Bloomberg Audio Studios, Podcasts, radio News.

Bloomberg Audio Studios, Podcasts, radio News.

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app. Black Rocks Kate Moore saying this, after a healthy pullback inequities over the last few weeks, the pressure on earnings and constructive guidance is particularly high. The biggest right tail risk for twenty twenty four is that earnings come in much stronger than current forecast. Kate is with us around the table.

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app. Black Rocks Kate Moore saying this, after a healthy pullback inequities over the last few weeks, the pressure on earnings and constructive guidance is particularly high. The biggest right tail risk for twenty twenty four is that earnings come in much stronger than current forecast. Kate is with us around the table.

Kate, good mornch Good morning.

Kate, good mornch Good morning.

It's been too long. It's great to see you in person here in New York. Let's talk about that upside potential on the big tech names over the next week. Ac count great is it?

It's been too long. It's great to see you in person here in New York. Let's talk about that upside potential on the big tech names over the next week. Ac count great is it?

So?

So?

I think the big thing to watch here is not what happened in the first quarter. I mean, we want to see some monetization on AI, We want to see constructive guidance on AI. But I really think it's going to be the tone for a management. You guys were talking about Tesla a moment ago, and I think this was the critical thing turning the stock price there is that it sounds like there's a plan, and I think there's been a lot of good news priced into a lot of the big tech companies. But this is a chance to really kind of show me what does the rest of twenty twenty four look like, how are we thinking about AI spending, what does customer demands look like?

I think the big thing to watch here is not what happened in the first quarter. I mean, we want to see some monetization on AI, We want to see constructive guidance on AI. But I really think it's going to be the tone for a management. You guys were talking about Tesla a moment ago, and I think this was the critical thing turning the stock price there is that it sounds like there's a plan, and I think there's been a lot of good news priced into a lot of the big tech companies. But this is a chance to really kind of show me what does the rest of twenty twenty four look like, how are we thinking about AI spending, what does customer demands look like?

And then we can go from there.

And then we can go from there.

Do you say we need a c sweet therapy session on anix cos Yeah, we.

Do you say we need a c sweet therapy session on anix cos Yeah, we.

Need to see a constructive happy face from all of these leaders.

Need to see a constructive happy face from all of these leaders.

By the way, a funny bit.

By the way, a funny bit.

We've talked about this before, but we always want to listen to CEOs and say they're kind of the strategists, are the ones thinking big picture. But it's also really really important to listen to the CFOs who tend to get really down into the dirt. And so I'm going to be listening to both for both the strategy as well as the hard data well happy talk.

We've talked about this before, but we always want to listen to CEOs and say they're kind of the strategists, are the ones thinking big picture. But it's also really really important to listen to the CFOs who tend to get really down into the dirt. And so I'm going to be listening to both for both the strategy as well as the hard data well happy talk.

Work for the likes of Meta or even Alphabet.

Work for the likes of Meta or even Alphabet.

Given how much the shares have gained so far this year, I think we've taken some pressure off of those stocks in recent weeks, as you know, some prices have come down, and we've seen kind of growth in general as a factor fade a little bit since the end of the first quarter. That said, they really do need to deliver.

Given how much the shares have gained so far this year, I think we've taken some pressure off of those stocks in recent weeks, as you know, some prices have come down, and we've seen kind of growth in general as a factor fade a little bit since the end of the first quarter. That said, they really do need to deliver.

I think these are well owned names. They are well loved names.

I think these are well owned names. They are well loved names.

They are names that are expected to really lead the market, not just through twenty twenty twenty four, but through the rest.

They are names that are expected to really lead the market, not just through twenty twenty twenty four, but through the rest.

Of this cycle.

Of this cycle.

So I think it's possible for them to get people excited, but we recognize that they're well held, well owned going into reporting.

So I think it's possible for them to get people excited, but we recognize that they're well held, well owned going into reporting.

Moving outside of big tech, your idea here is a really fascinating one that the biggest risk is upside risk, right that we actually get better than expected earnings data and that could fuel a rally among a lot of pessimism still out there. Why do you think that's the biggest upside risk at a time where it seems like there's still a lot of bullish sentiment right now.

Moving outside of big tech, your idea here is a really fascinating one that the biggest risk is upside risk, right that we actually get better than expected earnings data and that could fuel a rally among a lot of pessimism still out there. Why do you think that's the biggest upside risk at a time where it seems like there's still a lot of bullish sentiment right now.

So I think it's about the mechanics of how we get to the bottom line that really matter here, and in this case, I want everyone to have some confidence in US companies doing the right thing, continuing to manage their cost continuing to manage their labor force, thinking really long and hard about where they're putting their dollars in each businesses, so that they can really deliver on earnings even an environment where revenue growth is just okay. And I think we've heard that from some of the companies that have reported so far. It's really the bottom line I want to see companies deliver on. And we saw actually since the earnings recession ended that this focus on cost control and this focus on delivering earnings has been front and center.

So I think it's about the mechanics of how we get to the bottom line that really matter here, and in this case, I want everyone to have some confidence in US companies doing the right thing, continuing to manage their cost continuing to manage their labor force, thinking really long and hard about where they're putting their dollars in each businesses, so that they can really deliver on earnings even an environment where revenue growth is just okay. And I think we've heard that from some of the companies that have reported so far. It's really the bottom line I want to see companies deliver on. And we saw actually since the earnings recession ended that this focus on cost control and this focus on delivering earnings has been front and center.

This doesn't speak of some sort of screaming hot economy though.

This doesn't speak of some sort of screaming hot economy though.

Yeah, I don't think we want a screaming hot economy for a variety of different reasons. We want a solid economy, we want solid demand, we want rates and to be stable, and we want certainty or a light least lack of uncertainty when it comes to policy. I think that's an environment that corporates are looking to kind of capitalize on and that they do well on and one thing we're not mentioning here is the election year, and of course the uncertainty around the election outcome and what that might mean for policy is weighing on companies a little bit. So if we have stability in these other areas and growth and demand and policy rates are relatively stable, I think that gives them some confidence to continue to do these cost cutting and really managing their margins.

Yeah, I don't think we want a screaming hot economy for a variety of different reasons. We want a solid economy, we want solid demand, we want rates and to be stable, and we want certainty or a light least lack of uncertainty when it comes to policy. I think that's an environment that corporates are looking to kind of capitalize on and that they do well on and one thing we're not mentioning here is the election year, and of course the uncertainty around the election outcome and what that might mean for policy is weighing on companies a little bit. So if we have stability in these other areas and growth and demand and policy rates are relatively stable, I think that gives them some confidence to continue to do these cost cutting and really managing their margins.

How are CEOs thinking about the election? Imagine on these earnings call they get asked about it, and we have to really walk a very fine line, be very careful.

How are CEOs thinking about the election? Imagine on these earnings call they get asked about it, and we have to really walk a very fine line, be very careful.

Yeah, I mean, I think that they're being deliberately evasive because they don't really know what to expect. And we know that there's a huge amount of different policy outcomes for both administrations depending on who wins in November, because a lot is going to depend on Congress. So they don't want to bank too much one way or another on support or on challenges. They're just trying to kind of manage over the next few quarters.

Yeah, I mean, I think that they're being deliberately evasive because they don't really know what to expect. And we know that there's a huge amount of different policy outcomes for both administrations depending on who wins in November, because a lot is going to depend on Congress. So they don't want to bank too much one way or another on support or on challenges. They're just trying to kind of manage over the next few quarters.

But given the fact that we do know who these two individuals are, Yeah, they're basically two incumbents up against each other. Does that help executives plan for the future.

But given the fact that we do know who these two individuals are, Yeah, they're basically two incumbents up against each other. Does that help executives plan for the future.

I think we understand big picture some of the main tenets of each of these policy programs. That said, it's really hard to say what the details are going to be, what the timing of any changes might be. And I'm going to go back to this Congress point again. There's a limitation to how much an executive can get done, a chief executive in this case, without.

I think we understand big picture some of the main tenets of each of these policy programs. That said, it's really hard to say what the details are going to be, what the timing of any changes might be. And I'm going to go back to this Congress point again. There's a limitation to how much an executive can get done, a chief executive in this case, without.

Support from Congress.

Support from Congress.

So I'm going to be watching, frankly, the Senate and House races very closely going into the fall.

So I'm going to be watching, frankly, the Senate and House races very closely going into the fall.

Which is the reason why a lot of people are looking for some sort of split in terms of Republican and Democrat on the different sides of the government. I am curious about what you said, which is at least stable rates.

Which is the reason why a lot of people are looking for some sort of split in terms of Republican and Democrat on the different sides of the government. I am curious about what you said, which is at least stable rates.

Which raises this question.

Which raises this question.

If the Fed holds rates at this level, is that fine as long as there isn't any volatility, that that's going to be enough to potentially fuel a pretty significant rally in equities.

If the Fed holds rates at this level, is that fine as long as there isn't any volatility, that that's going to be enough to potentially fuel a pretty significant rally in equities.

I think stability and certainty are things that equity markets love, right and when it comes to rates, would be nice if we saw some raycots, sure, but we also know that eighty percent of US large cap debt is long term fixed.

I think stability and certainty are things that equity markets love, right and when it comes to rates, would be nice if we saw some raycots, sure, but we also know that eighty percent of US large cap debt is long term fixed.

We don't really have to worry about this.

We don't really have to worry about this.

In twenty twenty four or even the beginning of twenty twenty five. Well, we do want to kind of, you know, be able to incorporate is you expectations for the next couple quarters and if we're constantly adjusting and it's will the FED be cutting or will they not? I think that holds back some decisions that corporate leaders need to make which would be supportive for growth. So stability is better than any outcome, I would.

In twenty twenty four or even the beginning of twenty twenty five. Well, we do want to kind of, you know, be able to incorporate is you expectations for the next couple quarters and if we're constantly adjusting and it's will the FED be cutting or will they not? I think that holds back some decisions that corporate leaders need to make which would be supportive for growth. So stability is better than any outcome, I would.

Say, Well, to Enry's point, it's hard to talk about stability at a time where we can't really come up with any clear narrative. When we're talking about the potential for tariffs and we're talking about geopolitical risk. I mean, how much does that sort of give you some pause in terms of the degree of bullishness and where you're looking to hedge just on the margins.

Say, Well, to Enry's point, it's hard to talk about stability at a time where we can't really come up with any clear narrative. When we're talking about the potential for tariffs and we're talking about geopolitical risk. I mean, how much does that sort of give you some pause in terms of the degree of bullishness and where you're looking to hedge just on the margins.

Well, I think the thing I'm watching in regards to that uncertainty, the geopolitical uncertainty, and perhaps the policy the government policy uncertainty is what happens to capital expenditure, and particularly if companies just go through with regular maintenance necessary capex and hold off on real expansionary Capex until they get through the US election, But of course we know it's not just the US election. They're elections all over the world of this year, and frankly, you know, US companies are mostly or many of the large cab ones are geographically dispersed, right, So they have big businesses in many different regions, so policies in each of those regions will affect their decisions. So I'm kind of waiting to see how do they talk about capital expenditure. Are they waiting to get more clarity on the political side, or do they see such a long term secular tailwind to whatever this project is that they're willing to spend despite the uncertainty.

Well, I think the thing I'm watching in regards to that uncertainty, the geopolitical uncertainty, and perhaps the policy the government policy uncertainty is what happens to capital expenditure, and particularly if companies just go through with regular maintenance necessary capex and hold off on real expansionary Capex until they get through the US election, But of course we know it's not just the US election. They're elections all over the world of this year, and frankly, you know, US companies are mostly or many of the large cab ones are geographically dispersed, right, So they have big businesses in many different regions, so policies in each of those regions will affect their decisions. So I'm kind of waiting to see how do they talk about capital expenditure. Are they waiting to get more clarity on the political side, or do they see such a long term secular tailwind to whatever this project is that they're willing to spend despite the uncertainty.

Or international companies better hedged or worse hedged right now, given the fact that they do face different political regimes and frankly different economic realities, well, it's.

Or international companies better hedged or worse hedged right now, given the fact that they do face different political regimes and frankly different economic realities, well, it's.

Very very challenging to manage a global multinational corporation. Regulations here, political change, there, change in demand, consumer behavior.

Very very challenging to manage a global multinational corporation. Regulations here, political change, there, change in demand, consumer behavior.

So I get all of that.

So I get all of that.

I like the geographic diversity though of these multinationals. I think that's going to really lend strength to them through multiple parts of the business cycle and through all these elections.

I like the geographic diversity though of these multinationals. I think that's going to really lend strength to them through multiple parts of the business cycle and through all these elections.

You like Japan. Can we finish on Japan?

You like Japan. Can we finish on Japan?

We can?

We can?

Does the effects market matter? Sort of preoccupied with the prospect of breaking through one point fifty five, which with about that far away from doing Does that matter?

Does the effects market matter? Sort of preoccupied with the prospect of breaking through one point fifty five, which with about that far away from doing Does that matter?

I mean it matters, But I think there's more on the ground that we like about the Japanese.

I mean it matters, But I think there's more on the ground that we like about the Japanese.

Most so we hear can you come for the details?

Most so we hear can you come for the details?

Yeah, I mean I think that we're seeing a change in consumption. I think, for the.

Yeah, I mean I think that we're seeing a change in consumption. I think, for the.

First time in a very long time, over ten years, a real shift, and how corporates are being forced to behave which is much more shareholder friendly, you know what. I like to see more Japanese individual investors buy into the market.

First time in a very long time, over ten years, a real shift, and how corporates are being forced to behave which is much more shareholder friendly, you know what. I like to see more Japanese individual investors buy into the market.

Absolutely, we don't want this just to.

Absolutely, we don't want this just to.

Be a market that's participated in by international investors. But I think both the macro side and some of the structural bits in the market are quite supportive.

Be a market that's participated in by international investors. But I think both the macro side and some of the structural bits in the market are quite supportive.

The currency could be supportive as well, but.

The currency could be supportive as well, but.

I don't want to base my thesis on that because frankly, I don't have a great track record on FX trading.

I don't want to base my thesis on that because frankly, I don't have a great track record on FX trading.

Yeah, FX is difficult, but what I hear from you is this is not just some sort of short term tactical trade. This is fundamental that's longer term.

Yeah, FX is difficult, but what I hear from you is this is not just some sort of short term tactical trade. This is fundamental that's longer term.

We believe it's fundamental, and so we're buying really high quality companies that benefit both from things like you know, the the macro demand global So this is where geographic diversity really helps, as well as companies that are going to kind of come up in the market as they make these big corporate changes.

We believe it's fundamental, and so we're buying really high quality companies that benefit both from things like you know, the the macro demand global So this is where geographic diversity really helps, as well as companies that are going to kind of come up in the market as they make these big corporate changes.

Okay, this was awesome on the dates of this morning, the dates of tomorrow and going into the FED next week, and please to say that with us is Tiffany Wildeck of Pimco. Tiffany, wonderful to catch up with you again. Just had a bit of economic datesa this morning. Going get into GDP tomorrow. What are you expecting from the first quarter and how do you think everything we've seen in the first quarter of this year will shape the conversation next week.

Okay, this was awesome on the dates of this morning, the dates of tomorrow and going into the FED next week, and please to say that with us is Tiffany Wildeck of Pimco. Tiffany, wonderful to catch up with you again. Just had a bit of economic datesa this morning. Going get into GDP tomorrow. What are you expecting from the first quarter and how do you think everything we've seen in the first quarter of this year will shape the conversation next week.

Yeah, so we're looking for a pretty strong report. I think the Bloomberg consensus, as you mentioned, is two and a half, but our lene as well is on the higher side of that. And I think the more important thing that we'll be focused on, you know, is just the core measure of GDP final domestic demand growth which economists call it.

Yeah, so we're looking for a pretty strong report. I think the Bloomberg consensus, as you mentioned, is two and a half, but our lene as well is on the higher side of that. And I think the more important thing that we'll be focused on, you know, is just the core measure of GDP final domestic demand growth which economists call it.

That's going to be incredibly strong.

That's going to be incredibly strong.

That strips out the volatyle trade in inventories categories, and that looks like that's going to be above three, you know. And the thing that we've been really highlighting and focusing in is that will be the third quarter in a row that we've gotten core GDP growth of above three, and that's something that we haven't seen since twenty fourteen, absent the pandemic related rebounds. So all of this is to say is that GDP in the United States is incredibly strong, and that strength has continued after twenty twenty three. We've seen strong momentum going into twenty twenty four. All of that suggests that inflationary pressures in the economy, you know, we're running, we're running at a hot economy here, and it's not really consistent with inflationary pressures further moderating.

That strips out the volatyle trade in inventories categories, and that looks like that's going to be above three, you know. And the thing that we've been really highlighting and focusing in is that will be the third quarter in a row that we've gotten core GDP growth of above three, and that's something that we haven't seen since twenty fourteen, absent the pandemic related rebounds. So all of this is to say is that GDP in the United States is incredibly strong, and that strength has continued after twenty twenty three. We've seen strong momentum going into twenty twenty four. All of that suggests that inflationary pressures in the economy, you know, we're running, we're running at a hot economy here, and it's not really consistent with inflationary pressures further moderating.

Do you think that we'll shape the language and the statement next Wednesday when we open that up at two pm Eastern time, It's that going to look any different?

Do you think that we'll shape the language and the statement next Wednesday when we open that up at two pm Eastern time, It's that going to look any different?

Yeah?

Yeah?

I mean, I certainly I think you could see some changes to the statement, But I think what markets will be more focused on is what Powell says in the press conference and his you know, in the past. At least Powell has made reference to the SEP projections prior SEP projections at a non SUP meeting and given us some hints on how he thinks they could change. And we think that's potentially what he could do now set the stage for more revisions to the SEP that we're going to get in June, you know, say that the inflation forecasts are likely going to have to be revised up, and then as a result of.

I mean, I certainly I think you could see some changes to the statement, But I think what markets will be more focused on is what Powell says in the press conference and his you know, in the past. At least Powell has made reference to the SEP projections prior SEP projections at a non SUP meeting and given us some hints on how he thinks they could change. And we think that's potentially what he could do now set the stage for more revisions to the SEP that we're going to get in June, you know, say that the inflation forecasts are likely going to have to be revised up, and then as a result of.

That sort of hint at the.

That sort of hint at the.

Fact that you could take out maybe one or even two cuts in the forecast for twenty twenty four.

Fact that you could take out maybe one or even two cuts in the forecast for twenty twenty four.

Tiffany, I hate to do this.

Tiffany, I hate to do this.

I feel kind of a little bit dirty doing this, but.

I feel kind of a little bit dirty doing this, but.

Is this a pivot to the pivot that we got in December?

Is this a pivot to the pivot that we got in December?

Well, it does seem like in some sense the pivot party from December is over, you know, and I think that'says a result of the inflation prints that we've seen, you know, and again, just the economy is just incredibly strong, you know. We have argued you know that, you know, the so called last mile on the inflation in the inflation race is going to be the toughest, you know, and that's just because we have a strong economy, labor markets are tight, and that and that just is likely to result in inflation hanging above their target. And really the question is is, you know, are they okay with that? And it seems like, you know, there is some threshold maybe we think it's three percent where they won't be okay with that, but you know, above three it's okay. But again, you know, it's it's a bit you know, monetary policy is a bit of an art and a science here, so you know, I think the art is that you know, they don't really need to be cutting, they shouldn't be in a rush, and so really it's up to them to choose when they start to do it.

Well, it does seem like in some sense the pivot party from December is over, you know, and I think that'says a result of the inflation prints that we've seen, you know, and again, just the economy is just incredibly strong, you know. We have argued you know that, you know, the so called last mile on the inflation in the inflation race is going to be the toughest, you know, and that's just because we have a strong economy, labor markets are tight, and that and that just is likely to result in inflation hanging above their target. And really the question is is, you know, are they okay with that? And it seems like, you know, there is some threshold maybe we think it's three percent where they won't be okay with that, but you know, above three it's okay. But again, you know, it's it's a bit you know, monetary policy is a bit of an art and a science here, so you know, I think the art is that you know, they don't really need to be cutting, they shouldn't be in a rush, and so really it's up to them to choose when they start to do it.

You said, the pivot party is over, and when people were talking about the pivot party, it was including.

You said, the pivot party is over, and when people were talking about the pivot party, it was including.

A real rally in risk assets.

A real rally in risk assets.

So I wonder, okay, pivot party is over, the earnings party just getting started. Is this basically an economy that can handle where we're at right now? And that's basically what we're hearing from a lot of people around this table.

So I wonder, okay, pivot party is over, the earnings party just getting started. Is this basically an economy that can handle where we're at right now? And that's basically what we're hearing from a lot of people around this table.

Yeah, I mean it's certainly if you not only obviously, if you the equity market. We look at equity risk premiums and even though you've seen some weakness in the equity market, you know, the additional yield over treasuries, earning ziel that you get over treasuries is still looking okay. There are still looking rather narrow in the equity market. So from evaluation perspective, you know, equities you know, still look.

Yeah, I mean it's certainly if you not only obviously, if you the equity market. We look at equity risk premiums and even though you've seen some weakness in the equity market, you know, the additional yield over treasuries, earning ziel that you get over treasuries is still looking okay. There are still looking rather narrow in the equity market. So from evaluation perspective, you know, equities you know, still look.

Somewhat rich here.

Somewhat rich here.

But but nevertheless, I would just say, if we look at the GDP data, the data that I focus on more, we're seeing a reacceleration in cyclical sectors of the economy, that is, residential investment, you know, even in cap backs and things like that. Corporate profits, Nippu corporate profits have have reaccelerated as well. And this is at these high level of interest rates. So it does seem like the peak effects of the monetary policy drags, you know, they are increasingly behind us. And that suggests that, yeah, maybe the economy can withstand rates at these higher levels.

But but nevertheless, I would just say, if we look at the GDP data, the data that I focus on more, we're seeing a reacceleration in cyclical sectors of the economy, that is, residential investment, you know, even in cap backs and things like that. Corporate profits, Nippu corporate profits have have reaccelerated as well. And this is at these high level of interest rates. So it does seem like the peak effects of the monetary policy drags, you know, they are increasingly behind us. And that suggests that, yeah, maybe the economy can withstand rates at these higher levels.

Which raises this question how much do financial conditions frankly, how rich stocks are, how well bid credit markets are, how much does that influence how long inflation can be persistently above the FEDS target.

Which raises this question how much do financial conditions frankly, how rich stocks are, how well bid credit markets are, how much does that influence how long inflation can be persistently above the FEDS target.

Yeah, I think I think overall, you know, the federal reserve where monetary policy works through not only the policy rate, but but a broader context of financial.

Yeah, I think I think overall, you know, the federal reserve where monetary policy works through not only the policy rate, but but a broader context of financial.

Conditions, you know.

Conditions, you know.

And the point that we've been making lately is that you need financial conditions to tighten here in order to cool the economy down. And the question is how does the FED engineer that. Now, partly they can engineer that through just staying on hold. The bond market is still pricing in cuts, So the longer they push that out stay on hold, you know, that should sort of mechanically tighten financial conditions. And I think that's what the FED will try to do and just see if that's enough, you know, and maybe rates on hold longer will get them that financial conditions tightening that they need in order to cool things down a bit here, you know. But of course if not, then they'll have to find other ways to try to tighten a little bit more.

And the point that we've been making lately is that you need financial conditions to tighten here in order to cool the economy down. And the question is how does the FED engineer that. Now, partly they can engineer that through just staying on hold. The bond market is still pricing in cuts, So the longer they push that out stay on hold, you know, that should sort of mechanically tighten financial conditions. And I think that's what the FED will try to do and just see if that's enough, you know, and maybe rates on hold longer will get them that financial conditions tightening that they need in order to cool things down a bit here, you know. But of course if not, then they'll have to find other ways to try to tighten a little bit more.

I know we're all focused on inflation this week, but I want to ask you about the jobs market because in your note you talk about elevated immigration boosting boats supply and demand. What happens if we still don't have those same levels of immigration, Whether or not it's executive order that Henrietta Trace says to be coming out of the Biden administration or a whole new paradigm next year, if we get an entire different administration.

I know we're all focused on inflation this week, but I want to ask you about the jobs market because in your note you talk about elevated immigration boosting boats supply and demand. What happens if we still don't have those same levels of immigration, Whether or not it's executive order that Henrietta Trace says to be coming out of the Biden administration or a whole new paradigm next year, if we get an entire different administration.

Yeah, so that will result in growth slowing for sure, because you know, because immigration boosts both supply and demand, the effects on inflation are are more nuanced, we would argue, and they're they're less clear. So you know, what we could see is if you have immigration that is falling without a lot of asylum seekers cross you know, across our borders over the last couple of years, we estimate that that's contributed around point five fifty basis points to Hunter basis points to GDP growth. So if you don't get that, we will absolutely see growth slowing. But in terms of the inflationary effects, you know, that's certainly less clear. You know, now there are folks that are in the economy now, they have workers permits, they're waiting for their asylum hearings. You know, I guess if there's policies to try to you know, make them wait in Mexico or other places like that, you know that that growth drag will be even more you know, but it'll just we'll just have to see how that plays out.

Yeah, so that will result in growth slowing for sure, because you know, because immigration boosts both supply and demand, the effects on inflation are are more nuanced, we would argue, and they're they're less clear. So you know, what we could see is if you have immigration that is falling without a lot of asylum seekers cross you know, across our borders over the last couple of years, we estimate that that's contributed around point five fifty basis points to Hunter basis points to GDP growth. So if you don't get that, we will absolutely see growth slowing. But in terms of the inflationary effects, you know, that's certainly less clear. You know, now there are folks that are in the economy now, they have workers permits, they're waiting for their asylum hearings. You know, I guess if there's policies to try to you know, make them wait in Mexico or other places like that, you know that that growth drag will be even more you know, but it'll just we'll just have to see how that plays out.

It's infinity. As we were talking and we're talking about US strength, how pronounced there is, how much longer it could last. I was just thinking of your sycl care outlook that you helped lead and readies through that note, the amount of divergence that we can expect. What about everybody else? What is the growth back drop going to look like the US versus the rest of the world.

It's infinity. As we were talking and we're talking about US strength, how pronounced there is, how much longer it could last. I was just thinking of your sycl care outlook that you helped lead and readies through that note, the amount of divergence that we can expect. What about everybody else? What is the growth back drop going to look like the US versus the rest of the world.

Yeah, well, well, ultimately, you know, we we still think that, you know, there is some durability in this US exceptionalism story. You know that started in twenty twenty three, you know, and really the factors that we believe contributed to that was just the fact that the US government fiscal stimulus during the pandemic was much larger than it was in other developed markets. We've also seen you know what I call less mean reversion in our federal government fiscal deficits. Since then, they've been kind of structurally hanging around six to seven percent. Everybody else has managed to get, you know, more fiscal retrenchment. The other thing for the United States is that we've seen less passed through of monetary policy, you know, via the interest rates that people actually pay. We have a large stock of mortgages that are you know, low duration, low interest pay, long duration, low interest paying. That's just not you know, the consumer is not feeling really the effects of higher mortgage rates in the United States.

Yeah, well, well, ultimately, you know, we we still think that, you know, there is some durability in this US exceptionalism story. You know that started in twenty twenty three, you know, and really the factors that we believe contributed to that was just the fact that the US government fiscal stimulus during the pandemic was much larger than it was in other developed markets. We've also seen you know what I call less mean reversion in our federal government fiscal deficits. Since then, they've been kind of structurally hanging around six to seven percent. Everybody else has managed to get, you know, more fiscal retrenchment. The other thing for the United States is that we've seen less passed through of monetary policy, you know, via the interest rates that people actually pay. We have a large stock of mortgages that are you know, low duration, low interest pay, long duration, low interest paying. That's just not you know, the consumer is not feeling really the effects of higher mortgage rates in the United States.

They are elsewhere.

They are elsewhere.

So we think these things can can continue, you know, at least through our cyclical horizon. You know. I think structurally the US economy is also just delivering better productivity growth than some of our peers, and I think that can certainly continue, you know, versus Europe, for example, where they've had you know, a pretty big energy shock that's made them somewhat less competitive. Obviously, you know, weakness in China's also had a bigger impact on Europe. You know. But all of these things in our minds can you know, can contribute to this US exceptionalism story, and eventually, you know, that's also going to create divergence and monetary policy.

So we think these things can can continue, you know, at least through our cyclical horizon. You know. I think structurally the US economy is also just delivering better productivity growth than some of our peers, and I think that can certainly continue, you know, versus Europe, for example, where they've had you know, a pretty big energy shock that's made them somewhat less competitive. Obviously, you know, weakness in China's also had a bigger impact on Europe. You know. But all of these things in our minds can you know, can contribute to this US exceptionalism story, and eventually, you know, that's also going to create divergence and monetary policy.

We think.

We think.

Tiffinitely enjoyed this and enjoyed the not as well. Tiffany Wolding there of Pincott to trace a Veder Parmas joined us now to break this down head before we race off into the detail. I just want to sit on this just for a moment. We've talked so much about the division down in Washington. Only a few months ago, some people thought the prospect of this happening was almost unthinkable. Just how united did Washington become on this issue in the last few months.

Tiffinitely enjoyed this and enjoyed the not as well. Tiffany Wolding there of Pincott to trace a Veder Parmas joined us now to break this down head before we race off into the detail. I just want to sit on this just for a moment. We've talked so much about the division down in Washington. Only a few months ago, some people thought the prospect of this happening was almost unthinkable. Just how united did Washington become on this issue in the last few months.

They gained i want to say, eight votes since February from the Republican Party who had been so opposed providing the A to Ukraine, Israel, and Taiwan. This is really a case of members wanted to be on the right side of history. You know, last week when Speaker Johnson said, Hey, go into the sitroom, look at all of the foreign intel, look at the data that we have backing this up, and why we need A to Ukraine.

They gained i want to say, eight votes since February from the Republican Party who had been so opposed providing the A to Ukraine, Israel, and Taiwan. This is really a case of members wanted to be on the right side of history. You know, last week when Speaker Johnson said, Hey, go into the sitroom, look at all of the foreign intel, look at the data that we have backing this up, and why we need A to Ukraine.

We need America to be strong against Putin and she and Iran.

We need America to be strong against Putin and she and Iran.

And that is exactly what the members decided to ultimately deliver. I think this is a testament to the foreign policy arm of Joe Biden's career in the Senate as President.

And that is exactly what the members decided to ultimately deliver. I think this is a testament to the foreign policy arm of Joe Biden's career in the Senate as President.

Obviously Chuck Schumer.

Obviously Chuck Schumer.

But in no small account it's Mitch McConnell who wants this to be his legacy, which is something we've been hearing from staff for seven months since the October seventh attacks in Israel and well before that in Ukraine.

But in no small account it's Mitch McConnell who wants this to be his legacy, which is something we've been hearing from staff for seven months since the October seventh attacks in Israel and well before that in Ukraine.

But Henrietta, this got through with our border policy, which Republicans are basically promising their caucus that we would make sure we would do. Where does that leave that potential legislation or is this just one hundred percent become an election issue and no one in Congress is going to work on it until maybe next year.

But Henrietta, this got through with our border policy, which Republicans are basically promising their caucus that we would make sure we would do. Where does that leave that potential legislation or is this just one hundred percent become an election issue and no one in Congress is going to work on it until maybe next year.

Congress is definitely not going to be able to do anything on the border. Republicans had their chance, they decided it wasn't good enough. They let the perfect be the enemy of the good and all the cliches that we hear from Lindsay Graham repeatedly on issues like this, and we haven't passed immigration reform in decades. I still remember twenty thirteen when we came so close. They do not have the ability to get to yes on immigration. But the administration is planning a series of executive orders on border policy, which we'll see potentially as early as next week. So I expect that to be the bulk of what we do on foreign policy, excuse me, on border security in this Congress, and.

Congress is definitely not going to be able to do anything on the border. Republicans had their chance, they decided it wasn't good enough. They let the perfect be the enemy of the good and all the cliches that we hear from Lindsay Graham repeatedly on issues like this, and we haven't passed immigration reform in decades. I still remember twenty thirteen when we came so close. They do not have the ability to get to yes on immigration. But the administration is planning a series of executive orders on border policy, which we'll see potentially as early as next week. So I expect that to be the bulk of what we do on foreign policy, excuse me, on border security in this Congress, and.

Of course that's going into the election. We have a new poll out this morning which shows that Biden bumpy head following the state of the Union has evaporated. He really only has control right now with Michigan. And it continuously comes back to the economy, especially inflation. What is the messaging from the White House going to be because it's not landing on voters.

Of course that's going into the election. We have a new poll out this morning which shows that Biden bumpy head following the state of the Union has evaporated. He really only has control right now with Michigan. And it continuously comes back to the economy, especially inflation. What is the messaging from the White House going to be because it's not landing on voters.

You know, the economy has been a weak point for President Biden for many years now. He one thing I'd really point into into your polls, which I think have an incredible margin of error just one percent, you know, speaking to the testament of how thorough your polls are of the.

You know, the economy has been a weak point for President Biden for many years now. He one thing I'd really point into into your polls, which I think have an incredible margin of error just one percent, you know, speaking to the testament of how thorough your polls are of the.

Swing states, Michigan is an interesting one. Obviously.

Swing states, Michigan is an interesting one. Obviously.

President Biden has made huge efforts to get with the Union groups on that. He got another endorsement today, But Kennedy did get on the ballot in Michigan, which is potentially going to be a problem for the Biden team and the Trump team. But when it comes to the economy, the president has had an underwater darth with women voters.

President Biden has made huge efforts to get with the Union groups on that. He got another endorsement today, But Kennedy did get on the ballot in Michigan, which is potentially going to be a problem for the Biden team and the Trump team. But when it comes to the economy, the president has had an underwater darth with women voters.

Female voters specifically because.

Female voters specifically because.

Of their exposure to inflation and the cost of household goods and gas prices, which are a disproportionate share of where money is spent in America from the women of the household, and that delta is potentially being superseded by the abortion issue, which for the first time in your poll, is now a major issue of very important to a majority of voters in those swing states that includes Democrats, independence, and what we saw from twenty twenty two. If we want to learn from something beyond just the polls, the actual boots on the ground, that issue has a history of superseding even the economic issues and inflation, as we saw in twenty twenty two when inflation was even higher at nine point one percent. So I do think that it is going to be a situation where Biden keeps having to tout the state of the US economy, which is by all accounts strong, which is why the Fed is struggling to cool it enough to bring inflation down, but really getting that message across I think something that's occurring as they're trying to two step it with abortion. I'd like to see where immigration falls in the polls when I get a chance to read a little deeper into it. That's also something Republicans a lot of season, But the economy continues to be paramount.

Of their exposure to inflation and the cost of household goods and gas prices, which are a disproportionate share of where money is spent in America from the women of the household, and that delta is potentially being superseded by the abortion issue, which for the first time in your poll, is now a major issue of very important to a majority of voters in those swing states that includes Democrats, independence, and what we saw from twenty twenty two. If we want to learn from something beyond just the polls, the actual boots on the ground, that issue has a history of superseding even the economic issues and inflation, as we saw in twenty twenty two when inflation was even higher at nine point one percent. So I do think that it is going to be a situation where Biden keeps having to tout the state of the US economy, which is by all accounts strong, which is why the Fed is struggling to cool it enough to bring inflation down, but really getting that message across I think something that's occurring as they're trying to two step it with abortion. I'd like to see where immigration falls in the polls when I get a chance to read a little deeper into it. That's also something Republicans a lot of season, But the economy continues to be paramount.

Henry, we were saying that now that this ninety five billion dollar bill was passed, there's a question of what next, what gets done before the election? Anne Marie Well said electioning will probably get done, not.

Henry, we were saying that now that this ninety five billion dollar bill was passed, there's a question of what next, what gets done before the election? Anne Marie Well said electioning will probably get done, not.

A whole lot else.

A whole lot else.

You talked about the potential for some sort of single executive actions on the border issues, What about tariffs?

You talked about the potential for some sort of single executive actions on the border issues, What about tariffs?

What about other.

What about other.

Issues that might come to the four including from the FTC that very much are in line.

Issues that might come to the four including from the FTC that very much are in line.

With what Biden has been talking about.

With what Biden has been talking about.

Oh yeah, I'm finally expecting for tariffs and trade to be front and center. Ambassador Tie was on Capitol Hill yesterday last week in the House on the Senate side, and there were some major announcements. Three times higher steel tariffs, which is only about two percent of US imports, so don't expect that to be a major mover for steel prices in the US, But directionally and from a sort of messaging standpoint on China, very important in a new section three oh one investigation into shipbuilding, which is an area that the United States is way behind on in China dominates with and then a coordinated effort with Mexico potentially also Canada via the new USMCA that inveastamdor Tie was integral and getting past during the last administration, could be used to look into electric vehicles, their import from China on the components side, and sort of preemptively getting in front of that entire sector. So I think a lot of activity on trade. And then of course we are eagerly awaiting a conclusion of the Section three oh one review, which covers the three hundred and seventy billion dollars worth of tires that are currently in place, and by the end of next month, Investment Tide will announce which and whether any exclusions that we're agreed to in the last year will be extended. So lots of movement on the trade front. But to your point on Congress, don't expect anything.

Oh yeah, I'm finally expecting for tariffs and trade to be front and center. Ambassador Tie was on Capitol Hill yesterday last week in the House on the Senate side, and there were some major announcements. Three times higher steel tariffs, which is only about two percent of US imports, so don't expect that to be a major mover for steel prices in the US, But directionally and from a sort of messaging standpoint on China, very important in a new section three oh one investigation into shipbuilding, which is an area that the United States is way behind on in China dominates with and then a coordinated effort with Mexico potentially also Canada via the new USMCA that inveastamdor Tie was integral and getting past during the last administration, could be used to look into electric vehicles, their import from China on the components side, and sort of preemptively getting in front of that entire sector. So I think a lot of activity on trade. And then of course we are eagerly awaiting a conclusion of the Section three oh one review, which covers the three hundred and seventy billion dollars worth of tires that are currently in place, and by the end of next month, Investment Tide will announce which and whether any exclusions that we're agreed to in the last year will be extended. So lots of movement on the trade front. But to your point on Congress, don't expect anything.

They're going to be gone campaigning.

They're going to be gone campaigning.

For the rest of the year when it comes to trade front. You know, you mentioned steel. I think Pennsylvania. You mentioned potential evs on Chinese terror, So I think of Michigan. What lever could Biden pull before the election to short votes in Wisconsin if he has to keep the blue wall, which Mario Parker colleague in Washington says, he has to keep the blue wall to win, you.

For the rest of the year when it comes to trade front. You know, you mentioned steel. I think Pennsylvania. You mentioned potential evs on Chinese terror, So I think of Michigan. What lever could Biden pull before the election to short votes in Wisconsin if he has to keep the blue wall, which Mario Parker colleague in Washington says, he has to keep the blue wall to win, you.

Have to keep the blue wall.

Have to keep the blue wall.

You really want to see the heartening part of the data for the Biden team in your poll this morning is Michigan, where he continues to maintain his lead even though he's underwater everywhere else. I would also say the primary vote in Pennsylvania last night is really interesting. Nikki Haley, who hasn't been on the ticket for months now, got seventeen percent of the vote. So I think what Biden is going to do is try to continue moving forward with the steel workers.

You really want to see the heartening part of the data for the Biden team in your poll this morning is Michigan, where he continues to maintain his lead even though he's underwater everywhere else. I would also say the primary vote in Pennsylvania last night is really interesting. Nikki Haley, who hasn't been on the ticket for months now, got seventeen percent of the vote. So I think what Biden is going to do is try to continue moving forward with the steel workers.

Again.

Again.

That three times higher steel tire is something that he is calling for that speaks.

That three times higher steel tire is something that he is calling for that speaks.

Directly to the steel workers.

Directly to the steel workers.

And what we know about the unions the team stirs the steel workers and all those groups is that they will go to the mat to get their two hundred and fifty thousand members in any individual union to.

And what we know about the unions the team stirs the steel workers and all those groups is that they will go to the mat to get their two hundred and fifty thousand members in any individual union to.

Vote in the direction that they're advocating for.

Vote in the direction that they're advocating for.

So I think that Biden is really taking that labor message to heart, which is an integral in Pennsylvania, Wisconsin, Michigan and the whole Ross belt.

So I think that Biden is really taking that labor message to heart, which is an integral in Pennsylvania, Wisconsin, Michigan and the whole Ross belt.

Hen reader, you are one of the best. It's great a cat show with you. Hen read a trace there. This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, angiopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.

Hen reader, you are one of the best. It's great a cat show with you. Hen read a trace there. This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, angiopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.