Bloomberg Audio Studios, podcasts, radio News. Well, there you have it, fetchjer J. Powell wrapping up comments roundtable questions at an event at Harvard University. It was a moderated discussion in a principles of economics class. Let's take a look at markets. On the back of those comments, we actually saw yields fall across the curve.
As fed jer J. Powell spoke.
Look at that down on the two year and the tenure by let's go ahead and.
Call that nine basis points.
We also did see stocks move off their lows of the session when fed jer J.
Powell was speaking.
The NASAQ one hundred right now up close to two tenths of one percent, The S and P five hundred intra day up four tenths of one percent. The S and P was flat going into this in the NASAQ one hundred.
Was ever so slightly lower.
I want to bring in Bloomberg's International Economics and Policy correspondent Mike McKee. Mike, apart from no selfies with J. Powell, which seems like a relatively good rule when you are someone like J. Powell, I want to hear about the big takeaway from this it really seems like supply shocks have the FED has little control when it comes to supply shocks such as the one we're seeing right now in oil. Is that the big takeaway from him seeking earlier today.
Yeah, If there is a takeaway, it would be that the FED doesn't know what's going to happen because it does have this supply shock that's going to weigh on the inflation rate. It could also if the inflation rate stays up for a while away on demand. So the FED is, as Pal repeated several times, well positioned to sit and wait for a while. Now, if you look at FED fund's futures, they traded the opposite of where they've been during Poll's comments. They now price in some cuts.
I'm not sure that's the right reading of this. I don't think the FED knows yet where they're going to go, except that they're going to be on hold for a while. He noted risks to both sides to growth and employment and as well to inflation, but express confidence the FED will get inflation down to two percent at some point.
Tearis have a one time impact on inflation, He said, inflation expectations remain well anchored. The FMC will reach its two percent inflation goal, and the fed's tools have no meaningful effect.
On supply shocks.
That doesn't necessarily mean, though, Mike, that we will not see and are not seeing, an inflationary effect from this more than month long conflict any wrong. What can the FED do or what will the FED do if we do see inflation flow through as a result.
Well, it depends on what areas inflation flows into. If it's oil prices, gasoline prices, those are things that the FED can't do much about. If it starts to get into the broader economy, which it will in the sense that higher diesel prices are going to mean it's going to cost more for your package to be delivered, that sort of thing, and for trucks to resupply the rest
of the country. If it starts to get into other areas of the economy, they might think about a rate increase, but they'll probably do more jaw bating than anything else, because they feel that at some point the strait will open, the oil will flow again, and it may take a while,
but inflation will come down. And he made the point that if the FED raises rates now, the effects are long and variable and could take as a year or more to start to hit the economy, and the economy might be in a totally different situation by then, and
the FED rate move wouldn't be good news. So the Fed is going to be very very cautious about what they're going to do going forward because mostly they think this is going to be about oil prices, and they just keep an eye on the rest of the economy.
Bloomberg, a TV and radio international economics and policy forsponded Mike McKee, Mike, thanks so much well. Thre's higher energy prices in focus the war and Iran officially enters its second month. Treasury Secretary Scott Besn't indicated some optimism about a reopening of the Straight of horm moves, but that's as President Trump renewed threats against Iran. If a deal isn't made soon, Let's bring in Bloomberg Balance of Power
co host Kaylee Lyons to break it all down. Kaylee, the President said the US is end quote serious discussions with a new regime in Iran. An Iranian official earlier said there haven't been any direct talks. Do we know who is talking to whom right now?
Well, that's a major question, Tim. Whatever talks are happening
are through intermediaries. You had the likes of Egypt, Pakistan, Turkey all meeting this weekend as they seek an end to this conflict, though representatives from the US and Iran were not at that table, and as you say, Iran contends that they are not talking directly with Washington, having rejected the fifteen point ceasefire plan in public that President Trump told reporters a board Air Force one last night that Iranians had accepted most of those fifteen points, that
we didn't specify which one. So there's a bit of a he said, she said, situation here when it comes to the US and Iran. It also is a bit of a good cop bad cop situation, Tim, Except frankly, President Trump seems to be playing both of those roles. Is on the one hand, he is citing good progress and ages ciations he says are happening. On the other hand, he's taking to true social and threatening running an infrastructure,
the energy infrastructure, oil wells, carg Island. He said, all of these things, even a water infrastructure through desalination plants, could be targeted. According to the President, if the straight off news is not open for business, which, of course right now it is not. So the escalation risk is certainly there, especially considering thousands more American service members have arrived.
In the theater.
Of course, you had thousands of marines and sailors aboard an amphibious assault ship. You have more marines and Army paratroopers that have been ordered there. And you have reports than the likes of the Wall Street Journal in the Washington Post that the President is seriously considering putting troops on the ground in some form, the Wall Street Journal talking about the idea of seizing enriched uranium, something that
would likely require ground forces and take some time. You also had the President telling the Financial Times that he would like to take Iron's oil, something that could involve the seizure of carg Island, which is also something that is likely to need ground forces. Then the other escalatory thing we have to keep an eye on here is, of course, the Iranian proxies, the Houthis, who over the
weekend launched attacks, missiles and drones at Israel. Specifically, remember how disruptive the Houthies were in the Red Sea beginning back in twenty twenty three, very disruptive to commercial shipping, so that poses a threat to the alternate route through the Red Sea that other Gulf nations like the Saudis are using to try to get their energy exports out, So there's exculatory risk at the same time, Tim that the President is still talking about this diplomatic off ramp.
I guess though, when you still have Iran saying that the claims the President is making around Iran accepting these points, when Iranian officials are calling them excessive and illogical, it doesn't seem like we are necessarily getting any closer to concrete resolution here.
In Bloomberg's Kaylee lines more from her and Joe in the one o'clock hour on a Balance of power.
Thanks so much, Kayleie well back to market.
It's because the NASAQ one hundred has slipped into correction territory. The selloff in big tech now flashing signals that have marked turning points in the past. Many and Wall Street now see the sector as a potential opportunity, pointing to oversold conditions and the likelihood of relief rallies, even amid uncertainty tied to the Iran war.
From where let's bring a.
Denise Chisholm, Fidelities, Director of Quantitative Market Strategy. Denise, in your view, is this a turning point? Is this a buying opportunity when it comes to tech.
Yeah, when you look at the data, I mean, there's certainly concerns around the technology sector since it's been such dominant leadership in the markets. But it's interesting when you look at the mathematical setup. We saw this very very briefly in the tariff tantrum last year, but the sector is now in the bottom third of its cheapest when you look back to the data since the sixties, and we haven't really been this cheap from a valuation perspective
in over ten years. And look, I mean, there's always the potential that it could be different this time, or there's a value trap, but there is a very linear relationship between the cheaper this sector has been historically, the more likely it is to outperform seventy percent odds or
not one hundred percent odds. But the risk reward when you take a one year time horizon, I can't say if the bottom is in right now, but when you take a longer term time horizon, it does look more like an opportunity now that those seventy percent odds are actually sticky, even if things like operating margins decline or earnings revisions come down, which is kind of a mathematical way to say, whatever it is that you're worried about might be partly priced in at this point.
I think what people might be concerned about right now, Denise, is that this sell off looks a little bit different if you peel back the layers of quote unquote tech, because there's this worry about AI and the idea that AI will lead to the demise of some in the software industry, the so called saaspocalypse.
Where are you seeing deals?
Because just because we're seeing something is relatively cheap doesn't necessarily mean there's opportunity around the corner.
Right to your point in terms of a value trap.
Now, look, I'll let the fundamental analysts tackle what will happen to software from a long term perspective, But when I look at the data, you see something very rare. Historically, you have an industry that's never been more profitable, pin to the one hundredth percentile of their profitability, and yet what we've seen over the last three months only has been a devaluation such that relative forward pees or now
in the almost the bottom decile. So you have this massive disconnect between the valuation and the operating profit that is rare.
Historically.
When you look back in all industries to the sixties, you only see this happen two percent of the time. The instances that it happens are things like the financial crisis.
So one of the ways that we can.
Sort of tackle this quantitatively is to say, well, it is different, but we have seen a little bit of this movie before. In some ways, software is going through its own great financial crisis pricing, now, how has that worked historically?
Speaking now?
And is only two percent, so you can't draw broad conclusions. But we have seen this historically in technology sectors like communications, common equipment, and hardware. Even though we haven't seen it in software, we've also seen it in semiconductors. When you look back historically, and it's you know, in some ways the odds, but go forward perspective, what's your price like this, what are your odds of out performance over the course of the next twelve months, and what's your average out
performance over the next twelve months? Is look, it's only fifty to fifty which is hard to say that that's a table pounding buy. It's not, but it is to say that the average out performance of all these sectors is around zero, in the sense that they tend to be at the point where much is priced in and downside might be more or less limited.
Denise, I do want, yeah, go ahead.
The technology sectors like semiconductors and common equipment have actually had higher odds about performance, which gets to a little bit of what sharepal was talking about, which is technology as a sector has a history of reinventing itself.
And yes, there may be in.
Fact bankruptcies within the software industry, but there might be companies that are actually coming in to create new products as well.
I understand the urge to use history as a guide here, but I do wonder for those people who are out there who say, wait a second, we are on the verge of a new industrial revolution. We are seeing something with AI that we've never seen before in modern investing and in the modern economy. Do you have to throw the history textbook out the window, or the market's history textbook out the window in an environment like this.
Well, I'm always struck by the fact that it is always different this time right, COVID was very different, terrorists were very different, and yet the patterns are very sticky. I do think that there's always a knee jerk reaction behind. You know, equity markets need to be reflective of very good times in the economy or no existential risk. But when you study history, you know you see over and
over again this. Sometimes the market goes up and climbs the wall of worry despite whatever you are worried about, ending upcoming to fruition. And I do think that what is the definition of this cycle when I look at the math, is that the equity market has remained much more fearful on an ongoing basis than we see in most credit markets, which are tend to be the smarter markets.
More you see that fear.
And that knee jerk reaction, the more likely the market is to be highed, not to say over any three month time horizon, but it is to say over any long term time horizon. So yes, could it be different this time, But I think history shows you that those differences might end up being tailwinds that you don't suspect, like productivity like higher GDP growth, like higher earnings growth, like more profitability in the overall market as well.
I'm taking a look at WTI crew, It's up to one hundred and two dollars a barrel. Brand is at about one hundred and twelve dollars a barrel. To what extent are.
High energy price is a drag on the tech industry.
On the tech industry, you know, in some ways you can think of it as a cyclical industry. So I think it's pro cyclical in the sense that it's tied to the US economy overall. I mean, energy prices are interesting in that I understand why the knee jerk reaction is to.
Look at real energy prices.
Over time, and we've seen them spike in you know, obviously nineteen eighty and even the high in two thousand and eight from a real inflation adjusted perspective was nominally higher, was actually higher than the peak.
In nineteen eighty.
So you draw those peaks and you say that there's real, very strong correlation to very uncomfortable economic situations. But it is quite different.
Right.
History can show you what the similarities are and also the differences, which is to say that oil intensity has actually declined substantially in the overall economy, so that effect on the same price might actually have a much less impact than you think on the overall economy, and in some ways to think about it in very practical terms instead of just oil prices, to think about the stress that it could impact on corporate profits, specifically when we're
talking about equity prices. If you renormalize those oil prices in relation to corporate profits, you'd see that that spike in nineteen eighty effectively was one thousand dollars in terms of the price per barrel that it would take to equate the same stress. Which is not to say that higher energy prices don't take a bite off the US consumer.
They do. You see declines in.
Real income growth and especially year of the short run demand is relatively an elastic. But what you do see is I think that the comparisons to the seventies and eighties of stagflation, this is a very different economy and it might be much more absorbable than you think, which might mean back to technology, that more of that is priced in than you may think.
Okay, some really good historical context. Denise Chisholm of Fidelity Investments, thanks so much for joining.
Us on Bloomberg Tech.
Well coming up, NASA is preparing to send astronauts back to lunar orbit for the first time since the nineteen seventies. It's a critical milestone for broader US space ambitions. We'll discuss that next. This is Bloomberg Tech. Some news in Elon Musk's world. A top judge in Delaware said she will no longer preside over a handful of lawsuits involving Musk in his companies, and will reassign several Musk related cases.
This comes after the billionaire's lawyers alleged she had shown bias against him after she had ruled against him in.
High profile cases.
Well, NASA is sending astronauts back to the Moon for the first time in over fifty years. The lunar flyby will test the Artemis to spacecraft, paving the way for a lunar landing in twenty twenty eight. Let's get more on this historic mission from our reporter, A Lauren Brush at NASA's Kennedy Space Center. Lauren, good to have you on the program, especially joining us from Kennedy Space Center.
I think if we think.
Historically about the Moon mission, when we did this fifty years ago we were locked in this space race with the Soviet Union a very different time. Now, why spend so much money to go back to the Moon, Well, I.
Think it just depends on who you ask. You know, recently there has been a lot of concern brought up about the fact that China is also sending astronauts to the Moon, and so you'll hear lawmakers and even you know, NASA executives talk about the need to beat China to the Moon. There's been concerned that maybe they will get there first and kind of stay a claim to that area, preventing our exploration of it.
But for more.
Peaceful reasons, you know, there's a lot that NASA hopes to gain from the Moon. For instance, there's this idea of jump starting a looter economy, so finding ways to make money off the Moon, possibly for an economy around
the Moon. And then of course it's learning how to live off of another planetary body that's no small small feet and eventually, you know, the goal is to get to Mars, and so learning to live off of the surface of the Moon, those lessons can then be applied to Mars living someday.
Lauren, how is this a test for NASA in an environment where there's you know, significant investment in the private space industry, namely in a company like SpaceX, which is expected to IPO this year. What does this mean for NASA? What's at stake?
The unique thing, Artemis is that it is kind of an amalgam of the old and the new. Right, so they are using a lot of their long time, long term contractors like Boeing and which will be on display with this mission. And when it comes to landing on the Moon, NASA has contracted and outsourced the lander development to newer players like SpaceX and Blue Origin. So it's actually kind of a mashup of the old and new
way of doing business. And so it'll be a test to see if those companies can work together in this and these different contracting mechanisms can actually work together to put people back on the surface of the Moon.
Bloomberg's Lauren Grush live at Kennedy Space Center. Thanks Lauren, check out her reporting in the entire teams reporting on the Bloomberg Terminal and at Bloomberg dot com. More on space with the SpaceX IPO this time.
That's next. This is Bloomberg tech.
Let's fivoting out of the business of space as investors gear up for the highly anticipated mega IPO from SpaceX.
Joseph Alagna is.
The foundingner at Buttonwood Funds. It's invested in the Elon Musk led company four times in the past year and a half. Joseph, good to have you on the program this morning. I want to start with a potential one point seventy five trillion dollar valuation at an IPO that raises a wopping seventy five billion dollars, which our team reported last week. Would this represent a satisfy, satisfying valuation or exit for you at Buttonwood Funds.
I don't know if we were to exit or not. I mean, we're about to go public in a few weeks, so I can't really talk about what we're going to doing we're doing going forward. But you know, the one point seventy five trillion dollar IPO valuation, you know, was was announced right after the merger with Xai, and you know before that was one point five at the end of last year before they talked about the merger. But no one's really talking about the addition of terror fab
yet what that impact has. And I do think that that is going to be a game changer for for SpaceX.
Why do you think that'll be a game changer.
Well, he really has the total ecosystem now with terrafab, he no longer is going to be dependent on chips from Nvideo. It might be one of the reasons why you're seeing, you know, in video stock act the way it is. You know, Elon Musk is the type of guy that does not like to be dependent on other companies. So look what he did with the Tesla, you know, with the with the Gigawat factories. You know, he didn't want to be buying batteries and be dependent to to
other companies. So it's it's it's the same playbook that I think he's doing right now with whether it's SpaceX and building a significant infrastructure play in space and artificial intelligence like no one's ever seen.
Okay, So that raises a really important question, Joseph, what are what are people investing in? If they invest in in space X in the I p O, are they investing in in your monopoly in space? So they investing in an AI company, a telecoms company or is it Elon who they're investing in?
Well, I always say it's Elon because there really is no one else out there. I quite like him, but you know, he's what he's put together here with AI space, you know, and the combination here and infrastructure play that he's got a mote now that that that's built around him, that makes very difficult for any other company to really
truly be a competitor. You know, we've seen other companies like Amazon try to compete with SpaceX as far as the installing division is in the satellite, you know, deployment. But now things that people are are quite different the ecosystem he has now built. I don't think anyone is going to be able to touch.
You did mention you're a little limited in what you can talk about because of your fund going public in the near future.
Can can you give us.
Some more color around a timeline there.
We expect to probably start trading in May, possibly in early June. SpaceX is one of eleven positions within the but would first access fund that we're bringing public. The second second largest to Anthropic, but we also had to say as a position in the fund and now they merch together, but there's still slightly less than our positions in Anthropic, which.
Is the largest there are other funds that do give access to public market investors and privately held companies.
What makes butt in what different?
Yeah, you know, we're starting to see this trend now right of public vehicles that are own public companies that are like how do you want to call them? The
pre i pos? You know, what makes us different, I believe is really the timing that you know that we've invested in some of these companies, and you know, I think when you look at that at some of these other vehicles that might have similar portfolios two hours, you know, I think you have to ask yourself, well, you know that the portfolios might look similar, but you know, wind management purchase these securities now might not do any thing for someone that steps in and buys a portfolio that's
that looks the same as another portfolio now, but it should give you some insight on management ability to identify companies in the future. Was obviously all these funds, including mine, will be adding other public private companies, you know, pre IPO companies in the future.
You mentioned Anthropic.
You have invested in Anthropic over the past year and a half, and you would give access to investors to that through this fund. Where do you see Anthropic playing differently than XII.
Well, XAI has got a long way to go to catch up to Anthropic. I don't know if they have a will. You know, Anthropics really you know focused on the enterprise customer and that was a very smart move by them, you know. And the reason why we chose Anthropic, you know, over a year and a half ago is when you know, everyone's very concerned about artificial intelligence and how it can you know, run.
Run a miss.
And you know, they have guardrails that they put on with their constitutional AI and they've been taking a different approach to artificial intelligence than say some of the other companies that are out there that are really is looking for growth. So you know that's probably why you have seen in Tropic pro so quickly.
Right, XAI now is going to.
Have capital that I think that they needed. I think they were having a hard time competing with.
The Joseph Traffic and Chat. We got to run up against the clock. Appreciate you joining us. Joseph Alana, managing member and founder partner of the Button with fund that is going to do it for this edition of Bloomberg Tech