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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordernt. 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. We begin the sound with stock steady and bond yields moving lower, investors focusing on President atlect Donald Trump's first day in office. Matt Miskin of John Hancock saying, we are likely moving to a new macro regime here, as we have to say goodbye to goldilocks. Before the data was not too hot and not too cold, which left the FED supportive to markets. Now that data is coming in hotter nearly across the board, Matt joins us. Now for more. Matt, welcome to the program. Did this change things for you in any way, shape or form.

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordernt. 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. We begin the sound with stock steady and bond yields moving lower, investors focusing on President atlect Donald Trump's first day in office. Matt Miskin of John Hancock saying, we are likely moving to a new macro regime here, as we have to say goodbye to goldilocks. Before the data was not too hot and not too cold, which left the FED supportive to markets. Now that data is coming in hotter nearly across the board, Matt joins us. Now for more. Matt, welcome to the program. Did this change things for you in any way, shape or form.

The Philly Fed index John was through the roof. I mean, it's a little too sunny in Philadelphia right now.

The Philly Fed index John was through the roof. I mean, it's a little too sunny in Philadelphia right now.

It almost seems like and when you see across the I mean the NFIB survey.

It almost seems like and when you see across the I mean the NFIB survey.

Also, I mean, some of these moves in the economic data almost look like main stocks in terms.

Also, I mean, some of these moves in the economic data almost look like main stocks in terms.

Of their parabolic upside.

Of their parabolic upside.

And when you see this, and then you hear the FED not or FMC members like Waller as you've been addressing saying they're still going to be cutting at it's hard to put those two pieces together. But at the end of the day, you've got a position more for a reacceleration of growth. We're looking down in cap mid cap stocks, industrials. We've been talking about them for a long time, but frankly, the earnings are looking good. They're starting to get more appreciation relative strength.

And when you see this, and then you hear the FED not or FMC members like Waller as you've been addressing saying they're still going to be cutting at it's hard to put those two pieces together. But at the end of the day, you've got a position more for a reacceleration of growth. We're looking down in cap mid cap stocks, industrials. We've been talking about them for a long time, but frankly, the earnings are looking good. They're starting to get more appreciation relative strength.

And if there's.

And if there's.

More on shoring cap X, that's our favorite place to be in global equities.

More on shoring cap X, that's our favorite place to be in global equities.

So matis built on that. How further down in market, camp would you come and would you go down to small camps? And let's just talk about it, Brush, So can small camps work that interest rates coming down?

So matis built on that. How further down in market, camp would you come and would you go down to small camps? And let's just talk about it, Brush, So can small camps work that interest rates coming down?

We don't believe so, John, And that is the big difference about reading this macro regime. It's almost like the macro regime playbook is missing pages here, or the pages are so dated you have to go back and get a new addition. Because the small cap industries are just different than what they used to be ten twenty years ago. Now in a booming economy, forty percent of the companies don't make money, and so they really actually would prefer a zero interest rate regime more than a strong economic regime. And MidCap on the other hand, eighty five ninety percent are profitable. You're getting more industrial exposure. You're still getting financials, but that industrial exposure typically is higher quality with a higher ROE. So if you want quality and value combined, which is basically our mantra quality at a reasonable price, we would go to mid MidCap may be the new small cap to implement for this kind of macro regime.

We don't believe so, John, And that is the big difference about reading this macro regime. It's almost like the macro regime playbook is missing pages here, or the pages are so dated you have to go back and get a new addition. Because the small cap industries are just different than what they used to be ten twenty years ago. Now in a booming economy, forty percent of the companies don't make money, and so they really actually would prefer a zero interest rate regime more than a strong economic regime. And MidCap on the other hand, eighty five ninety percent are profitable. You're getting more industrial exposure. You're still getting financials, but that industrial exposure typically is higher quality with a higher ROE. So if you want quality and value combined, which is basically our mantra quality at a reasonable price, we would go to mid MidCap may be the new small cap to implement for this kind of macro regime.

Mat can I go back to what you're saying about data looking like memestocks. Peter share of A had to me had basically the same read as you, but his conclusion was something is wrong with the data that you can have a job support that comes in and seventy four out of seventy five economists have a number in expectation below two hundred thousand, yet it surprises.

Mat can I go back to what you're saying about data looking like memestocks. Peter share of A had to me had basically the same read as you, but his conclusion was something is wrong with the data that you can have a job support that comes in and seventy four out of seventy five economists have a number in expectation below two hundred thousand, yet it surprises.

To the upside.

To the upside.

Is there a factor that maybe the data as hot as it's showing, is just not correct.

Is there a factor that maybe the data as hot as it's showing, is just not correct.

It could be.

It could be.

I mean, you know, at the end of the day, these are surveys, and surveys have been the hardest thing to read over this whole cycle since COVID. Basically, surveys have been broken leading economic indicators. Surveys that are trying to lead the economy have just frankly been wrong.

I mean, you know, at the end of the day, these are surveys, and surveys have been the hardest thing to read over this whole cycle since COVID. Basically, surveys have been broken leading economic indicators. Surveys that are trying to lead the economy have just frankly been wrong.

They were overly.

They were overly.

Pessimistic over the last couple of years as the economy chugged along pretty well, and now they've really whiplashed into more positive, kind of more optimist type outlooks.

Pessimistic over the last couple of years as the economy chugged along pretty well, and now they've really whiplashed into more positive, kind of more optimist type outlooks.

Now, does real GDP improve, does other activity improve? We'll just have to see.

Now, does real GDP improve, does other activity improve? We'll just have to see.

But you've seen such a flip of the switch on survey data at the end of the day, though, we're seeing it in markets. I mean, even just to start this year, I think in the best way, you know, ll cool Day made us.

But you've seen such a flip of the switch on survey data at the end of the day, though, we're seeing it in markets. I mean, even just to start this year, I think in the best way, you know, ll cool Day made us.

Have said it best. Don't call it a comeback. You're seeing the markets rotate.

Have said it best. Don't call it a comeback. You're seeing the markets rotate.

Industrials, financials, materials are all starting.

Industrials, financials, materials are all starting.

To be better. Tech isn't working.

To be better. Tech isn't working.

I know this is like stunning for markets after two years of just tech domination. But a rotation's happening in markets, and that's reflecting probably what's happening in the economy, a better economic outcome.

I know this is like stunning for markets after two years of just tech domination. But a rotation's happening in markets, and that's reflecting probably what's happening in the economy, a better economic outcome.

I mean, you see that with an S and P that declines yesterday, even so seventy five percent of the constituents of the S and P were up yesterday. The equal weight it is on track for its second best week over the past year. The only week that was better was after the inauguration of Donald Trump. Matt how enduring is that broadening? Is that better breath of the market.

I mean, you see that with an S and P that declines yesterday, even so seventy five percent of the constituents of the S and P were up yesterday. The equal weight it is on track for its second best week over the past year. The only week that was better was after the inauguration of Donald Trump. Matt how enduring is that broadening? Is that better breath of the market.

We've been saying that it's got to be an earning's driven rotation in financials this week now, they had low base effects. Q four or of twenty twenty three is when the SVB payouts happen, so that really hurt Q four of twenty twenty three earnings and then Q four of twenty twenty four earnings.

We've been saying that it's got to be an earning's driven rotation in financials this week now, they had low base effects. Q four or of twenty twenty three is when the SVB payouts happen, so that really hurt Q four of twenty twenty three earnings and then Q four of twenty twenty four earnings.

We're strong on top of that. But investment banking.

We're strong on top of that. But investment banking.

You know, you were all just talking about this investment banking businesses are starting to come back and starting to get more strength. We're seeing, you know, the yield curve steep and that helps financials. Financials are the biggest value sector. It's really tech verse financials. If you're trying to make a growth first value decision, if you're going to see that rotation. But the great news of this week was really actually the fundamental side.

You know, you were all just talking about this investment banking businesses are starting to come back and starting to get more strength. We're seeing, you know, the yield curve steep and that helps financials. Financials are the biggest value sector. It's really tech verse financials. If you're trying to make a growth first value decision, if you're going to see that rotation. But the great news of this week was really actually the fundamental side.

And it was all those beats by the big banks.

And it was all those beats by the big banks.

You say that the FED is likely done holding markets hands, So then what do you make of Governor Waller yesterday.

You say that the FED is likely done holding markets hands, So then what do you make of Governor Waller yesterday.

To me that it was an outlier.

To me that it was an outlier.

And this is where it gets difficult listening to FOMC members because they're going to be all over the place. And if this divergence really happens over the next couple months, I don't think it really helps markets. It's just going to add on certainty. But if you're data dependent, I don't get it. I mean, you just talked about how the CPI report by beat by zero points, zero zero two percent, and trillions of dollars were you know, moved across markets, and even in this little bit, as soon as inflation comes down a little bit, you get the speculative frenzy back in things like crypto, and that's not going to help your inflation problem. Or you're kind of that speculative nature or sentiment of markets.

And this is where it gets difficult listening to FOMC members because they're going to be all over the place. And if this divergence really happens over the next couple months, I don't think it really helps markets. It's just going to add on certainty. But if you're data dependent, I don't get it. I mean, you just talked about how the CPI report by beat by zero points, zero zero two percent, and trillions of dollars were you know, moved across markets, and even in this little bit, as soon as inflation comes down a little bit, you get the speculative frenzy back in things like crypto, and that's not going to help your inflation problem. Or you're kind of that speculative nature or sentiment of markets.

So matt Let's address it. Can I just jump in. It's kind of a world of dice to dependent or is a FED chair I can say dependent.

So matt Let's address it. Can I just jump in. It's kind of a world of dice to dependent or is a FED chair I can say dependent.

I think that's the latter. I think there's other motives, but you know, at the end of the day, you know, over the course of the year, I think he could be right. I think the way we're looking at this is a two half story of for FED in twenty twenty five. The first half I think they have to be hawkish. I think they have to back off and let the economy settle in see what happens. And then the back half I do think they're going to be cutting. But it's hard to say right now. Look we're going to get in the first half, I think you're just kind of bringing forward an inflationary impulse that you really would rather not have upfront. Here is we're going to reset into the beginning of twenty twenty five. A lot of the inflation and commodities are coming back. That makes me a bit nervous on the inflation front, but it helps the cypical side of equities, and that's what we're leaning into.

I think that's the latter. I think there's other motives, but you know, at the end of the day, you know, over the course of the year, I think he could be right. I think the way we're looking at this is a two half story of for FED in twenty twenty five. The first half I think they have to be hawkish. I think they have to back off and let the economy settle in see what happens. And then the back half I do think they're going to be cutting. But it's hard to say right now. Look we're going to get in the first half, I think you're just kind of bringing forward an inflationary impulse that you really would rather not have upfront. Here is we're going to reset into the beginning of twenty twenty five. A lot of the inflation and commodities are coming back. That makes me a bit nervous on the inflation front, but it helps the cypical side of equities, and that's what we're leaning into.

Well, Matt Let's tayk with commodities for a minute. Scott Bessett yesterday took a moment to directly say if any Russian officials are watching his hearing right now, they should be on guard that potentially they will go after the biggest Russian oil producer, something we saw Biden do in the very last days of his administration. Did you get a sense that actually we're going to get a very hawkish Donald Trump administration when it comes to Russia and sanctions coming into office very shortly.

Well, Matt Let's tayk with commodities for a minute. Scott Bessett yesterday took a moment to directly say if any Russian officials are watching his hearing right now, they should be on guard that potentially they will go after the biggest Russian oil producer, something we saw Biden do in the very last days of his administration. Did you get a sense that actually we're going to get a very hawkish Donald Trump administration when it comes to Russia and sanctions coming into office very shortly.

You know, I did not see that on the twenty twenty five bingo card, but what we're seeing yet, you're right. I mean, it's just interesting to see that it weighed. You know, the administration really waited to the end to kind of throw on these sayings, and that is really where oil prices started to respond before all the other sanctions or other supply issues was just kind of breezed over. I mean, WTI was more like seventy dollars. You know, it's kind of breaking that. It almost looked like it was going to break down even further, and then it just really has rallied here. If you wanted disinflation, that oil rise is not good news, But at the end of the day, look, commodities work in these kind of short term spurts.

You know, I did not see that on the twenty twenty five bingo card, but what we're seeing yet, you're right. I mean, it's just interesting to see that it weighed. You know, the administration really waited to the end to kind of throw on these sayings, and that is really where oil prices started to respond before all the other sanctions or other supply issues was just kind of breezed over. I mean, WTI was more like seventy dollars. You know, it's kind of breaking that. It almost looked like it was going to break down even further, and then it just really has rallied here. If you wanted disinflation, that oil rise is not good news, But at the end of the day, look, commodities work in these kind of short term spurts.

Even coppers is ripping.

Even coppers is ripping.

I think this also has to do with getting ahead of the tariffs more broadly, and just trying to get as much inventory, whether it's supplies, finish goods, ahead of this as possible. You've seen it in the China data. China's basically having this huge export data. They need the commodities to do it. But I don't know if it's really sustainable. Frankly, we believe inflation is going to come down over the course of the year.

I think this also has to do with getting ahead of the tariffs more broadly, and just trying to get as much inventory, whether it's supplies, finish goods, ahead of this as possible. You've seen it in the China data. China's basically having this huge export data. They need the commodities to do it. But I don't know if it's really sustainable. Frankly, we believe inflation is going to come down over the course of the year.

We think housing prices moderate.

We think housing prices moderate.

So we would actually use this impulse and lean against it, actually maybe grab a little litle bit of duration here.

So we would actually use this impulse and lean against it, actually maybe grab a little litle bit of duration here.

I mean it's a lot matt and only the seventeenth day so far of twenty twenty five. You think people would welcome a long weekend, but you know everybody's going to be glued to their screens waiting to see what happens on Monday. In terms of executive orders, what's your read on how vulnerable the market is to any sort of action from Trump beyond immigration or teriffs.

I mean it's a lot matt and only the seventeenth day so far of twenty twenty five. You think people would welcome a long weekend, but you know everybody's going to be glued to their screens waiting to see what happens on Monday. In terms of executive orders, what's your read on how vulnerable the market is to any sort of action from Trump beyond immigration or teriffs.

Right now, we're pricing in a lot of good news and sentiment has really skyrocketed to be more positive. I think more broadly, what we're seeing is the biggest liability to this market is the positive sentiment. One of the best things this market had and markets had going in to the last year or so was that, you know, it was pretty bearish and right. The new administration has brought a lot of hope, a lot of optimism, not necessarily bad thing. Again, that's probably driven some economic activity and more capex, deregulation all that. But at the same time, you've got to be careful here looking for everything to go right and thinking that you know, it's all going to be kind of an easy way to navigate this this macro backdrop, there is still policies that could you know, kind of dent some economic growth. There is policies that could create volatility. So at the end of the day, you still got to think about risk management, and again that would bring us to the bond market.

Right now, we're pricing in a lot of good news and sentiment has really skyrocketed to be more positive. I think more broadly, what we're seeing is the biggest liability to this market is the positive sentiment. One of the best things this market had and markets had going in to the last year or so was that, you know, it was pretty bearish and right. The new administration has brought a lot of hope, a lot of optimism, not necessarily bad thing. Again, that's probably driven some economic activity and more capex, deregulation all that. But at the same time, you've got to be careful here looking for everything to go right and thinking that you know, it's all going to be kind of an easy way to navigate this this macro backdrop, there is still policies that could you know, kind of dent some economic growth. There is policies that could create volatility. So at the end of the day, you still got to think about risk management, and again that would bring us to the bond market.

Matt Miskin making tears running down like a monsoon. Appreciate it, Sir of Johana Hancock. Here's the latest this morning, Trump's Treasury pick Scot Besson urging Congress to extend twenty seventeen tax cuts, warning their expiration would made any economic crisis. Best in appearing on track for confirmation without specific objections from Democrats during yesterday's hearing. Joining us now is a Botansky of BTIG. Hey is welcome to the program, Sir, We need to talk about executive orders and Trump Day one. I just want to get your thoughts on yesterday. How do you think Scott Beson did.

Matt Miskin making tears running down like a monsoon. Appreciate it, Sir of Johana Hancock. Here's the latest this morning, Trump's Treasury pick Scot Besson urging Congress to extend twenty seventeen tax cuts, warning their expiration would made any economic crisis. Best in appearing on track for confirmation without specific objections from Democrats during yesterday's hearing. Joining us now is a Botansky of BTIG. Hey is welcome to the program, Sir, We need to talk about executive orders and Trump Day one. I just want to get your thoughts on yesterday. How do you think Scott Beson did.

Look, I think it's clear that Scott Besson is a mind at work, and I think that it should be heartened by that, as I think all of us would like a steady hand in that role, someone of his, with his experience in the office advising the president. But John, let's not kid ourselves, right. We are still going to be living and dying day to day by whatever Donald Trump is typing out on his phone's keypad. So I think that it's heartening and positive and best and it's going to be easily confirmed, and he's going to be a stable voice in the Treasury Department and ultimately in the over Office advising the president. But the President himself is going to decide what tariffs are going to go into place and how those are going to be communicated to the market.

Look, I think it's clear that Scott Besson is a mind at work, and I think that it should be heartened by that, as I think all of us would like a steady hand in that role, someone of his, with his experience in the office advising the president. But John, let's not kid ourselves, right. We are still going to be living and dying day to day by whatever Donald Trump is typing out on his phone's keypad. So I think that it's heartening and positive and best and it's going to be easily confirmed, and he's going to be a stable voice in the Treasury Department and ultimately in the over Office advising the president. But the President himself is going to decide what tariffs are going to go into place and how those are going to be communicated to the market.

So we're expecting some one hundred executive orders after Donald Trump is sworn in ISAAC. What do they look like.

So we're expecting some one hundred executive orders after Donald Trump is sworn in ISAAC. What do they look like.

I think it's going to be a busy day. I think that there's an enormous amount of anticipation around what we're going to see on Monday. I do want our clients in general to be aware of that. Just because it doesn't come out Monday doesn't mean it's not going to happen. I think that there is a bit of a law there in terms of all the different things they want to do. From my seat, I think you're going to see a fair amount of paper focusing on immigration, border security. I think that that's one area where he's consistently said he wants to focus, and I think that there's some administrative levers that he can pull. My cautionary point there is I think that that's going to be one area that you see heavily litigated. So that's one area and one dynamic that we're aware of. I think you're also going to see a fair amount of orders on the energy front and the healthcare front. Those have less risk of litigation generally speaking, so we'll be keeping an eye eye on that, and of course there's a lot of signaling. Ann Marie, right, We're going to have a lot of things that don't actually have teeth, a lot of things relating to the culture wars and things that I don't think that the markets are going to have to worry about all.

I think it's going to be a busy day. I think that there's an enormous amount of anticipation around what we're going to see on Monday. I do want our clients in general to be aware of that. Just because it doesn't come out Monday doesn't mean it's not going to happen. I think that there is a bit of a law there in terms of all the different things they want to do. From my seat, I think you're going to see a fair amount of paper focusing on immigration, border security. I think that that's one area where he's consistently said he wants to focus, and I think that there's some administrative levers that he can pull. My cautionary point there is I think that that's going to be one area that you see heavily litigated. So that's one area and one dynamic that we're aware of. I think you're also going to see a fair amount of orders on the energy front and the healthcare front. Those have less risk of litigation generally speaking, so we'll be keeping an eye eye on that, and of course there's a lot of signaling. Ann Marie, right, We're going to have a lot of things that don't actually have teeth, a lot of things relating to the culture wars and things that I don't think that the markets are going to have to worry about all.

Too much, and the siglings on the other side as well. Biden is continuing a ton of executive actions used as staffers are starting to pack up their offices currently right now when it comes to tariffs, though, will we get executive orders next week?

Too much, and the siglings on the other side as well. Biden is continuing a ton of executive actions used as staffers are starting to pack up their offices currently right now when it comes to tariffs, though, will we get executive orders next week?

I think that we're going to get a few. And look, my base case here is still that there's going to be an overarching incrementalism to the tariff policy from the Trump administration. I think that they are cognizant of the economic impact, and I think ultimately they still want tariffs to be used primarily primarily as a negotiating hit. And the way that I think about this is for those negotiating chits to have any value, you still need to prove that you're willing to shoot the hostage if you will, And so from a framing perspective, I think that ultimately they will move quickly on instituting new Chinese tariffs, likely using Section two thirty two or Section three oh one, which takes a few months to get there, and then maybe a few acute areas where they focus on issues that they have a fair amount of political backing for things like going after European autos. But I don't expect the broad based universal tariffs to be where we start from.

I think that we're going to get a few. And look, my base case here is still that there's going to be an overarching incrementalism to the tariff policy from the Trump administration. I think that they are cognizant of the economic impact, and I think ultimately they still want tariffs to be used primarily primarily as a negotiating hit. And the way that I think about this is for those negotiating chits to have any value, you still need to prove that you're willing to shoot the hostage if you will, And so from a framing perspective, I think that ultimately they will move quickly on instituting new Chinese tariffs, likely using Section two thirty two or Section three oh one, which takes a few months to get there, and then maybe a few acute areas where they focus on issues that they have a fair amount of political backing for things like going after European autos. But I don't expect the broad based universal tariffs to be where we start from.

You make a good point that this is really year five of truck not year one, But what is going to be different from one point zero to two point h Yeah.

You make a good point that this is really year five of truck not year one, But what is going to be different from one point zero to two point h Yeah.

Look, I think I think emory it's a lot of amplification, right, So we know there's going to be a deregulatory agenda, we know there's going to be a focus on tax cuts and border security, but there's an amplification of some of those issues. So on border security, it's not just focusing on the border, it's also the deportation dynamic that's in play on the tariffs. I think that they have more of an awareness of the different tools, which is why you're hearing so much more about i EPO, which allows the president to impose tariffs based on national emergency. That's something that they didn't really get their arms around until probably halfway through the first term. So in general, I would just say it's more awareness of the levers of power. And then also if the personnel they have around them, you have very well vetted, truly loyal folks around the president, which should allow them to move a little bit more quickly and I think ultimately avoids some of the pot holes that they fell into during the first administration.

Look, I think I think emory it's a lot of amplification, right, So we know there's going to be a deregulatory agenda, we know there's going to be a focus on tax cuts and border security, but there's an amplification of some of those issues. So on border security, it's not just focusing on the border, it's also the deportation dynamic that's in play on the tariffs. I think that they have more of an awareness of the different tools, which is why you're hearing so much more about i EPO, which allows the president to impose tariffs based on national emergency. That's something that they didn't really get their arms around until probably halfway through the first term. So in general, I would just say it's more awareness of the levers of power. And then also if the personnel they have around them, you have very well vetted, truly loyal folks around the president, which should allow them to move a little bit more quickly and I think ultimately avoids some of the pot holes that they fell into during the first administration.

Well, Isaac, to your point, though, they need to show a willingness in your words, to shoot the hostage, to do the most of extreme measures in order to use it as a negotiating chit. Do you think that that's well enough appreciated. Is this administration that would be willing to go to the extremes?

Well, Isaac, to your point, though, they need to show a willingness in your words, to shoot the hostage, to do the most of extreme measures in order to use it as a negotiating chit. Do you think that that's well enough appreciated. Is this administration that would be willing to go to the extremes?

You know, Look, it depends, it depends which client I'm talking to, but I think that there's at least an awareness that the China tariffs are something that he is absolutely serious about. There's a fair amount of debate among the client community that I speak to as to whether there can be a grand bargain with China over time, but I think that we need to have that as our base case, that China is going to be where he moves quickly. Canada and Mexico, I truly think are more about a conversation, more about one off negotiations than anything else. And on the European side, I do think that he is a true believer, especially on the Auto story. So I think what we have now is sort of trying to understand that bridge from rhetoric to reality and trying to get into Donald Trump's mind, in the mind of those who are running this administration as to what they're really going to prioritize, because it's clear they can't do everything, So what is their prior organization hierarchy on tariffs?

You know, Look, it depends, it depends which client I'm talking to, but I think that there's at least an awareness that the China tariffs are something that he is absolutely serious about. There's a fair amount of debate among the client community that I speak to as to whether there can be a grand bargain with China over time, but I think that we need to have that as our base case, that China is going to be where he moves quickly. Canada and Mexico, I truly think are more about a conversation, more about one off negotiations than anything else. And on the European side, I do think that he is a true believer, especially on the Auto story. So I think what we have now is sort of trying to understand that bridge from rhetoric to reality and trying to get into Donald Trump's mind, in the mind of those who are running this administration as to what they're really going to prioritize, because it's clear they can't do everything, So what is their prior organization hierarchy on tariffs?

Well, as Amory started this hour saying, Scott Bessett yesterday laid out several different use cases for tariffs. One of them that seemed to keep coming up was this idea of tariff's as national security, that sanctions pressure the dollar and its reserve status and it makes more sense to use therefore instead tariffs. When it comes to China, Isaac, what is the strategy? Is it negotiation or is it one of national security? And that's why terrafs would be put on.

Well, as Amory started this hour saying, Scott Bessett yesterday laid out several different use cases for tariffs. One of them that seemed to keep coming up was this idea of tariff's as national security, that sanctions pressure the dollar and its reserve status and it makes more sense to use therefore instead tariffs. When it comes to China, Isaac, what is the strategy? Is it negotiation or is it one of national security? And that's why terrafs would be put on.

Yeah. Look, I think that it's a full court press, That's how I think about it. And I think that there's more awareness here than there's ever been in terms of we need to have more of a holistic approach in terms of our competition with China. And you heard it yesterday during the hearing. I think it was noteworthy to hear how much was reference in terms of our outbound investment screening. Look, we have screening for if foreign entities want to buy interest in the US. We should also have some awareness and some say as to outbound investment and what that means for acute areas of competition. They think that it's one of the few areas of bipartisanship, and so we've got to be aware of how that's playing, not just politically but also operationally in terms of the different level levers of government they have, from siphius which we've seen with the usdel deal, to acute areas of legislation like we've seen with the TikTok.

Yeah. Look, I think that it's a full court press, That's how I think about it. And I think that there's more awareness here than there's ever been in terms of we need to have more of a holistic approach in terms of our competition with China. And you heard it yesterday during the hearing. I think it was noteworthy to hear how much was reference in terms of our outbound investment screening. Look, we have screening for if foreign entities want to buy interest in the US. We should also have some awareness and some say as to outbound investment and what that means for acute areas of competition. They think that it's one of the few areas of bipartisanship, and so we've got to be aware of how that's playing, not just politically but also operationally in terms of the different level levers of government they have, from siphius which we've seen with the usdel deal, to acute areas of legislation like we've seen with the TikTok.

Ben isaid the horse has bolted, the technology has already lost. I wish we were having this conversation twenty years ago, but we're not. And then I started to hear things like the TikTok CEOs coming to the inauguration. She's invited to the inauguration not turning up By the way, Isaac, what is going to be the approach to things like TikTok? If it is seriously a national security risk and Chinese hackers have infiltrated the Treasury, care who's in charge, they could possibly do the same thing in the incoming administration as well, I don't really understand what the hold up is.

Ben isaid the horse has bolted, the technology has already lost. I wish we were having this conversation twenty years ago, but we're not. And then I started to hear things like the TikTok CEOs coming to the inauguration. She's invited to the inauguration not turning up By the way, Isaac, what is going to be the approach to things like TikTok? If it is seriously a national security risk and Chinese hackers have infiltrated the Treasury, care who's in charge, they could possibly do the same thing in the incoming administration as well, I don't really understand what the hold up is.

Well, look, I'm confused by Congress passing a bill saying that they want to ban TikTok, and now at this eleventh hour, we're seeing many of those lawmakers from both sides of the aisle retracting their previous statement saying we would love a reprieve, we would love to find a way to push this ban out. And so I think that they're always those political wins which are tough to dissect, but by and large, when I try to step back and say what does this actually mean for markets? Was this mean for investors? Is one of the persistent tailwinds that I see from a spending in a appropriations areas, We're going to spend a whole lot more money on cybersecurity as a federal government. There's going to be a whole of government approach to cybersecurity. That is frankly twenty years too late. But in terms of areas, the clients ask, where are we going to plus up spending? Where are we going to spend more and more? No matter who is in charge of that pen, it's cybersecurity and overall just defense and national security.

Well, look, I'm confused by Congress passing a bill saying that they want to ban TikTok, and now at this eleventh hour, we're seeing many of those lawmakers from both sides of the aisle retracting their previous statement saying we would love a reprieve, we would love to find a way to push this ban out. And so I think that they're always those political wins which are tough to dissect, but by and large, when I try to step back and say what does this actually mean for markets? Was this mean for investors? Is one of the persistent tailwinds that I see from a spending in a appropriations areas, We're going to spend a whole lot more money on cybersecurity as a federal government. There's going to be a whole of government approach to cybersecurity. That is frankly twenty years too late. But in terms of areas, the clients ask, where are we going to plus up spending? Where are we going to spend more and more? No matter who is in charge of that pen, it's cybersecurity and overall just defense and national security.

Forgive me for putting you on the spot, but what you actually think happens with TikTok? And the next way, kind I said, what's your buys case?

Forgive me for putting you on the spot, but what you actually think happens with TikTok? And the next way, kind I said, what's your buys case?

Look, I think that we're going to get the Supreme Court order today. They have a release this morning. My base case has been that when you can bet on DC taking longer than it should, it will. I think that the Supreme Court is likely to say that they're going to continue deliberating on this. There's going to be a temporary injunction for a couple of months while they do so, and that we get their order, I think ultimately upholding the statue, which is negative for TikTok. But we're going to have to wait a couple of months before that comes out.

Look, I think that we're going to get the Supreme Court order today. They have a release this morning. My base case has been that when you can bet on DC taking longer than it should, it will. I think that the Supreme Court is likely to say that they're going to continue deliberating on this. There's going to be a temporary injunction for a couple of months while they do so, and that we get their order, I think ultimately upholding the statue, which is negative for TikTok. But we're going to have to wait a couple of months before that comes out.

OASAC going to catch up this appreciated busy wait next week for sure. Thank you Isipotanski btig. So here's the lights this morning. Market's prancing for President elect Donald Trump's trained policies, the dollar hovering knit two year highs as tariff uncertainty ways on global currencies. Jane Furley of Rubber Bank writing, Trump may be prepared to back down on his previous preference for a weaker US dollar, particularly if it views the tariffs can do the heavy lifting on addressing the US training balance. Jane joined us Now for more. Jane, didn't work last time? Can it work this time?

OASAC going to catch up this appreciated busy wait next week for sure. Thank you Isipotanski btig. So here's the lights this morning. Market's prancing for President elect Donald Trump's trained policies, the dollar hovering knit two year highs as tariff uncertainty ways on global currencies. Jane Furley of Rubber Bank writing, Trump may be prepared to back down on his previous preference for a weaker US dollar, particularly if it views the tariffs can do the heavy lifting on addressing the US training balance. Jane joined us Now for more. Jane, didn't work last time? Can it work this time?

Well? I think things are a little bit different this time, and I think we know Trump is an experienced politician. He's also I think ready to hit the ground running next week, and I think this time next week we'll be able to answer that question a lot with a lot more clarity, because if he comes through very quickly with executive orders, the market's going to get a very strong flavor as to whether or not what it's priced in in terms of tariffs, in terms of growth, in terms of inflation, is really you know, broad based correct or not.

Well? I think things are a little bit different this time, and I think we know Trump is an experienced politician. He's also I think ready to hit the ground running next week, and I think this time next week we'll be able to answer that question a lot with a lot more clarity, because if he comes through very quickly with executive orders, the market's going to get a very strong flavor as to whether or not what it's priced in in terms of tariffs, in terms of growth, in terms of inflation, is really you know, broad based correct or not.

Well, Jane, what do you think is behind the dollar move we've seen? Is it great differentials off the banker superior economic growth and inferior growth abroad or is it really about anticipating the policy changes from the administration.

Well, Jane, what do you think is behind the dollar move we've seen? Is it great differentials off the banker superior economic growth and inferior growth abroad or is it really about anticipating the policy changes from the administration.

You know, it's both. Certainly. You know, if we just take a snapshot of the US economy now and compare it with for instance, Germany China, what we see is a lot more strength. For instance, if you look at the forecast for growth in the US this year, they're averaging around about two percent. The consensus are roundty percent for the US. It's about half of that for the Eurozone. Obviously, we will know that China's still got growth struggles even though it did hit its target for twenty twenty four, so that there is a better growth outlok And with that, you know, there is evidence of sticky inflation in the US. So that's the snapshot right now. And on top of that we need to layer in the potential inflationary impacts of tarists or of mass deportations for instance. That could certainly create a more tightness in the labor market, where you know, a very significant proportion of the workers in the US are foreign born. Now obviously a lot of those have got documentation, but even so we could certainly see some inflation or wage prices coming through in certain sectors, so you know, agricultural workers, etc. And some others. So we do anticipate more inflation. The market is anticipating more inflation from Trump, but that's layered on top of what is a pretty robust economy already.

You know, it's both. Certainly. You know, if we just take a snapshot of the US economy now and compare it with for instance, Germany China, what we see is a lot more strength. For instance, if you look at the forecast for growth in the US this year, they're averaging around about two percent. The consensus are roundty percent for the US. It's about half of that for the Eurozone. Obviously, we will know that China's still got growth struggles even though it did hit its target for twenty twenty four, so that there is a better growth outlok And with that, you know, there is evidence of sticky inflation in the US. So that's the snapshot right now. And on top of that we need to layer in the potential inflationary impacts of tarists or of mass deportations for instance. That could certainly create a more tightness in the labor market, where you know, a very significant proportion of the workers in the US are foreign born. Now obviously a lot of those have got documentation, but even so we could certainly see some inflation or wage prices coming through in certain sectors, so you know, agricultural workers, etc. And some others. So we do anticipate more inflation. The market is anticipating more inflation from Trump, but that's layered on top of what is a pretty robust economy already.

I understand these things are hard to disaggregate. Scott Besson did take a run at it yesterday when he said for every ten percent increase in tariffs, you would see a four percent move in currency markets. Jane, does that math square for you?

I understand these things are hard to disaggregate. Scott Besson did take a run at it yesterday when he said for every ten percent increase in tariffs, you would see a four percent move in currency markets. Jane, does that math square for you?

It is difficult because who are these tariffs going to be on? What about the tip for tap tariffs? You know, there is so much to say, so it's very difficult, I think, to be to say with any certainty that that's exactly the rule of thumb that we can follow. But you know, one thing that I think is going to be very very interesting during this, you know, the next a few years under Trump, is is to what extent tariffs are used for foreign policy. Now, we had some indication from Bison yesterday at saying that, you know, tariffs could be used for broader reasons. We had Trump a week or so ago in his press conference, you know, talking about the economic power that he could exert on Canada, for instance. You know, to what extent are we going to have this different type of state craft really under Donald Trump? Whereas tariffs are used not just for economic policy objectives in the US, but for foreign policy objectives in the US, And that is a different ballgame, which is very difficult to measure.

It is difficult because who are these tariffs going to be on? What about the tip for tap tariffs? You know, there is so much to say, so it's very difficult, I think, to be to say with any certainty that that's exactly the rule of thumb that we can follow. But you know, one thing that I think is going to be very very interesting during this, you know, the next a few years under Trump, is is to what extent tariffs are used for foreign policy. Now, we had some indication from Bison yesterday at saying that, you know, tariffs could be used for broader reasons. We had Trump a week or so ago in his press conference, you know, talking about the economic power that he could exert on Canada, for instance. You know, to what extent are we going to have this different type of state craft really under Donald Trump? Whereas tariffs are used not just for economic policy objectives in the US, but for foreign policy objectives in the US, And that is a different ballgame, which is very difficult to measure.

It's something Terry Haynes has been writing about at Pangaea for some time, Jane. But it's for those uncertainties that you get something like the reporting we've heard of the Bank of Japan that officials there do and are leaning towards a hike at the end of next week. But one a wait until Monday, until we get Trump's inauguration. Understand what sort of executive actions he would take.

It's something Terry Haynes has been writing about at Pangaea for some time, Jane. But it's for those uncertainties that you get something like the reporting we've heard of the Bank of Japan that officials there do and are leaning towards a hike at the end of next week. But one a wait until Monday, until we get Trump's inauguration. Understand what sort of executive actions he would take.

What is the.

What is the.

Path that Trump might take that would either derail boj from hiking or give them the green light.

Path that Trump might take that would either derail boj from hiking or give them the green light.

Well, you know, I if Trump were to indicate that Japan was not in the center of the sites in terms of tariffs. But you know, Japan, I think is in a very interesting, potentially quite a strong position, because we've got to remember that Japan not only is you know, the largest holder of US treasuries outside of the US, but it's also the biggest provider of US FDI. And of course over the last you know, were compared say to thirty years ago, the geopolitics between the US and Japan have changed significantly. Whereas you know, in thirty or so years ago, the US really forced Japan to move away from its semiconductor business if it was going to protect its manufacturing sector, and really forced Japan, you know, to move large auto plants, for instance, into the US. Now, you know, Japan sees itself more in certain areas, particularly tech, as more of a collaborator, and that relationship I think could be strengthened in areas as defense going forward. So those sorts of indication perhaps give Japan a little bit more strength in terms of the hands that it it has gone en off or to play against Donald Trump. So certainly not as vulnerable in terms of trade as perhaps China, maybe not even as vulnerable as in Germany for instance, but I think that's going to become a lot clearer over the next few weeks.

Well, you know, I if Trump were to indicate that Japan was not in the center of the sites in terms of tariffs. But you know, Japan, I think is in a very interesting, potentially quite a strong position, because we've got to remember that Japan not only is you know, the largest holder of US treasuries outside of the US, but it's also the biggest provider of US FDI. And of course over the last you know, were compared say to thirty years ago, the geopolitics between the US and Japan have changed significantly. Whereas you know, in thirty or so years ago, the US really forced Japan to move away from its semiconductor business if it was going to protect its manufacturing sector, and really forced Japan, you know, to move large auto plants, for instance, into the US. Now, you know, Japan sees itself more in certain areas, particularly tech, as more of a collaborator, and that relationship I think could be strengthened in areas as defense going forward. So those sorts of indication perhaps give Japan a little bit more strength in terms of the hands that it it has gone en off or to play against Donald Trump. So certainly not as vulnerable in terms of trade as perhaps China, maybe not even as vulnerable as in Germany for instance, but I think that's going to become a lot clearer over the next few weeks.

And also warming up to the present elect Japan will also be sending their foreign minister to inauguration on Monday, Jane. I'd love to get your thoughts on one thing Scott Besson said yesterday about sanctions. He said Trump thought that potentially the US has gone over as Skis on sanctions because of de dollarization. Do you think sanctions are leading to de dollarsation around the world.

And also warming up to the present elect Japan will also be sending their foreign minister to inauguration on Monday, Jane. I'd love to get your thoughts on one thing Scott Besson said yesterday about sanctions. He said Trump thought that potentially the US has gone over as Skis on sanctions because of de dollarization. Do you think sanctions are leading to de dollarsation around the world.

Well, if we look purely at just the IMF data, there is not that evidence yet. We've hact, if we look back over the last twenty years, there is evidence of dedollarization, but actually where central bank reserves have moved into other curtencies, it has tended to be maybe the ausie or the Canada currencies perhaps where over the last twenty years there has been some yield for instance. So there isn't any firm evidence in the IMF data. Yeah, but there does appear to be a logic behind the fact that if you are going to be applied by US sanctions, then it is in your incentive to stop using the US dollar. And we have seen, for instance, China set up its different payment system for instance, we have seen some more spread of that between its trading allies. So it would appear logical that if you were to issue more and more sanctions that you will eventually chase countries away from using the dollar, So there is I think a logic in that and there therefore again you know, it comes back to how far can tariffs be used as a replacement. So this different type of state craft where foreign policy aims can be used again by tariff's potentially not just economic policy aims.

Well, if we look purely at just the IMF data, there is not that evidence yet. We've hact, if we look back over the last twenty years, there is evidence of dedollarization, but actually where central bank reserves have moved into other curtencies, it has tended to be maybe the ausie or the Canada currencies perhaps where over the last twenty years there has been some yield for instance. So there isn't any firm evidence in the IMF data. Yeah, but there does appear to be a logic behind the fact that if you are going to be applied by US sanctions, then it is in your incentive to stop using the US dollar. And we have seen, for instance, China set up its different payment system for instance, we have seen some more spread of that between its trading allies. So it would appear logical that if you were to issue more and more sanctions that you will eventually chase countries away from using the dollar, So there is I think a logic in that and there therefore again you know, it comes back to how far can tariffs be used as a replacement. So this different type of state craft where foreign policy aims can be used again by tariff's potentially not just economic policy aims.

Jane, quickly, just before you go, how many hour was something? Before you leave? How do you explain the difference between Governor Waller and President Hammock on the f WEBC Because the Cleveland Fed President is saying things like we still have an inflation problem. Manait policy is only moderately restrictive, and Governor wallacane in the last twenty four hours signaling he's opened to plenty of rate cuts in twenty five. What's that about?

Jane, quickly, just before you go, how many hour was something? Before you leave? How do you explain the difference between Governor Waller and President Hammock on the f WEBC Because the Cleveland Fed President is saying things like we still have an inflation problem. Manait policy is only moderately restrictive, and Governor wallacane in the last twenty four hours signaling he's opened to plenty of rate cuts in twenty five. What's that about?

Well, you know that is surprising, but certainly you know we have this in the Bank of England too. You know we have this in the Bank of Japan. I mean, this is why there is a whole council, you know, making policy decisions. We need all those different points of views, and of course at the end of the day's which way the majority vote will go. And listening to many of the other Fed officials, it would certainly suggest to me that the majority is one of a cautious outlook. Now even Waller, perhaps as an outlier.

Well, you know that is surprising, but certainly you know we have this in the Bank of England too. You know we have this in the Bank of Japan. I mean, this is why there is a whole council, you know, making policy decisions. We need all those different points of views, and of course at the end of the day's which way the majority vote will go. And listening to many of the other Fed officials, it would certainly suggest to me that the majority is one of a cautious outlook. Now even Waller, perhaps as an outlier.

Jane, I appreciate your time. As always, Jane Foley a rubberbank there on the FX market. This is the Bloomberg Survenllants podcast, bringing you the best in markets, economics, an giopolitics. 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

Jane, I appreciate your time. As always, Jane Foley a rubberbank there on the FX market. This is the Bloomberg Survenllants podcast, bringing you the best in markets, economics, an giopolitics. 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