Why A Longtime Bull Just Flipped Very Bearish On The Stock Market

a little bit. It's still an interesting, timely and relevant discussion in the grand scheme of things, but we just wanted you to be aware of exactly when we had this chat. Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal, and I'm Tracy Alloway. Tracy, something I've been thinking about lately is that we're in

a pretty interesting time for financial markets. And I should start by noting that today we're actually going to have a conversation about markets themselves rather than some esoteric topic tangentially related to markets. But it feels like we're I don't know if crossroads is the right word, but lots of interesting things are just happening right now. Well, I'll take the bait. I can think of a few interesting

things that have happened recently. For a start, as we're recording this, we're coming up to the G twenty meeting. There's a bunch of expectations around Chi shin Ping meeting Donald Trump, whether or not they'll agree some sort of trade deal or a trade truces. And we also have the tenure US Treasury back below two percent, that was after another devish pivot from Jerome Pale at the Fed. And we have a whole lot of negative yielding debt. We also have earning season coming up. So yeah, there's

a lot going on. But the one thing you didn't say, and what makes it really weird, is that with all this tension out there, whether it's trade, the Fed feeling that it needs to pivot do a more dovish stands to signal possible rate cuts, all this debt falling deeper into negative territory in many instances, the stock market is

more or less right now and all time high. So despite all these concerns out there and interesting stresses showing up in the market, the one market that's sort of the purest proxy for risk sentiment is basically as good as it's ever been. Yeah, so we have this big divergence between bonds and stocks. But if I could just say one thing, it's interesting because we talk a lot about the bond market pricing in a potential recession, but it of course depends on what bond market you're talking

about government, mint bonds. Sure, but if you look at corporate bonds, other types of credit risk, those are also doing amazingly well. So again, the riskier parts of the market, equities, credit all doing really well, while other parts are sort of screaming that a slowdown is about to hit exactly right.

And then the one thing that I think also sort of makes even the stock market interesting is if you look at various survey measures, there's not a ton of bullishness out there, you know, various surveys of say, fund managers, lots of anxiety, lots of evidence that people are engaging in a high level of hedging defensive stocks leading the rally higher. So even within the internals, not many signs of euphora. It's just kind of a it's kind of

a weird time. Yeah, it feels like a lot of people are in wait and see mode, but I'm not sure what we're waiting for at this point. I I don't know what we're waiting for either anyway, So I mentioned the top we're gonna be talking about actual markets today, and I'm very excited about our current guest. He flew all the way from Singapore for this podcast. No, it's not totally true, but of course he's one of our

colleagues here at Bloomberg. But and I'm all, I always loved talking to him because he's based in Singapore and every once in a while he comes to New York and he's our he's he's our macro strategist, or he's one of our macro strategists here at Bloomberg. He puts out views, he's a former trader. He has very strong

opinions about the market. And what I think makes them really notable right now, among other things, is that he's been a long time bowl who suddenly flipped bearish, and that's not very common, but someone, uh, you know, there are a lot of people out there who are bearished, but they're always bearish. It's refreshing and different to hear from someone who may have flipped or who has flipped. You forgot the most important part, which is he's also

a previous All Thoughts guest. That's true, and I think he's probably significantly more bullish on the market, uh the last time, which is probably I don't know, maybe a year and a half ago or two years ago that he appeared on the show. So anyway, without further ado, I want to bring in Mark Huddmore. He's a Bloomberg macro strategist. He's also the editor of the m Live blog, which you you have a terminal you have to check out. And as I mentioned, he's a long time ball going

back to at least twenty eleven. He's been optimistic about the market in the economy, and for the first time in years, he's warning about significant market sell offs in a possible US recession. So Mark, thank you very much for joining us. Yeah. Absolutely, Joe, I'm really excited to be here. And as you say, all of the previous times i've spoken to you on TV or on odd lots,

it's I've always been bullish. I've always been kind of a permable as what I've been kind of laughed up on my colleagues here, and I think that's I've had periods of tactical barraishness, like oh, this will hurt the market for five ten percent. But I've always been very much in the camp that, you know what, we're gonna go back to record high soon. There was these three pillars driving the rally, and that was growth, earnings, in liquidity.

And I'll kind of come into that later why some of those pillars are disappearing, just for the kind of the context in the history. I was someone who I was working in Leaving Brothers before the last crisis, and I did turn bearish, like I think many people the forefront of the financial crisis in two as and seven. I was, you know, not particularly a stutor smart, but along with the people in the financial industry, I became negative in kind of sometimes late tess and seven can't remember,

and I stayed too bearish too long, right. I stayed bearish until definitely through Chasen in late two nine, in tens and ten, in turns and eleven when the Euro crisis kind of flared up and I was like, this is it. It's the next kind of sell off again. And then I kind of learned from when we got through that. I was like, hey, no way to sect

the game has changed too much. Liquidity is coming. So since then I've been basically you always buy the dip, and the difference is now I think in the US equity market in particular, it's we've now changed to sell the rallies and it's I think we're gonna get a proper bear market is in a plus decline over the next kind of year. Well, you mentioned your three pillars of bearishness, then walk us through your thesis. Mark, Yeah,

absolutely so. I think that two of those pillars are about to be taken out completely and the other one has lost a little bit of impacts. I don't think liquidity is disappearing anytime soon, but I think the amount of the love leverage in the system can be harmed pretty quickly. So what we've actually seen in economic forecasts over the last two months is that they've not been changed, or in fact, they are actually raised about a months ago for the three largest economies in the world US, China,

UH and the Eurozone. But overall all economists aren't yet factoring in all the tariffs because they want to believe they're temporary, because they don't want to suddenly slash all their forecasts and then suddenly find that Trump signs a deal, and because he's been shown to kind of change tack quite quickly in the past, it means that economistsern hold.

So what happens is you've still got US economists. The consensus forecast is still for two and a half percent growth in the US, even though all high frequency indicators show that's quite clearly just not going to happen. So it will take not just a truce in trade world, take removal of all tariffs and some extra positivity that removal of tariffs and the rate cuts to come through for US to get that kind of growth rate. So we're seeing global manufacturing p m I has fallen for

thirteen straight months, is now contraction territory. The preliminary p ms, which we get for about fift the readings that we've already got this month, that for the next reading next Monday, show that will probably fall again again in contraction. And that's been that's been a pretty good guide for growth. And that's more of the global indicator, but with very much in the US we're seeing that as well. You talked about you know, stocks are a record highs, but

stocks haven't always been a good indicator. We look back in the last crisis Chess and seven, so the market knew there was a real problem in the economy suddenly flaring. From about August, we suddenly started seeing that step in the curve was was we start the easing cycle. So what happens is the Fed actually started their five out basis points rate cutting cycle in September two and seven. The stock market made its record high in October two seven.

The recession came in December two seven. I would not be surprised if you get a roughly similar timeline. Then we had the same thing back in tess and one. I can't remember the exact months, but the five and fifty basis points rate cycle rate cutting cycle I think started in January three. The recessions still came in March one, so two months after the rate cutting cycle started. So it just to back up your three pillars. One is liquidity and that's the one you're not particularly concerned about

right now. The other one is growth and obviously and then what's the middle earnings? Okay, so I think one of the problems with earnings is again earning strategists also are starting to ash forecast, but not too aggressively, yet because they use as their macro inputs what their economists say. This works for most banks. Some banks they are actually not allowed to have different inputs than their official economists.

Other ones they are. But overall they're still going, Hey, all the experts are saying growth isn't gonna slow, it's not going to be impacted by the trade war, even though we know it's definitely gonna be impacted, and even though all the surprise indexes have been missing anyway, So even if during the trade war, the datas of saying that the economic growth is going to slow down drastically, Now we've had fresh tariffs in May, which will feed

through the economy, and about August that's when we'll get those indicators come down. So growth about to drop like massively in from about August September onwards, even without an escalation the trade wars. We actually need removal of tariffs to change that. Now, once we get past you twenty and once economist starts slashing their forecast, that will start feeding through the earning strategist, the equity strategist, and they'll

start slashing equities. We do have a pretty good correlation between the direction of kind of earnings and whether we're getting earnings growth or earnings recession and equity markets, and I think we're about to see quite a drastic kind of earning slash, you know, earning deep earning recession, partially because we had such a high peak from the tax stiminus before. So both earnings and growth are about to

be completely taken out. But Mark, I guess the response to all of that, and you know you've laid out a very clear list of worries there. But the response that any bull would tell you would be, well, we have the Federal Reserve which is now back in easing mode. Won't they be able to offset a lot of this? My simple answer is no. The Federal Reserve has got

a very poor track record of preventing recessions. And I said, refer to the last two recessions, the only two recessions we've had in this century, um, and both times the easing cycle started aggressively before the recession came. The recession still came. And both those times the Fed five basis points to cut SOS seven they did actually cut by exactly five in our basis points. And I said, the

easing cycles started in September Tessman's seven. They'd cut I think a hundred and twenty five basis points before the recession came, but I'm not sure exactly that, but basically they're already cutting aggressively. In Urson In one, we've I think it started with a fifty basis point cut and we still got the recessions starting a couple of months later.

It didn't stop it. Ultimately, monetary policy is not the best tool for changing the economic cycle, and that's become even more constrained given the amount of QUEI we've seen in the system. So that's the transmission has been broken. So I don't think the FED can stop the economic cycle when it's this drastic. I think they can slightly

massage it. But we've now reached breaking point. Talk to us about this divergence that we're seeing in the stock market and the bond market, because everyone knows there's all this negative yielding dead curve and versions you name it. Meanwhile, as you pointed out, stocks are they may be at all time highs, but historically they don't often call the turn,

and uh, they can be slow to the game. Is it a matter of bond investors knowing more, because that's often the sort of naive like, oh, the smart market versus the dumb market. But how do you think about that divergence. I think that, first of all, as you kind of pointed out, this is not so anomalous in history as people think, so quite often normally goes this way towards the end of the economic So you pointed out, You're that's very fly doing that, you said, I point

out what you're the one you point out. But normally we do see that equities kind of top out just kind of just as recession is basically guaranteed, whereas bond markets turn much quicker. And I think that a lot of people got very panicked about the bond curve flattening over the last year or two, and and like since turs and sixteen, I've been writing macroview articles in my bull guys as like, stop this panic margermongering over the

flattening yield curve. It's not a good indicator, blah bah blah. It's about the steepening after the flattening. We're now getting that steepening. We're now getting the bond market is now saying, hey, the recession is probably coming in the next kind of

six months or close enough to recession. So we're we're kind of following the historical path of where equities markets keep on going to record highs because we get that kind of bond market react first, which provides extra liquidity, lowers the discount rate for earnings and for stock prices, which makes them seem even more attractive as an asset. And that is basically what we get in these economic cycles.

And normally there's a little bit of the same sentiment story as well, where we've gone through the economic cycle long enough that stock investors have learned, you know what, you buy the dip, you ignore the scares. I don't want to miss out in the rally. And so when they see this bond market signal, they go, great, that's extra easing, that's extra liquidity, that's a lower discount rate. This means I buy that dip. I do not get scared by it. So I think that's what we're seeing there.

So you mentioned economic cycles, and this is something that I've been wondering about in in recent months. We're pinning a lot of the economic concerns that we've seen on the trade dispute, and you mentioned that economists hadn't really yet been ratcheting down their forecasts due to the tariffs, because they're sort of waiting to see how it comes out.

But I'm wondering, is it possible that what we're seeing is actually just the end of the economic cycle, a sort of natural end, versus anything that's been spurred on by the trade war. I think that's a really valid question, and probably are not the the best person to answer that deeply. I'll give you my impression of it, and my impression is, yes, we have We've had already a very long economic cycle, and there's been a sign of a kind of a change in some of those indicators

for some times. And like even as I said, in the equity market that's reaching record highs, we've now suddenly seeing weakness seen transport stocks and small caps, in home builders, we're seeing that kind of change. We're also seeing jobs that you know, at a low and now we've just seen some bad jobs prints and jobs is actually a lagging indicator, so people you should't watch it too closely. But nfp A and ADP last month both showed that there is kind of a turn in the job cycle.

So I think that already we're reaching the end of the economic cycle. And I think that's part of the reason why I suddenly become structurally bearished in the last month and into this kind of sell the rallies mode. And that's because even without the tariffs in May, we're looking like we were getting to a kind of a difficult place in the economy. I thought, if we got some wonderful deal, all went well, So I actually turned

bearish on April thirty. But when I turned bearish, it was my usual just to sell off for a few weeks, don't worry, and I was in the mindset, will be back at record highs again. It was a tactical bearishness, but it was the change in the trade war that said, oh wait a second, we've got a really tough economic situation. And since that April thirtie date, all the data that from before when the trade were flared up again has

disappointed again. It's coming even worse. So the economic cycle was looking really, really drastic, and now we've had a tariffs on top. So this is a really really bad story. And it's not only without a taris, but there seems to have been a complete breakdown in the relationship between China and US and May and I think that's really the key, key point that I now no longer see

a solution on the horizon. Expand on that. And I'm curious how your perception or how the perception of the trade situation is different here when you come to New York for a couple of weeks versus when you talk to people in your home base of Singapore. Yeah. Sure, I mean, I'm going to give a views here, and I'd love it if Tracy kind of either contradicts me and tells me she sees a different or validates this,

given that she's in Hong Kong. But I feel that the trade war is viewed completely differently on the either side of the globe. And I think that in the US, everyone's very much believes that the trade war comes down to Trump's decision. It's unilanderal decision. He's going to want to deal before the election, is how the narrative goes,

and therefore he'll get a deal at some point. It might not be to next year, it might be a little bit difficult, it might be noisy, but ultimately Trump wants a deal, and there if he'll get a deal, I think that that narrative in Asia has completely shifted. I think in China, China also wanted a deal, and they did want to deal, but there is a real

change in me and the reason the talks breakdown. We heard, I think with the Wall Street Journal that broke that story saying the idea that the Politt bureau Baski told Chgemping you can sign something to change laws, and that does go back to their long history the opium wars.

They still regret that. So what's happened is that in China, the idea of a trade war wasn't mentioned in the mainland press before May, and suddenly now it's not only mentioned, it's been really hyped up that they, you know, they're going to stand up to imperial aggression from the US. They're going to go through the Long March again to get their kind of independence and prove China's you know, authority on the world stage. They're demanding an equal footing.

So I think the whole narrative has changed that China can no longer agree to any deal without US essentially making all the initial concessions. So US will have to remove all tariffs first before China will get to some kind of trade deal. I don't see Trump going that way soon. So suddenly I think the narrative has changed that I think there's no chance of trade. I think optimistically we don't get more tariffs, and I think that's

an optimistic case. But I just don't see how you get a resolution given that China can no longer They've talked themselves into the mainland audience that they no longer can agree to a deal without being seen to win, and Trump count afford to be seen to concede to China, and he's built it up so much out of the election. So that's what I see it. How do you hear? Do you see it? Tracy from Age the age perpective

as well. Yeah, I would broadly agree with that. So I think partially because of the type of people who tend to work in markets and finance and investing, uh, they have a high tendency, let's say, to ascribe rationality onto other actors. And I'm not entirely sure at this point in time that the major actors in the trade war are actually acting that rationally. And I think you're absolutely right that both China and the US at this point have boxed themselves in a bit when it comes

to satisfying domestic public opinion in very different ways. But it's particularly acute in China, where you're right, we didn't see the polite Burero's sort of ramping up the trade tensions talk and talking about imperialist aggression up until very recently, and you can imagine it's going to be very, very difficult for them to roll that back in any significant way. And the same and goes for the Trump administration to

some extent as well. If you think about, for instance, what they've done when it comes to Huawei, how in the world are they going to start rolling that back? That feels really really difficult to sort of undoe to me, So that I think you're absolutely right. I mean, it's got bipartisan support in the U. S. Here, So I think that's why the Trump count back down. Both sides do actually want Trump to kind of get some win against China, even if not the exact manner of how

it's doing it. So I'm pretty negative on the trade deal, and I think that's why we're going to start seeing Capex slump a lot. We're gonna see Earning slash and this goes back to the core point. Why am I so worried about the stock market, Well, it was expensive already with an economy that was turning, as Tracy kind

of applied. Maybe it's just even the economic cycles already turning, and now we're suddenly adding a complete, completely disastrous scenario for both private companies that rely on these these big US mountinnationals rely on the consumer base in Asia. I think they'll forget that, you know, suddenly Asia is the rising rampant middle class consumer and middle class. I think people have this idea that there's much especially in the US, build this idea that much of Asia is still poor

and not buying you know, apple goods. That's just not true. So I think that this is a really really bad situation of both growth and earning slash at a time with stocks are expensive and a Ford looking basis. The sp trading around sixteen point eight versus the tenure average of fifteen. So it's expensive already, but that P four looking P will look completely different once that the denominator,

the earning side of that gets slashed. So, Mark, You've been talking a lot about equities being overvalued, but I'm wondering how you feel about credit, because when it comes to a lot of finance professionals, overheated credit markets has really been the sort of bug bear that people have been worried about for a long long time. Is it as simple as when the economic cycle turns, the credit market is going in to be in for a world

of pain? Is it that simple in the sense that what everyone has feared and expected for such a long time now is just going to happen. I think it is that simple. I'm really glad you brought this up, because I think that it's hard to get plus sell off in the SMP five hundred without some kind of financial pain. And I should be clear that even though I've turned structurally barished the first time since the last crisis, I don't think we're having a repeat of tersm Nate.

I don't think the global financial systems at risk. I don't think it's quite as scary as that. But I do think that we're going to have some severest financial market pain, and that will come in credit markets. And we've heard a lot of warnings from the big credit names. You know, whether I think leverage finance of the area that people are most worried about. But I think that it's the structural problem For me that most worries the

lack of liquidity and credit markets. So when the credit market turns, there's just no ability because the regulation we've put in since the crisis for the banks as middlemen to stop step in and kind of control the sell off. So I think the credit cycle can turn much more painfully and much more rapidly than previous crisis. Is the recent stress that we've seen in various funds in London, the Natixus funds Woodford. Is there an early indicator of anything?

Is that a like, I don't know, some sort of prestige of trouble when the when the tide goes out, you see something naked type of thing. If you're in my point of view, it's very easy to see it like that way. I'm sure that many people can kind of pick these kind of anecdotes if you want. It's it's the same with suddenly this year we've seen all those kind of massive unicorn I p o s and again people would say that's a sign that we're reaching

near the peak. I think if you're looking for these signals, you can definitely see them and I do think some of these funds things are worrying. And one of the things that it's interesting is that while I've turned structurally barrish, I have no particular strong view and we're we're going to trade in the next couple of weeks because we

might convert twenty some platitudes positive platitudes. But I think the point is that professional investors have started trading more defensively in terms of their stock rotation, and they started being a little bit more bearish. But if you looked at this week, we saw that the hedge fund leverage is actually reaching back to kind of pre crisis highs again.

So that's the idea that people are actually taking on more risk, and I think there's that leverage in the system there that will get squeezed very quickly because the lack of liquidity in the credit system. So you mentioned lack of liquidity in credit, and you know, this is something that lots of people have talked about for a long time, and I certainly have written my share of

articles on this and also overheating in that market. And one thing that has given me pause at various points of time is the notion that when the big sell

off comes. You sell what you can, essentially, So I just wonder, if we do get a big rupture in financial markets, is there a chance that, instead of people, you know, rushing to sell off corporate credit and leverage loans, that because of the very fact that these things are extremely a liquid and it's going to be tough to find buyers for them, that they actually don't move that much, and instead we see people selling off much more liquid

items like stocks or government bonds. That's a that's a great question, and I'm trying to, you know, remember the playbook from how I was trading to the last crisis. And I have to say that the last time I, you know, I was trading GFC, it was my first crisis to be in a trading seat, and therefore I was learning and making the mistakes back then, and some of the mistakes I learned quite painfully, and I remember

quite vividly. Another ones, you know, I'm not sure if I fully learned them, but I'm trying to remember then, and I think one of my my big takeaways then is that it was very clear from late two thousand and seven that there was an incredibly big problem brewing in the financial system, and I have emails that I wrote on my Gmail account to all my friends back in Ireland saying, look, I think you know all the

banks are going to fall. I did naively think that Lehman Brothers was one of the safest, I will confess, which is a little bit embarrassing, but that was I think a bit of hometown naive. But certainly so. I thought Line Brothers be fine, but I thought that most of the banks would. We were vulnerable. I was telling friends from November twosman seven that I thought there was going to be a massive systemic financial crisis and you know,

cash machines might not work and stuff. I was a little bit in a Doumonger phase, but then I was an emerging market trader. Emerging market effects reached a record high in August two thousand and eight. Now, as I said, the stock market actually topped out in October two and seven. It was you know, we had bear Stearns in March ts and seven. I mean Lehman Brothers stock probably where I was working, was plumbing throughout that summer, and yet

emerging market currencies reached an all time high. Enogs as a Nate, and I think that was an important message. I'm very indirectly answering your question, Tracy, but to kind of affirm that, yes, how these kind of sell us go when we do get a negative cycle, they're very difficult to trade. Is not necessarily you find that the most overpriced thing and you sell it, or you find the most vulnerable thing you sell it. You've got to

really care about the timing of when things go. And I think you're right that sometimes actually assets which aren't particularly expensive but are more liquid gets sold first, and then you suddenly see these massive step moves later on. But I guess one of my main takeaways in the last crisis is that for those slightly harder assets that are a little bit less liquid, they are a little bit step moves. You can probably wait till your shure

the cyclist turning. You know, get in the trade a slightly more expensive price, but you know it's going to make the jump move at some point, rather than trying to be clever, basically, don't try to be clever through the liquid interestments. If you're trying to be clever in time, perfectly do it through the liquid stuff, where you can keep on chopping and change your mind through the liquid stuff. Wait till it's certain, Wait till maybe we see how the G twenty trades and plays out, and then you

can kind of go, yeah, it's interesting. I hadn't remember that or realized that exactly how well emerging market currencies

did throughout two eight. But it's interesting because we just recorded an episode with the human Suction of the b I S talking about the dollar, and we're talking about that sort of relentless dollar pessimism that pervaded markets really in the years preceding, uh, the Great Financial Crisis, but really two thousand six through two thousand and eight, so much negativity on the dollar, and that seemed to be a major source of concern, a major difference in the

post crisis era or the dollar has just been phenomenal. I think that's gonna be denomic scene again. I guess part of that is because what happens is bone markets start. Bond markets do react to click in the stock markets because they have to react to date to their macro instruments, whereas equities traders rely on their micro strategists to provide

those macro inputs. Um So bond markets basically forced the FED Act, and we've seem to seem to see that even more than normal this time where the FED is being pressed act. So the easing cycles start, that weakens one of the dollar supports. The dollar starts weakening, and then what you see is that because the dollar's weakening, that eases the liquidity situation. E M S. E M actually does a little bit okay in that initial circumstance,

and you want to start seeing commodities do well. I mean, pe'll forget where oil went to a hundred and fifty dollars a barrel, you know, just going into the crisis. And I think that's because we were seeing this kind of dollar barish and it's just before the crisis. And then obviously once the crisis hit properly, even though as US centric dollar absolutely roared and and I I think that we're going to see that playbook this time. We're

gonna see the dollar weakened quite a bit. It's going to support assets that you would think would be really vulnerable to a global financial crisis, like emerging markets, like commodities, but it's going to support them until quite far in, until it's clear that this is a much bigger problem. When that happens, I don't know. Maybe that's early next year.

It's hard to know the exact time span. The one difference I would say this time is I do not think the dollar gets the subsequent massive boost it did. You mentioned hedge fund leverage, and I'm always curious. I enjoy asking people this question, but where do you see the leverage in the system. Now you already mentioned that you don't see it on a scale of of sort of pre two thousand eight levels, but I'm sure you have some idea of where there might be sort of

hidden pockets of leverage in the system. I'm not best place to answer that question. I mean, part of the reason I kind of set the hedge fund leverage this week is that, you know, I saw the actually article on Bloomberg Actually, and I want I will say that you know, um, I didn't remember the exact details from it, but they were saying that leverages back to the pre crisis high. It's kind of jumping up again on the

hedge fund leverage system. I think what you do see is how certain assets trade, and I think that it's more in the certain sectors of the credit market where we are seeing that in the leverage finance and the clos and you're seeing those kind of those permanent buyers.

I mean those stories again. You know drast earlier about whether you see these kind of signals from certain equity stories, and I think it's again in credit market, it's very easy to see the warning signs if you're looking for them. Warning signs I might have ignored even only six months ago.

But when you find that like there's just you know, one Japanese asset manager that is the main buyer of some certain type of credit product, you know, and they're lapping it up for like massive credit product back in Europe, that seems like a warning sign. Now that I'm more worried about the market, so I think that we are

saying that leverage in the credit system. I have a sort of meta question about this call of yours and your shift to bearishness, because now you're you know, you fully identify yourself as a bear and you say, you know, in April it was sort of tactical, but now you're

like full on with the thesis. Do you find that um stating that makes it harder to be nimble and that if data, you know, like let's say the trade Day dispute doesn't get as bad as you expect, and maybe the data starts to rebound a little bit that having publicly sort of come out as a bear maybe you know what if, like, do you feel comfortable in October or November saying you know what, I was wrong? Or is it harder to do that once you've sort

of identified as such. It's definitely harder, And I can't to know. It's something I'm very conscious of, and I'm like, as I said in the last crisis, I was pleased that I felt that I was aware of it early, and then I stayed bearished for too long and it was horrendously unprofitable as a traitor. I think, you know, I try to learn my lesson that I will turn

when I think the facts change. And I guess one of the reasons I'm trying to I like it, you know, being able to express this view is because I want to know what the loopholes are. I'm hoping, you know, listeners will kind of message me after this is going to go and you're completely missing this element and that's

the point that kind of change the game. But having analyzed that lots and kind of expressed this view very publicly, in writings on TV and radio for the last kind of month or so, I've not found the big loophole apart from if there is a really grand trade deal bets and trying to remove all tariffs and they're suddenly in some wonderful happy world of trading, then clearly we're not at the top now that will provide a sustainable

boost markets. But I will say that that it needs to be removal of the tariff that are already in place, not just a truce. Um. I I have. What I've been trying to analyze is if we get a truce now escalation from here, are we in the barrass scenario? And I think yes, but it'll just come through a little bit more slowly, a little more less drastically. But yes, we are in the barrastionary. So but yeah, I'm going

to be alert to that. Will we see a change, But I think it will take that massive trade deal to change my mind. Mark Cutmore always a pleasure to talk to. Thank you very much for joining us, and uh I wish you were here more often. Thank you. So, Tracy, are you convinced are you going to uh put all your money in gold and silver and under your mattress. I think I told you this before, but I do have a sizeable stash of silver coins that have been

bequeathed to me by my dad. No. Look, on a serious note, I don't think I needed a lot of convincing that we are late cycle. But again, as someone who has written about overheated credit markets and and leverage and the possibility of a you know, liquidity driven sell off in credit markets for many, many years now, the question is always timing. And so yes, we have the trade war, but I'm still a little bit uncertain exactly what the catalyst is going to be for the end

of the cycle. And sorry, just one more thing, but it seems to me like the FED is also acutely aware to some extent of problems in credit and whenever we do see cracks in the credit markets start to develop, like we did earlier in the year, the FED usually responds, yeah, no, absolutely. I mean, I don't know whether I'm completely convinced or not.

Something does feel a little bit different now, And I've been thinking about that for a few weeks really since really since the start of May, because people have been getting very the the observers of the U S China relationship have been very dire, and they're saying this is very serious, and you see very sober minded analysts talking about a new Cold War is emerging between the U. S and China and so forth. And yet even in the stocks sell off in May, it never felt disorderly

at any time. It never felt panic, and it started to feel like right then that some sort of gap was starting to open up between the sort of calmness of the market, and you know, obviously the markets bounced back versus the alarmed rhetoric of a lot of observers, and ever since then it started to feel a little different. And even the fact that the FED is now shifted into easing mode with stocks not having sold off very much, it feels a little bit different than past periods of

tension throughout this essentially decade long bull market. Yeah, I suppose at a minimum, you would ask, okay, even if the FED isn't cutting rates into a recession, if what it's trying to do is to extend the expansion, well then realistically, how long are they actually going to be able to do it? Given that we've had what more than a decade now, I think of expansion or exactly a decade. Uh, it's sort of like pushing on a

string at this point. And the other argument, and again I'm I'm getting sort of deja vu because this is something we used to talk about a couple of years ago. But there's this notion of bang for buck. It comes to the FED easing. At what point is the market no longer impressed by the FED stubbishness or you know, easing or policy measures. And it does, especially when you

look at the bond market. Right the bond market is now basically demanding three rates into the rest of the year, which seems really really extreme, and it seems hard to believe that the FED is going to be able to deliver on that. And it just to Mark's point, you know, the soft landing is kind of a myth, the idea that the FED has really particularly any ability to engineer one as evident by what we saw with the raid cuts that started in two thousand seven and two thousand one.

So even a FED that that is well attuned to the risks and observing all them, a credit markets and so forth, and what the bond market is saying, it might just be that you know, they really it just doesn't matter basically to your point as well, right, And one thing is for sure this time next year, we can have Mark Cudmore back on and he will either be a mass of hero within Bloomberg or we can vilify him and make fun of him for missing out

on whatever epic Bowl rally there's been. I thought you were going to say either he'll be a massive hero inside Bloomberg or he won't be inside Bloomberg anymore. That would be too harsh. But either way, I loved talking to Mark, and I'm looking forward to having him on again a year from now. Uh So looking forward to that absolutely. This has been another episode of the Ad Thoughts Podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway. I'm Joe Wisntdal. You could follow

me on Twitter at The Stalwart. Our guest Mark Cudmore is not on Twitter, but I really think he should be. Maybe people can email him and harass him to get on because he would be a great Uh he would be great on there, but he's not on Twitter. But you should follow our producer Laura Carlson on Twitter at Laura M. Carlson. You should follow the Bloomberg Head of Podcasts, Francesca Levie at Francesca Today, as well as the new home of Bloomberg Podcast on Twitter at the handle at podcast.

Thanks for listening.