tom Can. We are commercial free in this hour. Thrilled to bring you. Ian Lincoln of BEMO Capital Markets.
Hey, Ian, you know, honestly, I don't pay attention to these treasury auctions. They're smarter people that do that for US Ira Jersey, Lisa Bromwitz for me, did what happened yesterday with these auctions?
And why were they important?
So we had a strong takedown of the ten year auction. The risk was that in retaliation for some of the higher tariffs, that foreign buyers would step away from the treasury auction and it would tail dramatically. In fact, we saw a strong stop through which really reaffirmed the markets perception that there are going to be buyers of treasuries, particularly in an environment like this with so much uncertainty.
Ian Lingan, thank you so much for being my capital markets. Of course, you can protect the copyright of all of our guests. Look to his important research note at the Bank of Montreal.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Joining us now from Laffert Tangler Investments, Nancy Tangler. I saw a Professor Laugher writing yesterday. Now maybe it was a couple of days ago. Join out ed about we're going to get through this, and we're going to get through it with a budget responsibility. Nancy, were all exhausted. Take us away from the politics, and when do we get back to what we call a few years ago is normal?
I know, Tom.
I went to bed at five point thirty last night, and I slept all the way through you slept.
All the way through me. I'm going arethramatic. I had two hours sleep than four hours sleep, and last night it was like five and a half hours sleep. So after your beauty rest, wait to see.
So I feel like this was an unforced error Ago red SOX I was told to say how about this?
Ye with exact about it.
I think, look, you expected the president to come out and declare victory. He did, All the proxies are declaring victory. But really this was one of the sloppiest policy rollouts I've ever witnessed in my forty plus your career. It didn't I don't think advance the ball to the extent that we wanted it to. And the repercussions will be felt for some time. So if you look at Google reinforced or restated, Yes, we're going to use our you know,
we're going to implement our CAPEX budget. Microsoft pulled the factory. These are very long, as you know, time horizons to build a factory and to get parts. Sixty eight percent of industrial I'm sorry of manufacturing GDP is imported parts. You can't fix that overnight. So I think we're going to continue to see this ripple through the markets, and I wouldn't jump in quickly. I take my time and add to names. I do think we come out the other side.
Laugh For Tangler is the most interesting. I've been a defender of Arthur laugh where a lot of critics going after Emie and I will argue about the calculus of the laugh For curve and where the tangent is in the curve. Forget about that. You got Yale and Stanford economics on your creative writing and psychology. It's a really interesting mix out there. And when you say you don't get what they're doing in a white house, that's important.
What's our laughless say? He's got to be as appalled as you.
I mean, I can't speak for him, but I can say he's pretty annoyed.
So I just spoke.
Okay, we're missing an action. Where's the Secretary Treasury, Where's the Secretary of Commerce? Where in God's name is a Penn PhD. Kevin Hassett to advise them within the prism of Laffler Tangler economics.
They have to get through Peter Navarro has been the problem. Come on, I mean it I mean I do, and I'm I'm I think it's really interesting how he's been m I A from the media, and that's a good thing. And now they just need to get Howard Lutnik off the air and put out Bessett, put out Hassett, and have the president speak to his own to his own policy. But I think it was so poorly rolled down. I don't think they knew what they were doing until the day before. And I was told they used chat GPT
to generate that chart, which was ridiculous. All of us were going, what the no, we.
Can't say that at radio. You can say that over on Bloomberg TV and the gakire on radio you go to jail. So be careful, Paul. Let me get one more in here, because I think this is just absolutely critical. What does the president have to do with comfortable conservative economists, the giant Glenn Hubbard of Columbia University, exquisite Cudlow, it was a legit.
Economist over at Fox, all of them. What does the Tangler, Lafler, Coudlow, Hubbard crew, the great Ed Lazir who we miss every day at Stanford. What does your cadre have to do to get past Navarro to the President.
I think we've sort of done it in the media. I think there's been a drum beat, and you know, ten percent isn't as troublesome as these arbitrary slapped on tariffs. But I actually think that the President believes a lot of this, and just like he believes the trade deficit is bad, and those of us who have been around for a while would say trade deficits are good if it's driven by prosperity. So ten percent would be more like a flat tax, and I think that would at least stop distorting behavior.
Down negative seven under surveillance. Apology. I'm sorry, Paul, it took too much time there. I was all wound up about the moment there, about the bodies at the White House. Nancy knows them all. That's what Nancy.
Have you guys changed your risk outlook over the last several days year, as we've had to deal with a lot of this tariff volatility.
We started changing it, Paul, after the market peaked and we started getting sell off, so we moved a little bit more defensively. We're still selectively buying tech names, mostly focused on the software side of things, less focused on the hardware side. We still believe AI is instrumental. You saw Spotify headline that said, no more new jobs unless you can prove it can't be done with AI. So
I think those are important. Walmart came out and re affirmed the full year guidance they're going to generate fifth They're our poster child of an old economy company that is pivoted to the new names. So we've added names like eccentric, or added two names like accenture in Netflix, Spotify. These these could be more defensive names if we do go into recession, but I think we're into economic deceleration as opposed to a potential recession.
What do you expect to hear from the c suite this earning season? I mean, I think a lot of folks are concerned that there's headwind and there's really earnings risk out there, that the essens that are out on the street need to come down, and maybe come down pretty significantly. Maybe that's already priced in. I don't know, but are you concerned about the earnings season coming out?
I don't think we're gonna hear much. I think we're gonna hear delayed guidance. Why I mean I would do that if I was in the c suite? Why would you give guidance? But Walmart was interesting at their investor day because they did reaffirm the year, they just kind of gave a wider range on the quarter. So I think what we heard last earning season around tariffs was that the CEOs were confident they knew how to navigate.
I don't think they were expecting maybe some of what we got, but they could be, you know, expecting what now what we've got now. So but it is a ninety day pause, and I think we have to be aware of that.
I'm focused on the labor economy. It's maybe the greatest disagreement I've had with the supply side crew. I think of you know, folks, this is esoteric but real business economic Carnegie Mail in Freshwater, Charles plots Er, Philadelphia. I've got some real issues with a job generation. A guy named Summers who's from the dark side, and Olivier Blanchard the Giant. We'll talk about hysteresis where just the labor
economy just falls apart. Do we risk a new permanent higher unemployment rate with all this carnage?
I think we could Tom I mean so far that you know we've seen here.
Now that's a headline for the day. Tangler and Summers on the same page.
Continue.
I found myself agreeing with Elizabeth Warren the other day, what please on maybe Congress should be a little more involved in tariff policy. Yeah, but I think we could, and I think it could be accelerated by AI because we are seeing, like at our firm, we're using AI software to listen to the calls for us and then we can go in the earnings calls that is, and then we can go in and focus on when we want to. So that saves hours and hours a quarter, and I think you'll start to see more of that
more in our firm. It's more thinking, less just analyzing headlines, and I think that's important. So I think we're hearing that we're hearing AI. Last quarter we heard the theme was we're hiring less on the low end or entry level, and we're hiring less or keeping less middle management people
and that spanned across sectors. So I do think it's a risk, but I also see in expanding growing economy, if we get deregulation or once we realize the effects of deregulation and the tax cuts if we get them.
What are we doing in the bond market these days? See come are we taking credit risk? Are we sitting in the treasury market where we're going?
So we've done so in our uni portfolios. We've built callable portfolios and kept the duration below a year, so we've been getting a little over four percent. As you know, the muni market melted down a couple of days back, but it started to come back on credit. We're not taking credit risk at this particular point. Although the credit the spreads have expanded, they're still not in danger zone.
So we've been parking in the short end of the treasury market for clients where we're expecting to extend duration later.
To finish up here with a broad philosophy, and this goes back to I remember sitting. I was in the hanover in in Dartmouth with a guy named Nut Gingrich and we were talking about that night in nineteen ninety four.
I'm sitting in the current remember it well.
Dan rathers talking to me. He was CDs. Nobody's prepared for this, and all of a sudden, folks, supply side was run in Congress. Where is your movement Doctor Laffer's movement in ten or twenty years. I can't figure it out.
I mean, let's hope that it's not forgotten. I know he has the Laffer Center and he continues to put forward his policies through the Laffer Center. Got Young of Americans or Foundation for Young Americans that focuses on it and is teaching young college students about the movement. But I do think at some level it is common sense and it will continue if we get congressmen who can
stand a position. And I think that's what's been so disappointing for me, the falling in line on either side all the time, like we need fresh thinking and supply side economics worked and it could work again.
This has been wonderful. Don't be a stranger. Nancy Tangler folks Iconic with Laffler Tangler.
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Short visit right now with Jordan Rochester, We're gonna have the mind for a longer visit here in the coming days. But we just had to get them in writing with the Missuo their fic macro strategy Jordan. In the currency market right now, it appears that China's affecting some form of depreciation if they do. You want remember depreciation, what does that mean for the dollar and.
For America, Typically it would mean a stronger doll It usually would mean therefore you offset the impact of tarifs. But the tricky thing is is that we've not really seen broad dollar strength after tarifs were announced. It actually breaks most of the textbooks in terms of tariffs usually mean that the dollar has to appreciate because the terms of trade of Europe and everybody else's wee can. But what we've seen is it's just laid. This whole situation
led to a seizing up of the financial markets. Dollar export received usually in Asia weren't being received as now. Everyone's been trying to wait out the tariffs and try and hopefully get a better deal down the line, and so you've not had the same recycling into US treasuries and into US equities, so you've seen broad dollar selling. As a result, you've seen much less dollar buying on the equities and the fixed income signed from foreign investors thanks to all of this.
Jordan, What does it one hundred and twenty five percent tariff on Chinese goods mean for the US economy? Everything it seems like we use comes from China at some point. What does that mean for the economy?
Do you think it's a level of tariff that I think is so high that it makes it very difficult to say that you're going to continue to imput from China at the same rate. But really what's going to happen is a lot of rerouting of trade from China to Vietnam, to Cambodia to Singapore, and it's going to have the lower tariff rates than one hundred and twenty five. So the US is still going to import from China, it's just going to have a bit of a sight
seeing trip along the way. And so for the US economy, this is still way on growth. It's still a tax hike on the economy, but it's not as bad as the sticker price.
Is that cheating? I mean, what we're going to hear in the house is China's cheating because they're running the Jordan Rochester missul merch Yes, through Vietnam. By the way, is that like that's just to me, that's like normal decision making a trade. Or do you buy the idea during Rochester that it's cheating.
I don't know if the word cheating, it's just what happens in business. I do you think about oil sanctions as well, there's lots of you know, the EU still buys a lot of natural gas and oil from Russia despite the being sanctioned. So there is lots of these examples into an international trade where the aim seems right but the actual outcome is different. I think really the sort of ten percent flaw that Donald Trump is set for everybody is a better example of how to avoid
that problem of rerouting. There is no one to reroot through that is actual zero And I think this applies to the trade talks with the UK, Japan and everybody else. I don't know how they go get them below ten percent, because then you'll just have rerouting through Belfast from Dublin. That's the sort of thing that will happen if we go any lower.
So Jordan, what is the fixed income commodities credit macro strategy call out on Zuho today after what we learned yesterday.
Every day is a new day. If you asked me yesterday, I would have said flattening is the best trade. And I didn't expect to thirty basis points flattener in just thirty minutes after I said it in two tens for the US. So I think what you're likely to see is you're a dollar is going to be quite range bound because the ECB is probably going to cut rates more aggressively than the market prices, and the FED will
not cut rates as aggressively as the market prices. We have about eighty five basis points priced by the year end for the Fed. We don't think they're going to cut at all. So I think that we could see some dollar strength at some point when the Fed makes their reaction function more clear. But I think the better trade if you want to be short the dollar is short dollar m because I think the the Japanese will
continue to raise rates this year slowly. The market completely whacked that lower yesterday before the good news, and we had no hikes at all. Price for Japan. We started to creep back in for higher rates in Japan. That's going to continue, I think, and I think the US will put pressure on the Japanese to raise their rates as well and to have a stronger currency. So Dolly end to one forty is another view, and the US ten year five percent by year end.
Oh oh okay, Jordan sets us up. We need to get you out in the next couple of days for much much longer than you York even a two blocker. If he's in New York City, we'll steptured Rochester and studio as well. He is with Maszua.
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Haiks so happy that she could be with us today, Kona in this crisis, I should say, with Ed and f Man iconic in commodities, which soft commodity is of the greatest study for you this morning.
Because it seems to be a US China trade war focus right now, I guess it would have to be soybeans China imports heavily from the US. Well, it had been. It managed to divert away from the US market in Trump's first term during the first trade war. So I guess it's less reliant on the US as it was before, but it's still very it's still big imports. Today it gets a lot more from Brazil. So I think that's going to be the big trade flow move that we're going to see as a result of these retaliations.
For all of you across the Great Midwest of America, this is the conversation of the day, COONa Haik. How easy is it for Beijing to say, Donald Trump Sia, We're going to Brazil for the marginal soybean pretty easily.
Actually, In fact, right now most of it's coming from Brazil, and I think that shipment is going to have to happen in a more rapid force. The seasonality is such that that's going to happen right now as we speak. The US season export season doesn't happen until later in the year, in September, so we have a long time to go before we actually decide we actually see how this time spent out, because you know, six months is a long time in this trade war. Right, things could
create completely different by then. So until now, China is getting most of it soybeans from Brazil. Brazil stands to be a massive beneficiary of any trade war arising from US and China, and they're taking advantage of it. So yeah, I think that China has managed to diversify our fair amount already.
So kind of you know, we're not really sure where we are with this trade war here. We had a little bit of a pause yesterday, the presidents stepping back a little bit on rest of world. Here, what's the commodities play here in a world where trade tensions are so high? Where do you go?
Oh, it's not good. I mean, commodities ultimately is a risk asset. So whenever you have macro risk of commodities will be sold off. As we have seen in this last week which was on presidental volatility, crude oil is tanking, as it should be because the economic outlook in any trade war is always so negative. The first thing that he gets impacted is negative energy demands, So that's impacting all the energy commodities. Metals, likewise, softs and agricultural commodities
have weather the storm better than the other three. I guess, particularly because I think that you know, at the end of the day, inputs will still have to happen. It's just a question of trade dislocation. The one thing that tends to win always is gold. It is the classic safe haven, and it has reached record highs. It probably will go higher again. So I think, you know, long gold all the way, but crude oil at some point
it starts getting very cheap. I worry about Donald Trump plans to for drill, baby drill, because he's you know, you need, you need, you need seventy dollars all to get any kind of investment in the US for shale oil.
Paul's up sixty three dollars, thirty one forty three. Yep, that's a wow statistic.
Wow statistics. So Connor, when you think about gold, is there is there a valuation call here for gold and all? Is there a way you look at gold and think about a relative to maybe other commodities, whether it's a stock market, the bond market. How do you think about evaluation here or is it just buy it?
It's you buy it, you buy it. It's one of your diversification portfolios, alongside other safe havens like the Swiss, frank and the Japanese. Yeah, traditionally US bonds and the US dollar would have been in that basket, but today arguably it's less in favor. So gold still has that instrinsic value that people like, so I think it definitely
has more upside to go. But you know, at some point, once we start getting a more of a feel for where negotiations are going with bilateral negotiations, and eventually, and I do believe at some point China and the US will come back to the table. At some point you start looking at the metals and energy again.
One final question con ed n f Man. With just the heritage that you have, if you are in Beijing today, what's the commodity where China has power or leverage over America. It's I'm sure it's some odd commodity. I don't know which is it.
It's a critical minerals, it's the rarer. It's they have complete ownership and control over that. And that's that is one thing that the USA needs badly if they want to build this whole electrification and transition energy side of things, which we clearly trun Donald Trump wants, because those minerals have been actually exempt in these tariff tariffs. So yeah, I think that's something where China definitely has leverage. And then the sheer population. China has been a very export
oriented economy. Today China is going to have to shift into more domestic consumption led economy. So that's been forced upon them, becoming a bit more like the US GDP. And once that happens, that doesn't reverse rapidly. So I think then this is structure and it's going to be forced upon. We'll have dramatic changes on the way the world second largest economic power starts behaving with the rest of the world. I think really interesting times.
Just brilliant Colin. Thank you so much, particularly on soybeans.
There.
Good morning to Brazil. Listening on YouTube. Subscribe to Bloomberg Podcast in South America, Kona ache Ed and f Man.
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