April 9, 2025 • 35 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
President Donald Trump’s pledge to pause tariffs on some trading partners ignited the biggest burst of buying Wall Street has seen since 2008. Trump announced a 90-day pause on higher reciprocal tariffs that hit dozens of trade partners after midnight, while raising duties on China to 125%.
After narrowly avoiding a bear market, the S&P 500 staged a historic bounce from a selloff that wiped out trillions from global share prices amid the specter of a full-blown trade war that fueled fears of a US recession. The equity benchmark soared 9.5%, the most since the global financial crisis, while the Nasdaq 100 surged 12% as euphoria gripped markets after four days of bruising, high-volume trading. Nearly every stock in major gauges rose.
Treasuries staged a tentative return to normalcy as investors dumped havens on fear of missing out on the great risk rebound. Two-year US yields briefly spiked past 4% as traders pared expectations for Federal Reserve rate cuts this year.
Today's show features:
- Vincent Cignarella, Bloomberg Markets Live Macro Strategist
- Brent Schutte, Chief investment Strategist at Northwestern Mutual Wealth Management
- Danielle DiMartino Booth, CEO & Chief Strategist at QI Research
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
This is Bloomberg business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business, finance
and tech news as it happens. The Bloomberg Business Week
Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 3 (00:32):
A rally is one way to put it. Maybe Vince
Signerello would call it a rip your face off rally.
The Nasdaq can posit higher by ten point nine percent,
the S and P five hundred up by eight and
a half percent, the dowd Jones Industrial average up by
seven point four percent. I do want to bring in
Vince Signerello. He's Bloomberg News macro strategist. He joins us
this afternoon from White Plains. How do you describe the
(00:52):
market action the tape today?
Speaker 4 (00:55):
I've ripping your face off a really, really good way
to put it. Put it, Tim, I mean, this is
you know, I've often get asked by traders, what was
it like trading in the eighties? And this is about
as close as I've seen it in a very very
very long time.
Speaker 5 (01:10):
So for those who weren't around in the eighties, we
were what does that mean?
Speaker 4 (01:18):
The volatility was fantastic. I mean you you know, you
have to remember this is pre euro so you had
well every country had their own currency, and there were
days where you could see the German mark move ten
big figures up, ten big figures down, then five or
six up again, back and forth, like I mean, you
(01:38):
could see a thirty big figure day in one day,
back and forth. I was trading cable during the eighties
after Maggie announced her reelection and Sterley went from this
very sleepy currency to moving three, four, five big figures
in a day. And to put that in perspective, just
a one million pound position on five big figures is
a fifty thousand dollar chain and l so when you're
(02:01):
trading fifty to one hundred million pounds, you can imagine
that if you get that wrong, you could give a
bank away in a heartbeat. So you know, we haven't
seen anything like that until literally this week, and I'm tired.
Speaker 3 (02:16):
Well it's only Wednesday, Vince. You got a couple more
days to go here, hey, Gina Martin Adams said, a
move such as this concerns her, whether it's to the
upside or whether it is to the downside. This doesn't
make her any less concerned about the direction of the
US economy, about what earnings we're going to get as
companies start to report. We heard from Delta earlier today,
the company suspending its guidance for the year as a
(02:37):
result of concerns over tariffs in the economy. We're going
to hear from JP Morgan on Friday, among other banks.
Are you concerned about a move higher like this?
Speaker 6 (02:47):
No?
Speaker 4 (02:48):
I And I'm sure what Gina was referring to whose
analysis is brilliant by the way that the difference between
Main Street and Wall Street. I mean, this is just
Wall Street. Main Street is it needs to react in
a completely different way to this, what the tariffs really
mean to them, what it's going to mean for earnings.
Move down or move up in the stock market doesn't
(03:09):
necessarily change the scope of what it does. If you're
the CEO or CFL of a company trying to source
trade and look at what your cost price analysis is
going to be going forward, and again, obviously earnings are
a big picture. I think it's going to be interesting
is to see what sentiment indicators look like on Friday,
and of course we've got inflation in terms of CPI
(03:32):
PPI coming up in the next couple of days as well.
I wouldn't worry so much about the stock market. This
is just a lot of you know, a lot of
back and forth on headlines. It is completely separate from
what the real economy is going to be doing. I
was encouraged though by Besson's comment earlier this morning where
(03:53):
he said he was going to take sort of front
and center of the trade negotiations, and that seemed to
put both Naviro and but Nick on the backbench, which
I think that was the real encouragement I think for
investors in that sort of the sound mind, the sound
voice coming from Washington is going to speak. And then
later today basically saying he was going to try to
(04:15):
get an alliance together if you will try to make
individual trade agreements with all different allies and then form
a consortium of sorts against China, which really would put
China in a box if you were able to do that,
because that would be a really really strong negotiating power.
You're not just talking about sort of NATO or Canada
and Mexico you're talking about Latin America, you're talking about Japan,
(04:36):
talking about Asia, Europe a whole lot. Now facing China
and saying this is where we stand. We're tired of,
you know, patent infringement, We're tired of the non monetary
tariff situation. We're standing up to you. Now, what are
you going to do? And if you don't capitulate, we're
all just going to play nice with each other. And
that's going to put China, I think in an extraordinarily
(04:57):
difficult situation. I know what ended was saying about, it's
not an all one way street, but I think I
think in this particular trade war, if Beuston pulls off
what he's trying to do, it puts China in an
incredibly difficult situation and one they can't win.
Speaker 5 (05:10):
You know, yeah, exactly. And I keep thinking of the
interview that Shanelli had with Boas Weinstein and the whole
idea of the one thing that's difficult is that President
Trump presumably will be in the White House for four
years in total, and that the uncertainty genie is out
of the bottle and we have seen that this is
(05:31):
a president and I think it's fair to say this
is truthful, is that he can change his mind on
things and that level of uncertainty and it's ramped up
more than maybe we saw in the first administration, and
there are not the guardrails necessarily. I know you talk
about the Treasury Secretary, but it's taken a while I
feel like for maybe a potential guardrail to come forward.
(05:53):
So I just wonder, you know, Vince, traders like volatility,
but CEOs don't, right, and can consumers don't. They need
things to be certain at this point to make decisions
and to spend money. So I am just curious that
this trade we could see another sell off tomorrow. I mean,
are there any guarantees at this point?
Speaker 4 (06:14):
No, I don't think there are any guarantees whatsoever. And
I think you make a really really good point. Corporation
ceo CFOs do not like this. Consumers certainly don't like this.
I think what you're going to see is probably a
little pulled back in investment, particularly capex from corporations, particularly
the larger corporations. You're going to see mid sized small
(06:35):
businesses be very very cautious about how they spend money.
One of the big things that you know, I ran
a small business, and one of the key things about
running a small business is cash flow. And the last
thing you want to do is put yourself in a situation.
You know, it's a difficult situation. You want to spend
money on inventory anticipating you know, price increases, but at
the same time you need to preserve cash flow because
(06:57):
you could buy all this inventory and then nobody comes
into by it from you, correct just they're worried about
the future. And so now you're stuck with shelves that
are full of lower price items, but still nobody wants them. So,
you know, for a smaller business, it's a really really
tough situation. You know, for mid sized businesses as well.
You know, the big, big companies, you know, Pepsicos of
(07:17):
the World and such. You know, they can withstand this
for a while, Apples of the world. They've got the
balance sheet to to eat that inventory for quite a
long time. But other businesses do not, and that is
probably going to weigh on both sentiment spending and the economy.
We're still looking at We're still looking at first quarter
growth pen from the Atlanta GDP at minus two point
(07:39):
four percent.
Speaker 5 (07:40):
Right down, but not as bad as it was, but
still down.
Speaker 4 (07:43):
It does have it from two point eight to two
point FOURY, you're absolutely right, but we did.
Speaker 5 (07:47):
We just have a headline crossing Goldman Sachs rescinding its
recession call after this move by the President on tariffs.
I feel like it's like bing bing bing, you know,
ricochet rabbit, Like you are just seeing people who just
see I know who that is, Google it everybody, No,
but it's just right, like, so that's that's the world
(08:07):
we live in, right, and so that's a difficult environment.
Speaker 4 (08:12):
It's totally I mean, Goldman made this call literally before
the announcement, so they couldn't have found it any worse.
I mean, not that you know, it was their fault.
And so of course they're coming pulling it back now
and it goes. It speaks exactly to what you say
as to how businesses are trying to find their way
in this world and they're constantly changing their mind. And
when you have that uncertainty, if you're running a business,
(08:35):
you're going to basically say, full stop, we're not investing,
we're not hiring, we're not we're not moving forward with
plans at the moment. Let's shelve everything. We're going to
keep looking at the situation. We're going to wait and
see and then more likely they're not. They're going to
wait and see for things to really develop before they
step in. You don't want to step in on day one,
(08:55):
thinking again, maybe somebody changes their mind. You're going to
want to see this developed. I think in the long run,
this will develop positively. I think that you know, China
will eventually Trump is going to need to look for
a way to give President she Away a face saving
way out, to give him an opportunity to come to
the table to have this conversation. If that happens, I
(09:18):
think you can just you know, wipe all of this away.
Starting from you know, the beginning, things are going to
move positive. I think you'll see a lot freer trade,
a different form of globalization, if you will.
Speaker 3 (09:30):
Vince to the point that Carol just brought up this
headline crossing that says Goldman Sachs rescinds its recession call
after the Trump tariff pause. I'm confused about what fundamentally
changes here, because as we heard from the Treasury Secretary,
as we saw in that post from the President, this
is a ninety day pause on countries that are not
(09:50):
retaliating right now, this doesn't seem like a fundamental shift
in the way the president is thinking about tariffs. Why
does the recession risk rem then, at least according to Goldman.
Speaker 4 (10:03):
Yeah, but if you think about the countries that are retaliating,
it's really just the European Union, Canada and China.
Speaker 3 (10:09):
Those are big trading partners.
Speaker 4 (10:11):
Yeah no, but Canada, Canada is in a different situation.
Cartney's running for reelection, so you expect him to talk tough.
One would assume he is the the the front runner
at this point. He is the odds on a favorite.
Will he change his tune after he is elected? I
think he will. I think he's going to look to
do something something positive for Canada, and that's going to
(10:31):
be Yeah. You know, listen, we're allies. Let's let's let's
cut this out. You know, where we're enemies, we're allies.
Let's let's put this aside and let's figure out what
our differences are similar to what Shine Maam is doing
in Mexico.
Speaker 3 (10:43):
Right, Yeah, that's a good viewing.
Speaker 4 (10:45):
It's definitely. I think the EU is definitely going to
come around again because they're not in great shape right now.
Speaker 3 (10:49):
There was a question shouted at the Treasury Secretary as
he was walking away, what about the EU? What about
the EU? Because they have retaliated. So we'll expect to
hear maybe something on that and we will bring it
to you when we do get an answer. Vince, thank
you for jumping in today. Vince SIGMREALI. He's a global
macro strategist.
Speaker 1 (11:05):
You're listening to the Bloomberg Business Week Podcast. Catch us
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Speaker 3 (11:20):
Let's drive to the clothes with a brand Shooty, Chief
investment officer at Northwestern Mutual Wealth Management. The firm has
more than three hundred billion dollars in assets under management.
The division that Brent oversees has about ninety billion dollars
in AUM. He joins us from Milwaukee. We got to
start with just today's trade and what we're seeing. Superlatives abound. Brent,
(11:44):
is this the environment people should be buying?
Speaker 4 (11:48):
Well?
Speaker 6 (11:48):
I think if your time arising is longer term, I
think usually any day is a good opportunity to buy.
I think in the near term, I still think there's
tremendous volatility still out there. I don't think we've learned
too much new We have a reprieve, but certain we
still have ninety days of uncertainty. As you and your
previous guests were talking about, and during that time period,
I think anything's on the table, and so to me,
you still want to make sure that you're careful. You
want to make sure that you're at your allocation and
(12:10):
not overweight, and that you're prepared in case the market
does go down again, that you will stay through to
the other side to get to the higher returns that
are somewhere off in the future.
Speaker 3 (12:18):
When you say prepared, when you say prepared, do you
just mean like, have the stomach for it to stay
the course? Is that what you mean?
Speaker 6 (12:25):
Yeah, stay the course and have the stomach for it. Look,
I think unfortunately a lot of investors are still concentrated.
I see it when I travel around the country. They
only want to own US large cap stocks, and they
want to own a narrow swath of the US large
cap stocks. To me, the trend has changed, the environment
has changed, whether or not the tariffs go through. I
think some form of them still do. The tariffs are
still something that I think the President has an affinity
(12:46):
for and believes are the right thing to do. I
don't think he really is in love with trade altogether.
He just decided today that the market damage was probably
more than he wanted in the near term, and so
therefore pulled them back. I want people to diversify every
economic cycle. Whether or not this cause of the recession
or not will find out, but every cycle has new leadership.
And to me, the S and P five hundred is
(13:08):
still trading at twenty times, even though it's off its
highs by quite a bit. Twenty times forward earnings, there
are opportunities other places that are trading at thirteen or
fourteen times, where I think there are better opportunities for
those people willing to think intermediate to longer term, which
is what you're supposed to do when you buy equities.
Speaker 5 (13:22):
All right, So you're saying, Brent at this point that
the S and P five hundred is still overpriced over values, and.
Speaker 6 (13:30):
That's where I think, Yeah, no one cares about No
one cares about valuation on the upside. But when people
like me start thinking about when they're going to dip
their toe in or potentially buy more OVERVOT stocks. On
the downside, they start doing valuation exercises because that's marginal safety.
And to me, that's where I think people need to
think about the next side of this. You know, if
it's up, up, and a way, then we truly have
(13:50):
those areas of the market that are cheaper that I
would expect to do better if it's not some other
those other parts of the market have evaluation you know,
floor to them, And so that's where I I just
want people to diversify because no one knows exactly how
that's going to play out, and today the anadote for
that is diversification, not concentration, all.
Speaker 5 (14:07):
Right, So that's where I want to go to because
I'm curious if no one knows where this is going
to play out, and if it might be another ninety
days before we really know maybe what the next sequence is,
you know, uncertainty continues to rain. You said, trade has changed,
environment has changed. So what is exactly diversification in this environment?
(14:28):
How do you see it? What's the equity fixed income mix,
what's the US versus global mix? What is the do
I just kind of throw it in some kind of
cash like investment. What do you do here? We are
like over the last three days, you got beaten up.
If you had a lot of equity exposure, just got
a bounce. Do we sell at the end of this
and put it into something safer for I don't know,
(14:48):
six months, twelve months, who knows?
Speaker 6 (14:51):
Hopefully today shows you that you shouldn't put anything into cash,
and cash only whens in so many different circumstances, not many, actually,
And that's where if you put your assets in one
asset class such as cash, you're telling me that you
know exactly what's going to happen. And I'm telling you,
after doing this for thirty years, I don't, and I
don't especially know with what's happening today, given the back
and forth that can occur and these huge swings that
(15:12):
can occur. Look, we've been cautious for a little while.
We're towards the end of an economic cycle. The market
is fully valued and there is the tariff uncertainty out
there that's more of the near term. That doesn't mean
that you abandon your equity ratio and what's in your
financial plan, but that means you're at your target are
just a bit below and you're cautious about what could happen,
and you're ready to hold through whatever occurs. On the
(15:33):
other side of this, I think of valuation becoming much
much more important once again in the future, and I
think about a three, five, seven, ten year time holding
period where valuation does matter, and that's where I think
there's opportunities in people that have in parts of the
market that people have decided to move out of because
they haven't done well for the prior a few years.
That's where I think their opportunity is going forward. And
if you're not diversified, hopefully today is a wake up
(15:53):
call that it's time to do so.
Speaker 3 (15:55):
So are you know thinking about this from the perspective
of valuations, which you just mentioned, If people are thinking
about dipping their toes back in, what is a valuation
that you would want to see on the S and
P five hundreds, It's say, okay, now's the time.
Speaker 6 (16:09):
It's not twenty times for darrings that expected to go
ten days.
Speaker 3 (16:11):
Is it eighteen?
Speaker 6 (16:14):
I think perhaps it's somewhere lower than eighteen, maybe sixteen,
maybe fifteen, depending on if we have a recession or
now that's certainly important, but maybe eighteen's more reasonable, and
if you do the math on that with the earnings,
you're a lower number than what you are today. That's
not to say that you should be selling that. It's
just saying that there are better opportunities than things like
small midcaps, which I know are economically sensitive and so
does everyone else. They traded thirteen to fourteen times earnings.
(16:35):
That's historically more normal, and that gives them more of
a margin of safety, and that gives them more opportunity
for upside when valuation matters in the longer term.
Speaker 3 (16:44):
Yeah, it's okay, Okay, that makes sense. Okay, from the
perspective of if we drill down a little bit beyond
in disease and sort of regionally. You said that you
still go around the world and you hear people want
to buy megacap us companies. Do you see that changing
at all in the near term. There's a lot of
questions right now about this idea of US exceptionalism.
Speaker 6 (17:07):
If history is any guide, look historically and tell me
how long one trend has lasted. Has it lasted forever?
I think back to the late nineteen ninety nine period,
which is exactly what this reminds me of, and that
was a period of American exceptionalism. That was a period
when everyone only wanted to own large cap, mega tech
tech stocks and then they were essentially didn't make a
new high for seventeen years, while every other part that
(17:29):
they didn't want to own did make new highs. And
so no one theme has dominated forever. I think the
backdrop has changed. The backdrop of the prior three or
four or five years has been American exceptionalism driven by
a lot of debt, which is a bipartisan thing. Now
you're seeing places like Europe where they're waking up to
the reality that they have to spend money on defense
and infrastructure. Places like Germany haven't issued a lot of debt,
(17:51):
and so I think you're seeing a definite trend change.
And it's not to say that those companies in the
US are companies that you should have known. I just
want people to admit they don't know what's going on
to happen and not concentrate, because when you concentrate, you
have to make difficult decisions like do you sell something
now or do you think that one part of the
market is what's going to be going forward, and no
one knows that answer, Bret.
Speaker 5 (18:10):
What I really keep thinking about is what are the
long term implications for investors, for the world at large,
for trade at large. Maybe we don't have clarity on
that too. But are you assuming that on the other
side things are changed dramatically and that means the growth
outlook for US companies has changed, the growth for the
US economy has changed. I'm just curious if you can
(18:31):
go that far out here.
Speaker 6 (18:33):
I think the administration, the president most likely once a
currency that's lower. I think that's a tailwind towards international stocks.
I mentioned Europe spending more money, possibly in other parts
of the world spending more money, which is something that
they probably need to do on defense. Anyway, I think
about perhaps even more domestic US. Does that benefit small caps?
What about deregulation going forward? Certainly there are different things
(18:56):
that happen during every economic cycle. They're probably similar and
how play out, But I think the backdrop for the
next one had shifted, and that's where I think there
are other opportunities. Plus, if you think about the opposite
side of our trade deficit, that is a financial account
surplus where foreigners have put a lot of money into
our markets. Does that lower our raise our cost to
capital in the future, Do they buy less of our treasuries?
Which I think was a question people were asking earlier
(19:18):
today as the bond market kind of blew out, Was
that because foreigners were becoming less interested? And so I
think there are lots of trend changes that occur no
matter what happens in the next few weeks and days,
and that's where I think there's opportunities on the other
side for parts of the market that have been left
behind for the prior two or three years. And every
cycle ends this way. I take you back to the
(19:38):
late eighties, people only wanted to own Japan. I take
you back to the late nineteen ninety nine time period.
People only wanted to own tech. They didn't want to
own international, they didn't want to own the Eurozone, they
didn't want to own commodities. Then we got to two
thousand and seven, two thousand and eight, people were certain
that China was going to drive US forward, and that
commodities were the asset class they all should own, and
that the US was the dirtiest shirt or whatever the
(19:59):
commentary was back then. And then things have changed. Once again,
the future will be different in the past. At least
that's what history has shown me.
Speaker 5 (20:05):
Okay, So one thing that we've been asking some of
our guests, I mean, are we getting to a point
where when we think about the future, as you said,
people only wanted to own Japan or some different things.
Do we get to a point where a lot of
global investors don't want to own the United States that
it's uninvestable.
Speaker 6 (20:22):
I don't know about that. I mean, I think perhaps
there's some sort of pullback from that from the treasure
perspective or somewhere else. But right now, we still are
the deepest, most liquid markets, and we do have companies
that do an incredible job of creating profits. That's something
that's likely not to change. And so I don't think
people are going to pull back dramatically from the US.
But certainly right now there is a heavy allocation to
(20:42):
US across the world. There's probably just a little bit
of room for that to be taken back to a
touch and put towards other places that may be a
better at least in the near term place going forward.
Speaker 2 (20:53):
You are listening to the Bloomberg Business Week podcast catch
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Speaker 5 (21:08):
All right, we have a guest in studio we want
to bring in and talk a little bit more about
the market's Danielle di Martino, Booth, CEO and chief Strategies
at Quill Intelligence, former advisor to the President of the
Dallas Fed here in our Bloomberg Interactive Broker's studio, a
little bit out of breath, just trying to keep up.
How are you and what are you thinking about the
news today and what fundamentally has changed, if anything, in
(21:30):
terms of the market.
Speaker 7 (21:31):
Fundamentally is a great big word, and I'm not so
sure that the bond market has the answer to that question.
The stock market seems like it's it's already given you
an answer. But we're still up on the benchmark ten
year yield. You know, we're about four basis points on
the day it crossed over the four fifty line. In
overnight trading. We're seeing continued unwind of the basis trade
(21:52):
obviously in overnight trading. I'm not gonna I'm not going
to stop watching the markets at the Asian open.
Speaker 5 (21:58):
I'll probably still.
Speaker 7 (21:59):
Wake up in the mole and I to see how
the bond market is faring. But we have no idea
if this is the art of the deal or the
art of playground fighting, and China is going to come
back with yet more retaliatory.
Speaker 5 (22:11):
Measures of their own. We don't know.
Speaker 7 (22:12):
This is just going to keep ramping up.
Speaker 3 (22:14):
So I want to get to China in a second.
But before we get there, you brought up the bond
market and the equity market.
Speaker 5 (22:21):
Hm.
Speaker 3 (22:21):
Who's right in your view?
Speaker 5 (22:23):
Gosh?
Speaker 7 (22:23):
I mean, you know, look, we're coming into earning season, right,
Delta was obviously battening down the hatches as the first example.
Do we really think that with banks tightening lending standards? Right?
The dallasht To Reserve release a survey just a few
days ago that said that loan demanded already declined, lending
standards had already tightened prior to April to second, So
(22:44):
are bank's going to pull back on any plans that
they had due to this uncertainty because of one announcement?
And I think we'll learn a lot more from Corporate America.
Speaker 5 (22:53):
Yeah, that's what they're saying.
Speaker 3 (22:55):
We hear that from Gina Marnadams. I mean we've heard
that from everyone, like, okay, earnings are starting, yes right now?
Heard from Delta Today Friday, we'll hear from some of
the big banks, including JP, Morgan Chase. What do you
want to hear from these companies? Like, what is the
question that you need to have answered?
Speaker 7 (23:09):
I want to know if they're comfortable with where their
margins are going forward, or if they feel that they're
going to have to continue to preemptively cut costs and
continue to push through as we saw today with the
newly found group that I can't even think of the
name that now owns JP, J C. Penny and Brooks Brothers.
They just pushed through a nine percent layoff announcement today.
(23:29):
I want to know if the margins are protected enough
or if they're going to continue to react by continuing
to cut costs. You know, we've seen we've seen corporate
bankruptcies up twenty percent this year through March. That has
nothing to do with this tariff terror as I like
to call it.
Speaker 5 (23:45):
You're talking about Catalyst brands.
Speaker 7 (23:46):
I'm talking about Catalyst brand. Yes, that came across the
terminal this afternoon.
Speaker 5 (23:50):
You know, I'm thinking you go back and you put
out a new report from Queer Qi Research in the morning,
and is it a case of do you say things
have changed, you know, dramatically, or do you say, hey
folks again, Right, there's worries in the bond market, like
this is something that necessarily has not changed, right.
Speaker 7 (24:10):
And you know, we had the probability of a FED
rate cut in May. Came off quite a bit to day,
but there's still.
Speaker 5 (24:18):
A lot of FED speakers are saying differently. They're still
on inflation watch.
Speaker 7 (24:21):
They are still on inflation watch, but I can guarantify
it they've been on liquidity watch for the last seventy
two hours. Because remember above all else, above both the
inflation and employment mandate. They are the lender of last resort, right,
And I think that it has been the moves in
the bond market, the moves in bond market volatility, the
moves in investment grade spreads and highield spreads. These are
(24:43):
the things that really are going to spook the FED.
And they have to start paying attention to their employment mandate.
Speaker 5 (24:50):
Do you buy? And I have to find my notes
here scrolling. Sorry, it's been one of those days where
you have to kind of scroll your script back and forth.
US Treasury Secretary Scott Bessett earlier downplay the recent sell
off in US treasuries. He attributed it to a normal
deleveraging process in the bond market. Is that what we
were seeing was a normal deleveraging process in the bond market.
He's someone who very much understands the financial markets. How
(25:12):
do you see you also understand the financial markets and
have seen a fair amount of cycles, right, was that
a normal deleveraging process?
Speaker 7 (25:20):
Well, when you've got the owner of seven hundred and
sixty billion dollars over the US treasuries under attack, I
eat China. The answer is I don't know, and I
don't think he can know either, So it really the
jury's out again. Just because it's only theoretically China in
the crosshers, that does not take away the fact that tariffs.
Speaker 5 (25:39):
Remain in place.
Speaker 7 (25:39):
We still have a ten percent tariff exactly, and we
still don't know what the ripple effects are going to
be across the rest of Asia and other large holders
of our treasuries and how this is going to play
out in the bond market.
Speaker 5 (25:52):
You know what it's what's terrifying. Is I feel like
for years we have had conversations. I've certainly had conversations
with my husband, but it's like, what if all of
us then China says we're not going to buy your treasuries,
or what if not like Japan or Japan?
Speaker 4 (26:05):
Right?
Speaker 5 (26:05):
And I don't I'm not going to say that's exactly
what's happening, but.
Speaker 7 (26:09):
It feels like there's a lot of but there is
some of this happening, right there is there's some of
it happening. And right now the United States treasury market
is not being treated as its old safe haven self,
and it's supposedly the world's risk free asset.
Speaker 5 (26:24):
Rule of law safe haven, all of those trustworthy, right.
Speaker 7 (26:27):
And you know, I had somebody in my Bloomberg chat
room today come out and say, if it was me
and I was a credit rating agency, I would still
downgrade this sovereign daddy, the United States because of this
crazy behavior, because it is so unsettling, it's so meant
so much uncertainty. You know, even in the hard data,
as far as the Federal Reserve is concerned, going forward,
(26:48):
we haven't even seen a sintilla of evidence of the
eighty thousand people who took the buyout from the federal
government and or all of the layoffs and closures that
have that have followed this, and we still have a
household we still have an impaired household balance sheet on
top of all of that.
Speaker 3 (27:04):
Where does that show up? You cited data right there,
But where are we going to start to see cracks form?
It sounds like you're a little concerned.
Speaker 7 (27:10):
I'm definitely concerned. Were not only up twenty percent year
over year with corporate bankruptcies, we're up fifteen percent year
over year with household bankruptcies. So we're starting to see
that unravel as well.
Speaker 5 (27:20):
I don't think that.
Speaker 7 (27:21):
Earlier today, Jamie Diamond said that he expected increased defaults
going forward, and magically they disappeared with the wave of
one announcement. It doesn't work that way when credit markets
begin to come unglued and we have not seen, you know,
the insurance to protect against a default in investment grade.
It came down quite a bit today, but it certainly
didn't rally like the stock market. So we have to
(27:43):
be going cognizant of this massive leveraging up across corporate America,
across household balance sheets. The New York Fed told US
nine point seven million student loan bars or at risk
of having their FI go scores fall. There are a
lot of things going on right now, A miss again
continued cost cutting in corporate America. I continue to go
(28:03):
back to that because it is their obligation, it's their
obligation to shareholders, or it's their obligation to their family
if they run a dry cleaning company, to make sure
that they shore up their margins and stay in business.
Speaker 5 (28:14):
Everybody's looking at their balance sheets right now, absolutely right
and rightly so exactly so, Danielle, do you then see that, Okay,
ninety day pause, ninety day extension. As you said, there's
still ten percent tariffs out there, But so are we
in limbo potentially for another ninety days unless something else
comes up.
Speaker 7 (28:31):
So I think we're in relief, and then I think
that that relief is going to dissipate fairly quickly when
we realize how much we still don't know. We don't
I mean, you still hear Treasure Secretary Vessent talking tough
about Canada. We don't know what's going to happen in Mexico.
But by everything we're seeing from those two countries, pmis
they're in recession, right, So our neighbor to the north
(28:53):
and our neighbor to the south are both in recession.
I'm from the great State of Texas. If Mexico's in recession,
Texas is in recession, I guarantee you, because we're the
biggest exporting state and there's a ton of uncertainty that
continues to weigh on, especially the auto sector, but also lumber.
We need Canada's heavy sweet crude because our refineries don't
(29:14):
refine what we pull out of the ground, so we
need for that trade to continue, and we need resolution
closer to home first, I would say, so, if.
Speaker 3 (29:22):
You were advising folks in the White House right now
on economic policy, how would you advise them?
Speaker 7 (29:29):
I would say to stop saying that this is all negotiations,
because if it's negotiations, it's certainly not how negotiations are
done among adults. We have to recognize who our economic
allies are and we need to forge relationships going for
If China is the sworn enemy, so be it. But
(29:51):
why should there necessarily need to be collateral damage in
the form of the layoffs that we saw them out
of Canada last week, Why we harm thy neighbor. No,
I don't think that's how it's done. I think that
we need to have a little bit I'm going to
say this out loud, a little bit more bessent and
a little bit less Navarro.
Speaker 5 (30:12):
Is that likely? Do you think based on what we got?
Speaker 6 (30:14):
Oh?
Speaker 7 (30:14):
I do think Besson has a more of President Trump's ear.
He does because I think Besson's besons initial wanting to
take a slower approach, wanting to have more caret less stick,
wanting to provide in numerous interviews that he did prior
to being confirmed, saying we need to give American corporations time.
(30:35):
If we want for them to re sure, we need
to give them time. And for Heaven's sake, we can't
beat them over the head for friend shoring because it's
what they were told to do. So you can't invest
billions of dollars in Mexican auto plants and then be
told that that's sorry, write it off, it's a sunk cost.
It doesn't work that way.
Speaker 5 (30:53):
It's interesting because I think I'm trying to remember who
we who said that to us? Was it Maybe it
was Josh Wing Grove who said that I think best
Into and Lutnik were in the Oval office or in
the room when the President put out that social media
post talking about the ninety day pause. All right, so
walk us through. I don't know the next couple of days,
(31:15):
like how are you thinking about Lot's radar?
Speaker 7 (31:17):
And I'm back to being data dependent, I really am
what data right now? Is the US economic weekly jobless
claims and you know what, not the CPI but the PPI.
I want to know how much input costs are rising
and therefore how much margins are at risk, because either
you pass those higher costs through or you are post
(31:40):
serial and you're closing two plants down, which was announced
earlier today, because Americans are only going You can't squeeze
blood from rock if their budget is their budget and
their income is their income. You know, this is why
you know we found out just a few weeks ago
that seventeen percent of existing home sales in twenty twenty
four were to multi generational households, right, because people are
doing what they can to live within budgets, even if
(32:00):
it's trading down to a generic brand and you can
no longer buy that post box that you'd prefer to
buy life is light. We have to live within our budgets, I.
Speaker 3 (32:09):
Think, you know, and we're going to be talking about
China in a second. I said we'd come back to China. Yeah,
after we talked with you a little bit. I think
that's still for a lot of investors and for a
lot of observers, the big question.
Speaker 7 (32:21):
Mark, well, it certainly is. I mean, you know, quietly
we announced that they were a currency manipulator. They might
or might not have challenges with trying to prevent flight
out of the country.
Speaker 3 (32:33):
So I'll ask you the same question I asked Joe
Wisenthal earlier, which is what's the off ramp or the
de escalation for China? Because every day it just seems
like more tit for tat, more retaliatory tariffs, and more
tariffs being imposted.
Speaker 5 (32:46):
It's a dangerous game of chicken, right, it really is.
Speaker 7 (32:49):
And my grandmother Di Martino from Connecticut, may she rest
in peace, would say that you were dealing with two calabress,
two men with very thick heads and huge egos. And
that's why again my greatest concern, why I'll be watching Asia,
why I'll be watching you know, the offshore you won
was up about a half percentage point before this announcement
(33:09):
closed down. I'll be watching that pig set. I'll be
watching to see if we're going to have a continued escalation,
because you know what, the last time we escalated, they
went right back at us.
Speaker 5 (33:20):
What do you make of when the President says China
doesn't know how to go about it, China wants to
make a deal, it doesn't know how to go about it.
Speaker 7 (33:27):
Great, So you you you basically stick a fork in
the eye of somebody who doesn't want to lose face.
Speaker 5 (33:34):
I mean, what do you mean, Well, it's all about
losing face. Okay?
Speaker 7 (33:39):
So and and by the way, so was.
Speaker 5 (33:42):
Retaliation by China losing? Was it that that was keeping face?
But but for China?
Speaker 2 (33:48):
Yes?
Speaker 5 (33:48):
But do you think the president was surprised by that?
I mean, I know, we're just kind of or do
you think he expected it in terms of this game
back and forth.
Speaker 7 (33:57):
I certainly don't think you should have been surprised by it.
But then we rereramped it up today now it's one
hundred and twenty five percent. At some point, regardless of
what happens with China's neighbors, if you take the Chinese
economy down to its knees. It will affect its neighbors'
economies as well.
Speaker 5 (34:15):
Wh okay, we're going to get into the Chinese economy
in just a moment. Thank you so much, such a pleasure.
Danielle Di Martino, Booth, CEO and chief strategists of Qi Research,
QI Research, Right Research, Qui Research, former advisor, as we
mentioned earlier too, to the President of the Dallas Fed.
Speaker 2 (34:32):
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Speaker 2 (00:08):
This is Bloomberg business Week Daily reporting from the magazine
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Speaker 3 (00:32):
A rally is one way to put it. Maybe Vince
Signerello would call it a rip your face off rally.
The Nasdaq can posit higher by ten point nine percent,
the S and P five hundred up by eight and
a half percent, the dowd Jones Industrial average up by
seven point four percent. I do want to bring in
Vince Signerello. He's Bloomberg News macro strategist. He joins us
this afternoon from White Plains. How do you describe the
(00:52):
market action the tape today?
Speaker 4 (00:55):
I've ripping your face off a really, really good way
to put it. Put it, Tim, I mean, this is
you know, I've often get asked by traders, what was
it like trading in the eighties? And this is about
as close as I've seen it in a very very
very long time.
Speaker 5 (01:10):
So for those who weren't around in the eighties, we
were what does that mean?
Speaker 4 (01:18):
The volatility was fantastic. I mean you you know, you
have to remember this is pre euro so you had
well every country had their own currency, and there were
days where you could see the German mark move ten
big figures up, ten big figures down, then five or
six up again, back and forth, like I mean, you
(01:38):
could see a thirty big figure day in one day,
back and forth. I was trading cable during the eighties
after Maggie announced her reelection and Sterley went from this
very sleepy currency to moving three, four, five big figures
in a day. And to put that in perspective, just
a one million pound position on five big figures is
a fifty thousand dollar chain and l so when you're
(02:01):
trading fifty to one hundred million pounds, you can imagine
that if you get that wrong, you could give a
bank away in a heartbeat. So you know, we haven't
seen anything like that until literally this week, and I'm tired.
Speaker 3 (02:16):
Well it's only Wednesday, Vince. You got a couple more
days to go here, hey, Gina Martin Adams said, a
move such as this concerns her, whether it's to the
upside or whether it is to the downside. This doesn't
make her any less concerned about the direction of the
US economy, about what earnings we're going to get as
companies start to report. We heard from Delta earlier today,
the company suspending its guidance for the year as a
(02:37):
result of concerns over tariffs in the economy. We're going
to hear from JP Morgan on Friday, among other banks.
Are you concerned about a move higher like this?
Speaker 6 (02:47):
No?
Speaker 4 (02:48):
I And I'm sure what Gina was referring to whose
analysis is brilliant by the way that the difference between
Main Street and Wall Street. I mean, this is just
Wall Street. Main Street is it needs to react in
a completely different way to this, what the tariffs really
mean to them, what it's going to mean for earnings.
Move down or move up in the stock market doesn't
(03:09):
necessarily change the scope of what it does. If you're
the CEO or CFL of a company trying to source
trade and look at what your cost price analysis is
going to be going forward, and again, obviously earnings are
a big picture. I think it's going to be interesting
is to see what sentiment indicators look like on Friday,
and of course we've got inflation in terms of CPI
(03:32):
PPI coming up in the next couple of days as well.
I wouldn't worry so much about the stock market. This
is just a lot of you know, a lot of
back and forth on headlines. It is completely separate from
what the real economy is going to be doing. I
was encouraged though by Besson's comment earlier this morning where
(03:53):
he said he was going to take sort of front
and center of the trade negotiations, and that seemed to
put both Naviro and but Nick on the backbench, which
I think that was the real encouragement I think for
investors in that sort of the sound mind, the sound
voice coming from Washington is going to speak. And then
later today basically saying he was going to try to
(04:15):
get an alliance together if you will try to make
individual trade agreements with all different allies and then form
a consortium of sorts against China, which really would put
China in a box if you were able to do that,
because that would be a really really strong negotiating power.
You're not just talking about sort of NATO or Canada
and Mexico you're talking about Latin America, you're talking about Japan,
(04:36):
talking about Asia, Europe a whole lot. Now facing China
and saying this is where we stand. We're tired of,
you know, patent infringement, We're tired of the non monetary
tariff situation. We're standing up to you. Now, what are
you going to do? And if you don't capitulate, we're
all just going to play nice with each other. And
that's going to put China, I think in an extraordinarily
(04:57):
difficult situation. I know what ended was saying about, it's
not an all one way street, but I think I
think in this particular trade war, if Beuston pulls off
what he's trying to do, it puts China in an
incredibly difficult situation and one they can't win.
Speaker 5 (05:10):
You know, yeah, exactly. And I keep thinking of the
interview that Shanelli had with Boas Weinstein and the whole
idea of the one thing that's difficult is that President
Trump presumably will be in the White House for four
years in total, and that the uncertainty genie is out
of the bottle and we have seen that this is
(05:31):
a president and I think it's fair to say this
is truthful, is that he can change his mind on
things and that level of uncertainty and it's ramped up
more than maybe we saw in the first administration, and
there are not the guardrails necessarily. I know you talk
about the Treasury Secretary, but it's taken a while I
feel like for maybe a potential guardrail to come forward.
(05:53):
So I just wonder, you know, Vince, traders like volatility,
but CEOs don't, right, and can consumers don't. They need
things to be certain at this point to make decisions
and to spend money. So I am just curious that
this trade we could see another sell off tomorrow. I mean,
are there any guarantees at this point?
Speaker 4 (06:14):
No, I don't think there are any guarantees whatsoever. And
I think you make a really really good point. Corporation
ceo CFOs do not like this. Consumers certainly don't like this.
I think what you're going to see is probably a
little pulled back in investment, particularly capex from corporations, particularly
the larger corporations. You're going to see mid sized small
(06:35):
businesses be very very cautious about how they spend money.
One of the big things that you know, I ran
a small business, and one of the key things about
running a small business is cash flow. And the last
thing you want to do is put yourself in a situation.
You know, it's a difficult situation. You want to spend
money on inventory anticipating you know, price increases, but at
the same time you need to preserve cash flow because
(06:57):
you could buy all this inventory and then nobody comes
into by it from you, correct just they're worried about
the future. And so now you're stuck with shelves that
are full of lower price items, but still nobody wants them. So,
you know, for a smaller business, it's a really really
tough situation. You know, for mid sized businesses as well.
You know, the big, big companies, you know, Pepsicos of
(07:17):
the World and such. You know, they can withstand this
for a while, Apples of the world. They've got the
balance sheet to to eat that inventory for quite a
long time. But other businesses do not, and that is
probably going to weigh on both sentiment spending and the economy.
We're still looking at We're still looking at first quarter
growth pen from the Atlanta GDP at minus two point
(07:39):
four percent.
Speaker 5 (07:40):
Right down, but not as bad as it was, but
still down.
Speaker 4 (07:43):
It does have it from two point eight to two
point FOURY, you're absolutely right, but we did.
Speaker 5 (07:47):
We just have a headline crossing Goldman Sachs rescinding its
recession call after this move by the President on tariffs.
I feel like it's like bing bing bing, you know,
ricochet rabbit, Like you are just seeing people who just
see I know who that is, Google it everybody, No,
but it's just right, like, so that's that's the world
(08:07):
we live in, right, and so that's a difficult environment.
Speaker 4 (08:12):
It's totally I mean, Goldman made this call literally before
the announcement, so they couldn't have found it any worse.
I mean, not that you know, it was their fault.
And so of course they're coming pulling it back now
and it goes. It speaks exactly to what you say
as to how businesses are trying to find their way
in this world and they're constantly changing their mind. And
when you have that uncertainty, if you're running a business,
(08:35):
you're going to basically say, full stop, we're not investing,
we're not hiring, we're not we're not moving forward with
plans at the moment. Let's shelve everything. We're going to
keep looking at the situation. We're going to wait and
see and then more likely they're not. They're going to
wait and see for things to really develop before they
step in. You don't want to step in on day one,
(08:55):
thinking again, maybe somebody changes their mind. You're going to
want to see this developed. I think in the long run,
this will develop positively. I think that you know, China
will eventually Trump is going to need to look for
a way to give President she Away a face saving
way out, to give him an opportunity to come to
the table to have this conversation. If that happens, I
(09:18):
think you can just you know, wipe all of this away.
Starting from you know, the beginning, things are going to
move positive. I think you'll see a lot freer trade,
a different form of globalization, if you will.
Speaker 3 (09:30):
Vince to the point that Carol just brought up this
headline crossing that says Goldman Sachs rescinds its recession call
after the Trump tariff pause. I'm confused about what fundamentally
changes here, because as we heard from the Treasury Secretary,
as we saw in that post from the President, this
is a ninety day pause on countries that are not
(09:50):
retaliating right now, this doesn't seem like a fundamental shift
in the way the president is thinking about tariffs. Why
does the recession risk rem then, at least according to Goldman.
Speaker 4 (10:03):
Yeah, but if you think about the countries that are retaliating,
it's really just the European Union, Canada and China.
Speaker 3 (10:09):
Those are big trading partners.
Speaker 4 (10:11):
Yeah no, but Canada, Canada is in a different situation.
Cartney's running for reelection, so you expect him to talk tough.
One would assume he is the the the front runner
at this point. He is the odds on a favorite.
Will he change his tune after he is elected? I
think he will. I think he's going to look to
do something something positive for Canada, and that's going to
(10:31):
be Yeah. You know, listen, we're allies. Let's let's let's
cut this out. You know, where we're enemies, we're allies.
Let's let's put this aside and let's figure out what
our differences are similar to what Shine Maam is doing
in Mexico.
Speaker 3 (10:43):
Right, Yeah, that's a good viewing.
Speaker 4 (10:45):
It's definitely. I think the EU is definitely going to
come around again because they're not in great shape right now.
Speaker 3 (10:49):
There was a question shouted at the Treasury Secretary as
he was walking away, what about the EU? What about
the EU? Because they have retaliated. So we'll expect to
hear maybe something on that and we will bring it
to you when we do get an answer. Vince, thank
you for jumping in today. Vince SIGMREALI. He's a global
macro strategist.
Speaker 1 (11:05):
You're listening to the Bloomberg Business Week Podcast. Catch us
live weekday afternoons from two to five d's during Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
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Speaker 3 (11:20):
Let's drive to the clothes with a brand Shooty, Chief
investment officer at Northwestern Mutual Wealth Management. The firm has
more than three hundred billion dollars in assets under management.
The division that Brent oversees has about ninety billion dollars
in AUM. He joins us from Milwaukee. We got to
start with just today's trade and what we're seeing. Superlatives abound. Brent,
(11:44):
is this the environment people should be buying?
Speaker 4 (11:48):
Well?
Speaker 6 (11:48):
I think if your time arising is longer term, I
think usually any day is a good opportunity to buy.
I think in the near term, I still think there's
tremendous volatility still out there. I don't think we've learned
too much new We have a reprieve, but certain we
still have ninety days of uncertainty. As you and your
previous guests were talking about, and during that time period,
I think anything's on the table, and so to me,
you still want to make sure that you're careful. You
want to make sure that you're at your allocation and
(12:10):
not overweight, and that you're prepared in case the market
does go down again, that you will stay through to
the other side to get to the higher returns that
are somewhere off in the future.
Speaker 3 (12:18):
When you say prepared, when you say prepared, do you
just mean like, have the stomach for it to stay
the course? Is that what you mean?
Speaker 6 (12:25):
Yeah, stay the course and have the stomach for it. Look,
I think unfortunately a lot of investors are still concentrated.
I see it when I travel around the country. They
only want to own US large cap stocks, and they
want to own a narrow swath of the US large
cap stocks. To me, the trend has changed, the environment
has changed, whether or not the tariffs go through. I
think some form of them still do. The tariffs are
still something that I think the President has an affinity
(12:46):
for and believes are the right thing to do. I
don't think he really is in love with trade altogether.
He just decided today that the market damage was probably
more than he wanted in the near term, and so
therefore pulled them back. I want people to diversify every
economic cycle. Whether or not this cause of the recession
or not will find out, but every cycle has new leadership.
And to me, the S and P five hundred is
(13:08):
still trading at twenty times, even though it's off its
highs by quite a bit. Twenty times forward earnings, there
are opportunities other places that are trading at thirteen or
fourteen times, where I think there are better opportunities for
those people willing to think intermediate to longer term, which
is what you're supposed to do when you buy equities.
Speaker 5 (13:22):
All right, So you're saying, Brent at this point that
the S and P five hundred is still overpriced over values, and.
Speaker 6 (13:30):
That's where I think, Yeah, no one cares about No
one cares about valuation on the upside. But when people
like me start thinking about when they're going to dip
their toe in or potentially buy more OVERVOT stocks. On
the downside, they start doing valuation exercises because that's marginal safety.
And to me, that's where I think people need to
think about the next side of this. You know, if
it's up, up, and a way, then we truly have
(13:50):
those areas of the market that are cheaper that I
would expect to do better if it's not some other
those other parts of the market have evaluation you know,
floor to them, And so that's where I I just
want people to diversify because no one knows exactly how
that's going to play out, and today the anadote for
that is diversification, not concentration, all.
Speaker 5 (14:07):
Right, So that's where I want to go to because
I'm curious if no one knows where this is going
to play out, and if it might be another ninety
days before we really know maybe what the next sequence is,
you know, uncertainty continues to rain. You said, trade has changed,
environment has changed. So what is exactly diversification in this environment?
(14:28):
How do you see it? What's the equity fixed income mix,
what's the US versus global mix? What is the do
I just kind of throw it in some kind of
cash like investment. What do you do here? We are
like over the last three days, you got beaten up.
If you had a lot of equity exposure, just got
a bounce. Do we sell at the end of this
and put it into something safer for I don't know,
(14:48):
six months, twelve months, who knows?
Speaker 6 (14:51):
Hopefully today shows you that you shouldn't put anything into cash,
and cash only whens in so many different circumstances, not many, actually,
And that's where if you put your assets in one
asset class such as cash, you're telling me that you
know exactly what's going to happen. And I'm telling you,
after doing this for thirty years, I don't, and I
don't especially know with what's happening today, given the back
and forth that can occur and these huge swings that
(15:12):
can occur. Look, we've been cautious for a little while.
We're towards the end of an economic cycle. The market
is fully valued and there is the tariff uncertainty out
there that's more of the near term. That doesn't mean
that you abandon your equity ratio and what's in your
financial plan, but that means you're at your target are
just a bit below and you're cautious about what could happen,
and you're ready to hold through whatever occurs. On the
(15:33):
other side of this, I think of valuation becoming much
much more important once again in the future, and I
think about a three, five, seven, ten year time holding
period where valuation does matter, and that's where I think
there's opportunities in people that have in parts of the
market that people have decided to move out of because
they haven't done well for the prior a few years.
That's where I think their opportunity is going forward. And
if you're not diversified, hopefully today is a wake up
(15:53):
call that it's time to do so.
Speaker 3 (15:55):
So are you know thinking about this from the perspective
of valuations, which you just mentioned, If people are thinking
about dipping their toes back in, what is a valuation
that you would want to see on the S and
P five hundreds, It's say, okay, now's the time.
Speaker 6 (16:09):
It's not twenty times for darrings that expected to go
ten days.
Speaker 3 (16:11):
Is it eighteen?
Speaker 6 (16:14):
I think perhaps it's somewhere lower than eighteen, maybe sixteen,
maybe fifteen, depending on if we have a recession or
now that's certainly important, but maybe eighteen's more reasonable, and
if you do the math on that with the earnings,
you're a lower number than what you are today. That's
not to say that you should be selling that. It's
just saying that there are better opportunities than things like
small midcaps, which I know are economically sensitive and so
does everyone else. They traded thirteen to fourteen times earnings.
(16:35):
That's historically more normal, and that gives them more of
a margin of safety, and that gives them more opportunity
for upside when valuation matters in the longer term.
Speaker 3 (16:44):
Yeah, it's okay, Okay, that makes sense. Okay, from the
perspective of if we drill down a little bit beyond
in disease and sort of regionally. You said that you
still go around the world and you hear people want
to buy megacap us companies. Do you see that changing
at all in the near term. There's a lot of
questions right now about this idea of US exceptionalism.
Speaker 6 (17:07):
If history is any guide, look historically and tell me
how long one trend has lasted. Has it lasted forever?
I think back to the late nineteen ninety nine period,
which is exactly what this reminds me of, and that
was a period of American exceptionalism. That was a period
when everyone only wanted to own large cap, mega tech
tech stocks and then they were essentially didn't make a
new high for seventeen years, while every other part that
(17:29):
they didn't want to own did make new highs. And
so no one theme has dominated forever. I think the
backdrop has changed. The backdrop of the prior three or
four or five years has been American exceptionalism driven by
a lot of debt, which is a bipartisan thing. Now
you're seeing places like Europe where they're waking up to
the reality that they have to spend money on defense
and infrastructure. Places like Germany haven't issued a lot of debt,
(17:51):
and so I think you're seeing a definite trend change.
And it's not to say that those companies in the
US are companies that you should have known. I just
want people to admit they don't know what's going on
to happen and not concentrate, because when you concentrate, you
have to make difficult decisions like do you sell something
now or do you think that one part of the
market is what's going to be going forward, and no
one knows that answer, Bret.
Speaker 5 (18:10):
What I really keep thinking about is what are the
long term implications for investors, for the world at large,
for trade at large. Maybe we don't have clarity on
that too. But are you assuming that on the other
side things are changed dramatically and that means the growth
outlook for US companies has changed, the growth for the
US economy has changed. I'm just curious if you can
(18:31):
go that far out here.
Speaker 6 (18:33):
I think the administration, the president most likely once a
currency that's lower. I think that's a tailwind towards international stocks.
I mentioned Europe spending more money, possibly in other parts
of the world spending more money, which is something that
they probably need to do on defense. Anyway, I think
about perhaps even more domestic US. Does that benefit small caps?
What about deregulation going forward? Certainly there are different things
(18:56):
that happen during every economic cycle. They're probably similar and
how play out, But I think the backdrop for the
next one had shifted, and that's where I think there
are other opportunities. Plus, if you think about the opposite
side of our trade deficit, that is a financial account
surplus where foreigners have put a lot of money into
our markets. Does that lower our raise our cost to
capital in the future, Do they buy less of our treasuries?
Which I think was a question people were asking earlier
(19:18):
today as the bond market kind of blew out, Was
that because foreigners were becoming less interested? And so I
think there are lots of trend changes that occur no
matter what happens in the next few weeks and days,
and that's where I think there's opportunities on the other
side for parts of the market that have been left
behind for the prior two or three years. And every
cycle ends this way. I take you back to the
(19:38):
late eighties, people only wanted to own Japan. I take
you back to the late nineteen ninety nine time period.
People only wanted to own tech. They didn't want to
own international, they didn't want to own the Eurozone, they
didn't want to own commodities. Then we got to two
thousand and seven, two thousand and eight, people were certain
that China was going to drive US forward, and that
commodities were the asset class they all should own, and
that the US was the dirtiest shirt or whatever the
(19:59):
commentary was back then. And then things have changed. Once again,
the future will be different in the past. At least
that's what history has shown me.
Speaker 5 (20:05):
Okay, So one thing that we've been asking some of
our guests, I mean, are we getting to a point
where when we think about the future, as you said,
people only wanted to own Japan or some different things.
Do we get to a point where a lot of
global investors don't want to own the United States that
it's uninvestable.
Speaker 6 (20:22):
I don't know about that. I mean, I think perhaps
there's some sort of pullback from that from the treasure
perspective or somewhere else. But right now, we still are
the deepest, most liquid markets, and we do have companies
that do an incredible job of creating profits. That's something
that's likely not to change. And so I don't think
people are going to pull back dramatically from the US.
But certainly right now there is a heavy allocation to
(20:42):
US across the world. There's probably just a little bit
of room for that to be taken back to a
touch and put towards other places that may be a
better at least in the near term place going forward.
Speaker 2 (20:53):
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Speaker 5 (21:08):
All right, we have a guest in studio we want
to bring in and talk a little bit more about
the market's Danielle di Martino, Booth, CEO and chief Strategies
at Quill Intelligence, former advisor to the President of the
Dallas Fed here in our Bloomberg Interactive Broker's studio, a
little bit out of breath, just trying to keep up.
How are you and what are you thinking about the
news today and what fundamentally has changed, if anything, in
(21:30):
terms of the market.
Speaker 7 (21:31):
Fundamentally is a great big word, and I'm not so
sure that the bond market has the answer to that question.
The stock market seems like it's it's already given you
an answer. But we're still up on the benchmark ten
year yield. You know, we're about four basis points on
the day it crossed over the four fifty line. In
overnight trading. We're seeing continued unwind of the basis trade
(21:52):
obviously in overnight trading. I'm not gonna I'm not going
to stop watching the markets at the Asian open.
Speaker 5 (21:58):
I'll probably still.
Speaker 7 (21:59):
Wake up in the mole and I to see how
the bond market is faring. But we have no idea
if this is the art of the deal or the
art of playground fighting, and China is going to come
back with yet more retaliatory.
Speaker 5 (22:11):
Measures of their own. We don't know.
Speaker 7 (22:12):
This is just going to keep ramping up.
Speaker 3 (22:14):
So I want to get to China in a second.
But before we get there, you brought up the bond
market and the equity market.
Speaker 5 (22:21):
Hm.
Speaker 3 (22:21):
Who's right in your view?
Speaker 5 (22:23):
Gosh?
Speaker 7 (22:23):
I mean, you know, look, we're coming into earning season, right,
Delta was obviously battening down the hatches as the first example.
Do we really think that with banks tightening lending standards? Right?
The dallasht To Reserve release a survey just a few
days ago that said that loan demanded already declined, lending
standards had already tightened prior to April to second, So
(22:44):
are bank's going to pull back on any plans that
they had due to this uncertainty because of one announcement?
And I think we'll learn a lot more from Corporate America.
Speaker 5 (22:53):
Yeah, that's what they're saying.
Speaker 3 (22:55):
We hear that from Gina Marnadams. I mean we've heard
that from everyone, like, okay, earnings are starting, yes right now?
Heard from Delta Today Friday, we'll hear from some of
the big banks, including JP, Morgan Chase. What do you
want to hear from these companies? Like, what is the
question that you need to have answered?
Speaker 7 (23:09):
I want to know if they're comfortable with where their
margins are going forward, or if they feel that they're
going to have to continue to preemptively cut costs and
continue to push through as we saw today with the
newly found group that I can't even think of the
name that now owns JP, J C. Penny and Brooks Brothers.
They just pushed through a nine percent layoff announcement today.
(23:29):
I want to know if the margins are protected enough
or if they're going to continue to react by continuing
to cut costs. You know, we've seen we've seen corporate
bankruptcies up twenty percent this year through March. That has
nothing to do with this tariff terror as I like
to call it.
Speaker 5 (23:45):
You're talking about Catalyst brands.
Speaker 7 (23:46):
I'm talking about Catalyst brand. Yes, that came across the
terminal this afternoon.
Speaker 5 (23:50):
You know, I'm thinking you go back and you put
out a new report from Queer Qi Research in the morning,
and is it a case of do you say things
have changed, you know, dramatically, or do you say, hey
folks again, Right, there's worries in the bond market, like
this is something that necessarily has not changed, right.
Speaker 7 (24:10):
And you know, we had the probability of a FED
rate cut in May. Came off quite a bit to day,
but there's still.
Speaker 5 (24:18):
A lot of FED speakers are saying differently. They're still
on inflation watch.
Speaker 7 (24:21):
They are still on inflation watch, but I can guarantify
it they've been on liquidity watch for the last seventy
two hours. Because remember above all else, above both the
inflation and employment mandate. They are the lender of last resort, right,
And I think that it has been the moves in
the bond market, the moves in bond market volatility, the
moves in investment grade spreads and highield spreads. These are
(24:43):
the things that really are going to spook the FED.
And they have to start paying attention to their employment mandate.
Speaker 5 (24:50):
Do you buy? And I have to find my notes
here scrolling. Sorry, it's been one of those days where
you have to kind of scroll your script back and forth.
US Treasury Secretary Scott Bessett earlier downplay the recent sell
off in US treasuries. He attributed it to a normal
deleveraging process in the bond market. Is that what we
were seeing was a normal deleveraging process in the bond market.
He's someone who very much understands the financial markets. How
(25:12):
do you see you also understand the financial markets and
have seen a fair amount of cycles, right, was that
a normal deleveraging process?
Speaker 7 (25:20):
Well, when you've got the owner of seven hundred and
sixty billion dollars over the US treasuries under attack, I
eat China. The answer is I don't know, and I
don't think he can know either, So it really the
jury's out again. Just because it's only theoretically China in
the crosshers, that does not take away the fact that tariffs.
Speaker 5 (25:39):
Remain in place.
Speaker 7 (25:39):
We still have a ten percent tariff exactly, and we
still don't know what the ripple effects are going to
be across the rest of Asia and other large holders
of our treasuries and how this is going to play
out in the bond market.
Speaker 5 (25:52):
You know what it's what's terrifying. Is I feel like
for years we have had conversations. I've certainly had conversations
with my husband, but it's like, what if all of
us then China says we're not going to buy your treasuries,
or what if not like Japan or Japan?
Speaker 4 (26:05):
Right?
Speaker 5 (26:05):
And I don't I'm not going to say that's exactly
what's happening, but.
Speaker 7 (26:09):
It feels like there's a lot of but there is
some of this happening, right there is there's some of
it happening. And right now the United States treasury market
is not being treated as its old safe haven self,
and it's supposedly the world's risk free asset.
Speaker 5 (26:24):
Rule of law safe haven, all of those trustworthy, right.
Speaker 7 (26:27):
And you know, I had somebody in my Bloomberg chat
room today come out and say, if it was me
and I was a credit rating agency, I would still
downgrade this sovereign daddy, the United States because of this
crazy behavior, because it is so unsettling, it's so meant
so much uncertainty. You know, even in the hard data,
as far as the Federal Reserve is concerned, going forward,
(26:48):
we haven't even seen a sintilla of evidence of the
eighty thousand people who took the buyout from the federal
government and or all of the layoffs and closures that
have that have followed this, and we still have a
household we still have an impaired household balance sheet on
top of all of that.
Speaker 3 (27:04):
Where does that show up? You cited data right there,
But where are we going to start to see cracks form?
It sounds like you're a little concerned.
Speaker 7 (27:10):
I'm definitely concerned. Were not only up twenty percent year
over year with corporate bankruptcies, we're up fifteen percent year
over year with household bankruptcies. So we're starting to see
that unravel as well.
Speaker 5 (27:20):
I don't think that.
Speaker 7 (27:21):
Earlier today, Jamie Diamond said that he expected increased defaults
going forward, and magically they disappeared with the wave of
one announcement. It doesn't work that way when credit markets
begin to come unglued and we have not seen, you know,
the insurance to protect against a default in investment grade.
It came down quite a bit today, but it certainly
didn't rally like the stock market. So we have to
(27:43):
be going cognizant of this massive leveraging up across corporate America,
across household balance sheets. The New York Fed told US
nine point seven million student loan bars or at risk
of having their FI go scores fall. There are a
lot of things going on right now, A miss again
continued cost cutting in corporate America. I continue to go
(28:03):
back to that because it is their obligation, it's their
obligation to shareholders, or it's their obligation to their family
if they run a dry cleaning company, to make sure
that they shore up their margins and stay in business.
Speaker 5 (28:14):
Everybody's looking at their balance sheets right now, absolutely right
and rightly so exactly so, Danielle, do you then see that, Okay,
ninety day pause, ninety day extension. As you said, there's
still ten percent tariffs out there, But so are we
in limbo potentially for another ninety days unless something else
comes up.
Speaker 7 (28:31):
So I think we're in relief, and then I think
that that relief is going to dissipate fairly quickly when
we realize how much we still don't know. We don't
I mean, you still hear Treasure Secretary Vessent talking tough
about Canada. We don't know what's going to happen in Mexico.
But by everything we're seeing from those two countries, pmis
they're in recession, right, So our neighbor to the north
(28:53):
and our neighbor to the south are both in recession.
I'm from the great State of Texas. If Mexico's in recession,
Texas is in recession, I guarantee you, because we're the
biggest exporting state and there's a ton of uncertainty that
continues to weigh on, especially the auto sector, but also lumber.
We need Canada's heavy sweet crude because our refineries don't
(29:14):
refine what we pull out of the ground, so we
need for that trade to continue, and we need resolution
closer to home first, I would say, so, if.
Speaker 3 (29:22):
You were advising folks in the White House right now
on economic policy, how would you advise them?
Speaker 7 (29:29):
I would say to stop saying that this is all negotiations,
because if it's negotiations, it's certainly not how negotiations are
done among adults. We have to recognize who our economic
allies are and we need to forge relationships going for
If China is the sworn enemy, so be it. But
(29:51):
why should there necessarily need to be collateral damage in
the form of the layoffs that we saw them out
of Canada last week, Why we harm thy neighbor. No,
I don't think that's how it's done. I think that
we need to have a little bit I'm going to
say this out loud, a little bit more bessent and
a little bit less Navarro.
Speaker 5 (30:12):
Is that likely? Do you think based on what we got?
Speaker 6 (30:14):
Oh?
Speaker 7 (30:14):
I do think Besson has a more of President Trump's ear.
He does because I think Besson's besons initial wanting to
take a slower approach, wanting to have more caret less stick,
wanting to provide in numerous interviews that he did prior
to being confirmed, saying we need to give American corporations time.
(30:35):
If we want for them to re sure, we need
to give them time. And for Heaven's sake, we can't
beat them over the head for friend shoring because it's
what they were told to do. So you can't invest
billions of dollars in Mexican auto plants and then be
told that that's sorry, write it off, it's a sunk cost.
It doesn't work that way.
Speaker 5 (30:53):
It's interesting because I think I'm trying to remember who
we who said that to us? Was it Maybe it
was Josh Wing Grove who said that I think best
Into and Lutnik were in the Oval office or in
the room when the President put out that social media
post talking about the ninety day pause. All right, so
walk us through. I don't know the next couple of days,
(31:15):
like how are you thinking about Lot's radar?
Speaker 7 (31:17):
And I'm back to being data dependent, I really am
what data right now? Is the US economic weekly jobless
claims and you know what, not the CPI but the PPI.
I want to know how much input costs are rising
and therefore how much margins are at risk, because either
you pass those higher costs through or you are post
(31:40):
serial and you're closing two plants down, which was announced
earlier today, because Americans are only going You can't squeeze
blood from rock if their budget is their budget and
their income is their income. You know, this is why
you know we found out just a few weeks ago
that seventeen percent of existing home sales in twenty twenty
four were to multi generational households, right, because people are
doing what they can to live within budgets, even if
(32:00):
it's trading down to a generic brand and you can
no longer buy that post box that you'd prefer to
buy life is light. We have to live within our budgets, I.
Speaker 3 (32:09):
Think, you know, and we're going to be talking about
China in a second. I said we'd come back to China. Yeah,
after we talked with you a little bit. I think
that's still for a lot of investors and for a
lot of observers, the big question.
Speaker 7 (32:21):
Mark, well, it certainly is. I mean, you know, quietly
we announced that they were a currency manipulator. They might
or might not have challenges with trying to prevent flight
out of the country.
Speaker 3 (32:33):
So I'll ask you the same question I asked Joe
Wisenthal earlier, which is what's the off ramp or the
de escalation for China? Because every day it just seems
like more tit for tat, more retaliatory tariffs, and more
tariffs being imposted.
Speaker 5 (32:46):
It's a dangerous game of chicken, right, it really is.
Speaker 7 (32:49):
And my grandmother Di Martino from Connecticut, may she rest
in peace, would say that you were dealing with two calabress,
two men with very thick heads and huge egos. And
that's why again my greatest concern, why I'll be watching Asia,
why I'll be watching you know, the offshore you won
was up about a half percentage point before this announcement
(33:09):
closed down. I'll be watching that pig set. I'll be
watching to see if we're going to have a continued escalation,
because you know what, the last time we escalated, they
went right back at us.
Speaker 5 (33:20):
What do you make of when the President says China
doesn't know how to go about it, China wants to
make a deal, it doesn't know how to go about it.
Speaker 7 (33:27):
Great, So you you you basically stick a fork in
the eye of somebody who doesn't want to lose face.
Speaker 5 (33:34):
I mean, what do you mean, Well, it's all about
losing face. Okay?
Speaker 7 (33:39):
So and and by the way, so was.
Speaker 5 (33:42):
Retaliation by China losing? Was it that that was keeping face?
But but for China?
Speaker 2 (33:48):
Yes?
Speaker 5 (33:48):
But do you think the president was surprised by that?
I mean, I know, we're just kind of or do
you think he expected it in terms of this game
back and forth.
Speaker 7 (33:57):
I certainly don't think you should have been surprised by it.
But then we rereramped it up today now it's one
hundred and twenty five percent. At some point, regardless of
what happens with China's neighbors, if you take the Chinese
economy down to its knees. It will affect its neighbors'
economies as well.
Speaker 5 (34:15):
Wh okay, we're going to get into the Chinese economy
in just a moment. Thank you so much, such a pleasure.
Danielle Di Martino, Booth, CEO and chief strategists of Qi Research,
QI Research, Right Research, Qui Research, former advisor, as we
mentioned earlier too, to the President of the Dallas Fed.
Speaker 2 (34:32):
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