Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Meron Talks Money Weekly round Up, our debrief on the biggest stories in markets and economics. I'm Maren Sum's Web editor at Large for Bloomberg UK Wealth.
I'm jointed Staffake or my Stolle newsletter On senior reporter at Bloomberg.
Right, John, and I would like you to know that this is not a bonus podcast. It is not an emergency podcast. It's just our normal Merin Talks Money Weekly Roundup. Right John, We are not panicked in anyway whatsoever.
We are entirely calm.
However, we are also going to keep this short and snappy because our producer would like to get it out before Donald Trump wakes up, so it's valid for at least half an hour.
Also, Fair's decision. It's not a bonus sort on emergency podcast, but it is a rapid podcast.
Not panicked, just rushing a little, right, So we should, I suppose set the scene because obviously there is only one big story now that we're panicked. But there is only one big story, which is the coming and going and coming and going of the tariff. So we're eight days on now from Liberation Day. How many trading days since? Then? Seven? We hang on, We're on the eighth trading day, up down, up, down, up down, odd things happening all over the plaze markets
going down, down, down, down down. Then suddenly, yesterday six eighteen pm UK time, we find out that there is going to be a ninety day pause for most people, not for everybody. Obviously the ten percent stays and China gets one hundred and twenty five percent of tariffs. Now, this was amazing. Everything changed instantly. When the US market closed last night, the now's up but twelve percent. The SMP five hundred was up nine and a half percent.
So that means that while they're both still down year to date, to look at them over a year and you wouldn't know that anything has happened. The NASDAK is now Bysibor closed last night up over six percent over twelve months, and the SMP was also up over twelve months. So if you were the kind of person who only looked at your portfolio once a year, and you chose last night to look at it, you would think that
absolutely nothing had happened at all. Event you've probably be pretty pleased that you've got six percent over a year, given how expensive the US market was, right.
It really is a good lesson in if you are on a long term investor and you are comfortable with your investment plan and you've thought it through, then looking at your portfolio relatively really is a sensible decision in terms of being able to sleep well at night in order the rest to I appreciate that would have been difficult if you pay any attention to the news at all. A lot of the time, it really is was just
parking everything and staying calm. And that's the reason to make sure you've got your financial affairs and financial goals and or the whale markets are not doing things like this.
God is so sensible. If I didn't have this job, I would have been trading manically for the last five days anyway. By mid morning today, and I'm sticking with mid morning because who knows what's going to happen. This afternoon, the footsoo was back up as well, five percent up, so back to the kind of evens on the year out of about two percent over twelve months. But also, and here's John, why you know, maybe you should trade this stuff. By mid morning this morning, sixteen forty one
hundred stocks were up over ten percent. So if you spent yesterday afternoon making a night's list of cheap UK high yielding shares, you'd be really really happy today.
Oh yeah, I mean this is the other thing I'll tell If you're buying individual stocks, then you should already have a watch list and an idea of what place would tempt you to buy these stocks. There's largest opportunities for people who did mice to stay calm and who had the kind of optionality of winning cash. And also anyone who's held a better the portfolio in gold would at least if it's something that'll look at on the downdees that wasn't collapsing.
Actually, and that's lots very neatly into the we told you so section of this podcast. We told you so, We did tell you to always hold gold because it'll help you out the tough times. Anyway, So onner, what's going to happen next or what was kind of maybe going to happen next? You can have the fainted idea, But let's start with this question, John, is Trump winning? Did he blink? Did he fold? Or is this what
he planned to do all along? I mean, you can tell a lot about the biases of every financial and political commentator out there by the way they've started their columns and their articles on this today. But when I look at it, I'm not sure I see anything particularly straightforward. I mean, the plan was always as I understood it, the idea was or worth to take action, mainly against China. And here we are. There are still massive teriffs ainst China,
and everyone else still has a ten percent tariff. So the problem remains, this is still a huge global upheaval. It isn't over. It's not solved. These tariffs have to be paid. The supply chains that everyone has had on the go for the last couple of decades, and the shift doors of free trading environment that we've had on the go for the last eighty years, this is over. So whether Trump is called a pause and why he
called that pause, the basic situation remains the same. We are at a massive turning point in global economic and political history, and those dislocations are going to change everything around us, and we can't tell quite how. Am I the mad one or is it the market.
Nor You're right, certainly I agree both you.
That means I'm right if we agree almost always together, we're right.
Yeah, so yes, awfully yeah, because look, in terms of the tariff's on China, but at the point where the number actually doesn't matter, you've effectively declared a trade embargo.
And that's a really big deal. I mean, obviously, nel Fi Ferguson came up with this term ki America for what had been going on in the last ten twenty years since the World Trade Organization that China was allowed into it, which is the idea that Americans bought cheap consumer goods from China and China invested in US treasuries. And clearly that that's gone. That's definitely gone unless there's some really an actual U turn. And as far as all the capitulation stuff goes, it's kind of down to
your own bias. I can't see any Trump's mind, but what you can see is that he started ten days ago from what looked like an absolutely to most people, crazily thought through a way of putting on tariffs and then in a very aggressive position, and now he's retreated to where people thought he was going to be, except
that actually I don't think anyone thought that. Behondred and twenty five percent tariffs or in China, and so actually he's further forward and his agenda then he would have been if he'd just gone straight for this ten days ago.
Also, I mean, he did say that he wanted everyone to negotiate, and you look at it now and it does look like this big pile of chok and all has actually done that. Everyone's got their flat ten percent except famine Canada and Mexico and China, and pretty much everyone is coming to the table to negotiate him. When we're told that the fifty out of sixty odd countries are having a go, there was an EU tweaked yesterday saying how much they look forward to finding a way
to get to zero tariffs with the US. Everyone's coming to the table. So maybe maybe we have the headline say maybe he's kind of winning.
I wouldn't go so far as to say that yet, just because I don't know who this is going to unfold, and I don't nine to fall into the trap can of beas and things and where my own sympathies lie one way or the other part from anything else is American politics. I don't really have sympathies one direction or the other. But I do think this idea that Trump's
an idiot, that's a waste of your time. If that's what your mentality is, then don't spend any more time thinking about this because you're not going to learn anything. The fact is the world has changed. China and America's kind of trade relationship has been severed, and America is now mix to impose a ten percent tax when every import that comes into the country, which is another thing that will be interesting to see how that unfolds. Now, there is one argument that this is effectively back door
way of introducing that consumption tax in America. You can't do a VAT because obviously, you know Americans don't like taxes and fair play to them, So this is a way to impose a ten percent vaight. The looks as I was being paid for by exporters, and to whatever extent it is paid for by the exporters, that's a win for you as a country. But it is also a summer at least is going to be passed on
to consumers. And I think that's it's really interesting we look at it because it also shows that the administration is aware that America has got a debt problem and they are going to try to address it in some way. Whether that walks or not is another matter. But the point is all of these imbalances have been lead knocked to in a moment like this.
That's the absolutely key point. We've been talking about this, and I wrote about it a few weeks ago, effectively saying he's a catalyst, not a course. Of course, everything Trump does escalates, changes, shifts a direction to degree of
where we're going here. But the fact remains that we've been gearing up for some kind of trade wall between the US and China for a long time now, and there's anger towards globalization, anger towards the inequalities or perceived inequalities driven by globalization has been underway for some time, and actually electorate after electorate after electorate has asked their leaders to do something about this, and of course have been roundly ignored. And I did right the other day
that the tariffs are Americas brexiting. And I suppose you could say that we voted for Brexit, but our leaders are too to know what we wanted, what the UK wanted. With Donald Trump, they're kind of getting what they're asked for.
Up until two thousand and eight, they kind of anger was papered over by rising house prices and kind of abundant credit, et cetera. And then whenever the financial crisis came along and everything blew up so sufficient people felt they were losing out from the system as it was to start getting angry about it. And it wasn't until twenty sixteen that people basically get fed up of business as usual, politicians promisingly changed things and not changing things.
And that's whenever we got boats Brexit and Trump elected for the first time. Even there with voters taking quite radical action, nothing has been done fast enough for their liking. So this is a point where that's it. It's coming apoy so that Trump's actually just standing up and seeing
the quiet part out loud as they see. And people don't like it because it upset it's the kind of establishment view and they're not used to someone speaking so undiplomatically putting said any personal qualities that Trump has or not hasn't. But the fact is some kind of big change is what people have been asking for and know they're going to get it, whether they'll EKO not like.
It or not. I suppose we're supposed to talk about markets. So the key thing to talk about here is what
on earth is going on in markets. We've talked before about the fall in US markets so far this year, sure related to things that Donald Trump's administration have said and done, but coming anyway, because if there's massive divergence in valuations between US markets and other markets, which we were told until readily recently was down to US exceptionalism, US perfection, everything always going right, AI, etc. And whether Trump or no, all those things would have begun to
crumble over this year. So this is as much about that valuation problem than about anything else, and that valuation differential remains, so regardless of what happens next, it still makes sense to expect the US market to come off over the next year, two years, five years, whatever it is, until valuations return to some kind of norm because now we know that the US is not perfect. Well I think we knew it before, but apparently not everybody did.
We know that exceptionalism never lasts that long, and we know that every time you hear anything like the word exceptionalism, you should immediately get out of whatever market it is. I mean, we were old enough to know that, right, So the simplest thing to say about this is that regardless of everything happening around US, US stock markets are
still expensive. Other stock market's still off of value. And if you're moving into a difficult environment, why would you not want to hold the markets that start at the right price rather than the markets that started the wrong place.
Yeah, definitely, and I think that's going to be whatever else happens. It's very obvious to the people who believed in US exceptionalism that use exceptionalism is now over. So yeah, I think it's you can expect capital to move out of the US, or rather, in relative terms, you can expect the rest of the world to catch up to the US. There's another interesting question over whether this is
a time for having an element to home bias. We haven't seen it overtly yet, but this is the sort of environment in which capital controls are something that people will be looking at, and that's just worth considering. I don't know how extreme those controls might get, but well, now in a world where if globalization is rolling back or stalling or whatever, and more borders are going up in more friction is going up, then you want stuff to be nearer to you, and that includes your money.
To an extent. I mean, I'm not saying you don't have a two percent money in the UK. But the point is, whatever you live, if you may want, you think about, actually, what are the implications of other countries to say that, actually we're going to put a tax or in their sort of tax on that, or your own country says if you don't keep money in the UK, for example, then it's going to be treated less favorably than if it does well.
I mean, we know that we've talked about national capitalism on this podcast a lot with Russell Nathan You've been on several times, and this is a new era of exactly that where and the tariff is just one symptom of people wanting to retreat and protect their owner above above others. And of course we've heard in the UK endlessly about how our punchinesses are isorets, etcetera. Should be brought back to the UK and used to help build the rebuild the UK's infrastructure, and we're hearing that in
other countries around the world. So this is a shift that combines nicely with the idea of some possibility of
capital control. There's just a very different environment, very unfamiliar to everybody eighty years as man a trade war that there hasn't been this kind of sense of national capitalism for many decades either, So very very very hard to see how things can unfold from here, because of course, this kind of thing has never happened inside a global economy that is not just so globalized but also so financialized. Financialized is that a word? Yeah?
Yeahs long enough.
And that brings us back, of course to the bond market, which is the thing that apparently made Trump blink or not blink.
Who knows boind market moves where interest? But beyond that, I meanly Norman seems to the way exactly what was driving it all as a thing called the basis trade in the US, which I'm not going to even try to explain because I basically don't know what it is. I will buy well, I.
Will tell you what are Our colleagues and competitors over odd lots have explained this very well. So we will put in our show notes a link to what they have done, and you can go and see what the basis trade is there, rather than John and I are suffering through trying to explain it.
Yes, I mean, but you can startly see as America's aldi basic leverage positions that blow up and then force things to get sold when you don't want to sell them. It's fair. I mean the puttly your boind yield went back to where it started to day by the end of the session. Yes, that they have once they're tile of stuff could changed. Boind markets had a problem, but I'm not sure of their actual disciplinary powers, especially all over some somewhere the US will be interesting to see.
Yeah, I mean, it seems to me that the bond market business is simply a reminder to us of something that again we've talked about on this pod quite a lot. I don't need to remember. When we had Edward Chancellor
on the main part as an interviewee. One of the things he said was that you should always worry about interest rates having been low for so long, and it would take ages to see where the problems are and the full consequences of the GFC and COVID, etc. Because these very low interest rates get into all the cracks
and you never know where it's going to blow. And the fragilities in the system from our very very long low interest period remain remain, and there will be places where it will blow and we won't know where and how. And I think what's happened in the bondmarket over the last few days is a reminder that there are these fragilities built into the system that we can't identify until they go horribly wrong. Yeah.
I think that's a really good way of putting that. People that always told me they can reduce liquidity and increased dependence on central banks generally, which has been a big problem. We spent a long time suppressing a lot of stuff, and that kind of needs to come somewhere eventually. And it looks like that's the point of what I.
Know deep sigh or.
Well, I mean, on the opposite markets wise, it's basically playing out as we'd expected it is. The rest of the world catches up with the US after using which the S and P. Five hundred is the only game in town. You own about of gold, you're own some catch to take advantage of the opportunities when they come about. You can look at the point side of your portfolio.
You can look at that it's been basically what you need in terms of income, just kind of tax tree, how close to retirement you are et cetera, et cetera. You should be basically comfortable as long as you've thought things through and you're investing regularly.
And as long as you understand I think at this point that you mustn't listen to markets. Yes, you never always been told markets contain all the information. Markets are very clever, markets are sending you messages. I'm not sure that markets have been sending us very accurate messages over the last week. So don't listen to market. Don't really know any more than you do. And also, I suppose
we've talked again on this podcast. We've talked previously about how terrible forecasts are and how almost everybody's forecasts are almost always wrong. Forecasts are always wrong. They will be even more wrong, even more wrong than usual, for the next little while, because no one can begin to understand
what would happen. Even if things stopped right now and stayed as they are, and we knew these were the teriff rates and that was that and there was no further change, it would be impossible to forecast what would happen with all the moving parts. But given that we know that everything is subject to more and more and more change and constant uncertainty, which, of course the Trump's usp this uncertainty that he creates around him. It's impossible
to forecast everything, so that's important. And the final thing I want to say on this, the final thing is that you are so close, John, so close to your headline, the one that I know you're going to use at some point say thank you to Trump for your low mortgage rate name. Thank you to Trump.
You're so close, so close it.
As soon as UK rates come down, for whatever reason they come down, I guarantee John's going to use their headline definitely. Thanks for listening to this week's Merrin Talgs Money Debrief. Not a bonus, not an emergency, just a normal debrief. If you like our show, rate review, and subscribe wherever you listen to podcasts. Also be sure to follow me and John on ex or Twitter at marins w and John Underscore Stepic. This episode was produced by Moses and Questions and comments on this show and all
our shows are always welcome. Forecasts not so much. Our show email is Merror Money at Bloomberg dot net