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One of the things you get jaded out in this business is beautyless. The beautyless come out, and there's usually an angle, and I'll be honest, it usually has to do with raising revenue. And what was great about this weekend's barons? You know, I'm sitting there, you know, I got the Mimosa going the chain mimosa. You know I'm opening it up. You know, Ellen Zettner's getting a splash from Wrgan Stanley. But they did their one hundred Women
in Finance. It was actually adult like, they had no remorse. It was like as a power list. So I'm looking around for strategists and lo and Behald. There's Laurie Calvicina, who we welcome now with RBC. How did you stumble upon that list? What did they see in your work? Did they actually read your reports?
I hope so, I hope so. Now, to be honest, I have no idea who nominated me, But we're grateful for the honor. And you know, Tom, it's interesting. I've been doing this a long time, and you know, I had a birthday yesterday. I'm not going to tell you.
How old I am, but twenty nine looking solid.
Twenty nine over and over again. But I'll tell you I spent a lot of time early on in my career trying to do the job the way people told me it needed to be done, and to tell stories and have conviction and all these other things. And at some point I figured out that was not what worked for me, and I'm going to do the job the way it makes sense to me and the way I know how to do it. And I've been much happier
since I made that conversion. So maybe whoever nominated for me for this list, you know, wasn't looking at the young glory, but is looking at the old world.
And your conviction is to pull back your standard and porest call go through the process of that. Why did you cut your estimate?
So you know, we we've been running you know, sort of a base case and a bare case since November. We thought it was going to be a highly unpredictable year. And I'll tell you, honestly, Tom, what happened last week was my economics team updated their forecasts along with our rate strategist, and they made some big changes to the GDP and inflation views. And as I was reading their report, I said, you know, I think there's a lot of we don't have to agree, by the way, we can
all do whatever we want to do. But I thought that sort of the impact they showed to one q GDP and how that reverberated to the year. So they kind of had you know, kind of a flatish quarter over quarter number in one queue, and then they took their annual number from two down to one six. They made inflation stickier, They had yields moving down before moving back up at the end of the year. And I said, look,
there's so much uncertainty out there right now. I'm not going to wait for this big moment of profound clarity. There are some things we can start to bake into our models now. So we flowed that through to the earnings, to the valuation model, some other number, you know, other models. Frankly that we're done on twelve month back test. I changed those to nine month forward back tests. And the numbers changed a little bit, so we felt like it was time to put that out.
Primarily an earnings driven adjustment, a discount rate adjustment, or just I'm going to use the word I've heard on all the conference calls and all the it's just uncertainty out there.
You know.
I think the idea of uncertainty taking a toll on the economy is what really showed up in the GDP forecast, and the GDP numbers flow through to my earnings model. So we pulled that from two seventy one down to two sixty four. And also we have a GDP test and the targeting process, and we had actually said at the beginning of the year, where GDP ends up matters a great deal to this market. Two to three percent GDP historically a very strong range for the stock market.
You're up about ten percent on average. But if you look at a one to two percent number, and so remember Francis and her team went down to one six, so they're squarely in the middle of that range. That is typically an onerous environment for the stock market. We're down more often than up, and your average decline is about three So moving from that two to three assumption to that one to two assumption was huge in the targeting.
I would editorialize ball here that the tag team wrestling of Lori Calvisina and Francis Donald is die for Francis Donald is so damn good at GDP makeup. Frankly, mister Kearney could call upon her for Francis Donald's Canada. I mean, Francis Donald can't be one UNDERD financed women in America, right, she's Canadian list that, but trust me, if she was, she would have joined Laurie on the list.
It's tom a good thing about this list.
Many many of the people on this list are regulars on Bloomberg Surveillance.
So we're making the right calls there.
It seems like we try it every t It's like a real list. What can I say? Now, I know the real bunch of ringers.
Good stuff, Laurie. So where do we go from here? You know, one could argue if the uncertainty is calls in part by the rhetoric associated with tariffs and changes in immigration policy and so on. So I don't think that's going away anytime soon. So does that suggest that there's going to be a wait to this market?
For a while.
So look, I was talking to someone about this this morning, and I got up early this morning. Now, so I've had a bunch of conversations. But it feels like we're stuck in a moment we need to get out of. And I don't know if we're going to be able to get stuck out of that moment or not. But the longer we are stuck in this moment where it's just tariff, tariff, tariff and uncertainty, uncertainty, uncertainty, the bigger
toll that is going to take. You know, I do think as I've looked through a lot of the soft data, you know, we're consistently seeing softness on capex expectations and employment expectations. And they're not terrible yet, so you could shift them back in the other direction, but we are seeing evidence that this is having an impact.
A lengthy conversation of value ed Ford Global, Wall Street, Lori Cavacina, Royal Bank of Canada RBC is with us right now in studio. We welcome all of you on your commutes across North America this morning. Good morning worldwide on Apple, car Play, Android, Auto, on YouTube, growing each and every day. Subscribe Lisa Mateo demands that you subscribe to Bloomberg podcasts out on YouTube, growing each and every day.
So if I have a more tepid economy, I'm seeing a distribution of where SPX is down whatever, but the median or average stock including the Lori Kelvasina worlds getting hammered as well. So if I say I want to buy quality, how does Lori kelvis upweight I want to own or buy quality, how does Lori Kelvisina define that.
I think quality is going to be done on a sector bisector basis within industries. You know, if I look at the Rustle two thousand right now, it's actually been acting a little bit better than I would have anticipated. That's something that's calming me down. But if you look at it within the factors within the Rustle two thousand, it is the higher quality factors that are starting to act a little bit better. You look at things like
positive negative earnings. You can look at analyst rating. I tend not to do a lot of work on cash.
Flow because a capex variability.
Well, I mean my clients do look at cash flow. I think that's that's a big part, especially of SMID investing I'll tell you it's a nightmare from a quantitative database perspective, so I don't tend to do a lot around it.
So where do we go from here?
Do we think about just we had a person here, just a couple of guests ago, a couple of seconds ago, who's now in the hedge fund going to thirty to forty percent cash?
Is that what you're hearing from some of your clients these days?
So I have heard a little bit of that. I will tell you the conversation last week. And I was a little bit more in sort of the hedge fund derivatives world last week, and there was more of a sense of looking to buy the dip okay, and you know, sort of not entire clarity as ten percent is actually the bottom or maybe we have a bit more to go, but there was sort of a constructive bias, and I think you see that reflected in some of the options markets indicators.
Right.
The VIX has moved off to certain extremes we saw late last year, but things like the s dex and the T decks haven't really moved, you know, sort of indicating concern, right, but lack of kind of true fear at this point.
What does multiples do? I mean, if a multiple's a ratio? Yeah, and I got market cap price whatever in the denominator, I got the Calvissina statistic. Do we get multiple compression? Where we enjoy a selected bear market?
You get multiple compression. If you look at like a mediaan S and P five hundred PE, you run that against the Economic Policy Uncertainty Index, you tend to get PE compression when the policy is certain out where do you hide?
So we've been telling like Sweeney's.
I'll tell you Tom, the sectors are a struggle right now. And interestingly, I think every sector except tech and discretionary is outperforming in the S and P five hundred this year. So that's one bit of the strategy job that you know that's been bit easier for folks. But I don't love defensives in here. So we're underweight staples, we're neutral healthcare. We think there's policy risk on both of those. There's cheap and there's knee jerk defensivism.
You know, kind of going intimism. What do you long.
I've been telling people to buy financials, and I know they're cyclical, and I know they get hammered when sentiment gets hammered, and so you know, we're not sitting here saying they're not going to underperform a bit more if we, you know, have to get to a bottom and sentiment. But the U missed consumer sentiment survey is getting so bad it is actually close to recession like levels right now. And if you if you go back to our financial conference a few weeks ago, the banks sounded pretty calm
and confident. I think they're going to be able to manage through this pretty well. You know, I think they sort of proved themselves post s VB. So I think we're going through a sentiment shock that's going to have some reverberations unless we have a really nasty recession. I think the banks are okay, and I think honestly they were. The sector was a little frothy before this all got started, and we've pulled that valuation froth out.
I know you.
Did take down your S and P five hundred earnings estimate. Do you think there's even more risk to earnings?
Yeah, and look we took our number down a bit. I think we went to two sixty four. And I apologies first day new forecast. Sometimes, you know, I get the numbers a little jumbled up, but you know, we took it down from two seventy one to two sixty four, and we got there through updating the econ forecast. GDP take a huge bite out of that. The stickier inflation adds some back to the revenue line, but frankly, we also took our margin assumption down. I've been baking in
some modest expansion this year. I just took it to flat. That's a guess, that's an assumption. But I've gone through so many earnings calls where you know, maybe there's one company that's you know, baked in a little bit of the China terrace, but nothing on Mexico or Canada, and even some of the others have a lot of have a lot of both and a lot of Mexico, and they haven't put any in. So we've got to go
through the process of getting something in those numbers. Okay, I think it shows up in my number three Francis's GDP forecasts, but there's a lot of variability around.
I only agree with that, whether nominal or real GDP. But what I find fascinating is a solution to this uncertainty for animals like you is you just bring in your X axis. I mean, what you knew three year forecast four months?
I actually never have a three year forecast. I mean I always tell people get it, I'm not anymore.
We used to have like a three year forecast.
Well, look and look, I think that the strategy community has undergone a bit of a shift. When I started in the business, I think it was reasonable to have a twelve year forecast that you didn't have to change our twelve month forecast. You didn't have to change all that much. Things moved too quickly now and I've sort of tried to get the conversation started about, like stop writing these shame on you articles in December about the strategists who moved their targets around a couple of times
that worked if you were byron Ween. That doesn't work in this day and age anymore.
It maybe otter byron Ween. He was such a support. But Laurie, I mean, are you out the fourth of July with a Sweeney view.
Look, you will revise as we need to revise, and as we get you know, new information that comes in, and we you know, we're very forthcoming about that. In our product. Nothing is set in stone here.
Right, What are clients, what's the feeling you're getting from your clients, and how has it changed over the last now four or five six weeks Because we kind of came into this administration saying animal spirits gone.
Wild, American exceptional.
Exactly right, and it was a real thing back in the day. But we are one hundred and eighty degrees from that now.
It seems like, you know, I think any consensus assumption there's a Trump put you know, things are going to have this big unfreezing of activity. Every consensus assumption has been thrown out the window. I think Tom hit on something important though about American exceptionalism and our Weekly today we had a couple of charts buried in the back where we were able to look at European domiciled investors and what they're doing. And they're taking money out of
the US and putting it into Europe. In the US it's kind of like more neutralish on the US, but the money is flowing into Europe. So I think that, you know, regardless of whether we stabilize here in the US and the US can rebound, I think the door to Europe has been opened.
Lloyd Kelvicina, thank you so much, greatly appreciate it with OURBC and of course her honor of being with Barons one hundred women in finance, along with a very good group including Ellen Zeenner.
You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten an listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Mike Green starts as strong here with Simplify asset management, more of a bigger broader view with his hedge fund experience as well. I want to get to the hedge funds in a minute. But you know when you came in, you know, you know, you got in through the rain. You said, you know, the money's moving back to Europe. What does the quote unquote money moving back to Europe due to the Dow Jones Industrial Average.
Well, it really depends on where it was invested. But one of the things that we have clearly seen is a European and rest of world investment into the United States, primarily to access the MAGS seven, but honestly increasingly through things like passive total market allocations, has been invested in the United States. Now that Europe has to bring that money home. We actually are starting to see the first signs of you know what we have always talked about,
its financial repression, which is directed return of assets. You've seen pension plans in the UK encouraged to bring more assets home. You're seeing headlines of you know, French banks buying into strategic wastewater and UH treatment in their in their own country. This is causing the dollar to sell off as that money comes back and converted to euros, and it's also causing US assets to sell off. And I think that was an unintended byproduct.
So there's a directly into the stock market in America.
So, Mike, I mean, I guess a lot of investors are trying to say, all right, this pullback in the market, is it a healthy pullback in otherwise market exactly or is it something else reflecting a new world where tariffs are the name of the game, which calls into question growth and inflation and so on.
Well, I was going to joke that if April showers bring mayflowers, what the March showers bring and the answer is terrifidils, right, right, So what we are absolutely saying, I would say is not healthy, although it is necessary. Right, So, when we talk about Europe needing to reinvest in itself, when we talk about the rest of the world having to take on the border the burden from the United States, it's for defense on a global basis or at least
on a regional basis. They need those funds to reinvest.
Now, is this healthy?
Quote unquote doesn't mean it reflects good economic outcomes. No, we know that's bad, but it is unfortunately necessary. It's probably something we should expect to see more of going forward as compared.
To last Torsten slack Apollo was out with a note over the weekend saying, basically, the consumers really really slowing down here. He quoted a bunch of statistics, including last week the airlines took down their earnings, Cole's, a big retailer took down its guidance. How do you feel about the consumer here and what it means for this economy.
Well, I think what we're seeing, unfortunately, is the air coming out of the Trump enthusiasm trade. So we saw a huge balance in the fourth quarter as it became apparent that Biden had withdrawn from the race, that the pivot to Kamala Harris had not worked for the Democrats. In turn, that led to a surge and consumer confidence. Unfortunately, underneath that there was just always tremendous weakness. This bifurcated economy had been something we've seen for a long time.
There's been continual deterioration and consumer credit metrics, and now, of course we've got the reporting that's coming back on whether it's student loans or we're starting to see the disconcerting information coming out of the FAHA on subprime mortgage crisis that has been created there. All of this is basically just reversing that sentiment bounce and exposing what was already happening under the surface.
So what do we do here? Do we get defensive? Do we buy the dip? How are you talking to your clients these days?
Well, the biggest thing I would highlight, you know, one we mentioned the idea of the real rate, the ten year real rate, that seems very much at odds with almost everything else we're seeing. When there's uncertainty around investment, you should look for certainty or when you can find that opportunity, that two percent reel is a relatively attractive
yield versus history. So that's one thing I'm encouraging people to make sure that they take a look at the second component is is to recognize that the markets are just like they were going into COVID. We know there's something ugly out there, we know there's problems out there, but they can't react until the flows from four oh one k is, et cetera start to deteriorate, until that non discretionary fund starts to change.
Bloomberg surveillance nationwide in your commute this morning, we welcome all of you. Good morning, ninety nine one FM. Nathan Hagers, Washington, Good morning to ninety two nine FM and Boston saw some Red Sox baseball this weekend digested. I think they can be first placed by April fifteenth.
Nice, don't ask me about all sixteen.
All there as well, we say good morning, Bloomberg eleventh Roe zero in New York. Wherever you are in the weather tour in America, be careful out there, and to a Michael Borrow, have some good updates for you. Mike Green with us is simplify asset management?
What to simplify simplify As an ETF firm, we were launched in September of twenty twenty in response to regulatory change. The facilitated the inclusion of alternative strategies and ETFs.
Hedge funds within an ETF structure.
Yeah, there was a big change coalition.
It's going reasonably well. We've got several funds that are doing quite well. In particular, managed futures has been an area for US that's been really successful. Some of the revisions or or more conservative ways of into volatility markets have been successful for us. We've grown from about two hundred million to now about seven billion.
How does long short do here? Away from simplify just as a general statement to me, it's stochastic on both sides. I'm catching a knife on both sides on a daily basis.
So actually, this is one of the areas I spent a lot of time talking about passive I tend to play a bit of a psychologist role for short sellers because the problem is they are short securities that are convex in their structure, right, and so the vanguards, etc. Those passive flows, when those come in, they're larger than any one player, and as a result, people are getting shaken out and a big chunk of the volatility that we've experienced has been a breakdown in correlations, a breakdown
in rotation and leadership. Is that MAGS seven turned around and went down. That caused unwinds and significant stress in the long short community that's manifested itself in that wild gyrations that we've seen.
So where are you seeing funds flows today? Maybe over the last couple of months.
Actually, well, it really depends on the underlying fund right, So managed futures, as I mentioned, as an area, that's one where we're seeing a lot of interest. Is people are unsure about the protection that's provided by bonds in this environment, so they're looking for alternative, non equity correlated assets. That's been an area that's attracted some funds. We're starting
to see money flow into commodities again. Fears about inflation are kicking in, and obviously things like gold are attracting a ton of assets, not just domestically but also internationally.
Is gold and commodities in general on a trend basis. You mentioned managed futures, but you know CTA one oh one is commodities trend? Is gold trending?
Well, gold is clearly trending. We are certainly seeing elements of that. Other commodities, particularly the softs, are starting to show some indication of trend as well, and so that's been an area really started to attract some capital.
So what do we do here?
I mean, as it relates to kind of risk on, risk off here, I kind of feel like we're a kind of a fork in the road a little bit to here. I'm not sure people really want to jump in and sound buying this dip here.
How do you guys think about it?
Well, we watch it on two fronts.
So one is the systematic flows we mentioned ct a's CTAs have increasingly Ata is the trend following type strategies. The trend has broken down in the Monroe trout.
Good morning perfect.
I was weaned on all these animals. One of them, by the way, folks, is a guy named Jay Henry from Boston. I think he has a baseball team.
He has a baseball team that is always in first place at the start of the season.
First place. Well, good, let's let's sake, let's digress it. Let's do it, Paul, that was great. Let's do an audible here, because Mike Green and I just take it for granted. There's a casking trend. And I'm going to say thirty five years ago, Paul Ray bar Munroe Trout a bunch of other animals figured out, this is m I T H. Who do we talk to?
Up at MI I T Yes, that young lady very smarty, smart.
And this is Andrew Lowe up at MI T explain CTAs and how they are better at not losing money.
Well, that's a very dangerous and loaded statement.
But what I would emphasize on any trend following is it's very much like an option theory, right. If you buy a call option, as the underlying moves into your strike price, the delta picks up on that, meaning that you are gaining exposure. Trend following just does the exact same thing. It increases exposure as the trend increases, but it doesn't pay the volatility premium. That's the really key component.
You effectively flip flip the narrative around. You play the dealer who is delta hedging as compared to the buyer of the option who's always starting behind. Basically, you know, a three ball two strike set up.
Kati Kaminski's saying, yes, that was very good. Micrain is there a trend in place right now.
Well there has in the equity markets, there had been a trend, and so part of what we've actually is we've we've removed that element of trend. The CTA has been flowning out again. That's another source of these flows of funds, which is increasingly the future that we'd emphasize. So what I was highlighting earlier about what Europe's doing, it's what I would call portfolio effects, poor portfolio rebalancing effects. When people choose to make changes to their allocations. We
see those flows. That impacts currencies, it impacts equities, it impacts bond.
Markets, international investors. We had heard towards year end last year, maybe even into the first quot a little bit money really coming in from Europe into the US equity markets because where.
Else are you going to go? And has that changed?
Well, that has changed, right, So that's a component of flow has shifted. And again that's part of what I would emphasize. When you have discretionary flows, they create these kind of waves or disturbances, but it's the structural flows that really matter. And so historically we've seen an growing fraction of allocated portfolios sending money from Europe.
If that changes on.
A structural basis, this is a really big change in the American exceptional some story.
We clearly haven't seen Catharsis yet in no way, shape or form. But with a VIX of twenty two, we're sort of middling right now.
Well we are, Yeah, we really are middling. One of the things I'd emphasize though, is that the VIX used to be used for hedging prior to the advent of zero data X ray options and the shorter time component, we would have to use that thirty day point for hedging. Today not so much. We're actually we're seeing that VIX be relevant, I would argue, is heading into this option xpery,
which is just in a couple of days. Obviously on Friday we see option x pery that is actually creating a condition under which a lot of funds that had created income streams.
Where they'd sold foot spreads or they'd sold calls, they're somewhat.
Trapped in that positioning. We're going to get a reset with this option reset. I think that could provide some relief against some of these I question you're.
Thinking about, but maybe away from your remit with a FED on Wednesday. Is the geopolitics and what we're seeing at the White House so overtaken the dialogue. The narrative at the FED doesn't matter.
Well, the FED always matters. Howell could surprise.
I think we would all be somewhat surprised by anything meaningful coming from the FED, given the uncertainty around inflation, and candidly, given the uncertainty around the development of the economy. Those consumer sentiments components that we indicated are deteriorating at an alarming rate. And I agree with that. It hasn't yet translated into final sales, and it hasn't translated into
unemployment claims. And the FED, although I think unemployment claims are incredibly misleading, the FED is very focused on that metric.
Mike Green, thank you so much. Great way to start the Can we get to this every Monday? Brain Er shine you know Jach Mike Green, thank you so much. Simplify asset management.
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.
Julia Coronado joins, founder President Macropolicy. Respect She's got a green plant behind her. Thank you Julia for that. And this is important, folks. This is the interview of the day because nobody's paying attention to the FED. So we're going to dive into this with doctor Coronado. We're gonna slow down and spend some time on this. Julia, how does a FED synthesize the data in this moment? Do they just step back and say we give up.
Well, I don't think they're going to give up, Tom. The FED never gives up, you know that. I think what they do, though, is they do step back and they say, look, there are competing influences. There's a lot going on on the policy front. We just don't know Howell in the last his last speech stressed the net impact of all of these policies on the economy. They go different directions, and so the FED is really going to have to wait and see because look, the inflation
data haven't made the progress that that had wanted. We're still hovering above their target. The labor market latest data still resilient, So they can afford to wait and see the.
Money question right now. And I'm going to go back to Frank Knight at Chicago and Night in uncertainty and the idea of ambiguity. If they cut interest rates, does that boost growth, does it boost nominal GDP activity? Or we beyond that now where we really don't know the outcome of a rate cut.
It's a great point, Tom. The rate cut isn't going to be the antidote to all the worries that investors and businesses have right now. There is a tremendous number of sources of uncertainty right now. Trade policy is one of them. Immigration is another, Cuts and cuts in government contracts is another. Reshaping global alliances is another. So I think there's just many sources of uncertainty. They collide with each other. It's very difficult for businesses to make longer
term plans. Of course, everybody we all get up in the morning and go to work and run our businesses and do our jobs. But are you going to make the bigger decisions about hiring, about cap x, about moving forward with strategic initiatives in this environment? It's difficult, It's challenging. So Noah, Rate cut. Isn't the antidote to the uncertainty that we face.
Joya, the uncertainty that you mentioned from whether it's tariff talk or just you know, doze and things like that. It's certainly calling the question growth forecasts, inflation forecasts, and we saw at the University of Michigan data last week really captured that uncertainty in the market place.
Yes, the Trope.
Administration says, Okay, that's some near term pain for some long term gain. Do you see the long term gain or how do you kind of think about that story?
You know, it's it's difficult right now to see what the strategy is, what is the you know, we all knew that there was going to be a trade war. We believe that the focus was on unfair trading practices in China and that China would be the focal point and then there would be other secondary initiatives. And now the focal point is our main trading partners of Canada and Mexico. And what's the endgame? What's the strategy? I
think that's that's what's harder to see. It's it's a little cheeky of Secretary Best to suggest that this is just near term pain for long term gain. When markets are inherently supposed to be forward looking, right, We're supposed to see through the trade offs and if we can see, okay, we're gonna get this now and then, but we can see where we're going, and markets maybe wouldn't be so volatile or struggling to see the through line of all
of this. I don't think it's clear, and it's chaotic, and so I think that's what's lacking.
Julia Carnado with as we continue with doctor Coronado here on the Saint Patrick's Day across the nation on your commute, we say good morning, Good morning ninety nine to one FM and a very active Washington on YouTube. Subscribe to Bloomberg Podcast. We are humbled, Paul, and I are absolutely humbled. And how it's growing each and every day, Paul, did our future is deteriorate slightly down negative two hundred, SPX, negative eighteen, the Vicks twenty two point twenty five.
Absolutely, Tom, So, Julia, have you taken down or do you expect to take down your GDP? I'll look for maybe this year next year.
We started the year below consensus because our emphasis was that some of the policies that are going to be negative for growth are going to happen before the policies that are positive for growth, and that seems to be playing out. So we are at one point four percent for GDP this year, and that is something that we had kind of starting where we are around two percent and then slowing as the year unfolds, given specifically reduced
immigration and trade wars. I think that you know, we just did a survey of market participants, which we do every quarter ahead of the FED meetings, and investors are also taking down their median growth forecast went from two point two percent for this year down to one point five percent for this year, and that's very striking result.
And we asked a lot of questions about the individual policies and the net effect of all of the policies, and on balance, they are expected to be growth negative for this year.
Have you marked down nominal GDP or is it such a stagflation that inflation stays up and supports the animal spirit.
We do have a little bit of the stagflation flavor, at least for this year. We kind of see this as macroeconomists unfolding with a shock to prices from tariffs, and that in and of itself is demand destroying, and that may lead to lower inflation in twenty twenty six, but what you get in the near term is a burst of inflation that keeps the FED from stepping in as early or as aggressively as they typically would.
I'm absolutely fascinated in this milieu of the effect of the FED, and have they become impotent?
You know, we said that before the pandemic, and then the FED stepped in and proved us wrong. So I would never say that monetary policy is impotent. What I would say is that they are likely to face, at least in the near term, conflicting pressures on their dual mandates. We may see the labor market deteriorate, but we may
see inflation drift higher. That combination is just going to keep them on the sidelines for longer, unless until either the best and rosy view of a better future plays out and they don't have to do anything, or the recession, you know, ferries start to sprinkle their dust on the US economy and the FED ends up cutting rates more aggressively than is currently priced.
I mean, Paul got a couple more questions in there, but The overwhelming thing to me is the labor data. Yeah, it's deteriorated at what the last four days. I mean, I'm not making this up.
Now.
Their hockeystick moves and we're.
Going to see I mean, Joya, we're going to see some retail sales data today. I think you are a little bit neurse about that, given that you mish sentiment data from last week here.
How do you think the consumer's doing right here?
Yeah, you know, consumers, it's hard to count them out. They we saw some softness in January. Some of that looked to be when I look at the consumer data, I see some evidence that there was a pull forward of durable goods spending in Q four ahead of the tariff. So we saw autos and electronic sales really surge in Q four. So we're kind of due for a little bit of a pothole just because that was a pull forward.
But we are going to.
Look at sort of the core or the control retail sales categories, the really discretionary areas, like you know, restaurant spending or clothing spending. Our consumers being cautious in those areas, that's usually an early indicator that they're pulling back more broadly, So.
You've got a central banker running Canada. Your comment on Mark Kearney's ability to lead Canada forward, Yeah.
He's a He's an intriguing choice, not a politician, a central banker multiple times, certainly, you know he has the chops, he knows policy. He's been a global leader, so he has all the relationships that are kind of needed at this moment. Canada has to restructure its trading relationships, its strategic relationships given what the US is doing. And Mark Carney's I mean, I can't think of a better person to help lead that effort, which is so critical right now.
So he's an unusual candidate, but but somebody that you know, he definitely has the policy depth.
Julie, your plants are very green, doctor with metro policy. I tried Bector, thank you so much. Sweening to the rescue. Why are retail sales out of Monday? It's out America.
I know, I'm not sure. We'll see what happens here.
Eight thirty yeah, exact, fifteen minutes, folks, mind freeze. I was worried about my bracket. Yes, instead of retail sales, go. I still further I haven't got the final four, you know. I don't know if you know this, folks. They got like an eight hundred page agreement. It's like codified in page four seventy two says I have to put Purdue.
Yeah, to final makers engine it's engineering staff bracket.
Yep. Absolutely, I lose every year on Purdue. Are they any good this year?
Not as goosed?
I've been the best couple of years, I don't think, but they're always good coming out of ten.
We're working at it as well. Julia Carnido, thank you so much. That was very informative.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
Sometimes in the in the racket, you get lucky as well. I'm going to do a statement here of all the people helping us this morning Bloomberg Surveillance. This morning, we're bunching by IBKR well US natural gas production? Will it exceed three point two seven billion cubic feet in January? At IBKR Forecast trader that yes, was recently at nine percent. Check the data spot the trends start predicting today at ibkr dot com slash forecast. Sometimes you get lucky you
have somebody in because there's lots going on. Whatever they do, and then something over the weekend happens. Julie Norman established besides her fandom of the Baltimore Orioles, she established the academic study of terrorism and particularly with an angle to the Middle East. And to have her on here after what we see in Yemen is truly a pleasure from
the University College London professor Norman. This morning, when we go in with jets, multimillion dollar jets, an attack the huties, Julie described the landscape of Yemen and wherever the hooties are.
Yeah, good morning, Tom. I'm not sure I've created the field of terrorism studies, but nice to be with you. Yeah, I mean so, I would say at first, I would say these are not the first strikes on Yemen that the US has been taking. There were numerous strikes that were undertaken under the Biden administration when these Houthi strikes on ships in the Red Sea started over a year ago. So this has been ongoing. Yemen is a country that the government is divided. The Houthis on control the capital
of Sunna and some of the northern areas. This is where most of the strikes took place. But again I would say this is something that is happening in a wider regional moment as well. A lot of this is Trump trying to put pressure on Iran. I think this is really where this where these strikes over the weekend are coming from, and we can kind of expect some escalation.
What we saw over the weekend, is it like isis where we're going after leaders.
I would say it's a little bit different than isis. I mean, first, this group is just very different. They're a rebel movement. They emerged about ten years ago. They again control different parts of the country, and when we're going after them now, it's mainly this not for what they're doing internally. So much is their strikes on global shipping in the Red Sea as well as US military assets there as well. Some of the strikes are targeting
military infrastructure, the abilities from the Huthis themselves. But over the weekend they did start targeting leadership, and by targeting leadership that also means you're often targeting residential areas. So we did see a much higher casualty rate over the weekend, estimates over fifty, possibly as high as one hundred.
Julie, what do we know about the Trump administration's policy towards Iran?
How do you think they're going to approach it?
Yeah, well, I mean we've obviously heard the maximum pressure speak for a while, and I think we're starting to see what that looks like. You know, we've already seen much harder sanctions going on for Iran, which was expected, but moreover, we saw this letter sent by Trump to Iran last week essentially saying you need to negotiate and essentially give up the nuclear program or be prepared for
military action to take it out. And we assume that would be you know, through US and possibly with Israel as well, which has been threatened in the past. So this is what I think is rationing up now. And I think these strikes on the who Thi's were part
of the Trump administration's calculations for that. With that said, for me, the Huthis operate with a bit more autonomy from Iran than I think administration is recognizing here, and I'm not sure how much Iran could rain them in even if they wanted to do.
They have defenses. I mean, I just I'm trying to frame out. I get the landscape. My amateur take is it's a lot of desert, a lot of poverty. You know, I don't want to be simplistic about it. But like when Aur when our jets go in Paul Delay, like have anti aircraft. I mean, is there risks here? Professor Norman, So.
I would say some, There is some. I would say, what do these do best? Is they use a lot of drones. They use a lot of strikes of their own. Externally, they don't have a super sophisticated missile defense system or something like that that I think would put us at direct risk from some of these things. But they will retaliate again mostly where they can do it best again on that shipping that's coming through the waterways, where they
essentially have a straight shot there. But in terms of overall military capacity, this is obviously something where there's a reason why the US has has so many assets in the region is to to try and push back at groups like this. But even with limited sophistication, they can still be incredibly disruptive Julie.
Tomorrow, there's a scheduled call between President Trump and mister Putin.
What do you expect to hear from that call?
Well, I would say I think we're all waiting to hear what is said. I mean, obviously there's this discussion now of a thirty day ceasefire. Ukraine has agreed to it. Putin has not said no, but has certainly said there are going to be major conditions and things he wants to discuss. We heard from Trump's envoy over the weekend
that they're moving closer to some kinds of agreement. But I think what's really going to be on the table is what does Putin actually want and how willing is Trump to essentially give it to him in order to get to some kind of you know, ceasefire, pause, truce, what have you.
Why should Putin agree with Trump? I don't get it.
Yeah, I mean I would say I'm not sure that that he will, And I think there's probably more gap, more of a gap between them than Trump maybe wants to realize. Right now, I mean, right now, there is again this idea of re engagement with the US, ever, reopening diplomatic channels of, you know, easing some of the tensions that have obviously been in play for the last four years, and there's a lot of incentive for Russia to want that to happen.
Okay, Julie, we really don't care. I mean, the reason you're on is I'm filling out my bracket. I'm fed up with Sweeney Duke, Duke Duke. I mean you do have Duke Alabama in the East as well. Do you fill out a bracket at the University of College London?
Oh yeah, I mean I went to Duke Tom So I'm like, I'm all ready for brackets, and so Duke goes all the way from me every year, even when they're not having a good year. But I'm definitely going number one for Duke right now. And yeah, I'm super excited about the tournament. So I think you should listen to all these days.
There we go.
Hey, Julie, you know, we're two months a little bit more than two months into the President Trump administration here, and it seems to be from a foreign policy perspective, a little bit of a kind of a go at a loan type of thing, kind of disengaging to various degrees. From our our allies. As you sit back and look at this, how do you frame it out?
Yeah, well, Paul, I would say here over in London, people definitely aren't sitting back. They're sitting up very rapt attention at how the US is changing very quickly. You know, there's a real worry right now, not only for the US, you know, changing on some policy things, but really being you know, potentially an unreliable actor and unreliable ally and
in some ways even adversarial in many spheres. And I think the world is watching very closely to see is this just a short term run, is this bluster or is this a real change in how we do things?
What does a change? Professor Norman of Trump foreign policy slash military policy first term and second term. What's the distinction there?
Yeah, So I would say first term Trump overall was more isolationist, and we heard that, you know language obviously in the campaign for the second term also. But with the second term, if anything, we've seen more of an interventionist foreign policy, not so much with military force. Would say.
One reason that the attacks over the weekend stood out is it does indicate that the administration kenon will use military force but really much more of an expansion, you know, Panama, Dreamland, Gaza, these areas that we're not really talked about as focus areas, but the US obviously has interests there on Trump is going to push for them.
Julie Norman, thank you so much. Next time you're on, we'll frame out Orioles Baseball as only that you can do. Professor the University College of London.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Cockplay 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.
Right to the newspapers, Sie, right, We're right to the newspapers this morning. Thank you. I'm a rad elier. For those on YouTube, somebody sayment says, how do you tie a bow tie? We're not gonna know. We're not gonna waste time now. Lisa's time is to prefer. But in the next block, you know, I'll do the quick vo tie tie thing. I did it on LinkedIn years ago. What a weekend for the newspapers they were on fire.
Yeah, there was a lot going on, all right, So this one I want to start with because this is from Bloomberg screen Time. Lucas Shaw put out this great article about the next CEO of Dwell Street. Yeah, they say it's in full swing. So they're saying that there are two leading candidates. We go to entertainment Coachair Dana Walden.
She was at this Morgan Stanley conference talking about the profitability of Disney streaming services and they said, what that shows is that her chance to show the ability to handle that Wall Street side of being in a CEO. And then you have Parks chief Josh Diamaro. He spoke at another event about his creative ideas. But what that showed is at how a parksky can handle TV and film, So it's showing different sides. He talked about video games too, which is apparently a possible growth.
Areas the previous guy that got fired.
He was a was a parks guy.
That's right, But I mean, parks are now the biggest profit contributor to the entire company, So you have to give the Park TI a certain come on.
Come on, the parks guy's going to sit in a meeting with the three representatives for the rock, right, and go back and forth exactly. I mean, I don't know, I don't know.
I mean again, this is a the third or fourth bite at the apple for bob byger in succession.
He's blown it every time.
This is tough talk, but I mean, I mean, in the world of executives, this is like how not to do it.
And it's funny because it was at a time he had it perfectly set up and then he chose not to leave ten years ago. Anyway, Oh my gosh, sweet the rare mood.
Did you start at St. Patrick's exactly?
Yes, Oh, it's not tanging in his compass exactly.
All right.
Moving on President Trump's taris policies, a federal government cuts. We've been talking about it, right, But the New York Times is this article saying that it's boosting stocks overseas. So they point out investors pulling money from the US relocating it around the world. So they give examples. Right, They say, since Trump's inauguration, s and P five hundret fallen six percent, hang saying risen more than twenty percent, Dax in Germany increased ten percent. They go to Europe's
stock six hundred gaining more than four percent. So it has all this data and it shows how over the past week investors pulling money from funds at buy US stocks for the first time this year. So kind of the money shifting to overseas, that's what they're saying, that the trend is right.
Yeah, because we heard from a lot of fund managers late last year people Europeans are flooding into the US market because that's where the performance was.
Of all technying. Oh well, I don't know what to make of it. I think what Mike Green said Midland, somebody wants a vector for me this morning on the stock market, they're not going to get it.
Who knows.
I don't have any any value had here at all, Lisa, Mateo is a value add next.
Thank you. I'm not sure if you've noticed this one, Tom, but they're apparently a lot more kids are using AI to get better grades in school, and they're not telling mom and dad about it. They're just kind of touting it that they're doing good, you know, And what do
you think? So, I don't know. I think if you use it as like this launch pad to kind of if you're stuck and you have like you know, brain fod just you can't think of where to start an essay, like it's a good way to spark you know, some some good ideas, but you can't just copy and paste and like put it.
I don't I have done no idea. How teachers police this, Well, that's the problem.
The teachers are saying they can't. And there's even dozens of companies that they have. They have apps that claim that they can write essays, complete homework with software that cannot be detected. So they're like these companies coming out doing this too. So I don't know, they're just saying with kids, it's it's it's hurting them they learn they can't.
It's like devices with the kids. I mean, you know, whether it's lecturing them on the value add back then was the seagreums and seven ye. But you know, I can I just say that. I think, you know, you look at all the cliff Notes, there's only six I didn't buy.
Yellow and black cover.
Yeah to them. I mean I got through aerospace engineering, liberal arts on cliff Notes. Plato Plato, Oh my goodness.
But the clip Notes didn't write it for you.
Lisa Mateo. The newspapers Thank you.
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