Bloomberg Audio Studios, Podcasts, Radio NEWSOM. I'm Nancy Cook, a senior national political correspondent for Bloomberg News, in for Stephanie Flanders. This week, Welcome to trump Anomics, the Bloomberg podcast that looks at the economic world of Donald Trump, how he has already shaped the global economy and what on earth is going to happen next. So this week we're bringing the focus back from Europe and the Middle East and asking a question that centers around the mood on Wall Street.
Our bankers still celebrating Trump's return. What does the way Wall Street is moving money tell us about their feelings with me from our offices in New York. Are our two star reporters from our finance team, schreidhar naderin our chief Wall Street correspondent. Welcome Stree. I thought of you as soon as I wanted to do this story because we had so much fun together at the Democratic National Convention in August.
And how different was the mood back then. I think I remember we were tripsing through that convention floor with all the balloons falling down. Unfortunately for the Democrats, that mood did not carry over into November.
You are so right. And then Hannah Lovett, who covers JP Morgan and Morgan Stanley and has been speaking with a lot of executives in the last few months. Welcome Hannah, Hey, thank you for having me. Of course, so it's probably worth remembering. We got an early read on how bank executives were viewing Donald Trump's return to the White House at the World Economic Forum in Davos this year. They were, for the most part elated about the prospect of fewer
regulations and more deals. The consensus was a market focused deal maker was at the helm of the US economy and that would present a new era of opportunity with money to be made. So here we are, roughly one month later, and how to finance executives feel now and what can we learn beyond the rhetoric and more the actual trades. Sree, why don't we start with you?
If you want a good proxy for feelings and vibes on Wall Street, I think the best indicator is obviously the stock price for those individual companies and their firms. And if you look at what's happened since November fifth, since the night of the election, we've pretty much had a consistent charge up on some of the major stocks Goldman Sachs all time high, JP, Morgan all time high. The private equity stocks have also been climbing since November.
So the feeling there at least the immediate reaction to the result has been this will be good for big business, This will be good for big Wall Street. One of the points you just mentioned was deal making. We've so far had about five hundred and sixty billion dollars worth of deals announced globally quarter to date, which is a decent number. But if I go back to Q one twenty twenty four, that number was nine hundred and sixty billion.
That explains why. When Wall Street executors were talking at a major financial services conference last week, one of the questions that analysts kept asking them was, you've all talked about this pickup and deal making, Why has it not really materialized. It feels slower than it should be, And the answer was truly, yes, it is slower. We're having a lot more conversations. A lot of these dealmaking discussions are at the five yard line. They've just not converted.
You could have the gusher open anytime. But it does go back to the idea that yes, there are a lot of things about the Trump administration and the way they talk to big business and about big business that automatically generates this sense of enthusiasm and hope for these companies. But there is also the Trumpian policy uncertainty that they
have to deal with. When you have all the questions about tariffs and it attacks policy changing one day to the other, and Trump's attention span going from his one favorite subject to perhaps something else the next day, and not showing which one will come through and which one will fall by the wayside. That does create a little bit of an obstacle for business, and they'll have to figure out a good way to navigate it.
On that, Hannah, you've been talking to a lot of executives. I wonder how they're feeling about that point that Tree brings up about the tariffs. You know, I know that they are excited about the possibility of lower taxes and less regulation. But the tariff policy, my reporting shows it is really uncertain, And I wonder how executives are feeling about that.
Yeah, totally, So, I would say to Shred's point, there's still broadly this palpable optimism. Various bank executives have described
it as animal spirits and all of that. But it's a bit more CAVEATD today than it was a couple months ago and even a few weeks ago before inauguration, and that really stems from just kind of all the uncertainty and some of these executives, you know, whether it be bank executives or you know, CEOs of companies that they bank and things like that, they need more certainty before they move forward with these strategic actions like you know, deals or IPOs and all of that. And the tariffs
are an element of that. You know. I covered JP Morgan, as you said, and Jamie Diamond, the CEO there, said last month that tariffs, if they're properly used, can be effective to resolve things like unfair competition, national security things like that, but they can also do damage if they're misused. And he's described Trump as a negotiator and said that tariff talk will get people to the table. But I think there's a bit of a wait and see attitude as far as how all of that shakes out now.
On the market side, though, the you know, these banks have these huge trading desks, and it spells more of an opportunity on that, you know, market moves, volatility, you know that that translates generally into banks making money on those trades. So that has continued. We saw some of that in the fourth quarter, and it seems like that's continued into the first quarter.
And if I could quickly jump in and thinking back to the time when Hannah and I started working together about seven years ago, now there was this predominant concept, you know, when we talked about volatility in markets and how it impacted the trading desk, the markets businesses of these big banks. The talk was always around whether it's
good volatility or bad volatility. Funnily enough, I think in the last couple of years, especially with a lot of changes that have been made, banks have gotten themselves into a position where and look, if there is a massive market correction, yes, they would also be affected because they're in the business of buying from one party and selling to another party. So if there are massive moves, they
will be affected. But the businesses have been structured in a way that it's almost their ability to make money, their ability to transact and the revenue is almost dependent on the volume and less so on the direction of markets. And upmarket obviously helps so in general, if you look at this idea that you will have a higher uptick in volatility over the next few months, next few quarters, or perhaps throughout Trump two point zero, that will generally
be good for a lot of these trading businesses. And for the biggest Wall Street firms, that is a big source of revenue, That is a major source of earnings for them.
Absolutely, And I would just say JP Morgan, which has the biggest trading business on Wall Street, they had their highest fourth quarter trading revenue ever when they reported in mid January. And so that's the level of momentum that executives have since described as continuing. And I was speaking to a bank executive earlier today actually who said market movements are generally good for Wall Street unless it's a shock. So I think that really sums up, you know, ratifies what she was saying.
And then I'm also curious, sort of who are the Wall Street whispers in the Trump White House. I know a big complaint of the Biden White House was that they did not have a lot of connections to Wall Street, and so I'm wondering what you're hearing about those two things.
Let me first start with the second part of your question, Nancy, So, I think when we think about some of the key characters in the Trump orbit, Susie Wilds played a massive role in sort of the campaign and now at the White House. She is perhaps one of the few people in that immediate Trump circle, in that immediate group of decision makers and Trump world, who's not that well known to Wall Street. She doesn't really come from that background. Not a lot of people have had time to build
connections with her. But if you move past Susie Wills, you look at the cost of other characters, Howard Lutnik, extremely well known to Wall Street, Scott Besson creature of Wall Street, extremely well known to all the major players, that even folks like Doug Bergham have been like big
clients of firms like Goldman Sachs over the years. So there are enough folks in that orbit that you're very, very unlikely to hear the same complaint about this administration as you heard about the Biden administration about not having someone in there who would take their phone call, who would take a meeting with them. That's not going to be a problem in terms of what these folks are doing, what these players are doing. I was just thinking about
a few memes. Hannah and I were swapping over the last couple of days about Jamie Diamond going down to Capitol Hill, and you know, folks wanted him to comment on the dismantling of the CFPB, I think, and he said, no comment, and then he pulled out this chart that he carries with him, his famous spaghetti chart that shows this wide area of regulators and the oversight they have over JP Morgan. That has been Jamie Diamond's pet pee
for a long time. And it's funny that it almost has a printed outslide that he carries with him every time he goes from New York to DC. In fact, I know Hannah has some interesting color on the backstory of this chart.
Well, yeah, he does bring it with him, and it's funny because it was actually originally in his twenty eleven letter to shareholders, so you know, it's more than ten years that he's had this with him. They call it the spaghetti chart kind of informally, and it has all these agencies and what they oversee and all the kind of interconnecting lines, and you know, I'm looking it right now,
it's quite clear why it's called the spaghetti chart. But yeah, you know, the complaint on Wall Street over the years has been that there are too many cooks in the kitchen basically on Wall Street overside. And so yeah, when they went, when the bank CEOs went to DC last week, it is not surprising to me at all that Jamie had this chart with him.
Yeah, that's one thing that I would like to think about. And it's something that maybe too if you can weigh on, is I think the biggest firms on Wall Street, the biggest banks, for instance, had gotten used to Jamie Diamond's ten year old beef a side with the regulatory agenda, had gotten used to this idea that they had to invest a lot for the regulatory needs, for the regulatory requirements.
But effectively what they did was also build this wide, deep moat because most other people cannot come in and play on your turf. They if the cost of entering that business is prohibitively high. That has helped especially and I think about like the key trading businesses and some of the other key businesses that are two, three, four top players. Everyone else sort of sits outside that mode.
So they've benefited greatly from that. So if you have a rapid unraveling of the regulatory agenda, doesn't it in some way backfire for these biggest players.
That's a wonderful point, Hannah. Do you have any insight into them?
The way that I've heard it described over the years is kind of death by a thousand cuts from the banks, which is perhaps a bit dramatic, but basically, if you go business by business, there are companies, non banks that have been able to play in that realm in a big way, but not you know, there haven't been new entrance to the kind of full on big bank systemically
important category. So yeah, I think it's kind of tbd how that all shakes out, you know, in a world where there's a lot of deregulation, which you know, lets the banks do more but also lowers those barrier centry.
That's a great point. And just from where I sit in Washington, you know, having done a lot of reporting in the last week on elon mus stoge efforts, so much of that group is staff by you know, tech people who I think do want to you know, less regulation, but they also want to sort of upset establish business and the status quo, and so that is quite interesting. I think that you know, just the idea that it would make it easier for other companies to come in.
One of you brought up Scott Besson, who is a former hedge funder and who is now Treasury Secretary. That's going to be such a key role this year as I think about cutting taxes again, I wonder how his tenure is being viewed so far by by finance executives.
I think so far they have no complaints. Scott Besson's proved to be exactly what they thought he would be. They see him as a bit of a moderating influence in Trump World. Of course, that might not really win you a lot of kudos and Trump World itself, and Scott Besson will perhaps have to do more to prove himself in Trump's in a circle, make sure he's spending more of his weekends now mar Lago instead of back
at home in South Carolina. But for Wall Street and for markets in general, Scott Bessen was a choice that they all cheered, that they all welcome. They realize this is someone whose business focus, whose markets focus, and they could get behind this pick. Scott Pasant in that position is good for Wall Street, And when you think about the key proposals about taxes, lowering tax rates. Yes, Scott
Bessand will champion that. The question though, is is it going to be Scott Besant who makes sure that the tax cut policy actually makes its way through Congress. I don't know how much of a say in power he will have that, especially when you consider a Congress where, especially in the House, the Republicans have a very very slim majority, and you've already seen that there are various
factions today's GOP. There half the times they're battling the Democrats, but most of the times in America, majority of the time they're battling their own different factions within the GOP. And they have to figure out a way to put forward a unified front. And that is important for Wall Street. I was just looking at some numbers before coming on here. When you look at pre tax earnings that a Goldman Sachs at a Morgan Stanley, that's about twenty billion dollars
a year. Let's say you can cut corporate tax rates, their effective tax rate can go down by five percent, you know, just making up a scenario which a nice round number like Donald Trump would prefer, that's about a billion dollars in savings. A billion dollars in savings is you could have a twenty thirty forty percent slow down in deal making and therefore the fees that they make from that advisory business that you know, one of the key components they've been talking about when they talk about
this turbocharge deal making environment. You could still have a big, massive slow down there, and yet that savings from the tax cuts could offset that. That's how important the tax cut agenda will be for these big banks. So they would hope that Scott Besson could work his magic. More importantly, they would pray for unity within GP ranks for that to come through.
Howard Lutnik is the Commerce Secretary. He wanted to be Treasury Secretary, but Trump passed him over. He has given him a powerful perch where he's in charge of all the tariffs. Howard Lutnik is a very familiar character to you all because he ran Canter Fitzgerald. But what should Washington d C. Know about the way Howard Lutnik operates as he sort of takes over a huge portfolio here.
The most interesting dynamic about Howard Lutnik was how he almost Dick cheneyed himself in the leading the hunt for the Treasury secretary, only to say maybe I would be the best Treasury secretary. So the first few weeks, especially during the transition months, a lot of the talk in town was about this warring dynamic between Scott Bessant and Howard Lutnik. That's obviously not a good look in an administration that's so focused on these items of tariff's, tax's,
deregulations and whatnot. You know that this person in the Commerce seat and the person in the Treasury seat have to work hand in hand. They've even been given this mandate of figuring out how to create this sovereign wealth fund that also involves a lot of Scott Beson and Lutnick working together. And I think Kevin has it involved there as well. So more than how he operates on Wall Street, which again he will say and do things that are generally appreciated by Wall Street. He is from
New York. He's an old time fixture. He knows everyone in the city, so he knows all of Wall Street. That all works just fine. In fact, much like Trump, he was also a one time Hillary Clinton fundraiser and now he's Team Trump. Much like Donald Trump is now Team Trump after once being a Hillary Currenton fundraiser. But the fact remains that Wall Street will have no issues
with Lutnick. It's more whether Lutnik can navigate the dynamics of getting along with everyone in Team Trump, especially someone like Scott Beson, to be able to push through the agenda, the ambitious agenda that they need to push through, in a way that does not rattle markets, in a way
that also is fiscally responsible. You know, they talk about the ballooning debt burden, but when you think about the deregulatory agenda and the massive tax cuts that they're trying to push through, that will have an impact on the deficits. So how do you offset for all of that? It will require a lot of careful planning with the rank and file of the GOP in Congress, with the various
administration members, and with the various cabinet members. That's the dynamic that Lutnik will have to be focused on, because that will be a difficult needle to thread.
Steve Minuchin was Treasury Secretary in Trump's first term, and Wall Street executives liked him then, and they looked back fondly on his tenure. You know, he was there the whole time. He was seen as kind of a steady presence in that world, and it's someone who they recognize and that goes a long way. And so I would say that with both Bessen and Lutnik now it's a similar dynamic.
I'm so curious to see how Lutink fares because just as a political reporter, he made a bunch of Trump people, you know, on the politics side of things, quite angry during the transition when he sort of ran roughshot over things and put his own name up for Treasury secretary. So I am I asked, because I am really watching sort of how he operates in a political environment. One final question, and Hannah, I want to go to you first. I am curious. You know, there's so much political geo
instability right now. You know, we are trying to figure out what's going to happen with the end of the war in Ukraine. As Trump thinks about that, it's very uncertain what his relationship with Heran will be like. He has said that he wants all the Palestinians to leave Gaza.
There's just a lot of big foreign policy questions right now, and I'm wondering if that concerns the finance executives that you speak to at all and just sort of how they're factoring that into their plans for the next year or so.
Yeah, it absolutely does. I think the way that that translates to the business side of things, or one of the ways that that translates is, you know, when you look at deals like M and A and the cross border aspect of that, are cross border deals getting done. And we were talking earlier about the post election euphoria that continued, but I was speaking to a bank executive last week who was describing it as US firms are waiting for the dust to settle. So you know that
euphoria hasn't been immediately translating. But in Europe there was apprehension immediately post election that has turned a bit more into how can we get in on US economic growth? And then you know in Asia, especially China and Hong Kong, there's a sense of it's not as bad as it
could have been in the early days and weeks. So I think that as you're looking across kind of the different regions, there are different expectations and then reactions to you know, the things that are happening as they happen, but it is there is still broad sense that it's early days in this administration. People are kind of waiting to see how things shake out.
I would go back and look at the world economic order and say, perhaps since the two thousand and eight financial crisis, if you look at different parts of the world, Europe massively struggled. Africa is still a growth story but has now not hit the breakout phase. Middle East has been a bright spot. That have been strong emerging economies in Asia, which have had their stumbles once in a while, but in general, over the last decade or so, the
American growth story in some ways has been unparalleled. And perhaps that leads to this assumption that America has an island onto itself and what happens in the rest of the world doesn't necessarily affect the country, And you could assume that in a America first focused administration that is the predominant thought. But I feel that the world is way too interconnected that you can't just overnight snap your fingers and say, you know, each one to himself. That
will be very difficult. So from that perspective, when you think about how the geopolitical situation is playing out worldwide. If you have a scenario where your enemies remain your enemies and you turn your allies into your enemies Que Canada, Q, European Union and the big speech from JD Vans or the Munich Security Conference over the weekend, she suddenly start to distance all of those players who've been your allies, who've been part of you know, enabling helping your growth story.
Then it does reach a situation where it starts to worry markets, it starts to worry the big investors, and it starts to worry the big films. That is one reason why Jamie Diamond's almost been like a broken record for the last half a decade talking about how the geopolitical risks in the world today are the biggest risk faced by the world. To an extent, it almost feels like he's been talking about these dark clouds on the horizon without any real follow through on that. But he's
not wrong. Not a lot has to go wrong for things to turn in the absolute wrong direction, and that will be a cause for worry. And at that time you can forget about the cheering on of dealmaking and tax cuts and deregular. You have much scarier things to worry about.
What's one thing that you think the listeners should know just about Trump and the Wall Street relationship that we haven't talked about yet.
He lives and dies by the market. He judges himself by how the markets performed. So he might be wedded to a policy, but it almost feels like if the market gives it a veryative negative reaction, the sense is that Trump will backtrack.
And that is something that Wall Street executives have almost been taking solace in, you know, in recent weeks, and probably will continue.
To do so, maybe almost taking it for granted. Let me caveat that by saying that is the assumption on Wall Street in the second Trump administration, where it seems more untethered from prior norms. It's not entirely clear to me that that still will remain his guiding philosophy, but at least Wall Street things and hopes and beliefs that still remains the guiding principle about Donald Trump when they think about Donald Trump.
That's a great point. I do think this stock market was sort of his primary form of polling in his first term. But I think you're right I think he is a more self assured leader now and fairly confident in how he's moving. And so you're right, I'm not sure sort of if that if the stock market and how it's performing will be a checks and balances on him this time. Shre thank you so much for joining us. This was wonderful to have you.
Always great chatting with you.
Nancy and Hannah, thank you so much. It was great to speak with you from New York.
Yeah, thank you for having us.
Thanks for listening to this week's trump Andomics from Bloomberg. It was hosted by me Nancy Cook. I was joined by shridehar Nojeron and Hannah Lovett. Trump Andomics is produced by Summer Saudi and Moses Andam with help from Chris Martlou Special thanks to Dashel Bennett and Jared Rudderman. Sound designed by Blake Maples. Brendan Francis Newman is our executive producer. To help others find the show, please rate and review wherever you listen to podcasts.
Mhmm